InsiderTAPS (22 July 2019)
Trade Mark or Artwork?
The Hakubaku Conundrum
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22 July 2019
Malaysia adopts the common law first-to-use principle in determining priority of ownership of trade marks. This principle has been applied by the Malaysian courts in many cases.
The first-to-use principle provides that the right of a prior user of a mark prevails over that of a subsequent user in relation to the same or similar goods or services despite the subsequent user being the registered proprietor of the said mark under the Trade Marks Act 1976 (“TMA”). It is aimed at protecting bona fide first users of trade marks against bad faith registrations and has been effective in combating trade mark squatting in Malaysia.
Essentially, the first user of a mark is entitled to claim ownership under common law and such common law ownership will in turn entitle him to apply for registration under Section 25(1) of the TMA. As a common law owner, he is entitled to restrain a person who later commences use of a same or confusingly similar trade mark under the tort of passing off and may seek to expunge an existing trade mark registration from the register on the basis that the mark has been wrongfully entered or wrongfully remaining in the register pursuant to Section 45(1) of the TMA.
Section 14(1)(a) of the TMA is often invoked as a ground to challenge the validity of a trade mark registration. It prohibits the registration of a mark if the use of the mark is likely to deceive or cause confusion to the public or would be contrary to law. In cases where the representation of trade marks constitutes artistic work which is capable of protection under the Copyright Act 1987 (“CA”), this may lead to conflicts of intellectual property rights between trade mark rights on the one hand and copyright on the other hand in determining the priority of rights.
It is noteworthy that the High Court had recently in Hakubaku Co. Ltd. v Asiamega Food Manufacturers Sdn. Bhd.  MLJU 1820, endorsed the principle of first-to-use and considered Section 14(1)(a) of the TMA in resolving issues arising from conflicts between trade mark registrations and common law right arising from actual use of a mark and those between trade mark right and copyright. The Court also gave its observation on the relationship between copyright and trade mark rights.
In this case, the Plaintiff had sought to expunge a trade mark, namely “HAKUBAKU & device” which was registered by the Defendant on 23 September 2013 in class 30. The Plaintiff claimed that it is the first bona fide user in the course of trade of a similar “HAKUBAKU & device” mark in Malaysia and the copyright owner of three “HAKUBAKU” variation marks including the “HAKUBAKU & device” mark.
The Plaintiff had on 15 October 2015 applied to register the “HAKUBAKU & device” mark in classes 30 and 31 but the applications were objected to by the Registrar. The Defendant alleged that it is the first user of the registered mark due to having successfully registered the mark and argued that the Plaintiff is estopped from expunging its registered mark as the Plaintiff did not object to the Defendant’s application when it was published during the opposition period.
In considering the issue of first use, the Court stated that a mere application to register a mark does not constitute use of the mark nor confer any priority on the applicant. As the Defendant failed to adduce evidence of use, the Court rejected the Defendant’s claim of being the first user of the mark and found that the Defendant’s use of the mark was unlawful in that it had passed off its goods in Malaysia as and for the Plaintiff’s goods.
In response to the Defendant’s argument on issue estoppel, the Court held that whilst the Plaintiff failed to raise any objection during the opposition period the Plaintiff should not be barred from challenging a mark which has been wrongfully entered or wrongfully remains in the register.
The Court found as a matter of fact that the Plaintiff is the first user of “HAKUBAKU & device” mark in Malaysia by virtue of its use since 6 June 2013 which is prior to the registration of the Defendant’s mark on 23 September 2013 and therefore is the common law owner. Accordingly, the Court allowed the Plaintiff’s expungement application on the basis that the Plaintiff is the rightful owner being the first user of the mark and that the use of the registered mark by the Defendant is likely to deceive or cause confusion to the public pursuant to the first limb of Section 14(1)(a) of the TMA.
The Court then asked whether the registered mark may be expunged on the ground that the Defendant committed the tort of passing off and copyright infringement under the second limb of Section 14(1)(a) of the TMA if it is assumed that the Defendant is the first user of the mark in Malaysia and is thus the common law owner. In answer to this question, the Court applied Section 35(1) of the TMA that confers upon the Defendant the exclusive right to use the mark upon registration and remarked that such provision negatives the commission of the tort of passing off by the Defendant. In view thereof, it was held that the mark may not be expunged on the ground that the Defendant committed the tort of passing off under the second limb of Section 14(1)(a) of the TMA.
Some uncertainty arises from this because if it was made on the assumption that the Defendant is the first user of the registered mark, the resulting common law proprietorship would have negated the commission of passing off by the Defendant in any event without the need to rely on Section 35(1) of the TMA. On the other hand, if the decision was premised on the finding that the Plaintiff is the first user of the registered mark, it appears not to have taken account of the fact that the statutory right of use given by registration of a mark under Section 35(1) of the TMA does not provide a defence to an action for passing off having regard to Sections 82(1) and 82(2) of the TMA which expressly preserve the right of passing off.
The above view finds support in the principle enunciated in the English case of Eli Lilly & Co. Ltd. v Chelsea Drug Chemical Co. Ltd.  RPC 14 that use of a registered trade mark confers no defence to an action for passing off having regard to Section 2 of the UK Trade Marks Act 1938 (which is pari materia with the Malaysian Sections 82(1) and 82(2) of the TMA). This principle is reiterated in Inter Lotto (UK) Ltd v Camelot Group Plc  RPC 9 where the Court of Appeal held that the presence of Section 2(2) of the UK Trade Marks Act 1994 (which is substantially similar to Sections 82(1) and 82(2) of the TMA) provides that “… nothing in this Act affects the law relating to passing off” is fatal to the registered proprietor’s claim that he is not liable for passing off by virtue of its rights in its registered trade mark. Further, in Re Lyle and Kinahan Ld.’s Application (1907) 24 RPC 249, the Court of Appeal held that registration of a trade mark only confers upon the proprietor the right to restrain others from using the mark as a mark for their goods but it does not give him the right to use the mark if it would deceive.
It is interesting to note that the High Court had previously in X1R Global Holdings & Anor v Y-TEQ Auto Parts (M) Sdn Bhd & Anor  1 LNS 125 (HC), considered the statutory rights given to the defendant who was the registered proprietor of certain marks in determining whether the defendant had breached a consent order. The Court held that there was no restriction in the consent order on the registration of the defendant’s trade marks and hence use by the defendant was a valid statutory right conferred by registration which did not constitute passing off. There was therefore no breach of the consent order. The Court then remarked that the plaintiff’s remedy should be expungement of the defendant’s trade mark registrations. This lends support to the principle that a trade mark registration is only a defence to passing off if the validity of the registration is upheld.
Nonetheless, the Federal Court in Ho Tack Sien & Ors v Rotta Research Laboratorium SpA & Anor, Registrar of Trade Marks (Intervener) & Another Appeal  4 CLJ 20; 4 MLJ 166 (FC) has provided guidance in holding that the defence to infringement by pleading use of a registered mark may only be relied upon to the extent that the registration is valid. This is consistent with the English case of Berlei (UK) Ltd v Bali Brassiere Company Incorporated  RPC 469 where it was held that the defence under Section 4(4) of the UK Trade Marks Act 1938 (which is substantially similar to the Malaysian Section 40(1)(f) of the TMA) is afforded only to a proprietor of a trade mark registration which is valid.
In the instant case, the Court had also found that the Plaintiff has established copyright ownership in the three “HAKUBAKU” variation marks and held obiter that even if the Defendant was the first user of the mark, and hence acquired common law proprietorship of the mark as a result, the use would still constitute copyright infringement. This suggests that the Court has taken the view that where copyright and trade mark rights occupy the same space, copyright would prevail.
Since this decision was made on a finding of fact that the Plaintiff is the first user of the registered mark, no incongruity arises between trade mark rights and copyright. There would, however, be a disconsonant over whether copyright would still take precedence if the Defendant was the first user of the mark in Malaysia. This question is essentially a matter to be resolved by Parliament and something for the rest of us to chew on. The new Trademarks Act 2019 does not address this issue.
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