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Malaysia: Ken Holdings & Ors succeed

28th May, 2013

In the case of Ken Holdings Berhad & Ors v Sri Seltra Sdn Bhd & Ors, the High Court of Malaya at Kuala Lumpur adjudged Sri Seltra Sdn Bhd & Ors to have committed the tort of passing of while simultaneously rejecting Sri Seltra Sdn Bhd & Ors counter claim for defamation and unlawful interference.

Ken Holdings Berhad & Ors (hereinafter referred to as “the Plaintiffs”) operate in the business of construction, engineering, specialist engineering services, consultancy and property development industry, provision of geotechnical services, building works, turnkey contracts, land reclamation, dredging, soil improvement and property development.

Sri Seltra Sdn Bhd & Ors (hereinafter referred to as “the Defendants”) operate in the business of property development, retailing and dealing of motor vehicles and heavy machinery, provision of management administrative and business consultancy services, contractual works in property development and property and investment holding.

The Plaintiffs claimed that the Defendants had passed-off the Plaintiffs’ mark “Ken” (hereinafter referred to as the “Plaintiffs’ Mark”) when the Defendants used the trade mark ‘Ken City + Device’ (hereinafter referred to as the “Defendants’ Mark”) in promotional materials to promote their development projects that were started in 2011.

The Defendants refuted the Plaintiffs’ claims and counterclaimed for defamation and unlawful interference. The Defendants further counterclaimed for a declaration that the Plaintiffs had no right, sole or exclusive or otherwise, to the name ‘Ken’.

In 2012, the Plaintiff had obtained an interlocutory injunction to restrain the Defendants from continuing using the Plaintiffs’ Mark in respect of property development business.

The Plaintiffs claimed that the Defendants had not obtained the necessary approval for the advertisements in newspapers. The Plaintiffs noted that before beginning to develop a housing development project, a developer has to obtain Advertising and Sales Permit (AP) and Developer’s License (DL).

The Defendants argued that they had received the appropriate approval for the advertisement. However, the Plaintiff stated that approval letter was issued after the Defendants had published the advertisements. Also, the draft advertisements submitted by the Defendants for approval were different from the advertisements published in June and November 2011.

The High Court sided with the Plaintiffs in adjudging that the name, ‘Ken City Square’, as reflected in the developer’s license, was unilaterally inserted by the Defendants and was an un-approved project name.

The High Court next turned to the Plaintiffs’ claim of passing-off i.e. whether there was misrepresentation by the Defendants that their business was the business of the Plaintiffs. The Plaintiffs contented that they had goodwill and reputation in the Plaintiffs’ Mark in the property development and construction sector due to their long continuous usage of the mark. However, the Defendants argued that the mark ‘Ken’ was a common English word and hence no goodwill could arise out of it. The Defendants also submitted evidence that there was a list of companies in Malaysia which used Ken as part of their business names and therefore, the word ‘Ken’ could not be monopolized by the Plaintiffs unless it had acquired a secondary meaning.

The High Court accepted the Plaintiffs’ submission that the list of companies using the word ‘Ken’ adduced by the Defendants did not show what the activities of those companies were or whether those companies were still actively trading. The High Court further adjudged that the Defendants had failed to provide any evidence that these companies had been using the ‘Ken’ mark in the property development and construction sector or how these companies brand themselves.

The Plaintiffs adduced evidence that they commenced the usage of the work ‘Ken’ as its project names for its property development as early as 2000, whereas the Defendants had attempted to market its property development using the ‘Ken’ name from June 2011. Also, to support the use of the mark by the Plaintiffs, the Plaintiffs produced voluminous promotional materials including booklets, brochures, newspaper advertisements, television commercials etc.

The Defendants claimed that they had been using ‘Kenco’ as a company name since 1979. However, the High Court rejected this argument stating that the use of ‘Kenco’ as a company name was different from the use of ‘Ken’ as both the names were not similar. Hence, the High Court adjudged that the public had associated the mark ‘Ken’ with the Plaintiffs in the property development and construction sector and that ‘Ken’ had acquired a secondary meaning which was distinctive of the Plaintiffs.

On the issue of misrepresentation, the Plaintiffs argued that the current action was not premised on a classical passing-off action but an extended form of passing off action where misrepresentation is typically a false association with the Plaintiffs’ business arising from the use by the Defendants of a name, trade indicia or mark which is closely associated with the Plaintiffs. Hence, the Plaintiffs argued that the Defendants’ usage of the name ‘Ken City’ in the promotion of their property development projects caused a wrongful unlawful association of that project with the Plaintiffs due to the usage of the name ‘Ken’.

The High Court acknowledged that in such a case the Plaintiffs need not prove actual confusion; rather only mere proof of possibility of confusion was sufficient in a passing-off action. The Plaintiffs provided evidence that various members of relevant public thought that the Defendants’ projects under the ‘Ken City’ name were associated with the Plaintiffs. Further, the Defendants witness also admitted during cross-examination that there was a likelihood of association between the Plaintiffs and the Defendants.

As a result, the High Court adjudged that the Plaintiffs had established evidence of confusion arising from the Defendants’ usage of the mark ‘Ken’.

The High Court further agreed with the Plaintiffs allegation that the Defendants had deliberately used ‘Ken City’ in their advertisement in a manner that would allow them to ride on the goodwill and reputation of the Plaintiffs.

With regard to the issues of damages, the Plaintiffs submitted that if the Defendants were allowed to continue using any mark containing the word ‘Ken City’ to promote their development projects, it would cause harm to the Plaintiff. The Plaintiff further adduced evidence that the Defendants had a bad track record as a property developer in Malaysia. The High Court admitted that the property market was a niche market where reputation of a developer was important and given the bad track record of the Defendants as a property developer, the probability of damage to the Plaintiffs’ goodwill were convincing.

Hence, the High Court ruled that the Defendants had committed the tort of passing-off their business as being associated with the business of the Plaintiffs by using the mark ‘Ken City’.

The Defendants counter claimed against the Plaintiffs for defamation and unlawful interference due to the letters written by the Plaintiffs enquiring about the AP and DL of the Defendants. The Defendants argued that the words and the statements used in those letters were defamatory statements as they had a tendency to harm the Defendants by lowering the Defendants in the eyes of right thinking members of the public. However, the High Court sided with the Plaintiffs stating that the Plaintiffs were merely enquiring from the authorities whether the Defendants had obtained the necessary approval for their advertisements. Further, the authorities had replied confirming that the Defendants had not received the necessary approval for the advertisements. Hence, the High Court dismissed the Defendants’ claim for defamation and unlawful interference.

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