Singsung Pte Ltd and another v LG 26 Electronics Pte Ltd (Trading as L S Electrical Trading) and another

• Jurisdiction: Singapore
• Judge: George Wei JC (as he then was)
• Judgment Date: 29 May 2015
• Neutral Citation: [2015] SGHC 148
• Plaintiff Counsel: Adrian Tan Gim Hai, Ong Pei Ching and Loh Jien Li (Morgan Lewis Stamford LLC)
• Docket Number: Suit No 238 of 2012
• Date: 29 May 2015
• Hearing Date: 01 July 2014,15 November 2013,02 July 2014,10 July 2014,04 July 2014,10 November 2014,21 November 2013,25 November 2013,14 November 2013,19 November 2013,08 July 2014,09 July 2014,12 November 2013,03 July 2014,13 November 2013,20 November 2013
• Subject Matter: Passing off,Copyright,Defamation,Intellectual property,Malicious falsehood,Tort
• Published date: 29 May 2016
• Citation: [2015] SGHC 148
• Defendant Counsel: Philip Ling (Wong Tan & Molly Lim LLC)
• Court: High Court (Singapore)
• Year: 2015

George Wei J:

In Suit No 238 of 2012, the plaintiffs commenced proceedings and claimed against the defendants on the grounds of passing off, copyright infringement and defamation. The defendants counterclaimed for malicious falsehood and groundless threats of a copyright infringement action. The present trial is bifurcated, and I am only concerned with liability at this stage. In full recognition that this judgment is of substantial length and complexity, I add a glossary of the key acronyms used in the judgment for the reader’s convenience in an appendix at the end of the judgment.

The background to the claims

A large number of factual disputes and issues was raised by the parties. Instead of setting out all my factual findings here, I set out only a brief summary of the main events leading up to the dispute. I will discuss my specific factual findings in greater detail where relevant to the legal issues before me.

The dispute between the parties has a long history, going back well over 15 years. At trial, the parties’ recollections of the dates and details of many material events were often inconsistent or hazy.

S H Econ Electrical Trading

See Lam Huat (“the 2nd Plaintiff”) and See Lam Seng (“the 2nd Defendant”) are brothers. Sometime in 1998, the 2nd Defendant started a sole proprietorship under the name of S H Econ Electrical Trading (“S H Econ”).¹ In 2001, S H Econ was converted into a partnership in the names of the 2nd Defendant and his other brother, See Lam Quee (“SLQ”).² In reality, S H Econ was a partnership between the 2nd Plaintiff and the 2nd Defendant. Although the 2nd Plaintiff was not formally named as a partner, SLQ’s shares and interest in the partnership were held on trust for the 2nd Plaintiff.³ The brothers entered into this complicated arrangement because the 2nd Plaintiff was being sued by a creditor, and he did not want the legal dispute to jeopardise the business.⁴

It appears that S H Econ was (at least initially) in the business of acquiring outdated and/or second-hand electrical and household products in Singapore and Malaysia for resale to customers overseas.⁵ It is unclear how the partnership was run. The role played by each partner in the partnership was never clearly explained to the court. No written partnership agreement of any sort has been adduced in evidence.

The start of the new millennium witnessed a number of significant events. Apart from the conversion of S H Econ into a partnership, the 2nd Defendant and SLQ purchased three shop houses in Singapore (“the Shop Houses”). Legally, the 2nd Defendant and SLQ each held a 50% share in the Shop Houses as tenants-in-common.⁶ However, beneficially, SLQ held his share of the Shop Houses on trust for the 2nd Plaintiff.⁷ The brothers entered into this arrangement also because the 2nd Plaintiff was worried that any property in his name might be subject to seizure by the same creditor mentioned above.⁸

Disputes eventually arose between the brothers over the invoices and accounts of S H Econ. Whilst the evidence as to when the said disputes started is hotly contested and confused, it is clear that by 2005, the relationship between the 2nd Plaintiff and 2nd Defendant had deteriorated.⁹ On 9 November 2007, the 2nd Defendant commenced Originating Summons No 1652 of 2007 (“OS 1652/2007”)¹⁰ against the 2nd Plaintiff and SLQ to liquidate the Shop Houses, and for an account of monies due to the partners from the S H Econ business. OS 1652/2007 was settled before the actual hearing, set for June 2008.¹¹

The S H Econ partnership was subsequently dissolved. The date of S H Econ’s dissolution is unclear. The 2nd Plaintiff claims that the dissolution happened in 2007. The 2nd Defendant however asserts that S H Econ was only dissolved in 2009. I note in passing, that in all probability, the 2nd Plaintiff and the 2nd Defendant effectively ceased working together sometime around 2007, but the S H Econ partnership was only legally dissolved in January 2009.¹²

Singsung Pte Ltd

Either way it is clear that in April 2006, before the dissolution of the S H Econ partnership, the 2nd Plaintiff incorporated Singsung Pte Ltd (“the 1st Plaintiff”).¹³ The name “Singsung” was chosen by the 2nd Plaintiff. The 1st Plaintiff was in the business of selling new electrical and household equipment. Whilst the plaintiffs assert that some of these new products were sold in Singapore to Singapore-based customers for use in Singapore, it is apparent that the vast majority of the sales were to trade buyers who exported the products overseas.¹⁴ Further, whilst the plaintiffs assert that their trade buyer customers come from a variety of African and Asian countries, it appears that most of the new products were acquired by foreign trade buyers for sale to end users (or consumers) in Africa. In particular, the evidence adduced by the parties related only to end users from the Republic of Cameroon (“Cameroon”). As such, where the foreign markets in which the plaintiffs’ and defendants’ products are sold become relevant, my discussion will mainly centre on the market in Cameroon.

The 2nd Plaintiff’s position is that the business of the 1st Plaintiff belongs solely to him. In particular, the said business was never a part of S H Econ’s business. This is so even though there are invoices which suggest that at least some of the 1st Plaintiff’s business operations in 2007 were being conducted through S H Econ. The plaintiffs claim that the 1st Plaintiff’s business was conducted in that way purely as a matter of convenience. The question as to whether S H Econ had any interest in the 1st Plaintiff will be discussed later in connection with the plaintiffs’ claim for passing off.

LG 26 Electronics Pte Ltd

In October 2007, the 2nd Defendant registered L S Electrical Trading (“the 1st Defendant”) as a sole proprietorship.¹⁵ Initially, the 1st Defendant dealt only in the purchase and re-sale of second-hand electrical goods. However, the 1st Defendant soon expanded into the business of purchasing and selling new electrical and household products to foreign trade buyers for export to consumers in Africa and elsewhere. In January 2009, the 1st Defendant, LG26 Electronics Pte Ltd (trading as L S Electrical Trading), was legally incorporated.¹⁶ The brand name adopted by the 2nd Defendant was “LS”. The long and short of the evidence is that the brothers had gone their separate ways and were now effectively competitors.

The parties’ products

The 1st Plaintiff’s first line of new products appears to have been DVD players. Subsequently, it expanded its range of products to include television sets, rice cookers, electric kettles, blenders, floor fans and gas stoves.¹⁷

The 1st Plaintiff’s business model involves sourcing its products from manufacturers in China. Typically, the 2nd Plaintiff would visit the Chinese factories and examine the range of products the factories had. The products were often displayed in the premises of the factories, or were set out in the factories’ catalogues.¹⁸ I pause here to note that it is helpful to determine whether these Chinese factories are original equipment manufacturers (“OEMs”), or original design manufacturers (“ODMs”). Whilst these are not legal terms but trade terms, and whilst the legal principles of intellectual property law do not depend on these categories, an appreciation of the factual differences between these two types of manufacturers is helpful. To be clear, I use the terms OEM and ODM in this judgment purely for convenience and expediency.

An OEM generally refers to a manufacturer who produces component parts for another manufacturer, who then incorporates the component parts into its products. The final products are sold under the second manufacturer’s brand name. For example, where a United States computer manufacturer orders the hard disk drives installed inside its computers from a Chinese disk manufacturer, the latter is an OEM.

However, consider the following example: Company A designs and manufactures a product, which is sold to Company B. Company B then releases and sells the product into the market under its own brand. In this example, Company A is not an OEM, but an ODM.

There can be many variants of the factual pattern described above, and the exact relationship between Company A and Company B will depend on the particular facts. In some cases, Company B may be permitted to request certain design alterations or modifications. In other cases, Company A may design and produce the product under its own brand. Subsequently, it may enter into an arrangement with Company B whereby Company B can apply its own brand to the product under some form of reseller arrangement.

In the present case, it appears that the Chinese factories were in the position of being ODMs because they designed and manufactured the 1st Plaintiff’s products. In many cases, the Chinese factories offered numerous different models of a particular product line. The models were of different sizes, surface designs and decoration, or technical features. Customers such as the 1st Plaintiff ordered the model(s) of their choosing, and in some cases, asked for changes to particular aspects of the product. This included requests relating to the packaging.

The question as to who owns the intellectual property rights in the design and technology of the products (if any) depends on the facts of each case. Prima facie, any industrial design right will likely belong to the ODM. Any technology invented or developed by the ODM will also likely belong to him. In other words, going back to the example I gave above, prima facie, Company A owns the intellectual property rights in the design and technology of the products that it designs and manufacturers and then sells to Company B.

However, the question whether Company B acquires rights over the design and technology will depend on whether these have been...