Grace Teoh discusses the groundless threats provisions in the Trademarks Bill 2019.
Back in 2014, Legal Insights examined the issue of patent trolls and the laws available to address such issues in Star Trolls: The Patent Menace. In December 2016, the Malaysian High Court held in Diesel SpA v Bontton Sdn Bhd  MLJU 1350 that the Malaysian courts only had grounds to grant negative declarations, e.g. that the plaintiff's bona fide use of the plaintiff's own name does not infringe the defendant's registered trademark, if Parliament amended the Trade Marks Act 1976 to provide a remedy for groundless threats of infringement.
Parliament must have found the issue sufficiently threatening in Malaysia and has taken steps to provide a solution, starting with the Trademarks Bill 2019. Section 61 of the Trademarks Bill 2019 will provide the remedies for groundless threats of infringement proceedings when the Bill comes into operation.
THE BEST DEFENCE IS A GOOD OFFENSE
Sections 61(1) and 61(2) provide that where an aggrieved person is threatened with infringement proceedings, that person may initiate proceedings for a declaration that the threats are unjustifiable. He may also seek an injunction to restrain the continuance of the threats, or damages in respect of any loss he has sustained by the threats. Section 61(4) further provides that even if the trademark proprietor proves infringement, the aggrieved person is still entitled to relief if it is proven that the registration of the trademark should be revoked or is invalid.
These provisions are in pari materia with section 35 of the Singapore Trade Marks Act (Cap. 332), section 21 of the UK Trade Marks Act 1994 (which has now been amended by the UK Intellectual Property (Unjustified Threats) Act 2017), and sections 129 and 130A of the Australia Trade Marks Act 1995.
HOLD YOUR HORSES
This does not mean that any and all aggrieved persons may initiate proceedings the moment they receive cease and desist letters.
Section 61(1) of the Trademarks Bill 2019 is only triggered where the threat is for grounds other than: (a) the application of the trademark to labels, packaging, or goods; (b) the importation of goods bearing the trademark; or (c) the supply of services under the trademark. Further, section 61(1) specifically refers to threats of infringement of registered trademarks, appearing to ignore threats of action for the tort of passing off.
In Han's (F & B) Pte Ltd v Gusttimo World Pte Ltd  2 SLR 825, Han's was the registered proprietor of trademarks depicting the word "HAN'S" in relation to Class 43 and the operator of Hainanese-Western restaurants named "Han's Café". Gusttimo operated a Japanese restaurant named "HAN Cuisine of Naniwa". Gusttimo received a letter from Han's solicitors, requesting it to change the name of its restaurant and immediately cease use of the trademark "HAN" for Gusttimo's food and beverage business. This matter then escalated to litigation, where Han's instituted proceedings against Gusttimo for trademark infringement and passing off, and Gusttimo counterclaimed for groundless threats of infringement proceedings and applied to expunge Han's registered trademarks. The Singapore High Court decocted from the facts that the threat of proceedings, if at all, was in relation to infringement arising from the application of the trademark to goods and the supply of services under the trademark. Accordingly, Gusttimo's complaint of groundless threats was half-baked and dismissed by the Court.
ON YOUR MARK
Section 61(1) of the Trademarks Bill 2019 expressly refers to threats of proceedings for trademark infringement. Section 61(5) clarifies that the mere notification that a trademark is registered does not constitute a threat under section 61(1).
As to when a statement is a 'threat' and when it is a 'mere notification', Justice Lightman in L'Oréal (UK) Ltd v Johnson & Johnson  FSR 686 succinctly stated that the test is whether the communication would be understood by the ordinary recipient in the position of the claimant as constituting a threat of proceedings for infringement. The objective recipient test has now been statutorily encoded via amendments to the UK Trade Marks Act 1994 by the UK Intellectual Property (Unjustified Threats) Act 2017.
In L'Oréal (UK) Ltd, Johnson & Johnson's lengthy letter stated, among others, that: (i) no decision to sue had been made yet but Johnson & Johnson had six years to make that decision; (ii) others had ceased infringing Johnson & Johnson's "NO MORE TEARS" trademark after pressure from Johnson & Johnson; (iii) Johnson & Johnson thought that L'Oréal had unfairly sought to benefit from Johnson & Johnson's goodwill; and (iv) L'Oréal would not receive assurances regarding the possibility of such proceedings. Justice Lightman tore the letter apart, declaring it "the work of a master of Delphic utterances who uses all his skills to say everything and nothing and to convey an enigmatic message which has the same effect on the recipient as a threat or adverse claim whilst disclaiming to be either". The threat may have been veiled and muffled by protestations of a continuing state of indecision but the threat remained sufficient (if not designed) to unsettle L'Oréal and the threat was of trade mark infringement proceedings.
L'Oréal (UK) Ltd was decided based on the previous section 21 of the UK Trade Marks Act 1994, which was almost identical to, and may be of guidance in interpreting, section 61 of the Trademarks Bill 2019.
Section 61(2) provides that the aggrieved person may apply for "any" of the following reliefs: (a) a declaration that the threats are unjustifiable; (b) an injunction against the continuance of the threats; or (c) damages in respect of any loss he has sustained by the threats.
When compared with groundless threats provisions in other jurisdictions, section 61(2) is odd in its use of the conjunction 'or', implying that the aggrieved person may only opt for one of the three remedies. No conjunction is used in the comparable provisions in the Singapore and UK Acts. In Australia, the Act specifically uses the conjunction 'and'. It remains to be seen how the Malaysian courts would interpret this provision.
The Singapore Court of Appeal in Lee Tat Cheng v Maka GPS Technologies Pte Ltd  1 SLR 856 held that even though section 77(2) of the Singapore Patents Act 2005 provides that the plaintiff "shall ... be entitled to the relief claimed", the court's power to grant relief is discretionary and not mandatory as the plaintiff still had to prove that it was aggrieved by the threats of patent infringement proceedings made. The plaintiff would not be "aggrieved" if it was unable to demonstrate that it had suffered any loss arising from the threats or that it was appropriate for the court to grant the reliefs. In Dr Babor Gmbh & Co Kg v Sante De Beaute Pte Ltd  5 SLR 928, the Singapore High Court applied this principle in the context of groundless threats of trademark infringement proceedings, on the basis that the Singapore Trademarks Act is structured and worded similarly to the Singapore Patents Act and the policy considerations underlying all groundless threats provisions are similar.
If the Malaysian courts were to be guided by the Singaporean cases, aggrieved persons in Malaysia may find that they are unable to obtain reliefs even if they succeed in proving that the threats were groundless or unjustified if they fail to prove loss or damages arising from the threats, or the need for a declaration or an injunction against the trademark proprietor.
Trademark proprietors are not entirely unarmed. Section 64(3) of the Trademarks Bill 2019 provides that the aggrieved person is entitled to relief unless the trademark proprietor shows that the aggrieved person's acts constitute trademark infringement.
In Telstra Corporation Ltd v Phone Directories Co Pty Ltd  FCA 568, a case concerning groundless threats of copyright infringement, the Federal Court of Australia held that whether a threat is justifiable is to be answered by reference to whether, objectively, the threat had a proper legal basis, without regard to the right owner's subjective intent.
At the time when Telstra made its threat, it had asserted a legal position that was supported by the Full Federal Court of Australia in Desktop Marketing Systems Pty Ltd v Telstra Corporation Ltd (2002) 119 FCR 491. Subsequently, by the time the dispute between Telstra and Phone Directories went to trial, the High Court of Australia had changed the applicable legal position. Nevertheless, the Federal Court of Australia found that as it stood at the material time, Telstra's threat of copyright infringement was based on strong authority and Telstra had good legal grounds for asserting the rights against Phone Directories that it did, even if Telstra subsequently failed at trial to claim copyright infringement. Accordingly, Phone Directories' claim that Telstra's conduct was an 'abuse of the copyright regime' or a 'threat in the air' constituting groundless threats was rejected.
So, trademark proprietors may have to make a call (or seek legal advice) as to whether objectively, at the time the threat was made, they had sufficient legal basis to assert their rights.
That's not the end of it; the aggrieved person may take another stab at it. Section 61(4) of the Trademarks Bill 2019 then goes on to provide that even if the trademark proprietor is able to prove that the aggrieved person's acts constitute trademark infringement, the aggrieved person is still entitled to relief if the aggrieved person could show that the registration is invalid or liable to be revoked under the Trademarks Bill 2019.
Under the Trademarks Bill 2019, the registration of a trademark may be revoked under section 45 by the Registrar where the Registrar failed to take into account opposition to the registration or extensions of time to oppose the registration, or under section 46 by the High Court on an application by an aggrieved person for non-use or for misleading use. The registration of a trademark may be declared invalid by the High Court pursuant to an application by an aggrieved person under section 47 on the ground that the trademark was registered in breach of section 23, which stipulates absolute grounds for refusal of registration.
Lord Justice Simon Brown in Unilever plc v Procter & Gamble Co  IP&T 171 explained that the policy represented by groundless threats provisions is to stop proprietors who were "willing to wound but afraid to strike from hanging a Damocletian [sic] sword above any trader's head". In Avel Pty Ltd v Intercontinental Grain Exports Pty Ltd (1996) 65 FCR 154, the Full Federal Court of Australia held that an important rationale for the groundless threats regime in copyright, patents, and trademarks legislation is to guard against abuse of the protections afforded under that legislation.
Have we traded one monster for another? It appears that the law on groundless threats may have lowered the sword of Damocles that hangs above the heads of traders in Malaysia, but has it raised another over heads of trademark proprietors?
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