APAA e-Newsletter (Issue No. 28, April 2022)

LEX, LEXUS or Can There Be Concurrent Use of Both? The Federal Court Decides in Munchy Food Industries Sdn Bhd V Huasin Food Industries Sdn Bhd [2021] 21 CLJ 329

Wendy Lee Wan Chieh, Shook Lin & Bok (Malaysia)

Munchy Food Industries Sdn Bhd (“Munchy”), a manufacturer of biscuits and confectionary, is the proprietor of the mark “LEXUS”, which has been registered since 23.01.1998. Huasin Food Industries Sdn Bhd (“Huasin”), who also produces confectionary, used and applied for the registration of the mark “LEX” on 25.09.2015. Consequently, Munchy opposed the registration of Huasin’s mark and brought an action for trademark infringement and passing off against Huasin. Munchy’s and Huasin’s biscuit products are as follows:-

Munchy’s LEXUS

Huasin’s LEX

In response, Huasin counterclaimed for the expungement of Munchy’s registration for “LEXUS” on, interestingly, the basis of likelihood of confusion of the mark with Toyota Motor Corporation’s (“Toyota”) “LEXUS” mark which is used on cars. Toyota is not party to the action and has not use the mark “LEXUS” for biscuits. The High Court eventually decided in favour of Munchy, allowing Munchy’s claims for trademark infringement and passing-off, and dismissing Huasin’s counterclaim for expungement.

Dissatisfied with the decision of the High Court, Huasin appealed to the Court of Appeal but did not pursue the appeal in respect of the dismissal of its counterclaim for expungement, informing the Court of Appeal that it would agree to the co-existence of both marks instead. The Court of Appeal allowed Huasin’s appeal, finding that the issue of confusion had to be determined with the literacy level of the purchasing consumer in mind and that both parties are genuine traders and not tortfeasors.

The Court of Appeal also found that the High Court failed to consider the dispute in totality and should have allowed both marks to co-exist despite also acknowledging that the defence of honest concurrent use was not pleaded before the High Court. In addition to that, the Court of Appeal also found that the expungement of a mark is a declaratory relief that is equitable in nature. The courts should therefore be slow in granting such relief as Munchy had not demonstrated that it had exhausted all other options under the Trade Marks Act 1976 – with co-existence with suitable variation of the mark being an available option.

Munchy then obtained leave to appeal to the Federal Court in respect of the following questions of law:-

Question 1: Is honest concurrent rights under the Trademark Registration system a relevant consideration in an action for trademark infringement and/or passing-off where the trademark of the defendant is not registered?

Question 2: Is variation of a registered trademark a remedy that a plaintiff should seek as an option before commencing an action for trademark infringement and/or passing-off even if the trademark of the defendant is not registered?

In this regard, the Federal Court answered Question 1 in the negative, and found that the Court of Appeal was wrong in failing to consider the conflicting tests in determining the likelihood of confusion or deception in an action for trademark infringement. It should not have considered the issue of honest concurrent use even though it is a defence to a claim of trademark infringement as it was not pleaded, canvassed or addressed before the High Court at all.

Even if it was pleaded, there was no evidence to show that Huasin had used its mark bona fide and without knowledge of Munchy’s registered mark. The court cannot simply ignore the basic tenets of pleadings in that parties must be bound by their pleadings.

Question 2 was also answered in the negative, with the Federal Court observing that it was absurd to even suggest that the Munchy should consider a variation of its registered trademark which had been registered since 1998 and which it had used for almost 17 years before Huasin even commenced the use of its mark. Munchy would succeed in its action for trademark infringement as long as it succeeds in establishing the criteria under Section 38 of the Trade Marks Act 1976.

While this case appears to be a fairly straightforward case of trademark infringement and passing-off at first blush, it was fortunate that there was the chance for the case to be considered and decided upon by the Federal Court. Even though the Court of Appeal’s decision to consider the issue of honest concurrent use and the matter “holistically” could arguably appear, at a glance, to be reasonable, it has serious implications on how parties would litigate in future cases.

If the Court of Appeal’s decision was allowed to stand, the very basic tenet of parties being bound by their pleadings would be undermined and trademark proprietors may be forced to contend with an almost impossible burden to consider variation of its mark which, as the Federal Court correctly observed, is quite absurd.