Federal Court adopts liberal interpretation of "use as a trademark in the course of trade"

Malaysia

Mesuma Sports Sdn Bhd v Majlis Sukan Negara Malaysia was an appeal brought by the appellant, Mesuma Sports Sdn Bhd, a private limited company in the business of supplying sporting apparel, equipment, accessories and sporting goods, which had been a contract supplier to the respondent since 1990.

The respondent was The National Sports Council, a statutory body formed pursuant to the National Sports Council of Malaysia Act 1971. The National Sports Council was tasked with promoting sports locally and internationally, as well as participating in the development of sports in Malaysia. 

In 2005 the Ministry of Youth and Sports, with the cooperation of the respondent, co-organised a design competition to design a new motif for sports attire to be worn by all Malaysian athletes representing the country in sports events held within the country and internationally. The 'tiger stripes 'design was selected as the winning design of the competition. After final selection, on November 14 2005 the ministry officially launched the said design. Subsequently, the ministry entrusted the respondent with all responsibilities over the rights, ownership and management of the 'tiger stripes' design.

The appellant was eventually appointed by the respondent as contract supplier to produce sports attire bearing the 'tiger stripes' design to be worn by Malaysian athletes for the 2006 Asian Games in Doha.

On July 9 2009 the appellant, claiming to be the first user of the design as a trademark in the course of trade, applied for registration of the design under the Trademarks Act 1976, while it was still a supplier of sports goods to the respondent. On February 11 2011 the 'tiger stripes' design was registered as a trademark by the registrar of trademarks in the name of the appellant for a period of 10 years from July 9 2009 to July 9 2019 in Classes 18 and 25 in respect of “sporting apparels, equipment and accessories and sports clothing” (No 09011365 and No 09011366, respectively). The appellant admitted that its registered trademark was entirely adapted from the respondent’s 'tiger stripes' design.

On or around January 15 2010 the respondent filed for registration under the act of the same 'tiger stripes' design as a trademark. Its application was objected to by reason of the appellant’s earlier trademark registrations for a similar design.

The respondent then commenced a passing-off action against the appellant on the basis that it had commissioned the design or that it was the assignee of the proprietary rights in the design and, therefore, it was the owner of the design as copyright, industrial design and trademark owner. The respondent also sought to cancel the appellant’s registered trademarks No 09011365 (Class 18) and No 09011366 (Class 25), based on Sections 45(1)(a) and 46(1) of the act.

The appellant, on the other hand, maintained that it was the true owner of the said design motif, being the first to have used the design as a trademark in the course of trade. 

The High Court held that the respondent was the rightful proprietor and user of the 'tiger stripes' design, as the respondent, together with the ministry, was the first conceiver and first user of the said design; moreover, since 2005, the respondent had earned substantial goodwill and reputation in the design, which was distinctive of the respondent and not of the appellant in any manner whatsoever. The High Court also found that the appellant’s registered trademark had been wrongly entered, or entered without sufficient cause, into the register and, as a result, should be expunged pursuant to Section 45(1)(a) of the act. Consequently, the Register of Trademark was rectified by removing the trademarks registered in the name of the appellant.

The appellant then filed an appeal against the High Court’s decision before the Court of Appeal. The Court of Appeal unanimously held that the High Court was correct in expunging the appellant’s trademarks from the register, as the appellant was neither the proprietor nor the first user of the 'tiger stripes' design.

The appellant then filed an appeal against the decision of the Court of Appeal, and leave to appeal was granted. The appeal to the Federal Court related only to the respondent’s application in the High Court to expunge the appellant’s registered trademarks.

The appellant submitted that the High Court and Court of Appeal had erred in finding that the respondent had used the 'tiger stripes' design as a trademark in the course of trade in a distinctive way so as to have acquired goodwill in the design. The appellant contended that use in ‘a trademark sense’ could be achieved only through the manufacturing and sale of goods bearing the 'tiger stripes' design, and goodwill could be achieved only through business activities such as "manufacturing, supplying and selling" sports attire. The appellant also contended that there was no evidence that the respondent had, at any material time, used the 'tiger stripes' design as a source indicator in relation to goods, since the respondent’s activities related to branding.

The Federal Court held that the fact that the claimant was the designer of the motif or the assignee of the proprietary rights to the design did not automatically entitle it to claim common law trademark ownership rights. The Federal Court held that, unlike copyright or industrial design rights, common law proprietorship of a trademark required the claimant to establish its entitlement to the trademark through use as a trademark on goods in the course of trade.

The Federal Court, in dismissing the appeal, held that common law trademark ownership could be claimed only if there was use of the motif as a trademark on goods in the course of trade. On the factual matrix, the Federal Court found that it was the respondent, the National Sports Council, who was the first to use the design motif in a manner distinctive of itself in the course of trade under its contractual sponsorship arrangement with the appellant. It thus had the necessary goodwill and was therefore the common law owner of the design. 

In reaching this decision, the Federal Court adopted a liberal approach by giving an expansive meaning to the definition of “use in a trademark sense in the course of trade”, holding that one did not need to be a "trading entity" before it could be said to have used a trademark in the course of trade. The Federal Court, in referring to the Concise Oxford Dictionary (Ninth Edition), construed the word 'trade' as meaning “business conducted for profit, business of a specified nature, or even a transaction with a person for a thing”. 

The Federal Court held that, while the respondent was not a trader, it was a sports organisation, with statutory functions and duties, which was authorised to engage in commercial business incidental to its primary statutory objects; the appellant was no more than a contract manufacturer which affixed the 'tiger stripes' design to the sports attire made to the respondent’s order.

This case highlights the importance of spelling out clear obligations and ownership of IP rights from the outset between organisations and their contract manufacturers, even in the case of long-standing commercial relationships. Another important lesson arising from the Federal Court decision is the importance of protecting one’s trademark prior to the commercialisation of that mark.

Janet Toh Yoong San, Shearn Delamore & Co, Kuala Lumpur

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