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27th October, 2015

The appellants in Yeohata Machineries Sdn. Bhd. & Anor v Coil Master Sdn. Bhd. appealed against the decision of the High Court which dismissed the appellants’ claim that the Defendants infringed the Malaysian Patent no. MY-125572-A (hereinafter be referred “the Patent”) and which allowed the respondents’ counterclaim to invalidate the Patent.

The Patent is owned by the first appellant (Yeohata Machineries Sdn. Bhd.) and the subject matter of the invention is an apparatus for the production of mosquito coils in which much of the handling of the trays is automatically carried out and many of the operations can be effected pneumatically or hydraulically. The machine is known as “Yeohata”. The second plaintiff had the license to manufacture the Yeohata and to deal with all confidential information relating the apparatus and process of the Yeohata.

The second defendant was a director and marketing manager of Moscoil Enterprise (M) Sdn. Bhd. (“Moscoil”), the marketing arm of the second plaintiff. The third defendant, the son of the second defendant, worked as the research and development engineer of the second plaintiff. In 20 July 1999, the second defendant and the third defendant established the first defendant company (Coil Master Sdn. Bhd.) to manufacture and sell mosquito coil making machine by the trade name “Coilmaster MK-1”. At that time, the second defendant was still a director of Moscoil and the third defendant was still working with the second appeallant.

The issues addressed by the Court of Appeal are as follows:

Whether the Patent was infringed?

The Court agreed with the findings of the learned trial Judge that the patent was not infringed. The Court stated that the plaintiffs’ claim that the defendants have infringed the Patent was not borne out by the evidence adduced at the trial and appears to be premised on the assumption that the Coilmaster MK-1 must have been copied from the Yeohata because of the experience and knowledge acquired by the defendants whilst working for the first plaintiff. Therefore, it was concluded that the Plaintiffs have failed to discharge their burden of proof.

Whether there was a breach of confidential information?

The plaintiffs claimed that the defendants stole confidential information from the plaintiffs. In Coco v A.N. Clark (Engineers) Ltd. [1969] RPC 41, Megarry J stated that there are three elements essential to prove a case of breach of confidence, namely a) the information must be of confidential nature, b) the information must have been imparted in circumstances importing an obligation of confidence and c) there must be an unauthorized use of that information. The trial judge concluded that the plaintiffs have failed to prove the existence of these elements.

There are evidence that there were substantial improvements made to the methodology of mosquito coil production prior to the application for the Patent in 1997. One of such improvement was the Nakamura machines imported from Japan and were used in the industry in the 1960s and 1970s. Another is the Tickwell machine which was developed in Malaysia in 1991. The trial judge had concluded that there were no confidential information as the Yeohata machine was based on the Nakamura and the Tickwell machines. It was also concluded that the Plaintiffs have not imparted any confidential information to the Defendants as there no confidential information to begin with. The Court of Appeal agreed with the findings of the trial judge.

Whether there was fraudulent misrepresentation?

The Plaintiff submitted that misrepresentation could be found in the marketing documents of the first defendant which was prepared by the second defendant. The phrase is reproduced as follows:

“…more importantly it is manufactured by the same engineer who successfully produced the most acceptable pneumatic machine in the market”.

The Court reiterated the requirements for an action for fraudulent misrepresentation. There five requirements are, namely a) there must be a representation of fact by words or by conduct and mere silence does not suffice, b) the representation must be made with the knowledge that it is false, c) the representation must be made with the intention that it should be acted upon by the claimant, d) the claimant must have acted upon the representation, and e) the defendant must have suffered damage relying on the representation.

The Court stated that the documents were addressed to third parties and not to the plaintiffs. Furthermore, the Court stated that there was no evidence to show that the plaintiff had relied on the false statement to their detriment. Accordingly, the Court concluded that the misrepresentation claim was without merit.

Whether there was conspiracy to injure the plaintiffs?

The Court reiterated the four requirements to prove an action in conspiracy. They are namely a) that there must be a combination or agreement between 2 or more individuals, b) there must an intention to injure, c) there were certain acts carried out pursuant to such combination or agreement and that intention, and d) the plaintiffs must have suffered loss and damage.

The Court agreed with the findings of the trial judge that there was no conspiracy to injure the plaintiff. In reaching this conclusion, the trial judge took into account that the defendants did not take any confidential information from the plaintiffs, that there was no agreement to prevent the defendants from incorporating their own company and that the Coilmaster MK-1 was more expensive than Yeohata.

Whether the Patent should be invalidated?

The Defendants submitted that the Patent is not valid as the first plaintiff did not inform the registrar of patents about prior art Tickwell and Sri Dapat machines.

The Court of Appeal disagreed with the finding of the trial judge and concluded that the evidence given by the Defendants’ witnesses on the technical operations of the machine should have been ruled inadmissible as they are not specially skilled in the technical process of making mosquito coils. The Court also concluded that evidence of prior art is found in the comprehensive description of the invention. Accordingly, the Court of Appeal partly allowed the appeal and ruled that the decision of the learned trial judge invalidating the Patent to be set aside.