The Court of Appeal Adopts Purposive Construction of Patent Claim. Putting Patents Through The Novelty & Obviousness Wringer At Trial

Transcription

1 April IP Valuation The Court of Appeal Adopts Purposive Construction of Patent Claim Putting Patents Through The Novelty & Obviousness Wringer At Trial Case Summary -Microsoft Corporation v. Conquest Computer Centre Sdn Bhd Case Summary -Wieland Electric GMBH v. Industrial Automation (M) Sdn Bhd & Anor

2 IP VALUATION By Jin Nee Wong In today s global economy, intangible assets which encompass intellectual property (IP) have surpassed tangible assets to become the principal contributor to the market value of the many major companies listed in the stock markets. Many studies and reports have demonstrated that such intangible assets now account for up to 75% of public companies market capitalization and IP is fast becoming the major assets that create value and growth for companies. As companies strive to be more innovative and competitive, they need more funds to conduct further research and developments. They need to leverage on their IP to secure external financing from banks, venture capitalists and other sources. These trends and developments raise the importance of IP valuation. Companies must be able to value their IP when estimating their own corporate value, when determining the royalty rates in licensing deals, and when estimating the value in a possible merger or acquisition. Financial institutions (FIs) need to assess the value when IP is used for collaterals and investors in assessing the value of the companies in order to make informed investment decisions. Lack of clear directions and guidelines in IP valuation will impede such efforts. The Malaysian Government is fully cognisant that in knowledge-based economies, IP plays a critical role in business performance and economic growth. Malaysian Intellectual Property Office (MyIPO) had undertaken many fact-finding projects and held conversations with various stakeholders to further understand and study the local and global landscapes in relation to IP valuation and IP financing. The findings have shown that a significant number of promising Malaysian businesses, particularly the small and medium enterprises (SMEs) most valuable assets are their intangible assets including IP and yet one of the most common challenges encountered is their inability to secure financing to innovate and expand their businesses based on their intangible assets. Uncertainty surrounding valuation of intangible assets is the most significant obstacle in generating interests and activities from FIs to recognize IP as collaterals for loans. SMEs play a critical part in stimulating innovation and are often considered the backbone of economic growth in any nation, and engines of growth and employment. During the Global Intellectual Property Valuation Conference (GIPVC) entitled Unlocking the Mysteries of IP Valuation, Developing a Sustainable IP Ecosytem organized by MyIPO in November 2013 in Kuala Lumpur, the Minister of Domestic Trade, Cooperatives and Consumerism, YB Dato Hasan Malek launched the Intellectual Property Valuation Model (IPVM). The key features of the IPVM include: Intended for use by lenders in the financial sectors; IP assets must be pledged as part of connected assets, which could be tangible or intangible assets that contribute to the efficient use of the IP assets; Limited to SMEs engaged in the development and utilization of IP assets that meet certain requirements; The preferred valuation methodology is the income approach, in particular the Relief from Royalty basis; Other methodologies are encouraged to be used as crosschecks to provide a reliable estimate of the fair value of the IP assets; Consistent with internationally accepted standards including IFRS, IVS and ISO; and Continuously evolving, to be reviewed and evaluated progressively, adapted to suit each unique situation and type of IP asset. The IP Valuation model provides the much needed clarity and standards for various stakeholders and key players to implement. As a testament to the Government s firm commitment to these initiatives, 2

3 RM200 million was allocated in the 2013 Budget for an Intellectual Property Financing Fund scheme. The Government would provide a 2% interest rate subsidy and a guarantee of 50% of the IPR value through the Credit Guarantee Corporation Malaysia Bhd, with the rest being borne by banks. Another Government initiative includes the Community Innofund (CIF) to assist community groups in translating knowledge and ideas into products, processes or services that improve the socioeconomic standing and quality of life of the community. In anticipating a strong demand for highly skilled IP valuers, RM19 million was allocated IP valuation is often seen as a complex creature. Many articles have been written about it and yet it is not getting any simpler. IP valuation is a process to determine the monetary value of the particular IP, be it a trade mark, a patent or a copyrighted work. Some may say IP valuation is an art, some said it is part science, part art. Regardless, the point is IP valuation is an emerging issue that we cannot do without. IP valuation is relevant for a myriad of reasons M&As, IP portfolio rationalization and assessments, tax planning, transfer pricing, monetizing IP including licensing and franchising, sale and purchase of business or IP asset, JV, technology transfer, the same approaches (cost, income and market). The art part is in the experience and gut feel of the IP valuer in applying the approaches to the types of IP to be valued to generate a relevant, mathematically sound and defensible value that is acceptable. The next question is acceptable to whom? The purchaser, the banker or the client/seller? It would appear that the best appraisal is done through a multidisciplinary approach, involving accountants, IP consultants and the technical experts experienced in the relevant fields. IP valuation is by no means an easy feat. It would involve various considerations and skills including understanding the purpose and context in which the IP is being valued, nature, scope and validity of the IP to be valued, timing of the valuation, access to and reliability of comparative data, assumptions made to a particular valuation approach, legal, tax, financial and other business considerations and other factors when adjusting the discounted cash flow. There are essentially 3 main approaches, namely, market, income and cost. Each has its advantages and limitations. for training programs. So far there has been a total of 23 participants from 2 separate batches who have completed and passed the IP Valuation Training to become local IP valuers. collateral in financing or IP-backed securitization, litigation or liquidation. Every IP valuer, regardless of background and training, would learn The market approach is determined based on comparison with the actual price paid for a similar IP asset under a similar circumstance. For this approach to be accepted, one needs to have sufficient similarity of verifiable qualitative and quantitative data for the same or similar industry of comparable size, growth, business and financial risks, availability of price information and whether this price was at arm s length or a forced or 3

4 distress sale situation and the nature and extent of IP asset transacted. The factors are then adjusted for any differences in circumstances. The list of factors to be considered is by no means exhaustive. The major disadvantage of a market approach is the lack of availability of comparable industry data and transactions, the difficulty in identifying an exactly It goes without saying that the best way to exploit and manage one s IP is to know its real value. alike or even a similar IP asset. This approach, while relatively simple and useful if exact comparables are available, is usually used as a cross check for an income approach. The cost approach involves an analysis of either one or both of the following: (1) the historic cost associated with developing the IP asset by calculating the total direct expenditures and costs involved; (2) the replacement cost based on the cost to recreate the functionality or utility of an equivalent IP asset. This approach is rarely used except when valuing assets such as workforce or software. It is a useful approach in gaging the IP value when the IP has not been marketed yet or at a stage when there is no direct cash flow generated. In reality, historic cost is often a fraction of the expected economic benefits or potential income to be generated from the IP asset. It does not take into account the risks and uncertainty associated with realizing the economic benefits nor the trends in the economic benefits associated with the IP. In short, this approach does not provide a good indication of the highest price that can be obtained in the open market place or fair market value of a particular IP. Notwithstanding these shortcomings, many valuers use the cost approach to get a useful sense check to support other approaches adopted. The income approach, the most commonly adopted method, values the IP asset on the basis of the amount of economic income it is expected to generate, adjusted to its present day value. The ways in which to determine the economic value include the relief from royalty method that estimates the value of the IP based on the hypothetical expected future royalty payments it would receive if the IP owner were to license the IP to third party over the remaining useful life (RUL) of the IP asset. These hypothetical future revenue flows are then discounted to their present day value by using an appropriate discount rate reflecting the time value of money and risks associated with these cash flows. There are different measures of economic income that may be relevant to the income methods and given these differences, the essential element in the application of the income method is to ensure that the appropriate discount rate used is derived on a basis consistent with the measure of economic income used. This approach is highly popular for IP assets that generate positive and predictable cash flows. Citing a quote that is often attributed to Peter Drucker, what gets measured gets managed, IP valuation would enable organizations to exploit their IP and make rational economic decisions on which IP asset has the best ROI, how best to monetize the IP, what royalty rate to charge, whether to go ahead with the S&P or M&A based on the price on the table, and what damages to claim in litigation. It goes without saying that the best way to exploit and manage one s IP is to know its real value. This is indeed an exciting time for the IP fraternity. No doubt about it. 4

5 THE COURT OF APPEAL ADOPTS PURPOSIVE CONSTRUCTION OF PATENT CLAIM By Bong Kwang Teo For those who have been involved in a patent litigation the terms purposive construction and literal construction must be something not entirely alien. It is difficult to give a succinct definition of purposive construction. But one thing is clear: it is to be contrasted with a literal interpretation where strict adherence to the plain meaning of the words or phrases used in the patent claim is required. For example, if the word used is vertical then it will mean 90 degrees. There is no other way of interpreting it except to stick to its dictionary and literal meaning. But a purposive construction is significantly different from a literal interpretation. When adopting a purposive construction or purposive interpretation, the question to be asked is whether strict compliance with the particular words found in the claims of a patent would be understood as an essential requirement of the invention? The person who should answer this question is a person who has ordinary skill in the relevant technology or in patent parlance, the skilled person. The purposive approach was first expounded by Lord Diplock in the leading case of Catnic Components v Hill & Smith (1982) RPC 183 at p where his lordship said: A patent specification should be given a purposive construction, rather than a purely literal one derived from applying to it the kind of meticulous verbal analysis in which lawyers are too often tempted by their training to indulge. The question in each case is: whether persons with practical knowledge and experience of the kind of work in which the invention was intended to be used, would understand that strict compliance with a particular descriptive word or phrase appearing in a claim was intended by the patentee to be an essential requirement of the invention so that any variant would fall outside the monopoly claimed, even though it could have no material effect upon the way the invention worked. The Catnic Component case is a very good case to illustrate what a purposive construction entails. In this case the plaintiff was the registered proprietor of a patent for galvanized steel lintels for use in the construction industry. Such lintels were used as support spanning the space above the window and the door openings in cavity walls built of bricks and had at or near the rear vertical support members. The defendants manufactured lintels which were similar to those manufactured by the plaintiffs but with the rear support members inclined at 6 to 8 degrees. The claim of the plaintiff s patent protect a lintel in the form of a weight bearing box girder of which the back plate was referred to as extending vertically from one of the two horizontal plates to join the other. The inclination of 6-8 degree had no material effect on the way the lintel worked when used in building operations. The issue is whether vertically must be given its literal meaning of precisely at 90 degrees or should a purposive construction be adopted? We hold that in determining patent infringement, it is the doctrine of purposive construction that ought to be applicable. The apex court of England (i.e. the House of Lords) held that a patent should be given a purposive construction rather than purely a literal one. The question to ask is whether a builder with ordinary building operations would understand that a strict compliance with the word vertical appearing in the Claim was intended by the patentee to be an essential requirement. If the answer is no, then the defendant s 5

6 product would still infringe. In the Catnic Component case, the House of Lords decided that the answer was in the negative and therefore the defendant s lintel with support members inclined at 6 to 8 degrees still infringed the plaintiff s patent. The purposive construction was first adopted by the Malaysian Court in Rhone-Poulenc AG Company & Anor v Dikloride Herbicides Sdn Bhd [1988] 2 MLJ 323 at page 327 where VC George J stated: it is to be noted that in respect of claims in patents, a purposive interpretation should be given. This I think, stems from the de minimis rule. The principle was explained in Catnic Components. More recently, the Malaysian Court of Appeal has reaffirmed the principle of purposive construction in the case of Cadware Sdn Bhd v Ronic Corp [2013] 6 MLJ 19 at p.28, para 23: We hold that in determining patent infringement, it is the doctrine of purposive construction that ought to be applicable. The Court then cited the above passage of Lord Diplock. Besides that it also cited in the more recent restatement of the Catnic Component test of infringement in cases where the impugned product of the defendant contains some differences (which are called variants ) as found in the case of Improver Corporation v Remington Consumer Products Ltd [1990] FSR 181: The proper approach to the interpretation of patents registered under the Patents Act 1949 was explained in Lord Diplock in Catnic Components Ltd v Hill & Smith Ltd. The language should be given a purposive and not a literal construction. If the issue was whether a feature embodied in an alleged infringement which fell outside the primary, literal or contextual meaning of a descriptive word or phrase in the claim ( a variant ) was nevertheless within its language as properly interpreted, the court should ask itself the following three questions: (a) Does the variant have a material effect on the way the invention works? If yes, there is no infringement. If no; (b) Would the immaterial variant have been obvious at the date of publication of the patent to a reader skilled in the art? If no, there is no infringement. If yes; (c) Would the reader skilled in the art nevertheless have understood from the language of the claim that the patentee intended that strict compliance with the primary meaning was an essential requirement of the invention? If yes, there is no infringement. If no, infringement will be established. The facts of the Cadware case show that the respondent/plaintiff was a proprietor of a Malaysian patent in respect of an invention entitled device for sensing and alarming the absence of water in a home machine for manufacturing soybean milk, watery bean curd and bean curd. An essential feature in this patent was the first switching transistor called Transistor Q9. The appellant/ defendant denied infringement on the ground that its machine did not have a Transistor Q9. The High Court ruled in favour of the respondent/plaintiff and found that infringement of patent was established. The appellant/ defendant being dissatisfied with the trial court s decision, appealed to the Court of Appeal. In the Court of Appeal, the decision was reversed on the ground that the learned trial judge did not critically examine the evidence of the respondent/plaintiff s witnesses to determine whether the absence of Transistor Q9 has a material effect on the way the respondent/plaintiff s invention worked. In other words, the learned trial judge has erroneously answered question (a) of the Improver test stated above. Instead of giving an affirmative answer, she had answered it in the negative. According to the expert report tendered as evidence, the absence of Transistor Q9 did have a material effect on the working of the invention as it caused it to work in the reverse order. Because of this fundamental error, the the decision of the High Court was held to be erroneous. 6

7 PUTTING PATENTS THROUGH THE NOVELTY & OBVIOUSNESS WRINGER AT TRIAL By Yueng May Ng In patent infringement cases, a typical defence strategy would be to counterclaim for invalidation of the patent. Invalidation of the patent can be for either lack of novelty or lack of inventive step (i.e. obviousness). For those unacquainted with principles of patent law, the concepts of novelty and obviousness can easily be construed as being the same thing. However, in the context of patent litigation, these two concepts are completely distinct and are in fact, determined using tests that are completely different. There is danger in construing both concepts as being the same as this may result in the validity of the patent being assessed unfairly. A wrong or erroneous application of the tests may result in the patentee being deprived of a valid monopoly. The defendant may alternatively be wrongly accused of infringement when he or she may very well have been relying on existing art instead of the alleged patented invention. This article aims to set out in simple terms the two concepts and the different tests involved in assessing the validity of a patent for (a) novelty and (b) obviousness. NOVELTY Novelty is a requirement for the grant of a patent under Section 14 of the Patents Act 1983, which requires the invention (sought to be patented) to be new in the sense that prior to the priority date of the patent application, it does not form part of the state of the art. If the invention forms part of the state of the art, it would not be new and would be deemed to be anticipated by the prior art. In this regard, it is important to note that prior art consists of everything that is disclosed to the public anywhere in the world by written publication, oral disclosure or by use before the priority date of the patent application. For those unacquainted with principles of patent law, the concepts of novelty and obviousness can easily be construed as being the same thing There are several requirements that must be met in order for an invention to be deemed anticipated. Firstly, the claimed invention must be shown to have been anticipated in a single document. No two or more documents can be combined together (i.e. mosaic) to be treated as an anticipating prior art. Secondly, the disclosure through the single prior art document must be an enabling disclosure. Enabling disclosure requires the disclosure in the prior art to enable the addressee (i.e. reader of the prior art, being an ordinary skilled man) to perform the disclosed invention if he attempted to do so by using the disclosed matter and common general knowledge. 1 The enabling disclosure must also be clear in that it provides a clear description of, or clear instructions 2 to do or make something that is the same as what is claimed in the patent (i.e. something that would infringe the patentee s claim). If the prior art does not satisfy either of the aforementioned requirements, the next step would be to consider whether the prior art renders the invention in question obvious. OBVIOUSNESS Inventiveness is a requirement under Section 15 of the Patents Act 1983 which provides that [a]n invention shall be considered as involving an inventive step if, having regard to any matter which forms part of the prior art under paragraph 14(2)(a), such inventive step would not have been obvious to a person having ordinary skill in the art. 7

8 In other words, in order for the invention in question to be deemed inventive, it must be shown to be not obvious to a person having ordinary skill in the art. The word obvious is to be given its plain and ordinary meaning; as meaning very plain. 3 In assessing an invention for inventiveness, Malaysian courts have applied the 4-questions test as set out in the case of Windsurfing International Inc. v Tabur Marine (Great Britain) Ltd [1985] RPC 59. The 4-questions test can be summarized as follows: (1) Firstly, to identify the inventive concepts of the invention in question; (2) Secondly, to identify the notional person skilled in the art (i.e. the unimaginative addressee in the art with common general knowledge); (3) Thirdly, to identify the differences between the prior art and the inventive concepts of the invention in question (as identified in (1)); and It is important to note that when assessing for inventiveness, it is possible to mosaic several prior art documents together. However it must be emphasized that the mosaic must be one that can be put together by an unimaginative man with no inventive capacity. 4 In this regard, the person considering the inventiveness of the invention should also be mindful of refraining from applying hindsight. CONCLUDING REMARKS It is important that patent holders who are contemplating legal action take into account the above principles when considering whether to bring a claim for patent infringement. This is because a patent infringement claim would usually trigger a counterclaim for invalidity. Once invalidated, the patent holder will lose the privilege to promote their product as a patented invention. Likewise, defendants should also familiarize themselves with the above principles when selecting the documents to adduce as prior art to invalidate the patent in question. (4) Fourthly, without the benefit of hindsight, to decide whether the differences (as identified in (3)) constitutes steps which would have been obvious to the skilled man or whether they required any degree of invention. 1 Synthon BV v SmithKline Beecham Plc [2005] UKHL 59 2 The General Tire & Rubber Company v The Firestone Tyre And Rubber Company Limited [1972] RPC The General Tire & Rubber Company v The Firestone Tyre And Rubber Company Limited [1972] RPC Technograph Printed Circuits Ltd v. Mills & Rockley (Electronics) Ltd [1972] RPC 346 8

9 CASE SUMMARY By Yen Cheng Koo Microsoft Corporation v. Conquest Computer Centre Sdn Bhd Facts: The Plaintiff, Microsoft Corporation, is a globally recognized and renowned company involved in designing, producing, marketing and supporting a wide range of company related products. It is the copyright owner of a wide range of computer related products, including software/ programs. The Defendant on the other hand, is a company incorporated under the Companies Act 1965 of Malaysia which carries out the business of trading in and service of computers, computer software and their related products. On or about , the Defendant sold an Acer Aspire 4752 Model laptop ( the PC ) which was harddisc loaded with Microsoft Windows 7 Home Premium ( the Work ) for the sum of RM1, The Plaintiff alleged that the Work installed into the PC was a pirated version as it was not accompanied with any relevant enduser license agreements nor proof of authentication of the Work. Plaintiff s Case The Plaintiff claimed copyright infringement of the Plaintiff s Work and the further Work by the Defendant in reproducing and marketing pirated copies of the Plaintiff s computer software. The Plaintiff alleged that the Defendant sold personal computers, in particular the PC, which were preinstalled with the Plaintiff s software without the Plaintiff s license or consent and without providing the original and licensed software in CD- ROMs/discs, the end-user license agreements, manuals, product registration cards and Certificates of Authenticity ( CA ), which must be given to the purchaser upon any personal computer being sold with the Plaintiff s software pre-installed in the hard-disc of the computer. Defendant s Case The Defendant denied infringing the Plaintiff s copyright in the Work and further Work. The Defendant also challenged the Plaintiff s ownership of the copyright in the Work. The Defendant further contended that there is a trial version of the Work where there is a period of time when the software can be used for free. Issues: 1. Whether the Plaintiff is the owner of the copyright in the Work; 2. Whether the Defendant had infringed the Plaintiff s copyright by wrongfully or illegally selling t he PC which was hard-disc loaded with the Work, had reproduced or distributed the Work without the authority, license or consent of the Plaintiff; and 3. Whether the Work installed into the PC through the Defendant s employees, agents or workers, on , is a trial version. The Plaintiff managed to prove its Work to be eligible for copyright protection under Sections 3 and 7(1) of the Copyright Act 1987 ( the Act ) and further proved that it is the owner of the Work pursuant to Section 26(2)(a) and (b) of the Act to which the learned Judge accepted as prima facie evidence of the Plaintiff s ownership of copyright in the Work in question. With reference made to Microsoft Corporation v Yong Wai Hong [2008] 3 MLJ 309, it is the Defendant s burden to disprove the Plaintiff s ownership, but the Defendant had failed to do so. The Plaintiff also managed to prove that the Work installed into the PC sold by the Defendant was not genuine as the Work was not accompanied by the required End User Licence Agreement ( EULA ) 9

10 nor the genuine Microsoft Certificate of Authenticity ( COA ) label which must be affixed to the computer or appear on the manufacturer s or installer s packaging. A genuine Microsoft Windows 7 Home Premium must always be accompanied by a COA. If a PC is installed with, offered for sale and/or sold without the corresponding COA sticker it is not authorized by the Plaintiff and is thus, a breach of the Plaintiff s licence in the said software. The Defendant also admitted that there was no COA given for the Work installed into the said PC, and as such, the learned Judge found that the Plaintiff was successful in establishing that the Defendant had infringed the Plaintiff s copyright in the Work when it had installed the Work in the PC without a licence from the Plaintiff as there was no COA affixed to the PC. Although admitting installing a copy of the Work into the said PC, the Defendant however contended that the Work that was installed into the PC was a trial version of the Work. Therefore, the Defendant argued that it had the right to install the Work and did not infringe the Plaintiff s copyright in the Work. The Defendant relied on the internet print-outs of articles saying that there was such a trial version of the Work and it is free. This was later disproved by the Plaintiff as there was no such trial version of the product available for the Work in question. All the Plaintiff s Work must be properly licensed and the license fee must be paid for every software downloaded and installed onto the computer. The learned Judge dismissed the Defendant s contention that he had not infringed the Plaintiff s copyright in the Work because he was entitled to use the trial version of it for free because there was no substantial evidence that the trial version existed. The learned Judge opined that the Defendant who is in the business of selling computers for about 10 years could have easily verified the matter by logging into the Microsoft website itself. However, the Defendant s action in resorting to depend on other websites and articles from the internet to support the Defendant s contention, seemed to be an intended action of the Defendant to find ways and means to circumvent the Plaintiff s copyright in the hope it could argue its way out of an infringement action. Conclusion Based on the above reasons, it was held that on a balance of probabilities, the Plaintiff had established a case of copyright infringement against the Defendant in respect of the Work. Among others, the learned Judge granted a perpetual injunction against the Defendant in respect of the Work, exemplary damages of RM200, by the Defendant to the Plaintiff and costs of RM50,

11 CASE SUMMARY By Min Lee Boo Wieland Electric GMBH v. Industrial Automation (M) Sdn Bhd & Anor Facts: The case concerns the Plaintiff, Wieland Electric GMBH, a company incorporated in Germany who is a manufacturer of electrical connection technology for automation technology and building installation. The Plaintiff had obtained international trade mark registrations for the W device and WIELAND word marks under the Madrid System, national trade mark registrations in Germany and trademark registrations in many other countries all over the world since The 1st Defendant on the other hand was a company incorporated in Malaysia on and is a supplier of industrial electronic and electronic products. It claims to be the sole distributor, as well as manufacturer of many reputable and leading names of a range of electrical and automation products. The Plaintiff had entered into an Agency Agreement with the 1st Defendant on wherein the 1st Defendant was appointed as the sales agent for the Wieland products in Malaysia. However, subsequently, the Plaintiff discovered that the 1st Defendant had applied for the registration of a trade mark identical with the Wieland Trademarks in its own name which was registered by the Registrar of Trade Marks (the 2nd Defendant) on Via an , the Plaintiff enquired on the said trademark application, informed the 1st Defendant that it had not been authorised to file the said application and demanded that it stop the registration of the trade mark. The 1st Defendant responded and apologised that they had not discussed with the Plaintiff prior to the application as they thought they should act quickly to protect the Plaintiff s interest. They further proposed to the Plaintiff that they allow the said trademark application to proceed to registration and thereafter, the 1st Defendant would take the necessary steps to assign the registered trade mark to the Plaintiff. Despite their own proposal, the 1st Defendant failed to assign the said trade mark back to the Plaintiff as a result of which this suit was filed. Upon arguments by both parties, the court made findings on the following issues: (i) Whether the Plaintiff is an aggrieved person The Plaintiff s application was pursuant to Section 45(1) of the Trade Marks Act 1976, section 45(1)(a) of which requires the Plaintiff to show that they were a person aggrieved in order to establish their locus standi. The learned judge held that the Plaintiff was an aggrieved person, based on the Plaintiff s affidavits and noting that there is nothing in the affidavit of the 1st Defendant that challenged the locus standi of the Plaintiff. The court was of the view that the 1st Defendant s registration of the Wieland trade mark will prevent the Plaintiff from expanding its business in Malaysia, especially given that the Plaintiff s and Defendant s trade are similar. (ii) Whether the Plaintiff is the rightful proprietor of the Wieland Trademarks In this regard, the court stated 2 issues which requires consideration, namely whether the Plaintiff is a bona fide proprietor of the trade mark and whether there is any merits in the Plaintiff s application. The court was of the considered opinion that the Plaintiff has established the first use of the Wieland Trademarks in Malaysia prior to the registration date of the Subject Trademark and is 11

12 therefore its rightful proprietor. This opinion was based on the Agency Agreement and the s of the 1st Defendant. Although the 1st Defendant submitted that they are the one who popularized the Wieland Trademarks and goods in Malaysia, it was held that such activities do not accord the 1st Defendant any ownership rights over the Wieland Trademarks and forms part of its obligations to the Plaintiff as its sales agent in Malaysia. In view of the same, the court held that only the Plaintiff has the legal right to make the application to the Registrar for the registration of the Wieland mark in the Register. (iii) Whether the registration of the Subject Trademark was obtained by fraud The court found that in view that the Plaintiff is the rightful proprietor of the Subject Trademark, the 1st Defendant has misled and misrepresented itself to the Registrar by claiming itself to be the rightful proprietor of the Wieland Trademark via its Statutory Declaration. This was held by the court to be clearly fraud by the 1st Defendant committed on the Registrar of Trademarks. Further, there was also bad faith on the 1st Defendant s part judging by the fact that the 1st Defendant s Affidavit in Reply established that the Defendant are merely sole distributor or sole agent of the foreign trademarks which it has applied for or is registered as proprietor. (iv) Whether the registration of the Subject Trademark offends section 14(1)(a) and (b) of Act 175 The above provisions provide that a Based on the above considerations, the court made the order that the Trade Mark Registration No consisting of the Wieland Trademarks be expunged from the Register of Trade Marks, Malaysia mark shall not be registered as a trade mark in circumstances where the use of it is likely to deceive or cause confusion to the public or contrary to law; or if it contains or comprises of any scandalous or offensive matter. In view of the court s finding that the Plaintiff is the rightful proprietor of the Wieland Trademarks and that the registration of the Subject Trademark by the Defendant was obtained by fraud, the court held that it is therefore likely to deceive or cause confusion to the public and is contrary to law and should not be allowed to remain on the Register. (v) Whether the registration of the Subject Trademark offends section 10 of Act 175 Sections 10(1)(e) and 10(2A) of Act 175 provides that a mark should only be registered if it is distinctive, and distinctive means that the trademark must be capable of distinguishing the goods with which the proprietor is connected in the course of trade from goods which no such connection subsists. The court held that the Subject Trademark was not distinctive of the goods of the 1st Defendant because at all material times, the Defendant was only the sales agent/ distributor/importer of the Plaintiff s Wieland Products. (vi) Whether the Plaintiff did not come to court with clean hands, as they have full knowledge on the details of the registration and failed to oppose the registration The court disagreed with the 1st Defendant s contention above as it was clear from the 1st Defendant s representations to the Plaintiff that it was fully aware of its wrongful application to register the Subject Trademark which is rightfully owned by the Plaintiff. The court further held that the failure of the Plaintiff to file an opposition to the 1st Defendant s registration does not preclude the Plaintiff from taking this action premised on s.45(1) of Act 175. (vii) Whether there has been an inordinate delay in filing this application The court agreed with the Plaintiff s submission that there has not been any delay in the application given that the Subject Mark was only accepted to be registered on and the parties have been trying to settle the dispute amicably since then. Conclusion Based on the above considerations, the court made the order that the Trade Mark Registration No consisting of the Wieland Trademarks be expunged from the Register of Trade Marks, Malaysia. 12