Unjustified seizure results in damages award

Malaysia

In Parkson Corporation Sdn Bhd v Fazaruddin bin Ibrahim ([2002] 4 AMR 3951), the Court of Appeal has ruled for the first time that a producer of goods seized under suspicion of being counterfeits is entitled to damages if it is able to prove that the trade description order, issued pursuant to Section 16 of the Trade Descriptions Act 1972, was unjustified.

Trade description orders (TDOs) are issued by the High Court if mark owners are able to prove that another party is guilty of trademark infringement (in relation to a registered mark) or passing off (in relation to an unregistered mark or design). TDOs declare the infringing mark or get-up as a false trade description when applied to specified goods. As TDOs are normally issued ex parte, the suspected infringer is given no opportunity to refute the mark owner's claims.

In the case at hand, Ibrahim suspected Parkson of trademark infringement and counterfeiting, and therefore applied for and received a TDO. Parkson attempted to set aside the TDO but failed. Ibrahim then made an application to the High Court for an order to assess damages against Parkson pursuant to Section 16 of the Trade Descriptions Act. The High Court granted the order and Parkson appealed.

The Court of Appeal reversed the decision and held that the High Court has no power under Section 16 to order assessment of damages in favour of a successful TDO applicant. It ruled that the remedy provided by Section 16 must be restricted to its clear wording and no more.

The Court of Appeal also clearly stated for the first time that any party raided pursuant to a TDO is entitled to damages if it can subsequently prove that the order was unjustified.

As a result of this decision, the risk of taking enforcement action against potential trademark infringers has increased dramatically. Applicants for TDOs should ensure that their application is well founded.

Bong Kwang Teo, Raja Darryl & Loh, Kuala Lumpur

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