The “right” in copyright

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(I hope you’ve understood the pun)

Foreword: During the summer after my first year of law school, I did 2 internships in 2 different law firms. One of the law firms gave us a training session every week which was very interesting and something my first internship did not have. The IP partner then told us about this story and this is THE CASE that got me interested in IP law. It’s an old case but nevertheless an interesting one. Enjoy 🙂

Maxis Sdn Bhd v Suruhanjaya Syarikat Malaysia [2004] 2 MLJ 84

Maxis is one of the strongest names in Malaysia and I’m sure that whenever someone says the word “Maxis”, a distinct green squiggly line will appear in your head. What if, Maxis was not the Maxis you knew?

The two parties in the case are Maxis Sdn Bhd on one side and the Registrar of Companies along with Maxis Group of Companies on the other (the latter is the one that we are well versed with). Maxis Sdn Bhd was incorporated in 1992 and was engaged in the business of information and system services provider in 1993. Then after, it ceased operations and became dormant. On the other hand, the principal companies in the Maxis Group of Companies do not previously carry the forename ‘Maxis’. They were formerly known by their principal name: ‘Binariang’. With subsequent changes made to their names, all the companies in the Maxis Group of Companies have the word ‘Maxis’ as its leading character. The latter was established in 1995 and was one of the first mobile communications providers in Malaysia.

Maxis Sdn Bhd sought a declaration that the Registrar was wrong in approving the use of the name “Maxis” by Maxis Group Companies and therefore, should be canceled. Maxis Group Companies counterclaimed for an interim injunction and several others for passing off. This case concerns the counterclaim.

Maxis Group of Companies now allege the defendants of passing off or assist in passing off the defendants’ business as and for that of the Maxis Group of Companies. Some of the instances are as follows:

  1. Saw and Yeoh had acquired Maxis Sdn Bhd in 2001, a then inactive company with the intention to revive it.
  2. They have incorporated Maxis Capital Sdn Bhd in 2001 by using the name Maxis as the lead name.
  3. They have caused a name change in Maxis Biotech Sdn Bhd which previously does not carry the word Maxis.
  4. Maxis Sdn Bhd, Maxis Capital Sdn Bhd and Maxis Biotech Sdn Bhd took premises in Menara Maxis that housed most of the offices of the Maxis Group of Companies.
  5. Printing letterheads and distributing name cards which carry the name Maxis in similar fashion and style as the brand name used by Maxis Group of Companies.

Defendant’s defence:

The Defendants deny that they had in any way “passing off” business as being part of Maxis Group of Companies because Maxis Sdn Bhd existed before Maxis Group of Companies did. They also stressed the fact that although they had at one point rented an office in Menara Maxis, they said it was due to the advantage of the location. Also, Maxis’s business activities are only confined to telecommunication; they have not acquired goodwill for goods or services outside this area.

*pause and drink a sip of coffee*

First things first, what is “passing off”?

Passing off occurs when someone uses very similar traits of a product/ service/ brand to create some false representation likely to induce a person to believe that the goods or services are those of another. Example:

 

It occurs when the following are satisfied in the landmark case of Reckitt & Colman Products Ltd v Borden Inc

  • The trader must establish goodwill or reputation attached to the goods/ services
  • The trader must demonstrate that the defendant made a misrepresentation
  • The trader must demonstrate that he will suffer damage by reason of erroneous belief

Each will be discussed below.

 

  1. Goodwill/ reputation

Unlike above, goodwill is easy to describe, difficult to define. It is the one thing which distinguishes an old established business from a new business at its first start. In other words, it is the business interest that the claimant is trying to protect.

Whether the claimant has the reputation (or goodwill) is a question of fact and entirely dependent on evidence showing that consumers recognize the sign as indicating origin. In simpler terms, it is the attractive force which brings in custom and that which distinguishes old business from a new. (Fletcher Challenge Ltd v Fletcher Challenge Pty Ltd)

Adding up the above, a passing off action is a remedy for the invasion of the right of property, not in the mark, name or get-up improperly used, but in the business or goodwill in which it has been used.

An argument tender by the defendant is that passing over should only exist in the line of business or services that the applicant was in. They are of the view that the applicants’ business activities are only confined to telecommunication; they have not acquired goodwill for goods or services outside this area, namely for their company Maxis Capital Sdn Bhd and Maxis Biotech Sdn Bhd.

However, case law has suggested that this is insufficient to protect the goodwill of businessman from appropriation and misuse by another businessman. It may very well extend to any business that may mislead anyone into thinking that the products or services were the goods and services of the plaintiff. This is especially where a business is a conglomerate.

Example: AirAsia also owns Tunehotel and Tunetalk. If TuneTaxi pops up, I would think 70% Malaysians (modest estimation) would think it relates to Tune Group.

This is the case EVEN IF the defendant promises that he would never enter into the same business line as the applicant. Where there is an invasion or likelihood of invasion into the rights of the property of the applicants, the cause of action is a well-founded one. Maxis has expended huge sums of money to promote and market the name ‘Maxis’ aggressively throughout this country in the field of telecommunication, which they are primarily engaged in but also to other fields of business the Group owns. It doesn’t take a lot for one to think it’s unfair that someone else should usurp the benefit when another has spent millions to develop the name.

For now, Maxis Group 1 – 0 Maxis Sdn Bhd

*Pause and eats a chocolate*

2. Misrepresentation

What is funnier than having a Maxis-named non-Maxis company breathing existence in Maxis Tower. *facepalm*

The D’s argument was that they mistook that this building is within the Multimedia Super Corridor and since such setup taking up premises there would be advantageous when it wasn’t. They even declared that they would not move into this building and reiterated that they will never set up an office there, even if they are successful in this suit.

(still, the thought of it is already baffling)

I don’t think anyone would be convinced and the judge was certainly not amused. The judge considered them to have an intention to deceive and where Kuala Lumpur being so vast and wide, and filled with available office space could have easily accommodated the defendants’ companies, they had to choose Menara Maxis. The judge notes the similarity of the name made the slip-up of by the building management into allowing them to penetrate this fortress of the Maxis Group of Companies.

On the point of Maxis using the word “Maxis”. Maxis Sdn Bhd was incorporated before Maxis Group of Companies used the name “Maxis” and as such, they had every right to use the name. They stressed that at no time they had represented themselves to be part of Maxis Group of Companies.

(Perhaps Maxis Group of Companies knew this because all the companies under the parent are named Maxis XXX Sdn Bhd)

They claimed that and yet the judge found the use of the shape, style, and character of the word ‘Maxis’ printed on these documents are almost identical to that trade name which the applicants are promoting. (I couldn’t find the exact logo of Maxis Sdn Bhd which is regrettable) Similar to the above, there are about 69 fonts in Microsoft word so why choose the one that Maxis uses and in such a form and fashion so similar to that of the applicants’ unless they did it with some sinister intentions. The crucial issue is what effect the false statement has on the minds of the claimant’s customer and make them think that this was ‘something for which the (claimant) was responsible’

On the contrary, if the consumer is not confused and does not mistaken, then there can be no misrepresentation and no liability for passing off. Looking at the above, it is difficult for this court to accept the defendants’ explanation that their actions as being reasonable and are devoid of any intention to deceive and mislead.

Maxis Group of Companies 2 – 0 Maxis Sdn Bhd

3. Likelihood of damages suffered by reason of erroneous belief

The applicant must now show that they have suffered or likely to suffer losses and must affect the goodwill of the company. The test is that the applicants need not prove “actual damage in order to succeed. Likelihood of damage is sufficient. One of the ways in which a business reputation may be injured is by the appropriation of that reputation or part of it by a third party. Such appropriation may be brought about by the adoption of a name which suggests that the person or company adopting it is in some way connected or associated with the person or company enjoying the reputation.

It is quite obvious that Maxis Group of Companies would be adversely affected by the use of the word “Maxis” by another. If any undertakings that go by the name “Maxis” were to conduct illegal dealings or be bankrupt, the general public would understand it to be somehow related to the applicant instead of being distinct.

Owing to the above reasons, Maxis Group of Companies obtained interim injunction and Maxis Sdn Bhd was precluded from conducting business using the word ‘Maxis’. An intriguing point to add is according to Bloomberg, as of January 18, 2006, Maxis Sdn Bhd operates as a subsidiary of Maxis Communications Bhd.

Comment:

Whilst reading the facts of the case and the judgment therein, I can’t help but think about the prominent staircase shot widely shared on Instagram in APW Bangsar. Before going to APW Bangsar myself, I’ve always thought that the staircase was within the property/ vicinity of BT. Little did I know when I went there, it was directly below a sushi burrito shop and NOT on the same structure as where BT was located and most commonly tagged on Instagram. The sushi burrito shop owns the stairs (or at least the landlord I presume) and not BT but since the latter popularise it so hypothetically, does it justify that BT should be allowed to call it their stairs?

I do acknowledge that Maxis Sdn Bhd had overstepped the line and became from dormant to active very shortly after Maxis was listed to be very suspicious indeed. However, where does one draw the line where a product came first but some other undertaking popularised it? The staircase (I would consider) was part of the structure of the sushi burrito shop but Breakfast Thieves was the one who popularised it so does that mean the staircase belonged to Breakfast Thieves instead?

Maxis Sdn Bhd was registered prior to Maxis Group of Companies changing their name so was it right that Maxis Sdn Bhd should be allowed to continue trading in its name? Even the judge acknowledged that this legal issue is debatable. The basic rule is that reputation and goodwill should be exclusive to the claimant but sometimes there may be a sharing of reputation such as where two companies, by coincidence, acquire a separate reputation and neither can stop the other from using the name. An example is Anheuser-Busch Inc v Budejovicky Budvar NP where BUDWEISER was the trademark of both and the net outcome was that they were forced to co-exist, neither having a right of priority over the other.

Personally, I do think it’s unfair if, by market power, one were to be allowed to dominate (and steal) another’s business because they have better resources for marketing and investing. Perhaps the truth is, the bigger company knew about the smaller company but figured it could overpower it (not suggesting this was the case in Maxis). However, market power also isn’t everything. In 2009, McCurry (short for Malaysia Chicken Curry) won it’s lawsuit against McDonald when the latter sought an injunction to prevent the former from using the prefix “Mc” in its business. The Court of Appeal stated that there were several distinguishable grounds such as the business logo was noticeably different, none of McCurry’s menu had used the prefix “Mc” and the menu was very different in that it only sold Indian food. What amounts to a “passing off” seems to me to vary quite acutely depending on the parties in the case and many other factors.

In the end, it’s up to the courts to weigh on where the balance of convenience lies and the degree of damage that would cause one an undertaking should the application be refused based on reasonable judicial principles.

Resources:

  1. Compagnie Generale Des Eaux v Compagnie Generale Des Eaux Sdn Bhd
  2. Bulmer v Bollinger
  3. Commissioners of Inland Revenue v Muller and Co Margarine
  4. https://asia.nikkei.com/Company/00C8GY-E
  5. Fletcher Challenge Ltd v Fletcher Challenge Pty Ltd
  6. Anheuser-Busch Inc v Budejovicky Budvar NP
  7. Reckitt & Colman Products Ltd v Borden Inc
  8. Helen E Norman, Intellectual Property Law
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