DDIP's speaks on how IP impacts on Chinese Medicine

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Following is the text of an article by the Deputy Director of Intellectual Property, Mr Peter Cheung, presented to the Mainland-Hong Kong Special Administrative Region Intellectual Property Symposium 2000 in Beijing today (April 13):

"How intellectual property impacts on small and medium-sized enterprises: Taking Chinese Medicine as an example"

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Abstract

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This article explains that intellectual property rights such as undisclosed information, patents, plant varieties protection and trade marks, coupled with good intellectual property strategy and management, can add value to the business operation of any enterprise.

Introduction

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Chinese medicine has become a major competitive business and is expected to grow. It has been recognised as having much development in Hong Kong. In his Policy Address delivered in October 1998, the Chief Executive has reaffirmed his vision to turn Hong Kong into an international centre for Chinese medicine. The future development of a Chinese medicine industry in Hong Kong can enhance Hong Kong's economic growth. It can give Hong Kong a competitive edge in the domestic, regional and world market on health food, dietary supplements and new drugs.

This article sets out the specialist legal infrastructure in Hong Kong that would help accomplish the policy objective: intellectual property protection. It explains that the result of research and development in a field (such as Chinese medicine) is not a false hope, but can amount to "a possible bundle of intellectual property rights". Intellectual property rights such as undisclosed information, patents, plant varieties protection and trade marks, coupled with good intellectual property strategy and management can add value to the business operation of any enterprise, including those dealing with Chinese medicine and related industry and commerce.

Intellectual property right

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Intellectual property is the name commonly given to a group of separate intangible property rights. These include undisclosed information, copyright, patents, plant varieties, industrial designs, lay-out designs of integrated circuits, and trade marks. The law creates rights in intellectual property by providing for protection of categories of monopolies or near-monopolies. An intellectual property right holder can stop anyone else from using his intellectual property right without authorisation and payment of licence fees.

Importance of intellectual property protection

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The Government of the Hong Kong Special Administrative Region (SAR) attaches great weight to the contribution that the creation of intellectual property makes to the economy. There has been an on-going effort to ensure that Hong Kong people and overseas investors in the Hong Kong SAR can be assured of intellectual property protection as good as, if not better than, in any other economy in the world.

Recognising the importance of intellectual property protection in the Hong Kong SAR, the Basic Law specifically provides in Articles 139 and 140 that the Hong Kong SAR should on its own develop appropriate policies and afford legal protection for intellectual property rights.

Hong Kong is a creative place. Our film and television production, sound recordings production, publications, fashion and jewellery design and graphical design are known world-wide and enjoy a ready market overseas.

Against this background, the Hong Kong SAR has developed a body of intellectual property law, which is compatible with international standards and norms, and put it at the competitive edge of intellectual property development and protection.

Nature of intellectual property right

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"Intellectual property rights" are private property rights. The legal policy is to protect innovation and to economically reward those who invest their intellectual effort or money in a creative and financially risky venture.

The rights are "possible" because some intellectual property rights (such as patents for inventions) cannot be conferred automatically. The potential right holder has to follow certain legal rules, procedure and practice to acquire the intellectual property rights.

There can be a "bundle" as intellectual property rights that can either be formally acquired or automatically conferred are generally not mutually exclusive. Concurrent intellectual property rights often exist in an innovative product or process.

Good intellectual property management

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Users of the intellectual property right system should manage well their intellectual property related transactions. This is essential throughout the initial process of research and development, and the subsequent commercial exploitation.

The following is a brief description of the current status of intellectual property system in the Hong Kong SAR. In addition, it gives certain pointers concerning:

* How to preserve one's possible bundle of intellectual property rights,

* How to avoid infringing others' intellectual property rights and

* How the law provides for incidence of intellectual property right ownership.

Significance on research and development

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(1) Undisclosed information

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(a) Undisclosed information

Undisclosed information can be a document, a formula, a plan, sketch or something, which results from work being done by the maker of the document. Such information can be protected as 'undisclosed information' if the maker of the document has used his brain to produce the information and produced a result, which can only be reproduced by somebody who goes through the same process.

(b) Basis

Legal protection of undisclosed information in the Hong Kong SAR is based on the common law. The law does not depend on any contract, express or implied, between parties, because if it did, then strangers to the contract would not be bound. Legal protection depends instead on the broad principle of equity.

The essence of the legal protection is that the recipient of confidential information shall not take unfair advantage of it. He must not make use of it without consent to the prejudice of the person communicating the information. The whole of the information is private. A person complaining the breach of confidence must be the person to whom the duty of good faith is owned.

(d) Elements

Three elements are normally required if, apart from contract, a case of breach of confidence is to succeed:

* The specific information identified must itself have the necessary quality of confidence about it.

* The information must have been communicated in circumstances importing an obligation of confidence.

* There must be actual or threatened unauthorised use of the information to the detriment of the party communicating it.

(e) Confidentiality

The information or trade secret must be of a confidential nature. There are essentially four criteria, which help identify confidential information or a trade secret.

* The provider of the information believes that the release of the information would injure his interests or would be of advantage to his rivals or others.

* The provider of the information must believe that the information is confidential or secret and is not in the public domain.

* The belief of the provider of the information must be reasonable.

* The information must be judged in the light of the usage and practices of the particular industry or trade concerned.

Thus, there is no breach of confidence in revealing to others something, which is already common knowledge. However, something that has been constructed solely from materials in the public domain may possess the necessary quality of confidentiality. This is because something new and confidential may have been brought into being by a person's application of skill and ingenuity. Novelty depends on the thing itself as a whole, and not upon the quality of its components. Furthermore, the mere simplicity of the idea does not prevent it being confidential.

(f) Communication importing an obligation of confidence

The information must have been communicated in circumstances importing an obligation of confidence. However secret and confidential the information, there is no binding obligation of confidence if the information is communicated in circumstances which negate any duty of holding it confidential. If the circumstances are such that any reasonable man standing in the shoes of the recipient of the information would have realised that upon reasonable grounds the information was being given to him in confidence, then this should suffice to impose upon him the equitable obligation of confidence. The basis of equitable intervention to protect confidentiality is that it is unconscionable for the recipient of information - on the basis that it is confidential - subsequently to reveal that information.

(g) Unauthorised use to the detriment of the person communicating it

There must be unauthorised use of the information to the detriment of the person communicating it. The recipient of the information must not use the information as a "spring board" to assist in his own work. Detriment ought to be present in most cases. Information obtained pursuant to statutory powers can only be disclosed by the recipient to such persons and for such purposes as are envisaged by the statute conferring the powers, or pursuant to a court order. The remedy of the person who provided the information who wishes to ensure compliance by the recipient with his obligation is an action for breach of confidence. If the recipient discloses information in breach of duty, then any third party who proposes to use it can not be restrained unless he is aware of the confidentiality of the information at the time of the proposed use.

(h) Remedies

The civil remedies for breach of confidence are much the same as other intellectual property rights: injunctions, damages and accounts for profits may be granted by the court.

(i) Statistics

These are undisclosed information.

(j) Assessment

The nature of traditional Chinese medicine is such that it is not easy to obtain a patent or a plant variety protection. This makes undisclosed information as a legal vehicle of protection relatively attractive.

Those who invest in Chinese medicine should maintain secrecy on (1) the identity of specific ingredients of Chinese medicine, (2) the weight ratios of the specific ingredients, (3) the specific steps of the preparational process e.g. crushing and refluxing of the specific ingredients, evaporating the filtrate or combining the filtrate with other solutions and (4) the form (e.g. oral solution, injectable solution, capsule or tablet) and application of the final product (e.g. not for use with pregnant women) etc.

(2) Copyright

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(a) Copyright works

Copyright law protects the products of human creativity. Copyright can subsist in literary works such as books and computer software, musical works such as musical compositions, dramatic works such as plays, artistic works such as drawings, paintings and sculpture, sound recordings, films, broadcasts, cable programmes and published editions of literary, dramatic or musical works. The Hong Kong SAR's Copyright Ordinance (Cap 544) expressly provides that these include works made available to the public on the Internet.

(b) Exclusive right

The author of a work is the first owner of the copyright work. The employer is generally the first owner of the copyright work made by the employee during the course of employment. The duration of protection is generally the life of the author plus 50 years. A copyright holder can take legal action against any person who infringes the copyright in the work. The activities, which the holder can prevent, will differ depending on the type of work, which is being infringed. Essentially the owner has the exclusive right to copy the work and to distribute it to the public. The holder may seek an injunction to prevent an infringement of his copyright and may claim money compensation.

There are no formalities required to obtain copyright protection for works in the Hong Kong SAR. Works of authors from any place in the world, or works first published anywhere in the world, will also qualify for copyright protection in Hong Kong.

(d) Permitted acts

Certain special acts are permitted, but only to the extent that they do not conflict with the normal exploitation of the work, and do not unreasonably prejudice the legitimate interests of the copyright holder. For example, copyright is also not infringed for research and private study or by the making of a transient and incidental copy which is technically required for the viewing and listening of the work made available on the Internet.

(e) Sanctions and liabilities

There are wide-ranging provisions in the law for criminal and civil enforcement of copyright. Those who indulge in copyright piracy, production of infringing articles on a commercial scale, or possession of infringing articles for trade or business can be subject to a maximum fine of HK$50,000 (US$6,410) per infringing article and a term of imprisonment of up to four years. Import or export of pirated articles is a criminal offence. It is also an offence to be involved in copyright piracy outside the Hong Kong SAR for the purpose of importation into the Hong Kong SAR. The law provides copyright owners with a sole importation right of their works into the Hong Kong SAR. However, protection against parallel importation may not be available to right holders unless they take reasonable measures to publicise their intention to restrict importation or appoint a sole distributor. In addition, the exclusive importation right of a right holder may be defeated if he withholds supply of the work to the Hong Kong SAR public unconscionably.

(f) Statistics

No survey on Chinese medicine related copyright material in the Hong Kong SAR has ever been made.

(g) Assessment

Copyright generally protects the expression of ideas and not the ideas themselves. Its use to protect Chinese medicinal products and process in the initial stage of research and development is therefore very limited. However, it is instructive to bear in mind, especially during the process of research and development, that the facilitation tools such as application computer software are licensed; and that the information (whether in printed, audio-visual or digital format) is authorised so as to avoid infringing others' copyright. It may be that in future (1) the computer software houses will develop some specific computer software that would facilitate analysis of Chinese medicinal components and processing methods and (2) the academics and practitioners would generate more literature in the field. Copyright will then become a major legal vehicle.

(3) Patents for inventions

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(a) Patents

Patents protect technical innovations. The patent system encourages new technology by granting the inventor a patent, which gives him the exclusive right to exploit the invention for a set term. In exchange, the inventor is required to make the invention public.

(b) Patentability

A patent will only be granted if the invention is new, involves an inventive step and is capable of being industrially applied. The invention must not fall within the excluded category of inventions.

To be new, the invention must never have been made public and must not form part of the state of the art. 'The state of the art' comprises everything made available to the public whether in the Hong Kong SAR or elsewhere by means of a written or oral description, by use, or in any other way -

* before the deemed date of filing of an application for a standard patent for the invention or before the date of priority claimed, if any; or

* before the date of filing of an application for a short-term patent for the invention or before the date of priority claimed if any;

whichever is the earlier.

(d) Inventive step

An invention must involve an inventive step. This means that the invention is not obvious to a person skilled in the art, having regard to all matters forming part of the state of the art. In other words, there must be a clearly-noticeable difference between the state of the art and the claimed invention, resulting in a new step or an advance in the art. The step must be significant and essential to the invention.

(e) Industrial application

To be capable of industrial application, an invention should be something that can be made industrially, or that it relates to an industrial process (eg useful and practical machinery, handicrafts, or manufacturing activities that relate to agriculture, forestry, fisheries and science). This means the invention must take the practical form of an apparatus, device, or product (such as a new material or substance), or an industrial process or method of operation. Its use must be distinct from purely intellectual or aesthetic activity.

(f) Excluded inventions

It is instructive to note that not all inventions qualify for the grant of a patent and such excluded inventions include the following:

* a discovery, scientific theory or mathematical method;

* an aesthetic creation;

* a scheme, rule or method for performing a mental act, playing a game or doing business, or a programme for a computer;

* the manner of presentation of information.

* a methods for treatment of the human or animal body by surgery or therapy;

* a diagnostic method practised on the human or animal body;

* a plant or animal variety or an essentially biological process for the production of plants or animals, other than a microbiological process or the products of such a process.

(g) Territorial application

Patents registered in the Hong Kong SAR will only grant protection in Hong Kong SAR. The Hong Kong SAR patent system is separate from the system which operates in other parts of China. Patents granted by the State Intellectual Property Office are not automatically protected in the Hong Kong SAR. However, patent applications published by the State Intellectual Property Office on or after 27 June 1997 can form the basis for an application for a standard patent to the Patents Registry of the Hong Kong SAR. For historical and continuity reasons, there are other two designated patent offices, namely, the United Kingdom Patent Office and the European Patent Office, in respect of patents granted under European Patent Convention designating the United Kingdom.

(h) Two-stage procedure for standard patents

The term of protection for a standard patent is up to twenty years. The Patents Ordinance (Cap 514) establishes a two-stage application procedure in the Hong Kong SAR which the applicant must comply with if he is to obtain a registration in the Hong Kong SAR. An applicant must first apply to a designated patent office for grant of a patent. The first stage includes filing with the Hong Kong SAR Patents Registry a "request to record" the designated patent application published by the designated patent office. The request must be made within six months after such publication by the designated patent office. If the request to record is satisfactory, after an examination on the minimum and formal requirements, the Hong Kong SAR Patents Registry will record the designated patent application in the register, publish the request to record and advertise the fact in the Gazette. The second stage takes place after the designated patent application has been recorded in the register of the Hong Kong SAR Patents Registry. An applicant will have to file "a request for registration and grant" within six months after the date of grant of the designated patent or publication of the request to record, whichever is the later.

(i) Short-term patents

The Patents Ordinance provides for a new type of protection - the short-term patent - for inventions with a short commercial viability. The term of protection is up to eight years. Applications are made directly to the Hong Kong SAR Patents Registry, and patents are granted subject to a formality examination. Short-term patent applications in the Hong Kong SAR can enjoy Paris Convention priority.

(j) Procedure

An application for a short-term patent can be made directly to the Hong Kong SAR Patents Registry. There is no substantive search and examination of a short-term patent. Instead, it is only subject to formality examination before grant. The applicant may request a deferral of the grant of the short-term patent up to twelve months. The applicant has to file certain documents including a search report from a prescribed searching authority.

(k) PCT applications

The People's Republic of China has applied the Patent Cooperation Treaty (PCT) to the Hong Kong SAR. An application may be made under the PCT for the protection of an invention. An applicant who has designated China in the international phase of his PCT patent application can elect to have his application considered in the Hong Kong SAR, in accordance with the Hong Kong SAR's Patents Ordinance, when that international application enters its national phase in China.

(l) Procedure

Where an applicant wishes to obtain the grant of a standard patent in the Hong Kong SAR in reliance upon the PCT application, he must comply with the two-stage system set out in the Ordinance. Where the PCT application designating China seeks protection for a utility model, an applicant may apply for grant of a short-term patent in the Hong Kong SAR under the provisions of the Ordinance.

(m) Priority

An applicant enjoys the same right of priority for an application for a standard patent or short-term patent in the Hong Kong SAR as he enjoyed in the designated patent office, provided that the earlier application was filed in a country, territory or area which is a party to the Paris Convention, or a member of the World Trade Organisation, or a party to any other international agreement which is applied to the Hong Kong SAR.

(n) Monopoly right

There are provisions in the Patents Ordinance, which set out the rights that are given to the proprietor of a patent. Where an application for a standard patent is published, as from the date of publication and until the grant of the standard patent, the applicant has the same right as he would have had if the patent had been granted on the date of the publication of the application to bring proceedings in the court for damages in respect of any act which would have infringed the patent. However, action for infringement cannot be commenced until after grant.

(o) Assignment

A patent belongs to the original owner of the invention or to someone to whom ownership has passed. This can be achieved by means of agreement or contract of employment.

(p) Employee award

The right to inventions made by employees in the course of employment in the Hong Kong SAR generally belongs to the employer. However, employees are entitled to a fair share of compensation for any benefits received by the employers from the patent on the employees' inventions made in the course of employment. Thus an employee may apply to the court for compensation on the basis set out in the Ordinance.

(q) Compulsory licence

There are compulsory licensing provisions in the Ordinance which allow for the grant by the court of a licence to use a patented invention without the consent of the owner. The intent is to prevent any possible abuse of the right given by the patent. At any time after the expiration of three years from the grant of a patent in the Hong Kong SAR, application may be made to the court for a compulsory licence on the basis that the patented invention is not being properly worked in the Hong Kong SAR. The licence will be given subject to payment of appropriate royalties and other specified safeguards.

(r) Statistics on pharmaceutical preparations in end

February 2000

On standard patents, there were about 17 857 granted patents on the Hong Kong SAR's Standard Patents Register, only about five (5) of them related to Chinese herbal medicine. On short-term patents, there were about 195 granted patents on the Hong Kong SAR's Short Term Patents Register, none of them related to Chinese herbal medicine.

(s) Assessment

The characteristic of Chinese medicine is such that it is not at all easy to obtain a patent. "Products of nature" such as extracts from herbs and animals are in general excluded from patent protection. Simply isolating a chemical substance from nature is usually considered as unpatentable "discovery". A thing occuring in nature, which is substantially unaltered, is not capable of industrial application.

However, there are possibly three kinds of plant or animal derived drugs that might be patented: (1) patents on the structure of the compound, (2) patents on the process of isolation and (3) patents on the specific uses of the drug.

Structure may include specific chemical structure, specific ingredients and weight ratios. Process may include time, temperature, processing additive components, secondary processing such as crushing, refluxing, evaporating and combining. Usage may include the form of the medicine to be used e.g. liquid, syrup, powder, pill or capsule and how the medicine is to be administered.

A highly refined chemical extract that requires an involved process of purification is generally considered to be sufficiently removed from the product of nature status and can be patentable. Thus, if the product (1) was "previously unknown in its purified and isolated form", (2) "differs not only in degree but in kind" from the naturally occurred substance and (3) demonstrates "unexpected properties", then the product may be patented as a substance (ie the purified form of the chemical substance).

Furthermore, creating a semi-synthetic drug through slight alteration to the chemical structure of products of nature can be patentable. The chemical structure of a natural compound is tinkered with by adding small modifications to it, developing new ones which has a slightly different structure whilst retaining the natural compound's original useful properties.

The novelty of a process patent on Chinese medicine preparations could be eg the use of low temperature and low pressure in the evaporation process.

Patentability aside, users of the patents system in the Hong Kong SAR may consider to obtain a short-term patent on products or processes, which have only a short commercial life. The comparatively short time needed to obtain a short-term patent will meet the needs of manufacturers and businessmen engaged in the production or commercialisation of such patents.

(4) Plant Varieties

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(a) Plant varieties

Plant varieties mean a multiplicity of plants, which are largely the same in their characteristics and remain the same within specific tolerances after every propagation or every propagation cycle. Plant varieties are all cultivated varieties, clones, lines, strains and hybrids which can be grown in such a way that they are clearly distinguishable from other varieties, and are sufficiently homogenous and stable in their characteristics. New varieties of plants give a higher harvested yield or provide resistance to plant pests and diseases. These are essential factors in increasing productivity and quality in agriculture, horticulture and forestry.

(b) Plant breeders' right

Plant varieties protection is also known as 'plant breeders' rights'. Breeding new varieties of plants requires considerable labour, skill and financial investment. It is also time consuming e.g. a plant species can take as long as 10-15 years to breed. The legal policy is to provide incentive to plant breeders to pursue innovative activity. Plant breeding needs to be conducted in such a way as to secure the maximum benefit from the potential offered by plant breeding. A plant breeder, like other intellectual property owners, has the exclusive right to authorise reproduction of his new plant variety. The Plant Varieties Protection Ordinance (Cap 490) confers intellectual property rights on breeders of plant varieties. The Registrar of Plant Variety Rights considers applications for plant variety rights. A plant variety must be new, distinct, uniform and stable in order to be considered for protection under the law.

Every application has to be accompanied by the quantity of reproductive material, if any, in respect of the varieties of the kind concerned, among others. A 12-month priority claim of an earlier and equivalent application in the International Union for the Protection of New Varieties Plant is recognised. Subject to conditions, provisional protection is available on the date of application as if a grant had been made to the applicant in respect of the variety concerned. Within the prescribed period, the applicant has to provide details describing the origin and breeding of the variety, the botanical features of that variety and those aspects of that variety that distinguish it from those other varieties whose existence was a matter of common knowledge at the time of the application. Within three months of the notification, anyone who considers that the Registrar should not approve application can object in writing. Objections after grant, cancellations of grants and extensions of grants of plant variety rights to cover essentially derived variables are also possible.

(d) Exclusive rights

Once rights to plant variety have been granted, the grantee will have the exclusive right to control (1) the production for sale, (2) the import or export of reproductive material of the variety concerned and (3) the propagation of that variety for the purpose of commercial production of fruit or flowers of that variety, for 20 years or 25 years or more, commencing on the date of application.

(e) Remedies

The rights are proprietary rights and their infringement would entail the usual civil remedies, including exemplary damages. If the defendant is not aware or has no reasonable grounds for supposing that his act was an infringement, then the plaintiff is only entitled to an account for profits rather than damages. It is an offence for anyone who falsely represents that a plant variety right as registered.

(f) Compulsory licence

The non-availability to the public at a reasonable price reasonable quantities of reproductive material of reasonable quality of the variety concerned may trigger the statutory power of the Registrar to give written permission of use, subject to the payment of equitable royalty by the purchaser to the grantee of the right.

(g) Statistics

There has not been any application since the opening of the Registry.

(h) Assessment

The level of plant variety protection is weaker than patent protection. It attaches to the whole plant rather than its component chemicals. Thus if a chemical is found in the leaf of a protected plant that has value as a pharmaceutical, no right will attach to that chemical. The protection in the Hong Kong SAR is relatively new. As the plant breeder has the monopoly right to propagate, produce and distribute the protected variety right, the protection can be a very powerful legal vehicle in the long term development of bio-technology in the field of herbal medicine, especially if certain active ingredient of medicinal plants can be enhanced through propagation of new varieties in a controlled environment.

Significance on producing and processing

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(5) Industrial designs

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(a) Independent designs registry

Upon the commencement of the Registered Designs Ordinance (Cap 522) on 27 June 1997, the Hong Kong SAR has its own, independent designs registry. Applicants can apply for registration of new designs directly with the Hong Kong SAR Designs Registry. Designs are registered subject to a formality examination. Registered design applications in the Hong Kong SAR can enjoy Paris Convention priority. The Hong Kong SAR's designs registration system is separate from the system which operates in other parts of China. Designs registered in the State Intellectual Property Office, or registered elsewhere in the world, must be registered in Hong Kong before they can be protected in Hong Kong.

(b) Statistics

In end February 2000, there were about 11 160 industrial designs registered with our Designs Registry. Only four (4) of them related to Chinese medicine, mainly on the packaging of Chinese medicinal products.

New and eye appeal designs of any article can be protected by industrial designs. The protection is general. It may have an indirect impact e.g. designs of accessories relating to Chinese medicine.

(6) Layout-design (Topography) of Integrated Circuits

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(a) Layout-design of integrated circuits

The Layout-design (Topography) of Integrated Circuits Ordinance (Cap 445) protects the original layout-design for incorporation into an integrated circuit. Subject to certain exceptions, the owner is able to take civil action to prohibit others from reproducing or distributing his layout-design without his consent or without payment of royalties. There is no need to register the layout-design right and protection will be automatic.

(b) Statistics

As protection is copyright-like in the Hong Kong SAR, there are no statistics on protected circuit layout of integrated circuits.

An integrated circuit, which may be incorporated in any articles, can be protected. The protection is general and is not confined to articles for processing or preparing Chinese medicine. Unless technology develops to the extent that a chip can substitute and operate certain Chinese medical treatment functions when surgically planted into the human body, this category of intellectual property protection is not directly related to Chinese medicine. Reference is made for the sake of completeness only.

Significance on commercial exploitation

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(7) Passing off protection of unregistered trade marks

(a) Unregistered trade marks

Trade marks are signs or logos used by businesses to identify the goods in which they trade, or the services they provide in the course of business. Trade marks can be either registered or unregistered.

(b) Common law action of "passing off"

Unregistered trade marks are protected by the common law action of passing off. It is a specific civil wrong, which provides common law liability against unfair competition. A passing off action is a common law remedy for the invasion of a property right not in a mark, name or get-up improperly used, but in the business or goodwill likely to be injured by the misrepresentation made by the passing off one person's goods as the goods of another. The mental element of the infringer is irrelevant.

The modern character of the tort of passing off is not only anchored to trade marks or trade names. It encompasses other descriptive material, such as slogans or visual images, or else advertising campaigns in the media, which may lead consumers to associate with a plaintiff's product, (provided always that such descriptive material has become part of the goodwill of the product.) And the test is whether the product has derived from the advertising of a distinctive character which the market recognises. In order to establish a passing off action, it is essential that the following will come up to proof by the plaintiff who can be said to be carrying on a trade.

(d) The plaintiff's reputation

A passing off action is a remedy for the invasion of a property right not in the mark, name or get-up improperly used, but in the business or goodwill likely to be injured by the misrepresentation made by passing off one person's goods as the goods of another. The plaintiff's reputation or goodwill, which is the subject of a proprietary right, is incapable of subsisting in itself. It has no independent existence apart from the business to which it is attached. The plaintiff has to show that he has a goodwill within the Hong Kong SAR. If the business is carried on in several countries, a separate goodwill attaches to it in each. So when the business is abandoned in one country in which it has acquired a goodwill, the goodwill in that country perishes with it although the business may continue to be carried in other countries.

(e) The defendant's representation

The defendant's representation must be such that it gives rise to confusion. If someone chooses a common descriptive name under which to trade, he does so at the risk arising from the confusion which relatively small differences in the names will engender. It is otherwise where a fancy word has been chosen as part of the name.

(f) Poaching of goodwill

In a passing off action, the plaintiff does not have to show that the defendant's business is thought by the public to be the plaintiff's. There is no need for the person who is deceived to have known the name of the person who complains of the passing off. It is sufficient if the plaintiff can show an overall impression that the defendant's business is related to the plaintiff's business, and thereby a likely poaching of goodwill by the defendants has occurred.

(g) Damage or likelihood of damage

Damage is presumed on proof of passing off. A nominal sum by way of damages follows as a matter of course. General damages may only be awarded if there is evidence of damage. If the plaintiff can prove that he has suffered injury, which cannot be properly compensated by damages, or that he will probably suffer such injury, injunctions may be granted to restrain the irreparable harm.

(h) Statistics

No survey on unregistered marks related to Chinese medicine has ever been made.

(i) Assessment

A civil remedy is still available if a reputable trade mark on Chinese medicine is unregistered. Passing off is usually a more difficult action to bring than an action for infringement of a registered trade mark.

(8) Registered trade marks for goods and services

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(a) General

A trade mark is used to promote and identify the owner's goods and services and to enable the public to distinguish them from the goods and services of other traders. The Trade Marks Ordinance (Cap 43) provides the framework for the Hong Kong SAR's system of registration of trademarks. The Ordinance sets out the basis and criteria for registration and sets out the rights attached to a registered trade mark. The holder of a registered trade mark has an exclusive right to use the mark on his goods or services. The holder can take legal action to prevent anyone from using his mark without consent.

(b) Mark

A "mark" is defined in the Ordinance to mean any sign that is visually perceptible and capable of being represented graphically and may, in particular, consist of words, personal names, letters, numerals, figurative elements or combination of colours, and includes any combination of such signs. A "sign' may include three-dimensional shapes. However, a sign must be represented in a form, which can be recorded and published, and must not consist exclusively of:

the shape that results from the nature of the goods themselves;

the shape of goods that is necessary to obtain a technical result; or

the shape that gives substantial value to the goods.

A trade mark relating to services identifies the services provided by the owner of the trade mark in the course of business. In considering what is meant by "a service provided in the course of business", applicants have to consider whether the service has the following characteristics:

is the service a distinct mental or physical activity performed in the course of business?

is the activity provided for the benefit of someone other than the applicant?

is the activity qualitatively different from anything necessarily done in connection with the sale of goods or the performance of another service, i.e. is it a separate and distinct business?

There is no requirement that the service must be provided for money or money's worth. If the service provided is merely incidental to the applicant's principal trade or business, there may not be "a service provided in the course of business" in respect of which the mark can be registered. However, such ancillary services may still be registered if it can be established in all the circumstances that the service is provided in the course of business (e.g. retail service in the course of selling goods.)

(d) Registrability

The mark must be distinctive. It clearly distinguishes or is capable of distinguishing the goods or services provided by the applicant in connection with his course of trade or course of business, from other goods or services which he is not connected with. It is not necessary for a mark to have been used at the time of application, provided that the applicant uses or proposes to use the mark at the time of application. A mark, which is not clearly distinctive or capable of distinguishing, may still be registered if it has in fact become distinctive or capable of distinguishing because it has been sufficiently used. A general rule of thumb is that the applicant would need to prove use and sales over a period of two to five years prior to the date of application.

(e) Effect of registration

Registration will give the registered proprietor exclusive right to the use of the trade mark in relation to the goods or services specified in the application subject to any conditions or restrictions entered on the Register. That right is infringed by any person who, not being the proprietor or registered user of the trade mark, uses in the course of trade a mark identical with or nearly resembling it, in relation to any goods or services in respect of which the mark was registered, or in relation to goods or services of the same description where such use would result in a likelihood of confusion, and in such a manner as to render the use likely to be taken either as being use as a trade mark relating to goods or services; or as importing a reference to the proprietor or registered user or to the goods or services of either of them. The fact of registration is also prima facie evidence of the validity of the original registration of the trade mark in all legal proceedings in relation thereto. Anyone fraudulently using a trade mark, including selling and importing goods bearing a forged trade mark or possessing or using equipment for that purpose, commits a criminal offence under the Trade Descriptions Ordinance (Cap 362). The maximum penalties for trade mark offences are a fine of HK$500,000 and imprisonment for five years on conviction on indictment, and a fine of HK$100,000 and imprisonment for two years on summary conviction.

(f) Duration of protection

The registration of a trade mark will date back to the date of application for registration and is valid for seven years from that date, renewable indefinitely for successive periods of fourteen years.

(g) Territorial protection

The Hong Kong Trade Marks Registry started operating in 1874, and is one of the world's oldest trademark registries. Hong Kong has been registering marks for services as well as for goods since 1992. The number of applications has been rising steadily over the years. The Hong Kong SAR's trade mark registration system is separate from the system operating in other parts of China. Trade mark registrations obtained in the Chinese Trade Marks Office, or elsewhere in the world, do not have effect in the Hong Kong SAR. Trade marks must be registered in the Hong Kong SAR before they can be protected under the trade mark law in the Hong Kong SAR.

(h) Statistics

In end February 2000, there were 112 291 registered trade marks for goods and 13 671 trade marks for services. There were about 500 registered trade marks for Chinese medicinal goods and 10 on Chinese medicinal services.

(i) Assessment

After a product or process patent for a Chinese medicine expires, other competitors might like to provide for the same under a different brand name. A trade mark is a guarantee of quality and a sign of loyalty to the customer or patient. The advantage of trade mark is the unlimited monopoly that the proprietor can get. If wilful trade mark counterfeiting for goods on a commercial scale is detected, the proprietor of a trade mark can, in addition to the usual civil remedies, lodge a complaint with the Customs and Excise Department, which will take criminal enforcement actions.

Government institutions on intellectual property

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Intellectual Property Department

The Intellectual Property Department was established in 1990. The Department is responsible for advising the Secretary for Trade and Industry on policies and law to protect intellectual property. The Department operates the Hong Kong SAR's patents, designs and trade marks registries. The Department provides intellectual property legal advice to Government bureaux and departments. The Department also promotes intellectual property protection through public education.

Customs and Excise Department

The Customs and Excise Department is responsible for enforcing the criminal aspects intellectual property right infringements. It investigates complaints alleging wilful copyright piracy and trade mark counterfeiting on a commercial scale. The Department has extensive powers of search and seizure, and cooperates with overseas enforcement authorities and owners of copyright and trade marks in a concerted effort to combat infringement of intellectual property rights.

Conclusion

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Undisclosed information, patents and trade marks should be good and direct intellectual property options to secure an economic reward on one's intellectual and financial investment on Chinese medicine.

The advantages of the protection of undisclosed information are that no formal acquisition is required (thus saving money and time), and protection may last perpetually. The disadvantage is that if the information is known by others through independent research and development, no remedy would be available. Even so there are a number of successful stories. This is the traditional method in protecting Chinese medicine, even before undisclosed information has become a recognised form of intellectual property.

The price of getting a patent is to disclose the inventive information. The upside of patent protection is that the right is a monopoly one which can last for 20 years. The downside is that the patent has to be formally acquired. The characteristics of Chinese medicine make it difficult to obtain a patent. Thus there is no surprise that the statistics on patented Chinese medicine in the Hong Kong SAR is particularly low. However, it is important to note that a patentee's monopoly right is a powerful one. Patent protection is nearly a must to attract venture capitalists in the commercial exploitation of the product or process.

Whilst undisclosed information and patents are mutually exclusive options, trade mark protection can run concurrently with other intellectual property rights and can last forever. A registered trade mark affords more protection than an unregistered one. The Hong Kong SAR has a 126 years of trade mark protection. This also explains the statistics on trade marks on Chinese medicine is comparatively high.

The Government of the Hong Kong SAR has provided the local community and international investors with a comprehensive body of intellectual property law compatible with international standards and norms. It appears that the Chinese medicine industry is making use of the system in securing the possible bundle of intellectual property rights resulting from their research and development, and commercial exploitation.

As intellectual property is a private property right, the potential right holder in the Chinese medicine industry should exercise good intellectual property strategy and management. He should respect and avoid infringing other's intellectual property rights e.g. by obtaining licences. He should determine the intellectual property options to protect his rights. He should settle the incidence of intellectual property right ownership in advance. He should acquire the intended intellectual property protection in the Hong Kong SAR or elsewhere (depending his marketing strategy), in accordance with the relevant legal principles, rules and procedure.

The Intellectual Property Department encourages intellectual property compliance as one of the business ethics. It endeavours to raise the public's understanding of intellectual property rights through its promotional and educational activities.

End/Thursday, April 13, 2000

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