Common Law Proprietorship: Is Evidence Territorially Restricted?

By Amir Murshidi

The established principle of trademarks is that the protection is territorial in nature. Does that mean without a registration, trademark owners do not have rights in a particular country? Yes and no – yes in countries that adopt the “first-to-file” rule while in common law jurisdictions (Malaysia included), owners who use the trademark first in the country can still rely on unregistered rights. However, the latter requires substantial evidence to be adduced before the Court and could be slightly difficult to enforce.

What if there is no evidence of use locally? Will use of a trademark abroad constitute use in the particular country? Well, this depends on the relevant laws in each country.

A recent case in Malaysia between SRAM, LLC (the Appellant) and Huan Schen Sdn Bhd (the Respondent) has enlightened the above mentioned issues. Intriguingly, the Court of Appeal had overturned the decision of the High Court of Malaya for expunging the Appellant’s marks.

The salient facts of the case were that the Appellant, being a US incorporated company, is a manufacturer of bicycles, including parts and accessories, bearing the trademark “SRAM” and several other variants. It was not disputed that the mark was created by the Appellant since 1987, deriving from the acronym of its three founders namely, Scott, Ray and Sam. The Respondent, on the other hand, is a local company that distributes and sells bicycles, bicycle parts and accessories.

On 26 December 2003, the Respondent filed an application for the trademark “” and the battle began when the Appellant opposed the mark. Unfortunately, the Registrar of Trade Marks dismissed the Appellant’s opposition on the ground that the Respondent was the first user of the said trademark in Malaysia.

Consequent to the above, the Appellant filed an appeal before the Court against the Registrar’s decision on 22 October 2015 but decided to discontinue the appeal. As of December 2015, five trademarks carrying the word “SRAM” in Class 12 (in relation to bicycles, parts and accessories) were registered at the Malaysian IP Office. Four of the marks were in the name of the Appellant and the other was in the name of the Respondent.

On 30 December 2015, out of the blue, the Respondent filed an originating summons to expunge the Appellant’s registered trademarks namely, “SRAM RIVAL”, “SRAM RED”, “SRAM VIA” and “SRAM APEX”. The High Court decided in favour of the Respondent in that the Appellant was not the first user of the said trademarks in Malaysia and failed to adduce documentary evidence showing use of its trademarks within the Malaysian territory thus, allowed the originating summons and ordered the Appellant’s marks be removed from the register.

The Appellant brought the case before the Court of Appeal to thwart the ruling and the latter court had a different view on the issues. The fact that the Appellant had widely used its trademarks in international sports events like the Seoul Summer Olympic Games in 1988, the Atlanta Summer Olympic Games in 1996 and the Sydney Summer Olympic Games in 2000 which predated the evidence of use as shown by the Respondent, according to the Court of Appeal, should not be regarded as an irrelevant consideration. Such events, which featured the Appellant’s marks and were broadcasted in Malaysia must be given due weight in that case.

In addition, the relevant provision under the Trade Marks Act 1976 (the Act) concerning protection of well-known marks played a pertinent part as well. Based on the provision, the Court of Appeal had admonished that the concept of “user” is no longer restricted territorially. Precedents had corroborated that reputation and goodwill could be acquired outside Malaysia, especially in this age of information technology where confusion and deception have no borders. The Court of Appeal held that the High Court had erred in its findings that a trademark must have been used locally i.e. in Malaysia and the Respondent was the common law proprietor of the said mark. Further, it was found that the Respondent did not satisfy the relevant sections under the Act to justify expunging the Appellant’s marks. The appeal was allowed and thus negated the previous Court’s decision.

Was the Respondent’s mark registered in bad faith? Although there is no explicit provision under the Act in regards to bad faith in Malaysia, the Court of Appeal did not repudiate the surmise that the Respondent had attempted to obtain the benefit of the Appellant’s worldwide reputation, especially since there was no explanation by the Respondent as to how they arrived at the identical mark “SRAM” which was not a generic term. That raised the question of whether they independently devised the mark themselves.

This case shows that, while one can attempt to be the first to register trademarks of others, other potential issues may make it not worth the risk. Proprietors of well-known marks for instance, need not carry on business or possess any goodwill within the local territory to demonstrate their common law ownership. What can be done instead is to acquire a license from the trademark owner. After all, the fame and reputation a trademark has built is a result of the owner’s hard work over the years.

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KASS International is an established Intellectual Property Firm which offers a one-stop solution for IP matters in Malaysia, South East Asia, and worldwide.