The New Trade Descriptions Act 2011: For Better or For Worse?

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The Trade Descriptions Act 2011 (“New TDA”) has effectively come into force on 1 November 2011. The New TDA seeks to reform the law on trade descriptions by repealing the Trade Descriptions Act 1972 (“Old TDA”).

The New TDA, like its predecessor, is enacted to promote good trade practices in the market by prohibiting false trade descriptions and false or misleading statements, conduct and practices in relation to the supply of goods and services, thereby protecting the interest of consumers.

This article sets out to highlight some of the key provisions in the New TDA that every trademark owner should be aware of when protecting their trademarks in Malaysia.

Methods to Enforce Trade Mark Rights

In Malaysia, there are several methods in which a trademark owner can use to enforce and protect his rights. One of the most common methods is by initiating a civil action against the trademark infringers.

However, a civil action is usually expensive, time-consuming and it places the burden of proof on the trademark owners to establish their case. In most cases, trademark owners usually prefer to stop the infringement immediately in the most cost-effective manner.

As a first step, the trademark owners may issue a letter of demand or what is commonly known as a “cease and desist letter” to the infringers stating the trademark owners’ rights and how those rights have been infringed by the infringers. Issuing a cease and desist letter has proven to be quite effective in stopping further infringement.

However, if the infringers deny their infringing acts, the trademark owners may resort to a civil action under the Trade Marks Act 1976.

The trademark owners may also apply for an injunction to restrain further infringement or an order for delivery up of the infringing goods. In addition, the Trade Marks Act 1976 also provides a remedy for border measures control in which it allows the trademark owners (with the co-operation from the Royal Malaysian Customs Department) to stop the importation of counterfeit goods into the country.

Similarly, like the Old TDA, the New TDA also provides for certain criminal remedies which would allow the trademark owners to stop their trademarks from being misused as false trade descriptions.

Trademark owners may apply for a Trade Description Order (“TDO”), which is basically a declaratory order granted by the High Court declaring that a trademark or get-up used by an infringer amounts to a false trade description. The TDO empowers the officers from the Ministry of Domestic Trade, Cooperatives and Consumerism (“MDTCC”) to receive official complaints from the trademark owners and to raid and seize goods to which a false trade description has been applied.

As a TDO is applied on an ex parte basis without having to call the respondent to the court, this lessens the procedures usually associated with injunctions and thus it saves substantial time and cost for the applicant.

Besides, the enforcement and prosecution of the offence are carried out by the MDTCC at minimal cost to the registered trademark owners. As a result, an action under the TDO has proven to be the most commonly used and cost-effective way in curbing the sale of counterfeit goods.

“Trade Description”

A trademark owner should be aware that the New TDA expressly defines a “trade description” to include an indication, whether direct or indirect and by any means given, in respect of any goods or parts of goods relating to any rights in respect of trade marks registered under the Trade Marks Act 1976.

A “false trade description” is a trade description which is false to a material degree or is misleading. Under the New TDA, it is an offence for any person who applies a false trade description to any goods as if the goods were subject to any rights relating to a registered trademark, or who supplies or offers to supply, exposes for supply or has in his possession, custody or control for supply any goods to which a false trade description is applied as if the goods were subject to any rights relating to a registered trademark.

Upon conviction, the person will be liable to a hefty fine or imprisonment or both.

Key Features of the New TDA

One of the key features under the New TDA is that only registered trademark owners in Malaysia can apply for a TDO.

Previously, under the Old TDA, any trademark owners who have not registered their trademarks in Malaysia were allowed to enforce their common law trademark rights through the TDO.

It appears that the Parliament has decided to restrict the right to the TDO, to only trademark owners who have registered their trademarks in Malaysia. No explanation was proffered for such a radical move.

It should be noted that the Old TDA was modelled upon the UK Trade Descriptions Act 1968 and the UK law still allows common law trademark owners to enforce their rights regardless of whether they have a registered trademark in the UK. In the light of these changes, trademark owners should ensure that their trademarks are duly registered in Malaysia in order to protect their rights and interest.

The validity period of a TDO has also been reduced from 5 years under the Old TDA to 1 year under the New TDA.

Although the TDO can be renewed for a further period as may be determined by the court, this would incur further cost and time to the trademark owners. As such, the trademark owners who have obtained a TDO from the court should initiate the enforcement action as soon as possible rather than procrastinate.

It should be noted that the TDO is only required in cases where the trademark or get-up used by the infringer is not identical but can be passed off as a registered trademark.

A TDO, once granted, shall be taken as conclusive proof of a false trade description. Due to its far-reaching effects, the courts have held that a TDO will only be granted if an applicant can identify with clear certainty the material similarity between the registered trademark and the infringing trademark and show how the infringer has applied for the infringing trademark on his goods which constitutes a false trade description.

In cases of exact imitation (i.e. identical trademark is used on the infringing goods), there is now an express presumption under the New TDA that the person is deemed to have applied, supplied or offered to supply goods bearing a false trade description unless the contrary is proved. A TDO is not therefore necessarily required where the trademarks are identical with each other. However, having a TDO will usually speed up the enforcement action.

False or Misleading Statements in Advertisements and Contests

In a bid to curb fraudulent business practices, the New TDA introduces provisions as to the use of false or misleading statements in advertisements in relation to goods or services.

Interestingly, it places the burden on the person who is charged with such an offence to prove that the statement made by him is true or not misleading, a shift of the burden of proof rarely seen, if ever, in the criminal justice system.

From 2009 to 2011, 1,703 complaints with regard to sham contests and fraudulent games were lodged with the MDTCC. To address this problem, a new provision that seeks to curb false or misleading statement in relation to contests and games was introduced in the New TDA. It is now an offence for any person to make a false or misleading statement that the goods or services offered by him are able to facilitate winning in any contest or game of chance, or to make a statement that a person has already won, or will win a prize or other equivalent benefit where in fact there is no such prize or equivalent benefit or to require the person claiming the prize or equivalent benefit to pay money or to satisfy some unreasonable conditions.

It is hoped that this provision will deter people from running sham contests, something that happens quite often here in Malaysia.

Other New Features under the New TDA

The New TDA also introduces several new provisions in addition to those that were already in existence under the Old TDA. A person who is found to have in his possession three or more of the same goods of similar description and bearing the same trade description is deemed to have in his possession, such goods for supply.

The definition of “supply” has been extended to cover supply through electronic means such as the buying and selling of goods over the Internet. There is a new defence of personal or domestic use but this defence is only afforded to individuals and not body corporates.

Tipping-off by disclosing information to any other person which is likely to prejudice the investigation by the relevant authority is now an offence. To assist with the investigation and prosecution, the evidence of an agent provocateur is now admissible in court. Informers or whistle-blowers will also be rewarded for providing information or evidence which leads to the conviction of offenders. The reward will be in the form of a monetary payment to be deducted from the fine.

The New TDA also empowers the Minister of MDTCC to assign definite meanings to any expressions or descriptions used in relation to the goods or services or in the course of trade or business.

The Minister also has the power to appoint competent regulatory bodies as the exclusive awarding body of a particular expression or description. It has been reported that this new provision would facilitate the Malaysian Islamic Development Department (JAKIM) and State Islamic Religious Councils to issue Halal certificates, in an effort to standardise the issuance of Halal certificates in the country.

Hefty Penalties for Offences

The penalties for offences have also increased substantially.

In the case of false trade descriptions, a body corporate may face a fine of up to RM15,000 for each goods bearing the false trade description and for the second and subsequent offences, to a fine of up to RM30,000 for each goods bearing the false trade description.

An individual may face a fine of up to RM10,000 for each goods bearing the false trade description or imprisonment of up to 3 years or both and for the second and subsequent offences, to a fine of up to RM20,000 for each goods bearing the false trade description or to imprisonment of up to 5 years or both.

In the case of false or misleading statements in advertisements and contests, the fine is up to RM500,000 for the first offence and RM1,000,000 for the second or subsequent offence (for body corporates) and a fine of up to RM250,000 or imprisonment of up to 3 years or both for the first offence and RM500,000 or imprisonment of up to 5 years or both for the second and subsequent offences (for individuals).

Directors and officers of the company may also be severally and jointly liable to a hefty fine and punishment unless they can prove that the offence was committed without their knowledge, consent or connivance and that they had taken all reasonable precautions and exercised due diligence to prevent the commission of the offence.

Conclusion

Like its predecessor, the New TDA continues to provide for the administrative enforcement/ quasi-judicial alternative to trademark infringement actions and to regulate the descriptions and indications that are applied and used in relation to goods and services.

It appears that while the New TDA provides a much wider scope of protection, it also surprisingly limits some of the prominent features that were previously found in the Old TDA.

Whilst it is noted that the Government’s initiative in strengthening the law to curb fraudulent business practices and to provide stronger protection to trademark owners is laudable, it is unfortunate that the New TDA has withdrawn protection previously accorded to common law trademark owners who have yet to register their trademarks under the Trade Marks Act 1976.

One can only hope that this was an inadvertent oversight on the part of Parliament, which will be rectified in due course, and hopefully, in the not too distant future.

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About the author:
This article was written by Edwin Lee Yong Cieh, Partner of this Firm (+6016 928 6130, [email protected]). Feel free to contact him if you have any queries.
This article was first published in CHIP Magazine Malaysia.
The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.

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