The Federal Court handed McDonald’s a loss in finding that the use of the “Mc” prefix by McCurry Restaurant did not amount to passing off of the McDonald’s trade name and get-up.
A September 9, 2009, decision by the Federal Court, affirmed a decision by the Court of Appeal that the use of the “Mc” prefix by McCurry Restaurant (KL) did not amount to passing off of the McDonald’s Corporation’s trade name and get-up.
McDonald’s has been in business in Malaysia since 1982. The global franchise of hamburger fast-food restaurants has more than 30,000 outlets around the world, all employing the get-up of the golden-arched “M” with the word “McDonald’s” set against a red background. The prefix of “Mc” is used in conjunction with other words to name the various foods available at all of the company’s restaurants, such as “McChicken”, “McNuggets”, and “McMuffin.”
McCurry Restaurant commenced trading in Kuala Lumpur on July 1998, selling Indian and Malaysian food. Its restaurant signboard carries the words “Restoran McCurry”, with the lettering in white and grey on a red background with a picture of a chicken giving a double thumbs-up and the words “Malaysian Chicken Curry.”
In 2001, McDonald’s commenced the action at the High Court of Malaya at Kuala Lumpur against McCurry Restaurant. The grounds of action were that the “Mc” prefix was distinctive to McDonald’s alone, both in Malaysia and around the world, in conjunction with the food, beverage and restaurant business. McDonald’s contended that McCurry Restaurant was misrepresenting and deceiving the public into the false belief that there exists an association or connection between the two restaurants. Further, McCurry Restaurant had created an instrument of deception for others to commit passing-off, misuse and abuse of McDonald’s distinctive “Mc” prefix, which would cause damage and harm to the goodwill, reputation and commercial advantage acquired by McDonald’s in the course of its trade.
McCurry Restaurant submitted that McDonald’s does not have monopoly over the use of the word “McCurry” and denied that McDonald’s has any exclusive right to the “Mc” prefix. The name “McCurry” was created based on the abbreviation of “Malaysia Chicken” and “Curry”. McCurry Restaurant contended that its business and range of food and drinks are totally distinct from that sold by McDonald’s, selling typical Malaysian and Indian food such as fish head curry, briyani rice, roti canai, nasi lemak and teh tarik while McDonald’s sells burgers, fries, shakes, pies, etc. Thus, McCurry Restaurant denied that its business style and the get-up of its restaurant causes confusion and deception in the minds of the public, and that it did not amount to passing-off, either in the traditional or extended sense. McCurry Restaurant further submitted that there was no evidence that proved passing-off.
The issue for determination before the court was whether McCurry Restaurant has passed off McDonald’s goods and services as its own, by its use of the “Mc” prefix and the colour scheme it used in its restaurant, in both the traditional and extended form of passing-off.
During the course of the trial, McDonald’s tendered evidence to show that McDonald’s has been using the red and white colour scheme on its signage and that it has since become distinctive of McDonald’s. While McDonald’s does not claim proprietary rights on the colours, it does claim rights for the combination and presentation of the colour scheme, and that McCurry Restaurant has used signage that was confusingly similar.
McCurry Restaurant put forward evidence on the fact that its restaurant sells typical Indian curries and the word “McCurry” is solely the name of the restaurant and that the food items offered its menu do not have the “Mc” prefix. It further emphasized the contrast in the signages: the “McCurry” lettering is white and gray on a red background, using the Arial font, with the “M” in “McCurry” upright, while “McDonald’s” is a Century Gothic font with a slanted “M” and no shading used. The decor and layout of McCurry Restaurant, and the manner in which its staff is attired, could only mean that there was no way in which the public could have been confused between the McCurry Restaurant and that of McDonald’s.
Both parties put forward consumer witnesses on the issue of whether there had been any confusion between the McCurry Restaurant and a McDonald’s restaurant.
The learned High Court judge held that McDonald’s had proven all elements to show the existence of the act of passing-off both under the traditional and extended form of passing-off. It found that McDonald’s owned the goodwill and reputation developed out of the usage of the “Mc” prefix, and McCurry Restaurant should not be allowed to take unfair advantage of the goodwill and reputation of McDonald’s, as the distinctiveness of “Mc” to McDonald’s would be lost if the defendant was allowed to continue to use “Mc.” As the first impression created in the minds of the public when they see the red-and-white-coloured McCurry signage was to associate it with McDonald’s, the misrepresentation by McCurry Restaurant in its attempts at creating an association derived unfair benefit detrimental to the rights of McDonald’s.
McCurry Restaurant appealed the High Court’s decision
On April 27, 2009, the Court of Appeal allowed the appeal. It held that the High Court judge erred in assuming that McDonald’s had a monopoly in the usage of the “Mc” prefix on signage or in the conduct of business. The fact that McCurry Restaurant chose the name “McCurry” could not by itself lead to the inference that it sought to obtain an unfair advantage from the usage of the prefix “Mc.”
It was held that both businesses differed in terms of presentation of their style, get-up and targeted market, and McCurry Restaurant’s signboard would not result in reasonable persons associating McCurry Restaurant with McDonald’s.
The food items McCurry offered to its customers were wholly different from those offered by McDonald’s. The facts showed that McCurry did not use the “Mc” prefix to name the food items served in its outlet, contrary to what was held by the learned judge.
Accordingly, the Court of Appeal stated that there was no proof of the tort of passing off, and there had been no judicial appreciation of the most important pieces of the evidence presented at the trial.
McDonalds filed an application for leave to appeal to the Federal Court. The Federal Court dismissed McDonald’s application for leave and awarded McCurry Restaurant costs of RM10,000 (US$3,000).
It must be noted that the Federal Court had dismissed the application for leave to appeal on a procedural ground, i.e., that the appeal did not fall under Section 96 of the Court of Judicature Act 1964, which sets out conditions of an appeal before the Federal Court.
Unfortunately, the issue of extended passing off had not been dealt with at the Court of Appeal level, since the Court found there not to have been any passing-off at all. The concept of extended passing off was first developed in 1979 in the case of Erven Warnick BV v. J Townsend & Sons (Hull) Ltd. In a traditional action for passing off, goodwill, misrepresentation leading to confusion, and deception resulting in damage must be proven. Extended passing off applies in any situation where goodwill is likely to be injured by a misrepresentation, and there is no need to prove confusion.
This case does not bring any developments in the law of passing-off, although it does set interesting precedent for future like cases – the iPod and iPhone trademarks owned by Apple Computer especially come to mind.
Also, the outcome of this case would be very different in a jurisdiction, unlike in Malaysia, which recognizes trademark dilution and tarnishment as a cause of action. In the 1986 United States case of McDonald’s Corporation v. McBagels Inc, McDonald’s successfully prevented McBagels from using the word “McBagels” in connection with a bagel bakery and restaurant. The concept of “trademark family” was given judicial recognition in that case, and the Court, having noted the distinctiveness of the common formative component and other factors, including the extent of use, advertising and promotion, had no hesitation in finding that the McDonald’s owned a family of marks using “Mc” or “MAC” as a formative.
The Court of Appeal had referred to the 2001 case of Yuen Yu Kwan Frank v. McDonald’s Corporation, where the High Court of Justice, Chancery Division, in England held that a restaurant named “McChina” could carry on business selling Chinese food. Further, the Court of Appeal had pointed out that the judge at High Court had been wrongly influenced by the English case of McIndians, In the matter of Application No. 1412458, where it was decided that the “McIndian” mark could be confusingly similar to the McDonald’s family of marks, which all employ the “Mc” prefix.
While the Court of Appeal had stated that the McIndian case must be distinguished on the facts, since the McIndian restaurant in that case sold fried chicken, french fries and shakes, it must also be noted that both the “McChina” and “McIndian” cases are hearings before the United Kingdom Trade Mark Registry concerning registrability of a mark. The cases would have been decided based on an examination of the facts and circumstances surrounding the marks, with how the McDonald’s marks were being used, the classifications and specifications of goods and services involved, and the likelihood of the proposed mark being mistaken as that of McDonald’s. They were not actions in passing off where the elements of goodwill, misrepresentation and damages are to be proved.
Interestingly, McDonald’s Corporation had opposed the registration of two marks at the Australian Trade Mark Office cases, Opposition by McDonald’s Corporation to the Registration of the Trade Mark McMint and Opposition by McDonald’s Corporation to the Registration of the Trade Mark McVeg; both matters failed, as the hearing officer decided there had been no confusion or deception. These two Australian cases were referred to in Singapore in 2005 in McDonald’s Corporation v. Future Enterprises Pte Ltd. Heard before the Singapore Court of Appeal, McDonald’s Corporation unsuccessfully opposed to the registration of the marks “MacTea,” “MacChocolate,” and “MacNoodles.” The Court had found the mark neither visually nor aurally similar, and therefore there was no confusion or deception. It also expressed concern over McDonald’s Corporation having a monopoly over the “Mc” prefix.
This article first appeared in the November/December 2009 issue of Asia IP and is reproduced with permission. For further information on the magazine, or to obtain a copy of the complete issue, please call +852 8120 3119, or visit www.asiaiplaw.com
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