OLN

Test Blog

Employment Issues Arising from Social Events

by

Since June 2019, there have been an ongoing series of demonstrations and protests in Hong Kong (the “Protests”) against the enactment of the Fugitive Offenders and Mutual Legal Assistance in Criminal Matters Legislation (Amendment) Bill (the “Extradition Bill”).  The Extradition Bill, if enacted, would allow local authorities to detain and extradite criminal fugitives who are wanted in territories with which Hong Kong does not currently have extradition agreements, including Taiwan and mainland China.

The Protests have dragged Hongkongers with different political views into tensions, which occur in families and workplace and between friends.

Over the months, there were reported and repeated news on respective employer’s decisions to terminate employees, allegedly based on the supportive messages or acts of those employees in the Protests.

These included pilots and flight attendants hired by a Hong Kong airline; producers and artists of TV broadcasting company; in-house lawyer of an investment bank and so on.  There was also a complaint against a trainee solicitor which almost affected his admission as a solicitor of Hong Kong.

Are employers entitled to terminate employment due to employees’ political views on social media or involvement in social activities like the Protests?

The right to freedom of speech or expression is enshrined in Article 27 of the Basic Law and Article 16 of the Bill of Rights. However, these rights are not absolute.  Any statement of speech damaging to national sovereignty, national security and territorial integrity is a violation of the constitutional and legal bases for the Basic Law.

Under common law, an employment contract can be terminated by reason of frustration, such as imprisonment of an employee, which renders the performance of the contract impossible.

Separately, under the Employment Ordinance, either the employer or the employee can unilaterally terminate an employment contract without providing a reason of such.

It is therefore not unlawful for an employer to terminate an employment contract of its employee if the employee was involved in an illegal act and got sanctioned, or in the other cases, to simply serve notice of termination or make payment in lieu of such notice without providing a reason for the termination. 

In reality, employers facing employees of different political views or getting involved in vigorous social activities, whether or not these affect the proper performance of their work duties, can simply give notice of termination or make a payment in lieu of notice to terminate their employment contracts.  

Guidance to employers

Considering the potential ongoing series of Protests, it is high time for employers to revisit their in-house policies to ensure that they have clear guidelines on employees’ personal conduct which may affect the proper performance of work duties, inter alias, including the use of social media (whether personal or corporate account), internal and external communications, and employees’ involvement in social activities.

Employers should be aware that on setting out their policies and guidelines, respect on the personal life, privacy and rights of freedom of speech of employees should be observed.  There should also be policies to ensure that no discrimination acts due to the differences in political views between staff members, like bullying and verbal assaults, would occur in the workplace or if does occur, can be properly dealt with.

If it has come to a situation where an employer needs to consider termination of employment due to the employee having been involved in any illegal act or his/her involvement in any social events has deterred the proper performance of his/her work duties, the employer has to consider the proper grounds of termination or whether one should be given at all.

It is notable that Hongkongers are becoming more sensitive to the political position of corporate entities regarding the Protests.  Employers should consider the reputation risks in taking any action against employees being involved in the Protests or alike, among all other considerations.

Guidance to employees

Recent instances of companies taking disciplinary actions against employees also serve as a reminder that the use of social media comes with responsibilities. Offensive statements, personal attacks or distasteful comments should generally be avoided as a matter of respect for others.

While balancing basic human rights and respect of personal life, employees should also recognize that enjoyment of technology in this age also brings intrusion upon personal privacy to some degree.

Employees may argue that acts done in private should not be regulated by their employers, it should be recognized that certain personal conduct of employees would bring about damage to the employer’s reputation and lead to operational disrupt.

We could recall that the Civil Aviation Administration of China requested Hong Kong airlines to provide lists of crew members involved in the Protests and would ban flights having those crew members from landing in the PRC or passing through the PRC airspace.  This left the employers with no choice but to terminate the employees in concern since the employees could no longer perform their duties properly.

If you are, as an employee, facing discrimination in the workplace or even termination due to your involvement in any social or political activity or expression of political views, you are advised to seek independent legal advice.

If you, whether an employer or employee, have any question regarding the topic discussed or on other employment issues, please contact one of the members of our Employment Practice Group.

OLN Ranked in Chambers 2019 (Global and Asia-Pacific)

by

We are glad to announce OLN departments and lawyers have been ranked in Chambers Global and Asia Pacific 2019.

Chambers Global

Departments:

  • Corporate / M&A: Independent Hong Kong Firms – Band 2
  • Dispute Resolution (International Firms) – Recognised Practitioner

Lawyers:

  • Gordon Oldham, Corporate / M&A – Senior Statespeople
  • Tracy Yip, Corporate / M&A – Band 2
  • Richard Healy, Dispute Resolution – Band 4
  • Vera Sung, Intellectual Property – Recognised Practitioner

Chambers Asia Pacific

Departments:

  • Corporate / M&A: Independent Hong Kong Firms – Band 2
  • Dispute Resolution: Litigation (International Firms) – Recognised Practitioner
  • Employment: Hong Kong Law (International Firms) – Band 3
  • Family / Matrimonial (International Firms) – Band 3

Lawyers:

  • Gordon Oldham, Corporate / M&A – Senior Statespeople
  • Tracy Yip, Corporate / M&A – Band 2
  • Richard Healy, Dispute Resolution: Litigation – Band 4
  • Stephen Peaker, Family / Matrimonial – Band 3
  • Vera Sung, Intellectual Property – Recognised Practitioner

About Chambers Rankings

Chambers rankings offer reliable recommendations on the best law firms and lawyers around the globe and in Asia-Pacific. Chambers has been the leading source of legal market intelligence for over 30 years now. Especially in the Asia-Pacific-wide rankings it covers the most internationally important areas of law, such as Arbitration, Capital Markets, and Corporate / M&A.

International Bar Association Annual Conference 2019 in Seoul

by

The International Bar Association (IBA) Annual Conference is the premier conference for legal professionals worldwide to meet, share knowledge, network, build contacts and develop business. It also serves to advance the development of law and its role in business and society and to learn from the experience of others. This year, the conference had been held at the COEX Convention & Exhibition Center in Seoul on the 22-27 September 2019.

Anna Chan, Head of the Tax Advisory, Partner, has been invited to be the panelist speaker on the topic “Shadow Banking and its tax implication”. The session was well attended with over 50 officers and delegates all of whom are themselves tax experts of their home jurisdictions. Issues such as availability of tax incentives, risk of transparent entities, withholding tax on interest, interplay of DTA have been covered. Amongst the speakers, we have leading tax experts from the Netherlands, US, Canada, Germany and Luxembourg. The presentation has received lots of positive feedback.

Legal Challenges of using Robotic Process Automation (RPA)

by

With the advance of technology, a lot of audit firms have been using Robotic Process Automation (RPA) in auditing. However, notwithstanding the advantages brought along by RPA, audit firms would at the same time be exposed to certain legal risks.

Anna Chan, Head of Tax Advisory, Partner, has recently given a talk at the Accounting & Finance Show HK 2019 on legal challenges relating to Robotic Process Automation (RPA) in accounting. The seminar focused on different means to mitigate legal risks in using RPA and demonstrated how audit firms can protect themselves through careful drafting of agreements in the aspects of intellectual properties issue, the liabilities allocation, data privacy and confidentiality.

The seminar was a great success with over 50 delegates from the Accounting and Finance industry attended.

Legal Update: Hong Kong-Guangdong Framework Agreement on Legal Exchange and Mutual Learning

by

On September 7 2019, the Department of Justice entered into a framework agreement with the High People’s Court of Guangdong Province to facilitate the exchange and mutual learning by legal professionals in Hong Kong and Guangdong (the “Agreement”).

The Agreement

Hong Kong has been playing a vital role in the development of the Greater Bay Area. This Agreement takes it one step further by providing a platform for the Hong Kong legal sector to engage in meaningful exchange with its Guangdong counterpart, and to leverage opportunities in the Greater Bay Area.

Under the Agreement,  

  • Courts in Guangdong and legal bodies in Hong Kong will launch projects on legal aspects for mutual exchanges and collaboration for the enhancement of the legal development and safeguard in the Greater Bay Area; and
  • Mutual learning opportunities such as seminars will be held for judicial members and legal practitioners in both jurisdictions to forge a better understanding of each other’s legal system.

Implications

  • A communication mechanism between Guangdong and Hong Kong for the exchange of legal information encourages mutual undertaking on our respective legal system, which will be essential for the implementation of any future cross-boundary co-operation projects that must be underpinned by legislation and firmly rooted in the overarching principle of “One Country, Two Systems” enshrined in the Basic Law.
  • Given the growing economic and trading activities between Hong Kong and mainland China, mutual understanding of each other’s legal principles will help advocates in the Greater Bay Area better grasp the legal issues, expediting the process of dispute resolution.

Conclusion

The Agreement, when viewed in conjunction with the Legislative Council paper “Opportunities for Hong Kong’s Legal and Dispute Resolution Services in the Greater Bay Area” issued in March 2019, can be acknowledged as an attempt to speed up the legal cooperation in the Greater Bay Area that is commensurate with the development of an open economy.   

If you have any questions on the above or on any corporate and commercial law issues, please contact one of the members of the Corporate and Commercial Law team.

Effects on use of a trademark as OEM in China

by

With the rapid opening policy development of China, which has attracted more and more international brand owners to manufacture their products in China, called Original Equipment Manufacturer (“OEM”), the opinions on whether use of a trademark as OEM constitutes trademark infringement or whether it is sufficient to defend a non-use cancellation have been gradually developed, i.e. from infringing to not infringing in infringement proceedings, and from being valid to being invalid in non-use cancellation proceedings.

Use of a Trademark as OEM in Infringement Proceedings

It has been arguable that whether using a trademark as OEM and the OEM manufactured goods bearing the trademark without selling/circulation in the marketplace in China would constitute trademark infringement in China. Further, there is no specific law and rules regarding to this issue.

However, we can find some practical guidance by taking reference to some precedents, in particular the landmark PRETUL case (the Supreme People’s Court – No. 2014 – 38). The Supreme People’s Court (“SPC”) re-tried the case, and ruled that use of the PRETUL trademark as OEM does not constitute trademark infringement, on the grounds that the act of physically affixing the trademark to the manufactured goods is not deemed as the valid use of a trademark because such act does not function as an identifier distinguishing the source of goods in accordance with the PRC Trademark Law.

“Article 48 For the purpose of this Law, the use of trademarks shall refer to the use of trademarks on goods, the packaging or containers of goods and the transaction documents of goods, as well as the use of trademarks for advertising, exhibition and other commercial activities for the purpose of identifying the sources of goods.”

In addition, in the PRIME GUARD case (Ningbo Intermediate People’s Court – No. 2017- 02 – 4182), Ningbo Intermediate People’s Court also ruled that use of the trademark as OEM does not constitute trademark infringement, in which the main reasoning follows the landmark PRETUL case as above-mentioned.  

Moreover, in one of our client’s cases, our client’s OEM manufacturer was sued for trademark infringement by a local company who registered a trademark similar to our client’s trademark in respect of same/similar goods in China, we have submitted the following evidence including but not limited to Ningbo Beilun District Court in the first instance in support of our case:

  1. Registration Certificate of the trademark (“Local Reg.”) on the detained goods in the country where the Exported Goods were shipped to;
  2. OEM/Commissioned Manufacturing Contract entered between the manufacturer and the trademark owner of the Local Reg.; and
  3. Other evidence shows the Local Reg. has the legitimated trademark rights of the client’s trademark on the Manufactured/Exported Goods, and the Exported Goods are solely sold directly to the owner of Local Reg, but not in China etc.

We received a Judgment that is in favor of our client’s OEM from Ningbo Beilun District Court, ruling that their manufacturer use of the client’s trademark is an OEM act, and such act does not constitute infringement to the Plaintiff’s trademark rights.

The plaintiff further appealed before Ningbo Intermediate People’s Court. In the second instance, apart from the evidence 1-3 above, we supplemented evidence to enhance that the manufacturer use of the client’s mark is an OEM act and the client, who registered the Local Reg., has the trademark rights on the Exported Goods. Besides, we cited the two precedents i.e. the PRETUL case and the PRIME GUARD case in support our client’s OEM’s case.

We have just received the Appeal Decision that is in favor of our client’s OEM, in which Ningbo Intermediate People’s Court ruled that the plaintiff’s appeal is without merits and the facts affirmed in the first instance are certain and the laws applied are correct. Hence, Ninbo Intermediate People’s Court ruled that:

  • the Plaintiff’s Appeal be dismissed;
  • the Decision made in the first instance be maintained.          

Comment

In brief, to assess the infringement, the Courts primarily take into consideration the following facts:

  • Whether the manufacturer has ever been legally authorized to manufacture the products;
  • Whether the manufacturer has fulfilled duty of reasonable care;
  • Whether the use of the mark by the manufacturer confuses the customers as to the trade origin of the products;
  • Whether the manufacturer has intention of infringing the Plaintiff’s trademark rights.

Based on the current practice and the precedents, including but not limited the aforesaid cased, it is very likely that the Chinese court will rule that use of trademarks as OEM does not constitute trademark infringement if the manufactured goods are solely exported to the country of origin of the Local Reg. and the goods are not sold/circulated in China market.

OEM Use to defend Non-use Cancellation Proceedings

The issue that whether the use of a registered trademark as OEM is adequate to defend a non-use cancellation is disputed in China. Further, there is no relevant law set down to solve this issue.

In practice, some earlier precedents show that a registered trademark used on manufactured goods could be considered as valid use, so that it could defend a non-use cancellation. Whereas, some recent precedents shows such use was deemed as invalid, resulting from which the registration of the trademark will be canceled and removed from the register.

Use of a registered trademark as OEM is valid

In the SCALEXTRIC appeal case (Beijing High People’s Court – No. 2010 – 265), Beijing First Intermediate People’s Court ruled that the TRAB’s decision (No. 4077) be maintained and the registration of SCALEXTRIC be removed from the register on the grounds that the manufacturer use of the trademark as OEM does not comply with the use requirement of trademarks under the PRC Trademark Law. However, in the second instance, Beijing High People’s Court overturned the Decision made in the first instance by taking into full consideration of the user evidence of the OEM submitted and ruled that:

  • Beijing First Intermediate Court’s Decision (No. 2009 – 01840) be withdrawn;
  • The TRAB’s decision (No. 4077) be withdrawn;
  • The Trademark Office re-visit the non-use cancellation on registration of SCALEXTRIC (Reg. No.731233); and
  • The TRAB bears the entire official fees charged for both the first instance and the second instance.

In this case, Beijing High People’s Court ruled that the manufacturer use of the trademark as OEM is valid, and thus maintained the registration on the register

One interesting point to note is that the Beijing High People’s Court also ruled that: if use of a trademark as OEM is regarded invalid, this will be as the grounds for third parties to challenge the trademark via non-use cancellation. If so, this may result in the legitimate trademark being cancelled and removed from the register, which may prejudice to the registrant/right brand holder’s rights.

Use of a registered trademark as OEM is invalid

Nevertheless, on the contrary, in a latest case, i.e. the MANGO case (Beijing High People’s Court – No. 2016 – 5003), Beijing High People’s Court re-affirmed that use of the trademark “MANGO” as OEM is invalid under the PRC Trademarks on the grounds as follows:

  • Use of the trademark “MANGO” as OEM does not function as an identifier distinguishing the source of goods in the marketplace;
  • All the evidence submitted in both first instance and second instance is not adequate to prove the manufacturer use of the trademark, which complies with the requirement of the actual commercial use of a trademark in market circulation; and
  • Beijing First Middle Court’s Decision (No. 2015 -1249) cancelling/removing registration of the trademark “MANGO” from the register is not without merits.

Hence, Beijing High Court ruled to maintain the Decision (No. 2015 -1249) cancelling/removing registration of the trademark “MANGO” from the register.

Comment

It has been arguable that only manufacturing is sufficient to defend a non-use cancellation. However, according the MANGO case as above-mentioned, to effectively defend a non-use cancellation, we opine sales of the goods bearing the registered trademark in China market is advisable. Otherwise, only use of a trademark as OEM is unlikely to be prevailed in non-use cancellation proceedings, if the registration is challenged by a third party. Therefore, if there is no sales evidence in China, the registrant may consider re-registering the mark in every 3-year interval. 

One meaningful and key point to note is that Beijing High Court cited the landmark PRETUL case in support of the reasoning of the MANGO case, addressing that though the applicable articles of the PRC Trademark Law for these two cases are different, the nature of the legal concepts stipulated under the same law shall be treated and applied in the same way; otherwise contradictions/conflicts will be inevitably caused. This is because in the same way, use of a trademark is deemed as invalid in trademark infringement proceedings as ruled by the SPC in the PRETUL case. Thus, under the same concept of use of trademark and use of a trademark as OEM, the use of the trademark as OEM in the PRETUL case is invalid so does it in the MANGO non-use cancellation proceedings.

Although China adopts case-by-case principle and the Courts change practice time to time, we believe that the trend of citing precedents in support of similar cases is gradually increased, which is playing a significant role, in particulars, those ruled by the SPC.

We will continue observing the development of the impacts on the use of a trademark as OEM in China. Lastly, to obviate the risk of trademark infringement and protect your trademark rights in China, it is always advisable to seek professional advice/assistance before starting OEM.