Dispute Over Inherited Trademark: Which Son Wins?

When a trademark is famous, disputes regarding ownership of the trademark are more likely to crop up. This is especially common in family-run businesses when family members who used to work together part ways.

In a recent High Court case, two brothers, the First Plaintiff and the First Defendant, sued each other for the wrongful use of their respective trademarks. The First Plaintiff claimed that the First Defendant was passing off its business as the Plaintiff’s and the First Defendant claimed that the First Plaintiff had infringed its registered trademark.

The background of the case is that the two brothers inherited the business of serving Indian food (previously known as Restoran Kayu Nasi Kandar Sdn Bhd) from their father and had entered into a co-existence agreement on 30.11.2004. The relevant two clauses in the agreement for this dispute are as follows:

Clause 1 states that with effect from 10.10.2003, the First Plaintiff has full control and management of two business outlets (as specified in the Agreement) while the First Defendant obtains full control and management of the remaining outlets of Restoran Kayu Nasi Kandar Sdn Bhd; and
Clause 2 on the other hand states that the First Plaintiff and First Defendant shall continue being entitled to use the expression “Restoran Kayu Nasi Kandar” in their continuing businesses.

In addition to using different tradenames (albeit with small differences), both parties also used different logos next to their tradenames and used different colours in their trade dress.Upon the execution of the said agreement, the First Plaintiff continued his business in the name of Original Penang Kayu Nasi Kandar, whereas the First Defendant continued his business in either the name of Di Kayu Nasi Kandar and/or Restoran Kayu Nasi Kandar(later changed to Restoran Pulau Pinang Nasi Kandar Sdn Bhd).

The Plaintiffs’ trade sign was as follows, with the below-mentioned features:

White as base colour;
Name of the restaurant, “Restoran Original Penang Kayu Nasi Kandar” or “Original Kayu” depicted in red colour;
The logo depicting a man attired in a traditional Malay outfit, holding the hand of a young boy also attired in Malay outfit, carrying the traditional food baskets at both ends of a pole balanced on his shoulder; and
The word “Kayu” with the letter “K” written in stylized manner, its bottom stroke extended to reach the bottom of the subsequent letter “A”.

The Defendants’ registered trademark is as follows:

Name of the restaurant, “Kayu Nasi Kandar”;
The logo depicting a man attired in a traditional Malay outfit in yellow wearing a red songkok and a sarong in purple and red, carrying a traditional food basket in red colour;
The man in the logo is alone (without a young boy) and has a towel around his neck.

The Plaintiffs’ claim on passing off was based on the First Defendant’s redesigned trade sign at their USJ Branch restaurant (run by the Third Defendant). The redesigned trade sign had the following features:

White as base colour (it was originally yellow);
Name of the restaurant “Kayu Nasi Nandar” being depicted in red colour;
The logo depicting a man attired in a traditional Malay outfit and carrying the traditional food baskets at both ends of a pole balanced on his shoulder;
The word “Kayu” with the letter “K” written in a stylized manner, its bottom stroke extended to reach the bottom of the subsequent letter “A”

The Plaintiffs claimed that the Third Defendant redesigned its signs to resemble that of the Plaintiffs’, thereby causing confusion in the public and interfering with the Plaintiffs’ business.

Based on (i) the similarities of the redesigned trade sign with the First Plaintiff’s trade sign, (ii) the fact that there was no reasonable justification for the change in the trade sign in the USJ Branch and (iii) evidence of confusion (proven by the mistake made by food writer, Mr. Sam Cheong who had mistaken the restaurants owned by the different parties to be the same when criticizing the food of one particular restaurant), the Court concluded that the redesigned trade sign indirectly misleads the public to believe that the restaurant operated by the Third Defendant is similar to that of the Second Plaintiff’s. Therefore, there was an act of passing off by the Defendants.

With regard to the counterclaim filed by the Defendants in that the Plaintiffs had infringed their registered trademark rights as the Defendants are the registered proprietors of the trademark “Kayu Nasi Kandar”, the Court found that the trademark used by the Second Plaintiff was entirely dissimilar to that of the Defendants’ registered mark. Elements such as the phrases “KAYU NASI KANDAR” and “ORIGINAL PENANG”, devices of ribbons and a boy in a traditional Malay costume, were not existent in the Defendants’ registered mark. Thus, the Defendants’ counterclaim did not succeed.

This case comes as a lesson to all businessmen who pass on segments of their business to different successors. If the successors to the various segments of the business continue using the identical or substantially similar trademark to the one used in the initial business, there is bound to be confusion among the public, regardless of who owns the registered rights to the trademark. Furthermore, dividing the business into two and allowing both parties to use the identical or substantially similar trademark (without having one owner and one licensee) creates difficulties in the future. If, say, a third party in the future infringes or passes off their business as “Restoran Kayu Nasi Kandar” – which brother would initiate an action and claim damages?

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Communications at KASS International Sdn Bhd

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