HONG KONG COMPANIES REGISTRY: STARTING TO FEEL

UNCLAS SECTION 01 OF 02 HONG KONG 001600

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EB/TPP/MTA/IPC/FELSING
STATE FOR EB/IPE
STATE FOR EAP/CM
STATE FOR INR/EAP
DEPT PASS USTR FOR SMCCOY, ACELICO, RBAE
DEPT PASS TO USPTO FOR TBROWNING

E.O. 12958: N/A
TAGS: CH ECON ETRD HK KIPR
SUBJECT: HONG KONG COMPANIES REGISTRY: STARTING TO FEEL
THE HEAT


1. (SBU) SUMMARY: Alan Fong, Assistant Principal Solicitor
at the Hong Kong Companies Registry, acknowledged to EconOff
that Hong Kong's quick and efficient corporate registration
procedures -- heretofore believed by the Registrar to be plus
-- is bringing unwanted attention on the Hong Kong government
(HKG) for facilitating intellectual property theft in
Mainland China. Numerous foreign governments and private
associations are pressuring the Companies Registry to find a
solution to this loophole in the Hong Kong's Companies
Ordinance and other legislation. As part of a government
reshuffling for Chief Executive Donald Tsang's second
administration, Gordon Jones, the current Registrar of
Companies, will be relieved of his duties in August 2007.
While Fong believes the complete revision of the Companies
Ordinance, scheduled for 2012, will resolve the issue
permanently, the HKG is considering expanding the use of the
"Anheuser-Busch" solution, a recent legal ruling in which
Anheuser-Busch obtained court orders against nine infringing
companies to change their names. In this case, the High
Court of Hong Kong allowed Anheuser-Busch's lawyers to change
the name of these companies when they failed to comply with
the court order. Since rightsholders have criticized the
Anheuser-Busch remedy as a costly and reactive solution, the
Companies Registry is also exploring the possibility of
checking all proposed company names on future registration
applications with the HKG's defensive trademark registry
before allowing an entity to incorporate in Hong Kong. While
this second remedy might not help resolve existing cases and
fails to provide protection for all brands, it could help
prevent some future instances of company name theft. Most
importantly, however, these proposals indicate that the
Companies Registry now recognizes it has a problem and is
willing to consider alternative approaches. (NOTE: AmConGen
Hong Kong has been coordinating with the Japanese, EU and
French missions to increase pressure on the HKG to resolve
this issue and has urged local chambers of commerce to do the
same.) END SUMMARY.


2. (SBU) Background: Hong Kong's company registration
procedures have received much criticism by Japanese, U.S. and
European stakeholders due to their lack of protection for
well-known brand names and trademarks. For the past decade,
mainland Chinese shadow companies have used loopholes in Hong
Kong's company incorporation process to register
international brand names as part of their own corporate name
when they establish a business in Hong Kong. For example,
the Company Registry would allow a company to register itself
as "Hong Kong Coca Cola International, Ltd" even though it
has no relationship to the soft drink maker. These companies
then use the Hong Kong entity to deceive mainland Chinese
consumers into believing their products are affiliated with a
well-known and respected foreign brand. American companies,
such as Anheuser-Busch, Time Warner, Disney, Coca-Cola,
Playboy, Revlon, Colgate-Palmolive and others, have been
impacted as have a variety of European and Japanese brand
names


3. (U) Under current Hong Kong law, there is no requirement
for the Companies Registry to check company names for
trademark infringement prior to incorporation. After
incorporation, the Companies Registry has a twelve-month
period after registration when it can direct a company to
change its name if it finds that the proposed name is "too
like" one that has already been registered. However, its
definition of "too like" has been criticized as extremely
narrow and rigid. It also is up to legitimate brand-owners
to inform the Companies Registry of possible infringement
within this twelve-month period. Legitimate brand owners
have also taken shadow companies to court to obtain a
court-ordered name change, but Hong Kong law requires that
shareholders of a company make a special corporate resolution
to enact any legal name change. Without this resolution, the
Companies Registry claims it is not authorized to recognize
or enact any changes. As a result, shareholders of
infringing companies have successfully and indefinitely
delayed court-ordered changes to their names and/or company
registration documents.


4. (U) However, Anheuser-Busch recently forced nine
infringing shadow companies to change their names. In an
innovative solution, Anheuser-Busch obtained a court order
requiring name changes for the shadow companies. Based on a

HONG KONG 00001600 002 OF 002


2004 case from the English Court of Appeal (Halifax and
others vs. Halifax Repossessions Ltd & others),the court
subsequently granted Anheuser-Busch's lawyers the power to
serve as directors and shareholders of the infringing
companies. When the defendants failed to change their names,
Anheuser-Busch's lawyers signed the special resolutions
necessary for the change. The Companies Registry then
accepted these resolutions as having the same legal status as
those passed by the actual shareholders of the infringing
companies. While this solution addresses some brand owner
concerns, it is a costly and reactive remedy to brand name
infringement. Local stakeholders have urged the Companies
Registry to adopt a trademark or brand registration check
before a company can register; however, Gordon Jones, the
Registrar of Companies, has resisted such an approach as it
would delay and complicate registration procedures.


5. (SBU) Fong noted that the Companies Registry is under
increasing pressure from foreign governments, including the
U.S., Japanese, French, Dutch and EU missions. Local
Chambers of Commerce and members of the Hong Kong Law Society
have also raised this issue. Fong told EconOff that the HKG
will replace Jones in August, most likely by someone from
outside the Companies Registry. Furthermore, Fong said that
the Companies Registry is considering working with the
Intellectual Property Department (IPD) to gain access to Hong
Kong's defensive trademark registry. If an applicant
proposes a company name that is similar to one found on the
Hong Kong defensive trademark registry, the Companies
Registry would then require that applicant to provide proof
of a legal relationship to the trademark owner. This
solution, he predicted, would not create lengthy delays for
most applicants, but provide legitimate companies with
slightly higher protection for their brands. IPD has urged
the Companies Registry to close this loophole in registration
procedures and, as such, would likely agree to share its
defensive trademark database. Fong and others are now
considering the legal and privacy implications of sharing
information between two separate HKG departments. He notes
that previous cross-departmental data sharing have been
controversial in Hong Kong, but believes that the two
departments can find a way to overcome data-sharing concerns
since they are both under pressure to resolve the issue.


6. (SBU) Anita Leung, former AmCham IP Committee Chairperson
and a recent appointee to a Companies Registry advisory body,
said that the current proposals do not address the main
issue, which is the HKG's narrow definition of "too like."
Nonetheless, she said that the proposals at least indicate
that the Companies Registry now recognizes its policies cause
larger problems for the HKG. She hopes the new Registrar of
Companies will show dynamic leadership and an ability to push
the bureaucracy to find a solution that facilitates the
registration of legitimate companies, while providing
adequate protection for both local and international brand
names.
Cunningham