Malaysia - How Consent To Use Affects Ownership Rights To A Registered Trademark.

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

2 April, 2018


Introduction
 
Can “consent” to use a registered trade mark be considered an abandonment by the owner of the exclusive rights to that registered trade mark in perpetuity? Section 40(1)(dd) of the Trade Mark Act 1976 (“Act”) provides that it is not a trade mark infringement if it is “the use by a person of a trade mark in relation to goods or services to which the registered proprietor or registered user has at any time expressly or impliedly consented to” [Emphasis added].
 
This raises the question as to whether a licensee who had previously obtained consent for the use of a registered trade mark can be subsequently held liable for infringing that trade mark when the registered owner withdraws the consent.
 
In the case of Low Chi Yong v Low Chi Hong & Anor[1], the Federal Court considered the question of whether the consent to use a registered trade mark, once given by the registered trade mark owner, is perpetual.
 
The facts
 

This case concerns a dispute between two siblings on the right to use the trade mark, “Reynox”, in relation to their liquid fertiliser business.
 
In brief, the plaintiff/appellant (“Low Chi Yong) and the first defendant/first respondent (“Low Chi Hong”) are siblings who run a family business trading in liquid fertiliser under the trade mark, “Reynox”. Since 2005, Low Chi Yong had registered the “Reynox” mark in his sole name and allowed the “Reynox” mark to be used in the family business, including by the second defendant/second appellant (“Reynox Sdn Bhd”).

Reynox Sdn Bhd was a company formed by Low Chi Yong and Low Chi Hong to take over the production, business, sale and distribution of the liquid fertiliser under the “Reynox” mark, with Low Chi Yong and Low Chi Hong each owning equal shares in Reynox Sdn Bhd. Low Chi Yong was also a director of Reynox Sdn Bhd. When Low Chi Yong subsequently left Reynox Sdn Bhd, he filed a court action against Low Chi Hong and Reynox Sdn Bhd for infringement of the “Reynox” mark and passing off.
 
The High Court held that Low Chi Yong is the registered proprietor of the “Reynox” mark and that Low Chi Hong and Reynox Sdn Bhd had infringed the “Reynox” mark.
 
Low Chi Hong and Reynox Sdn Bhd successfully appealed against the High Court decision in respect of the infringement of the “Reynox” mark. The Court of Appeal held that the “Reynox” mark had been used by Low Chi Hong and Reynox Sdn Bhd with the consent and approval of Low Chi Yong. The Court of Appeal further held that Low Chi Yong’s conduct of terminating the consent for Low Chi Hong and Reynox Sdn Bhd to use the “Reynox” mark without reasonable notice was unjust, inequitable and oppressive.
 
Dissatisfied with the decision of the Court of Appeal, Low Chi Yong successfully obtained leave to appeal to the Federal Court.
 
The dispute
 
Low Chi Yong had registered the “Reynox” mark in his sole name with the Intellectual Property Corporation of Malaysia on 13 May 2005. The registration was for liquid fertiliser under Class 1 in respect of chemicals used in agriculture. Whilst Low Chi Hong claimed that he is the co-owner of the “Reynox” mark and that he was under the mistaken belief that the “Reynox” mark was registered under the names of both Low Chi Yong and Low Chi Hong, the Federal Court found no evidence to rebut the conclusiveness of the registration of the “Reynox” mark as promulgated under section 36[2] of the Act and, hence, the registration of the “Reynox” mark is valid, that is, in the sole name of Low Chi Yong.
 
Pursuant to section 35(1)[3] of the Act, Low Chi Yong had the exclusive right to use the “Reynox” mark and also the right to prevent another person (not being registered users) from using the same mark or any similar mark for liquid fertiliser used in agriculture.

Based on the evidence, the Federal Court was satisfied that Low Chi Yong had established a prima facie case of infringement of his “Reynox” mark by Low Chi Hong and Reynox Sdn Bhd.

The question before the Federal Court was whether Low Chi Hong and Reynox Sdn Bhd had a good defence based on the consent by Low Chi Yong to Low Chi Hong and Reynox Sdn Bhd for the use of the “Reynox” mark.
 
There is no doubt that consent was granted by Low Chi Yong to Reynox Sdn Bhd to distribute the liquid fertiliser under the “Reynox” mark when Low Chi Yong was still a shareholder/director of Reynox Sdn Bhd.
 
However, when Low Chi Yong subsequently resigned from Reynox Sdn Bhd, his solicitors sent notices dated 20 December 2012 to Low Chi Hong and Reynox Sdn Bhd stating that, amongst others, Low Chi Yong is the sole registered proprietor of the “Reynox” mark and demanding that Low Chi Hong and Reynox Sdn Bhd immediately refrain from using the “Reynox” mark.
 
Despite receipt of these notices, Low Chi Hong and Reynox Sdn Bhd continued to manufacture and market products which were similar to Low Chi Yong’s products under the “Reynox” trade mark. Low Chi Hong and Reynox Sdn Bhd argued that the consent continued on and still existed despite the withdrawal of the consent by Low Chi Yong in the notices.
 
The question before the Federal Court was whether consent once given by Low Chi Yong to Low Chi Hong and Reynox Sdn Bhd is an abandonment of his exclusive right to the “Reynox” mark in perpetuity such that the defence under section 40(1)(dd)[4] of the Act would apply to Low Chi Hong and Reynox Sdn Bhd.
 
“Consent” as defence
 

In deciding the question, the Federal Court considered the meaning of the term “consent” in Black’s Law Dictionary and held as follows:

“...consent means 'Agreement, approval or permission as to some act or purpose, esp. given voluntarily by a competent person; legally effective assent', 'Express consent' means 'Consent that is clearly and unmistakably state', whereas 'Implied consent' means 'Consent inferred from one's conduct rather than from one's direct expression'. Without the need of an exhaustive and laborious research,consent entails permission given by a competent person.”
 
Applying that definition, once that consent is withdrawn the legally effective assent ends.
 
The Federal Court held that the right for Low Chi Hong and Reynox Sdn Bhd to use the “Reynox” mark had ceased after Low Chi Yong withdrew his consent, as notified by the notices issued to Low Chi Hong and Reynox Sdn Bhd.
 
Low Chi Hong and Reynox Sdn Bhd argued that the consent continues by reason of an assignment of the “Reynox” mark from Low Chi Yong to them. The Federal Court, however, held that unless an entry has been made by the Registrar on the Register in respect of the assignment as provided under section 47[5] of the Act, no document or instrument to prove the assignment shall be admissible in Court (unless directed otherwise by the Court). In the absence of any evidence to show that the consent was indeed an assignment and entry has been made by the Registrar on the Register, the Federal Court held that the “Reynox” mark was never assigned to Low Chi Hong or Reynox Sdn Bhd.
 
Equitable defence
 
Apart from the issue of consent, Low Chi Hong and Reynox Sdn Bhd also argued that, by Low Chi Yong’s conduct in not enforcing his rights to the “Reynox” mark since 2005, he had waived his rights over the use of the “Reynox” mark and was precluded from enforcing his rights based on the doctrine of abandonment, acquiescence, estoppel and laches.
 
However, the Federal Court was of the view that there was no evidence that Low Chi Yong had abandoned his rights to the “Reynox” mark and the fact that he had served notices of withdrawal of consent to Low Chi Hong and Reynox Sdn Bhd and renewed the registration of the trade mark established that Low Chi Yong had not abandoned his rights over the “Reynox” mark.
 
As for the doctrine of estoppel, acquiescence and laches, the Federal Court was of the view that Low Chi Hong and Reynox Sdn Bhd had failed to establish “consent on the part of the Appellant, an integral ingredient leading to a successful establishment of the doctrine of estoppel, acquiescence and laches”[6]. Low Chi Hong and Reynox Sdn Bhd had no defence under these doctrines.
 
Conclusion
 
The Federal Court’s decision clarifies the nature and extent of the defence under section 40(1)(dd) of the Act and illustrates the importance of objecting to the unauthorised use of a registered trade mark. Giving notice of the objection will be important evidence to show non-consensual use of the registered trade mark.
 
Despite the words in section 40(1)(dd), “has at any time expressly or impliedly consented to”, an express or implied consent does not constitute an abandonment of trade mark right in perpetuity and will cease upon express withdrawal of consent by the registered proprietor.
 
It is also important for a licensee and/or a person who has obtained consent for the use of a registered mark to cease using a registered trade mark upon receipt of the notice of withdrawal of consent, termination of licence arrangement and/or letter of objection. Failure to do so may result in him being sued for trade mark infringement.

[1] [2018] MLJ 175
[2] In all legal proceedings relating to a registered trade mark (including applications under section 45) the fact that a person is registered as proprietor of the trade mark shall be prima facie evidence of the validity of the original registration of the trade mark and of all subsequent assignments and transmissions thereof.
[3] Subject to the provisions of this Act, the registration of a person as registered proprietor of a trade mark (other than a certification trade mark) in respect of any goods or services shall, if valid, give or be deemed to have been given to that person the exclusive right to the use of the trade mark in relation to those goods or services subject to any conditions, amendments, modifications or limitations entered in the Register.
[4] The use by a person of a trade mark in relation to goods or services to which the registered proprietor or registered user has at any time expressly or impliedly consented to.
[5] (1) Where a person becomes entitled by assignment or transmission to a registered trade mark he shall make application to the Registrar to register his title and the Registrar shall, on receipt of the application and proof of title to his satisfaction, register that person as the proprietor of the trade mark in respect of the goods or services in respect of which the assignment or transmission has effect and cause particulars of the assignment or transmission to be entered in the Register.
 (2) A decision of the Registrar under subsection (1) is subject to appeal to the Court.
 (3) Except in the case of an appeal under this section or of an application under section 45 a document or instrument in respect of which no entry has been made in the Register in accordance with subsection (1) shall not, unless the Court otherwise directs, be admissible in evidence in Court to prove title to a registered trade mark.
[6] [2018] MLJ 175, Paragraph 56

 

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For further information, please contact:

 

Mike Ho Mun Keat, Shearn Delamore & Co​

mikeho@shearndelamore.com