Doshin Rubber Products (M) Sdn Bhd v or Tan Teng (WA-24IP-8-05/2024)

(M) Sdn Bhd (Company No.: 198401001871 (114386-H)) And In the matter of Section 19 and other relevant provisions of the Patents Act 1983 And In the matter of Orders 92 and other relevant provisions of the Rules of Court 2012 BETWEEN DOSHIN RUBBER PRODUCTS (M) SDN BHD (Company No.: 198401001871 (114386-H)) … PLAINTIFF AND OR TAN TENG (NRIC No.: 481218-08-5415) … DEFENDANT GROUNDS OF JUDGMENT A. Introduction [1] The plaintiff filed an originating summons, seeking an order for the assignment of patents registered in the name of the defendant. [2] After considering documentary evidence before the court and submissions of counsel, the court allowed the originating summons. The reasons for this decision are set out below. B. Background Facts [3] The plaintiff is in the business of manufacturing and trading in rubber products, and is known for the production of rubber structural bearings used in seismic engineering. [4] The defendant is the founder of the plaintiff, who managed the plaintiff’s business from its incorporation, until his resignation on 3 April 2023. [5] Between 2019 and 2022, Kossan Rubber Industries Berhad (“Kossan”) acquired the defendant’s 20% shareholding in the plaintiff in stages, for a total sum of RM14,000,000. Upon Kossan’s full acquisition of his shares on 9 November 2022, the defendant ceased to be a shareholder of the plaintiff. The defendant also resigned as a director of the plaintiff on 3 April 2023. [6] Around the time of the defendant’s resignation, it came to the plaintiff’s attention that the defendant is the registered owner of the following patents: a. “Seismic Isolation Device”, registered under patent no. MY-198160 A in Malaysia (“160 Patent”); b. “Vibration Damping Device”, registered under patent no. MY 191196-A in Malaysia (“196 Patent”); c. “High Hysteresis Rubber Damping Composition”, registered under patent no. MY-187217-A in Malaysia (“217 Patent”); and d. “Seismic Damping Device”, registered under patent no. MY-185754 A in Malaysia (“754 Patent”). The Seismic Isolation Device, the Vibration Damping Device, the High Hysteresis Rubber Damping Composition and the Seismic Damping Device are collectively referred to as the “Inventions”, while the 160 Patent, the 196 Patent, the 217 Patent and the 754 Patent are collectively referred to as the “Patents”. [7] The plaintiff claimed the Inventions were made in the course of the defendant’s employment with the plaintiff, and were patented under the defendant’s personal name without the plaintiff’s knowledge. In this regard, it is the plaintiff’s case that the defendant had unlawfully obtained the ownership and rights to the Patents. [8] The plaintiff requested the defendant to assign the Patents to the plaintiff, and to furnish the plaintiff with a list of other patented inventions made by the defendant during his tenure with the plaintiff. In response to the request, the defendant sought a sum of RM2,000,000 from the plaintiff for the Patents. [9] The plaintiff thus filed this action seeking a judicial assignment of the Patents, under section 19 of the Patents Act 1983 (“PA 1983”). C. The Law [10] Section 19 of the PA 1983 empowers the court to grant a judicial assignment of a patent. The section provides as follows: “Where the essential elements of the invention claimed in a patent application or patent have been unlawfully derived from an invention for which the right to the patent belongs to another person, such other person may apply to the Court for an order that the said patent application or patent be assigned to him: Provided that the Court shall not entertain an application for the assignment of a patent after six years from the date of the grant of the patent.” (emphasis added) [11] The plaintiff claimed the defendant had unlawfully obtained the ownership and rights to the Patents, as the Inventions were made in the course of the defendant’s employment with the plaintiff. Thus, the Patents should be assigned to the plaintiff. [12] In claiming ownership and rights to the Patents, the plaintiff relied on section 20 of the PA 1983, which essentially provides that an employer owns the rights to a patent created by an employee in the course of employment. Section 20 states: “(1) In the absence of any provisions to the contrary in any contract of employment or for the execution of work, the rights to a patent for an invention made in the performance of such contract of employment or in the execution of such work shall be deemed to accrue to the employer, or the person who commissioned the work, as the case may be: Provided that where the invention acquires an economic value much greater than the parties could reasonably have foreseen at the time of concluding the contract of employment or for the execution of work, as the case may be, the inventor shall be entitled to equitable remuneration which may be fixed by the Court in the absence of agreement between the parties.

Where an employee whose contract of employment does not require him to engage in any inventive activity makes, in the field of activities of his employer, an invention using data or means placed at his disposal by his employer, the right to the patent for such invention shall be deemed to accrue to the employer, in the absence or any provision to the contrary in the contract of employment: Provided that the employee shall be entitled to equitable remuneration which, in the absence of agreement between the parties, may be fixed by the Court taking into account his emoluments, the economic value of the invention and any benefit derived from it by the employer …” (emphasis added) D. Considerations and Findings Conditions to prove ownership and rights to the Patents [13] From section 20 of the PA 1983, the following conditions must be met by the plaintiff, in order to prove that the plaintiff owns and has rights over the Patents: a. The defendant was employed by the plaintiff or had a contract with the plaintiff on the execution of work; b. The defendant made the Inventions in the performance of his contract of employment with the plaintiff, or if the defendant was not required to engage in any inventive activity, he made the Inventions using data or means placed at his disposal by the plaintiff; and c. There is no provision in the contract of employment between the plaintiff and the defendant that states that the rights to the Patents do not belong to the plaintiff. [14] If all the above conditions are met and the court finds that the ownership and rights to the Patents accrue to the plaintiff, the plaintiff is entitled to utilise section 19 of the PA 1983, and apply for an order for the Patents to be assigned to the plaintiff. The only proviso contained in section 19 of the PA 1983 is that the court cannot entertain an application for the assignment of a patent if it is made after six years from the date of the grant of the patent. The parties have not raised any issue on the application of the proviso to this case. First condition: The defendant was employed by the plaintiff [15] In assessing the first condition, the defendant’s employment with the plaintiff, the court first considered the undisputed fact that there was no written contract, whether for employment or for the execution of work, between the plaintiff and the defendant. [16] Notwithstanding the absence of a written contract, the existence of an employment relationship can be ascertained from documentary evidence before the court. In Soon Seng Palm Oil Mill (Gemas) Sdn Bhd v Jang Kim Luang @ Yeo Kim Luang [2011] MLJU 101, the court held that the existence of an employer-employee relationship is a question of fact to be determined by taking into account all the circumstances of a case: “… It is relevant to note that according to Section 3 of the [Patents] Act, an "employee" means "a person who work or has worked under a contract of employment, or who is in employment under, or for the purpose of, any individual or organization." What is important for the purposes of the Act is that there exists an employer-employee relationship. This is a matter of fact to be determined from all the circumstances of the case. A written agreement evidencing a contract of employment is not a pre-requisite (see: Ultraframe UK Ltd v. Fielding [2003] R.P.C. 23) …” (emphasis added) [17] In the present case, the employment relationship between the plaintiff and the defendant is evident from documentary evidence before this court. The plaintiff exhibited payroll slips for the defendant, which show that: a. The defendant was employed as a director of the plaintiff; b. The defendant was paid a monthly salary by the plaintiff; c. The plaintiff made contributions under the employees provident fund (“EPF”) and the social security organisation (“SOCSO”) on the defendant’s behalf; and d. Monthly income tax deductions were made from the defendant’s salary. [18] I also observed that the bottom right-hand corner of the payroll slips contains the defendant’s signature, presumably as a confirmation of receipt of the payroll slips. The signature portion is marked as “employee’s signature”. [19] Further, it is worth highlighting that the defendant had admitted that he was an employee of the plaintiff. In the affidavit filed in opposition to the originating summons, the defendant described himself as a “director cum employee” of the plaintiff. [20] Thus, I find that the totality of the evidence before the court can only lead to the irrefutable conclusion that the defendant was an employee of the plaintiff. [21] As such, I find that the first condition under section 20 of the PA 1983 has been met. Second condition: The defendant made the Inventions in the performance of his contract of employment with the plaintiff [22] The second condition relates directly to the creation of the Inventions. The plaintiff must prove that the Inventions were created in the performance of the defendant’s contract of employment with the plaintiff, or if the defendant was not required to engage in any inventive activity, that he had made the Inventions using data or means placed at his disposal by the plaintiff. [23] I first considered the role of the defendant while he was in the plaintiff’s employment. It is not in dispute and was admitted by the defendant that he was responsible for the overall management of the plaintiff, including managing the plaintiff’s projects. [24] The Patents were filed in 2016, while the defendant was in employment with the plaintiff. In his affidavit opposing the originating summons, the defendant averred that the Inventions were utilised in the plaintiff’s project works, and that the plaintiff lobbied for the works using the Inventions. In this regard, the defendant must necessarily have created the Inventions as part of his duties and responsibilities in the management of the plaintiff’s business, and in the course of his employment with the plaintiff. [25] Further, the research and development for the Patents were carried out under the banner of the plaintiff, and payments for the Patents were charged to the plaintiff, during the defendant’s employment with the plaintiff. [26] From these facts, it is clear that the Inventions were made in the performance of the defendant’s employment with the plaintiff, and the defendant had made the Inventions using data or means placed at his disposal by the plaintiff. [27] As an employee of the plaintiff, the defendant had a duty and was under an obligation to act in the best interest of the plaintiff. The creation of the Inventions and the filing of the Patents were carried out in furtherance of the defendant’s duty and obligation, and for the benefit of the plaintiff. [28] Thus, the defendant’s insistence to retain the Patents is in breach of his duties to the plaintiff. This was explained by the English High Court in Worthington Pumping Engine Co v Moore [1902] 20 RPC 41. In this case, the plaintiff company employed the defendant as its agent and manager. While in employment with the plaintiff, the defendant took out three patents, and utilised them for the plaintiff’s business. The defendant was subsequently dismissed from employment, and sought to restrain the plaintiff from using the patented inventions. Similar to the present case before this court, the plaintiff was ignorant of the fact that the patents existed until a short time before the defendant’s departure. The court held that the retention of the patents by the defendant is in breach of the defendant’s obligation to the plaintiff: “Having regard to the nature and scope of the Defendant's employment, to the obligations and duties arising from such employment, to the trust reposed in him, to his own conduct in endeavouring to establish a trade for his employers in the very articles he, in the action brought by him against them, sought to preclude them from using, I think I should be wrong in holding that he is entitled to continue to hold his Patents as against the Plaintiff Corporation, even with the belated undertakings which his Counsel offered to give on his behalf. The main issue is this – can the Defendant or can he not, without breach of his obligation towards his late employers, insist upon retaining and enforcing against them the Patents he has taken out? I think he cannot, either in whole or in part …” (emphasis added) [29] In the present case, the Inventions were created and the Patents were filed for the plaintiff’s business. As such, the Inventions and the Patents were a result of the defendant carrying out his duties as a director and employee of the plaintiff, to manage and develop the plaintiff using his skills, expertise and knowledge. The defendant cannot therefore appropriate the rights to the Patents for his own use, as this is contrary to his fiduciary duties and duties of good faith towards the plaintiff. [30] The defendant relied on Transachieve Sdn Bhd v Econ PI Pile Sdn Bhd [1997] MLJU 47 to support his argument that the plaintiff is not entitled to the Patents. In this case, Transachieve Sdn Bhd (“Transachieve“) sought a declaration that they are the rightful owners of a patent. The inventor of the invention which is the subject matter of the patent is one Wu Bong. The court found that the invention created by Wu Bong did not belong to Transachieve as the invention was created by Wu Bong before he became a director and shareholder of Transachieve. Further, there was a license agreement executed between Transachieve and Wu Bong for the use of the invention, which provides for payment of royalty by Transachieve to Wu Bong. [31] In the present case, there is no evidence that the Inventions were created before the plaintiff was founded. There was also no license agreement or any agreement between the plaintiff and the defendant on the use of the Patents. [32] Instead, the Inventions were made in the performance of the defendant’s duties while he was employed by the plaintiff, and the defendant had made the Inventions using data or means placed at his disposal by the plaintiff. [33] With this finding, the second condition under section 20 of the PA 1983 has been met. Third condition: There is no provision stating that the rights to the Patents do not belong to the plaintiff [34] Finally, the court considered the third condition, which is that there is no provision in the contract of employment between the plaintiff and the defendant that states that the rights to the Patents do not belong to the plaintiff. Given that there is no contract of employment between the plaintiff and the defendant, it would follow that this provision does not exist. Further, the defendant has not shown that such a provision exists in any other contract or documentation. [35] The third condition under section 20 of the PA 1983 has therefore been met. E. Decision [36] As all conditions under section 20 of the PA 1983 have been met, the court finds that the ownership and rights to the Patents are deemed to have accrued to the plaintiff. As such, the Patents should have been registered under the plaintiff’s name, and there is valid justification for a judicial assignment of the Patents from the defendant to the plaintiff, pursuant to section 19 of the PA 1983. [37] Thus, the court allowed the originating summons, with costs. Dated 17 March 2025 ADLIN ABDUL MAJID Judge High Court of Malaya Kuala Lumpur Counsel: Plaintiff : Cindy Goh (together with Jessye Ng) of Messrs. Cheang & Ariff Defendant : Revathy Thuraisamy of Messrs. Revathy Thurai & Associates