Philip Morris Products SA v Ong Kien Hoe & Ors

First published on 22 October 2009

CIVIL SUIT NO S6-23-95-2008 (HC)

Philip Morris Products SA (“Philip Morris”) is a manufacturer and distributor of cigarettes and tobacco products under the trade mark of ‘MARLBORO’ throughout the world and the proprietor of the registered trade mark “MARLBORO” in Malaysia.

On 10 September 2002, the officers of the 3rd Defendant (Director General of the Customs and Excise Department of Malaysia) detained 2 containers containing 1350 unmarked bale boxes containing cigarettes bearing the trade mark of ‘MARLBORO’.

These cigarettes were subsequently found to be counterfeit cigarettes. Philip Morris initiated an action against the 3 defendants but finally went to trial only against one, the 2nd defendant, who is a forwarding agent. Along the way, the claims against the 1st and 3rd defendants were withdrawn.

According to the declaration forms completed by the 2nd defendant and filed with the 3rd defendant, the consignors of the 2 containers were the 1st defendant. The declaration forms, packing and shipping of the goods in the containers were arranged by the 2nd defendant.

Philip Morris claimed against the 2nd defendant for infringement of Philip Morris’s trade and proprietary rights over the registered trade mark of ‘MARLBORO’. The infringement was said to have been committed by the 2nd defendant by passing off or attempting to pass off counterfeit cigarettes

(a) by its action in the transshipment, loading, unloading, reloading, transloading, storing, transitional storing, transiting, transporting, transshipping, transferring and/or dealing in any other manner in the course of trade with the counterfeit cigarettes;

(b) without the consent, authorisation or knowledge of Philip Morris dealt in or with the counterfeit cigarettes and/or counseled, instigated, procured, enabled, directed or assisted in the doing of those same acts.

The 2nd defendant is also alleged to have shown its direct complicity with the counterfeit cigarettes not only with regard to the importation and customs clearance but also in claiming ownership to obtain release and delivery of the counterfeit cigarettes to itself.

The 2nd defendant’s defence was that, among others:

(a) that it was merely carrying out its duties and obligations as a forwarding agent for a named principal;
(b) that it was not responsible or liable for the infringement; and
(c) the counterfeit cigarettes were seized within the free zone which is deemed to be a place outside Malaysia. That being so, not only is there no levy within this zone, the laws in Malaysia including the Trade Marks Act 1976 do not apply. Further, the ‘goods in transit’ are also exempted from seizure.

The High Court allowed Philip Morris’s claim with costs and held the following:

(1) The trade mark on the cigarettes seized from the 2 containers bore a trade mark identical to Philip Morris’s registered trade mark. Since Philip Morris had not authorised or licensed the 2nd defendant to use that registered trade mark there was infringement.

(2) The 2nd defendant was not a mere forwarding agent. On the facts the 2nd defendant did a lot more. In this regard:

(a) Firstly, the whole process from documentation to the handling of the cigarettes or the consignment is part and parcel of the course of the 2nd defendant’s trade or business as a forwarding expert. The 2nd defendant’s use is not as a private consumer. The documentation work related to the clearance of the cigarettes was an integral part of the expertise and trade of the 2nd defendant. It is the 2nd defendant who represented to others including the 3rd defendant that the goods in the 2 containers were cigarettes. Obviously these cigarettes must have a brand or be of a particular make, whatever that may be. The fact that the contents of the 2 containers cleared the Free Zone authorities indicates that these authorities must have believed that the 2nd defendant was authorised or licensed to ‘use’ in the sense of handling the cigarettes and clearing them in the course of its trade as a forwarding agent.

(b) Secondly, the 2nd defendant unstuffed counterfeit cigarettes and later consolidated these cigarettes with the other consignment of counterfeit cigarettes and paper bags. This required the 2nd defendant to open up the containers and deal with their contents. Although there is no need for the 2nd defendant to know for a fact that these cigarettes bore some particular registered trade mark, it is naive to suggest that the 2nd defendant is not aware at that time that it is handling cigarettes bearing the trade mark ‘MARLBORO’. Having being in the forwarding business for almost 15 years it is fair to impute that the 2nd defendant is at least generally aware of trade marks and counterfeiting or infringements of trade marks. Having opened the containers to consolidate their contents the trade mark must have been obviously displayed.

(c) Thirdly, the use of fictitious names and addresses admitted by the 2nd defendant indicates the existence of some element of complicity. Given that s 133(1) of the Customs Act 1967 (Act 235) makes it an offence to, among others, make a declaration which is untrue or incorrect in any particular, The Court held that the 2nd defendant’s argument that they are not obliged to ensure accuracy of the particulars in the documents presented for clearance of the cigarettes is unsustainable both in law and on the facts. On the contrary, ss 80 and 90 mandate the 2nd defendant with certain duties and liabilities for ensuring the completeness and accuracy of the details of the goods declared.

(3) The Free Zone is not free for all area, free of all laws or, that there is lawlessness in this zone. The enforcement agencies continue to hold jurisdiction over and in these Free Zones. In any event the issue of the validity of the seizure was immaterial and irrelevant to the success or otherwise of Philip Morris’s claim. Philip Morris’s rights in the registered trade mark were rights in rem.

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