Thursday, August 24, 2017

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GOODWILL HUNTING

It is common knowledge that the use of another person's trademark without his consent is an act of trademark infringement. However, many may not know that using another person's trade name or trademark (regardless of whether it is registered) without his consent may also amount to passing off.

Essentially, the tort of passing off protects the goodwill of a trader from a misrepresentation that causes damage to his goodwill. In order to establish passing off, the Plaintiff would have to prove the existence of the "Holy Trinity" of Passing Off, namely: Goodwill, Misrepresentation and Damages. However, out of the three, Goodwill is the most crucial element. For without Goodwill, there could be no Misrepresentation, and without Misrepresentation there could be no Damages.

So what is "Goodwill", you ask? Goodwill is a basically a combination of reputation and actual/potential customers of a business. The Plaintiff would have to prove they have goodwill and the Defendant would normally have to disprove it. Essentially the parties to a passing off suit would have to take part in a complex exercise of "Goodwill Hunting" (pardon the pun) to prove their case in court.

A good illustration of the complexities involved and the vital role played by goodwill in a passing off legal action can be found in the recent case of Mainfreight (S) Pte Ltd v Mainfreight International Logistics Pte Ltd.

The case involves an action by the Plaintiff, Mainfreight (S) Pte Ltd, against the Defendant, Mainfreight International Logistics Pte Ltd, for passing off the Plaintiff's trade name and service mark "MAINFREIGHT". The Plaintiff had been in business in Singapore for 22 years providing international shipping, freight forwarding, and warehousing services. The Defendant was incorporated in Singapore on 20 August 2010 and is a wholly owned subsidiary of Mainfreight Ltd, an international shipping company.

Goodwill

On the issue of goodwill, the Defendant sought to undermine the Plaintiff's case by claiming that although the Plaintiff has gained some goodwill in Singapore, it was "mere trivial goodwill" and limited to the customers who would use the Plaintiff's services in three particular trade routes between Singapore-Borneo, Singapore-Malaysia and Singapore-Myanmar. Consequently, the goodwill garnered by the Plaintiff was not significant enough to warrant exclusive use of the mark "MAINFREIGHT". The Court disagreed with the arguments of the Defendant and held that although the Plaintiff did not provide much evidence of its services beyond the three trade routes, there was enough evidence to show that the Plaintiff had potential customers in the other international routes. Therefore, the goodwill of the Plaintiff would extend to such potential customers, which although representative of a small section of the public, was not a negligible section.

Misrepresentation

After establishing that the Plaintiff had significant goodwill in Singapore, the Court also held that the Defendant had misrepresented itself as the Plaintiff. The Court took this stance after reviewing the evidence of numerous instances of mistaken identity and misdirected correspondences by customers of the Plaintiff. This shows that there was a significant risk of the public being confused into thinking that the Plaintiff was the Defendant and vice-versa.

Damages

Due to there being a real risk of misrepresentation, the Plaintiff did not have to prove the existence of actual damages to its business as the Court was of the opinion that if the Defendant was allowed to continue to trade under the name "Mainfreight International", the Plaintiff was likely to suffer damages from displaced customs.

Defence of Prior and Concurrent Use

Having proven this "Holy Trinity", the Court held that the Defendant was liable for passing off. However, The Defendant could still rely on the defence of prior and concurrent use to deny the Plaintiff's claim for passing off. The Defendant would have to show that both the Plaintiff and the Defendant had started using their marks at approximately the same time and the marks had co-existed all along.

To show prior and concurrent use, the Defendant had to show that they had garnered goodwill in Singapore which could rival the Plaintiff's, beginning from the early 1990s. As the Defendant was incorporated in 2010 and only started trading in 2011, the Defendant sought to rely on the goodwill of the holding company and one of its subsidiaries, Mainfreight NZ, which started trading in 1984. However, the Defendant needed to show that apart from being heard of by the public in Singapore, Mainfreight NZ had actual or potential customers in Singapore. 

As the Defendant could not provide sufficient evidence showing that Mainfreight NZ had actual or potential customers in Singapore, it could not rely on prior and concurrent use to thwart the Plaintiff's claim. Consequently, the Court held in favour of the Plaintiff and the Defendant was made to change its company name and cease using the word "Mainfreight" in Singapore.

If we can take anything from this case, it would be that the registration of your trademark is very important. And if your business has interests overseas, you should register your trademark in those countries as soon as possible, even before you enter into the country. The case also shows that you cannot rely solely on the international reputation that you may have to prevent others from using your trademark/trade name in a foreign country. Source: Kass International Sdn Bhd.

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