5 September, 2016
In August 2016, Iconic Locations Singapore Pte Ltd, (formerly known as Ku De Ta SG Pte Ltd) ("Iconic") served a third party notice on its once director and chief executive Chris Au ("Au") in relation to proceedings by the partners of Ku De Ta Bali (the "Partnership") against Iconic to recover damages and profits arising from the use of the "Ku De Ta" name. This recent development follows protracted litigation which culminated in two Court of Appeal ("CA") decisions surrounding the right to use the "Ku De Ta" name.
Background Facts
The Partnership was the beneficial owner of two registered trade marks in Singapore relating to the "Ku De Ta" name (the "Singapore Marks"). The registrations for the marks were held by Nine Squares Pty Ltd ("Nine Squares"). Nine Squares had two equal shareholders and directors, namely, Arthur Chondros ("Chondros") and Daniel Ellaway ("Ellaway"). Chondros was also a member of the Partnership. Subsequently, the relationship between Chondros and Ellaway soured. Chondros informed Ellaway that he was prohibited from entering into any agreements on Nine Square's behalf. In contravention of Chondros' express instructions, Ellaway caused Nine Squares to enter into a licence agreement with Au, granting Au an exclusive licence to use one of the marks (the "1st Singapore Mark"). The licence agreement was eventually assigned to Iconic, which would go on to operate the Ku De Ta club in Singapore.
The Partnership commenced an action against Nine Squares claiming that the Singapore Marks were held by Nine Squares on trust for the Partnership and should be transferred to the Partnership1. The Partnership also commenced a separate action against Iconic seeking to restrain the further use of the "Ku De Ta" name in Singapore2.
The CA's Decisions
The CA found that Nine Square held the Singapore Marks on an express trust for the Partnership and ordered Nine Squares to transfer the registration of the marks to the Partnership.
In separate proceedings between the Partnership and Iconic, Iconic sought to rely on the licence which it had procured from Nine Squares on the basis that the licence granted, being an exclusive licence, was proprietary in nature.
However, the CA held that a trade mark licence was merely a personal right and not proprietary in nature. Section 45 of the Trade Marks Act (the "TMA"), which conferred on an exclusive licensee of a trade mark the right to sue in his own name under certain circumstances, was a facilitative device that did not create a separate substantive right to exclude third parties from using the mark. The CA recognised that under Section 42(5) of the TMA, a licence to use a trade mark was binding on every successor in title to the grantor's interest except a bona fide purchaser without any notice of the licence.
1 Guy Neale v Nine Squares Pty Ltd [2015] 1 SLR 1097
2 Guy Neale and others v Ku De Ta SG Pte Ltd [2015] SGCA 28
However, the provision did not apply in the present case, where the licensee obtained its rights under a licence that had been granted in breach of the earlier rights of the equitable owners of the trade mark, who subsequently perfected their title by becoming the registered proprietor.
Consequently, Iconic did not have any valid and enforceable licence as against the Partnership. Their continued use of the “Ku De Ta” name subsequent to the transfer of the legal title to the Partnership constituted clear infringement of the 1st Singapore Mark, thus leading to the present claim in damages by the Partnership against Iconic. Iconic had in turn served their third party notice against Au on the basis that Au, being the company's then
CEO and director, had "solely or primarily caused the losses" being claimed by the Partnership.
Comments
The Ku De Ta saga serves as a useful reminder for licensees and assignees to make every effort to verify the grantor's right to use. On the facts, Au had argued that he took comfort from representations from Ellaway that Nine Squares was the true owner of the 1st Singapore Mark. However, Ellaway was merely one of several partners in the Partnership who did not have the authority to grant the right to use the Singapore Marks on behalf of the Partnership. Accordingly, the onus is on licensees and assignees to distinguish between the officers of a company and ascertain who is able to grant a right to use.
Allergan Succeeds in Claims for Infringement & Passing Off Against Seller of Eyelash Growth Enhancement Product
In 2013, Allergan, Inc. (the "First Plaintiff") and Allergan Singapore Pte Ltd (the "Second Plaintiff")(collectively, the "Plaintiffs") commenced proceedings in the High Court against Ferlandz Nutra Pte Ltd (the "Defendant") for trade mark infringement, passing off and malicious falsehood (Allergan, Inc, v Ferlandz Nutra Pte Ltd [2016] SGHC 131).
Facts
The product at the heart of this dispute is an eyelash growth enhancer marketed under the brand, Latisse (the "Latisse Product"). The Latisse Product is used in the treatment of a medical condition where a patient has insufficient eyelashes, a condition known as eyelash hypotrichosis. The Latisse Product was marketed under the registered "LATISSE" word mark (the "Latisse Mark") and the unregistered [page2image20536] device (the "Latisse Device"). The First Plaintiff is the registered proprietor of the Latisse Mark for pharmaceutical preparations used to treat eyelashes (class 5).
The Defendant marketed a competing product known as Lassez (the "Lassez Products"), under three marks (see here)
The Plaintiffs alleged trade mark infringement only in respect of the first two Lassez marks (collectively, the "Allegedly Infringing Signs"). The third mark is relevant to the passing off inquiry.
Decision
(i) Whether the Defendant had infringed the Plaintiffs' marks?
The Court found that the Defendant had infringed the Plaintiffs' marks by supplying the Lassez Products to clinics.
In assessing mark similarity, the Court considered who the "average consumer" in this case was, and whether it should be the notional average consumer, or the average consumer of the parties' actual products. The Court held that it would not be appropriate to allow the particular characteristics of actual purchasers to infiltrate the mark similarity assessment, as the Court of Appeal in the earlier case of Hai Tong3 and Staywell4 had considered this an extraneous factor. Accordingly, the judge should assess mark similarity on an objective basis, and assume the mantle of the notional average consumer and not the unthinking person who is in a hurry. The Court found that the
Allegedly Infringing Signs were similar to the Latisse Mark, holding that there was aural and visual similarity.
However, as "Latisse" and "Lassez" were both invented and meaningless words, albeit with French nuances, there was no conceptual similarity.
Although the Lassez mark is registered in relation to cosmetic products (class 3), whilst the Latisse Products are prescription-only-medicine, the Court found that the Lassez Products were a similar type of goods to the Latisse Products. The Court acknowledged that there was an increasing convergence between the cosmetics and medical industries which led to both industries competing for the same group of consumers (at [55] and [109]), and went on to consider other factors to determine if the goods were similar. These factors included the uses, users and trade channels of the goods in question, and the substitutability of the goods (at [56]). On an overall assessment of the facts, the Court found that the Lassez Products were similar to the Latisse Products. This was further reinforced by the fact that the Lassez Product fell squarely within the Latisse Mark's specifications – "pharmaceutical preparations used to treat eyelashes" – as it clearly did not restrict the scope of protection to prescription-only medicine used to treat hypotrichosis (at [63]-[64]).
There was also a likelihood of confusion amongst the relevant public. The Court held that end-users should form part of the relevant public if there is a risk that they might be led to believe that the competing products are derived from the same or economically-linked undertakings, or if they dealt directly with the products and had to differentiate one product from another (at [75]- [79]). Survey evidence was also heavily relied on by the Plaintiffs, which had engaged an expert to conduct a street intercept survey to assess consumer's perceptions to the Latisse Product and the Lassez Product. Whilst not conclusive of a likelihood of confusion, the Court agreed that the survey evidence indicated that a significant proportion of end-users would be confused by the two products (at [114]).
(ii) Whether Defendant could rely on the defence of comparative advertising?
3 Hai Tong Co (Pte) Ltd v Ventree Singapore Pte Ltd [2013] 2 SLR 941 ("Hai Tong")
4 Staywell Hospitality Group Pty Ltd v Starwood Hotels & Resorts Worldwide, Inc [2014] 1 SLR
911 ("Staywell")
The second category of trade mark infringement involved the Defendant's use of the Latisse Mark in its own advertisements to draw comparisons between the two products.
To constitute infringement, the Defendant must have used the Latisse Mark in a trade mark sense (i.e. as a badge of origin)5. As the brochures had expressly referred to the Latisse Product when comparing its efficacy to that of the Lassez Product, the Court found that the Defendant had used the Latisse Mark in the course of trade for a trade mark purpose (at [130]).
In interpreting section 28(4) of the Trade Marks Act (Cap. 332)("Trade Marks Act")(i.e. the defence of fair use in comparative advertising), the Court adopted the US position and held that the Defendant bore the burden of proving that his use constituted fair use (at [148]).
However, the Court also distinguished an English authority6 to address the issue of whether the average consumer might find the advertisements misleading, and thereby negate fair use of the Latisse Mark in the brochure (if any).
Whilst the Court recognised that it was not the job of trade mark law to regulate and control misleading advertisements, the Court ultimately held that the misleading nature of the brochure brought the Defendant's use of the Latisse Mark outside of the comparative advertising defence (at [163]). Accordingly, the Defendant was also liable for the category of trade mark infringement.
Flowing from that, the counterclaim for groundless threats naturally fell away.
(iii) Whether the Defendant had passed off Lassez Products as being connected to / associated with the Plaintiffs?
The Plaintiffs claimed goodwill in both the Latisse Mark and the Latisse Device, which were associated with their business. They proved that there was a substantial market for the Latisse Products by adducing marketing expenditure. Interestingly, the Second Plaintiff justified its seemingly low marketing expenditure (relative to the First Plaintiff's figures) on the basis that it had to limit its marketing activities to medical professionals only, to comply with regulations prohibiting direct-to-consumer advertising.
As to the element of misrepresentation, the Court found "badges of fraud" in the similarities between the parties trade marks, and between the Defendant's brochure and the Plaintiffs' poster. As the Defendant failed to offer any credible explanations for the striking similarities, the Court inferred that the Defendant had the intention to deceive the public into thinking that the Lassez Product was related to the Latisse Product. Notwithstanding the different product packaging and the huge price disparity, the Court concluded that there was a likelihood of confusion for end-users in the context of passing off.
Finally, the Court also looked at three heads of damage: (a) damage to goodwill by blurring; (b) damage to goodwill by tarnishment; and (c) restriction on expansion into related fields of activity. The Plaintiff succeeded in showing that there was blurring and a restriction on expansion into related fields of activity, but did not manage to show that there had been tarnishment as there was no evidence that the Lassez Product was of inferior quality to the Latisse Product.
5 City Chain Stores (S) Pte Ltd v Louis Vuitton Malletier [2010] 1 SLR 382
6 British Airways plc v Ryanair Ltd [2001] ETMR 24, which interpreted the predecessor provision
of section 28(4) of the Trade Marks Act.
(iv) Whether there was any malicious falsehood?
The United States Food and Drug Authority (the "FDA") had sent a letter to the First Plaintiff, a copy of which was obtained by the Defendant and circulated to one of the Second Plaintiff's customers. In the letter, the FDA had requested that the First Plaintiff immediately cease disseminating its promotional materials which the FDA viewed as misleading. The Court found that the FDA letter was not a publication of a false statement, as more than two years had passed since the FDA letter was first issued, and the reasonable person would not assume that the First Plaintiff's promotional materials were still in breach of the law. Nevertheless, the Court went on to find that there was malice on the Defendant's part by publishing the statement, and also that the Defendant's publication of the FDA letter was likely to cause pecuniary damage to the Plaintiffs.
Comments
This case clarifies the application of section 28(4) of the Trade Marks Act, and shows the Court's openness in considering both US and English cases to interpret the scope of the fair use defence. It also shows that survey evidence, when collected appropriately, can assist to prove to the Court the public's perceptions and point towards a likelihood of confusion or lack thereof.
Passing Off Claim Based on Confusion of Overseas End-users Succeeds on Appeal
Singsung Pte Ltd ("Singsung") was in the business of exporting household appliances manufactured in China for sale in Cameroon. Singsung mainly sold to non-resident trade buyers who would purchase the goods from his shop and have them shipped to Cameroon for sale to end users there. LS Electrical Trading ("LS Electrical") was incorporated subsequently by the brother of the owner of Singsung.
Singsung claimed that:
(1) LS Electrical were liable for passing off as the get-up for eight of the LS Electrical's products (LS Get-Up) was identical or confusingly similar to the Singsung's get-up for the corresponding product (Singsung Get-up); and
(2) LS Electrical had infringed the copyright in the Singsung's White Get- Up Picture, Blue Get-Up Picture and TV Stickers.
LS Electrical counterclaimed for amongst others, groundless threat of copyright infringement.
The High Court noted that the LS Electrical's business model was essentially "to shadow the Plaintiffs' business in terms of products, market and packaging". Indeed it was not disputed that the LS Get-Up was identical to the Singsung Get-Up save for the "SINGSUNG" and "LS" marks that were found on the goods of the respective parties. The products were also sourced from the same Chinese manufacturer. However, the High Court dismissed the passing off claim on the basis that there was no goodwill associated with the Singsung Get-Up in Singapore or Cameroon. The copyright claim was also dismissed but the groundless threats counterclaim allowed. The Plaintiffs appealed and the decision was reported in Singsung v. LG26 Electronics [2016] SGCA 33.
Decision
Passing Off Based on Instruments of Deception
The law of passing off recognises the doctrine of instruments of deception where a defendant may be held liable for passing off if "a trader puts into circulation goods which are inherently likely to deceive ultimate purchasers or consumers, even though the intermediate purchasers may be middlemen who are not themselves deceived and .. may ultimately dispose of the goods in a manner which does not deceive anyone at all."
The Court of Appeal first considered if the doctrine was applicable in the present case because the goods were sold to middlemen traders who were not confused as to the origin of the goods in question before being exported to end users in Cameroon. It held the doctrine applied because the LS Get-Up was inherently deceptive, being identical to the corresponding Singsung Get- Up. Accordingly, LS Electrical could be liable for passing off even though the middlemen traders were not confused as to the origin of the goods in question.
Contrary to the High Court, the Court of Appeal found that there was goodwill in the Singsung Get-up. The Court stated that goodwill exists in Singapore when a business offers a product or service for sale in the jurisdiction and a customer purchases the product or consumes the service here. In the present case, the trade buyers bought the goods from the Singsung's shop in Singapore. It was irrelevant to the existence of goodwill whether they resided in Singapore or if the goods purchased were ultimately consumed here.
As for the issue of misrepresentation, although there was little direct evidence regarding the distinctiveness of the Singsung Get-Up, the evidence presented showed that LS Electrical had taken steps to deliberately copy the Singsung Get-ups with an intention to deceive customers. The Court held that this was sufficient to find misrepresentation. Finally, in view of LS Electrical's misrepresentation and the fact that the parties were competing in the same line of products and export jurisdictions, damage was also likely through the diversion of business from Singsung. Accordingly, Singsung succeeded on the ground of passing off.
Copyright Infringement and Groundless Threats
The Court overruled the High Court’s decision and found that LS Electrical had infringed the copyright in the White Get-Up Picture and the TV Stickers. Ownership of copyright in the White Get-Up Picture had been validly assigned to Singsung and LS Electrical knew or ought reasonably to have known that they were infringing the Singsung's copyright in the TV Stickers. However, there was no infringement of the Blue Get-Up Picture which was a straightforward representation of a commonplace object (i.e. a DVD player) and required identical copying for copyright infringement.
Groundless Threats of Copyright Infringement
The Court held that although there was no infringement of the Blue Get-Up Picture, Singsung were not liable for groundless threat of infringement under Section 200 of the Copyright Act for sending a demand letter to the LS Electrical.
The Court noted that it does not necessarily follow that a groundless threat of infringement must be found when an allegation of infringement fails. Rather, the court has to consider whether any relief ought to be granted based on a fact sensitive inquiry into whether the action was warranted and any relief is required at all. It observed the competing interest between providing a relief for aggrieved parties whose business or reputation might be affected by threats of infringement and enforcement of intellectual property rights against, in particular small and medium sized firms. On the facts, there was no conceivable damage flowing from the demand which cannot be compensated by a cost order against Singsung for having made an unwarranted threat. Therefore, a declaration
that the threat was groundless is unnecessary.
Comments
The Court's application of the doctrine of instruments of deception is one that will be welcomed by rights owners who find the get-up of their products being copied by competitors. More important is the Court's clarification that it does not follow that groundless threat of infringement must be found when an allegation of infringement fails. This would prevent a rights owner from being penalised merely because he has made a good faith attempt to enforce his rights.
For further information, please contact:
Andy Leck, Principal, Baker & McKenzie.Wong & Leow
andy.leck@bakermckenzie.com
