In its 20 May 2021 decision in Mohammad Hafiz bin Hamidun v Kamdar Sdn Berhad,(1) the Federal Court was invited to answer a question of law – namely, who has the locus standi to commence a common law passing-off action as the owner of goodwill where two entities are entitled to claim such goodwill?
Mohammad Hafiz bin Hamidun is a popular nasyid singer and composer and a well-known figure in Malaysia.
Much like other celebrities, Hafiz also has business ventures in other industries, including the fashion and apparel industry. To this end, Hafiz incorporated the company Haje Sdn Bhd (HSB) (formerly known as Mikraj Concept Sdn Bhd), which sells baju melayu and kurtas.
Kamdar Sdn Berhad is primarily engaged in selling fabrics, with 29 stores located throughout Malaysia.
In approximately February 2017, Hafiz received queries from his fans and social media followers as to whether products sold by Kamdar which bore the label 'Hafiz Hamidun' belonged to his brand. Alerted by the existence of these products, Hafiz initiated an action against Kamdar for the tort of passing off on the premise that HAFIZ HAMIDUN is his unregistered trademark and using it for its fashion and apparel line.
The crucial question for consideration was who owned the goodwill in the Hafiz Hamidun label, Hafiz or HSB?
The primary argument advanced by Kamdar in defence of the suit was a technical one – namely, that the goodwill in the Hafiz Hamidun label belonged to HSB, not Hafiz. Thus, Hafiz lacked the locus standi to commence the suit. In other words, Hafiz was not the proper plaintiff to initiate the suit (ie, HSB was the proper plaintiff).
The high court allowed Hafiz's claim against Kamdar for passing off. In so doing, it held, among other things, that Hafiz had the requisite locus standi as the Hafiz Hamidun label was so inextricably linked and instrumental to Hafiz's business that he had personally established goodwill in the label. Simply put, the judge was convinced that Hafiz had direct ownership of and interest in the goodwill of the Hafiz Hamidun label.
The Court of Appeal reversed the high court's decision on a technical point of law – namely, it held that Hafiz did not have the locus standi to maintain his claim against Kamdar as the goodwill was actually established by HSB (and not Hafiz).
In setting aside the Court of Appeal's judgment and restoring that of the high court, the Federal Court provided some much needed clarity as to what goodwill is and with whom it resides:
- 'Goodwill' may be defined as "the attractive force which brings in custom".
- Goodwill is different from reputation. Something that is reputable and popular may not necessarily have goodwill. Goodwill is proprietary, whereas reputation is not.
- Goodwill, if it exists, is always attached to a business or trade.
- Goodwill, by its definition and in business, may not necessarily be attached so strictly to any particular person or group of persons. Goodwill resides in a trade or goods or services, or in the name, description or any other insignia, mark or distinguishing feature relevant to those goods or services.
- Goodwill is a flexible and malleable asset that can manifest and be generated in myriad ways, depending on the nature of the trade or business.
- The unregistered trademark HAFIZ HAMIDUN was identified with Hafiz as he used it and had accumulated goodwill therein.
- It is a common commercial practice for a celebrity to engage other corporations or establish corporations of their own to advance other business ventures, but this does not in itself make the goodwill of said celebrity in those businesses any less their own.
- In any event, there was an implied licence between Hafiz and HSB for the latter to use the Hafiz Hamidun label pursuant to their business arrangements.
- It was not for Kamdar, a mere outsider and third party, to attempt to make a technical distinction to absolve itself of liability when it had no business using the unregistered HAFIZ HAMIDUN trademark without Hafiz's consent.
In a lucid and illuminating judgment, which considered authorities from foreign jurisdictions, the Federal Court answered the question of law as follows:
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 case is a testament to the growth and advancement of the IP law regime in Malaysia. It shows that the Malaysian courts are receptive to foreign authorities when there are no local cases on a particular point.
Endnotes
(1) Mohammad Hafiz bin Hamidun v Kamdar Sdn Berhad (Civil Appeal 02(f)-64-10/2020(W)).
