Grounds of LEO Pharma decision issued

The grounds for the decision of the Malacca High Court in LEO Pharmaceutical Products Ltd A/S v Kotra Pharma (M) Sdn Bhd (Case 1-22-57-2001) have been released.
LEO Pharmaceutical Products Ltd A/S, the famous Danish manufacturer of pharmaceutical products, sued Kotra Pharma (M) Sdn Bhd, a local manufacturer of generic drugs, for trademark infringement and passing off.    
LEO Pharma owns Malaysian registrations for the famous trademarks FUCIDIN and FUCICORT in respect of pharmaceutical products. For many years, LEO Pharma has manufactured and distributed antibiotic preparations containing, among other things, fusidic acid and corticosteroid under these marks. Moreover, LEO Pharma has widely promoted and marketed pharmaceutical products bearing the marks in Malaysia and in many countries around the world. Kotra sold and distributed two pharmaceutical products under the trademarks AXCEL FUSIDIC and AXCEL FUSI-CORTE. 
During the trial, Kotra counterclaimed for cancellation of LEO Pharma’s FUCIDIN and FUCICORT marks on the following grounds, among others:
  • the FUCIDIN and FUCICORT marks were not registrable since they bear a close resemblance to the terms 'fusidic acid' and 'corticosteroid', the active ingredients of the relevant pharmaceutical products;
  • LEO Pharma’s marks were registered in violation of Section 10(1)(d) of the Trademarks Act 1976, as they are descriptive of fusidic acid and corticosteroid; and
  • at the time the suit was filed, LEO Pharma’s marks were not distinctive with regard to the relevant goods.
The court opined at the outset that the evidence and submissions of both parties “reveal[ed] complex and overlapping issues which will have far-reaching [...] implications for the pharmaceutical industry”.
The court first considered Kotra's counterclaim. After carefully examining the relevant provisions of the Trademarks Act and the evidence adduced, the court held that the act - unlike the Indian Trademarks Act - does not expressly prohibit the registration of international non-proprietary names (INNs) as trademarks. However, the court was quick to point out that FUCIDIN and FUCICORT were not equivalent to 'fusidic acid' or 'corticosteroid' and, therefore, were not INNs.
With regard to the issue of descriptiveness, the court accepted the evidence given by two of LEO Pharma’s witnesses and ruled that although the term 'fuci' is derived from 'fusidic acid', it has no meaning in itself. It also held that 'fucicort' is a portmanteau word - that is, a word formed by merging the sounds and meanings of two (generally descriptive) words. The court pointed out that FUCICORT is derived from the words 'fusidic' and 'corticosteroid' and, therefore, is distinctive. In this regard, the court held as follows:
An INN is, of course, not registrable as a trademark since it is generic in nature. It cannot be monopolized by any trader [...] However, this does not prevent pharmaceutical trademark applicants from choosing names which allude to INNs or from trying to obtain registration of a trademark which is as close as possible to the INN. A trademark cannot be directly descriptive, but this does not mean that it cannot be suggestive […] A word or term, even if it is descriptive, can still qualify as a trademark as long as it is distinctive or capable of being distinctive.”
The court also held that a trademark should not be divided into its components, but should be examined as a whole. Any attempt to divide FUCIDIN into 'fuci' and 'din', and FUCICORT into 'fuci' and 'cort', would be contrary to established principles of trademark  law.

With regard to the issue of distinctiveness, the court held that the burden of proof lay on Kotra. Based on the evidence adduced, the court found that Kotra had failed to discharge the burden and concluded that FUCIDIN and FUCICORT were able to distinguish the goods of LEO Pharma. The court took into consideration the fact that various pharmaceutical references (eg, Martindale-The Extra Pharmacopeia and A Dictionary of Medicines) clearly recognized FUCIDIN and FUCICORT as trademarks of LEO Pharma. 
Kotra's counterclaim was thus dismissed with costs.
With regard to LEO Pharma’s trademark infringement and passing off claims, the main issue was whether there was a likelihood of confusion  between LEO Pharma’s FUCIDIN and FUCICORT marks and Kotra's AXCEL FUSIDIC and AXCEL FUSI-CORTE marks. Kotra claimed that it sells its generic range of products under the trademark AXCEL, which it combines with the name of the active ingredient of the relevant product based on the recommended INN. In other words, Kotra contended that the elements 'fusidic' and 'fusi-corte' were not used as trademarks, but as descriptive terms.  
After carefully examining the evidence adduced, the court rejected Kotra's argument. The court held that at least two witnesses believed that Kotra's trademarks were FUSIDIC and FUSI-CORTE, and not AXCEL. In this respect, Kotra's own witnesses admitted that since Kotra sold more than 67 types of generic products prefixed with the word 'axcel', it was necessary to specify the full name of the product when placing an order. The court held as follows:
Whether a mark or word is used as a trademark must be viewed objectively. The defendant cannot escape infringement by establishing that the mark was not intended to function as a trademark. A generic or descriptive word can perform the dual function of indicating both the characteristics and the origin of the goods. Further, a generic term may acquire a secondary meaning through use and, therefore, function as a trademark.”
The court thus found for LEO Pharma on both claims. The court granted a permanent injunction and an order for assessment of damages, and ordered Kotra to pay the costs. The parties subsequently came to an agreement on the quantum of damages.
It is believed that this is the first case in which a generic drug company has attempted to cancel a well-known trademark belonging to an established company on the grounds that the mark has become publici juris. The decision is a warning to the local generics industry that any attempt to imitate a well-known trademark on the pretext that it is generic may not find favour with the courts. 
Teo Bong Kwang, Wong Jin Nee & Teo, Kuala Lumpur

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