MALAYSIA 1. INTRODUCTION 2007 sees the shift of trend in counterfeiting and intellectual property piracy in Malaysia. There is a noticeable increase in sales of pirated and counterfeit products through the internet.
2. ANTI-COUNTERFEITING ACTIVITIES AND ENFORCEMENT OPERATIONS 2.1 Mobile Phone Ringtones The introduction of mobile phone ringtone downloads in Malaysia is both welcome and unwelcome news for copyright owners. Although it creates a new source of revenue for the music industry, illegal sales to mobile phone users are causing a significant dent in the music industry's finances. It is not uncommon for whole songs to be illegally downloaded onto mobile phones. A recent news report estimated that there are 18 million mobile phone users in Malaysia and 3,000 mobile phone dealers selling illegal downloads. The songs are sold illegally for M$3 (US$0.86) per song; it is estimated that the music industry would suffer substantial losses if only 20% of mobile phone users bought such illegal downloads. Illegal downloads are commonly offered by mobile phone dealers as a bonus to boost sales of mobile phones.
The Recording Industry of Malaysia (RIM) is working with the Ministry of Domestic Trade and Consumer Affairs to combat the illegal activities of unscrupulous mobile phone dealers. RIM and the ministry are conducting raids in a concerted effort to stamp out such illegal activities. Illegal vendors may be arrested on the spot at the discretion of the authorities. However, RIM has stated that it will take a less aggressive approach towards vendors in smaller towns, who may be unaware that their activities are infringing IP rights. Mobile phone users can look forward to a legal alternative to obtain their favourite songs for their mobile phones, as RIM is planning to work with its partners to make legitimate downloads available for between M$4 and M$5 (US$1.14 to US$1.43) per song. In addition to over-the-counter sales, Malaysian websites have also been offering and selling illegal music. However, these online offenders pose a smaller problem at present, as local broadband penetration is not widespread (it is estimated at 13%). Moreover, offenders usually remove the illegal downloads from websites within a couple of days of receiving a warning. RIM has established a three-person team to deal with complaints about illegal music downloads on the Internet and aims to shut down at least two offending websites each month.
2.2 1st Sentencing by the New Intellectual Property Court A local bedding company had the dubious “honour” of being the first company to have been found guilty for copyright infringement by the newly launched Intellectual Property Court (Sessions Court). The accused was charged for having possession of four infringing copies each of Adobe Photoshop and Adobe Illustrator software at its office on 14th June 2005. It is an offence for a person or company to be in possession of infringing copies of copyrighted works otherwise than for private and domestic use. The accused pleaded guilty to the charges. Under Section 41 of the Copyright Act 1987, a person who had been found guilty of possession of an infringing copy of a work shall on conviction be liable to a fine of not less than RM 2,000 and not more than RM 20,000 for each infringing copy or to imprisonment for a term not exceeding 5 years or to both and for any subsequent offence, to a fine of not less than RM 4,000 and not more than RM 40,000 for each infringing copy or to imprisonment for a term not exceeding 10 years or to both. The company was fined RM 80,000. The Judge, in sentencing, said that he had considered copyright infringement to be a serious offence and therefore passed a deterrent sentence.
As at August 2007, the MDTCA had conducted 22 raids on companies suspected of using infringing software this year and had seized 858 copies of pirated software worth more than RM 2.843 million in retail value. With the Intellectual Property Court in place, MDTCA was confident that a steady flow of prosecution would be conducted against offenders who used infringing software in their businesses. The setting up of the Intellectual Property Court reflects the seriousness of the Malaysian Government in tackling the problem of copyright infringement in Malaysia
2.3 Use of Canines in Anti-Piracy Enforcement Raids In an anti-piracy raid recently conducted by the Enforcement Division of the Ministry of Domestic Trade and Consumer Affairs in Johor, 1 million copies of pirated video games and DVDs intended for Singapore, Hong Kong, Japan and the United Kingdom with a street value of approximately RM10 million were seized from an office building. Six people were detained in the raid. The distinguishing feature of the raid was the use of two specially trained Labradors, Lucky and Flo, who sniffed out the hidden DVDs, as well as CD-replicating machines and tools. This is the first major success for the dogs, who belong to the Motion Picture Association of America (MPAA). Lucky and Flo arrived in Malaysia in mid-March 2007 on a one-month loan to the ministry to help it in its anti-piracy operations. The dogs are trained to detect polycarbonate, a chemical used in the manufacture of optical discs. It is the first time anywhere in the world that authorities have commissioned trained dogs to detect counterfeit discs. After the month-long loan, the Malaysian authorities will evaluate and assess the effectiveness of deploying trained dogs to assist in detecting counterfeit discs. If this method proves to be cost effective and faster than human detection, the ministry will consider adopting the method permanently and training its own canine detectives. According to the MPAA, whose members includes top Hollywood studios such as Warner Brothers, 20th Century Fox, Universal and Paramount Pictures, in 2006 it lost $1.2 billion to film piracy in the Asia-Pacific region.
2.4 Efficient Destruction of Infringing Goods Kuala Lumpur City Hall recently took 2 days to destroy 138,130 copies of pirated discs confiscated in 2006. The pirated discs destroyed include DVDs, VCDs and CDs which were confiscated during operations conducted by the City Hall Unit Task Force and the Safety and Enforcement Department on illegal peddlers in Kuala Lumpur. The City Hall Unit Task Force and the Safety and Enforcement Department conducted about 9 to 26 operations each month last year with the aid of the Ministry of Domestic Trade and Consumer Affairs ("MDTCA"). While the MDTCA has jurisdiction to conduct raids on shops and malls, the City Hall focuses its operations against street peddlers. The pirated discs were confiscated from the street peddlers on the ground that the peddlers were conducting businesses without licenses. City Hall has never issued licenses to street peddlers to sell discs regardless of whether they are original or pirated discs. The total number of pirated discs confiscated by City Hall this year is lower than that confiscated in 2005 which was approximately 186,000 copies. This could possibly be due to the stricter enforcement practices by City Hall. The joint effort between Kuala Lumpur City Hall and the MDTCA to curb piracy should be lauded. It is a good example of co-operation between government agencies and other statutory bodies to eradicate piracy in Malaysia.
2.5 Counterfeit Pharmaceuticals There are rising concerns on the increase in sales of counterfeit pharmaceuticals in Malaysia. Among the counterfeit medicines that have been identified include drugs with the wrong ingredients, insufficient active ingredients, and those with fake packaging. Also available are unregistered generic copies of patented products primarily imported from India. These counterfeit products are being sold by both street vendors as well as health professionals alike. The Ministry of Health and the MDTCA have sought to improve their enforcement efforts, sharing information and collaborating with the pharmaceutical industry in their efforts.
2.6 Internet Piracy and Online Counterfeiting The pirates and counterfeiters are changing their modus operandi towards an internet-based system whereby pirated / counterfeit goods are marketed, displayed and sold through the internet. The MDTCA revealed that investigations showed that the DVDs were meant for buyers in Europe, South Africa and the United States. The MDTCA has vowed to form a special task force to work closely with entities such as the Motion Picture Association (MPA) to tackle Internet piracy.
In May 2007, MDTCA together with investigators from London raided 2 shoplots in Taman Cheras Baru and seized 11,500 pieces of counterfeit printer cartridges. The raid was conducted based on tip-offs from the trade mark owners who became suspicious when they noticed offers for sale of the cartridges being made through a website.
3. DEVELOPMENTS IN THE INTERNATIONAL FRONT 3.1 US – Malaysia Free Trade Agreement (FTA) Both the United States (US) and Malaysia are still in negotiations with regards to the terms of the FTA. Both sides missed the deadline to fast-track the agreement as the President’s Trade Promotion Authourity (TPA) expired on 31st March 2007. The expiry date gave US negotiators up to 31st March to present a deal for a mandatory 90-day review by the US Congress. Any agreement reached after that will have to go through a complex process in the US Congress in order to be passed.
Without a deadline for completion of the FTA talks, it seemed initially that the momentum for completion of the agreement would slow down, and there were speculations even that FTA negotiations may eventually languish, especially as further negotiations would require Malaysia to make certain sensitive political choices. However, despite the setback, officials from both parties have maintained that it would not hamper discussions on the FTA and that both parties are still actively discussing the agreement in smaller delegations to iron out the details. US officials informed that as of 31st August 2007, the parties were discussing 23 chapters of the proposed agreement. Both sides are aiming to reach an agreement by mid 2008.
3.2 United States Trade Representative (USTR) Piracy Watch List
Despite improvements in enforcements actions and combating piracy, Malaysia was still recommended by the International Intellectual Property Alliance (IIPA) to remain on the United States Trade Representative (USTR) Piracy Watch List for year 2007. Reports from the IIPA reveal that music piracy in Malaysia is down to 45% in 2006 from 49% in 2005. The Malaysian government has vowed that it will address issues raised by the IIPA and work towards reducing piracy in the country significantly.
3.3 Nice and Vienna Agreement Malaysia acceded to and became a Contracting Party of Nice Agreement and Vienna Agreement on June 28 2007. The Agreements entered into force on September 28 2007. The requirements of the said Agreements are in line with the recent amendments to the Trade Marks Regulations 1997.
The Trade Marks (Amendment) Regulations 2007 (PU (A) 460/1997) amended the Third Schedule on the Classification of Goods and Services. The regulations replaced the existing classification of goods and services with the International Classification of Goods and Services for the Purposes of the Registration of Marks under the current 9th edition of the Nice Classification which entered into force on January 1, 2007. The regulations also adopted the International Classification of the Figurative Elements of Marks established by the Vienna Agreement to facilitate trade mark anticipation searches. This is a step towards uniformity in trade mark registrations in Malaysia. This regulation came into force on July 13 2007 and applicants are required to adopt the 5th edition of the Vienna Classification.
4. ADJUDICATION Establishment ofSpecialised Intellectual Property Courts The establishment of the long-awaited specialized IP courts, which were officially launched on July 17 2007, is a major step by the Malaysian government, in particular the Ministry of Domestic Trade and Consumer Affairs, towards combating the increasing piracy of copyrighted materials and counterfeiting of trade marked goods in Malaysia. The idea of IP courts has long been mooted by the ministry and IP lawyers. Since 2005 the ministry, together with the Intellectual Property Corporation of Malaysia (MyIPO), has been working to prepare a concept paper, as well as studying the viability of setting up IP courts. In April 2007 the National Intellectual Property Policy was initiated by Prime Minister Datuk Seri Dr Abdullah Badawi, under which a fund of RM5 billion (approximately $1.5 billion) was allocated specifically for the protection of IP rights in Malaysia. The policy reaffirms the government's commitment to strengthening the protection of IP rights in Malaysia.
On June 6 2007 the Cabinet approved the establishment of 15 sessions courts, known as the Sessions Courts (Intellectual Property), which have criminal jurisidiction. There is one in each state, including one in the administrative capital of Putrajaya. It also approved the establishment of six high courts with both civil and appellate jurisdiction in Kuala Lumpur, Selangor, Johor, Perak, Sabah and Sarawak. These are known as the High Court of Malaya (Intellectual Property) and the High Court of Borneo (Intellectual Property) respectively. These specialized courts will hear cases involving various IP-related matters, including offences and disputes arising under the Trade Descriptions Act 1972; Patents Act 1983; Copyright Act 1987; Optical Disc Act 2000; and Trade Marks Act 1976. The establishment of IP courts in Malaysia will not only speed up the prosecution of IP rights violations; it is also hoped that it will also help to settle IP disputes at a sufficiently fast speed to allow businesses to continue operations. Aggrieved IP rights owners should also receive their compensation more promptly. If the IP courts are able to ensure the quick and speedy resolution of disputes, this will encourage more companies to invest and register their IP rights, thus creating a better business environment in Malaysia. In addition, the establishment of specialized IP courts in Malaysia will allow judges to focus on a highly technical and specialized area. As expertise and knowledge increase over time, efficiency in dealing with cases will also be enhanced.
5. RECENT CASE LAWS Trade Mark 5.1 In Acushnet Company v Metro Gold Manufacturing Sdn Bhd  MLJU 412, the Plaintiff, an American Company in the business of manufacturing, distributing, selling and dealing in golf clubs, golf balls and other golf related accessories, applied for summary judgment to be entered against the Defendant in the present suit which was an action for trade mark infringement. The Plaintiff was the registered owner in Malaysia of the mark “TITLEIST” in Classes 25 and 28 in Malaysia which covers inter alia the abovementioned goods.
Following a complaint lodged by the Plaintiff, on 21.12.2004 the Enforcement Division of the Ministry of Domestic Trade and Consumer Affairs (“the Ministry”) conducted a raid at the premises of one RGT Technology Sdn. Bhd. (“RGT”) and discovered and seized various counterfeit goods bearing the Plaintiff’s “TITLEIST” mark. Following documents discovered at the premises, the Defendant was identified as the supplier of the counterfeit goods and their premises were raided by the Ministry on the same day resulting in the seizure of various infringing items bearing the Plaintiff’s “TITLEIST” mark. Based on these findings, the Plaintiff proceeded to commence legal proceedings against the Defendant for trade mark infringement. The Plaintiff filed application for summary judgment seeking inter alia an injunction to refrain the Defendant from further dealing with goods bearing the “TITLEIST” mark.
The Defendant opposed the said application for summary judgment and argued that summary judgment is not an appropriate order under the circumstances as there were several triable issues. The Defendant contended, inter alia, that no counterfeit goods (including any moulds or dices used to produce the goods) were found at its premises. It also claimed that the raw materials / unfinished goods containing the “TITLEIST” mark and which was used in producing its goods were purchased from another company Zonson Sports (M) Sdn Bhd whom it alleged was the Plaintiff’s agent and who was authorized to manufacture materials bearing the “TITLEIST” mark. As the Defendant claimed to have obtained the materials from Zonson, the Defendant claimed that it was fully authorized to use the raw materials / unfinished goods bearing the mark. The Plaintiff argued that that there was no contractual agreement between them and Zonson, and that the Defendant should have carried out due diligence to verify the truth of Zonson’s claims.
The KL High Court in deciding the case in favor of the Plaintiff held that even assuming the Defendants did obtain the raw materials bearing the “TITLEIST” mark from an authourized agent of the Plaintiff, it did not grant it the right to produce and sell goods bearing the “TITLEIST” mark. Although the Plaintiff as the registered owner of the mark had the sole prerogative to allow its goods to be manufactured by a third party contract manufacturer, the third party contract manufacturer does not acquire or inherit any rights to the use of the mark or neither is he considered to be a licensee of the Plaintiff. The Court cited and followed the American Court of Appeal decision in El Greco Leather Products 1 USPQ 2d 1016 (2d Cir 1986), a case where rejected manufactured goods were sold by the contract manufacturer without authorization, where it was held that the failure of the manufacturer to obtain approval before selling the owner’s rejected goods meant that the goods were not genuine, and accordingly subsequent sales of such goods constituted trade mark infringement. Applying this to the present case, the Court held that Zonson in disposing of raw materials / unfinished goods without the Plaintiff’s consent and authorization was in itself an infringement of the Plaintiff’s trade marks. Thus, the Defendant in purchasing the said goods and in turn selling them to third parties for a profit is also infringing the Plaintiffs’ marks, and that it is not open for the Defendant to claim innocence or ignorance as there is no such defence in trade mark law.
5.2 An Indian curry house located in Kuala Lumpur, trading under the mark MCCURRY, has lost a five-year legal tussle with US fast-food restaurant chain operator McDonald's Corporation. In McDonald's Corporation v McCurry Restaurant (KL) Sdn Bhd (Kuala Lumpur High Court Civil Suit D6-22-989-2001) the Kuala Lumpur High Court ordered McCurry Restaurant to stop using immediately the prefix 'Mc', which it held to be distinctive of McDonald's Corporation, both on its own and in conjunction with food items. Therefore, McDonald's could claim goodwill and reputation in its business with reference to the prefix 'Mc'. The High Court further ruled that the curry house, in using the signature colours distinctive of McDonald's on its signage, could confuse the public into thinking that McCurry was associated with McDonald's. The High Court stated that the actions of the curry house were a deliberate attempt to take unfair advantage of McDonald's reputation to its detriment, thereby causing damage to its goodwill and reputation and eroding the singularity which it enjoys in relation to the MC trade mark.
In its claim McDonald's stated that it had created the prefix 'Mc' as a source or badge of origin to enhance its business. It had applied for and secured numerous registrations for the prefix 'Mc' and for 'Mc' with a suffix or suffixes in many countries around the world. It further stated that it had always emphasized the distinctiveness of the prefix 'Mc' on its goods and services in the course of trade. It stressed that the use of the prefix and its commercial presence can be seen in over 120 countries. The curry house denied it had used the prefix 'Mc' to enhance its business and insisted that the MCCURRY trade mark, with its red and gold logo which features a chicken giving a thumbs-up sign, was an abbreviation for a popular local dish, Malaysian chicken curry. The curry house, which was formerly known as Restoran Penang Curry House, argued that the prefix 'Mc' was not exclusive to McDonald's, citing examples of its use in surnames, particularly among Scottish people. The curry house serves an array of traditional Indian and Malaysian food which differs from the typical fare of burgers and fries at a McDonald's restaurant. The court has yet to decide the amount of damages to be awarded. McCurry has announced its intention to appeal the ruling.
5.3 In Kenwood Electronics (M) Sdn Bhd v Profile Spec (M) Sdn Bhd ( 2 CLJ 732) the first named plaintiff was a Malaysian company and the exclusive distributor of Kenwood car and home audiovisual equipment in Malaysia for the second named plaintiff, Kenwood Corporation. The second plaintiff was the registered proprietor of the KENWOOD trade mark. The plaintiffs alleged that the defendants had deceived the public by passing off their products as the same Kenwood products as were sold by the plaintiffs in Malaysia. The first plaintiff contended that it had widely advertised and promoted its Kenwood audiovisual products and had therefore acquired valuable goodwill in Malaysia in the name ‘Kenwood’ in connection with audiovisual equipment. It also contended that by sourcing, selling and importing audiovisual equipment from Kenwood’s distributors elsewhere, the defendants had damaged the first plaintiff’s goodwill. The second plaintiff contended that the defendants had infringed its rights as the registered proprietor of the KENWOOD trade mark by selling equipment bearing the trade name ‘Kenwood’ contrary to the wishes of the second plaintiff. Therefore, the plaintiffs sought an order to stop the defendants from importing and selling audiovisual equipment bearing the Kenwood brand name in Malaysia without the plaintiffs’ consent.
In dismissing the plaintiffs’ claims, the High Court held that the Kenwood audiovisual equipment sold by the defendants comprised genuine Kenwood products, and the complaint of trade mark infringement was therefore unfounded. The court further held that the mere fact that the defendants’ activities caused the plaintiffs to lose potential profits did not constitute a cause of action.
5.4 In Walton International Ltd v Yong Teng Hing t/a Hong Kong Trading Co ( 4 MLJ 133) Walton International Limited was an associated company of Giordano Limited, both were part of the group of companies owned by Giordano International Limited of Bermuda, a public-listed company on the Hong Kong Stock Exchange. The appellant was the registered proprietor of the GIORDANO trade mark for various goods in Malaysia and many countries throughout the world. The first respondent was the sole proprietor of Hong Kong Trading Co and had also applied to register the GIORDANO mark in respect of glasses and sunglasses in Class 9. The Registrar of Trade Marks accepted the application. The appellant filed opposition against the registration of the mark. The Registrar dismissed the opposition. The appellant appealed to the High Court contending that it was the originator of the GIORDANO trade mark and that the first respondent had copied that mark, thereby misappropriating the reputation, goodwill and commercial advantage in the appellant’s mark. The first respondent argued that it was the first user of the mark in respect of Class 9 goods in Malaysia as it had been selling glasses and sunglasses under the GIORDANO mark since 1992. In dismissing the appeal, the High Court held that the first respondent was the first person to use the GIORDANO mark in respect of goods in Class 9 in Malaysia and that there was no evidence of use by the appellant of the mark on Class 9 goods, either prior to or after the first respondent’s trade mark application. Therefore, the appellant had no reputation or goodwill in the GIORDANO mark in connection with goods in Class 9. Consequently, the court held that there was no risk of confusion as alleged by the appellant. The appellant had filed an application for leave to appeal to the Court of Appeal.
Passing-Off 5.5 Syarikat Zamani Hj Tamin Sdn Bhd and another party manufacture and distribute foodstuffs, including sauces, vermicelli and syrups, bearing the TAMIN trade mark. Syarikat brought a passing-off action against Yong Sze Fun and another party for the use of an identical and/or confusingly similar mark in relation to syrups and cordials. Syarikat also filed complaints with the Enforcement Division of the Ministry of Domestic Trade and Consumer Affairs, resulting in the seizure of the defendant's products. Yong claimed that they have used the trade mark TAMIN since 1991 and were the first to use it in relation to syrups and cordials. They counterclaimed for passing off by the plaintiffs and slander to title and goods.
The High Court held in Syarikat Zamani Hj Tamin Sdn Bhd v Yong Sze Fun  5 MLJ 262 that Yong had passed off their goods as the goods of Syarikat by manufacturing and selling syrups and cordials bearing the TAMIN trade mark. The court held that misrepresentation is dependent not on whether the products traded under the marks are the same, but rather on whether there confusion and/or deception might arise from the defendants' subsequent use of the TAMIN trade mark. Yong also raised the issue that Syarikat did not own goodwill in the TAMIN trade mark, claiming that goodwill belonged to the registered proprietor of the TAMIN trade mark, Sharifah bte Hj Tamin, the executive chairman of Syarikat, who was not a party to this action. Yong alleged that Syarikat were merely the licensees. However, the court held that the registered proprietor and Syarikat should be treated as one, and that Syarikat should not be defeated or deprived of compensation on a technical point. The court further held that any alleged licensing agreement on the common law right to the mark was between the registered proprietor and Syarikat and did not provide Yong with a means of escaping liability. In any event, the court held that there was clear evidence to show that Syarikat had taken over the businesses of its predecessors, including all goodwill associated therewith.
Yong adduced market survey evidence to show that (i) they were the first to use the TAMIN trade mark, and (ii) the mark was distinctive of Yong through use. However, the court was critical of the way in which the market survey was conducted, as the survey evidence was limited to a particular geographical area and the target respondents of the survey were Yong's customers; therefore, they were not representative of a cross-section of the public. The court ultimately placed little, if any, weight on the market survey evidence. In dismissing Yong's counterclaim for slander to title and goods, the court held that Syarikat's statement to the ministry was true since they had shown that they were the rightful owners of the TAMIN trade mark. Further, Yong failed to show any malice on Syarikat's part in making the complaints.
Copyright 5.6 In August 2006 the Court of Appeal issued its decision in Columbia Pictures Industries Inc v ODVD Manufacturer Sdn Bhd (D8-22-319-2003). Columbia Pictures Industries Inc owns the copyright in the film Stuart Little 2 in Malaysia. The exclusive licensee for reproducing and distributing the film in VCD format in Malaysia is Media Max Com Sdn Bhd. Columbia alleged that ODVD Manufacturer Sdn Bhd infringed its copyright by reproducing the film and distributing copies in Malaysia without its authority. On September 4 2002 enforcement officers from the Ministry of Domestic Trade and Consumer Affairs raided ODVD's premises and seized 550 discs containing the film. The premises were raided again on September 13 2002 and two exemplar discs were seized from ODVD's replication lines. The two exemplar discs were examined and found to have the same characteristics and defects as the 550 discs previously seized by the ministry.
Columbia subsequently commenced civil proceedings against ODVD, claiming for loss and damage to its goodwill, reputation, trade and business, and diminution in the value of its licensing activities. It also sought an injunction against ODVD from further infringing Columbia's copyright in the film. In its defence ODVD disputed Columbia's copyright in the film and alleged that it had the necessary licence to carry out its business lawfully, without clearly pleading that it had the right to reproduce and distribute the film. ODVD also counterclaimed for defamation. ODVD applied to strike out the suit on the grounds that the action: "disclosed no reasonable cause of action, is scandalous, frivolous and vexatious, may prejudice, embarrass or delay the fair trial of the action or is otherwise an abuse of process of the court." It contended that Columbia's claim was obviously unsustainable since information gathered during criminal anti-piracy operations conducted by the ministry could not be disclosed to Columbia, as to do so would breach the Copyright Act 1987. Therefore, Columbia would have no evidence to support its claim against ODVD.
In dismissing the application the High Court held that this was not a case where there was no reasonable cause of action, as sufficient facts were disclosed in the statement of claim to show that Columbia's case merited a trial. The High Court also held that the mere fact that Columbia's evidence may be weak and the claim might be unlikely to succeed at trial was not grounds to strike out the action. The Court of Appeal dismissed ODVD's appeal and upheld the High Court decision, allowing copyright owners to file civil actions based on information gathered during criminal anti-piracy operations conducted by law enforcement agencies.