Recently, the Malaysian High Court adjudicated on the issue of ownership of a mark in cases where an entity (such as a local distributor or dealer), in a commercial relationship with the trade mark owner, attempts to register the mark in its own name. The case was especially significant for foreign companies that are on the verge of entering the market but are yet to register their trade marks in Malaysia.

The dispute involved Jost Cranes GmbH & Co KG, manufacturer of construction cranes bearing the trademark Jost, and Jost Cranes Sdn Bhd, which had registered the mark in its name in 2003 (class 7 for cranes including parts and accessories thereof). The applicant initiated an expungement action in 2009 on the grounds that it was the rightful owner and first user of the mark in Malaysia and that the Jost mark had been wrongfully entered into the Trademark Register on behalf of respondent.

In its defence, the respondent, relied on an agreement between the two parties whereby the applicant had transferred certain rights of the product to them. However, after hearing the applicant’s contention and analyzing the pertinent precedents, the Court observed that there is a clear distinction between the intellectual property in a trade mark and the ownership of the goods upon which the mark is applied.

The Court decided in favour of the applicant, and ordered expungement of the respondent’s mark. In the judgment, the Court further elaborated that by virtue of the agreement between two parties, unless otherwise expressly specified, only the rights over the physical goods are transferred to the buyer, who could be an importer or distributor. Furthermore, any registration that is based on bad faith or otherwise is dishonest cannot be defended on the ground that it had incurred considerable expenditure in advertising and promotion during its registration term.

This judgment will be heartily welcomed by trade mark owners that operate on a licensing, distributorship or similar basis in Malaysia.