As a brand owner, your distributor acts as your representative on the ground. But what happens when that relationship turns problematic, especially when it involves your intellectual property?

In Malaysia, a recurring issue arises when a local distributor registers a foreign principal’s trademark in their own name. Sometimes this is done for convenience, but in other cases it allows the distributor to control the brand locally.

A similar risk can arise in manufacturing relationships. For example, a Malaysian business may source products from a Chinese manufacturer and intend to sell them under its own brand. However, if the manufacturer registers the trademark first, the Malaysian business may find itself unable to freely use the brand it created.

If you find yourself in this situation, Malaysian law provides several legal avenues to help you reclaim your trademark.

THE LEGAL AVENUES YOU CAN USE

There are 2 ways you can try to reclaim your trademark:

The Power of “First-to-Use” (Common Law Rights)

In Malaysia, ownership of a trademark isn’t actually created by the Register (MyIPO); it is created by Use.

Under the Trademarks Act 2019, the person who is entitled to register a mark is the “bona fide proprietor” (the genuine owner). If a distributor or a squatter files first, they are claiming to be the proprietor. However, if you used it first, you are the Common Law Proprietor.

So, when a “First-to-File” squatter meets a “First-to-Use” owner, the court asks: “Who was the first person to use the mark in the course of trade in Malaysia?”

Well, to answer the question, Syarikat Zamani Hj Tamin v Yong Sze Fun [2006] would be the leading authority for this.

The Facts:

  • The Tamin family had been using the “Tamin” brand for soy sauce since the 1940s but hadn’t registered it.
  • A relative later tried to register the mark for himself.

The Decision:

  • The Federal Court ruled that the first user has a better title than the first registrant.

The Principle:

  • Registration is “prima facie” evidence of ownership (it looks like you own it), but it is not absolute. It can be challenged and overturned by someone who proves earlier use.

So What Counts as ‘Use’

This is where many businesses fail. To “use” a mark in Malaysia, it must be more than just having a website. It must be “Bona Fide Commercial Use.”

  • Physical Presence: Goods actually being sold on Malaysian shelves or services being rendered to Malaysian residents.
  • Preparatory Acts: In some cases, “use” can include significant advertising or offering goods for sale even before the first invoice is issued, provided there is a “continuous” intent to trade.
  • The Trivial Use Rule: If you sold one bottle of soda to your cousin in Puchong five years ago and nothing since, the court might view that as “token use,” which isn’t enough to defeat a squatter.

The Exception

What if you haven’t started selling in Malaysia yet, but you are huge in the UK?

Under Section 76 of the Act, if your mark is “well-known” in Malaysia (even if you haven’t sold a single item here yet), you can stop someone else from registering it.

However, proving “well-known” status is expensive and requires massive amounts of data (global sales, international awards, high-traffic social media).

“Bad Faith” Route

Section 7(2) states:

“A trademark shall not be registered if the application for registration of the trademark is made in bad faith.”

Because it is an “absolute” ground, it doesn’t matter if the mark is unique or if no one else has registered it yet. If the intent behind the filing was dishonest, the registration is void from the start.

So, how do courts determine what is bad faith? They use both an objective assessment and a subjective assessment.

Subjective = What was the applicant thinking at the time of filing? (Did they know the mark belonged to someone else?)

Objective = Would a “reasonable and experienced” person in that industry consider this behaviour dishonest?

The leading authority on this would be Wieland Electric GMBH v Industrial Automation (M) Sdn Bhd

The Facts:

  • Wieland (The Principal): A German company that had been using the “Wieland” mark globally for decades.
  • Industrial Automation (The Distributor): Their Malaysian distributor.
  • Without telling Wieland, the distributor registered the “Wieland” trademark in Malaysia under their own name.
  • The distributor argued that since Wieland hadn’t registered it in Malaysia yet, they were just “protecting” the market.

The Decision:

  • The High Court ruled in favour of the German principal.
  • The judge held that the distributor’s registration was fraudulent and made in bad faith.
  • The court ordered the mark to be removed from the registry.

FIDUCIARY RELATIONSHIPS

In law, a fiduciary is someone who is in a position of trust (like a lawyer to a client).

Even if a distributor isn’t a “fiduciary” in a strict sense, the court views their relationship with the principal as **”fiduciary-like.”**As a distributor, your job is to promote and protect the principal’s brand in the local market.

By registering the trademark in your own name, you are effectively “stealing” the very thing you were hired to protect.

Because of this relationship, a distributor can never claim they didn’t know the mark belonged to the principal. Therefore, any registration they make without express written consent is automatically viewed as an act of Bad Faith.

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RECOVERY ROADMAP

Step 1: The MyIPO Search

Check the status of the mark on the MyIPO (Intellectual Property Corporation of Malaysia) database.

  • If Pending: File a Notice of Opposition within the 2-month publication period.
  • If Registered: You must apply to the High Court for an Order of Invalidation (expungement) under Section 47.

Step 2: Evidence of “Prior Use”

In Malaysia, “use” is king. Gather:

  • Invoices, bills of lading, and customs declaration forms showing sales to Malaysia.
  • Marketing materials or advertisements in Malaysian media.
  • Any “Statutory Declarations” previously filed.

Step 3: Breach of Contract

Review your Distribution Agreement. Most well-drafted Malaysian contracts include an IP Covenant where the distributor acknowledges they have no rights to the mark. If they register it anyway, they are in breach of contract and IP law.

PREVENTION ACTIONS

The most effective way to handle a distributor is to remove the temptation entirely.

  1. Register Early: File your own application with MyIPO before the distributor does. This establishes you as the “Prior User” and the legal owner from day one.
  2. The “No-Registration” Clause: Ensure your distribution contracts explicitly prohibit the distributor from registering your mark, or any similar mark, in any jurisdiction.
  3. The Madrid Protocol: Take advantage of Malaysia’s membership in the Madrid Protocol. This allows you to manage and protect your trademark in over 120 countries through a single, streamlined application.

Don’t let a “trusted partner” or a random squatter become the gatekeeper of your own brand. Whether you are expanding into Malaysia or looking to secure your rights globally, Quality Oracle is here to provide the legal and creative support you need.