SRAM, LLC v Huan Schen Sdn. Bhd. is a case which deals with expungement of trademark in which the Court of Appeal (hereinafter referred to as “the COA”) inter alia revisited the concept “use” of trademark, validity of a registered trademark and effect of cessation of the use of a trademark.
The Appellant is a US based company which manufactures bicycles, bicycles parts and accessories under the trademarks “SRAM”, and their variations.
The Respondent is a Malaysian company which is primarily involved in distribution and selling of bicycle, bicycle parts and accessories.
On 26 December 2003, the Respondent applied for registration of the Respondent’s trademark for goods in class 12 (bicycles, bicycle parts and accessories). The Appellant opposed the Respondent’s application on the grounds that the Respondent’s trademark was similar to the Appellant’s “SRAM” marks. The Registrar however dismissed the Appellant’s opposition and the Respondent’s trademark was registered with effect from 26 December 2003.
The Appellant thereafter successfully registered its trademarks bearing the word “SRAM” between the years 2005 to 2007. The Respondent however did not oppose the registration of the Appellant’s marks.
On 30 December 2015, the Respondent initiated an action in the High Court (hereinafter referred to as “the High Court”) under Section 45(1) (a) of the Trade Marks Act 1976 (hereinafter referred to as “the TMA 1976”) to expunge the Appellant’s trademarks from the Register.
The HC found in favour of the Respondent and ordered for the expungement the Appellant’s marks. The aggrieved Appellant then filed an appeal to the COA.
The COA allowed the appeal and reversed the findings of the HC. The COA examined the decision of the HC and while agreeing with the findings of the HC that the Respondent was “an aggrieved person” for the purpose of Section 45(1) (a) of the TMA 1976, the COA was of the view that the HC erred when it found that the Respondent is the first user and common law proprietor of the trademark in question and also the Respondent did not satisfy the requirements laid down in the relevant Section(s) of the TMA 1976 in order to enable him to expunge the Appellant’s registered trademarks.
The COA in coming to its decision clarified on the findings of the HC which was wrongly decided shedding light on the correct approach to be adopted.
Common Law Proprietor of the Mark?
In ordering the expungement of the Appellant’s trademarks, the HC had to determine who the rightful owner of the mark was.
The HC found that the Respondent was the first user of the trademark “SRAM” and also the common law proprietor of the trademark. The HC held that the common law ownership of trademark is established based on the first use of a trademark in course of trade in contrast to the creator of the trademark. Further, the HC held that the date of first use of the trademark is determined based on the use of the trademark on or in relation to goods locally i.e. within Malaysia.
The COA however disagreeing with the HC held that the trademark “SRAM” was created by the Appellant based on the acronym of the three founders of the company. The COA held it was a personalized trade name which belonged to the Appellant in contrast to common generic term which could belong to anyone. The Respondent did not provide any clarification on how the Respondent came up with the name “SRAM” . The absence of explanation on how the Respondent came up with the mark “SRAM” shows that the Respondent did not “independently devise the mark himself”.
Considering the above, the COA was of the view that the Respondent failed to establish that it was the common law owner of the mark.
Further in light of the fact of the Appellants trademark being featured in international sports events which were broadcasted in Malaysia, the COA was of the view that the Respondent tried exploit the Appellants worldwide reputation.
First date of use and territorial use?
The COA also opined that the HC erred in its decision when it held that the date of first use of the trademark is determined based on domestic use and evidence of use of the trademark internationally is irrelevant.
The COA held that the restrictive interpretation of ‘use’ to be limited to domestic use erroneous and not supported by previous decisions. The COA held that the Courts have recognised that reputation or goodwill can be acquired outside Malaysia. The COA refereed to the judgment of Ramly Ali JCA ( as he then was) in Walton International Ltd v. Yong Teng Hing; Pendaftar Cap Dagangan, Malaysia (Interested Party) [2010] 8 CLJ 802 CA, who held that :
“If at the date of application for registration of the trademark by the respondent, the trademark although it has not been used in Malaysia, has become associated in the mind of the public with the appellant’s goods, then the respondent cannot claim or appropriate proprietorship of the said trademark. There are no artificial limits on geographical areas to which reputation or goodwill can or cannot extend.”
The COA stated that the advancement in modern technology and communication has made it possible for the public in Malaysia to be aware of foreign trademarks even though such trademarks have not been previously used in Malaysia.
The COA also highlighted that the TMA 1976 was amended in August 2001, to include Section 14(2) which allowed a well-known foreign trademark which has not been used or registered in Malaysia, to be the basis for refusal of the registration of a similar mark by a different proprietor.
Thus, the COA was of the view that the HC had failed to consider the evidence of use of the mark by the Appellant in international sports events which were broadcasted in Malaysia, and the public in Malaysia would have been aware of the Appellant’s trademark though it was not registered or used domestically.
Any evidence of a well-known trademark’s origin or use internationally is relevant and it can be used to determine the date of first use of the mark.
Validity of Registered Trademark
The COA further was of the view that in order to expunge the Appellant’s trademarks the Respondent must satisfy the requirements of Sections 36, 37, 14 and 45 of the TMA 1976. The COA was of the view while the HC did refer to the above-mentioned Sections of the TMA 1976 in its judgments, the HC failed to give sufficient weight to the above stated Sections which provide a safeguard to registered trademarks.
The COA held that registration of a trademark is prima facie evidence of the validity of the original registration. This is clear from the wordings of Section 36 of the TMA 1976 which provide as follows:
“In all legal proceedings relating to a registered trademark (including applications under Section 45) the fact that a person is registered as proprietor of the trademark shall be prima facie evidence of the validity of the original registration of the trademark and of all subsequent assignments and transmissions thereof.”
Further Section 37 of the TMA 1976 provides
“In all legal proceedings relating to a trademark registered in the Register (including applications under section 45) the original registration of the trademark under this Act shall, after the expiration of seven years from the date thereof, be taken to be valid in all respects unless it is shown:
(a) that the original registration was obtained by fraud;
(b) that the trademark offends against section 14; or
(c) that the trademark was not, at the commencement of the proceedings, distinctive of the goods or services of the registered proprietor, except that this section shall not apply to a trademark registered under the repealed Ordinances and incorporated in the Register pursuant to subsection 6(3) until after the expiration of three years from the commencement of this Act.”
The registration of trademark shall after seven years from the date of registration be conclusive of the validity of the trademark unless the situations in a-c above apply.
Based on the facts of the case the, the issue is whether the Appellant’s trademarks are not in accordance with Sub-Sections (a) and (d) and (e) of Section 14 of the TMA 1976.
Section 14 TMA lays down the specific grounds on which a mark may be disqualified from registration as follows:
- (1) A mark or part of a mark shall not be registered as a trademark:
(a) if the use of which is likely to deceive or cause confusion to the public or would be contrary to law;
(b) …
(c) …
(c) if it is identical with or so nearly resembles a mark which is well known in Malaysia for the same goods or services of another proprietor;
(e) if it is well known and registered in Malaysia for goods or services not the same as to those in respect of which registration is applied for:
Provided that the use of the mark in relation to those goods or services would indicate a connection between those goods or services and the proprietor of the well-known mark, and the interests of the proprietor of the well-known mark are likely to be damaged by such use.
Likely To Deceive Or Cause Confusion?
In determining if the Appellant’s mark can be disqualified based on Section 14(1)(a) i.e. the use of mark is likely to deceive or cause confusion, the COA referred to the judgment in Lim Yew Sing v. Hummel International Sports & Leisure A/S [1996] 4 CLJ 784; which held that:
“Wholly different considerations apply where an application is being made under s. 45 of our Act for the removal of the registration of an entry made conclusive by s. 37. Here, the respondent must prove that by reason of the similarity, there is a practical likelihood of confusion to the public and ‘this he can only do for the purposes of the section (i.e. our s. 14) by proving the existing use by another … which is likely to cause deception or confusion’ (as per Upjohn LJ) (emphasis added)”
Thus, to establish confusion or deception as required by Section 14 of the TMA 1976, there needs to be evidence of use of the of the mark or any evidence that such use had cause confusion to a significant number of Malaysian public.
The COA held that the HC finding that the use of Appellant’s trademarks would confuse or deceive the public, was based on the similarity between the goods of the Appellant and Respondent , and also visual and phonetic similarity between the Appellant’s and Respondent’s trademark. There was no evidence of use of the Appellant’s trademarks at the material time or any evidence that such use had that caused confusion to a significant number of the Malaysian public. Accordingly, the HC was wrong in finding that confusion or deception as required by Section 14 of the TMA 1976 has been established.
Material Date
The COA referring to the case of the case of Industria De Diseno Textil, SA v. Edition Concept Sdn Bhd [2005] 2 CLJ 357; held that the material date for purpose of Section 14 of the TMA 1976, is the date of the original registration of the Appellant’s trademark (the date of original registration of the mark to be expunged).
Based on the fact of the case there was no evidence of the Respondent’s goods in Malaysian market at the material time i.e. during the period of registration of the Appellants trademarks from 2005 to 2009. Thus, is absence of the use of Respondent’s goods and the Respondent’s trademarks in respect of the goods, at the material time, it would no be possible to determine whether the Appellant’s trademarks and goods were identical or similar to the Respondent’s which would prevent registration of the Appellants trademark.
Cessation of Use of Trademark
It is established from the facts of the case, between the years 2007 to 2015 the Respondent did not use its trademark.
The COA was of the view the cessation of the use of the Respondent’s use of the Respondent’s trademark for a significant amount of time (more than seven years), could be construed as the Respondent having abandoned its mark.
It disagreed with the finding of the HC, which referring to the case of Ad-Lib Club Ltd v. Granville [1971] 2 All ER 300, opined that in absence of evidence that the Respondent had abandoned the Respondent’s trademark, the Respondent had retained residual goodwill and reputation in relation to the trademark.
The COA held whether or not residual goodwill is retained is to be determined based on fact of the case which is in accordance with the decision of Ad-Lib Club Ltd v. Granville [1971] 2 All ER 300. Based on the facts of the instant case, the COA was of the view in absence of evidence that the Respondent had taken any measures to preserve its goodwill during the cessation period, the Respondent did not retain any residual goodwill.
The decision of the COA in the instance case clarified on the concept “use” of trademark, validity of a registered trademark and effect of cessation of the use of a trademark. The decision of the COA particular, in regard to evidence of use of trademark being not limited to domestic use but to include international use should be welcomed, as it is in accordance with the reality of the world today where one’s awareness of the existence of a trademark is not limited by geographical borders. The COA adopted a practical approach in coming to its decision and the decision of the COA would surely serve as a guide for future cases.