A & M Beauty Wellness Sdn. Bhd. (hereinafter referred to as “the Plaintiff”) v Shopee Mobile Malaysia Sdn. Bhd. (hereinafter referred to “the Defendant”) is a case which concerns the obligations of e-commerce platform providers with reference to any counterfeit or trademark infringing products being offered for sale via their platform.
The Plaintiff is a company which is involved in beauty and cosmetic industry. The Plaintiff sells its product through a “Membership Business Model”. The products are sold together with its membership plan, whereby only its members have access to purchase and sell the products.
The mark “AM PROFESSIONAL SKIN CARE” (hereinafter referred to as “the AM Mark”) which identifies the Plaintiff’s product has been registered under the provision of Trade Mark Act 1976 (hereinafter referred to as “TMA 1976”).
The Defendant is a company which operates an online platform, www.shopee.com.my, (hereinafter referred to as “the Marketplace”). The Marketplace allows third party sellers to list and sell their goods to prospective customers.
The Plaintiff alleged there were counterfeit products similar to the Plaintiff’s, bearing the AM Mark, being offered for sale on the Marketplace. The Plaintiff, concerned its product and trademark being exploited emailed the Defendant requesting the Defendant to remove the said products and/or provide the Plaintiff with the particulars of the sellers to enable the Plaintiff to take further action. Failing to receive favourable response to its complain, the Plaintiff applied to court for a mandatory interim interlocutory injunction for the Defendant to remove all listing in its platform, of products which are similar to the Plaintiff’s and which bears the Plaintiff’s trademark.
The IP Court in Kuala Lumpur dismissed the Plaintiff’s application. In reaching its decision, the Court revisited the intergral elements in granting an injunction and applied it to the facts of the case before it.
The elements needed to be established in granting an injunction are:
- There is a serious question to be tried raised by the Plaintiff;
- The balance of justice or the balance of convenience lies in favour of granting an injunction
by taking into account all relevant matters;
- Damages are not an adequate final remedy for the Plaintiff;
- Whether the Plaintiff has given a meaningful undertaking as to damages; and
- If all relevant factors are evenly balanced, the status quo should be maintained.
There is serious question to be tried
In finding there was no serious question to be tried, the Court found that the Plaintiff had failed to adduce sufficient evidence to establish that the products being sold on the Marketplace were counterfeit.
The Court also noted that the Defendant provided a mechanism to remove any intellectual property infringing product from the Marketplace. The mechanism inter alia required complains to be accompanied by complete list of offending products and evidence of infringement. The Plaintiff did not avail itself to the mechanism, and in absence of that, the Plaintiff cannot resort to obtaining injuctive relief against the Defendant. Any cause of action, if any, only materialized upon refusal of the Defendant to remove any infringing product, after being supplied with the infringing list together with the evidence supporting it.
The Defendants were not sellers who may be restrained by an injuction from selling a product. They were operators of an online market place which facilitate the process of buying and selling between purchasers and sellers. Grant of an injuction requiring the Defendant to screen and remove every infringing product would undermine operation of e-commerce platform.
Further the Defendant does not have the technical capability to pre-screen each listing before they are published or to perform an ‘autoblock’ involving a particular product on the platform.
The AM Mark was registered under one Chua Siok and not under the Plaintiff. The Plaintiff claimed that the rights over the mark was assigned to it by Mr. Chua Siok through a deed of assignment. The court held the assignment was not done and registered in accordance to the TMA 1976. Further TMA 1976, requires the suit to be commenced in the name of the registered proprietor or a registered user and not an assignee who has not been registered as proprietor of a trademark. Accordingly, the Plaintiff lacked the necessary locus standi to initiate and maintain an action for trademark infringement.
The Plaintiff also contended that the Defendant should be prevented from allowing the sellers to sell the Plaintiff’s products at a lower price. The Court held this argument was unsubstantiated as control on the price would amount to restriction of the resellers’ right, which contravenes Section 4 of Competition Act 2010. Further, if any course of action subsisted, it should be against third party sellers and not Defendant as it was not privy to any arrangements between the Plaintiff and third party seller.
Balance of convenience
The Court found the balance of convenience was in favour of the Defendant, as grant of an injunction would place the Defendant under an impossible obligation of having to continually screen their platform for an infringing product at all times and automatically remove it. The Court also held that the injuction was too wide and unclear making it difficult for the Defendant to determine the extent to which it will be required to take steps to comply with the injunction.
Damages are Adequate
Damages were found to be adequate final remedy to the Plaintiff, since the claim was monetary in nature.
Plaintiff’s undertaking as to damages is inadequate
In light of absence of adequate evidence of financial standing of the Plaintiff, the Court was of the view that the undertaking to damage by the Plaintiff was inadequate.
Status Quo
The Court was of the view since the loss to the Plaintiff can be compensated by money, the status quo of the Plaintif would be maintained even in absence of the injunction.
However wrongful grant of injunction would not maintain the status quo of the Defendant since damages would not be an adequate remedy. This is in light of the fact that the injunction requires the Defendants to remove all products which are similar to the Plaintiff’s. This may interfere with course of trade of those who may not have infringed the Plaintiff’s marks, which in turn may expose the Defendants to action from other legitimate users.
The Court also held that for mandatory interim injuctions, in addditon to the basic requirements the applicant will have to show that they have an unusually strong and clear case and that there are special circumstances. Based on the fact of the case, the Court was of the view these requirements were not met.
The Court in coming to it decision dissected the requirements established in law in granting an injunction. The Court took into consideration the difficulty that would arise in placing the burden on e-commerce platform providers to guard the platform from being utilized by notorious trademark infringers. The decision seems to have relieved online platform providers from having the obligation of being a watchdog of trademark infringements in its platform. Nevertheless, it remains to be seen if the decision will withstand the test of time, in light of increased significance of online platforms in trade and uncontrolled access of infringers to the platforms.