IP in Malaysia: matters of principle

Does expansion of a business amount to passing off? This was one of the questions posed in DeGem Bhd & Anor v De Gem Goldsmith & Jewellery Sdn Bhd & Ors [2013] 3 CLJ 209. The plaintiff is a manufacturer and nationwide retailer of jewellery bearing the trademark ‘DeGem’. The defendants are local businesses, based in Johor Bahru, Malaysia and with a different retail image than the plaintiff’s. The defendants have always used the name ‘De Gem’ in relation to the entire company name together with Chinese characters.

In 2007, the defendants shed the image of traditional goldsmiths and adopted a modern, upmarket image. They branded themselves as ‘De Gem’ only and advertised their business beyond the place of origin. The plaintiff contended that the defendants were seeking to expand their business countrywide by fraudulently riding on the goodwill and reputation of the plaintiff.

In comparing the parties’ respective degree of goodwill, the High Court found the plaintiff to possess nationwide goodwill as it had been using the ‘DeGem’ trademark since 1997. On the other hand, the defendants’ goodwill, notwithstanding commencement of use since 1985, had always been limited to the city of Johor Bahru, or state level at best. The plaintiff’s claim was subsequently allowed. A permanent injunction was ordered to confine the defendants’ business to the state of Johor instead of outright prohibition on use of the mark ‘De Gem’.

Although the court in this case had essentially ruled that expansion of business outside Johor may constitute an act of passing off, it does not mean the restriction is absolute. The court has ensured that the plaintiff’s stronger goodwill is protected while not denying the defendants’ first-user rights provided they use the full company name and operate within their territory.

Chocolate wars

Following a controversial High Court battle, the chocolate wars of Chocosuisse Union des Fabricants Suisses de Chocolat & Others v Maestro Swiss Chocolate Sdn Bhd & Others [2013] 6 CLJ 53 reached the Court of Appeal. The High Court had decided that the use of the words ‘Maestro Swiss’ on the respondents’ chocolates would not lead the Malaysian public to believe that such chocolates were from Switzerland because the trade description ‘Swiss chocolates’ did not appear on the product packaging. What did appear was information that confirmed these products were made in Malaysia. It was decided in the first instance that the first appellant had no locus standi to commence legal action because it did not carry out any business in Malaysia, per se.

At the Court of Appeal, the panel unanimously found for the appellants. On locus standi, it was held that the first appellant did have locus standi to initiate action under common law and under the Geographical Indications Act 2000. The court relied heavily on a corresponding action in the UK: Chocosuisse Union des Fabricants Suisses de Chocolat & Others v Cadbury [1998] RPC 117, and held that members of the first appellant share a common interest and goodwill as they consist of Swiss chocolate traders and are entitled to protect any designation of chocolates having Swiss origin.

As for the appellants’ plea of extended passing off, the court again relied on the 1998 English case that proposed the test of whether members of the public will be confused into believing that the respondents’ chocolates are products that can legitimately bear that designation because of recognisable and distinctive qualities. Before providing an answer, the Appellate Court agreed with the High Court that they must be cautious in accepting a survey conducted by or on behalf of only one party in a dispute but that this is not equivalent to total disregard of such surveys. The Court of Appeal found that the High Court had erred in not giving any consideration to the survey results.

The Appellate judges held that, on a balance of probability, there was conscious use by the respondents of ‘Maestro Swiss’ on the packaging to give the impression of a link with Switzerland. Evidence showed that the respondents registered a company in Switzerland, calling it ‘Chocolate Vochelle SA’ (now in liquidation), thus making the choice of Switzerland deliberate. The products manufactured in Malaysia have no Swiss origin or connection.

The Court of Appeal held that the word ‘Swiss’ in ‘Maestro Swiss’ clearly qualifies as a geographical indication under the Geographical Indications Act 2000. However, the court agreed with the respondents on this count that use of the contentious geographical indication in this case pre-dated commencement of the act and thus the appellants’ claim for this failed.

Appeal allowed?

Finally, we consider a case which has recently been adopted as the guiding principle behind trademark appeal procedure, Tio Chi Hing v United Overseas Bank (M) Bhd [2013] 3 MLJ 212.

The issue before the court was whether the applicant should be granted leave to appeal to the Federal Court against a decision of the Court of Appeal. This depended on whether the decision made by the High Court was in exercise of its original or its appellate jurisdiction. The prevailing provision is Section 96(a) of the Courts of Judicature Act 1964 (CJA) where the Federal Court could grant leave only if, inter alia, the decision appealed from the Court of Appeal concerned a civil cause or matter decided by the High Court in the exercise of its original jurisdiction.

Before this case, the owner of a trademark which had been opposed and refused, could file an appeal to the High Court and bring the case to the Federal Court, should leave be granted by the Federal Court to hear the case.