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OLN Named “In-House Community: Firm of the Year 2019 – Hong Kong”

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We are pleased to announce that OLN has recently been named an In-House Community: Firm of the Year 2019 – Hong Kong in the area of Intellectual Property. This award recognizes our quality legal services to in-house counsel and buyers of legal services in Hong Kong.

About the In-House Community
In-House Community is a community of In-House Counsel helping In-House Legal and Compliance Professionals meet their ethical, legal and business commitments and responsibilities within their organisations. The In-House Community is comprised of individual member in-house lawyers and those with a responsibility for legal and compliance issues in the Asia-mena region. The In-House Community was founded back in 1998 and now has some 21,000 in-house members, for whom it provides 16 annual In-House Congress events, as well as Asian-mena Counsel magazine and online resources.

A New Year, A New Venture

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OLN IP Services – Building Value in 2021 and Beyond

4 January 2021 (Hong Kong) – OLN Oldham, Li & Nie Solicitors is delighted to announce the expansion of its intellectual property services with the creation of OLN IP Services – OLN IP.

OLN IP is a consultancy dedicated to providing bespoke, commercially-driven advice to owners of IP, from assisting with technology-based IP, trademarks, copyright, patents and designs to managing IP portfolios on an ongoing basis. OLN IP is led by Benjamin Choi as Managing Director, and Vera Sung, both veterans in the IP space, and backed by a seasoned team of intellectual property experts from our Hong Kong and Shanghai offices, who together bring formidable experience and depth of knowledge to provide clients with nuanced and precise IP advice tailored to their business needs. 

OLN will continue to offer contentious IP services, protecting clients’ IP assets through enforcements in both administrative and court proceedings. We also provide legal opinions to companies listing on the Hong Kong Stock Exchange. Vera said, ‘It is exciting to build on OLN’s heritage and reputation, and the trust we have with our clients, many of whom have been with us for the long term, to create OLN IP, as a standalone IP advisory and commercialisation consultancy, adding to the OLN platform of business solutions.’ 

‘Intellectual property often forms a company’s largest value component. Corporates require advice from professionals who are deeply knowledgeable on all aspects of IP so they can safeguard and create value, especially given the complexity of today’s multi-jurisdiction and technology driven business environments in which our clients operate,’ stated Benjamin. ‘OLN IP is perfectly positioned to provide strategic counsel and practical assistance to clients to maximise the value of their IP assets.’ 

Gordon Oldham, senior partner, OLN commented, ‘We are delighted to have Benjamin Choi join OLN IP. He brings two decades of commercial IP experience and will lead the new venture together with OLN partner, Vera. We are proud to pioneer OLN IP as an innovative consultancy driving the change in today’s IP market. Along with OLN Online, it is another example of the firm’s commitment to provide a recovering and renewed Hong Kong business community with the IP and legal solutions that it requires.’

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About Benjamin Choi, Managing Director, OLN IP Services Limited (OLN IP)
Benjamin Choi is highly experienced in trade mark prosecution in Hong Kong, China and overseas and in the management of trade mark portfolios for international brands and institutional clients, for over two decades. Apart from handling commercial transactions involving trade marks and other IP assets, he has been engaged in a considerable number of IP due diligence exercises for merger and acquisition projects involving high value IP assets. He also advises on general IP enforcement, passing-off/unfair competition, domain name disputes and data privacy issues. Benjamin is a former President of the Hong Kong Institute of Trade Mark Practitioners and remains actively involved in the Institute’s collaboration with the Intellectual Property Department in IP law and policy review and consultation. He is also on the Steering Committee of the annual Business of IP Asia Forum organized by the Hong Kong Trade Development Council. Outside of Hong Kong, Benjamin is active in INTA (INTA Bulletins Committee Member, Asia Pacific), APAA (Designs Committee Member, HK Group) as well as Marques (IP Emerging Issues Committee Member). For more information on Benjamin’s practice, please click here.

Contact details:
Email: benjamin.choi@oln-ip.com / benjamin.choi@oln-law.com
Tel: (852) 2186 1871

About Vera Sung, Director, OLN IP Services Limited (OLN IP)
Vera is a partner of OLN and heads OLN’s Intellectual Property team in Hong Kong and China. Her practice focuses on trade marks, patents, copyright, domain name disputes, passing-off actions, IP licensing and IP enforcement. Vera has extensive experience in intellectual property registration, prosecution, enforcement, portfolio management and development for multinational companies. Her experience spans a wide variety of sectors, from US government legal departments to corporate clients and charities. Vera was appointed as Chair of East Asia and Pacific Subcommittee of the Law and Regulation Committee for the International Trademark Conference (“INTA”) 2012-2013. She served on the Legislation & Regulation Committee of INTA from 2002 to 2006, and also from 2010 – 2015 term. She also served on INTA’s Geographical Indications Committee from 2007 to 2009. Vera is also an active member of the Asian Patent Attorneys Association (APAA) and Hong Kong Institute of Trade Mark Practitioners (HKITMP). Vera also became a notary public in 2010. For more information on Vera’s practice, please click here.

Contact details:
Email: vera.sung@oln-ip.com / vera.sung@oln-law.com
Tel: (852) 2186 1871

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About OLN
Oldham, Li & Nie (OLN) is a leading independent Hong Kong-based law firm, whose commitment to professional excellence has been the cornerstone of the firm since its creation in 1987. OLN’s practice areas include:
•    Corporate and Commercial
•    Dispute Resolution
•    Insolvency & Restructuring
•    Contentious Intellectual Property
•    Insurance
•    Private Client Services
•    Divorce & Family Law

OLN currently has 45 lawyers, admitted to one or more jurisdictions, including Hong Kong, France, the United Kingdom, the United States, Australia and Canada. OLN has a thriving China practice, driven from our Hong Kong and Shanghai offices and when necessary with our associate legal network in mainland China.

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OLN IP Services Limited (OLN IP) Address:
Suite 28, 3/F, Great Eagle Centre
23 Harbour Road
Wan Chai, Hong Kong
Tel: (852) 2186 1871

New Patent System in Hong Kong

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The Patent (Amendment) Ordinance 2016 and the Patents (General) (Amendment) Rule 2019 will come into effect on 19 December 2019.  It marks the history of Hong Kong that she will have her originally granted patent registration for the first time.

Highlights of Reform of Patent system in Hong Kong

The existing patent system, namely, standard patent and short term patent, will be retained with some refinement of short term patent. 

The new feature of the reform patent system is the introduction of the original grant patent system and some other issues relating to the existing patent system. 

1. Standard patent by original grant (“Standard Patent (O)”)

It is an entire new patent system in Hong Kong.  The applicant can file their standard patent (O) application directly in Hong Kong without first filing the patent application in designated patent office. 

New features:

(1) Direct filing of the patent application with or without priority claim.

(2) Apart from checking minimum requirement on formality, the applicant will need to request for substantive examination within 3 years from the application date or priority date.

(3) The patent will be substantively examined as to its patentability, namely, novelty, inventive step and industrial applicability by examiner in Hong Kong. 

(4) If the examiner considers that the patent lacks of novelty and/or inventive step, he will issue examination notice (and/or further examination notice), and the applicant has to deal with the official objection.  The application will be granted if the applicant can overcome all the objection or it may be provisionally refused if the application does not fulfil the formal requirement.

(5) If the applicant cannot overcome the official objection after examination, provisional refusal will be issued, which is subject to review requested by the applicant. 

(6) Applicant may request for review on provisional refusal notice, and the examiner will issue review opinion (or one or more further review opinion), and the applicant has to overcome the objection.  If the objection can be overcome, patent will be granted. Otherwise, the examiner will issue final refusal notice, subject to appeal to High Court.

2. Standard patent by re-registration (“Standard Patent (R)”)

Standard Patent (R) application in Hong Kong is retained.  The procedure is the same as the existing system, i.e. the application must be based on a designated patent application filed in China, U.K. or Europe designating U.K.  It may simply regard this system as a re-registration system.  The substantive examination of the Standard Patent (R) is conducted by the designated patent office.

The application process is divided into two stages, i.e. 1st Stage – Request to Record must be filed in Hong Kong within 6 months after the date of publication of the designated patent and 2nd Stage – Request for Registration and Grant must be filed in Hong Kong within 6 months after the publication of the request to record in HK; OR, the date of grant of the designated patent, whichever is later.  No grace period is allowed for 1st Stage or 2nd Stage filing.

3. Short term patent (“STP”)

Under the current system, STP application can be filed directly in Hong Kong, subject to examination on the formalities and submission of a search report issued by competent patent registry, e.g. China National Intellectual Property Administration (“CNIPA”).  Proprietor to establish the validity of the patent in enforcement proceedings before the court.  The STP is retained with refinement as follows:

New features:

(1) The application can include 2 independent claims instead of 1 independent claim.

(2) Proprietor or interested party can request for post-grant substantive examination of the short term patent.  If the proprietor wishes to commence enforcement action of an unexamined patent, it is a pre-requisite to have certificate of substantive examination.

(3) If the proprietor cannot overcome the objection raised in the examination notice issued against the short term patent, the examiner will issue provisional revocation notice of the patent, subject to appeal to High Court.

(4) When making a threat of infringement proceedings against a person, the proprietor should furnish with that person the basic patent information.  Otherwise, the threat may be regarded as groundless and a party aggrieved by the threat may be entitled to seek relief.

Filing Tips under the New Patent System

Missing priority deadline –  Possible restoration of priority right if a subsequent standard patent (O) or short-term patent application is filed within 2 months after the expiry of the 12-month priority period   
– Statement of priority and supporting documents may be filed with the Registrar within 16 months from the earliest priority date claimed   
      
Reference to an earlier specified application – An alternative for filing something that appears to be a description of an invention (one of the minimum requirements for obtaining a filing date)   
– Applicant can file a reference to an earlier specified application together with a statement indicating that a description and the drawings (if any) of the invention are completely contained in the specified application   
      
Missing parts of descriptions or drawings – applicant can take its own initiative to file missing parts of description or drawing within 2 months from date of filing OR file the same within 2 months (extendable) from the date of notice   
– If filed within the prescribed period but later than the accorded date of filing, the accorded date of filing may be changed to the date on which the missing parts of the description or missing drawings were filed   
      
Voluntary amendment – may be filed any time before publication; OR   
– at the time of filing request for substantive examination   

4. Other Remarks

i. Regulating certain title or descriptions of Patent Practitioners

Under Patents (Amendment) Ordinance 2016, use of certain titles or descriptions is prohibited:

  • certified patent agent/attorney
  • registered patent agent/attorney
  • a title/description reasonably causing a belief that a person using such title/description holds a qualification that is –

(i) granted for approving that person to provide patent agency services in Hong Kong; and

(ii) recognized by law or endorsed by the Government.

  • Exception: titles/descriptions that solely relate to a person’s qualification for providing patent agency services in jurisdictions outside Hong Kong with clear indication of such jurisdictions is allowed.

ii. Revised official fee for patent filing

  • Concession official fee for e-filing over paper filing, applicable to Standard Patent (O) and STP
  • Inclusion of official fee for request for substantive examination Standard Patent (O) application/STP and request to review Registrar’s opinion on provisional refusal of Standard Patent (O) application or provisional revocation of STP
  • Revision of renewal fee of a standard patent on progressive scale, 1st level for 3rd to 10th year; 2nd level for 11th to 14 year and 3rd level for 15th to 19th year.

iii. New set of patent forms

  • New set of official forms for patent filing will be introduced, e.g. for filing Standard Patent (O), request for substantive examination.  Certain existing official forms are also revised to accommodate the new patent system.

iv. PCT patent

  • Though Hong Kong is not a PCT patent application receiving office, the applicant can claim priority within 12 months from their PCT patent application for the Hong Kong patent application.

Legal Update: Tax Treatment of Payments on Termination of Employment

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In its recent decision in Commissioner of Inland Revenue v Poon Cho Ming, John [2019] HKCFA 38, the Court of Final Appeal revisited the issue of tax implications on terminal or severance payments. It reaffirms the orthodox position in Fuchs v Commissioner of Inland Revenue (2011) 14 HKCFAR 74 that a payment made in return for acting or being an employee is taxable.

Background

Immediately prior to July 2008, the Claimant was employed as an executive director and the Group Chief Financial Officer with a company in Hong Kong. On 18 July 2008, he was informed of the company’s decision to terminate his employment but refused to go quietly. He threatened to bring the matter in front of shareholders and to take his claims to court, which would likely attract media attention and trigger market reaction.        

To avoid acrimonious disputes, the company entered into a Separation Agreement with the Claimant, promising to pay, inter alia, a payment in lieu of any discretionary bonus (the “Sum”) and acceleration of the vesting of certain option shares of the company previously granted to him so that he could exercise those share options (“Share Option Gain”).

Judgment

The test laid down in the Court of Final Appeal’s landmark decision in Fuchs is that a payment has to be paid as a reward for past, present or future services in employment to be classified as income earned in the course of employment, which is chargeable to salaries tax. Everything else is outside the operation of the statute and non-taxable.  

As a matter of substance, the Sum, which was in an arbitrary amount, was of a “wholly different nature” from any discretionary bonus under the employment agreement between the Claimant and his employer. It was decided that the Sum was not a payment to induce the Claimant to provide future services or to reward him for past services. Rather, it was paid with a view to eliminating any possible claim the Claimant might advance against the company. The Court applied the Fuchs test and found that the Sum is not chargeable to tax.

With reference to the Share Option Gain, it was paid under the Separation Agreement, which abrogated any rights that Mr Poon might have under his employment contract. It has been held that sums paid to employees as consideration to or compensation for the total abrogation of contract (Henley v Murray [1950] 31 TC 351 and Comptroller-General of Inland Revenue v Knight [1973] AC 428) are not given to reward past services, and hence non-taxable. In the same vein and consistent with Fuchs, the Share Option Gain was not taxable as it was not paid as a reward for past services.

Implications

This decision clarifies the tax treatment of sums paid in scenarios where an employer terminates the employment of staff and wishes to placate them with payments. Essentially, one must look at the reason for which the money is paid and consider whether it arises out of arrangements in the employment contract. The determination of the nature of such payment becomes a question of fact.

One of the arguments advanced by the Commissioner in the present case was that the “substitution test” from Mairs v Haughey [1994] 1 AC 303 should be applied so that the Sum, made in lieu of bonus, would be considered to take on the nature of a bonus which means the Sum would be regarded as recognition of the Claimant’s past employment services. However, looking at the substance of the Sum, the Court found that the Sum was paid to silence the Claimant and the amount was determined arbitrarily.

The reaffirmed principle in relation to terminal payments is helpful to both employers and employees when they have to negotiate for and structure the drafting of a separation agreement.  It is also essential for the employers and employees to maintain documentary evidence relating to the terminal payments.  

If you have any questions in relation to the above, please contact any member of Employment and Tax Teams or the writer at victor.ng@oln-law.com.

Legal Update: Hong Kong Human Rights and Democracy Act

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The formal relationship between the United States (the “US”) and Hong Kong is based upon the “one country, two systems” framework established in the Basic Law of Hong Kong. The United States-Hong Kong Policy Act of 1992 (the “HK Policy Act”) enacted by the US establishes the US government’s policy of treating Hong Kong as a non-sovereign entity distinct from China for purposes of US-Hong Kong trade and economic cooperation.

On 19th November 2019 following a similar move by the House of Representatives, the US Senate passed the Hong Kong Human Rights and Democracy Act of 2019 (the “HK Human Rights Bill”), which is intended to amend the HK Policy Act. Despite passage by both the House and Senate, however, the HK Human Rights Bill will not become law until the US President signs off on it.

This writer tries to explore key provisions of the HK Human Rights Bill and analyse its potential impact on Hong Kong should it be passed from the commercial point of view.  This article should not form any advice on US laws and legislation.  

Major provisions of the HK Human Rights Bill

  1. The existing HK Policy Act requires the Secretary of State to submit an annual report on US-Hong Kong relationships in terms of bilateral agreements entered into, cultural exchanges and export control cooperation etc. The Human Rights Bill adds additional matters for reporting, including China’s ability to limit Hong Kong’s autonomy, limitations to Hong Kong’s autonomy, and their impact on US-Hong Kong cooperation. 

    The Secretary of State is obliged to submit an annual certification on the status and treatment of Hong Kong under treaties and agreements as to commercial and law enforcement cooperation.
     
  2. Another major amendment to the HK Policy Act is that US visa applicants shall not be denied solely on the basis of the applicants’ past arrest, detention or government action against them as a result of their participation in Hong Kong protests.   
     
  3. The HK Human Rights Bill, if enacted, requires the US President to submit a report to the Congress, assessing whether Hong Kong enforces the US Export Control Reform Act of 2018 and sanctions imposed by the US and the United Nations. The report shall describe goods and services transshipped or re-exported through Hong Kong in violation of such sanctions and relating to terrorism, drugs trafficking or weapons of mass destruction, or other matters that pose a threat to US national security or economy.

    The HK Human Rights Bill particularly provides for scrutiny of whether US-originated technology is transferred to China through Hong Kong in violation of US laws, and which ends up being used in mass surveillance, predictive policing or social credit system in China.  
     
  4. The Secretary of State will have to notify the Congress of any proposed legislation in Hong Kong that may put US citizens at risk of rendition to China or have an adverse impact on US interests in Hong Kong. 
     
  5. Foreign persons regarded as being knowingly responsible for gross violations of human rights in Hong Kong, including arbitrary detention or torture of individuals in Hong Kong, are to be identified in a report to the Congress. The said persons may be subject to sanctions by the US such as freezing of their US properties and barring of entries into the US by themselves and their family members.  

Implications

Should the HK Human Rights Bill be enacted, it entails (and indeed, expands the scope of), among other things, an annual review of the degree of autonomy of Hong Kong, which was the justification for preferential trade and economic benefits as a result of the city’s special status granted under the HK Policy Act – It is indeed with this special status Hong Kong is shielded from tariffs on Chinese goods levied by the US.

Should the special status of Hong Kong be revoked, it would be unavoidable for Hong Kong to suffer a heavy economic blow from various tariffs and import and export restrictions. There is also the possibility of US sanctions imposed on Hong Kong, creating challenges to Hong Kong’s commercial services and potentially unseating it from its position as an international financial hub.

Other benefits afforded by the special status, such as the free currency exchange between Hong Kong and US Dollars, import of sensitive technologies from the US to Hong Kong, and circumvention by Hong Kong residents of visa restrictions that apply to their mainland Chinese counterparts, would likely be cancelled should the HK Human Rights Bill be enacted.

Not only would Hong Kong suffer, but the US-Hong Kong relationship could also be jeopardized. There are currently more than 1,300 US firms operating in Hong Kong. The US trade surplus with Hong Kong is the single largest with a US trading partner, and the US remains a major source of foreign direct investment in Hong Kong. 

From a business perspective, if the HK Human Rights Bill becomes law, we can expect to see a chilling effect on US trade and investments in Hong Kong. While it is unclear how substantial the economic impact it would have on Hong Kong, it is almost certain that Hong Kong’s reputation as a trusted player in the global economy would be adversely affected.

If you are interested to discuss with or want to learn more about how your business may be impacted by different current legal developments, please feel free to contact us atvictor.ng@oln-law.com.

What does it take to void an aircraft lease for common mistake?

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What is meant by common mistake?

The general rule under English law is that a contract is likely to be deemed void if, at the time it was concluded, both parties wrongly assumed a particular state of affairs which for some reason did not in fact exist.

It is also generally accepted that a common mistake cannot occur when one party has made a warranty that a state of affairs exists, with the result that performance of the contract becomes impossible.

The key elements to a common mistake are that the contract becomes impossible to perform, and also the subject matter of the contract becomes “essentially and radically different from the subject matter which the parties believed to exist”.

This rule was examined by the English High Court in the case of Triple Seven MSN 27251 Ltd and Anor v. Azman Air Services Ltd [2018] EWHC 1348.

The facts

In June 2016, the airline (Azman Air Services) entered into separate leases for two Boeing 777’s belonging to a lessor (Triple Seven Ltd). The aircraft were to be used to perform pilgrimage flights to Saudi Arabia from West Africa over a 5-year period. Shortly after the leases were signed however the airline was informed by the Saudi regulator that it would not be licensed to operate these services, even though the Nigerian equivalent had given its approval. The airline therefore refused to accept delivery of the aircraft as a result of the Saudi regulator’s decision, relying on what it said was a ‘common mistake’. Specifically, the airline alleged that both parties believed (or at least understood) that the airline would be approved to operate the pilgrimage flights, and this was the sole purpose for the aircraft agreements. The airline failed to make any rent payments when they became due under the lease. The lessor did not accept that there had been a common mistake and proceeded to bring a claim for damages against the airline having unilaterally terminated the aircraft leases.

The decision

The court considered the key elements of common mistake set out above and applied them to the facts of this case. It was decided that the parties had entered the leases on the assumption that a) the Nigerian regulator had given its approval; b) the Saudi regulator may/may not do likewise; c) the airline was expecting to receive Saudi approval; d) the Saudi regulator had not made its decision at the time the leases were signed.

It was held by the court that whilst there were certain shared mistaken assumptions, they were not sufficiently fundamental, and did not make the leases essentially and radically different from the parties original understanding, nor would they render the agreements impossible to perform. It is worth noting that the Saudi regulator’s failure to approve the proposed services only applied to the first year of the operation. Approval may have been granted for the subsequent periods during the 5-year lease period.

The Judge (Mr Peter Eggers QC) stated that the 2016 pilgrimage was just one such event within the 5-year lease period; the airline could have made significant profit from the remainder of the period; whilst revenue earned from the 2016 pilgrimage was important it was not sufficiently important to the performance of the agreements as a whole, and also there was nothing to suggest that the knock-back for the 2016 pilgrimage by the Saudi regulator would necessarily apply in subsequent years.

The Judge was also persuaded that under the leases there was an allocation of risk (that the Saudi regulator would not provide its approval) to the airline. The leases provided that the airline’s obligations were “absolute and unconditional, irrespective of any contingency or circumstance whatsoever”.

The Judge therefore found for the lessor, awarding them in excess of USD $22million in damages for breach of contract.

Practice points

  • Make allowance for any risks which are specific to the performance of the contract when negotiating with your opposite party.
  • Draft appropriately. Make sure that the contract provides for, and apportions the risk that an expected set of circumstances (which are crucial to the performance of the contract) do not occur.
  • Don’t waste time attempting to argue common mistake if the contract imposes absolute or unequivocal obligations.

Contact

To discuss any issues raised by this article, or any other issues relating to an aviation commercial dispute then please contact me – gdoldham@oln-law.com

*Disclaimer – the views expressed in this article are those of the writer, and not necessarily those of the firm.