Wannabe Swiss? Don't cheat on chocolate, Malaysian Federal Court says

  Kat friend Kim Poh NG, a  partner at Christopher & Lee Ong, provides this timely guest post about a recent decision of the Federal Court of Malaysia addressing geographical indications, Swiss chocolate, and not-at-all-Swiss chocolate pretending to be Swiss in Malaysia.  According to Kim Poh:

“The Federal Court (the highest court) of Malaysia has recently provided its grounds of judgment for the landmark decision in Maestro Swiss Chocolate Sdn. Bhd. & 3 Ors v Chocosuisse Union Des Fabricants Suisses De Chocolate & 2 Ors & Another Appeal (FCCA No. 02(f)-97-12-2012(W), which dealt with extended passing-off and unlawful use of a geographical indication.

Factual background

Chocosuisse Union Des Fabricants Suisses De Chocolat, the first respondent, is a co-operative society established in Switzerland. It is responsible for the protection of the worldwide reputation and goodwill of its members, which are Swiss chocolate manufacturers.

Kraft Food Schweiz AG and Nestle Suisse SA are two chocolates manufacturers, members of the Chocosuisse Union. They have been exporting to, and selling in, Malaysia, Swiss-made chocolates such as “Toblerone” and “Nestle” chocolates.

The respondents brought proceedings against the appellants (Maestro Swiss Chocolate Sdn. Bhd. et al.) in the High Court for extended passing-off and unlawful use of a geographical indication under Section 5, Geographical Indications Act 2000 (GIA). The dispute involved the appellants’s use of the words “Maestro SWISS” in relation to chocolates and chocolate-related products in Malaysia, in particular bearing the brand “Vochelle”. In light of the reputation and goodwill for fine quality chocolates made in and exported from Switzerland, the respondents claimed that the use of the words “Maestro SWISS” would lead a significant number of Malaysian consumers to erroneously believe that those products were manufactured in Switzerland or by a Swiss manufacturer.

"I tawt I taw an IPKat!"

Decisions of the lower courts

The action was dismissed by the High Court. In essence, the High Court ruled that the use of the words “Maestro SWISS” had not led, nor was likely to lead, Malaysian consumers to believe that those products were made in or imported from Switzerland. Further, the Court took the view that those words were not used as a geographical indication on the packaging of the products. In any event, the High Court held that the first respondent did not have standing to sue  either as  manufacturer or seller of chocolates, lacking the business interest or goodwill necessary to bring an action.

The respondents appealed the first-instance decision. The Court of Appeal held that the first respondent had locus standi and allowed the claim for extended passing-off. After acknowledgintg that “Maestro SWISS” was a geographical indication under the GIA, the Court of Appeal dismissed the claim as the action was barred under Section 27(2), GIA,  since the appellants had started using that sign before the GIA entered into force (that occurred on 15.08.2001).

Thus, the case went up to the Federal Court.

Decision of the Federal Court

On extended passing-off

 The Federal Court overruled the Court of Appeal’s decision on the issue of locus standi. Following the decision of the Court of Appeal of England and Wales in Chocosuisse Union Des Fabricants Suisse De Chocolat and Others v Cadbury Limited [1999] RPC 826, the Court held that the first respondent did not have locus standi to commence the action for passing-off due to its lack of a business interest or goodwill. Stressing that the test for extended passing-off was the same as that for traditional passing-off, the Federal Court upheld the Court of Appeal’s finding that the appellants were liable for extended passing-off vis-à-vis the second and third respondents. The finding was primarily based on the survey evidence adduced by the respondents, which proved that some members of the public were likely to be confused by the words “Maestro SWISS” and led to believe that the products branded that way were manufactured in Switzerland or were Swiss chocolates.

On unlawful use of a geographical indication under the GIA 

The Federal Court affirmed the Court of Appeal’s decision regarding the phrase “Maestro SWISS”  as a geographical indication under Section 2, GIA (par. 70). Each of the respondents was held to have locus standi to bring action on that basis under Section 5, GIA (par. 71), as they each constituted an “interested person” under Sections 2 and 11, GIA [which include any “person who is carrying on an activity as a producer in the geographical area specified in the application with respect to the goods specified in the application, and includes a group or groups of such persons”, as well as “trade organization or association” among those having standing to sue on the basis of geographical indication].

Based on the same reasoning that allowed the claim for extended passing off, the Federal Court held that the claim based on Section 5, GIA for unlawful use of a geographical indication was established. In this regard, the Federal Court held that:

(a)   The appellants could not rely on their use in good-faith made before the entering into force of the GIA (Section 28(2), GIA; see par. 73). As the use of the “Maestro SWISS” sign and the marketing plans related thereto were intended to communicate a Swiss connection, such use could not be assumed as having been made in good faith, regardless of whether it started before or after the GIA’s birth.

(b)  The Court of Appeal erred in relying on Section 27(2), GIA, as the action was filed after the the GIA entered into force on 15.08.2001 (par. 76). In other words, Section 27(2), GIA only prevents action under Section 5, GIA if the contested conduct started and finished before 15.08.2001. In cases where  conduct continues on or after 15.08.2001, GIA can well-base claims against it.

Beware of Switzerland know how!

Comment

This decision is an important development in the law of passing-off. It affirms the concept of extended passing-off in Malaysia, which prevents unscrupulous traders from misrepresenting their goods as belonging to a particular or definite class of goods with a valuable and recognised goodwill, and where the misrepresentation is likely to cause damage to traders who own the goodwill in relation to the class of goods.

Further, the decision is also a significant milestone as regards protection of geographical indications in Malaysia. It provides much-needed guidance on the applicable principles and interpretation of several important provisions of the GIA, which will bode well for owners of geographical indications and serve as a “warning” to potential infringers.

However, this decision concerns protection of a class of premium or superior goods (ie, Swiss chocolates) having a strong geographical connotation. Notwithstanding the fact that the Federal Court did not expressly lay down any limitation on the applicability of extended passing-off based on these two aspects, it is not straight-forward whether Malaysian courts will follow the approach taken by the Court of Appeal of England and Wales in its recent decisions in the “VODKAT” case (Diageo North America Inc & Anor v Intercontinental Brands (ICB) Limited and Ors [2010] EWCA Civ 920) and the “Greek yoghurt” case (Fage UK Ltd & Another v Chobani UK Ltd & Another [2014] EWCA Civ 5) when dealing with cases involving “common” goods, or where the indications or names have no geographical significance or connotation.

Based on the decisions in the “VODKAT” case and in the “Greek yoghurt” case, extended passing-off not only protects premium or superior goods or brands, equally applying to any “common” goods having the necessary reputation and goodwill among the public, regardless whether the indications or names have any geographical significance or connotation per se. Stay tuned!”