In May 2021, the highest court of Malaysia, the Federal Court allowed a passing off claim by a celebrity against a third party’s unauthorized use of his name on fabrics that were sold to the public.
I. FACTS OF THE CASE
The Plaintiff is a popular singer and song composer. In addition to his role as an artist, the plaintiff is also in the business of selling fabrics such as Baju Melayu and Kurtas online and in boutiques. For the purposes of carrying out his trade in fabrics, the Plaintiff incorporated a company, Mikraj Concept Sdn Bhd (“MCSB”), which was later renamed as Haje Sdn Bhd (HSB).
The Defendant is a company primarily engaged in the business of selling fabrics.
The issue arose sometime in February 2017, when the Plaintiff received messages from his fans and/or followers on social media asking him whether certain goods sold by the Defendant with the label ‘Hafiz Hamidun’ (being the Plaintiff’s name) were actually his.
While no trade mark registration was sought by the Plaintiff, the Plaintiff’s position was that ‘Hafiz Hamidun’ (being his own name) was an unregistered trademark which the Plaintiff uses, among other purposes, for his own fabrics line. The Plaintiff asserted that by selling products with the same label, the Defendant passed off the unregistered trademark of his name.
II. HIGH COURT
The High Court found that the Plaintiff has established all elements of common law passing off, namely goodwill, misrepresentation and damage (or likelihood of damage) and allowed the Plaintiff’s claim.
In arriving at the decision, the Court found that the Plaintiff had the locus standi to commence the claim of passing off in respect of his name for two reasons:-
- Firstly, the High Court judge determined on the evidence that the Plaintiff’s name was so inextricably linked to him and instrumental to his business that the Plaintiff had established goodwill in that label.
- Secondly, the High Court found that even if the goodwill was established in HSB, the corporate veil between the two (i.e the Plaintiff and HSB) ought to be lifted in the interest of justice to reveal that the Plaintiff is HSB’s alter ego and that ownership still effectively lies with the Plaintiff. For this, the Defendant should not be allowed to evade liability on a technical issue of non-joinder of HSB.
III. COURT OF APPEAL
Upon appeal by the Defendant, the Court of Appeal reversed the decision of the High Court solely on what appears to be a technical point of law. The Court of Appeal was of the view that the Plaintiff did not have locus standi to maintain his claim as the goodwill was established in HSB and that HSB should be the rightful party making the claim.
Further, the Court of Appeal found that it was inappropriate to sanction the lifting of the corporate veil between the Plaintiff and HSB based solely on interest of justice, but there must be some kind of fraudulent conduct involved.
IV. FEDERAL COURT
On further appeal by the Plaintiff to the Federal Court, the primary question that came before the Federal Court was:
“In a common law claim for passing off where two (2) entities may be entitled to claim goodwill, who has the locus standi to commence an action in passing off as the owner of such goodwill?”
In considering the general principles on the law of passing off and its constituent elements, the Federal Court defined goodwill to be as follows:-
- Goodwill is the benefit and advantage of the good name, reputation, and connection of a business. It is the attractive force which brings in customers to the source from which it emanates.
- Goodwill, as the subject of proprietary rights, is incapable of subsisting by itself. It has no independent existence apart from the business to which it is attached.
- Being an intangible and fluid asset, goodwill, by its definition and in a business may not necessarily be attached strictly to any particular individual or group of persons.
- Goodwill resides in the trade or in the goods/service or in the name, description or any other insignia, mark or distinguishing feature relevant to those goods or services.
- Goodwill need not necessarily be confined to any particular trader so long as the goodwill in that trade is sufficiently established in that business such that any misrepresentation of it causes or is likely to cause harm to it. Any trader with sufficient nexus to that business is also eligible to sue.
In this connection, the Federal Court affirmed the High Court’s position that the goodwill in the Plaintiff’s name belongs to the Plaintiff and not HSB. As such, the lifting of corporate veil is not required.
To further put the principles in context, the Court pointed out that goodwill is a flexible and malleable asset in that it can manifest and be generated in a myriad of ways depending on the nature of the trade or business. Specifically, in the context of celebrities, it is apparent that the goodwill in their work or trade is particularly generated by their personal achievements and fan base. It is quite the common sight that celebrities in one field do often venture into side businesses such that those side businesses draw their goodwill from that celebrity’s name or even stature. It is also a common commercial practice that celebrities might even engage other corporations or establish corporations of their own to advance those businesses but that does not itself make the goodwill of those celebrities in those businesses any less their own.
Notwithstanding whether there is a formal agreement between HSB and the Plaintiff, the Federal Court held that the use of the goodwill is a matter of business between those two parties. In the circumstances, the Defendant is but a third party; a mere outsider who has otherwise no business to use the unregistered trademark without consent and by which it has generated profit through deception. The fact that a businessman/woman whose name or business indicium is used by a company or companies (typically used as vehicles of trade and nothing more) changes nothing in the general conclusion of ownership.
Responding to the question that was posed, it was therefore decided by the Federal Court that:
“In a common law claim of passing off involving the business indicium of a celebrity (whether his/her actual name, stage name, moniker or image of the person in question, etc), and provided that goodwill is factually established, either the celebrity in question or any of his licensees (or any such related entity) has the locus standi to commence an action in passing off against the misappropriating third party.”
This decision is a welcomed development wherein personality rights and image rights are now recognized in Malaysia and given a rightful place in the tort of passing off. That being said, this does not mean that anyone would automatically obtain a monopoly to his/her brand name or get up, however familiar they may be; such right would still need to be carefully balanced with an individual’s right of freedom of speech and expression, a fundamental right that should be accorded to and protected for all.
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