11th LAWASIA International Mootlawasiamoot.org/pdf/files2016/internationalrounds/2016_LAWASIA...11th...
Transcript of 11th LAWASIA International Mootlawasiamoot.org/pdf/files2016/internationalrounds/2016_LAWASIA...11th...
CONFIDENTIAL
11th LAWASIA International Moot
INTERNATIONAL ROUNDS (2016)
BENCH MEMORANDUM
Organiser of the LAWASIA International Moot Competition
1 BENCH MEMORANDUM
LAWASIA Moot Problem
Sri Lanka 2016
The Bench Memorandum
CONFIDENTIAL
1 Background
1.1 This dispute between a Sri Lankan tea manufacturer and its former
distributor in Malaysia principally revolves around the use of “Ceylon” as a
geographical indicator in relation to tea products, touching also on other
related issues such as trade descriptions and the concept of confusing
similarities in the law of trade marks and passing off.
1.2 The parties are former business partners in Malaysia. The Appellant, Chelsea
Tea Company, is a manufacturer of the CTC CEYLON Ceylon tea. The
Respondent, Almond Tea Company, was the distributor of the Appellant’s
CTC CEYLON in Malaysia from October 2008 to October 2013. The
Respondent is also the manufacturer of SAILOR’S CEYLON, which is the tea
product that the Appellant has now taken issue with.
2 Facts
2.1 The Appellant’s CTC CEYLON is manufactured in accordance with the Ceylon
tea standards set by the Sri Lankan Tea Board (‘SLTB’), which is a fully
government-owned statutory institution acting as the apex regulatory and
administrative body of the Sri Lankan tea industry. The SLTB, which is not a
party to this dispute, owns the rights to the Lion Logo, which it allows to be
affixed onto the labels or packaging of tea grown and manufactured entirely
in Sri Lanka by approved traders that conform to the quality standards it has
BENCH MEMORANDUM
2 BENCH MEMORANDUM
set. SLTB has registered the Lion Logo in Malaysia, with disclaimers imposed
by the Intellectual Property Corporation of Malaysia on the words ‘CEYLON
TEA’ and SYMBOL OF QUALITY’.1 The Appellant is a registered user of the Lion
Logo in Malaysia, and all its CTC CEYLON tea products are affixed with the
Lion Logo. The CTC CEYLON tea leaves were grown in the Kandy District in the
Central Province of Sri Lanka.2 CTC CEYLON is marketed mainly in Europe.3
2.2 The Respondent was incorporated in 1999 by Philip Chan, a former
Singaporean ship captain. The Respondent sourced its tea leaves from
Malaysia and China since its inception, and from January 2009, also began to
grow tea themselves in China.
2.3 The Chairman of the Appellant, Marvan Ranatunga, met Philip Chan by
chance during a visit to Cameron Highlands in Malaysia in 2008. Ranatunga
was interested to appoint the Respondent to be the exclusive distributor of
CTC CEYLON in Malaysia as he was keen to tap into the Malaysian market.
Philip Chan rejected the offer as he was unwilling to accede to Ranatunga’s
request to cease the sale of all other tea products in Malaysia. Following a
fungal disease which devastated the tea plantations where the Respondent
sourced its tea leaves from, both parties entered into protracted negotiations
and eventually entered into a distributorship agreement (the ‘Agreement’)
on 20 October 2008.
2.4 Under the Agreement, parties agreed that “during the Term4 and for a period
of 12 months after it the Distributor5 must not be concerned or interested,
either directly or indirectly, in the manufacture or distribution in the Territory6
1 The implication of a disclaimer in a registered trade mark is such that the registered proprietor has no exclusive rights over the disclaimed elements, and that any other third party can still use the disclaimed elements. 2 Answer to Question 1, Additional Clarifications to Moot Problem. 3 Answer to Question 9, Clarifications to Moot Problem. 4 Defined as “the period of 5 years commencing on the date of this agreement unless terminated earlier in accordance with the terms of this agreement” in sub-clause 1.1.4, Agreement. 5 Namely the Respondent. 6 Defined as “Malaysia” in sub-clause 1.1.5, Agreement.
3 BENCH MEMORANDUM
of any goods that compete with the Products7, affixed with the Trade Marks8
or any other arguably similar mark in the Territory.”
2.5 Under the Respondent’s distributorship, the total profits from the sales of
CTC CEYLON in Malaysia increased from year to year, exceeding targets set by
the Appellant, and in 2012 constituted approximately 35% of the global nett
revenue of the Appellant. The market share of CTC CEYLON was equal to the
market share of the Respondent’s own tea products in Malaysia, collectively
making up approximately 30% of the tea products sold in Malaysia.9
However, the Agreement was not renewed upon its expiry on 20 October
2013 as the Appellant had then set up its Southeast Asian headquarters in
Kuala Lumpur to promote and distribute CTC CEYLON on its own. In terms of
sales profits pursuant to the expiry of the Agreement, CTC continued to make
some profits although its sales fell by 30% in 2013. The sales suffered a
further 15% drop in 2014. The 2015 figures, however, reported a slight
increase of 8% from the previous year.10
2.6 In March 2015, an employee of the Appellant saw a tea product named
SAILOR’S CEYLON affixed with ATC’s Mark in a Malaysian supermarket.11 The
recommended retail prices of the CTC CEYLON and SAILOR’S CEYLON are
similar, with SAILOR’S CEYLON priced only slightly lower than CTC CEYLON.12
Following investigations, the Appellant discovered that the Respondent is the
manufacturer and distributor of SAILOR’S CEYLON in Malaysia since
November 2012. The SAILOR’S CEYLON is in fact black tea in the form of Earl
Grey tea and English Breakfast tea13 which were not manufactured in
accordance with the Ceylon tea requirements set by the SLTB. The
7 Defined as “the Ceylon tea products bearing the Trade Marks produced by the Supplier” in sub-clause 1.1.2, Agreement. 8 Means ‘CTC CEYLON’ and the Lion Logo, sub-clause 1.1.6 and Schedule 1 of Agreement. 9 Answer to Question 24, Additional Clarifications to the Moot Problem. 10 Answer to Question 10, Clarifications to the Moot Problem. 11 Answer to Question 10, Additional Clarifications to the Moot Problem. 12 Answer to Question 17, Additional Clarifications to the Moot Problem. 13 Answer to Question 11, Additional Clarifications to the Moot Problem.
4 BENCH MEMORANDUM
Respondent had grown manufactured the SAILOR’S CEYLON black tea in the
Fujian Province in China using seeds sourced from Sri Lanka.14
2.7 The Appellant’s CTC CEYLON and the Respondent’s tea products, including
SAILOR’S CEYLON, were made available to end consumers through
intermediaries such as wholesalers, retailers, and food and beverage
establishments. SAILOR’S CEYLON is marketed in China, Japan, Bangladesh,
Nepal, India, Pakistan, Singapore, Thailand, Indonesia, Philippines, Cambodia,
Vietnam, Germany, and the United Kingdom. Its main market is the
Southeast Asian market. Apart from SAILOR’S CEYLON, the Respondent also
marketed white tea and green tea in Malaysia under different brand names.15
The countries of origin of the tea leaves of both the Appellant and the
Respondent’s products are stated on their respective product packaging. The
Lion Logo and ATC’s Mark are respectively affixed on the sides of the boxes,
usually above the information of importers, packers, and/or distributors.
They do not take up huge spaces on their respective packaging.16
2.8 The Appellant immediately wrote to the Respondent, asking the Respondent
to pay damages for breach of the Agreement, also demanding the
Respondent to stop using the ATC’s Mark on its tea packaging and not use
the word “Ceylon” to describe its tea. The Respondent denied having
breached the Agreement and refused to accede to the Appellant’s demands,
adding that it had every right to use the word “Ceylon” on its tea products.
Nonetheless, the Respondent had never declared any of its tea products as
Ceylon tea.17 Further, the number “1972” in ATC’s Mark referred to Philip
Chan’s service number when he was a ship captain.18 As both parties were
unable to resolve the dispute, they decided to settle the matter by arbitration
in Colombo, Sri Lanka, in accordance with the Agreement. All communication
was done via email.19
14 Answer to Question 12, Additional Clarifications to the Moot Problem and Answer to Question 5, Clarifications to the Moot Problem. 15 Answer to Question 16, Additional Clarifications to the Moot Problem. 16 Answer to Question 21, Additional Clarifications to the Moot Problem. 17 Answer to Question 4, Additional Clarifications to the Moot Problem. 18 Answer to Question 18, Clarifications to the Moot Problem. 19 Answer to Question 26, Additional Clarifications to Moot Problem
5 BENCH MEMORANDUM
2.9 The Appellant sought the following relief:
a) Payment of damages to be determined by the profits of the Respondent
made by the sale of SAILOR’S CEYLON in Malaysia;20
b) An order that parties can only refer to tea grown and manufactured
entirely in Sri Lanka as ‘Ceylon Tea’;
c) An order directing the Respondent to stop using the name ‘SAILOR’S
CEYLON’, the ATC’s Logo, or any other name or mark containing the
word ‘CEYLON’ or a lion device if its tea does not originate from Sri
Lanka; and
d) An order directing the Respondent to discontinue the sale of its products
described as ‘Ceylon tea’ and to recall all such products from the
market.
2.10 The issues to be resolved are as follows:21
a) What is the applicable law that should be referred to in this dispute;
b) Whether or not the Respondent has breached the Agreement by
distributing SAILOR’S CEYLON affixed with the ATC’s Mark in Malaysia;
c) Whether or not the Respondent’s use of the word ‘CEYLON’ in respect of
its tea products is misleading; and
d) Whether or not the Respondent’s use of the ATC’s Mark amounts to
trademark infringement and/or passing off.
3 Applicable Law
3.1 Clause 22.1 of the Agreement states as follows:
“Any dispute, controversy or claim arising out of or relating to this
contract, or the breach thereof, shall be governed by and construed
according to the relevant applicable legislation, and shall be settled by
arbitration in accordance with the KLRCA i-Arbitration Rules.” (emphasis
added)
20 Parties have agreed that if the Arbitral Panel rules that the Respondent is to pay damages to the Appellant, the amount of damages will be determined in a separate hearing. 21 Paragraph 18 of the Moot Problem.
6 BENCH MEMORANDUM
3.2 Rule 6 of the KLRCA i-Arbitration Rules which provides for the Seat of
Arbitration states as follows:-
“The parties may agree on the seat of arbitration. Failing such agreement, the
seat of arbitration shall be Kuala Lumpur, Malaysia unless the arbitral
tribunal determines, having regard to all the circumstances of the case, that
another seat is more appropriate.”
3.3 Based on Clause 22.1 of the Agreement read with the said Rule 6, it can be
concluded that the seat of arbitration shall be Kuala Lumpur as there is no
explicit agreement in the Agreement on it. As such, it follows that the
procedural law should be Malaysian law.
3.4 It may be argued that Clause 22.2 which provides that the “place of
arbitration shall be Colombo, Sri Lanka” may be an implicit agreement that
the seat of arbitration shall be Colombo, Sri Lanka. In such case, then the laws
of Sri Lanka shall be the applicable law. Having said that, Rule 6.2 of the
KLRCA i-Arbitration Rules provide that while the seat of arbitration is Kuala
Lumpur, Malaysia, the arbitral panel may meet at any location it considers
appropriate and as such, the agreement to hold the arbitration at Sri Lanka
does not necessarily mean that parties agree that the seat of arbitration is at
Sri Lanka.
3.5 As for the law applicable to the substantive issues, since there is no
agreement by the parties as to what law is applicable, the conflict of laws
principles will be applied.
3.6 Some mooters will submit that Malaysian law is the law applicable for the
substantive issues:-
3.5.1 Malaysia was the place where the alleged wrong was committed. The
alleged wrong is the distribution of tea products under the brand
7 BENCH MEMORANDUM
name ‘SAILOR’S CEYLON’ in Malaysia since 2012.22 As such, Malaysia
has the closest connection to this dispute.
3.6.2 Other arguments advanced to support the contention that Malaysian
law is the applicable law will include the fact that the agreement was
signed in Malaysia,23 the obligations were to be performed in
Malaysia.24
3.7 Some mooters will submit that Sri Lankan law as the law applicable for the
substantive issues:-
3.7.1 The Claimant in this case is a company incorporated in Sri Lanka and
has its registered address at Sri Lanka also.25
3.7.2 The tea that was to be distributed in accordance to the Agreement
was grown and manufactured in Sri Lanka.26
3.8 Parties may very have agreed on the issue of applicable law and thus they
may choose to not spend too much time to submit on it. It may reflect
negatively on the mooters if they choose to submit at length on this issue if
parties do not dispute the issue on applicable law.
4 Substantive Issues
4.1 “CEYLON” as a geographical indication
4.1.1 It is noted that Ceylon Tea has generally been accepted as a protected
geographical indication in many countries. There would be little room
for argument in support of the Respondent in this regard.
22 See paragraph 14 of the Moot Problem 23 See the answer to Question 12 in the Clarifications to the Moot Problem 24 See clause 2.1 read with clause 1.1.5 in the said Agreement 25 See paragraph 2 of the Moot Problem 26 See paragraph 3 and 4 of the Moot Problem
8 BENCH MEMORANDUM
4.1.2 The Appellant will argue that “CEYLON” when used in relation to tea is
a geographical indication of tea grown and manufactured in Sri Lanka
in accordance with the standards set by SLTB.
4.1.3 The Respondent will argue the opposite, emphasising that in any
event, it is not using “CEYLON” as a description of the origin of its tea
products.
4.2 Breach of the Agreement
4.2.1 The issue on the breach of the Agreement by the Respondent will
revolve around the non-compete provisions found in Clauses 4.1 and
4.2 of the Agreement:
4 Restrictions on the Distributor
4.1 The Distributor must not obtain the Products, or any goods that
compete with them, for resale from any person other than the
Supplier.
4.2 During the Term and for a period of 12 months after it the
Distributor must not be concerned or interested, either directly or
indirectly, in the manufacture or distribution in the Territory of any
goods that compete with the Products, affixed with the Trade Marks
or any other arguably similar mark in the Territory.
4.2.2 The Appellant will argue that the Respondent has breached the non-
compete clauses of the Agreement by engaging in the sale of tea
products, relying on the following grounds:-
The Respondent’s tea products (green tea, white tea, and the
SAILOR’S CEYLON black tea) are competing products of the
Appellant’s CTC CEYLON notwithstanding that they are different
types of teas as they are all teas, have a similar price range, and
are sold via the same trade channels;
The Respondent was in breach of Clause 4.1 as although the tea
products sold were of its own brand name, the Respondent’s act
9 BENCH MEMORANDUM
of sourcing the tea leaves from a third party’s tea plantation was
an act of business, and the word “resale” must be construed to
include that.
The Respondent was in breach of Clause 4.2 as it was directly
concerned and interested in the manufacture and distribution of
competing tea products both during the term of the Agreement
and during the period of 12 months after the expiry of the
Agreement. Moreover, the Respondent’s trade marks were
arguably similar to the CTC CEYLON and/or Lion Logo.
While the Appellant was aware that the Respondent was in the
business of tea manufacturing and distribution during their initial
negotiations, parties were eventually in agreement following the
devastation of the tea plantations where the Respondent sourced
its tea leaves from that the Respondent would not engage in any
competing activities, as stipulated in the Agreement.
4.2.3 The Respondent will argue that the sale of its tea products is not in
contradiction with its non-compete obligations based on the following
grounds:-
The Respondent’s tea products (green tea, white tea, and the
SAILOR’S CEYLON black tea) are not deemed to be competitors of
the Appellant’s CTC CEYLON since they were different types of
teas;
The Respondent was not in breach of Clause 4.1 as it did not
obtain competing products “for resale” – the tea products sold
were its own products;
The Respondent was not in breach of Clause 4.2 as its tea
products were not affixed with the CTC CEYLON or the Lion Logo,
or “any other arguably similar mark”.
In any event, the Appellant was well aware that the Respondent
was in the business of tea manufacturing and distribution at the
point of entering into the Agreement;
The Respondent may also attempt to argue against the validity
and enforceability of a non-compete clause.
10 BENCH MEMORANDUM
4.3 Use of “CEYLON” is misleading
4.3.1 Arguments on this point will center around trade description laws.
4.3.2 The Appellant will argue the following:
The use of the word “CEYLON” in the Respondent’s brand name in
this regard was done in bad faith, aimed at misleading unassuming
members of the public into thinking that its products were indeed
Ceylon tea when that was not the case;
The use of the word “CEYLON” by the Respondent in this regard
was in contradiction with trade description laws as it is a
misleading/false trade description;
The mere fact that the Respondent had not expressly described
‘SAILOR’S CEYLON’ as Ceylon tea does not negate the truth that it
had deliberately selected the brand name to create the
assumption in the minds of the public that it was associated with
the real Ceylon tea;
Another example of bad faith was that the numeral “1972” was
chosen to create an impression that the Respondent had been in
existence since then. Sri Lanka was also known as Ceylon until
1972.
4.3.3 The Respondent will state the following:
The Respondent was merely using the word “CEYLON” as part of
its brand name, and the word “CEYLON” should not be separated
from the full name ‘SAILOR’S CEYLON’ to associate it with Ceylon
tea;
The use of the word “CEYLON” was an honest use of its Ceylon
Road address in Singapore;
It had never described ‘SAILOR’S CEYLON’ as Ceylon tea on its
packaging and advertisements;
The Respondent’s use of the numeral of “1972” in its ATC’s Mark
was to represent its founder, Philip Chan’s service number as a
ship captain.
11 BENCH MEMORANDUM
4.4 Trade mark infringement and/or passing off
4.4.1 In considering trade mark infringement and passing off, the main
issue to be debated here is whether or not the Respondent’s ATC
Mark was confusingly similar to the Appellant’s Lion Logo.
4.4.2 The Appellant would argue that there was trade mark infringement
and/or passing off by emphasising on the following points:
There were visual, aural and conceptual similarities between the
Appellant’s Lion Logo and the Respondent’s ATC Mark;
The main ideas of the marks were the same, i.e. a lion device.
Hence, as a consumer with imperfect recollection tends to
remember the most striking element of a visual mark, the
likelihood of a consumer mistaking the Respondent’s ATC Mark for
the Appellant’s Lion Logo is high;
The likelihood of confusion is further enhanced by the fact that
both products share the same trade channels and have a similar
price range.
4.4.3 The Respondent would defend its position by highlighting these
arguments:
When compared as wholes, the Appellant’s Lion Logo was very
different from the Respondent’s ATC Mark as there were very
visible differences. Further, the identical words “SYMBOL OF
QUALITY” were disclaimed elements of the Lion Logo;
The choice of a lion device was to represent its Singaporean
heritage, similar to its choice of the word “CEYLON”, which was an
honest use of its own Ceylon Road address;
Customers would assess the product packaging and read the
labels before making a purchase and as such, any likelihood of
confusion is greatly reduced;
The passing off claim should fail as the Appellant had not suffered
any detriment from the Respondent’s sale of SAILOR’S CEYLON.
12 BENCH MEMORANDUM
5. Relief
5.1 The relief seek by the claimant have been listed in paragraph 2.9 above and
are reproduced here for easy reference:-
(a) Payment of damages to be determined by the profits of ATC made by the
sale of SAILOR’S CEYLON in Malaysia. Parties have agreed that if the
Arbitral Panel rules that ATC is to pay damages to CTC, the amount of
damages will be determined in a separate hearing.
(b) An order that parties can only refer to tea grown and manufactured
entirely in Sri Lanka as ‘Ceylon Tea’;
(c) An order directing ATC to stop using the name ‘SAILOR’S CEYLON’, the
ATC’s Logo, or any other name or mark containing the word ‘CEYLON’ or a
lion device if its tea does not originate from Sri Lanka; and
(d) An order directing ATC to discontinue the sale of its products described as
‘Ceylon tea’ and to recall all such products from the market.27
5.2 Some mooters will submit that the current panel do not have to look into the
relief as it is stated that the arbitration will only be limited to the issues
regarding the applicable law and the substantive issues as discussed above.28
5.3 Other mooters may submit that the arbitration should also include
determining the relief as it will be pointless to have the arbitration without
deciding on the relief. It may also be pointed out that parties only agreed to
have a separate hearing to determine the amount of damages29 and as such,
the current arbitral panel will have to decide if damages should be awarded
in the first place.
5.4 The main issue regarding the reliefs will be whether the arbitral panel has the
power to order parties to do or to refrain from doing an act. The KLRCA i-
Arbitration Rules appear to be silent on this and it may be argued that the
27 See paragraph 19 of the Moot Problem 28 See paragraph 18 of the Moot Problem 29 See paragraph 19(a) of the Moot Problem
13 BENCH MEMORANDUM
silence could mean that there is no explicit prohibition to make such an
order. Conversely it could be argued that the silence means that the panel
cannot make such an order.
6. Conclusion
6.1 The moot problem is drafted in a way as to allow each side to be sufficiently
able to argue their case on behalf of their clients. However, it may be viewed
not incorrectly that the facts of the case seem to support one side more than
another.
6.2 The key thing to keep in mind is that the mooters will not be judged based
solely on the merits of the case but on how well they present their arguments
and how persuasive they are. This may mean that even if the arbitral panel is
of the view that one side should win the arbitration, the other side may still
be awarded more points based on their knowledge of the law, their
persuasiveness, creativity, clarity in their submissions and their ability to deal
with questions from the panel.
LAWASIA MOOT STANDING COMMITTEE 2016