MALAYSIA: CAN A DISTRIBUTOR REGISTER A TRADEMARK UNDER THEIR NAME FOR GOODS BEARING THE TRADEMARK WHICH THEY DISTRIBUTE?
INTRODUCTION
You have finally received your Certificate of Registration (hereinafter referred to as “CoR”) for a trademark, phew! But wait, does this mean your rights to use your trademark exclusively and prevent the use of your trademark by others absolute and unchallengeable? It is wise to be aware that your CoR is open to challenge in the IP Court in Malaysia pursuant to Sections 47 and 53 of the Trademarks Act 2019.
The case of Wei Her Pte Ltd and Ooi Teik Seng & Anor (2023) describes the position of a long established and sole distributor of a particular brand’s goods in Malaysia who had the trademark for those goods registered under the sole distributor’s own name.
BACKGROUND
In this case Wei Her Pte Ltd (hereinafter referred to as “the Plaintiff”) who is incorporated in Singapore sued one Mr. Ooi Teik Seng (hereinafter referred to as “the 1st Defendant”) who is a Malaysian citizen and DRY CUT Sdn. Bhd. who is a company incorporated in Malaysia (hereinafter referred to as “the 1st Defendant”) for infringement of the Plaintiff’s registered trademark ‘TORETOMAN’ as well as for the tort of passing off and slander of the Plaintiff’s goods. In turn the 1st and 2nd Defendants counter-claimed the Plaintiff to invalidate the Plaintiff’s trademark.
The Plaintiff was a registered proprietor of the ‘TORETOMAN’ trademark in Malaysia and Singapore. The Plaintiff had been distributing hair tonics under the trademark ‘TORETOMAN’ in Malaysia and Singapore for over 30 years. The Plaintiff received its supply of the hair tonics directly from the manufacturer of the goods in Japan, therefore the goods they distributed and sold in Malaysia and Singapore were different from the goods sold under the brand TORETOMAN elsewhere in the world.
The Plaintiff had distributed the hair tonics by supplying the goods to a company known as Derma Formula Marketing Sdn Bhd. (hereinafter known as ‘Derma’) and Derma’s directors and shareholders were the same as that of the Plaintiff, namely Elaine Chong and her daughter Kris Yap.
TIMELINE
April 1997 – The Plaintiff was appointed by Safety Co Ltd. (hereinafter known as ‘Safety’) to sell goods bearing the marks ‘TORETOMAN’ and ‘Traitement E’ in Singapore, Malaysia and Indonesia.
January 2012 – Derma was sold to the 1st Defendant and the shares held by the Elaine Chong and Kris Yap were transferred to the 1st Defendant and his wife under a Share Sale Agreement which was followed by a Distribution Agreement, to ensure the continued distribution of the hair tonics under the name of TORETOMAN which was supplied by the Plaintiff.
2013 – Plaintiff applied to register the trademark TORETOMAN in Malaysia under its own name.
2014 – Plaintiff received various complaints from wholesalers of the hair tonics that Derma failed to fulfil its orders on a timely basis, following which the Plaintiff terminated the Distribution Agreement.
July 2014 – Derma initiated legal proceedings against the Plaintiff in Malaysia for breach of contract. However, the suit was withdrawn in October 2016.
May 2016 – Plaintiff resigned as Safety’s distributor.
March 2019 – Plaintiff allegedly found out that the 2nd Defendant had wrongfully and maliciously served letters via a law firm to certain wholesalers involved in the distribution of the hair tonics. The letter purportedly alleged that the 2nd Defendant is the distributor of the hair tonic branded TORETOMAN in Malaysia and that the hair tonics sold as ‘Traitement E’ was passing off as ‘TORETOMAN E’.
Infringement of TRADEMARK AND Invalidation OF TRADEMARK
The Plaintiff contends their lawful proprietorship is unequivocally clear, as Safety had abandoned its application to register the trademark and slept on their rights, while the Plaintiff became the registered proprietor. Further to that the 1st and 2nd Defendants’ acts of importing and distributing the hair tonic in Malaysia amount to infringement of the Plaintiff trademark rights as the Plaintiff had not provided the 1st and 2nd Defendants any authorisation as the registered proprietor.
The Plaintiff also claims that the 1st and 2nd Defendants have no right to claim invalidation as they cannot be deemed to be ‘aggrieved persons’.
The 1st and 2nd Defendants contend that Safety is the bona fide and common law proprietor of the TORETOMAN trademark because the Plaintiff was merely a distributor. Specifically referring to agreements between the Plaintiff and Safety, which did not give the Plaintiff any right to register the trademark in Malaysia as its own and stated that the Plaintiff expressly acknowledges that the marks ‘TORETOMAN Parfait’ and ‘Traitement E’ are the trademarks of Safety.
Further to that the 1st and 2nd Defendants argued that they are considered as ‘aggrieved persons’ within the ambit of Section 47 Trademarks Act 2019 as they will be deprived from using the trademark, particularly in the sale and distribution of the TORETOMAN goods in Malaysia, which causes them to suffer commercial and reputational damage and losses in result of non-performance of their obligations in the sale and distribution of the goods bearing the trademark, as agreed between Safety and the 1st and 2nd Defendants.
It was held that the Plaintiff was not the bona fide owner of the trademark ‘TORETOMAN’ in Malaysia, despite prima facie evidence that the Plaintiff is the registered proprietor of the trademark in Malaysia, as shown in the CoR and the date of registration having exceeded 5 years thus deeming the registration as conclusive by virtue of Section 53 Trademarks Act 2019. This is because the 1st and 2nd Defendants successfully adduced evidence to prove that the trademark registration was obtained fraudulently.
Evidence was adduced, among many others, that Safety was the first user of the trademark TORETOMAN in Malaysia through the sale of the goods bearing the trademark through the distribution by the Plaintiff as the appointed distributor and that the registration of the trademark by the Plaintiff was done fraudulently without the consent or approval of Safety, the brand owner and common law proprietor of the trademark at all material times. The 1st and 2nd Defendants were also found to be aggrieved persons as they had genuine and present intention to use the trademark in the course of trade which is the same or similar to that of the Plaintiff’s.
The Plaintiff’s argument that Safety’s abandonment of its initial application to register the trademark in Malaysia was a clear indication that they had given up their rights to registration of the trademark was rejected by the IP Court pursuant to Section 159 Trademarks Act 2019. The Plaintiff had also failed to prove all the elements required to show infringement by the 1st and 2nd Defendants.
As the Plaintiff’s trademark was held to be invalid, thus there can be no infringement of the trademark by the 1st and/or 2nd Defendants.
Tort of Passing Off
The Plaintiff contended that their position as the first distributor of the goods bearing the trademark and their extensive trading of the goods, made the trademark become well-known in Malaysia and Singapore. Therefore, the goodwill of the trademark has been associated with the goods distributed and supplied by the Plaintiff.
In order to prove the tort of passing off, the Plaintiff submitted evidence which apparently shows that goodwill or reputation attached to the goods and/or services they supply in the mind of the purchasing public by association with the identifying get-up such that the get-up is recognised by the public as distinctive specifically to the Plaintiff’s goods and/or services. Secondly the Plaintiff submitted that the 1st and 2nd Defendants’ misrepresentation to the public led or is likely to lead the public to believe that the goods and/or services offered by them are goods and/or services offered by the Plaintiff. Lastly, the Plaintiff also submitted that they suffered or is likely to suffer damage by reason of the erroneous belief caused by the 1st and 2nd Defendants’ misrepresentation that the 1st and 2nd Defendants’ source of goods and/or services is the same as that of the Plaintiff.
The 1st and 2nd Defendants argued that no evidence showing extent of use of the registered trademark and the get-up was adduced by the Plaintiff to show that it had acquired goodwill and reputation whereby the general public and trade associated the registered TORETOMAN trademark and the get-up with the Plaintiff.
The IP Court held that the Plaintiff had failed to establish any of the elements of the tort of passing off and therefore this claim was dismissed.
Slander of Goods and Slander of Title
The 1st and 2nd Defendants had discovered that the certain wholesalers were involved in selling and distributing hair tonics ‘Traitement E’ to the public and the hair tonics reproduced or substantially reproduced the TORETOMAN get-up
The Plaintiff claimed that the 2nd Defendant had maliciously caused letters to be issued to the wholesalers demanding them to cease the sale of those goods as they are deemed to be infringing the trademark ‘TORETOMAN’. The Plaintiff contended that the letters were sent on instructions of the 1st and 2nd Defendants directly implicating the Plaintiff’s goods and their title to the goods.
Slander of goods and slander of title are applications of the generic tort of malicious falsehood. This tort is governed by Section 6 Defamation Act 1957, actionable due to the 1st and 2nd Defendant’s positive act of falsely and maliciously disparaging the Plaintiff’s goods or Plaintiff’s title of goods. In order to prove this tort, the Plaintiff submitted that the 1st and 2nd Defendants had published about the Plaintiff’s words which are false, they were published maliciously and that special damage had followed as the direct and natural result of the publication.
The IP Court held that the Plaintiff had failed to particularize the defamatory words and no evidence was adduced to prove the malicious letter was published on the instructions of the 1st and 2nd Defendants intending and aimed maliciously against the Plaintiff and failed to bring evidence to show special damage.
The Plaintiff filed for an appeal with the Court of Appeal against the dismissal of their claims and partial allowance of the 1st and 2nd Defendants’ counterclaim. However the Court of Appeal did not allow their appeal.
CONCLUSION
In conclusion, the 1st and 2nd Defendants’ counterclaim to invalidate the registered trademark under the Plaintiff’s name was allowed (partially), and in consequence there can be no infringement of the trademark as claimed by the Plaintiff.
The take away of this case is firstly, for a bona fide proprietor of a trademark by registration or through common law, it is of utmost importance when selling their goods under the trademark for distribution in other countries, a distribution agreement with clauses stating clearly and having the distributor acknowledge that the rights over the trademark remains with the proprietor unless otherwise agreed.
Secondly, for distributors of goods bearing a trademark first used by the owner of the mark but who has not registered their mark in the respective country the distributor is distributing in, does not give the distributor the right to become the proprietor of the trademark solely because they have successfully registered the mark under their name.
Therefore, obtaining a Certificate of Registration does not equate to bona fide ownership of the mark, as the presumption of conclusiveness is rebuttable, if any of the scenarios listed in Section 50 of the Trademarks Act 2019 is proven.