Malaysia - DORPAN, S.L. And MELIA HOTELS INTERNATIONAL, S.A. V NUSAJAYA RISE SDN BHD [JOHOR BAHRU CIVIL SUIT NO.: JA-22IP-05-09/2017]

Legal News & Analysis - Asia Pacific - Malaysia - Intellectual Property

12 March, 2019

 

Introduction

We successfully acted for the plaintiffs, Dorpan, SL and Melia Hotels International, S.A. (“Dorpan, SL and Melia”) against the defendant, Nusajaya Rise Sdn Bhd (“Nusajaya Rise”) (a wholly owned subsidiary of the well-known property developer UEM Sunrise Berhad), over the use of the word MELIA in relation to the Nusajaya Rise’s residential project at Nusajaya.

In addition to the usual injunctive orders, the Court further allowed Dorpan, SL and Melia the election between having their damages assessed and account of Nusajaya Rise’s profit flowing from the latter’s wrongful use of the mark MELIA.

The underlying principle behind an account of profit rests in the need to ensure that third parties do not make wrongful gains from the wrongful use of other proprietor’s trade mark.
 
Facts

 
Dorpan, SL and Melia claimed that Nusajaya Rise has passed off its residential property services as and for Dorpan, SL and Melia’s hotel services by using the mark “MELIA RESIDENCES” (“the MELIA RESIDENCES Mark”) in relation to its residential project at Nusajaya.

Dorpan, SL and Melia claimed that such use would lead to a likelihood of confusion and/or deception in the course of trade and the Malaysian public would be mistaken into believing that there is an association between the Dorpan, SL and Melia and Nusajaya Rise.

Dorpan, SL and Melia further claimed that their MELIA Trade Mark is a well-known trade mark and claimed for an injunctive relief under section 70B of the Trade Marks Act 1976 to restrain Nusajaya Rise from using the MELIA RESIDENCES Mark, which is identical and/or confusingly similar to Dorpan, SL and Melia’s well-known MELIA Trade Mark, in the course of trade.
 
The premise behind Dorpan, SL and Melia’s claim is that they adopted the MELIA brand since 1987 and the brand and trade mark has been extensively used since then. Today, Dorpan, SL and Melia’s group of companies operate more than 350 hotels in 43 countries in four continents. It is the third largest hotel chain in Europe and the 16th largest hotel group worldwide.

Insofar as Malaysia is concerned, Dorpan, SL and Melia are the registered proprietor/licensee of the MELIA Trade Mark. Dorpan, SL and Melia further manage the Melia Kuala Lumpur hotel and have used Dorpan, SL and Melia’s MELIA Trade Mark in Malaysia since at least 1990.
 
In recent years, Dorpan, SL and Melia have diversified and/or ventured into property development services, that is, by developing and/or managing condotels. Evidence was led in Court to show that such diversification of services is not an uncommon trend.

Owing to this trend, the use of the MELIA RESIDENCES Mark by Nusajaya Rise in its residential project will cause a probability of association between Nusajaya Rise’s services and Dorpan, SL and Melia’s services amongst the Malaysian trade and public.
 
Nusajaya Rise, in heavily contesting Dorpan, SL and Melia’s claims, raised, among others, the following arguments:

 

i. The proper owner of the goodwill in Dorpan, SL and Melia’s business in Malaysia is not Dorpan, SL and Melia as their hotel in Malaysia is owned by Dorpan, SL and Melia’s licensee. No licence agreements were adduced by Dorpan, SL and Melia to show the licensor-licensee relationship between Dorpan, SL and Melia and their licensee.

 

ii. Even if Dorpan, SL and Melia own the goodwill in its business in Malaysia, Dorpan, SL and Melia’s goodwill is only limited to hotel services and not residential property services.

 

iii. Dorpan, SL and Melia and Nusajaya Rise are not in the common field of activity. According to this argument, there is no room for any likelihood of confusion or deception as Dorpan, SL and Melia are not in the property development business.


iv. There is furthermore no probability of association between Nusajaya Rise and Dorpan, SL and Melia as Nusajaya Rise’s MELIA RESIDENCES Mark is always used together with the Nusajaya Rise’s house marks (which is the UEM Sunrise’s trade mark and the Gerbang Nusajaya trade mark, which were both well-known trade marks in Malaysia). 

 

Decision

 
In its decision on 28 January 2019, the High Court ruled in favour of Dorpan, SL and Melia. This decision is crucial as the High Court expressly acknowledged the following: 

 

i. There is no requirement in law for Dorpan, SL and Melia to adduce the licence agreement between Dorpan, SL and Melia and Pudu Sinar if the dispute is not between the licensor and licensee. Nusajaya Rise should not be allowed to rely on the technical argument that it had no connection with Dorpan, SL and Melia as a defence to its infringing activities. As such, the Court accepted Dorpan, SL and Melia as the proper owner of the goodwill in its business in Malaysia.

 

ii. The Court recognised the possibility of diversification and natural extension from one business to the other through an effluxion of time.  A proprietor in business A and later on in business B, for example, is entitled to pursue its claim for passing off vis-à-vis business B.  Alternatively, the proprietor in business A without having been involved in business B could nevertheless still pursue its claim against a third party in business B provided it could show trends of diversification or natural extension from business A to B which is seen as the premise for likelihood of association. Such trends no doubt are factual and evidence-heavy. On the facts the Court was satisfied that Dorpan, SL and Melia have established their diversification from hotel into residential property services.

 

iii. House brand and sub brand are in law stand-alone trade marks with their own distinctiveness and are thus capable of performing their respective source identifications. Confusion is not necessarily eliminated just because MELIA RESIDENCES Mark is used together with Nusajaya Rise’s house marks. 

 

Conclusion

This case reinforces the position in law that common field of activity is not a pre-requisite in establishing the element of misrepresentation in a passing-off action. A proprietor is able to lay claim against a third party in another field of activity provided it could show trends of diversification into the latter field.
 
This matter was handled by Indran Shanmuganathan and Michelle Loi Choi Yoke, who are partners in our Intellectual Property Law Practice, and Yap Khai Jian who is a legal associate in our Intellectual Property Law Practice.

 

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For further information, please contact:

 

Indran Shanmuganathan, Partner, Shearn Delamore & Co​

indran@shearndelamore.com