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

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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.

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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.

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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

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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

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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

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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

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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.

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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.

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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.

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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