Reflecting on Malaysian trade marks in 2018

Lim Eng Leong of Henry Goh & Co looks back at trade mark developments in Malaysia in 2018, analysing filing/registration statistics, administration, legislation and case law

The last year, 2018, has come and gone, and we are well into 2019. It is the author's personal observation that this past year was not particularly robust for trade marks in Malaysia. However, the figures and statistics on the annual report card are still excellent, with the number of trade marks filed in the country continuing to soar. Talks have been reinstated to roll out a revamp of Malaysian trade mark laws, but stakeholders are still holding their breath.

Trade mark growth

Growth, in terms of the number of trade mark applications filed and registrations granted in Malaysia, continues to break its own year-on-year record. Ever since hitting the big 35,000 milestone in 2015, we have not looked back. This bar has been impressively raised on an annual basis. In fact, in a short span of a couple of years, the number of new applications has surpassed the 40,000 mark and borders closer than ever before to a new 45,000 point. A total of 43,656 trade mark applications were filed in the country in 2018, which translates to a strong growth of 6.23% from the previous year.

The healthy number of trade marks filed last year shows that Malaysia remains an attractive country to invest in, particularly for foreign brand owners. In the twelve months of 2018, foreign applicants filed a total of 23,793 applications and 19,863 were filed by domestic applicants. Interestingly, it can be observed that nearly every year, there has always been an almost equal number of filings in both categories of applicants.

This closing-of-the-gap trend has continued and last year's data showed only a 9% variance between trade marks originating from foreign applicants and applications filed by local businesses and individuals. This reinforces the fact that more and more local trade mark owners are taking proactive measures to safeguard their rights. Many of these proprietors are also potential future users of the International Trademark Registration system as and when Malaysia does accede to the Madrid Protocol.

Of the approximate 24,000 applications filed in 2018 by non-Malaysian applicants, trade mark owners from China, the USA and Japan continue to form the biggest pool of foreign applicants. Applicants from these three superpowers alone command almost 25% of the number of applications filed here annually.
We believe the filing numbers are very encouraging given the humble size of the country's market and relatively young IP maturity. This upward trend demonstrates brand owners' continuous belief in the country's IP protection and economy.

Trade mark administration

Ever since preparations to accede to the Madrid Protocol commenced years ago, the skill and promptness of the Trade Marks Registry within the Intellectual Property Corporation of Malaysia (MyIPO) was under pressure to improve accordingly. The 34,566 registrations granted in 2018 are the highest number in recorded history, as MyIPO continues to clear its work backlog and enhance the trade mark process with its pool of better-trained examiners and appeal officers.

Even by way of a normal track application process, it now typically takes only about 12 months for a distinctive trade mark to be officially registered in Malaysia, a significant improvement from the long wait of the past. In fact, there have been quite a few pleasant surprises where some applications were examined and approved in under four months. Thus, together with the statutory two-month period mandated for opposition purposes, the whole registration process could potentially take only seven to nine months. This is an unexpected bonus for trade mark applicants who do not request expedited examination. We hope this fast-paced trend is not short-lived but will continue as part of Malaysia's rigorous preparations to commit to the Madrid Protocol's time requirements.

In order to sustain the figures highlighted above, there must continue to be a comprehensive support system at the TM Registry that eases the filing process and is friendly towards overall user experience. For the last five years or so, MyIPO's IP Online Filing System has served that purpose, although not without its periodic technical hiccups. However, November 2018 came as a shock when suddenly there was a short announcement that the online filing system would be closed and there would be a total migration to a new system in about a month's time.

Ample prior notification would have eased the transition because sudden regression to manual filing requires abrupt changes in work procedures, increases administrative work and incurs higher official fees. Although change is inevitable, the timing could have taken into account that a high number of filings usually occur at the end of the year in order to secure the same filing year or to wrap up work. As a result, such a system transition is disruptive.

The new online filing system that was rolled out a month later lacked readiness to support the usual electronic filing traffic. In view of the lack of or late training and guidance provided, users were wary of the completely new interface, features and requirements. Many functions were deemed not ready for use and those that were suffer from technical difficulties. Hopefully time will ease the administrative pain.

Trade mark legislation

No major changes were made last year to the governing statute (Trade Marks Act 1976) but we optimistically believe that some legislative changes are inevitably forthcoming soon. This anticipation is caused not only by the continuous need to harmonise local trade mark laws even more with global practices but also because any eventual accession to the Madrid Protocol would push for significant procedural and regulatory changes. To meet this need is a long list of statutory amendments in the form of an all new, all ambitious Trade Marks Amendment Bill that has been pending for political will to push for parliamentary approval for a long time.

For almost a decade, MyIPO has had a few public consultations, presentations and meetings with various stakeholders to gather feedback on various proposals for trade mark law in Malaysia. The latest batch of proposals came in September 2018, introducing the following provisions, among others:

  • to further regulate the registration and qualification of trade mark agents;
  • to allow partnership or bodies corporate to be registered as a trade mark agent if at least one partner or director is already registered as an agent;
  • to remove the record of a deceased trade mark agent from the register and if no replacement is communicated to the registrar, all the applications or registrations under his care shall be published in the IP Journal to enable them to be taken over by other agents to ensure that the rights of trade mark holders are not prejudiced;
  • to protect communication between a trade mark agent and the client as privileged communication to the same extent as communication between a solicitor and his client;
  • to introduce mediation in opposition proceedings;
  • to review the prescribed time and manner to commence an appeal to the court following a decision made by the registrar;
  • to establish a Board of Appeal to hear appeals after the registrar has refused an application, made a decision in an opposition proceeding, revoked a registration etc.

While some of the proposed changes are welcomed, it is believed that the other, more ambitious and far-reaching proposals would require further study and debate in order to not conflict with other applicable legislation, including the Rules of Court 2012.

Trade mark accreditation

The Global Intellectual Property Center of the U.S. Chamber of Commerce (a constructive tool to help business and policy makers measure an economy's overall IP environment) in its 7th edition report ranked Malaysia 24th out of 50 countries surveyed, with an overall score of 22.37 out of 45. According to the report, key trade mark areas that require improvement include the availability of frameworks that promote action against online sale of counterfeit goods and legal measures that provide necessary exclusive rights to redress unauthorised uses of trade marks.

Despite GIPC's report, the Office of the U.S. Trade Representative (USTR) in their Special 301 Report for 2018 commended Malaysia for the Special Internet Forensics Unit in our Ministry of Domestic Trade, Cooperatives and Consumerism responsible for online IPR enforcement. However, in terms of trade marks, the USTR pooled Malaysia with several other countries like Brazil, India and the Philippines for having extremely delayed opposition proceedings. It should be noted that the usual delay is in the final stage of the proceedings i.e. the consideration of the opposition and issuance of the grounds of decision by MyIPO, after parties have completed their exchange of arguments and documents.

Trade mark litigation

While waiting for the legislative amendments to see the light of day, there remains a steady stream of trade mark case laws shaped by the courts in Malaysia, especially the dedicated IP court in Kuala Lumpur. We highlight in this article some of the more interesting cases:

In Jyothy Laboratories Limited v Perusahaan Bumi Tulin Sdn Bhd (2018), an opportunity was presented to the High Court to consider the effects of disclaimers, amendments, modifications or limitations imposed by the registrar on a registered trade mark. The court held that pursuant to Sections 18(2) and 35(1) of the 1976 act, a registered proprietor would not succeed in a trade mark infringement action based on the disclaimed features of a registered trade mark. However, the court may refer to the disclaimed features in determining whether a registered mark should be expunged from the register on grounds of likelihood of deception or confusion.

The Federal Court has always been the highest court in the land. This final appellate court may hear appeals of decisions of the Court of Appeal where the Federal Court grants leave to do so. However, in the federal appeal of Merck KGaA v Leno Marketing(M) Sdn Bhd (2018), the highest court held that in hearing an appeal of a decision by the registrar of trade marks in an opposition proceeding under Section 28 of the 1976 act, the High Court does not determine the dispute at first instance. On the contrary, the provisions of Section 28 indicate that the appeal to the High Court is a re-hearing of the original cause before the registrar. The High Court is empowered to examine the merits of the case, correct errors in the registrar's decision and make such orders as were sought at first instance. Thus, the High Court was exercising its appellate jurisdiction in hearing an appeal from the registrar. Unhappy with the High Court's decision, the appellant's chances in the matter would have ended at the Court of Appeal. There cannot be a third bite of the cherry by appealing further to the Federal Court.

In yet another case involving Merck KGaA v Xtalic Corp (2019), the plaintiff was appealing against the decision of the registrar of trade marks for dismissing their opposition to the defendant's trade mark application made to MyIPO. The defendant requested payment of security for costs on the basis that the German plaintiff is a foreign private company. The court agreed that the application for security under Order 23 Rule 1(a) of the Rules of Court 2012 was meritorious because the plaintiff is ordinarily resident outside the jurisdiction of the court. Moreover, the plaintiff did not satisfactorily convince the court that it had a good prospect of success because this was an appeal and the defendant had already succeeded in the original forum before the registrar of trade marks.

Applying for security of costs within a month plus of the appeal was undoubtedly done with promptitude. However, the judge shared the plaintiff's view that the requested amount of RM80,000 was rather exorbitant and oppressive for an originating summons case based on affidavits. However, that did not mean the application for security would be outright dismissed. A reasonable amount (in this case RM25,000) should instead be substituted for it.

2018 was a year that was fairly nondescript, but there is strong hope that 2019 will exhibit heightened awareness, dynamic growth, major positive changes in the law and new challenges in Malaysian trade mark law.



The opinions expressed in this article are those of the author(s) and do not necessarily reflect the views of the firm, any other of its practitioners, its clients, or any of its or their respective affiliates. This article is for general information purposes only and is not intended to be and should not be taken as legal advice.

Author

Eng Leong

Eng Leong is the trademark manager and a legal counsel at Henry Goh & Co Sdn Bhd. As a registered trade mark agent in Malaysia, his expertise includes devising and implementing trade mark protection strategies as well as managing an extensive trade mark portfolio for a myriad of domestic and foreign clients from different major industries. He is adept in trade mark prosecution, administrative hearings and opposition proceedings. In tandem with external solicitor, Eng Leong has coordinated successful enforcement and defence of clients' IP rights at all levels of the Malaysian court system, including negotiations for amicable settlement and coexistence of rights.