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Illumina Cambridge Ltd v Mgi Tech Co., Ltd And Others

Judgment Cited authorities 9 Cited in Precedent Map Related
Vincent
Judgment Date01 November 2021
Neutral Citation[2021] HKCFI 3264
Year2021
Judgement NumberHCIP47/2020
Subject MatterIntellectual Property Case
CourtCourt of First Instance (Hong Kong)
HCIP47/2020 ILLUMINA CAMBRIDGE LTD v. MGI TECH CO., LTD AND OTHERS

HCIP 47/2020

[2021] HKCFI 3264

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

INTELLECTUAL PROPERTY PROCEEDINGS NO. 47 OF 2020

_____________

BETWEEN
ILLUMINA CAMBRIDGE LIMITED Plaintiff
and
MGI TECH CO., LIMITED
(深圳華大智造科技股份有限公司)		 1st Defendant
MGI TECH HONG KONG CO., LIMITED
(香港華大智造醫療設備有限公司)
(formerly known as BGI COMPLETE GENOMICS HONG KONG CO., LIMITED
香港華大基因醫療設備有限公司) 		2nd Defendant
MGI INTERNATIONAL SALES CO., LIMITED 3rd Defendant
MGI TECH R&D HONG KONG CO.,LIMITED
(華大智造香港研發中心有限公司)
(formerly known as BGI-HONGKONG CO., LIMITED
華大基因香港研發中心有限公司)		 4th Defendant
BGI TECH SOLUTIONS (HONGKONG) CO., LIMITED
(香港華大基因科技服務有限公司)		 5th Defendant
BGI HEALTH (HK) COMPANY LIMITED
(華大基因健康科技(香港)有限公司)		 6th Defendant

_____________

Before: Hon Lok J in Chambers

Date of Hearing: 24 & 25 February 2021

Date of Decision: 25 February 2021

Date of Reasons for Decision: 1 November 2021

_________________________

REASONS FOR DECISION

_________________________

1. In this action, the Plaintiff claims against the Defendants for infringing the Plaintiff’s Hong Kong Standard Patent No. 1253509, registered in Hong Kong on 7 August 2020 (“the HK Patent”).

2. On 14 August 2020, the Plaintiff took out a summons applying for interlocutory reliefs, including an interlocutory injunction, against the Defendants pending the trial of the action (“the Summons”).

3. The Summons was first heard before myself on 20 August 2020. Directions were given to the parties to file affidavit evidence. The Summons was adjourned to 24 February 2021 for substantive argument. In addition, a direction hearing was fixed on 16 September 2020 to deal with the issue of interim measures pending the determination of the Summons.

4. In the hearing on 16 September 2020, the Defendants gave a list of interim undertakings in relation to the “Subject Sequencers”, “Subject Kits” and “Subject Services”[1] (“the Undertakings”), as a result of which the arguments have substantially narrowed.

5. In gist, under the Undertakings (which were given until judgment):

(i) the 2nd and 3rd Defendant may sell or supply the Subject Sequencers to: (i) their “Existing HK Customers”[2] for the purpose of replacement or (with the Plaintiff’s consent or the court’s approval) increasing capacity; and (ii) the 5th and 6th Defendants for the purpose of carrying out the Subject Services up to certain limits;

(ii) the 2nd, 3rd, 5th and 6th Defendants may sell or supply the Subject Sequencers and the Subject Kits to their “Overseas Customers”[3] for use outside Hong Kong, provided that if such unit(s) is to be imported for this purpose, they would only do so for transit and remain sealed in their containers; and

(iii) the Defendants would procure: (a) the maintenance of full and proper existing records (dating back to 21 June 2019[4]) in relation to the dealings in or with the Subject Sequencers, the Subject Kits and the conduct of the Subject Services; and (ii) the keeping of such records for such future dealings.

6. In this substantive hearing, the Plaintiff applies for the following:

(i) the removal of the exception in the Undertakings (“the Transshipment Exception”) permitting the 2nd, 3rd, 5th and 6th Defendants to sell and supply the Subject Kits to the Overseas Customers by transit via Hong Kong;

(ii) a disclosure order, in terms of §6 of the Summons, in respect of the names and addresses of the Defendants’ customers and suppliers of the Subject Kits and the Subject Sequencers which have been supplied in or through Hong Kong; and

(iii) directions for a speedy trial.

7. In the substantive hearing, I agreed to lift the Transshipment Exception in so far as the new Overseas Customers are concerned. I also disallowed the disclosure application under §6 of the Summons (“the Disclosure Application”) and gave some directions for the setting down of the trial. I now give my reasons.

Background

8. The Plaintiff and the Defendants (who are members of the “BGI Group”) are the two major players in the provision of genetics sequencing platforms.

9. BGI Group’s operations in Hong Kong started in 2010 with a focus on sequencing services. By 2014, its staff had tripled from 50 to 140 people and occupied 3 floors of an industrial building in Tai Po, New Territories.

10. In terms of the Defendants’ respective roles in relation to Hong Kong as stated in their affirmations:

(i) The 1st Defendant was incorporated in the Mainland in 2016. It focuses on research, manufacture and sales of DNA sequencing instruments, reagents and related products and is the manufacturer of the “MGI” brand of sequencers and sequencing kits. Although the 1st Defendant sells its products to other entities in the BGI Group, it has no external customers in Hong Kong.

(ii) The 2nd and 3rd Defendants were respectively incorporated in Hong Kong in 2016 and 2019. Their role is to sell DNA sequencers and sequencing kits manufactured by the 1st Defendant to customers both in Hong Kong and overseas, and these include other BGI Group entities in Hong Kong. The 2nd Defendant started supplying the Subject Sequencers and the Subject Kits to Hong Kong customers (other than associated companies) in July 2018 and have since accumulated 7 such customers. The 3rd Defendant started doing the same from 2019 soon after its incorporation and has accumulated 8 customers. These customers include local universities and health care institutions.

(iii) &The 4th Defendant was incorporated in 2008 and mainly serves to hold shares in companies within the BGI Group and provide common supporting facilities and personnel. Save and except a supply of sequencers to a university in 2018, the 4th Defendant has had no substantive business in Hong Kong.

(iv) The 5th and 6th Defendants were respectively incorporated in 2012 and 2013 and mainly offer sequencing services in Hong Kong to users both from Hong Kong and overseas. Since around September 2016, they started using MGI sequencers and sequencing kits to supply sequencing services. The 5th Defendant’s customers are mainly researchers from universities and institutes, while the 6th Defendant mainly serves clinics, hospitals and medical examination centres. They do however supply sequencers and sequencing kits manufactured by the 1st Defendant to overseas customers for use abroad[5], including other BGI Group entities. Except for a single supply of a sequencer by the 6th Defendant as part of a settlement of a dispute, the 5th and 6th Defendants do not supply these locally.

11. While the Subject Sequencers and the Subject Kits are manufactured by the BGI Group within the Mainland[6], the vast majority of these products sold and supplied to the Overseas Customers by the 2nd, 3rd and 6th Defendants were shipped by transiting through the Hong Kong airport and not shipped directly from the Mainland.

12. Accordingly, there are two logistics centres set up in Hong Kong:

(i) one by the 2nd and 3rd Defendants in Kwai Chung of over 7,000 square feet and installed with refrigerators for storing the Subject Kits, which costs over HK$260,000 a month to operate; and

(ii) another by the 6th Defendant in Tai Po of several thousand square feet, also installed with refrigerators for the said purpose, which costs over HK$228,000 a month to operate.

13. The Defendants give the following reasons as to why the products destined for the Overseas Customers would need to transit through Hong Kong:

(i) The 2nd and 3rd Defendants are obliged under some existing customer contracts to ship products by transit via Hong Kong, and around 30% of their Overseas Customers prefer to engage their own freight forwarders in Hong Kong and thus would not accept direct shipment from the Mainland.

(ii) Many of the Overseas Customers are from countries without direct flights from Shenzhen and Wuhan (where BGI’s manufacturing bases are located) which are available in Hong Kong.

(iii) Direct delivery from the Mainland to the Overseas Customers would result in lengthy delay, additional costs and greater safety risks:

(a) compared to the Hong Kong airport which has streamlined and efficient customs and forwarding processes and favourable tariff policies, the Mainland airports are far more stringently regulated;

(b) in particular, it is very difficult for parcels containing dry ice (which is needed for shipping the Subject Kits) to be shipped from the Mainland airports, either because of safety check requirements, or that the airlines do not prefer accepting parcels with dry ice;

(c) compared to the Mainland, there are many more international cargo airlines stationed at the Hong Kong airport, with abundant and swift connections to major airports around the world at better prices and options, which offers better cargo safety.

14. It is the Defendants’ case that, for these reasons, approximately 90% of the 2nd and 3rd Defendants’ and the 6th Defendant’s respective sales to the Overseas Customers from 2016-2020 (for the 6th Defendant)[7] and 2018-2020 (for the 2nd and 3rd Defendants)[8] were shipped by one form of transit or another through the Hong Kong airport. All these transshipment activities had been going on for at least 2 to 3 years before the Plaintiff’s application for the HK Patent was published on 21 June 2019 and before the HK Patent was granted on 7 August 2020.

The Transshipment Exception

15. The main issue in the substantive hearing is whether the relevant Defendants should be allowed to continue with the existing transshipment arrangements for the Subject Kits pending trial.

16. I do not need to repeat the well-established principles for the granting of interlocutory...

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