Rares J has ordered that Centrefold Entertainment’s trade mark registration for CENTREFOLD, No 1695466, be expunged from the Register on the grounds that it is not capable of distinguishing “Entertainment’s” services.
Both Entertainment and Metro are in the business of providing “promo models” and adult entertainment services.[1] Metro promoted its services under the sign “Centrefold Strippers”. Having secured its registration for CENTREFOLD, Entertainment sued Metro for infringement. Things did not turn out how it hoped!
Entertainment argued that CENTREFOLD was a “covert and skilful allusion to its services, not descriptive of them.” It argued that the ordinary meaning of the word was of a person or the particular pages in particular types of magazine.
Rares J rejected this argument on the grounds that the word registered was a “noun” and not an adjective. However, Entertainment used the word in an adjectival sense as part of the composite mark “Centrefold Entertainment”. Hmmm.
Perhaps more compellingly, his Honour pointed out at [93] that there were at least three businesses in the adult entertainment field using names which included CENTREFOLD: Centrefold Lounge, Centrefold Strippers (i.e., Metro) and Centrefold Entertainment itself.
Also, the evidence showed that models who had achieved the status of being Centrefolds, promoted themselves as such and could often command a premium for their services.
In these circumstances, the word was not metaphorical or allusive. At [101], his Honour explained:
“Centrefold” is an ordinary English word that is apt to describe the kinds, qualities and characteristics of performers, models and others, as persons who appear, or have appeared or are prepared to appear, nude or scantily clad before strangers and in pages of magazines. Any supplier of adult entertainment services of the kind comprised in the designated services, without improper motive, might desire to use the word “centrefold” to describe that supplier’s services. That is because of the ordinary signification of the word: Cantarella 254 CLR at 358 [58].[2]
Next, his Honour held that Entertainment’s use of “Centrefold” was not sufficiently substantial to warrant registration under (the “new” version of) s 41(4).
Bear in mind that the trade mark was registered from 22 May 2015.
It appears to have been common ground that Entertainment had not used “Centrefold” alone before it applied to register its trade mark.
Secondly, until about March 2014 (i.e. just over a year before the filing date of the trade mark), the principal of Entertainment had been running two businesses, “XXX Princess” and “Centrefold Entertainment”. XXX Princess was the business promoting the adult entertainment services – by reference to XXX Princess. As part of a deliberate strategy, Centrefold Entertainment’s website and Facebook page did not explicitly promote adult entertainment services. It was only from March 2014 that Entertainment’s website explicitly promoted adult entertainment services by reference to its composite mark (see below). In that period (March 2014 to May 2015), the evidence showed Entertainment had only 2,000 customers. Rares J ruled at [107]:
It is unlikely that the limited use of “centrefold” in Entertainment’s dealings with perhaps, at maximum, the 2,000 individuals who made the bookings (but none of whom, on the evidence, ever received a tax invoice), would have brought its name to their attention, or that of others who may have telephoned the business, as a brand or trade mark rather than, if at all, as a mere reference to a business name. This limited usage would not have brought into the public consciousness the use of “centrefold” as a brand or trade mark in association with the designated services of Entertainment.
The evidence also showed that neither Entertainment nor Metro spent much (if anything) by way of Google AdWords on “centrefold”, focusing their expenditure instead on “strippers” and “waitresses”. There was also evidence a mere 0.39% of hits on Metro’s “Centrefold Strippers” website came via “centrefold”.[3]
Now that all seems uncontroversial. There are some potentially problematic issues.
First, here is one of Entertainment’s Facebook posts from 6 May 2013:
It appears that that was essentially the form of Entertainment’s page from at least early 2012.
One might think that was use of the composite mark as a trade mark for adult entertainment services, albeit not use of the trade mark as registered alone. It seems that the phone number appearing in the ads was a common phone number for XXX Princess and Entertainment and, as already noted, Entertainment’s case seems to have been that the performers were actually arranged by “XXX Princess”. That said, I am rather mystified what Entertainment’s page was doing.
Secondly, there was some evidence of a period late in 2012 where the principal of Entertainment answered the telephone to those calling in to book a performer “Centrefold Entertainment”. It appeared likely that, if the caller was surprised they had not reached XXX Princess, that some business patter was deployed to dispel any confusion. His Honour unsurprisingly, with respect, characterised that use in effect as de minimis.
Thirdly, Entertainment’s evidence was that from September 2012, invoices to all customers were sent out under the composite mark. There was a glitch in the system, however, so it appears no-one received them. Somehow, the performers and Entertainment got paid.
There was also evidence from at least one of the performers that she sent (at least) one invoice for her services into Entertainment by reference to the composite mark. Rares J, however, discounted this as evidence of use on the basis that which entity they were billing was hardly of any moment to the performers and they were rather confused about which company or website they were providing their services through.
The passing off and ACL claims by each party against the other failed on a straightforward application of the Hornsby Building Information Centre case.
By reference to the use of the word “may” in s 126, Rares J considered that the power to grant an injunction was discretionary. If his Honour had not found the trade mark invalid, Rares J would have refused an injunction on the basis of “lack of clean hands”. In promoting its services on the web, Entertainment used photographs of scantily clad young ladies. 90% of the photographs, however, were not of any of its models. They were photographs found on the Internet, including from sources such as “Sports Illustrated”. The Court would not condone such deceptive practices through the coercive power of an injunction.
with apologies to Seth Justman and the J Geils Band.
Apparently, a “promo model” is someone who provides his or her services to promote a business by, for example, handing out advertising or business cards in a public venue, or acting as an adornment at an event, such as appearing in a manufacturer’s clothing or livery at a trade or motor show. They do not appear naked, or partially naked and get paid $20 – $30 per hour. An adult entertainer (or, often, a “stripper”) would perform naked or partially naked and could earn 10 to 20 times that for a 20 – 30 minute show. ?
Entertainment’s case was no doubt “assisted” by its principal’s evidence to the effect that he had never heard the term being used to describe “centrefolds”! ?
The Google Analytics report showed almost 830,000 hits on the website for the relevant period. ?
The Full Court has dismissed Primary Healthcare’s appeal from the decision rejecting its attempt to register “Primary Health Care” for medical services.
The judgment is 438 paragraphs long; Greenwood J providing 77 paragraphs on aspects of s 41 (old form), Katzmann J providing 80 paragraphs and the balance being the leading judgment of Rangiah J.
While Greenwood J and Katzmann J agreed generally with Rangiah J on s 41 (old form), it appears there are some nuances to consider! Katzmann J disagreed with Rangiah J about the application of s 43.
IP Australia has released an exposure draft bill and regulations to implement some of the Productivity Commission’s recommendations from its Intellectual Property Arrangements report. Intended to be the Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other Measures) Bill 2017.[1]
According to the news release, the amendments will:
commence the abolition of the innovation patent system (PC recommendation 8.1)
expand the scope of essentially derived variety declarations in the Plant Breeder’s Rights (PBR) Act (PC recommendation 13.1)
reduce the grace period for filing non-use applications under the Trade Marks Act (PC recommendation 12.1(a))
clarify the circumstances in which the parallel importation of trade marked goods does not infringe a registered trade mark (PC recommendation 12.1(c))
repeal section 76A of the Patents Act, which requires patentees to provide certain data relating to pharmaceutical patents with an extended term (PC recommendation 10.1)
allow PBR exclusive licensees to take infringement actions
allow for the award of additional damages, under the PBR Act
include measures intended to streamline a number of processes for the IP rights that IP Australia administers,
and everyone’s favourite “a number of technical amendments”.
On the parallel imports front, the bill would introduce a new s 122A to replace s 123(1) with the object of overruling the Federal Court’s case law severely restricting the legality of “parallel imports” since the 1995 Act came into force. It’s a “doozy”.
For example, it attempts to reverse the onus of proof that the courts have imposed on parallel importers by providing that
at the time of use, it was reasonable for the [parallel importer] to assume the trade mark had been applied to, or in relation to, the goods by, or with the consent of, a person who was, at the time of the application or consent (as the case may be):
(i) the registered owner of the trade mark; or
(ii) an authorised user of the trade mark; or
(iii) a person authorised to use the trade mark by a person mentioned in subparagraph (i) or (ii), or with significant influence over the use of the trade mark by such a person; or
(iv) an associated entity (within the meaning of the Corporations Act 2001) of a person mentioned in subparagraph (i), (ii) or (iii).
I suppose “reasonable to assume” does at least require some objective support for the “assumption”.
The second part – (iii) and (iv) above – is trying to deal with the situation where the registered owner assigns the trade mark to someone in Australia, but with the capability of calling for a re-assignment.[2]
This will require considerable flexibility by the Courts in interpreting “significant influence”.
If you have made such and assignment, or your client has, you had better start re-assessing your commercial strategy, however. The transitional arrangements say the amendment will apply to any infringement actions brought after the section commences. Moreover, this will be the case even if the “infringing act” took place before the commencement date.
Morroccanoil Israel Ltd (MIL) has successfully obtained injunctions against some of Aldi’s lookalike products, but only on the basis that the marketing misrepresented they were “natural” products and further that their argan oil content conferred certain “performance” characteristics. MIL’s claims that the products infringed its trade marks and “passed off” failed. MIL did successfully appeal the Registrar’s refusal to register “Moroccanoil” as a trade mark and fended off Aldi’s attempt to have MIL’s trade marks removed on the grounds that they were not capable of distinguishing.
Katzmann J’s decision runs to 741 paragraphs, so there is a lot more ore to be mined than I shall cover in this blog post.
MIL has two registered trade marks in Australia1 in respect of, amongst other things, hair care products:
TM 1221017TM 1375954
Although its get up varied over time, you can get a good idea of how it sold its products in Australia from the following:
Aldi (Like Brands, only cheaper) introduced its own range of Moroccan Argan Oil products such as:2
The Trade Mark Infringement Claim
MIL put its case on trade mark infringement on Aldi’s use of Moroccan Argan Oil, not the get up of any product packaging.
Despite Aldi’s reliance on the presence of the PROTANE (or PROTANE Naturals) or VISAGE house brands, Katzmann J had little difficulty despatching the claim that Aldi did not use Moroccan Argan Oil as a trade mark over the fence for six. The term was not purely descriptive; argan oil was only one ingredient of many and only the 11th or 12th ingredient in terms of volume. Viewed objectively, it clearly presented as a badge of origin, especially when depicted with oil drops instead of “o”.
However, Katzmann J held that Moroccan Argan Oil was not deceptively to either trade mark. A central consideration was that each of MIL’s trade marks was a composite mark. “Moroccanoil” was a prominent feature, but the prominent “M” was an equally prominent feature.3
Further, by the time Aldi came to adopt “its” trade mark, there other players in the market using the expression “Moroccan Argan Oil”.
Treating “Moroccanoil” as the relevant essential feature of MIL’s trade marks, Katzmann J accepted that the interposition of “Argan” between “moroccan” and “oil” may well not interrupt the recall of the brand moroccanoil but nonetheless went on to hold at [220]:
…. In my view, there is no real, tangible danger that an ordinary or reasonable consumer with an imperfect recollection of one or other or both those marks or, as was argued, the name “Moroccanoil”, would wonder whether a mark called “Moroccan Argan Oil” is or is associated with either of the composite marks that are the First and Second Trade Marks. Ignoring similarities in the get-up of the respective products, including the colour-scheme and packaging, I am not satisfied that the hypothetical consumer would mistake the Aldi “Moroccan Argan Oil” mark for the First or Second Trade Marks or wonder whether the Aldi product is made by the owner of the First and Second Trade Marks. Considering each of the First and Second Trade Marks as a whole, I find that the Aldi mark is not deceptively similar to either of the MIL marks.
Four other points
First, MIL placed heavy reliance on what it said was evidence of 58 consumers being confused that Aldi’s product was MIL’s. These included reports of people who said, or were reported to have said, that they had bought MIL’s products in Aldo’s stores although, of course, MIL’s products were not available in Aldo’s stores.
Only one of those consumers gave direct evidence and Katzmann J considered there were sufficient deficiencies in her evidence to regard her as an unreliable witness.
For example, the witness had a clear recollection of seeing different Aldi products displayed together although it appears to have been accepted they were only displayed in different parts of the store, she referenced MIL’s get up rather than its trade mark, she admitted to being distracted by a distressed child and it emerged that she had not disclosed her previous experience working in advertising as the basis for concluding Aldi’s product was some kind of brand extension.
All the other evidence was the more typical hearsay evidence of employees of MIL and its distributor and stockists about what customers told them. Katzmann J accorded this evidence no weight. Her Honour’s reasons warrant very careful consideration, especially as this type of evidence (if not its scale) is very typical.
206 That is because the evidence largely consists of reports given to others in a way that makes it impossible to decide what was responsible for the confusion. Certainly, there is nothing to suggest that any deceptive similarity arising from the get-up of the products or aspects of it were disregarded. The evidence provides either no or no sufficient foundation for the conclusion that any purchase of an Aldi product was made because of the deceptive similarity of the respective marks.
The indirect nature of the evidence was critical as it meant there was no context to assess the conduct:
207 …. Matters such as the following are often left unclear, or are completely unexplained: whether the person was aware of MIL’s products when they encountered the Aldi products, and if so to what extent; which Aldi product(s) were in issue; in what circumstances the alleged confusion occurred, including what level of attention the person gave to the Aldi products at the time; whether there were other factors at play that might have led to the person acting in the way that they did; and any other relevant circumstances. It would be essential to understand these matters in order to accord any weight to the evidence.
208 In view of the way in which the evidence was adduced (predominantly through witnesses to whom the reports were either directly or indirectly made by anonymous consumers), and in the absence of contemporaneous records, it was not possible for these matters to be explored in cross-examination.
209 Furthermore, even at face value a number of the reports do not bespeak of confusion, let alone deception. In one case, reported by Ms Williamson, the consumer said that she had bought products at Aldi that “look like” MIL’s products. While this is illustrative of similarity, it does not denote deceptive similarity. Some of the evidence consists of second-hand hearsay, such as the complaints received by Thierry Fayard. As a matter of common experience this evidence is unreliable ….
Secondly, MIL sought to rely on Aldi’s alleged intention to trade on MIL’s reputation in its trade marks. There does not seem to have been any real dispute on the evidence that Aldi had set out to “benchmark” its products at least partly on MIL, but also partly on another competing product by Organix:
214 Ms Spinks’4 evidence is insufficient to demonstrate that by the choice of the name “Moroccan Argan Oil” Aldi set out to mislead consumers into thinking that the Aldi brand was moroccanoil. No precise evidence was led as to how Aldi settled on the name “Moroccan Argan Oil” and no questions on this subject were asked in cross-examination. If its object were as alleged, then one would think it would call its products “Moroccan Oil”. The name Aldi chose was different. The name Aldi chose —“Moroccan Argan Oil” — was the name then used by Organix, whose products Aldi had used as the “benchmark” for its shampoo and conditioner. Further, the ultimate product was not taken to market before Aldi had received advice as to compliance with Australian laws. Ms Spinks said that an organisation known as “Silliker” (Silliker Australia Pty Ltd) was retained to undertake “due diligence checks” to ensure that proposed product packaging and labelling complied with relevant “regulations” and the Australian Consumer Law. She was not challenged about this evidence in cross-examination.
A third aspect is that MIL also sought to lead evidence of 13 other major brands which Aldi was said to have knocked off “lookalikes”. MIL wanted to use this evidence as tendency evidence under s 97 of the Evidence Act to show that Aldi deliberately copied product get ups to take advantage of their reputation.
Katzmann J accepted that could potentially be relevant evidence. MIL’s application failed, however, because its notice was not sufficiently specific to comply with the stringent requirements for the admissibility of such evidence and it was given too late. Moreover, the evidence would not carry matters further than the direct evidence of Ms Spinks. At [129]:
… tendency evidence is generally used to prove, “by a process of deduction, that a person acted in a particular way, or had a particular state of mind, on a relevant occasion, when there is no, or inadequate, direct evidence of that conduct or that state of mind on that occasion”: …. Here, however, there was direct evidence from Ms Spinks of the development process in relation to the goods in question. The evidence MIL wished to adduce as “tendency evidence” consisted merely of samples and images of other, unrelated products. It did not include any evidence as to how or why the get-up for the particular products was selected. It takes the evidence given by Ms Spinks no further. Consequently I am not persuaded that the evidence in question has significant probative value.
Even if the tendency evidence had been admitted, it would not have helped on the trade mark case as it was evidence of a tendency to adopt features of get up, not the trade mark itself.
Finally on this part of the case, Katzmann J held that Aldi’s hair brushes and dryers etc. were goods of the same description as the hair care products in class 3 covered by MIL’s registrations. As with Aldi’s own hair care products, however, there was no likelihood of deception or confusion so s 120(2) did not come into play.
The ACL claims
MIL brought three claims under the Australian Consumer Law alleging that Aldi had engaged in misleading or deceptive conduct by:
misrepresenting that its products were MIL’s products or in some way sponsored or associated with MIL (i.e., a passing off type claim);
misrepresenting that its products were made from, or substantially from, natural ingredients; and
misrepresenting that the argan oil in the products gave the products performance benefits which they did not in fact have.
As noted above, MIL succeeded only on the latter two claims.
In relation to the passing off claim, Katzmann J accepted that Aldi had modelled the get up of some of its products on MIL’s get up5 and sought to appropriate some of the reputation of MIL’s products to its own benefit. At [380]:
Aldi unquestionably modelled its Oil Product on the MIL Oil Treatment. Ms Spinks referred to it as “the benchmark” product. Aldi copied several of its “diagnostic cues”, including the use of a bottle very similar in style, size, shape, and colour, the same pump mechanism for the extraction of the oil from the bottle, the use of a cardboard box, and the prominent use of a similar colour for both the bottle’s label and the box. Ms Spinks accepted in cross-examination that Aldi’s object was to achieve an exact colour match with the bottles and conceded that consumers would associate the colour of the bottle and the type of packaging with the MIL product. ….
and
384 The evident purpose of copying important features of the MIL Oil Treatment was to remind consumers of that product. It would be naïve to believe that in doing so Aldi was not seeking to capitalise on MIL’s reputation and attract to itself some of its custom. I find that in adopting the particular get-up for the Aldi Oil Treatment bottle and box, Aldi copied from the get-up of the MIL Oil Treatment and box and that it did so in order to appropriate part of MIL’s trade or reputation or the trade of MIL’s authorised distributors and resellers.
That was not sufficient in itself for a finding of misleading or deceptive conduct. The question was whether or not Aldi had sufficiently distinguished its products from MIL’s.
Katzmann J considered that, if regard were paid only to the similarities between the respective get ups, there would have been a likelihood of deception. However, it was necessary to have regard to the respective get ups as a whole. When considered as a whole, there were important differences which served sufficiently to distinguish Aldi’s products:
first, ALDI’s products were prominently branded with its well-established house brands PROTANE or VIGOUR;
secondly, MIL’s products featured the very prominent large “M”, which was not replicated in ALDI’s get up;
thirdly, in MIL’s products “moroccanoil” appeared vertically, while Aldi used “moroccan argan oil” horizontally only;
fourthly, there were significant differences in the packaging, especially the shampoo and conditioner which were closer to the Organix product than to MIL’s;
fifthly, the closest products – the competing oil treatment products – were sold by MIL in a glass bottle, but Aldi had used a plastic bottle only;
Her Honour considered that none of these differences were concealed and were at least as conspicuous as the similarities. Further, viewed as a whole, the Aldi range was cheaper and the use of the house mark clearly marked the products out as a different brand. Further, the two businesses marketed their products through completely different trade channels and at very different price ranges.
MIL’s heavy reliance on the similarity of the turquoise colours used did not avail:
413 Colour-blind, inattentive consumers, and consumers with an imperfect recollection of the MIL products might confuse the colours. I accept Professor Quester’s evidence that consumers are unlikely to detect subtle differences in colour between two sets of products as they would not ordinarily engage in a side-by-side comparison. Indeed, I am prepared to accept that a not insignificant number of consumers might think the colours are the same. On the other hand, as Ms Spinks’ evidence shows, at the time Aldi entered the market with “Moroccan Argan Oil”, at least one other company, Organix, was selling hair care products in turquoise containers and also under the name “Moroccan Argan Oil”. Other products, like Pure Oil of Marrakesh, were sold in cartons, bottles and other containers featuring various shades of blue.
414 Knowledge of third-party usage of a particular get-up or name can affect the chances that a consumer might be misled or deceived.
MIL also failed in its attempt to rely on the printing of “Moroccan Oil” on (at least) some Aldi receipts. At [428], they were issued after purchase, which was too late.
As one would expect, the failure of this part of MIL’s ACL claim was also fatal to its passing off claim.
Natural products
I don’t propose to go into the detail of why the use of the brand name Protane Naturals was misleading or deceptive other than to record that Katzmann J did find the brand name deceptive since the relevant products were not substantially “natural” products. There is some quite involved evidence about what a “natural” product is or may be if you are going to get into that sort of thing.
Performance representations
Some of Aldi’s products claimed on their packaging to “helps strengthen hair” and “helps protect hair from styling, heat and UV damage” and similar claims.
Katzmann J rejected Aldi’s argument that this was a reference to the capabilities of the product as a whole rather than as a result of the use of moroccan argan oil. Apart from the presentation on the packaging and the prominence given to that oil, Aldi’s own internal documents claimed it was the argan oil that conferred these attributes.
MIL’s scientific evidence established, however, that there was too little argan oil (which is apparently very expensive) in Aldi’s products to have the desired effects. Needless to say, the expert evidence dealing with this part of the case is also rather involved.
Wrap up
Overall and barring the outcome of any appeal, this seems like a rather Pyrrhic victory for MIL. I don’t have any idea how much damages will flow for the breaches of the ACL. Nonetheless, here is plenty of scope for Aldi to continue using its lookalike get up; the prevention of which was surely the point of the exercise. What is more, the result was achieved only after a very lengthy trial including, amongst other things, eight experts: 2 lexicographers, four marketing experts and two chemists!
Following her Honour’s decision (and barring any appeal), it will have three including TM No. 1463962 “moroccanoil” in respect of Hair care products, including oil, mask, moisture cream, curly hair moisture cream, curly hair mask, curly and damaged hair mask, argan and saffron shampoo, hair loss shampoo, dandruff shampoo, dry hair shampoo, gel, mousse, conditioner and hair spray in class 3. ?
In addition to hair “lotions” such as shampoo, Aldi also marketed hair brushes and powered hair dryers and the like. ?
Those of you who read 140 year old case law might also be thinking about the striking colour scheme. Katzmann J, citing the 5th edition of Shanahan and the Office Manual, held that MIL’s trade marks were not limited to the specific colours as there was no endorsement under s 70 and so the marks were taken to be registered for all colours. One could be forgiven for thinking this approach renders the Register seriously misleading at times. ?
The Aldi employee charged with introducing the range. ?
The Aldi shampoo and conditioner products were “benchmarked” on Organix’ get up, not MIL’s. ?
Government consultation papers on patent and trade marks
Government consultation papers on patent and trade marks
The Australian government has issued 5 consultation papers on how to implement some of the recommendations it has accepted from the Productivity Commission’s Final Report into Intellectual Property Arrangements:
Submissions are required by 17 November 2017 (with a view to introducing a bill as soon as possible).
I can’t say that introducing yet another inventive step test (there are 4 if you count common general knowledge alone – depending on which regime applies to the patent in question) makes much sense.
Most of the Productivity Commission’s reasoning was based on the common general knowledge alone test used in Alphapharm.1 It did find, however, that there had not been much change in the Commissioner’s rate of granting patents relative to the EPO since the Raising the Bar act was passed. However, so far as I could see, it doesn’t tell us how many applications the Commissioner had examined under the Raising the Bar regime and you would have to guess a large number were still under the 2001 regime.2
Essentially, the Raising the Bar regime allows any piece of prior art to be combined with common general knowledge to test obviousness. It also allows prior art information to be combined in the same way as one might expect an English court or an EPO board would.3 The Raising the Bar regime should in fact operate just like the UK/EPC regime and one would have thought we should give it a good chance to work!
2The Court of Appeal has ruled that Century 21 Australia’s arrangements permitting Victorian Realty Group to trade as “Century 21 Complete Properties” was a franchise agreement for the purposes of the Estate Agents Act 1980 (Vic.).
Section 43(5) of the Victorian Estate Agents Act has its own definition of a “franchising agreement”:
franchising agreement means an agreement whereby an estate agent is authorized to carry on business under any name in consideration of any other person entitled to carry on business under that name receiving any consideration whether by way of a share in the profits of the estate agent’s business or otherwise (emphasis supplied)
One of the reasons this is significant is that each party to the franchising agreement is jointly and severally liable for any defalcations, or negligence, by the estate agent : s 43.
Victorian Realty Group (VRG), while trading as “Century 21 Complete Properties” in Craigieburn, had committed a number of defalcations which resulted in 13 of its clients losing money. Those clients were compensated out of the Victorian Property Fund. The Secretary brought proceedings against Century 21 Australia, the franchisor1 under s 43 to recover those payouts.
Under the terms of the franchise agreement, and the incorporated Policy and Procedures Manual, Century 21 Australia granted VRG the right and obligation to trade exclusively under the name Century 21 Complete Properties. There were other rights and obligations to use “Century 21” in the various ‘trademarked’ forms, and to use various systems and participate in the Century 21 marketing plan. In other words, you and I would consider it a pretty typical example of a franchise arrangement.
The trial judge, however, found that the arrangement was not a “franchise agreement” as defined in s 43 because of the words in the definition “under that name”. VRG was authorised only to carry on business under the name “Century 21 Complete Properties”, not just “Century 21”; and “Century 21 Australia”, the franchisor, did not carry on business under that name.
The Court of Appeal unanimously allowed the Secretary’s appeal. As a matter of practicality and commercial reality both VRG and Century 21 Australia were carrying on business under “Century 21”, not just their respective formal names:
50 In its written case, the respondent seemed to accept that the Franchise Agreement was an agreement that would ordinarily be described as, and understood to be, a franchise agreement. The respondent’s written case described the Franchise Agreement as ‘the unambiguous franchise agreement in this case’. That description was, with respect, apposite. While that description does not relieve the Court of its obligation to properly construe and apply the definition of ‘franchising agreement’, it brings into focus the question of what legislative purpose might possibly exist in differentiating between franchise agreements that have different provisions as to trade names and the terms upon which their use is or is not permitted. That said, it is of course the text of the statutory definition that is paramount in the resolution of this proceeding.
51 ‘Century 21’ is a name. Equally, one might describe the relevant circumstances in this case as involving the use of a name being ‘the Century 21 name’. When one examines the Franchise Agreement (including the P&P Manual) it seems to us that that agreement authorised VRG to carry on business under the name ‘Century 21’ or the Century 21 name. Like any franchise agreement, it did so on particular terms. We have already set out the relevant terms in the present case. The existence of those terms does not gainsay the fact that the Franchise Agreement was one which authorised VRG to carry on business under the Century 21 name.
52 Similarly, in our view, the International Agreement entitled the respondent to carry on business under the name ‘Century 21’ or the Century 21 name within the meaning of the statutory definition. In our view, this conclusion accords with the text of the definition construed, as it must be, in its context and by reference to the legislative purpose of the provisions of the Act.
The focus on commercial reality is no doubt to be welcomed. The decision, however, has little direct relevance to the broader definition of “franchise agreement” for the purposes of the Franchising Code of Conduct as that is not tied just to a name. Instead, clause 5 of schedule 1 to the Competition and Consumer (Industry Codes – Franchising) Regulation 2014 applies to agreements which satisfy 3 requirements including (by way of contrast to the Estate Agents Act) the rather more broadly expressed operation of a business substantially or materially associated with a trade mark, advertising or commercial symbol. More fully, a franchise agreement is an agreement:
(b) in which a person (the franchisor ) grants to another person (the franchisee ) the right to carry on the business of offering, supplying or distributing goods or services in Australia under a system or marketing plan substantially determined, controlled or suggested by the franchisor or an associate of the franchisor; and
(c) under which the operation of the business will be substantially or materially associated with a trade mark, advertising or a commercial symbol:
(i) owned, used or licensed by the franchisor or an associate of the franchisor; or
(ii) specified by the franchisor or an associate of the franchisor; and
(d) under which, before starting or continuing the business, the franchisee must pay or agree to pay to the franchisor or an associate of the franchisor an amount including, for example
Century 21 Australia had been appointed the master franchisee for Australia by Century 21 International with powers to appoint and manage “Century 21” franchisees here. ??
Last week, we looked at Mortimer J’s reasons for dismissing Shape Shopfitters’ allegations of trade mark infringement against Shape Australia. Presumably, given the colour and stylistic constraints of the registered trade mark, Shape Shopfitters’ main attack was based on the prohibition against misleading or deceptive conduct under the Australian Consumer Law. It too was unsuccessful.
Shape Shopfitters’ contention was that, by changing its name from ISIS to Shape Australia, Shape Australia was misrepresenting to the public that the two businesses were affiliated in some way with Shape Shopfitters being the specialist shopfitting arm of the Shape Australia. The descriptive nature of the common term, Shape Shopfitters’ fairly confined reputation and the fact that most of its dealings were with well-established contacts combined to mean that there was no such misrepresentation.
In about October 2016 when Shape Australia changed its name, Shape Shopfitters had annual turnover of between $10 million to $13 million a year. Almost all of its business was in fitting out, or the maintenance of, retail food outlets; especially quick service restaurants. Two thirds of its jobs were for contracts under $5,000; over 90% was for jobs under $200,000. Most of its business was in Victoria. 88% of its business outside Victoria was for the same seven clients: Grill’d, Nando’s, Sumo Salad, San Churro, Mad Mex, Schnitz or Coco Cubano. All of whom were well-established customers. Most of its work came from invitations to participate in closed tenders requested by established clients or directly negotiated contracts, once again with established customers.
In contrast, Shape Australia had annual revenues of around $400 million and the average size of its contracts was $1.55 million. Its role was usually as head contractor and construction manager, contracting out the work to specialist sub-contractors. It did do, however, some shopfitting work.
Mortimer J rejected Shape Australia’s argument that the relevant public was restricted just to the purchasers of construction services. Section 18 is not limited just to consumers; it provides protection to all people dealing with the respondent. In this case, including suppliers such as architects and subbies.
Mortimer J also rejected Shape Australia’s argument that none of its customers would mistakenly think that there was a connection with Shape Shopfitters. That was irrelevant. The question was whether people aware of Shape Shopfitters’ reputation would be misled or deceived.
However, there was no real, practical risk that the public would be misled or deceived. The businesses were simply too different and those dealing with Shape Shopfitters were well aware of its identity: At [216] – [217]:
I am not satisfied that participants in the industry would be led into such an error [i.e. thinking that Shape Shopfitters was an arm of Shape Australia]. The parties’ business activities are too different, they operate in different areas, with the applicant being far more specialised and more geographically contained. The link the applicant posits is possible and not fanciful in a theoretical sense, but it is without any foundation in the reality of the way the parties’ business activities are conducted, and in the way the “participants in the commercial construction industry” encounter the two businesses. That is especially so when one considers evidence such as that from Mr Billings that the applicant secures a lot of its business through word-of-mouth referrals.
The most that can be said is that there is a likelihood that participants in the industry, on isolated occasions, may be led to confuse the two entities because they both have the word “Shape” in their name, and occasionally communications may be directed to one when meant for the other. That is what the evidence discloses has in fact occurred, from time to time, in relatively few instances.
While there was some evidence of confusion, confusion itself is not enough and they were isolated instances only. Quickly dispelled.
You might recall that her Honour excluded evidence of print outs of websites of various businesses as hearsay and prejudicial. Evidence of the registration of such businesses as companies or business names was admitted, however, because the evidence was official ASIC records. There were 12 such businesses.[1] While Mortimer J accepted that this evidence did not take the matter very far, nonetheless it showed that the public could well come across other “Shape” entities in circumstances which undermined the potential for Shape Shopfitters to be seen as an “arm” of Shape Australia:
I accept that evidence of the bare existence of these entities cannot take the matter very far. However, the number of such entities using the word “shape” in their corporate names, and (I am prepared to infer) trading activities, is not without significance. Even without more information about those entities, the relative prevalence of the word “shape” in corporate and trading names, frequently in conjunction with construction-related words such as “joinery” and “projects” suggests that “participants in the industry” (including potential clients, purchasers and subcontractors) might well come across other entities using the word “shape” in the provision, sale and promotion of their particular services. That possibility cannot be discounted, and it tends against the linear proposition on which the applicant’s case relies: namely, the likelihood that the applicant (and it would appear, only the applicant) will be perceived to be part of the respondent’s larger group, and perhaps as its specialist shopfitting arm. That linear proposition must depend, it seems to me, on the applicant occupying something of a unique place in the market so that such a representation by the respondent’s use of the word “SHAPE” could only be made in respect of the applicant, and not other entities. This evidence tends against such a conclusion.
There was also some evidence from a search engine optimisation expert. It showed that neither business had very active websites. Those people who searched for Shape Shopfitters, however, typically did so by reference to the term “shopfitters”. This reinforced her Honour’s impression that it was its shopfitting specialty that identified Shape Shopfitters. On the other hand, Shape Australia did not typically generate hits in searches on terms related to “shopfitting”. If it did come up, it was invariably placed below the result for Shape Shopfitters:
Because of this, people searching for the Shape Shopfitters Website through searches for these terms are very unlikely to be misdirected to the SHAPE Australia website.
The passing off allegations failed similarly for want of the necessary misreprensation.
Shape Building Pty Ltd; Shape Design; Shape Property Developments; Shape Consulting; Shape Constructions Pty Ltd; Shape Project Management Pty Ltd; Shape Builders Pty Ltd; Shape Joinery & Design Pty Ltd; Shape Fitouts Pty Ltd; Shape Projects Pty Ltd; Shape Construction; the 12th, Shape Developments Pty Ltd changed its name in the course of the litigation although the reasons for that were not known. ?
Mortimer J has dismissed Shape Shopfitters claims against Shape Australia for misleading or deceptive conduct, passing off and trade mark infringement.
Much of the focus of the decision is on the misleading or deceptive conduct claim (and will have to be the subject of a future post). This post will look at the trade mark infringement claim.
Shape Shopfitters has registered Trade Mark No. 1731525 for shopfitting, construction and advisory services relating to construction in class 37 for this trade mark:
TM No. 1731525
It alleged that Shape Australia infringed that trade mark by using these signs:
Shape Australia provided construction services, apparently on a much larger scale, but was not specifically engaged in shopfitting – sub-contracting out those parts of its jobs. Also, Shape Australia did not provide its services to the particular people who were customers of Shape Shopfitters.[1]
Mortimer J found that Shape Australia’s trade marks were not deceptively similar to Shape Shopfitters’. Her Honour considered that the imperfect recollection of the relevant public would recall not just the word SHAPE, but also its collocation with the word Shopfitters (albeit it was subsidiary) and the distinctive “bottle cap” shape of the border.
Of the four elements comprising Shape Shopfitters’ trade mark (apart from the blue colouring), Mortimer J explained:
The use of capitals for the word “SHAPE” in the applicant’s Mark is, I accept, a feature likely to be recalled. In part, it is the use of capitals which is likely to make the word “shape” stick in the memory, as well as its proportionate size in the Mark. It is also correct that the word “Shopfitters” is much smaller, as is “Est 1998”. I see no basis to find that the latter phrase would be generally recalled, however I consider the word “Shopfitters” may well be recalled in conjunction with the word “SHAPE”. There is an alliterative effect between the two words, as well the positioning of “Shopfitters” underneath the word “SHAPE”. An industry participant’s eye (to take the applicant’s wider class of people) will, in my opinion, be drawn to that word as well and what is just as likely to be recalled is the phrase “SHAPE Shopfitters”, rather than just the word “SHAPE”.
As a result, the prospect that the word mark would be deceptively similar was roundly dismissed. The two devices with the word in a circle were closer, but the absence of the word Shopfitters and the difference between a circle and the “bottle cap” border were decisive.
The Circle Mark and the Transparent Mark have a closer similarity, because of – in combination – the use of capitals of the word “SHAPE”, the placement of that word inside a circle, and the use of a circle itself. However, as I have set out, in my opinion even imperfectly, a reasonable industry participant of ordinary intelligence and memory is likely to recall the word “Shopfitters” in conjunction with the word “Shape”, especially because of the alliteration involved. I also consider such a person will recall the applicant’s Mark has a distinctive border that is not a smooth circle.
I do not consider the evidence about several industry participants referring to the applicant as “SHAPE” affects these findings in a way which means that word would be recalled as the only essential feature of the applicant’s Mark. Rather, that evidence is evidence of the contraction of the applicant’s business and trading name in ordinary speech, and such a contraction does not necessarily carry over to what a reasonable person is likely to recall of the applicant’s Mark. It goes only to how industry participants might refer to the applicant in conversation.
Given these findings, it was unnecessary for her Honour to express an opinion on whether the registration of Shape Shopfitters’ trade mark with the blue background imposed a limitation on the scope of the registration.[2]
Mortimer J’s conclusions do not explicitly turn on the fields of activity of the respective parties, apparently a closely fought battle in the context of the misleading or deceptive conduct case. Indeed, at [258] her Honour expressly said it made no difference whether the relevant public was defined as the “buyers” of construction services or participants in the commercial construction industry.
Although Shape Australia was much larger than Shape Shopfitters, you might recall that for much of its life it had operated under the name ISIS Group Australia and had changed its name after Shape Shopfitters came on to the scene and the name of the ancient Egyptian goddess took on some rather unfortunate (to say the least) connotations. ?
Referring to s 70 read with the definition of “limitation” provided by s 6. ?
Over at the IPKat, there is a report about a CJEU decision upholding Michelin’s opposition based on its “X” trade mark to the registration of Continental’s “XKING” mark (below on the right), both in respect of tyres.
Michelin X v Continental Xking
You should read the report, if for no other reason, than the revelation of the EU’s “scientific” approach to trade mark conflicts.
Putting to one side the peculiar procedural posture the CJEU seems to take in these kinds of ‘appeals’, Merpel quite rightly thunders about scope afforded to ‘descriptive’ marks. After pointing out that it has taken 5 years to get to this point, Merpel says:
The end result here is that one trader with a weakly distinctive trade mark for the single letter X, distinguished from the letter of the alphabet only by the merest stylisation, can prevent the registration (and potentially use) of a stylised mark XKING. It must also follow that the same trader can prevent other X-formative marks, especially if the other element is in some way laudatory (and the word “king” is hardly at the top of the laudatory scale). Might it be said that this hands too strong a right to the trader?
Merpel makes a cogent case for the rejection of the opposition. What I wonder about, however, is what is the ordinary consumer likely to recall imperfectly? Would the ordinary consumer recall the mark is just an “X” alone so that the inclusion in Continental’s mark of rather bland “KING” is sufficient to dispel any potential for confusion? Or is the putative consumer likely to be struck by the common use of the hollow (or white) X? Under our version of trade mark law, all that is required is a (significant?) number of people being caused to wonder and the nature of the recollection is explained by Latham CJ:[1]
They will compare the actual mark which they see upon goods which are offered to them with the memory of the other mark, which they will retain in a more or less distinct form… The court must endeavour to put itself in the position of ordinary purchasers of goods who have noticed a trade mark as being distinctive of particular goods, but who have not compared that mark with any other mark, and who are quite probably not aware of the fact that another more or less similar mark exists.
[socialpoll id=”2454828″]
If you’re really motivated, leave a comment explaining why!
