Loo Wai Hoong shares the Malaysian courts’ recent sentencing trends in relation to criminal offences involving counterfeit goods under the relevant provisions of the Trademarks Act 2019.

Ever since the introduction of the new Trademarks Act 2019 (“the Act”) at the tail-end of 2019, there have been a number of prosecutions and convictions secured against infringers dealing in counterfeit goods pursuant to raid and seizure actions conducted by the Enforcement Division of the Ministry of Domestic Trade and Consumer Affairs (MDTCA).

The Relevant Provisions under the Act

Unlike its predecessor, the Act contains a number of provisions dealing with criminal offences relating to trademarks, some of which were previously governed by the Trade Descriptions Act 2011. The following are some of the relevant provisions applied by the courts for the purpose of convicting offenders.

Pursuant to section 99(1) of the Act, it is an offence for any person to counterfeit a registered trademark without the owner’s consent either by (a) by making an identical or similar mark with the intent to deceive; or (b) falsifying a genuine registered trademark whether by alteration, addition, effacement, partial removal or otherwise. If convicted, the offender is liable to a maximum fine of RM1,000,000 (approx. US$250,000) or imprisonment of up to 5 years or both.

Further, it is also an offence for any person to falsely apply a registered trademark to goods or services by virtue of section 100(4) of the Act. The offender is deemed to have “falsely applied a registered trademark” when:

• a mark that is likely to be mistaken for the registered trademark is applied to goods or services without the owner’s consent; and
• in the case of goods, they are not the genuine goods of the owner or its licensee.

The applicable penalties for a contravention of section 100(4) of the Act would depend on whether the offence was committed in respect of goods or services.

For goods, if the offender is:

• a body corporate – A fine of up to RM15,000 (approx. US$3,750) for each of the goods (1^st offence) / up to RM30,000 (approx. US$7,500) for each of the goods (subsequent offence)
• an individual – A fine of up to RM10,000 (approx. US$2,500) for each of the goods or imprisonment of up to 3 years or both (1^st offence) / up to RM20,000 (approx. US$5,000) for each of the goods or imprisonment of up to 5 years or both (subsequent offence)

For services, if the offender is:

• a body corporate – A fine of up to RM100,000 (approx. US$25,000)
• an individual – A fine of up to RM70,000 (approx. US$17,500) or imprisonment of up to 3 years or both

According to section 102(1) of the Act, it is an offence for any person to import, sell, offer or expose for sale or possess goods bearing falsely applied trademarks for the purpose of trade or manufacture. Upon conviction, the offender is liable to the same penalties that would apply in cases involving the false application of a registered trademark onto goods set out above.

How have the courts decided?

Upon the conclusion of raid actions and ensuing post-raid investigations, the public prosecutors and/or the MDTCA may decide to either impose compound fines (i.e. administrative monetary fines) or prosecute the infringers in court. In respect of the latter, the following are some of the notable sentences that have been imposed by the Magistrates’ and the Sessions’ Criminal Courts:

• Pursuant to a raid action conducted by Wong Jin Nee & Teo (WJNT), the director of a company was prosecuted and fined RM28,000 (approx. US$7,000) in default of 6 months’ imprisonment under section 102(1)(ii) of the Act by the Kuala Lumpur Criminal Magistrates’ Court for possessing 1,546 bottles of counterfeit fragrances for the purpose of trade.
• In another raid action conducted by WJNT, the manager of a retail outlet was prosecuted and fined RM25,000 (approx. US$6,250) pursuant to section 102(1)(ii) of the Act by the Ayer Keroh Criminal Sessions Court for exposing for sale and/or selling 777 units of counterfeit luxury clothing and accessories worth more than RM300,000 (approx. US$75,000).
• An online seller was prosecuted and fined RM80,000 (approx. US$20,000) in default of 8 months’ imprisonment in respect of charges brought under sections 100(4) and 102(1) of the Act by the Kangar Criminal Sessions Court for possessing 2,172 units of counterfeit jerseys and pants bearing the trademarks of various brands for the purpose of trade.
• A counterfeiter was prosecuted and fined RM15,000 (approx. US$3,750) in default of 6 months’ imprisonment pursuant to section 99(1) of the Act by the Kuala Lumpur Criminal Sessions Court for counterfeiting or falsifying a registered trademark on 20 hair clippers.

Conclusion

While the judicial trends in sentencing seem to indicate that the fines imposed may not be that significant, brand owners should not be discouraged and completely rule out the option of initiating raid actions from their brand protection and enforcement strategies. Instead, a combination of various enforcement strategies that is customised based on the brand owners’ priorities and requirements, which may include raid actions resulting in compound fines or criminal prosecutions, Cease & Desist (C&D) letter programs and online takedowns would help to effectively enforce and protect the brand owners’ IP rights.

Given that some infringers would go to great lengths to frustrate or evade the brand owners’ enforcement efforts, criminal prosecutions are still effective and have a wider deterrent effect as they send a stern message not only to those infringers but also to other errant traders in the market and members of the public to cease their infringing acts immediately. Once the infringers are prosecuted, they are not given any leeway to abstain from or fail to attend prosecution proceedings as the MDTCA is empowered to obtain arrest warrants to secure their attendance and also court orders to freeze their assets under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATFPUAA) which reinforces the deterrent effect of prosecutions.

Wai Hoong is a Senior Associate at Wong Jin Nee & Teo. He develops and implements online and offline brand enforcement and anti-counterfeiting programs for multinational clients across various industries.