A case note by Sim Sook Eng.

Introduction

Does a sub-licensee of a registered industrial design owner have the required standing to bring an action for design infringement?

Section 33(4) of the Industrial Designs Act 1996 (“IDA”) provides that for the purpose of infringement proceedings:

“ … ‘owner of a registered industrial design’ means the registered owner and includes an assignee, a licensee or the beneficiary of a compulsory licence granted under section 27; but if any proceedings are instituted by a person other than the registered owner, it must be proved that that person had made a prior request to the registered owner to institute proceedings for the infringement complained of by him and that the registered owner had refused or failed to institute the proceedings within three months from the receipt of the request, without prejudice however to the registered owner's right to join in such proceedings.”

While section 33(4) of the IDA refers to the word “licensee”, it is unclear whether this would include a sub-licensee. This raises the question as to whether a sub-licensee enjoys the rights of a licensee and has the locus standi to sue for design infringement.

In the case of CMN International Sdn Bhd v Dart Industries Inc¹ , the Court of Appeal considered the standing of a sub-licensee in an action for design infringement.

The facts

This case concerns six appeals from a decision of the High Court at Kuala Lumpur in relation to two industrial design infringement suits which were heard together.

The first plaintiff in this case, Dart Industries Inc (“Dart”), commenced actions against the defendants, CMN International Sdn Bhd & four others (“CMN”), for infringing its registered industrial designs.

One of the issues considered in this case was whether the second plaintiff, Tupperware Brands Malaysia Sdn Bhd (“Tupperware”) (who is a sublicensee of Dart), has the right to file an action for design infringement.

Findings of the Court

The High Court in considering this issue took the view that there are two limbs in section 33(4) of the IDA by virtue of the use of the semicolon in the provision. It held that under the first limb, an assignee, a licensee or a beneficiary of a compulsory license granted under section 27 of the IDA may file a design infringement suit.

The second limb provides that if an industrial design infringement action is instituted by a person who is not the registered industrial design owner, it must be shown that that prior request was made to the registered industrial design owner to institute the infringement suit and the registered industrial design owner has refused or failed to initiate an action within three months from the receipt of such request.

The High Court took the position that the first limb of section 33(4) of the IDA is subject to the second limb due to the word “but” and hence a licensee can only file an action for design infringement if the second limb is satisfied.

To sum up, the High Court held that Tupperware as a sub-licensee is not entitled to bring an action for design infringement under section 33(1) and (4) of the IDA. The findings were based on the following grounds:

• Tupperware Products Inc (“TPI”), who is a licensee of Dart, is barred by the second limb from filing any design infringement suit since Dart as the registered industrial design owner has instituted the suits;

• Tupperware as Dart’s sub-licensee has no right under section 33(4) of the IDA to institute the design infringement suits; and

• even if Tupperware is not barred bysection 33(4) of the IDA from filing the infringement suits, Tupperware is estopped by the relevant clauses in the Sub-Licence Agreement entered between TPI and Tupperware from bringing any action².

Findings of the Court of Appeal

On appeal to the Court of Appeal, the question as to whether Tupperware as a sub-licensee has the right to initiate design infringement action was one of the grounds of appeal.

Contrary to the findings of the High Court on this issue, the Court of Appeal held that the first limb of section 33(4) of the IDA has expanded the definition of “owner” for the purpose of conferring the right to bring an infringement action and that the second limb of the provision is merely procedural. The second limb would only be applicable if the infringement action is commenced by a person other than the registered owner and without the presence of the registered owner.

In the present case, the infringement actions were commenced by Dart, who is the registered owner. The need for Tupperware to show consent from Dart in a case where Dart commenced action together with Tupperware is an absurd proposition. Thus, the Court of Appeal held that the second limb had no application in the present case. A licensee who cooperates with the registered proprietor and becomes coplaintiff in an infringement action should not be prevented from recovering damages because of the infringing acts of the defendant.

The Court of Appeal added that the intention of the second limb is a procedural safeguard to prevent an alleged infringer being subjected to two or more separate actions by a registered owner and by a licensee for the same acts ofalleged infringement. The absence of the second limb of section 33(4) of the IDA may result in multiple infringement actions filed against an alleged infringer for the same acts of alleged infringement.

The Court of Appeal held that section 33(4) of the IDA is worded in a broad manner in conferring a right to sue which is not only limited to an exclusive licensee. As such, section 33(4) of the IDA could not have intended to exclude the possibility that the licence might be granted by an agent of the owner.

The Court of Appeal concluded that section 33(4) conferred rights to sue on all licensees whether exclusive or non-exclusive. A sub-licensee is a licensee of the ultimate licensor, the registered industrial design owner and accordingly does have the required locus standi to sue in an infringement action.

The Court of Appeal further held that the High Court’s reliance on section 61(1), (2) and (3) of the Patents Act 1983 (“PA”) when interpreting section 33(4) of the IDA was erroneous. The Court of Appeal held that the wordings of section 61(1), (2) and (3) of the PA differ significantly from section 33(4) of the IDA. If section 33(4) of the IDA is intended to reproduce the same effect as section 61(1), (2) and (3) of the PA, the Parliament would have adopted the same wordings for section 33(4) of the IDA. The Court of Appeal took the position that the wording of section 33(4) of the IDA is clear and hence it is not necessary to consider section 61 of the PA when determining the ambit of section 33(4) of the IDA.

Regarding the High Court’s findings that Tupperware was estopped from filing a design infringement action by reason of the relevant clauses in the Sub-Licence Agreement entered between TPI and Tupperware, the Court of Appeal disagreed with the findings of the High Court.

The Court of Appeal held that the party entitled to the benefit of the contract (which is TPI in the present case) may choose to enforce it or not according to its own commercial interest. CMN, who are not parties to that contract, do not have any right to require the contractual provision of that contract to be enforced for their benefit. In any event, the Court of Appeal found that the clauses in the Sub-Licence Agreement do not prevent Tupperware from bringing an action for design infringement.

Based on the above reasons, the Court of Appeal held that Tupperware has the locus standi to bring an action for industrial design infringement and does not require consent from the registered owner to commence proceedings concerning any infringement since the registered owner was the party who commenced the actions.

Conclusion

The novel issue of whether a sub-licensee has the locus standi to sue in an action for design infringement has been clarified by the Court of Appeal in this case. It was held that section 33(4) of the IDA confers a right to sue in an industrial design infringement action on all licensees which would include sub-licensees.

SIM SOOK ENG

INTELLETUAL PROPERTY PRACTICE GROUP

^{1 [2020] MLJU 903.}

^{2 [2019] MLJU 120.}

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