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OLN IP has once again been shortlisted in ALB IP Rankings 2022

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OLN IP - Asia IP Ranking 2022

Our OLN IP team has been listed as a Tier 1 firm for Copyright / Trademarks and as a Tier 2 firm for Patents in the Asian Legal Business (ALB) “Asia IP Rankings 2022” for Hong Kong. To view the full rankings please click here.

OLN IP was established on 1 January 2020, and we are particularly proud that our new venture has received this recognition from ALB for the second time.

OLN IP is led by Benjamin Choi and offers tailored, commercially-driven advice to intellectual property owners, across the different IP asset classes, including IP portfolio management.

About ALB Asia IP Rankings

ALB IP Rankings recognise the top firms for Intellectual Property in Asia. The rankings draw information from firm submissions, interviews, editorial resources, and market suggestions to identify and rank the firms.

OLN Once Again Ranked by Benchmark Litigation Asia-Pacific

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OLN Once Again Ranked by Benchmark Litigation Asia-Pacific

We are proud to announce that the 2022 edition of Benchmark Litigation Asia-Pacific has placed Oldham, Li & Nie among the top Family & Matrimonial, Commercial & Transactions and Private Client law firms in Hong Kong.

OLN was ranked in the following categories:

  • Family and Matrimonial – Hong Kong and International firms – Tier 3
  • Commercial and Transactions – Hong Kong firms – Tier 3
  • Private Client – Hong Kong firms – Recommended

More information about the rankings – https://benchmarklitigation.com/NewsAndAnalysis/2022-Benchmark-Litigation-Asia-Pacific-is-now-live/Index/8294

About Benchmark Litigation

Benchmark Litigation, the definitive guide to the region’s leading dispute resolution firms and lawyers, was first published in 2008 covering the litigation and disputes markets in the United States and Canada and has broadened its coverage to include Asia – Pacific, Europe and Latin America – becoming a truly global guide. The guide provides in-depth law firm rankings, editorial commentary on many ranked firms and rankings of highly recommended dispute resolution specialists. Research is based in Hong Kong and is conducted through extensive interviews with litigators, arbitrators, dispute resolution specialists and their clients to identify the leading litigators and firms as well as examining recent casework handled by law firms and lawyers.

First Case in China Penalising Bad Faith Trade Mark Registration

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The Fujian Higher People’s Court issued a judgment on 27 September 2021 awarding Emerson Electric Co (“Emerson”), a US company damages in the amount of RMB1.6 million payable by the defendants (two affiliated Xiamen companies, the main shareholder of the Xiamen companies and the trade mark agent) in China for having registered Emerson’s trade marks in bad faith as an act of unfair competition. 

Emerson is the owner of the brand name “InSinkErator 爱适易”. 

Two affiliated Xiamen companies have been found registering “InSinkErator” and “爱适易” and a number of other well known brand names as trade marks in China since around 2010.   Having considered all the relevant factors and circumstances, the Court ruled that the trade mark registrations the Xiamen companies acquired or attempted to acquire have exceeded the normal needs for its commercial activities and disturbed the business activities and interest of Emerson.  Such acts have caused unfair competition in the market in violation of Article 2 of the PRC Anti-Unfair Competition Law.  The main shareholder of the Xiamen companies and the trade mark agent representing the Xiamen companies were also held liable for facilitating the unlawful act of unfair competition.

Many brand owners before this case had inevitably spent huge effort and millions of legal costs to re-claim their trade mark rights in China without expecting any award of damages.  This case has set an encouraging precedent for brand owners to look up to and materialized the PRC Government’s initiative and determination to better safeguard the legitimate trade mark rights of brand owners.

Update on Underground Banking – Lesnina H. D.O.O. v Wave Shipping et all (HCA 154/2020)

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If you are the plaintiff who has been defrauded within the underground banking system, think twice before applying for summary judgment where the defence of bona fide purchaser for value without notice has been pleaded.

Author: Eunice Chiu of OLN, Solicitor for the 8th Defendant

This is a short update on underground banking. Monies transferred through underground banking into Hong Kong may escape detection until they are mixed with funds obtained by fraud, and the defrauded party attempts to recover the defrauded funds by suing:

(a) the suspected fraudster (who will have usually disappeared by the time legal action is commenced), together with;

(b) other recipients who did not participate in the fraud but whose money arrived in the very same bank account which held the funds obtained by fraud.

It is generally when such a lawsuit is commenced (sometimes via an application for an injunction or the police issuing a letter of no consent which freezes the account) that innocent recipients come to realize that the fund senders had conducted the transfers using the underground banking system.

In April 2021, I wrote about how money transfers conducted through the underground banking system into Hong Kong may no longer be enforceable even if the recipient in question did not participate in the fraud or did not know that underground banking would be used to transfer funds to him/her. Between 2017 to 2021, the High Court decided in a number of cases that the use of underground banking, being illegal under PRC law though not illegal under HK law, violated the public policy of HK and therefore funds transferred in this manner are subject to being returned to the defrauded plaintiff: https://oln-law.com/underground-banking-in-hong-kong-ndash-can-a-payee-rsquo-s-finances-be-frozen/; https://www.lexology.com/24462/author/Eunice_Chiu/).  

However, in none of the cases decided based on the foreign illegality/public policy ground did the court make a factual finding that the recipient defendant knew, should have known or should have reasonably suspected that the money would be transferred using illegal means, i.e. the recipient defendant was a bona fide purchaser for value without knowledge who merely played a passive role. The question I then asked was, what if the recipient was such a purchaser?

In last Thursday’s decision handed down by Deputy High Court Judge Victor Dawes SC in  Lesnina H. D.O.O. v Wave Shipping et all (HCA 154/2020), not only did the Plaintiff fail to obtain summary judgment against our client, the 8th Defendant, the court also rejected the absolute approach used in previous cases including DBS Bank (Hong Kong) Limited v Pan Jing [2020] 4 HKC 395 (24 January 2020) as the correct or the only approach to be applied. Instead, the court spent a significant part of the judgment reviewing an alternative and more flexible approach represented by various authorities including Ryder Industries Limited (formerly Saitek Limited) v Chan Shui Woo [2015] 18 HKCFAR 546: Not every breach of foreign law makes a contract unenforceable; consideration must be given to the seriousness of the foreign illegality, i.e. there is a de minimis threshold. The court went on to reject the Plaintiff’s application for summary judgment on the basis that the illegality argument raised by the Plaintiff involves triable legal issues which ought to be fully ventilated at trial, not at the summary judgment stage, then granted the 8th Defendant unconditional leave to defend. In essence, the court rejected the absolute approach that has been in place since Pan Jing which was sufficient to grant judgment in favour of the Plaintiff even at the summary judgment stage – illegality renders a contract void and unenforceable full stop, both at the summary judgment and trial stages.   

Arguably, Dawes J went further than just deciding that there is an alternative legal approach that makes it inappropriate at the stage of a summary judgment application to grant judgment in favour of the Plaintiff where foreign illegality is triggered. At paragraph 57 of the judgment, he made it abundantly clear that he did not disagree with the heavy criticism of the absolute approach:

There is much to be said for the suggestion that Laddie J’s approach in Barros Mattos involved an overly blunt application of the maxim ex turpi causa non oritur action, and a preferable approach would be one that measures the gravity of the defendant’s criminal conduct against the impact of allowing the defence of change of position, and in my view the point applies to the bona fide purchaser defence as much as it does to the change of position defence [emphasis added]

Based on Dawes J’s latest judgment, in conjunction with that of Deputy High Court Judge Le Pichon in Solyda SRL v Wu Ge (HCA 1612/2019), [2021] HKCFI 1825 at para 24 who decided that the issue of the bona fides of the defendant was indeed relevant, I would see things in this way: At present, foreign illegality does not automatically render a transaction conducted via underground banking unenforceable, certainly not at the summary judgment stage, whilst 2 defences remain available to passive recipients: the de minimis threshold argument and the bona fide purchaser for value without knowledge defence.

OLN Once Again Awarded Employer of Choice by Asian Legal Business (ALB)

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We are delighted to announce that Oldham, Li & Nie has again been awarded Employer of Choice, Asia’s Best Law Firms to Work For, by Asian Legal Business.

The ALB Employer of Choice is an annual listing of the best firms to work for across various Asian jurisdictions. Law firms are listed on the basis of what kind of working environment and support they provide, particularly during the pandemic, training and mentoring, how clear the path to seniority is, how open the law firm is to receiving feedback from its employees, etc.

We are grateful to our employees for sharing their feedback and for making OLN a great place to work!

The Employer of Choice list is featured in April 2022 issue of ALB. Click here to read the publication.

5 Common Legal Mistakes Hong Kong Startup Founders Should Avoid

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Starting a new business adventure means managing multiple exciting activities simultaneously: product development, marketing, sales, etc. With so many things to get done, legal aspects usually tend to take a back seat. Many founders consider legal advice a luxury, assuming that their bootstrapped startups cannot afford it. Unfortunately, this leads to all sorts of legal problems that can undermine the foundation of their startup and even become company killers.

The following are some of the common mistakes made by Hong Kong startups:

1. Not protecting their intellectual property (IP)

Intellectual property refers to any intangible assets, such as patents, trademarks, copyright, logo, design, and anything else that differentiates a business’ offering. If a founder has a brilliant idea, there will always be those who will try to duplicate it and get a bit of the brand’s success, with a risk of undermining or even destroying the brand’s value. Intellectual property is one of the most valuable asset for a startup, as it provides commercial value to and differentiates a startup from the others. Therefore, it’s really important to identify the strategic intellectual property at the very beginning and to enlist legal support to protect it properly. Most, if not all, of the investors would love to see startups with a well-developed intellectual property protection strategy.

Also, there is no such thing as “global IP protection” – if the intellectual property is protected in Hong Kong this does not necessarily mean that it is automatically protected in any other country. The rule of thumb is to register IP rights in each jurisdiction the startup works with.

Some excellent resources about intellectual property protection in Hong Kong include:

Hong Kong – IP Trading Hub
Intellectual Property Department
Online Search for Trademark, Patents & Designs

2. Sealing the business with a verbal agreement and a handshake

When friends or family members come together to form a company, more often than not, they will not consider the need for a written shareholders’ agreement as they tend to rely on mutual trust, respect and confidence. Of course, this generally works perfectly when the business is doing well and profitable, and while the shareholders are receiving their expected return on investment. But what if things turn sour? Whether the business is not doing well or trust and confidence morph into distrust and suspicion, what can shareholders do? In circumstances like these, the shareholders’ agreement comes into play. A well-drafted shareholders’ agreement should be able to offer a solution to the parties in most cases. As with any other agreement such as those for sale and purchase, and loan transactions, the importance of a shareholders’ agreement is to safeguard interests of the shareholders and if disputes arise between the parties, there is an agreement they can fall back on setting out clearly what the parties can or cannot do, and shall or shall not do.

Here are some of the terms the written shareholders’ agreement should address:

  1. How the shares will be split between co-founders
  2. The management of the company – the roles and responsibilities of the co-founders
  3. The right of founders to nominate directors
  4. Frequency, procedures for convening and holding board meetings and shareholders’ meetings
  5. Matters which require simple majority, super majority or unanimous votes
  6. Dividend policy
  7. Issue of new shares and admission of new shareholders
  8. Transfer of shares
  9. Anti-dilution mechanism
  10.  Deadlock
  11.  Minority shareholder protection
  12.  Further financing needs of the company
  13.  Non-competition undertaking by shareholders
  14.  Term and termination of the shareholders’ agreement
  15.  Dispute resolutions

3. Poor management of accounting

One more common mistake made by startups is the poor management of their expenses throughout the year. Founders usually rush to collect all receipts only when they need to file tax returns. Some business expenses may be deductable from the income to reduce the amount of payable tax, so good accounting practices not just help make informed business decisions, but also save costs.

4. Not registering the right business entity

There are many reasons startups should form a business entity rather than operate as a sole proprietorship. In Hong Kong, in most instances, that will mean a limited company. Limited companies can protect the founders and investors from corporate liability, own property, open bank accounts, have different types of shareholders (holding common and preferred shares), sue and be sued, and carry on business both in and outside Hong Kong.

It is essential to form the company early and to document the formation, the ownership, and the agreed arrangements among the shareholders. All of this can be done cheaply by professional corporate service providers, but to make sure that it is done properly, taking into account the current and future needs of the startup, as well as the preferences of the founders (and investors), it is advisable to speak to a startup lawyer first.

5. Not engaging legal council

Smart business owners know that it is better to involve a professional legal counsel earlier than later and that fixing legal mistakes is more expensive than preventing them. Downloading free document templates on the internet can save money in the short term, but can lead to all sorts of problems in the future: the documents may not be suitable for industry or jurisdiction, may be outdated, etc. Though legal advice is not cheap, it is possible to find it all over the price spectrum. Moreover, lawyers often provide pro bono and free brief legal clinics and can even make special arrangements for startups.

Online subscription to customizable legal templates with ad-hoc legal advice, such as OLN Online, is also an easy-to-budget and easy-to-use solution.

If you need more hands-on assistance with your legal issues, we recommend that you contact one of us at OLN. We have decades of experience advising founders and investors about emerging businesses and can provide the advice you need for your contracts and other arrangements.

If you have any questions regarding your contract needs or other legal issues, feel free to contact us for advice.