Recognising Goodwill for Foreign Marks in Malaysia

 

In Lim Yew Sing v Hummel International Sports & Leisure [1996] 3 MLJ 7 (“Hummel case”), the Court of Appeal (“COA”) explained that trade mark law in Malaysia is territorial in nature and it is not unlawful for a local trader to become the registered proprietor of a foreign mark if the foreign mark has not been used at all in Malaysia.

The COA did however add that the decision is not intended to encourage anybody in this country to pass off his goods as the goods of a foreign country by appropriating the foreign mark. The COA commented that in today’s world of instant audio-visual communication, it is very easy for a trader to acquire distinctiveness in his trade mark to the effect that the public and trade would identify goods bearing such mark to originate from him, provided that he puts a reasonable quantity of his products on sale in Malaysia.

This decision has sparked a continuing debate as to the extent to which a foreign mark must be “used” in Malaysia in order for proprietorship to be recognised or in the case of passing off, for goodwill to be established in view of the fast changing developments in the way information and communication are exchanged across borders.

An interesting discussion on this issue can be found in the High Court (“HC”) decision of Thrifty Rent-A-Car System, Inc v Thrifty Rent-A-Car Sdn Bhd & Anor [2004] 7 MLJ 567 (“Thrifty case”).

In this case, the appellant was an American company involved in the vehicle renting and leasing business. The appellant appointed Sintatt Rent-A-Car International Pte Ltd as its sole franchisee for its business in Malaysia, Thailand and Singapore, with effect from 1 January 1985. The 1st respondent filed an application to register the ‘THRIFTY RENT-A-CAR’ mark in respect of inter alia paper and paper articles in Class 16 on 8 October 1985. The appellant opposed the trade mark application but the opposition was subsequently dismissed by the Registrar of Trade Marks. The appellant then appealed against the decision to the HC.  

The HC found that there was evidence of use of the ‘THRIFTY’ mark by the appellant’s franchisee in Malaysia and Singapore since early 1985 i.e. before the filing date of the application. More notably, the HC also took into consideration the appellant’s extensive use of the ‘THRIFTY’ mark overseas and the fact that the Appellant had registered or applied to register the ‘THRIFTY’ mark in numerous countries.

The HC referred to the passage from the Hummel case mentioned above and deduced the following propositions:

  • Once a foreign mark has become associated in the minds of the public with the foreign trader’s goods, a local trader cannot appropriate or claim proprietorship of the foreign trader’s mark, even though the mark has not been used in Malaysia.
  • A small amount of use of the mark by a foreign trader is sufficient to prevent a local trader from claiming proprietorship in the foreign trader’s mark.

The HC added that there are “no artificial limits on geographical areas” to which reputation or goodwill can or cannot extend. To this end, it stated that courts should take judicial notice of improvements in modern technology and communication which has allowed the Malaysian public to come to know of foreign marks, even though such marks have not been used in Malaysia before. Put succinctly, “confusion and deception have no borders in these days of information technology age”.

The HC also referred to a passage from the case of The Seven-up Co v OT Ltd (1947) 75 CLR 203 where it was stated as follows:

“[t]he court frowns upon any attempt by one trader to appropriate the mark of another trader although that trader is a foreign trader and the mark has only been used by him in a foreign country. It therefore seizes upon a very small amount of use of the foreign mark in Australia to hold that it has become identified with and distinctive of the goods of the foreign trader in Australia.

It was noted by the HC that in recent years, courts in some Commonwealth jurisdictions have taken a more liberal and pragmatic approach when assessing reputation or goodwill of foreign marks, by taking into account modern means of communications which allow businesses to be transacted across borders.

Notwithstanding the above, it is still important to bear in mind that the law as espoused by the COA in the Hummel case remains applicable i.e. evidence of use has to be established in order for goodwill of a foreign mark to be recognised in Malaysia. The HC in the Thrifty case has also indicated as such by holding that a small amount of use of the mark by a foreign trader is necessary to establish goodwill. It is thus important for foreign trade mark owners to keep track and maintain comprehensive documentary records of any local presence and business transactions in Malaysia. However, based on the other remarks made by the HC, it would appear that evidence of extensive international goodwill or extraterritorial use of a foreign mark may also be taken into consideration to bolster the case for the owners of foreign marks in view of modern advances in cross-border trade and communications. Nonetheless, to err on the side of caution and to prevent third parties from riding on the goodwill of others, it would be prudent for foreign owners to plan ahead and seek registration of their trade marks in jurisdictions that they intend to expand to from an early stage.