Huasin Food Industries Sdn Bhd v Munchy Food Industries Sdn Bhd (W-02(IPCV)(W)-269-02/2018)

1 IN THE COURT OF APPEAL OF MALAYSIA (APPELLATE JURISDICTION) CIVIL APPEAL NO. W-02(IPCV)(W)-269-02/2018 BETWEEN HUASIN FOOD INDUSTRIES SDN BHD (COMPANY NO.: 409658-D) ... APPELLANT AND MUNCHY FOOD INDUSTRIES SDN BHD (COMPANY NO.: 220353-H) ... RESPONDENT [IN THE HIGH COURT IN MALAYA IN KUALA LUMPUR, IN THE MATTER OF CIVIL SUIT NO: WA-22IP-12-03/2016] BETWEEN MUNCHY FOOD INDUSTRIES SDN BHD … PLAINTIFF (COMPANY NO.: 220353-H) AND HUASIN FOOD INDUSTRIES SDN BHD … DEFENDANT (COMPANY NO.: 409658-D) 2 CORAM: Hamid Sultan bin Abu Backer, JCA Abdul Karim bin Abdul Jalil, JCA Hanipah binti Farikullah, JCA Hamid Sultan Bin Abu Backer, JCA (Delivering Judgment of the Court) GROUNDS OF JUDGMENT [1] The appellant/defendant appeals against the decision of the learned High Court Judge in respect of ‘trade mark’ claim where the court had allowed the respondent/plaintiff’s claim and dismissed the appellant/defendant’s counterclaim. [2] The court has summarised the issues as follows: “(1) whether a party sued for infringement of a registered trade mark under s 38(1 )(a) of the Trade Marks Act 1976 (TMA), is "aggrieved” by the registered trade mark under s 45(1 )(a) TMA and is therefore entitled to apply to court to remove the registered trade mark from the Register of Trade Marks (Register);

(2) whether the prohibition of a likelihood of deception or confusion (Likelihood of Deception/Confusion) in the first limb of s 14(1 )(a) TMA applies to the first bona fide user of a mark on goods or services (Goods/Services) in the course of trade (1st User); 3

(3) whether the defendant company (Defendant) can apply to court under the first limb of s 14(1)(a) TMA read with s 37(b) TMA to expunge the plaintiff company's (Plaintiff) "LEXUS" registered trade mark no. 98013537 (Plaintiff's LEXUS Mark) for goods in Class 30 (biscuits), from the Register on the ground of a Likelihood of Deception/Confusion between Plaintiff's LEXUS Mark and Toyota Motor Corporation's (Toyota) LEXUS trade mark (Toyota's LEXUS Mark) used on Toyota's LEXUS cars. It is to be noted that Toyota is not a party in this case and Toyota's LEXUS Mark is not used for biscuits;

(4) can the Defendant expunge Plaintiff's LEXUS Mark from the Register pursuant to s 37(c) TMA on the ground that the Plaintiff's LEXUS Mark is not distinctive of Plaintiff's cream sandwich biscuits (Plaintiff's Biscuits)? In this regard, whether the use of a "house brand' or "house mark" together with a sub-brand on the same Goods/Services has any effect on the distinctiveness of the house brand and sub-brand for the Goods/Services;

(5) whether Defendant's use of a composite "Lex" mark (Lex Mark) on cream sandwich biscuits manufactured and sold by the Defendant (Defendant's Biscuits), has infringed Plaintiff's LEXUS Mark under s 38(1 )(a) TMA. If Defendant's use of Lex Mark constitutes an infringement of Plaintiff's LEXUS Mark, whether the Defendant can rely on the following defences -

(6) whether the Defendant has passed off Defendant's Biscuits as Plaintiff's Biscuits; and 4

(7) in cases regarding trade marks and tort of passing off -

2. P1 claimed that: D1 had infringed P1’s mark and committed the tort of passing off. Toyota LEXUS mark was registered for goods/services other than biscuits and only used for LEXUS luxury cars. D1’s biscuit is RM1 cheaper than P1’s biscuit.

3. P1 prayed for: injunction against D1 from infringing P1’s mark and passing-off. Order for full discovery of documents. Order for delivery up or destruction of D1’s goods bearing the offending mark and enquiry of damages, costs and other suitable relief.

4. D1 stated that: the public would be deceived/confused between P1’s mark and Toyota LEXUS mark. P1’s mark is not distinctive of P1’s biscuit. D1’s mark is introduced to the public as SAMUDRA LEX or SAMUDRA biscuits. SAMUDRA mark has been registered by D1. D1 admitted that D1’s biscuit is 55 cents cheaper. No complaint by the public regarding D1’s biscuit. D1’s biscuit has banana logo and are not confusingly similar to P1’s mark.

5. D1 counterclaimed for: declaration that LEX mark had not infringed P1’s mark. Declaration that D1’s goods are not a product of passing-off. Declaration that P1’s mark had no sufficient reason to be registered or had 6 wrongly been registered. P1’s mark to be expunged. Costs and other suitable relief.

6. The High Court: P1’s claim is allowed and D1’s counterclaim is dismissed with costs of RM104,535.88. Grounds of Decision of High Court (YA WONG KIAN KHEONG) Whether D1’s counterclaim should be allowed.

1. If D1 is successful in proving the counterclaim, P1’s claim will fall. D1 is aggrieved by P1’s mark and D1’s right is adversely affected by P1’s mark. P1 is the 1st user of P1’s LEXUS mark. D1 cannot rely on Wikipedia on Toyota LEXUS mark as it is not constituted as evidence of Toyota’s “use” of LEXUS mark. Nothing in the Wikipedia stated that Toyota LEXUS mark has ever been used for biscuits in Malaysia. The likelihood of deception/confusion does not apply to 1st user. D1 cannot apply to expunge P1’s mark as P1 is the 1st user of LEXUS mark. D1 failed to discharge the burden to prove a likelihood of deception/confusion between P1’s mark and Toyota LEXUS mark. D1 also failed to discharge the burden to prove that P1’s mark is not distinctive of P1’s biscuits. Whether P1’s claim should be allowed.

1. For consumer goods be purchased off the shelf, an application of the imperfect recollection test means that the court should not embark on a side-by-side comparison between P1’s mark and D1’s mark. It is a question of first impression in deciding a likelihood of confusion/deception. A visual comparison between P1’s mark and D1’s mark shows a striking similarity. Both marks share the first 3 letters LEX and a reasonable consumer of cream sandwich biscuits is likely to be deceived/confused that D1’s mark is an abbreviation of P1’s mark. The small price difference between both biscuits contributes to the likelihood of 7 confusion/deception. P1 had proven a likelihood of damage to P1’s goodwill caused by D1’s misrepresentation. P1 had proven its claim.” [5] Before us, the learned counsel for the appellant had informed us that they are not pursuing their appeal in respect of the dismissal of the counterclaim and they will be happy that both of their marks complained off can co-exist. [6] The High Court had held that: (i) the defendant’s trade mark infringes the plaintiff’s trade mark; (ii) the defendant’s Lex Products passes off on the plaintiff’s Lexus Products. The plaintiff’s prayer in the statement of claim reads as follows: “WHEREFORE the Plaintiff claims against the Defendant: -

1. An Injunction to restrain the Defendant either by itself, its directors, officers, servants or agents or any of them howsoever from doing the following acts:-

2. An Order for full discovery of all relevant documents particularly invoices, contracts, customer records, sales records, delivery orders, customers declaration forms and shipping documents and other documents relating to the Defendant's manufacturing, packing, labelling, exporting, distributing, supplying, offering for sales or selling or other dealings by way of trade, goods bearing the Offending LEX Trade Mark and/or Offending Get-Up as represented in Schedule B.

3. An Order for delivery up or destruction upon oath of all the Defendant's said goods bearing the Offending LEX Trade Mark and/or Offending Get-Up as represented in Schedule B and/or any other trade mark or get-up which is confusingly and deceptively similar to the Plaintiffs Trade Mark under registration number 98013537 and/or Get-Up as represented in Schedule A, whether in boxes, packages, cartons or otherwise in the possession, power, custody or control of the Defendant, its directors, officers, servants or agents, the sales, offer for sale or other commercial dealings by way of trade of which would constitute infringement of the said Trade Mark registered under No. 98013537 and/or passing-off of the Defendant's goods 9 as and for the goods of the Plaintiff or which would be in breach of the injunction granted herein.

4. An enquiry as to damages against the Defendant or at the Plaintiffs option an account of profits and payment to the Plaintiff by the Defendant of all sums found due upon taking such enquiry into account.

5. Costs.

6. Such other relief that this Honourable Court deems just and fit.” [7] The defendant’s prayer for the counterclaim reads as follows: “1. Satu Deklarasi bahawa Defendan, Cap Dagang "LEX" Defendan dan barangan Defendan seperti yang ditunjukkan dalam Jadual (B) Pernyataan Tuntutan bertarikh 21/3/16 tidak melanggar Cap Dagang No. 98013537.

2. Satu Deklarasi bahawa Defendan tidak melakukan apa-apa pengelirupaan terhadap Plaintif dan barangan Defendan seperti yang ditunjukkan dalam Jadual (B) Pernyataan Tuntutan bertarikh 21/3/16 bukanlah suatu pengelirupaan.

3. Satu Deklarasi bahawa Defendan tidak melakukan apa-apa pelanggaran Cap Dagang dibawah Akta Cap Dagangan 1976 dan tidak melakukan apa-apa pengelirupaan seperti yang dituntut dan dinyatakan dalam Pernyataan Tuntutan bertarikh 21/3/16.

4. Satu Deklarasi bahawa Cap Dagang No. 98013537 adalah suatu catatan yang dibuat dalam Daftar Cap Dagangan tanpa sebab yang cukup dan/atau berada dengan salah dalam Daftar Cap Dagangan. 10

5. Satu Perintah bahawa catatan Cap Dagang No. 98013537 dibatalkan, dihapuskan dan dikeluarkan dari Daftar Cap Dagangan.

6. Satu Perintah bahawa Pendaftar Cap Dagangan Malaysia hendaklah selepas penyampaian sesalinan Perintah ini padanya, menurut Peraturan 75 Peraturan-peraturan Cap Dagangan 1997, membetulkan Daftar Cap Dagangan dengan membatalkan, menghapuskan dan mengeluarkan catatan pendaftaran Cap Dagang No. 98013537 dari Daftar itu dan menyebabkan fakta ini diterbitkan dalam Jurnal Rasmi atau diwartakan dalam Warta Kerajaan.

7. Plaintif hendaklah membayar setiap dan semua kos termasuk kos sampingan yang berkaitan dengan tindakan ini kepada Defendan atas dasar indemniti penuh dalam apa jua keadaan.

8. Lain-lain relief yang Mahkamah Mulia ini anggap sesuai dan berpatutan.” [8] The main complaint of the appellant is that the learned judge had applied a wrong test to assess a likelihood to deceive or cause confusion by narrowly applying a single ‘essential feature’ comparison. The learned counsel asserts the correct test as per case laws is a consideration of a holistic approach related to: (i) consider the marks as a whole; and (ii) consider all relevant circumstances of trade. [9] Learned counsel in reliance of section 38(1) of the Trade Marks Act 1976 (TM), says the plaintiff must establish inter alia that the defendant’s trade mark is so near resembling the plaintiff’s registered trade mark as to be likely to deceive or confuse the public and asserts that the plaintiff had 11 failed to prove as per the statutory formula. Section 38(1) of TM reads as follows: “Section 38. Infringement of a trade mark

(1) A registered trade mark is infringed by a person who, not being the registered proprietor of the trade mark or registered user of the trade mark using by way of permitted use, uses a mark which is identical with it or so nearly resembling it as is likely to deceive or cause confusion in the course of trade in relation to goods or services in respect of which the trade mark is registered in such a manner as to render the use of the mark likely to be taken either—

1. The learned Judicial Commissioner erred in fact and/or in law in finding the Appellant/Defendant's use of its non-identical trademark ("Defendant's Trade Mark") infringing of the Plaintiff's Trade Mark given the whole of the circumstances;

2. The learned Judicial Commissioner erred in fact and/or in law in finding the use of the Defendant's Trade Mark so near resembling the Plaintiff's Trade Mark to be likely to deceive or cause confusion to the public;

3. The learned Judicial Commissioner erred in fact and/or in law by failing to apply or in misapplying the correct test to assess a likeliness to deceive or to cause confusion, in that his Lordship:

4. Despite admitting that his Lordship was not a relevant consumer of the related goods, the learned Judicial Commissioner then erred in fact and/or in law by failing to consider or give sufficient consideration to the evidence of the use of the trademarks in the relevant circumstances and trade, that would have placed his Lordship in the objective position of determining likelihood of deception and confusion to the relevant consumer or relevant members of the public.

5. Further or in the alternative, the learned Judicial Commissioner erred in fact and/or in law by failing to give any or sufficient consideration of material facts and evidence and failing to perceive that:

6. The learned Judicial Commissioner erred in fact and/or in law in finding that the Defendant's witnesses were not credible and that the Plaintiff's witnesses were credible when no evidence was put to the Defendant's witnesses to contradict or challenge their evidence. On Passing-Off

7. The learned Judicial Commissioner erred in fact and/or in law in finding the use of the Defendant's Trade Mark and related packaging bearing the Defendant's Trade Mark passing-off of the Plaintiff's Trade Mark and the 15 related packaging bearing the Plaintiff's Trade Mark in the whole of the circumstances.

8. Further or in the alternative, the learned Judicial Commissioner erred in fact and/or in law by failing to give any or sufficient consideration of material facts and evidence, including in failing to perceive that:

9. In failing to properly assess a likelihood of deception or confusion in respect of trademark infringement, the learned Judicial Commissioner consequently erred in fact and/or in law by concluding there was misrepresentation for the purposes of passing-off.

10. The learned Judicial Commissioner erred in fact and/or in law by failing to compare the whole of the Defendant's packaging bearing the Defendant's Trade Mark to the whole of the Plaintiff's packaging bearing the Plaintiff's 16 Trade Mark, and their relevant circumstances of use, and consequently was wrong to find misrepresentation for the purposes of passing-off. On Expungement of the Plaintiff's Trade Mark from the Register of Trade Marks

11. The learned Judicial Commissioner erred in fact and/or in law in failing to find that the Plaintiff's Trade Mark is a mark which ought to be expunged from the Register of Trade Marks when the Plaintiff's Trade Mark is an entry wrongfully entered and wrongfully remaining on the Register of Trade Marks.” [11] The executive summary of the appellant sets out the facts and issues as well as the marks in digital and photographic form for easy appreciation. To save courts time, we reproduce the Executive Summary of the appellant which reads as follows: “A – BACKGROUND SUMMARY

1. This is an Executive Summary of the Appellant (or "Defendant")'s submissions in its appeal against the Judgment of the High Court dated 24.01.2018. This appeal concerns the Judge's decision to:

1.1. allow the Respondent ("Plaintiff')'s claim that the Defendant's Trade Mark infringes the Plaintiff's Trade Mark; and

1.2. allow the Plaintiff's claim that the Defendant's Lex Products passes off on the Plaintiff's LEXUS Products. B - WRONG TEST TO ASSESS A LIKELIHOOD TO DECEIVE OR TO CAUSE CONFUSION 17

2. Under S. 38(1) of the Trade Marks Act 1976, the Plaintiff must establish inter alia that the Defendant's Trade Mark is so near resembling the Plaintiff's registered Trade Mark as to be likely to deceive or confuse the public.

2.1. However, the Judge applied a wrong test to assess a likelihood to deceive or cause confusion, by narrowly applying a single "essential feature" comparison.

2.2. The correct test, well-established in case law, is a holistic approach which must (i) consider the marks as a whole; and (ii) consider all relevant circumstances of trade.

2.3. This renders the Judge's conclusion of likelihood of deception or confusion flawed. It is wrongly based on a narrow, isolated view of the letters "L-E-X" in the Defendant's Trade Mark being similar to the Plaintiff's Trade Mark "LEXUS", without considering the marks and circumstances as a whole. The Defendant's Mark does not solely comprise these letters. C. - NO LIKELIHOOD OF DECEPTION OR CONFUSION BASED ON FACTS AND EVIDENCE 18

3. It was additionally wrong to hold that an 'objective' approach means the Court should not consider factual or consumer evidence. With this, the Judge failed to consider evidence of trade and use, and materially failed to appreciate the lack of relevant evidence showing circumstances of confusion and deception being likely.

4. The Court must weigh the facts and evidence before it (or the lack of relevant facts and evidence) to place itself in an objective position. This is all the more important as the Judge observed that his Lordship is not a consumer of the relevant goods.

5. A proper application of the tests and consideration of materials adduced must conclude no likelihood of deception or confusion in the Defendant's Trade Mark inter alia because:

5.1. Both marks as a whole, plainly have significant visual, aural and conceptual dissimilarities, such that the overall impression are profoundly different. There are an overwhelming number of distinguishing features, beyond the one sole similarity identified by the Judge. Observing the marks in use reinforces this:

5.2. The Judge failed to consider the circumstances in which the parties' goods are marketed. 19

(ii) The Plaintiffs Trade Mark contains elements which are common with other marks in the same market, which would lead consumers to pay attention to the distinguishing features between the marks. D - DEMEANOUR FINDING ON 'LACK OF CREDIBILITY' STRETCHED, PERVERSE AND UNNECESSARY

6. The Judge erred also in approach and conclusion that (i) the Defendant's witnesses were not credible - when no evidence was put to them to contradict their evidence. The law is clear: minor discrepancies and contradictions do not affect overall credibility.

7. Additionally, such findings totally conflate with findings of the Plaintiff's witnesses being credible - despite cautioning the Plaintiff's witnesses during trial, and the Plaintiff's witnesses recorded evasiveness on similar issues.3 These findings against the Defendant were stretched, perverse and unnecessary. E - FAILURE TO ASSESS GET-UP AS A WHOLE AND ALL THE CIRCUMSTANCES OF TRADE

8. In allowing the Plaintiff's claim for the tort of passing-off: the Judge also failed to apply the correct test to assess 'misrepresentation', similarly contingent on a likelihood of deception and confusion.

8.1. With passing-off - which seeks to prevent traders from passing-off of the goods of another trader - the Court must compare the relevant 20 marks and get-up (i.e. packaging) as a whole and must also regard to all circumstances of trade. This, the Judge failed to do.

9. Among others, his Lordship failed to consider:

9.1. Parties' marks in use have materially distinguishing features;

9.2. Purported essential features in the Plaintiff's LEXUS Packaging (i.e. cream sandwich biscuit device and rectangular packaging) are common elements in the biscuit trade. 21

9.3. Bearing these common elements in mind, when both get-ups are compared as a whole, it is obvious that both get-ups are so strikingly dissimilar such that the overall impression between them would not lead to any misrepresentation. F - CONCLUSION

10. In the premises, the Defendant/Appellant prays for the present appeal to be allowed.” [12] The respondent/plaintiff’s submission to the appellant’s appeal is set out as follows: “CONCLUSION

19. In conclusion we reiterate that the facts and evidence presented during the course of these proceedings have clearly and on the balance of probabilities shown the following which led the High Court to find in favour of the Respondent and to dismiss the Appellant's counterclaim:- i. The Respondent is the registered proprietor of the Respondent's said Trade Mark under the Trade Marks Act 1976. ii. Evidence presented in the course of trial also established that the Offending Trade Mark used by the Appellant in relation to goods within the scope of registration of the Respondent's said Trade Mark in the course of trade which is so nearly resembling the Respondent's registered trademark as is likely to deceive or cause confusion. This is turn established the Respondent's case for trade mark infringement under the Trade Marks Act 1976. 22 iii. There has been extensive and consistent use of the Respondent's said Trade Mark and said Get-Up by the Respondent. In fact by virtue of the consistent use of the Respondent's said Trade Mark and Get-Up, the said Trade Mark and Get-Up have become instant source identifiers of the Respondent's cream sandwich products and are distinctive of the Respondent. The extensive usage of the Respondent's said Trade Mark and said Get-Up has resulted in goodwill and reputation to its business, which is a property right protected under the law of passing-off. iv. The Appellant commenced use of the Offending Trade Mark and Offending Get-Up around late 2015. This use was well after the Respondent's use of the said Trade Mark and Get-Up. The use by the Appellant of the Offending Trade Mark and Offending Get-Up has resulted in confusion and deception or at the very minimum a possibility of association resulting in damage to the goodwill and reputation of the Respondent. v. Vis a vis the Appellant's counterclaim for cancellation under section 45 of the Act, it is clear on the facts that the substantive grounds have not been made out.

20. By virtue of the above, we humbly pray that this Honourable Court dismiss the appeal of the Appellant with cost.” [13] We have read the appeal records and the able submissions of the parties. After much consideration to the submissions of the plaintiff, we take the view that the appeal should be allowed in favour of the defendant, limited to the plaintiff’s claim as the defendant have informed the court that they are not pursuing the counterclaim. Our reasons inter alia are as follows: 23

70. To vary a mark from a device mark to a word mark would involve a change which substantially affects the identity of the mark. The appearance would clearly be different. It would amount to allowing a new mark to be entered on the register without giving third parties a chance to oppose. 1 am not prepared to let the respondents have the exclusive right to use the four letters, AUVI, without requiring them to go through the normal process. In any event, in the light of what I have said above, the respondents have not even made out a case for the court to exercise its discretion in their favour. [56] In our view, the 'customer' or 'consumer' approach can be the most decisive factor to decide on issues related to deception or confusion, in considering the provision of s. 14 and/or 19 of the TMA 1976. TMA 1976 in essence, is not an Act intended to give monopoly for a particular trader. Section 14 and/or 19, etc. is aimed at arresting deception or confusion among the public to the advantage of a tortfeasor (and/or even a genuine trader from overseas) attempting to legitimise his trade mark to the disadvantage of another lawful user already in place. As said earlier, our ss. 20, 25, 35, 44 and 45 may allow two competing traders to register or sustain its registered trade mark with suitable variations to eliminate confusion. It can be safely said that the policy of the Malaysian Trade Marks Act is to accommodate registration albeit where necessary with modification or variation of the competing trade marks strictly within the parameters of the Act. In dealing with s. 57 of the Indian Trade Marks Act, which is similar to our s. 45, P Narayanan observes: The phrase "the tribunal may make such order as it may think fit" in s. clearly shows that the exercise of the jurisdiction under the section is 26 discretionary. This jurisdiction arises only after establishing the following facts required under the section:

(1) that the applicant is a person aggrieved; and

(2) that the registered proprietor has contravened or failed to observe a condition entered on the register; or

(3) that the entry was made without sufficient cause; or

(4) that the entry wrongly remains on the register; or

(5) that there is an error or defect in the entry. When facts (1) and (2) are established, the tribunal may make such order as it may think fit for cancelling or varying the registration of the trade mark. When facts (1) and any of the facts (3), (4) or (5) are established the tribunal may make such order for making, expunging or varying the entry as it may think fit. In either case the tribunal has a discretion to rectify or not to rectify.” [17] In this appeal, we have taken consideration of the facts and the public advantage and the law in detail. We are convinced that it is a fit and proper case to allow the defendant’s appeal partly and set aside the learned High Court Judge’s decision in favour of the plaintiff only with no order as to costs. We hereby order so. Dated: 13 May 2019 sgd (DATUK DR. HJ. HAMID SULTAN BIN ABU BACKER) Judge Court of Appeal Malaysia. 27 Note: Grounds of judgment subject to correction of error and editorial adjustment etc. Counsel for Appellant: Ms Kuek Pei Yee [with Melissa Long and Gooi Yang Shuh] Messrs. Skrine Advocates & Solicitors Unit No. 50-8-1, 8th Floor Wisma UOA Damansara 50 Jalan Dungun, Damansara Heights 50490 KUALA LUMPUR. [Ref: KPY/LLP/GYS/2180410.9] Counsel for Respondent: Mr. Indran Shanmuganathan [with Sim Sook Eng and Elisia Engku Kangon] Messrs. Shearn Delamore & Co. Advocates & Solicitors 7th Floor, Wisma Hamzah Kwong Hing No. 1, Leboh Ampang 50100 KUALA LUMPUR. [Ref: SD(IP)/4159950/IS/SSE]