MALAYSIA: TRADEMARK INFRINGEMENT AND TORT OF PASSING OFF CLARIFIED

Ortus Expert White Sdn Bhd v Nor Yanni bt Adom & Anor is a case which re-examined the principles which deal with trademark infringement and tort of passing off.

The Plaintiff is a distributing company for “Royal Expert” beauty products (hereinafter referred to as “the Plaintiff’s product”) and the owner of the “Royal Expert White” trademark (hereinafter referred to as “the Plaintiff’s mark”) which is used on the Plaintiff’s product.

The first defendant (hereinafter referred to as “D1”) entered into a dealership agreement with the Plaintiff for distribution of Plaintiff’s products.  The second defendant (hereinafter referred to as “D2”) is the husband of D1 and the sole proprietor of Rafica Resources and had distributed the Plaintiff’s product together with D1.

D1 sold skin whitening cream bearing the mark “Real Expert White” with packing which was allegedly similar to Plaintiff’s product. The Plaintiff discovered this and commenced an action in the High Court against D1 and D2, premised on trademark infringement, breach of agreement and tort of passing off.

The High Court held in favour of the Plaintiff. The Defendants dissatisfied, appealed to Court of Appeal (hereinafter referred to as “the COA”) which reversed the findings of the High Court. The aggrieved Plaintiff then appealed to the Federal Court (hereinafter referred to as “the FC”).

The FC reversed the decision of the COA and found in favour of the Plaintiff. In coming to its decision, the FC revisited the elements required to establish trademark infringement.  The FC also looked at the principles required for establishing tort of passing off, in particular, if goodwill of a mark can be destroyed by general unrelated publications.

Requirements for trademark infringement action.

The FC  referring to the decision in in Low Chi Yong (t/a Reynox Fertichem Industries) v Low Chi Hong & Anor [2018] 1 MLJ 175) held that in accordance with Section 38 Of the Trade Marks Act 1976 (hereinafter referred to the TMA 1976), in a trademark infringement case, the Plaintiff needs to establish the following ingredients:

• The Defendant used a mark identical with or so nearly resembling the trademark as is likely to deceive and/or cause confusion;
• The Defendant is not the registered proprietor or the registered user of the trademark;
• The Defendant was using the offending trademark in the course of trade;
• The Defendant was using the offending trademark in relation to goods or services within the scope of the registration; and
• The Defendant used the offending mark in such a manner as to render the use likely to be taken either as being used as a trademark or as importing reference to the registered proprietor or the registered user or to their goods or services.

The first ingredient as laid down in Low Chi Yong is known as ‘the test of Likelihood of Confusion or Deception’.

Further exploring the first ingredient, the FC referring to the case of  Tohtonku Sdn Bhd v Superace (M) Sdn Bhd [1992] 2 MLJ 63, held that under Section 38 of the TMA 1976, a registered trademark is infringed by a person who uses a mark which:

• is identical with it; or
• so nearly resembling it as is likely to deceive; or
• so nearly resembling it as is likely to cause confusion.

The FC held that under Section 38 of TMA 1976, to amount to infringement, mere resemblance of the trademark is insufficient, instead the resemblance must be such that as to cause likelihood of deception or confusion among customers.  However, what needed to be established is only a probability or possibility of confusion or deception and not actual confusion or deception.

It further stated that in a trademark infringement action, the question of whether there is likelihood of confusion/deception of the public is a question of fact which is to be determined by the Court and not the witnesses.

Role of disclaimed words in ‘the test of Likelihood of Confusion or Deception’. 

Referring to Sections 18, 35(1) and 40(2) of the TMA 1976, the FC held that the effect of a disclaimer in a trademark is that the registered owner has no exclusive trademark rights to the disclaimer and any third party is free to use the disclaimed component in a subsequent trademark application.

The Federal Court also shed light on the legal stance of disclaimed words in a trademark infringement action and held:

• in a trademark infringement action, the Court ought to consider disclaimed words in juxtaposition or in combination with the essential features in the registered trademark for the purpose of deciding whether there is a likelihood of confusion and/or deception;
• the Court cannot decide the issues of infringement of trademark and likelihood of confusion and/or deception solely upon the basis of the use of disclaimed words;
• disclaimed words cannot be regarded as essential feature;
• the Court can consider disclaimed words in terms of phonetic, visual, and trade channel aspects for comparison to decide whether there is likelihood of confusion and/or deception; and
• the Court shall consider the marks as wholes and not disregard the disclaimed words, and whether their collocation and arrangement all inserted in similar form and similar position or arrangement so as to make the whole so similar as to be calculated to confuse and/or deceive.

Thus, in deciding whether the mark is similar so as to cause a confusion and/or deception, the Court can consider disclaimed words in juxtaposition or in combination with the essential features.

Essential features of the mark

The FC stated it is important to identify the essential feature of the mark to determine if there was an infringement of it. The FC having reviewed earlier decided cases, collated the following principles to serve as a guide in determining the essential features of the mark in a trademark infringement action:

• the particular mark is remembered by some feature in it which strikes the eye and fixes itself in the recollection or mind of a consumer;
• a word forming part of a mark has come in the usual course of trade to be used to identify the goods belonging to the owner of the mark;
• essential features can be ascertained through ocular test, as well as consideration of sound and the significance of the words in the mark, because ‘in most persons the eye is not an accurate recorder of visual detail and marks are remembered rather by general impressions or by some significant detail than by any photographic recollection of the whole’;
• identification of essential features is achieved through the Court’s own judgment and evidence; and
• use of one or more of a trademark’s essential features will lead to infringement of the trademark.

The test for likelihood of confusion and/or deception

The FC having identified the elements that can be taken into consideration when deciding if there was a likelihood of confusion and/or deception, in a trademark  infringement action,  went on to enunciate the test for likelihood of confusion and/or deception.

The FC referred to the often-quoted test laid in Re Pianotist Co’s Application [1906] 23 RPC 774 at p 777, in determining whether a mark is ‘likely to deceive or cause confusion’, which held that:

“You must take the two words. You must judge them, both by their look and by their sound. You must consider the goods to which they are to be applied … In fact, you must consider all the surrounding circumstances; and you must further consider what is likely to happen if each of the trademarks is used in the normal way as a trademark for the goods of the respective owners of the mark.”

The FC held that the test as laid down in Re Pianotist Co’s Appplication incorporated the side-by-side test, where two marks are placed side by side  and compared with each other and  also “the imperfect recollection test” which refers to the idea or impression which each mark produces or suggests to the mind of potential customers. The  “ imperfect recollection test”,  is different from the side-by-side test, where the former is based on the question on whether a person who see one mark in absence of the other mark would be likely to be deceived and to think both marks are the same in view of his/her general recollection of the latter mark.

The FC went on to enunciate the test for likelihood of confusion and/or deception as follows:-

• both side-by-side comparison and the Imperfect Recollection Test must be satisfied;
• the comparison is made in terms of phonetic, visual, trade channel, and idea aspects of the marks;
• the purpose of such comparison is to determine whether the defendant’s mark contains essential features of the plaintiff’s registered trademark, which strike the eye and fix themselves in the recollection of the users of the plaintiff’s goods;
• the Court shall then take into account all surrounding circumstances and apply the Imperfect Recollection Test, bearing in mind the outcome of the comparison, in order to determine whether it is likely that ordinary consumer with ordinary memory who would be likely to buy the goods would be deceived and think that the defendant’s mark is the same as the plaintiff’s registered trademark. In other words, the test of whether one trademark is confusingly similar is an objective test and the test is that of an ordinary person with an appropriate level of literacy; and
• in determining this test, the Court is entitled to give effect to their own opinions, and not confined to the evidence of witnesses.

The decision of the FC elucidated the correct test to be employed in determining likelihood of confusion and/or deception in a trademark infringement case.

Essential ingredients of Tort of Passing-Off

The FC also looked at the principles in establishing tort of passing off and referring to Lord Oliver in Reckitt & Coleman Products Limited v Borden Inc [1990] 1 AER 873,  reiterated the three elements  which are needed to establish tort of passing-off are:

• establishing a goodwill or reputation in the goods or services by association with a particular ‘get up’ which would be recognised by the public as distinctive of the claimant’s goods and services;
• demonstrating a misrepresentation which is likely to lead the public to believe the goods offered are those of the claims; and
• establishing that damage has or will be caused.

It further went on to define goodwill guided by Lord Lindley’s judgement in The Commissioners of Inland Revenue v Muller & Co’s Margarine, Limited [1901] AC 217 as

“Goodwill of a business is its established reputation which is regarded as a quantifiable asset and calculated as part of its value when the business is sold”

Further looking at the second element to be proved in tort of passing off, the FC held that the misrepresentation must be such that is deceives a significant part of the public and unlike in the case of trademark infringement, the deception must be proven, and mere confusion is insufficient.

In proving damages, the FC held that damages to the Plaintiff’s goodwill can be inferred in situations where the Plaintiff’s and tortfeasor’s product are in direct competition with each other. Damages may also be proven through loss of sales of the Plaintiff’s products.

Can goodwill be destroyed by general publication(s)?

The FC was also posed with the question on whether goodwill can be destroyed by publications which made no specific reference to the business owner.

On the fact of the case the Ministry of Health released a press release banning “‘Royal Expert Whitening Cream” by Ortus Expert Cosmetic Sdn Bhd for containing mercury. The COA found that the press release referred to the Plaintiff’s product and concluded that the Plaintiff’s loss was due to the negative publicity and not the Defendant’s misrepresentation and the goodwill of the Plaintiff’s product had been destroyed.

The FC disagreeing with the finding of COA held on the facts of the case the press release, referred to another entity and not the Plaintiff’.

Nevertheless, the FC held that even if the press release referred to Plaintiff’s product and the Plaintiff’s goods were illegal, these facts on it own were insufficient to destroy the goodwill of the mark.

The FC held distinction should be drawn between trademark as an intangible intellectual property right and the contents of the actual goods itself.

Goodwill is attached to the brand not to the goods. The FC opined if the goodwill is destroyed by negative publications, it would deprive trademark owners from relying on his/her goodwill to prevent infringers or tortfeasors from misusing their mark.  The FC further stated that there are many situations where well-known branded goods with established goodwill being subject to negative publicity, without the goodwill being destroyed.

Accordingly, the FC held that the Plaintiff’s goodwill was not destroyed by the negative publication.

The FC revisited the requirements in establishing trademark infringement and tort of passing off. It shed light on the legal position of disclaimed words in a trademark infringement case and ironed out the correct test to be applied in determining the likelihood of deception/confusion in a trademark infringement case. It also clarified on the effect of negative publication in relation to destroying the goodwill of a mark. The decision of the FC certainly has provided clarify in principal areas of law involving trademark infringement and tort of passing-off which would serve as a guide in future.