Hong Kong has long been one of the top markets for fashion goods. In recent years, the fashion industry in Hong Kong has been hit hard by social unrest and the COVID-19 outbreak. In the first three quarters in 2020, the number of tourists dropped by over 90% according to the World Tourism Organization (UNWTO). On the other hand, the value of clothing export from Hong Kong fell by 34% to US$8.24 billion due to regional competition, according to the Hong Kong Trade Development Council (HKTDC) research. However, with its duty-free policy and robust IP protection regime, Hong Kong has proven to be a resilient market and has shown signs of recovery as the city starts embracing the paradigm shift to e-commerce.
1 . What are the main intellectual property legal tools available to protect fashion products?
1.1. Trademarks and non-traditional trademarks
A trade mark in Hong Kong is defined in the Trade Marks Ordinance (Cap. 559) (TMO) as any sign which is capable of distinguishing the goods or services of one undertaking from those of other undertakings and which is capable of being represented graphically. Registration of a trade mark is valid for 10 years and may be renewed for further periods of 10 years.
Colour mark. Colours do not normally have the capacity to indicate the origin of the goods from the consumers’ perspective (and hence subject to challenge of lack of distinctiveness). While many fashion brands use a specific colour to identify their products, unless the mark is for very specific goods for a very specific clientele, or comprises a colour or shade which is extremely unusual and peculiar in the relevant trade, evidence will normally be required to establish factual distinctiveness. In such cases, the burden of proof is likely to be substantial. Therefore, it is advisable to consider adding a graphic or text element in the application for registration for a colour mark.
Black/White mark. Black/white marks are protected in Hong Kong in the following ways:
- A black/white mark and its coloured version can be registered as a series of trade marks if the colour scheme adopted in the latter (which is the only difference between the two versions) is regarded as a matter of non-distinctive character which does not substantially affect the identity of the trade mark.
- Even if a black/white mark is used in colour, its registered proprietor can still adduce evidence of such use to oppose an application for registration of a later mark.
- The registration of a black/white mark affords protection against the use of offending signs in any colour, provided that the registered proprietor can successfully establish the similarity between the registered trade mark and the offending sign.
Pattern mark. Pattern marks can be registered if they are identified by the public to indicate the origin of the fashion products. Evidence is needed to show that the patterns do not only serve decorative purposes. See the section Frequently asked questions below for further details on how to protect IPRs in pattern prints.
Position mark. Generally, a position mark is understood as a trade mark consisting of the specific way in which the mark is placed on or affixed to the goods. It is a common form of “non-traditional marks” in the fashion industry, especially for embellishments of wearables.
Shape marks. Generally, there is no material difference between a two-dimensional and a three-dimensional shape mark for the purpose of examination. A sign is not registrable in relation to goods if it consists exclusively of:
- a 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.
“Made in”. When registering signs of “Made in [e.g. Hong Kong]”, it should be noted that marks consisting exclusively of geographical origins are not registrable. Also, fashion brands are advised to make sure that the “Made in” sign accurately designates the geographical origin, otherwise it will be regarded as deceptive and not registrable.
Unregistered marks. An unregistered mark is entitled to limited protection in Hong Kong. In some circumstances, the owner of a well-known trade mark may oppose to the registration of an identical or similar trade mark or apply for an injunction against the use of an identical or similar trade mark by another person. Where there is a goodwill associated with the unregistered trade mark, the mark is also protected by the common law action of passing off.
1.2. Design as an alternative or addition to TM registration
Fashion designs are also protected under the Registered Design Ordinance (Cap. 522) (RDO), which offers registered design owners a right to prevent others from manufacturing, importing, using, selling or hiring the design product in Hong Kong. Jewellery and watch designs are commonly protected by design registration. To distinguish one design from another for the purpose of the RDO, a design can be understood as any feature of shape, configuration, pattern or ornament applied to a finished product by any industrial process. Hence, both two-dimensional drawings and three-dimensional models are protected, provided that they are new, have eye appeal, and are not contrary to public order or morality. Once registered, the protection will last for 5 years and is extendable for additional periods of 5 years (up to a maximum of 25 years).
1.3. Copyright as an alternative or addition to TM registration
Fashion drawings, sketches, etc. are artistic works that enjoy protection under the Copyright Ordinance (Cap. 528) (CO), provided they satisfy the requirements of originality and labour, skill and effort. No aesthetic element is required for the work to be copyrighted. The CO has adopted an open copyright system, i.e. the author need not be domiciled, resident or incorporated in Hong Kong to own Hong Kong copyright. Once published, fashion drawings, sketches, pattern prints and so on will be protected by copyright throughout the life of the author, plus 50 years from the end of the calendar year in which the author dies.
1.4. Any other pertinent IP rights?
1.5. Summary of additional IPRs
|IPR in Hong Kong||Duration||Time and modalities for grant||Pros and cons in the fashion sector|
Standard Patent: 20 years from date of filing.
Short-term patent (less stringent examination process and lower grant threshold): 8 years from date of filing.
Applications are to be made to the Hong Kong Registrar of Patents.
Standard patent (O) (i.e. original grant). Application will be subject to formality and substantive examinations, which normally take at least 2 to 3 years.
Standard patent (R) (i.e. by re-registration of prior grant of a corresponding patent by the Chinese National Intellectual Property Administration, the UK Patent Office, or (in respect of a patent application designating the UK) the European Patent Office (still applicable after BREXIT)). Application normally takes about 3 months.
Short term patents. Application normally takes about 3 months.
Pros: a strong fixed term exclusivity in the market.
Cons: Limited scope of protection in the sense that:
|Trade secrets||With properly drafted confidentiality provisions, protection can be agreed for an indefinite period.|
Trade secrets are mostly relevant in the employment context. A trade secret must be information:
Pros: wide range of remedies against misappropriation, e.g. compensation for breach of contract (provided with proper confidentiality provision) or breach of confidence, injunction, and accounts of profits.
Cons: availability of legal protection is fact-sensitive and can be uncertain in some cases.
Domain names (“.hk” or
Registrations for Hong Kong domain names are valid and can be renewed for periods of
1 – 10 years (depending on contract period with the Hong Kong Domain Name Registration Company Limited).
Disputes over a Hong Kong domain name can normally be resolved by arbitration in around 2 months from the point of complaint.
Pros: quick and inexpensive.
Cons: protection limited to Hong Kong domain names.
2 . Beyond intellectual property: what contractual arrangements are useful in manufacturing, distributing and advertising fashion products?
2.1. Manufacturing fashion products
Licence agreements and Non-Disclosure Agreements (NDAs). External manufacturers engaged by fashion companies will be using the latter’s IPRs in the course of production and hence a licence is needed to authorise such use.
A trade mark licence must be in writing and signed by or on behalf of the grantor in order to be effective. There is no legal requirement to register a trade mark licence, but an unregistered licensee will not be able to take advantage of an array of protections and benefits under the TMO (an unregistered licence is ineffective against anyone acquiring a conflicting interest in or under the registered trade mark without knowledge of the licence). Likewise, where an exclusive licence of registered design is unregistered, the exclusive licensee’s right to recover damages or profits for infringements will be restricted.
A non-disclosure agreement (NDA) is helpful in preserving the confidentiality of fashion designs before a product launch. Usual provisions include scope of confidential information, confidentiality obligations, permitted/mandatory disclosures, return/destruction of confidential information, acknowledgment of the inadequacy of damages (to justify a request for injunction or specific performance), duration of confidentiality.
Subcontract agreements / in-house manufacturing. It is not unusual for manufacturers to delegate their obligations to further downstream in the value chain. The main contractor remains liable to their customer unless there are effective provisions “novating” their obligations to the subcontractors, which requires consent by the original customer.
Where fashion companies decide to move their production lines in-house, it is important to put in place an NDA to prevent their employees from leaking confidential information, including design drawings and sketches, manufacturing methods, product specifications, business strategies, supplier lists and material sourcing terms etc.
2.2. Distributing fashion products
Agency agreement. Agency agreements are governed by contract law and agency law. An agent is a person who has the authority or capacity to create legal relations between their principal and third parties. An agent has an obligation to comply with the principal’s instructions and to exercise due care, skill and diligence etc.
In distributing fashion goods, an agent is often required to maintain applicable licences, registration and permits (e.g. import licences for the entry of the goods into Hong Kong). Agents may also be licensed to use the principal’s IP, and hence a clause requiring the agents to take all reasonable steps to assist in maintaining the principal’s IPRs is essential. On the other hand, there will often be provisions requiring the principal to indemnify the agent against any liabilities which the latter may incur as a result of acting as agent. To limit the liabilities, fashion companies may stipulate that no indemnity would be provided unless the agent acts with reasonable care and/or has obtained proper approval from the principal before incurring a certain amount of expense.
Where a mercantile agent (i.e. an agent that has the authority to sell (or consign for sale) goods, or to buy goods, or to raise money on the security of goods, in the customary course of business as such agent) is engaged, such arrangement will be further governed by the Factors Ordinance (Cap. 48).
Selective distribution online in high-end fashion and trademark protection. To maintain brand image, high-end fashion brands regularly deploy a selective distribution system, whereby the supplier would only provide their products to certain distributors. These distributors may be picked by criteria, e.g. financial stability and profitability. As the burgeoning trend of e-commerce is catalysed by social restrictions, luxury brands are eager to capture the economic benefits in the new normal while preserving their prestige and exclusivity. Given the versatile nature of online sales and promotions, fashion suppliers are required to provide extensive IPR licences for advertisements and promotional activities, whereas distributors have to acknowledge the suppliers’ ownership of such IPR. It is also important to be mindful of the pitfalls from the perspective of competition law.
Other common provisions include exclusivity, duration, product specification, orders and volumes, obligation of distribution, advertisement and promotion, payment terms. As COVID-19 unprecedentedly disrupted the supply chain, it is expected that both fashion brands and distributors will pay more attention when drafting force majeure provisions.
Co-branding and co-marketing. Co-branding and co-marketing are powerful tools that enable both brands to tap into the client base of each other and integrate their best features in driving innovation.
In those cases, an arrangement of trade marks’ cross-licensing is common. Alternatively, one brand (licensor) may license some of its trade marks to another (licensee) and authorise the licensee to lead the campaign. Fashion brands are reminded to carefully delineate the scope of licensed IPRs and their permitted use, as well as the ownership of any derivative IPRs that arise from collaboration. Fashion brands may also want to retain control by requiring any publication or product launch to be subject to their prior approval.
Economic benefits obtainable from the project may be governed by a guaranteed royalty or revenue sharing arrangement (or both).
2.3. Advertising fashion products
Employing fashion models. When employing fashion models, fashion brands should ensure the agreement clearly defines the scope of the models and their talent agents’ obligations (e.g. still photo images, videos). It is also important to obtain a release from the liabilities for use of the models’ images and any potential claims of passing off.
Social media, influencers and brand ambassadors/celebrities. Eager to enhance their hit rates and capitalise on the fashion brands’ prestige, influencers sometimes fail to sufficiently disclose their commercial relationship with the brands and provide accurate product information as they create paid contents. To avoid allegations of unfair trade practice or misleading omission under the Trade Descriptions Ordinance (Cap. 362) (TDO), fashion brands may incorporate their disclosure best practice into the engagement contract, for example to:
- directly state the commercial relationship / intent;
- disclose the type of compensation received (paid content / free samples); and
- deliver clear messages in “hashtags” (“#Sponsored” instead of “#Thanks[brand]”).
Influencers will usually be the creators of promotional works. If fashion brands anticipate any future use of those works after the engagement terminates, they should set out whether the promotional works are commissioned (and to whom the copyright should belong), or put in place a licence to use the promotional works.
Where the influencers’ conduct attracts negative publicity it may reflect unfavourably on the fashion brands they are working with, even though it may be unrelated to the engagement at all. To mitigate this risk, fashion brands can include appropriate warranties and representations on the influencers’ characters and conduct, and a right to terminate the engagement if the influencers’ conduct affects the image of the fashion brands.
Advertising standards, relevant authorities and advertising practice. There is no dedicated advertising authority or advertising practice for the fashion industry in Hong Kong. There are specific legislations, regulations, and codes of practice setting advertising standards for certain sectors (e.g. medicine, tobacco products, gambling, and radio and television programme services) but not for the fashion sector.
Under the TDO, the fashion sector must not provide false trade description, false, misleading or incomplete information, false marks and misstatements in respect of goods or services provided in the course of trade.
The Personal Data (Privacy) Ordinance (Cap. 486) (PDPO) provides that, where retail companies wish to use a customer’s personal data (e.g. contact information) for direct marketing purposes, they should first inform the customer that their personal data would be used for direct marketing, obtain consent from the customer, and provide a way for the customer to opt out.
3 . What regulations govern online marketing and how are the rules enforced?
Hong Kong does not have a unitary body of regulations for online marketing. As alluded above, the TDO prohibits several unfair trade practices, examples that are particularly relevant for online marketing are:
- misleading omissions of material information;
- bait advertising;
- bait and switch;
- wrongly accepting payment; and
- using aggressive sales techniques.
The TDO is enforced by the Customs and Excise Department (the Customs), who has the power to apply for an injunction against offending traders, or even institute criminal proceedings for serious contraventions. In some cases, the Customs would accept an undertaking from the online trader to cease and not to repeat the unfair trade practice.
3.1. Consumer protection regulations
The most relevant consumer protection rules applicable to the fashion sector are:
- the Consumer Goods Safety Ordinance (Cap. 456) which requires suppliers, manufacturers and importers of consumer goods (including fashion goods) to ensure the goods comply with certain general safety requirements or any applicable approved standards;
- the Sales of Goods Ordinance (Cap. 26) which provides for an implied condition that goods for sale must be of merchantable quality, be reasonably fit for the purposes of purchase, correspond with the description, and (in case of a bulk purchase) correspond with its sample; and
- common law rules of contract and tort.
3.2. Physical store and online store layout
Store layouts are protected by the copyright law in Hong Kong as artistic works. The same applies to online store layout. Online store layout may also be protected by the law of registered design as graphical user interface.
4 . What are the most relevant unfair competition rules for fashion businesses and how do the Courts interpret and enforce these rules?
The Competition Ordinance (Cap. 619) prohibits anti-competition agreements or concerted parties and abuse of market power. Examples of anti-competitive behaviour are more often found in the sale or distribution of luxury and fashion goods in Hong Kong, in particular:
- vertical price restrictions, e.g. resale price maintenance or recommended/maximum price;
- exclusive distribution and exclusive customer allocation;
- anticompetitive tying and bundling;
- exclusive dealing;
- predatory pricing; and
- limiting or controlling production, markets, technical development.
There has not been any enforcement action against any fashion company, possibly because by their nature fashion companies have little incentive in respect of cartel or bid-rigging.
5 . Is there any regulation specifically addressing sustainability or ESG (Environmental, Social and Governance) in the fashion industry?
The fashion industry is not subject to any specific sustainability related regulations in Hong Kong. The Hong Kong Companies Ordinance (Cap. 622) requires public companies and larger private companies to include in their annual reports a discussion on their environmental policies and performance, and an account of their key relationships with employees, customers and suppliers and others that have a significant impact on these companies and on which these companies’ success depends. Companies listed in Hong Kong are further required to publish an annual “ESG” Report on the following elements:
- environmental: emissions, use of resources, environmental and natural resources, climate change;
- social: employment, health and safety, development and training, labour standards;
- operating practices: supply chain management, product responsibility, anti-corruption; and
- community investment.
ISO certification. The fashion industry is not subject to any specific ISO certification for sustainability. One example of suitability-related ISO certification is ISO 14855 (determination of ultimate aerobic biodegradability for plastic materials).
6 . Customs monitoring: do any special import and export rules apply to fashion products?
Fashion goods are not subject to any specific import and export controls in Hong Kong. Importers of fashion goods are required to complete customs clearance and declaration procedures with the Customs. A charge based on the value of the fashion goods (capped at HK$200 as of 2021) will be applied except for articles exempted from declaration charge.
In late 2020, the US government posted a notice requiring goods made in Hong Kong for export to the United States to be labelled as “Made in China” after 25 September 2020. The World Trade Organisation Dispute Settlement Body has established a panel to examine this labelling requirement.
7 . Frequently Asked Questions
Are there any inexpensive means of enforcement of IP rights in Hong Kong?
The Customs is the only enforcement agency tasked with criminal sanctions against copyright and trade mark infringements in Hong Kong. Rights owners who are aware of infringement activities are highly recommended to get assistance from the Customs by completing an IPR recordation procedure, whereby the rights owners have to provide proof of ownership of copyright or trade mark registration and information of infringement, and undertake to assist the Customs in investigation. Once the recordation is complete, the enforcement action by the Customs is usually effective (given the deterrent effect of criminal sanctions).
How are pattern prints protected in Hong Kong?
Pattern prints can be protected by trade mark registration, design registration or copyright, each having its pros and cons. Trade mark registration is less costly than design registration, but it can be difficult to particularise the elements protected in order to substantiate distinctiveness. Patterns are expressly referred to as a design registrable but the owner has to establish novelty in the design. Finally, copyright affords the longest period of protection but the lack of a registration system can give rise to uncertainty in enforcement actions.
What are the pitfalls that fashion brands should be aware of as they deploy e-commerce solutions in Hong Kong?
The trend of personalised content and targeted advertisement is now gaining momentum, and the use of advertising technology (ADTech) solutions that track customers’ online behaviour adds impetus to this trend. The information gathered by these means may constitute personal data if: (a) it relates directly or indirectly to the customers; (b) it is practicable for the customers’ identity to be directly or indirectly ascertained; and (c) it is in a form in which access to or processing is practicable. Marketers for fashion products are advised to consult the Online Behavioural Tracking information leaflet to ensure compliance with the PDPO.