Hong Kong IP Law Blog

Kung Kin Wing & Anor v Splendid Profit International Holdings Ltd & Ors

HCIP 78/2019; [2020] HKCFI 894

I. What has happened in the case?

Kung founded a “Sour and Spicy Noodle” business in 2008 and devised the associated trade name and trade mark. In 2009, Chan invested $6 million into the business, and a Written Agreement recorded the terms of this joint venture. A company, SS Noodle, was later incorporated to operate the expanding business, and the trade mark was registered in Kung’s own name in 2010 — though SS Noodle paid the registration fees. The business grew into a large franchise operation and was eventually restructured for a planned stock market listing under a newly incorporated company, Splendid Profit. In 2019, a falling-out occurred: Chan removed Kung from management, and Kung then began a rival “consignment” noodle business using the same mark, prompting infringement proceedings by Kung against Chan’s camp, met by a counterclaim asserting that Chan’s camp (not Kung) beneficially owned the mark.

The central factual dispute was whether, properly construed, the 2009 Written Agreement placed the trade mark, trade name and goodwill into the joint venture, or whether Kung retained personal ownership and merely licensed the business to use it. Lok J found Chan’s witnesses credible and Kung’s evidence unreliable (noting, for example, an evasive explanation for deliberately splitting cheques to bypass a bank mandate). On the substantive question, the judge held that objectively construed, no sensible businessman investing millions in a restaurant venture would do so without acquiring its goodwill. This was reinforced by post-agreement conduct: the Judge found on evidence that SS Noodle paid the registration expenses, the franchise agreements proceeded on the basis that SS Noodle was licensing the trade mark and goodwill to franchisees, and the pre-listing share valuation implicitly included goodwill without any extra shares allotted to Kung for “his” mark. The judge therefore held that Kung held the registered mark on trust for SS Noodle/Splendid Profit as beneficial owner, dismissed Kung’s infringement claim, and ordered the mark transferred accordingly, alongside a passing-off finding against Kung’s rival consignment business.

II. What does this mean for practitioners?

1. Document beneficial ownership of IP explicitly in joint-venture agreements. Where one founding party registers a mark personally while a business built around it is jointly funded, practitioners should insist on an express assignment or licence clause stating who owns the mark, on what terms, and whether registration in an individual’s name is merely custodial.
2. Beware silence on IP treatment in shareholder/investment documents. The court drew adverse inferences from the absence of any provision reserving IP rights to Kung and from valuation figures that implicitly captured goodwill — advisers should ensure valuations, cap tables, and share allotments explicitly address IP ownership to avoid ambiguity later.
3. Contemporaneous conduct evidences intent. Payment of registration fees by the business, franchisee royalty structures, and share-distribution assumptions were all treated as strong evidence of beneficial ownership — practitioners should advise clients to align administrative and financial practices with the intended IP ownership structure from the outset, since inconsistent conduct can undermine a party’s later claim.