Singapore: Not a TOTAL failure

October 28th, 2013

 

Total English Learning Global Pte Ltd (hereinafter referred to as “the First Plaintiff”) and Total English Learning International Pte Ltd (hereinafter referred to as “the Second Plaintiff”). The First and Second Plaintiffs are the franchisors of the “I Can Read!” (“ICR”) system, which consists of an educational programme and educational materials developed to address all aspects of English literacy.

The First Plaintiff owns Singapore Trade Marks No. T0518206C in Class 16 for paper goods and art material (hereinafter referred to as “the Class 16 Trade Mark”) and T0518207A in Class 41 for educational services and reading instruction (hereinafter referred to as “the Class 41 Trade Mark”).

The First Plaintiff has assigned “all other intellectual property rights including all copyrights” to the Second Plaintiff by way of a Deed of Assignment dated 19 July 2012, and on that basis, the Second Plaintiff is a co-plaintiff in the present suit. The Second Plaintiff is supposedly the owner of copyrights in various artistic, literary and musical works relating to the ICR system.

The Defendant is one of the franchisees of the ICR system pursuant to a franchise agreement with the Plaintiffs (hereinafter referred to as ‘the Franchise Agreement’), and runs the franchise at 1 Goldhill Plaza #01-31/33 Singapore 308899 (hereinafter referred to as “the Goldhill Centre”).

The Defendant bought the business in 2005 from Mr. Yeou Foo Chong when Defendant entered into the Franchise Agreement Mr. Chong in October 2002. The Franchise Agreement was for an initial term of 10 years with an option to renew for a further period of five years.

The Defendant’s current principal director and shareholder is Wai Onn Lum, who acquired the Defendant’s shares in 2008. When taking over the Defendant, Mr. Lum allegedly met with one Allston Boyer Parkinson who was the managing director of Total Literacy (Singapore) Pte Ltd (hereinafter referred to as “TLS”) and requested that the Franchise Agreement be varied, and that the 10-year period of the Franchise Agreement be waived. Mr. Lum alleged that Mr. Parkinson agreed to the request and confirmed the variation. Mr. Lum pointed to an undated piece of paper (supposedly signed in August 2008), to substantiate this claim. Mr. Lum also alleged that from 2008 to 2012, he had requested for the variation of the Franchise Agreement and waiver of the period of the same to be formalised with Mr. Parkinson and TLS. Mr. Lum claimed that as a result of the assurances and representation given by TLS and the Plaintiffs’ representatives, he took no action to extend the Franchise Agreement.

On December 2012, the Plaintiffs had issued a letter of demand alleging that the Franchise Agreement had expired. Plaintiffs argued that the Defendant was using the ICR system without authorization and had therefore infringed the Classes 16 and 41 Trade Marks and copyright.

It is understood that on 2 January 2013, the parties had entered into a Non-Disclosure Agreement (“NDA”) for the purposes of negotiating the sale of the Defendant’s business to the Plaintiffs.

However, the Defendant remains listed on the Plaintiffs’ website as an authorised ICR centre. The Plaintiffs continue to supply materials to the Defendant and collect royalties from the Defendant. The Defendant also remains on the Plaintiffs’ email distribution list for operation matters. Indeed, the Defendant continues to run the franchise at Goldhill Centre and continues to use the Plaintiffs’ teaching materials.

The Plaintiffs had commenced the present action and claimed that the Defendant has breached the obligations under the Franchise Agreement and infringed their Classes 16 and 41 Trade Marks and copyright as the Defendant continued offering services under the Franchise Agreement after the expiration of the Franchise Agreement.

The Defendant sought to strike out portions of the Plaintiffs’ Statement of Claim in relation to certain aspects of alleged trade mark and copyright infringements for being scandalous, frivolous or vexatious and/or an abuse of process.

The Defendant argued that the entire Statement of Claim is moratorium. The Defendant further asserted that the claim was an abuse of process because the NDA created an implied forbearance to sue, or an implied extension of the Franchise Agreement; and the Plaintiffs had acted as if the Franchise Agreement remained in force, and such actions indicate that the Plaintiffs had waived the expiry of the Franchise Agreement.

The Plaintiffs argued that there could be no moratorium raised by the NDA because the Defendant had not shown either that the Plaintiffs had promised the Defendant not to sue (i.e. promissory estoppel); or, there could be gleaned a “shared assumption” that the parties will not sue (i.e. estoppel by convention).

The Singapore High Court viewed that a striking out application is not the proper forum to determine whether the NDA and/or the Plaintiffs’ actions subsequent to create a moratorium. Therefore, the Court had declined to strike out the entire Statement of Claim on the grounds that it is scandalous, frivolous or vexatious and/or an abuse of process.

The Defendant further argued that there can be no copyright infringement because there was no allegation of any electronic transmission of the copyright material. The Defendant had also contended that there can be no copyright infringement because there is no allegation in the Statement of Claim that the Defendant had reproduced the Plaintiffs’ materials, and as such, the materials used by the Defendant had been made by or with the license and consent of the Plaintiffs.

The Plaintiffs argued that the case is not based on “copying”, but rather “communicating to the public”. The Plaintiffs argued that the word “communicate” includes the “making available of a work”, and should not be limited to the “narrow interpretation” suggested by the Defendant. The Plaintiff alleged that the Defendant had actively initiated “communication” by distributing the copyright material to its students at the Goldhill Centre.

The High Court disagreed with the Plaintiffs. The Court found that it is clear that the term “communicate” and the phrase “to communicate the work to the public” are limited to communicate via electronic transmission.

The Defendant submitted that there can be no infringement of the Classes 16 and 41 Trade Marks as any materials used by the Defendant were supplied by the Plaintiffs and the Defendant had paid for them. The Defendant also argued that the Plaintiffs have not alleged that the Defendant had made unauthorized goods and applied the Classes 16 and 41 Trade Marks onto the unauthorized goods. As such, the Defendant contended that the Plaintiffs’ rights over the Classes 16 and 41 Trade Marks had clearly and plainly been exhausted under the Singapore Trade Marks Act when the Plaintiffs supplied the goods to the Defendant.

The Plaintiffs had pointed out that the term “uses” in the Act was limited to “trade mark use”. The Plaintiffs also contended that trade mark infringement under the Act is not confined only to “trade mark use”. The Plaintiffs had pointed out the term, trade mark proprietor’s consent is in the context of an infringement claim under the Act. The Plaintiffs argued that so long as the proprietor of the trade mark does not consent to its use, the use of a trade mark as a badge of (correct) origin to (correctly) identify the origin of a genuine product is itself infringing use pursuant to the Act. The Plaintiffs had pointed out that under the Act, a registered trade mark is not infringed by the use of the trade mark in relation to goods which have been put on the market, whether in Singapore or outside Singapore, under that trade mark by the proprietor of the registered trade mark or with his express or implied consent (conditional or otherwise). The Plaintiffs argued that the Act was intended to govern situations of parallel importation of goods, curbing the rights of registered proprietors and breaking down trade barriers for the freer movement of goods, and therefore had no applicability to the present case at hand.

The High Court found the first argument relating to the meaning of “uses” in the Act to be irrelevant to the issue at hand. This is because all parties agreed that the Classes 16 and 41 Trade Marks, as used by the Defendant on the allegedly infringing goods, (correctly) identified the origin of the products. On the second and third arguments, the High Court had inclined to take the position that there is no infringement of a trade mark under the Act if a person uses a trade mark as a badge of (correct) origin on a genuine product, and the trade mark in fact (correctly) identifies the origin of the product. The Court also found that the Plaintiffs’ arguments to the Act to the parallel importation scenario was substantiated neither by reference to the language of the provision itself, nor to any case law authority on the issue.

The High Court had declined to strike out the entire Statement of Claim. In fact, the Court had ordered the Plaintiffs to amend the Statement of Claim to provide better particulars of the mentioned claims, without prejudice to the Defendant’s right to pursue a similar striking out application in the event that the amendments still fail to disclose any reasonable cause of action. The High Court also concluded that there has been no abuse of process.