Last Tuesday, the Federal Court brought the curtain down on an eight-year legal battle in which American fast-food giant McDonald’s had sought to prevent a Kuala Lumpur restaurant from calling itself Restoran McCurry. The case was in keeping with McDonald’s global practice of vigorously defending its trademark and brand. It had experienced mixed outcomes in previous cases around the world, challenging businesses with names such as McBeans, McIndian, McCoffee, MacNoodles and McChina Wok Away.

Putting aside public interest and the general sentiment, what are the underlying legal principles behind the ruling and how will it affect other businesses?

Restoran Penang Curry House — a 24-hour restaurant serving traditional Indian and Malaysian food, such as chicken curry, fish-head curry, tandoori and naan — changed its name to Restoran McCurry in 1999. McCurry’s owner claimed that the name was derived from one of the staple dishes served there: Malaysian chicken curry.

McDonald’s, which currently has 185 outlets in Malaysia, took exception to the name and commenced legal proceedings in 2001. It claimed that McCurry, by using the prefix Mc in its name, had misrepresented itself as being somehow affiliated to McDonald’s. It contended that it had registered its name as a trademark in many countries, opened its first Malaysian outlet in 1982 and considered the prefix Mc an essential part of its brand identity.

In turn, McCurry pointed out that its menu was distinctly different from the offerings at McDonald’s and questioned McDonald’s right to claim exclusive use of a prefix which had been in use long before it commenced operations, most notably in Scottish surnames.

In essence, the court had to decide whether McCurry was guilty of a legal concept known as passing off.

Traditionally, to succeed in a passing off claim, a claimant must establish the following three elements:

• Goodwill or reputation attached to the goods or services supplied with the claimant’s mark;
• A misrepresentation by the defendant to the public, leading or likely to lead to the public believing that the goods or services offered by him are those of the claimant; and
• The claimant has suffered or is likely to suffer damage by reason of the erroneous belief resultant from the defendant’s misrepresentation.

However, the English courts have evolved to take a more pragmatic view of passing off, taking into account commercial realities when making decisions. In particular, judges in England have demonstrated an acceptance of the contention that a claimant can succeed in a passing off claim without having to fully satisfy the second element — that the resultant confusion need not be proved.

Parties interested in intellectual property in Malaysia, in particular legal practitioners and trademark owners, were very interested to see what approach the Malaysian courts would take in this high-profile passing off claim.

The High Court ruled in favour of McDonald’s on Sept 7, 2006, satisfied that McDonald’s had proved that McCurry unlawfully appropriated the trademark, which caused loss and damage to McDonald’s. McCurry appealed to the Court of Appeal, which overturned the High Court decision. The Court of Appeal’s decision on April 29, 2009, was based broadly on the following issues:

• Appearance: The signage used by McCurry consisted of letterings and a logo (a chicken giving two thumbs up and the words “Malaysian Chicken Curry”), which were not deceptively similar to the popular “golden arches” of McDonald’s;
• Food served: The food served by the two businesses was totally different and none of the items on the McCurry menu used the prefix Mc; and
• Customer base: Generally speaking, McDonald’s and McCurry are most popular with different age groups, with the latter appealing to a much older crowd.

While being receptive to the more pragmatic view of passing off mentioned above, taking into account these factors, the Court of Appeal decided that the use of the prefix Mc by McCurry did not constitute a passing off. McDonald’s applied for leave to appeal to the Federal Court, which was rejected on Sept 8 by a three-member panel of the Federal Court on the basis that there was no merit for the plea by McDonald’s to question the basis of the Court of Appeal’s decision. The Federal Court ruling means that there are no more legal avenues for McDonald’s to claim against McCurry for the alleged passing off.

The decision was widely reported by both the local and international media and there was perhaps expectedly little sympathy for the corporate behemoth, which has more than 30,000 outlets worldwide and reported annual sales of around US$70 billion. There has been some reaction that the decision could affect the confidence of other multinational corporations that have invested in Malaysia, which may worry that their own brands may be compromised without legal recourse.

In reality, the decision, as with all case law, is one that is based very much on facts. In this case, McCurry was deemed to be distinguishable from McDonald’s. The decision does not preclude McDonald’s or anyone else from succeeding in claims against parties for infringing their intellectual property rights.

Moving forward, McDonald’s has accepted the decision and McCurry has revealed plans for business expansion — probably buoyed by all the free publicity. In truth, it is difficult to see how McCurry’s use of the prefix has taken even the tiniest chink out of McDonald’s impressive brand armour. Perhaps, McDonald’s can take some comfort from an old adage that imitation is, in some cases, truly the sincerest form of flattery.

Marcus van Geyzel is a senior associate in the corporate and commercial division of Mah-Kamariyah & Philip Koh, Advocates & Solicitors

This article appeared in The Edge Malaysia, Issue 772, Sep 14-20, 2009.