Trademark delimitation agreements in Malaysia: a competition law perspective
. Although the CA does not presently contain any merger control provisions, the two main prohibitions under Sections 4 and 10 of the CA are modelled on the EU equivalents, such as anti-competitive agreements (Article 101) and abuse of a dominant market position (Article 102), respectively.
The infancy of competition law in Malaysia can be contrasted against the maturity of its IP laws, which have been providing a framework for the regulation of IP rights for decades. Legal counsel would naturally consider the issue of ownership, protection and exploitation of IP in drafting and negotiating IP agreements, but may not appreciate the competition law risks involved in clauses that were previously up to the parties’ discretion.
IP law grants owners the right to monopolise the exploitation of IP, while competition law is premised on preventing the monopoly of goods and services. Despite this conceptual conflict, it appears to have been accepted over the years that the distinction of the scope of each body of law is clear in its actual application. IP laws provide owners with the right to assign and defend IP rights, while competition law is more concerned with the use of those rights. Ultimately, both bodies of law strive to achieve one common goal, which is to strengthen competition.
It is important that when negotiating IP agreements parties are not overzealous in exercising their rights. Any restrictions imposed on the parties under the agreement should be necessary only to assign and defend legitimate IP rights.
The Chapter 1 prohibition
The Chapter 1 prohibition of the CA prohibits a horizontal or vertical agreement between enterprises in so far as the agreement has the object or effect of significantly preventing, restricting or distorting competition in any market for goods or services. The provision deems certain agreements to be anti-competitive, including any horizontal agreements that have the objective of sharing markets. A trademark delimitation agreement may be in breach of the Chapter 1 prohibition if the agreement allows parties to share markets, or if its effect is that competition is significantly prevented, restricted or distorted.
Trademark delimitation agreements, also known as trademark coexistence agreements, illustrate that while some restrictions may be necessary for IP owners to effectively exploit their IP and avoid disputes, excessive restrictions may be anti-competitive.
"Any restrictions imposed on the parties under the agreement should be necessary only to assign and defend legitimate IP rights."
Trademark delimitation agreements are entered into for the purpose of avoiding or settling disputes between owners of conflicting trademarks by defining the spheres within which trademarks may be used. Typically, a trademark coexistence agreement would consist of a territorial delimitation, a product delimitation and/or a no-challenge clause. However, due to the nature of these restrictions, they would be at risk of infringing the Chapter 1 prohibition of the CA or the equivalent Article 101.
Although there are no decisions, guidelines or directions from Malaysian authorities which may shed light on how the CA would apply to trademark delimitation agreements, the following guidance may be gleaned from past EU decisions. In negotiating such agreements, consider:
