Trade marks

Keywords – Marks & Spencer infringes INTERFLORA TM

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Marks & Spencer has been found to have infringed Interflora’s trade mark in the UK by ‘buying’ ads triggered by Google searches for the keyword INTERFLORA.

An example of the ads Arnold J found infringing:

Keyword search results
CLICK to enlarge

In Google France, the CJEU established that an advertiser would infringe a registered trade mark when its ads were triggered by a trade mark as a keyword where: [1]

“82 The essential function of a trade mark is to guarantee the identity of the origin of the marked goods or service to the consumer or end user by enabling him to distinguish the goods or service from others which have another origin (see, to that effect, Case C–39/97 Canon [1998] ECR I–5507, paragraph 28, and Case C–120/04 Medion [2005] ECR I–8551, paragraph 23).

83 The question whether that function of the trade mark is adversely affected when internet users are shown, on the basis of a keyword identical with a mark, a third party’s ad, such as that of a competitor of the proprietor of that mark, depends in particular on the manner in which that ad is presented.

84 The function of indicating the origin of the mark is adversely affected if the ad does not enable normally informed and reasonably attentive internet users, or enables them only with difficulty, to ascertain whether the goods or services referred to by the ad originate from the proprietor of the trade mark or an undertaking economically connected to it or, on the contrary, originate from a third party (see, to that effect, Céline, paragraph 27 and the case-law cited).

85 In such a situation, which is, moreover, characterised by the fact that the ad in question appears immediately after entry of the trade mark as a search term by the internet user concerned and is displayed at a point when the trade mark is, in its capacity as a search term, also displayed on the screen, the internet user may err as to the origin of the goods or services in question. In those circumstances, the use by the third party of the sign identical with the mark as a keyword triggering the display of that ad is liable to create the impression that there is a material link in the course of trade between the goods or services in question and the proprietor of the trade mark (see, by way of analogy, Arsenal Football Club, paragraph 56, and Case C–245/02 Anheuser-Busch [2004] ECR I–10989, paragraph 60).

Arnold J found on the evidence that a significant section of the public were confused and so Marks & Spencer infringed.

It is not possible to do justice in a blog post to the full range of reasons[2] contributing to his Lordship’s conclusion. Some that stand out follow.

Arnold J accepted (at [316]) that the majority of UK internet users appreciated the difference between paid ads and natural or organic search results, but there was still a significant proportion of internet users in the UK who did not. His Lordship also accepted that “nowadays” the majority of consumers appreciate .

nowadays the majority of consumers appreciate [they are being presented with ads by competitors to the brand they had searched for]. But I consider that a significant proportion do not. (emphasis supplied)

Secondly, the nature of the INTERFLORA brand appears to have been crucial. As you will no doubt be familiar, INTERFLORA is a network. It operates through a network of agents who are usually (always?) branded under their own names and trade marks. Those customers who were not buying online from “interflora.co.uk” or “interflora.com”, for example, would typically go into a retail outlet operating under its own name (and which may display the INTERFLORA name and logo).

The significance of this (at [297] and [299]) was that there was great potential for those customers who realised they were dealing with Marks & Spencer when they clicked on the ad mistakenly to think it was part of the INTERFLORA network.

That potential was in fact borne out by the evidence. In particular, there was evidence from “Hitwise data” that people who (1) searched on the keyword INTERFLORA and (2) as a result clicked on a Marks & Spencer ad generated in response to the search (3) were between 44 and 106 times more likely than the average visitor to the M & S flowers site to leave the M & S site without purchasing and instead go on to an INTERFLORA site.

At [304] – [306], his Lordship accepted the propositions that:

a significant number of consumers in Segment A decided after they had clicked through to the M & S website that it was not where they wanted to be and went to the Interflora website instead. The second is that the reason for this change of mind was that those consumers had clicked through from the M & S advertisement because they assumed from the appearance of the advertisement in response to their search that M & S was part of the Interflora network, but they realised that that was not the case when they clicked through to the M & S website and saw no reference to Interflora.

and such “initial interest” confusion was itself enough for trade mark infringement.

Thus, while Google doesn’t infringe by ‘selling’ keywords, the advertiser may and, in this case on Arnold J’s findings, did.

What, if anything, does it mean for us?

First off, the judgment is full of fascinating details about the “AdWords” and “search” market and the strategies that businesses deploy. For example, it appears that Google held around 90% of the global search (and paid advertising relating to search) market, with Bing and Yahoo! trailing out of site. There are also discussions of market research reports and Ofcom studies into what consumers understand when using the internet.

It is not clear whether Arnold J’s reasoning will provide us with much assistance here. First, while EU law does not appear to require use as a trade mark to infringe, the origin function referenced by the CJEU in Google France appears similar to our concept of use as a trade mark – as a badge of origin or to identify the trade source.[3]

Secondly, it seems doubtful that the considerations identified in [84] of Google France would be relevant at all under our law. The idea of examining whether the “normally informed and reasonably attentive internet users” could ascertain the trade source from the ad, or do so “only with difficulty”, indicates that the content of the advertisment may make it clear that the trade mark owner is not the source of the advertised product. However, a registered trade mark is infringed in Australia even if the trade source is made clear, for example by a disclaimer or other identifying factor. The type of analysis being engaged in under EU law is rather more like what would take place in a passing off action or action for misleading or deceptive conduct.[4]

Thirdly, our law does recognise the idea of “initial interest confusion”,[5] but the number of people who apparently went to M & S’ website and “clicked away” does rather highlight the difficulties with the concept as applied to web searches: clicking the back button, or even doing another web search in the browser, is not so costly as walking out of the shop, hopping back in your car and going looking for the intended destination.

Arguably, the most significant point could be the starting point identified at [288] – the Court of Justice’s recognition that:

keyword advertising is not inherently or inevitably objectionable from a trade mark perspective. On the contrary, the case law of the CJEU in this field recognises that, as a general rule, keyword advertising promotes competition ….

On this view, it was only the very special nature of INTERFLORA as a ‘network’ that convicted Marks & Spencer.

Interflora Inc v Marks and Spencer plc [2013] EWHC 1291 (Ch)

  1. See also [226] – [267] (esp.) of Arnold J’s judgment  ?
  2. Embracing some 318 paragraphs! His Lordship does start drawing the threads together at [295].  ?
  3. See *e.g. Optical 88 (No 2)* at [212].  ?
  4. See *e.g. Optical 88 (No 2)* at [99] and Crazy Ron’s at [86] – [88].  ?
  5. For example Southern Cross v Toowoomba at [5] but, at least in the context of misleading or deceptive conduct / passing off (yes, I know this is a post about registered trade marks) some brake may be imposed on that in at least some cases.  ?

Keywords – Marks & Spencer infringes INTERFLORA TM Read More »

Winnebago loses half an appeal

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The Full Court has partially allowed an appeal from Foster J’s decision to order Knott Investments to stop using the Winnebago trade marks for “campers” or RVs not made by Winnebago. As a result, Knott can continue to use “Winnebago” if it can make it clear it is not associated with the Winnebago company.

Some facts

From about 1959, Winnebago had been making and selling its RVs under that brand name in the USA and eventually other countries including the UK and Canada, but not Australia.

Winnebago logo
Winnebago logo

In the early 1960s, Binns became aware of the Winnebago name and logo while travelling around the USA. In 1978, Binns and his wife started manufacturing and selling their own RVs in Australia under the name “Winnebago” and using the Winnebago logo. In 1982, they incorporated Knott which then took over running their business.

The Winnebago company discovered what Knott was up to by 1985. However, the Winnebago company did nothing about this until 1992 when the parties entered into a “settlement” agreement. Following this, Knott kept making and selling its own Winnebago brand RVs and registered the Winnebago logo as trade marks. Winnebago itself did nothing further until 2010, when it wished to enter the market in Australia and started proceedings alleging misleading or deceptive conduct, passing off and seeking revocation of Knott’s trade mark registration for Winnebago and the logo.

When do you test whether conduct is misleading or deceptive

The Full Court allowed Knott’s appeal insofar as it related to when Knott’s conduct had to be tested as misleading or deceptive. Foster J held this was in 1982 when Knott was recorded in the Register of Business Names as having commenced running the business, there being no formal documentation of a transfer of the business. The Full Court, however, considered that Knott was plainly the successor in title to the Binns’ business and so the relevant time was 1978, when the Binns started up.

This is important because the Full Court unanimously considered the relevant time to assess whether conduct is misleading or deceptive under s 52 of the TPA (as it was) and s 18 of the ACL (as it now is) is the date when the “infringer’s” conduct started, not some later date.

As it turned out, however, this did not help Knott much as the Full Court considered the evidence clearly established Winnebago had a “spillover” reputation in Australia in 1978 even though it had not traded in Australia at that point.[1] Therefore, Knott (and the Binns’) conduct was likely to mislead or deceive.

Estoppel, laches, acquiescance or delay

The issue that loomed large in the Full Court’s eyes was Winnebago’s delay in bringing proceedings to enforce its rights – 25 years after it first learned of Knott’s activities and 18 years after the “settlement” agreement. Over that period of time, Knott had built up its own substantial reputation in “Winnebago” in vehicles of its own manufacture.[2]

First, the Full Court agreed with Foster J that the “settelment” agreement did not authorise or concede any rights to use “Winnebago” to Knott. Clause 6 provided:

This Agreement does not address, impact upon, or relate in any way, manner or form to the use or ownership of the [Winnebago marks] in Australia or to any rights relating to the [Winnebago marks] based on reputation or use under any statute or at common law in Australia. By entering into this Agreement, Winnebago does not expressly or impliedly acknowledge that Australian Company has any rights of any nature whatsoever to the [Winnebago marks] in Australia. To the extent not expressed in this Agreement, this Agreement shall be without prejudice to the rights of Winnebago and Winnebago expressly reserves all of its legal rights.

Knott argued, however, that the 18 year delay in bringing proceedings meant it was unjust to permit Winnebago to bring proceedings now. Allsop J despatched this argument for six:

First, there was no clear representation, arising either out of the Settlement Agreement or from the conduct. The terms of the agreement, in their context, contained a degree of commercial ambiguity. The terms, however, of cl 6 could leave no doubt in Mr Binns’ mind that any practical confidence in him that Winnebago was not going to sue him was not based on any right conceded by Winnebago. He proceeded at his own risk. The finding by the primary judge at [155] of the reasons (not specifically challenged) that Mr Binns knew there was a risk of having to rebrand his product if Winnebago entered the market is also fatal to the submission. (emphasis supplied)

Allsop CJ and Jagot J rejected Knott’s arguments based on laches, acquiescance and delay both for similar reasons and because Knott had expressly disclaimed them at trial.

Notwithstanding this, the Full Court considered that Foster J’s order that Knott be restrained from using the Winnebago trade marks was unjust. Even though Knott (or, really, Binns) had adopted the Winnebago trade marks to take advantage of the Winnebago company’s reputation and there was evidence that some members of the public had been misled, nonetheless, Knott had over decades built up its own substantial, independent reputation. Instead, therefore, the injunction should only prohibit use which did not appropriately disclaim any trade association with the Winnebago company. At [67], Allsop CJ explained:

This limitation of relief can be seen to reflect not only the balancing of the respective interests of Knott and Winnebago in the reputation developed by Knott’s expenditure, in the context of Winnebago’s extraordinary (and informed) delay, but also the erosion of the reputation of Winnebago ….

and

The evidence reveals sufficient to conclude that at least some of Knott’s reputation in the use of the name and marks was the development of its goodwill and reputation; that not all of the development of its business involved the taking advantage of Winnebago’s reputation in Australia. In normal circumstances, this would not matter; it would be something that the party passing off would have to accept as a consequence of its wrongdoing. Here, however, Winnebago has contributed to this by standing by, informed of the position, for 25 years while Knott expended money and built a business, part at least of which was its own reputation. (emphasis supplied)

The disclaimer or dissassociation had to be clear on the vehicles Knott made in future as well as in its advertising and promotional material.

The third member of the Court, Cowdroy J, did not explicitly reject the laches or acquiescance defence, but agreed in the approach of Allsop CJ saying at [106]:

the Court considers that the granting of relief to completely restrain the appellants from the use of the Winnebago marks to be unreasonable in light of the substantial delay by Winnebago.

Finally, the Full Court upheld Foster J’s order to cancel Knott’s registration of the Winnebago trade marks. Knott had registered these in direct contravention of the terms of the “settlement” agreement.

Some thoughts

In 1992, a representative of the Winnebago company had written to its then Australian lawyers explaining:

… While we are obviously interested in persuading or compelling Mr Binns to cease using the subject marks in Australia, I really do not think that we can justify any additional expense. We are not selling our products there nor do we have any plans to do so. There has in the past been some indication that Mr Binns was experiencing some financial duress and perhaps with any luck he will go broke. In any event, at least for the time being, I think we will just continue to monitor this situation … [3]

No doubt, the sentiments will resonate with everyone advising a foreign brand owner in Australia. The Full Court’s approach may provide a warning. The terms of the “settlement” agreement were sufficiently limited to preserve the Winnebago company’s right to enter the market and object to misrepresentation of association, but failure to enforce its rights promptly has left it encumbered with a competing, independent user of its brand. On the other hand, Knott did not bring matters to a head in negotiating the “settlement” agreement and finds itself constrained. As Allsop CJ said, it ran the risk. How the disclaimer should be effected is unclear, but there are indications in Allsop CJ’s reasons that Knott has been able effectively to dissociate its business from the Winnebago company, while still using the Winnebago trade marks, since 2003.

Knott Investments Pty Ltd v Winnebago Industries, Inc [2013] FCAFC 59

  1. Nothing controversial in the principle: see ConAgra v McCain [1992] FCA 159; 33 FCR 302, although successful cases are still relatively rare.  ?
  2. For example, Foster J referred to Knott spending over $6million in advertising expenditure between 1992 and 2010.  ?
  3. See [114] of Foster J’s reasons at first instance.  ?

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Trade mark oppositions (Australia)

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Andrew Sykes, a barrister and trade marks attorney, has started a new trade mark resource: Australian Trade Mark Opposition Law.

According to the website:

The purpose of this site is to provide quick, reliable answers to practitioners working with trade mark oppositions and appeals. Therefore the aim is to keep excessive academic discussion to a minimum and make good use of relevant and helpful citation to authorities. ….

The website is a work in progress with additional details and material dealing with further grounds and links to be added. Based on what is up already, however, Andrew has some interesting ideas.

Check it out!

Trade mark oppositions (Australia) Read More »

Trade marks, un-parallel imports and the emerging concept of use as a trade mark

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The Full Court has rejected another attempt by Paul’s Retail to invoke s 123 against allegations it was infringing LONSDALE trade marks.

Background

Lonsdale Sports Limited (Lonsdale UK) had a number of registered trade marks in Australia and elsewhere for LONSDALE.

In May 2008, it licensed Punch GmbH to use the LONSDALE trade marks in a number of countries, mostly in Europe. As part of the licence, Punch was permitted to get its LONSDALE goods made in China.

In June 2011, Lonsdale UK assigned its Australian trade marks to Lonsdale Australia. Both Londsdale Sports Limited and Lonsdale Australia were members of the same corporate group, having Sports Direct as their ultimate holding company.

Between December 2011 and April 2012, the appellants bought and imported into Australia 293,329 products bearing the LONSDALE trade marks. The way the goods were sourced plainly gave rise to considerable skepticism in the courts.

The goods were in fact made and marked by Punch in China. Punch sold them to Unicell. Punch invoiced Unicell and shipped them to Unicell in Sri Lanka, part of Punch’s territory, and bought them from Punch. . Unicell then engaged in ‘certain “pre-retailing” activities (such as splitting, tagging and pricing) and shipped them to the appellants via the intermediary of  TMS LLC (a US company).

Punch paid royalties to Lonsdale UK on the goods it shipped to Unicell. It appears from Gordon J’s reasons, however, that there were some differences between at least 2 of the trade marks registered in Australia and those licensed to Punch by Lonsdale UK. Although not licensed to it by Lonsdale UK, Punch nonetheless arranged to have those 2 trade marks put on the products the appellants imported and sold.

The Full Court (Keane CJ, Jagot and Yates JJ) has affirmed Gordon J’s ruling that the appellants infringed the registered trade marks in Australia for LONSDALE, but not for the reasons you, or the trial judge, might think.

The trial judge, Gordon J, held there were 3 reasons why Paul’s infringed:

32 There are three complete answers to this submission. First, for the reasons stated at [16]-[18] above, this construction of the Champagne Heidsieck principle should not be accepted. The reference to “registered owner” in the High Court’s statement of the principle should be understood to mean the registered owner of the Australian registered trade marks in question, consistently with the proper construction of the TM Act. Accordingly, the principle will only assist the respondents if they can show that Lonsdale Australia consented to the application of the Lonsdale Australia Trade Marks. Secondly, Lonsdale Australia (being the registered owner of the Lonsdale Australia Trade Marks) did not affix any mark to the Paul’s Goods. Thirdly, as stated at [27] above, it cannot be said that “a manufacturer [has put] a trade mark on his goods and [sent] them into the course of trade on the billowing ocean of trade … not telling any lies or misleading anyone in any way at all”: cf Atari 50 ALR 274 at 277. Here, the “manufacturer” of the goods (Punch) did not legitimately apply at least two of the three marks to the Paul’s Goods.

That is, Lonsdale Australia as the registered owner of the trade marks in Australia:

(1) did not apply the trade marks to the imported goods;

(2) did not consent to Punch applying the trade marks to the imported goods,

and Punch had no authority to apply at least two of the trade marks to any goods.

The Full Court – why s 123 did not apply

The Full Court, however, considered it was unnecessary to even address those questions. Instead, it said at [37]:

The consent given by [Lonsdale UK] to Punch on which the appellants rely was limited in its terms to “the non exclusive right to promote, distribute and sell Products bearing the Trade Marks in the Territory”. Whether one looks at the issue through a strict legal analysis of the Punch licence and the Punch-Unicell sales agreement, or from a broader commercial perspective, the use of the Lonsdale marks for the purposes of the sale by Punch to Unicell cannot be seen to be within the limited consent given by the Punch licence.

That is, as Punch had a licence limited only to selling LONSDALE products in Europe, s 123 was not even engaged. It was unnecessary to enquire whether the trade marks had been applied by or with the consent of the trade mark owner.

By dealing with the issue in this way, the Full Court avoided having to deal with the question (1) whether the common ownership of both Londsdale UK and Lonsdale Australia as members of the same corporate group was a sufficient basis to infer consent to the application of the LONSDALE trade marks to the goods imported by Paul’s.

Given (absent imputed consent through the corporate relationship) at least some of the trade marks applied by Punch to the Paul’s goods were not licensed to Punch by Lonsdale UK, one may wonder why the Full Court took its approach. If Punch’s licence had not been limited territorially, would the Full Court have imputed consent on the basis of the corporate relationship?

The Full Court’s approach to the scope of Punch’s consent is similar to the way the Courts deal with implied consent in the context of patents.[1] Accordingly, before one even considers whether the consent of the registered owner of the trade mark may be invoked under s 123, it will be necessary for a prospective parallel importer to ascertain the scope of the licence given to the licensee from whom the goods are sourced.

That this is a deliberate choice by the Full Court is reinforced by the Court’s express denial at [51] of any relevance to the interpretation of s 123 by reference to the doctrine of exhaustion. That rejection may be thought somewhat surprising as s 123 was enacted to implement the recommendation of the Working Party to give statutory force to the doctrine of exhaustion:

A majority of the comments received were in favour of the exhaustion of rights doctrine.. Questions were raised as to whether or not the mark was applied with or without the consent of the proprietor and whether the goods were materially different form the local goods. It was considered preferable that argument on these issues take place in the context of statutory recognisiton of the legality of parallel importation.

The Champagne Heidsieck principle

The Full Court also rejected the appellants’ attempted reliance on the so-called Champagne Heidsieck[2] principle. As re-formulated by the High Court in Gallo at [34]:

a trade mark is not infringed by a third party importing, offering for sale and selling, without the owner’s consent, goods to which the registered owner (or its licensee) has affixed the mark….

Gordon J’s reasoning at first instance avoided this principle since the registered owner, Lonsdale Australia, had never consented to anything Punch did or arranged.

Having noted there were difficulties in articulating how the Champagne Heidsieck[2] principle could apply in the context of the Act and particularly s 123, the Full Court at [64] considered that, if s 123 did not save the appellants, there was no other principle that could help them. However, the Full Court went on to reject the argument that:

the importation and sale of goods marked with the consent of the owner of the trade mark or its licensee does not involve a use of the trade mark by the importer or seller.

The Full Court rejected this argument at [65]:

If this argument were correct, an importer would not infringe the trade mark merely by acts of importation and sale even if the mark had been applied to the goods without the consent of the owner of the trade mark. This Court has previously expressed the view that “…absent s 123 the mere sale by an importer of goods already marked would be an infringing use of the mark by the importer”: See E & J Gallo Winery v Lion Nathan Australia Pty Ltd (2009) 175 FCR 386 at [58]; quoted in Paul’s Retail Pty Ltd v Sporte Leisure Pty Ltd (2012) 202 FCR 286 at [66]; see also Transport Tyre Sales at [94].[3]

Although the Full Court appears to treat this part of the appellants’ argument separately to the Champagne Heidsieck[2] principle, it is with respect difficult to see any difference between the two arguments.

It could be argued that the situation addressed by the Champagne Heidsieck principle is very different to that where the goods imported are not genuine. As the Full Court noted at [66], however, support for the view taken by, now, 3 Full Courts can be found in the observation of Aickin J in Pioneer,  which itself seems difficult to reconcile with s 7(3).

It therefore appears clear, failing intervention by the High Court, that the Champagne Heidsieck[2] principle is no longer applicable in Australian law.

One consequence of this appears to be that a provision intended to entrench the rights of parallel importers may well have made it much more difficult to engage in parallel importing.

More importantly, the Champagne Heidsieck[2] principle can be seen as an emanation of what US trade mark lawyers call “nominative use” or “nominative fair use”: one did not use a trade mark as a trade mark by using it to identify the goods or services marked with the trade mark by the trade mark owner. So, for example, under the old Act the Full Court held it was not use the trade mark ROLLING STONES as a trade mark to sell bootleg recordings of the Rolling Stones performing by reference to the name ROLLING STONES. Does the enactment of s 123 mean that principle is no longer applicable?

Paul’s Retail Pty Ltd v Lonsdale Australia Limited [2012] FCAFC 130

  1. Société Anonyme des Manujactures de Glaces v. Tilghman’s Patent Sand Blast Company (1883) 25 Ch. D 1 (CA).  ?
  2. Champagne Heidsieck et Cie Monopole Societe Anonyme v Buxton [1930] 1 Ch 330.  ?
  3. In Gallo, the High Court had refrained at [53] from expressing a view about the correctness of this view.  ?

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Q1?

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Mr Spagnuolo has been granted “special” leave to appeal to the Full Court from Reeves J’s dismissal of his opposition to Mantra registering Q1 for a range of accommodation, travel and holiday services.

Some background

Q1 is another one of those “iconic” high rise apartment buildings on the Gold Coast. Its 78 levels boast 526 residential apartments, a retail shopping plaza and a resort / conference complex.

In addition to operating the resort/conference part of the building under Q1 RESORT & SPA, Mantra also has arrangements for renting out 193 of the privately owned apartments.

Mr Spagnuolo owns two of the apartments himself and has arrangements to rent out a number of others’ apartments. He operates his rental business under the name Q1 Holidays Gold Coast and also holds the domain name q1holidaysgoldcoast.com.au.

Mantra’s predecessor applied to register 3 trade marks, Nos 1228706, 1228707 and 1228708 for a range of services in classes 36, 39, 35 and 43. (Not sure why they were in three different applications. has there been a change of practice about these things?)

The Registrar’s delegate had upheld Mr Spagnuolo’s opposition, but Reeves J overturned that decision on appeal.

Why?

While a party may appeal to the Court from the Registrar’s decision in an opposition proceedings as a matter of right, there is no automatic right of appeal from the Court’s decision at first instance. Leave is required: s 195(2).  It is fairly unusual for unsuccessful opponents to the registration of a trade mark to get leave to appeal to the Full Court.

One key factor in why Logan J granted leave was the legal point Mr Spagnuolo wants to run: he argues that Q1 is not inherently adapted to distinguish Mantra’s services as other people wanting to rent out their properties in the Q1 building will legitimately want to use Q1 too. That is, Mr Spagnuolo wishes to contend that Q1 is not inherently adapted to distinguish under s 41 because the Q1 building is not owned by one person. As a result of the disparate ownership of the properties comprising the Q1 building, therefore, Q1 may be the name of “a locality”.

According to Logan J and the parties, this question has not been the subject of judicial decision.

Another consideration was that there were conflicting decisions in the Office and at first instance, with the Registrar’s delegate allowing the opposition and Reeves J rejecting it.

After some rumblings about the potential for litigants with deep pockets to oppress those “not as well financially provided”, Logan J also pointed out that the parties had filed extensive evidence in the court proceedings, the benefit of which would be lost if Mr Spagnuolo was not permitted to appeal and was left to start revocation proceedings anew.

Finally, Logan J granted Mr Spagnuolo an extension of time in which to file his application for leave to appeal. Under the “old” Rules, an applicant for leave had 21 days to file the application. Under the new rules (in force since August 2011), however, applications for leave must be filed within 14 days. That wasn’t an obstacle in this case as Mr Spagnuolo’s advisers filed only 1 week late so there wasn’t really any special prejudice Mantra could point to.

Finally, Logan J granted a stay on Reeves J’s direction that the trade marks proceed to registration:

… Mantra IP has only briefly enjoyed the benefits of the judgment. Before then, its applications stood rejected. It was not greatly pressed, on its behalf, that there was any particular commercial harm that it would suffer beyond the obvious one of its position being unclear until there was a final judgment. It seems to me there would be much potential for mischief in the marketplace in the event that there were not a stay.

Spagnuolo v Mantra IP Pty Ltd [2012] FCA 1038

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Mediaquest v Registrar

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It turns out that the Registrar does have power to undo an assignment of a registered trade mark that has been registered wrongly.

A Mr Brailsford was the registered owner of the Peel Away trade mark for paint stripping preparations, TM No. 741047. He died in 2008.

On 23 Setember 2010, trade mark attorney McInnes filed an application to register an assignment of the trade mark to Mediaquest.

On 8 October 2010, the Registrar registered the assignment and Mediaquest became the owner of TM No. 741047.

On 12 November 2010, trade mark attorney Wilson wrote to the Registrar complaining about the registration of the assignment without notification to him and challenging it. Mr Wilson was acting for Mr Brailsford’s heirs and had been the address for service entered in the Register when the application to register the assignment was lodged.[1]

On 22 November 2010, the Registrar wrote to Mr McInness stating that the documentation relied on to establish the assignment was inadequate and so the Registrar intended to cancel the registration of assignment pursuant to s 81. Mediaquest objected to this and pointed out, amongst other things, that it had withdrawn a pending non-use action once the assignement was registered.

Further correspondence took place and, in due course, a hearing at which the delegate concluded Mediaquest had not established its entitlement to be registered as the assignee. Mediaquest appealed.

On appeal, Emmett J held that:

1 Mediaquest was not entitled to an assignment; and
2 the Registrar did have power to cancel the registration of the assignment.

Ownership

Mediaquest claimed it had an assignment from CRT. Mr Brailsford was the president and a director of CRT. Mediaquest sought to argue that his registration of TM No 741047 in Australia was in breach of his duties to CRT as a director and consequently the trade mark belonged in equity to CRT and, as a result of an assignment from CRT to Mediaquest, to it.

It seems Mr Brailsford may well have coined the mark and used it in the USA. At one point, the US mark was owned by another of Mr Brailsford’s companies, Pilgrim. In November 1992, Pilgrim assigned all its rights to Mr Brailsford and, in August 1993, Mr Brailsford assigned all his (US)[2] rights to CRT. It was after this, in 1997, that Mr Brailsford applied to register what became TM No. 741047 in Australia in his own name. In 1998, CRT applied to register a patent in the UK, identifying Mr Brailsford as the inventor and claiming entitlement through agreement with him.[3]

Emmett J found Mr Brailsford was entitled to register TM No. 741047 in his own name:

  • CRT was clearly the owner of the US trade marks;
  • both Pilgrim and CRT were creatures of Mr Bailsford;
  • while CRT was incorporated in Jersey in the Channel Islands, there was no evidence that it had ever traded anywhere other than in the USA or the UK.

At [34]:

The contention advanced on behalf of Mediaquest is that Mr Brailsford acquired the opportunity to register the Peel Away Mark in Australia by reason of his being a director of CRT. However, that can only be an inference. The circumstance that Mr Brailsford had dealings with the Peel Away mark before CRT was incorporated gives rise to a contrary inference. That is to say, it does not necessarily follow that the opportunity of registering the Peel Away mark in Australia was one that came to Mr Brailsford by reason of his being a director of CRT. Rather, an inference is at least available, and may perhaps be more easily drawn, that CRT acquired whatever opportunity it had to exploit the Peel Away Mark, and associated technology and knowhow, because Mr Brailsford chose to make it available to CRT. (emphasis supplied)

In these circumstances, his Honour concluded at [36] that the opportunity to register the trade mark in Australia did not come Mr Brailsford’s way because of his role in CRT and so CRT was not entitled to the trade mark in equity.

Power to cancel

Section [88(2)(e)] provides a power to rectify the Register on the basis that an entry in the Register “was made, or has previously been amended, as a result of fraud, false suggestion or misrepresentation.” This power, however, is conferred on the Court, not the Registrar.

Emmett J noted that under s 109 and s 110 the Registrar only had power to register an assignment of a trade mark. Whether there had been a valid assignment was a jurisdictional fact and, if there had not been a valid assignment, there was no power to register the assignment. In such a case, therefore, the Registrar had power to cancel the erroneous entry. As a result at [54]:

There was no actual assignment of the Registered Mark to Mediaquest, either from Mr Brailsford or from his executors. Accordingly, the Registrar’s decision of 8 October 2010 to record the assignment in the Register was tainted by jurisdictional error and was no decision at all. It was therefore open to the Registrar to reconsider whether the duty imposed by s 110 had been enlivened, by revisiting the question of whether there was an actual assignment or transmission of the Registered Mark to Mediaquest. Having determined that there was no actual assignment or transmission, it was open to the Registrar to take steps to cancel the earlier action. There is nothing in the Act to indicate that a decision of the Registrar under Part 10 that was affected by jurisdictional error should continue to have legal effect. Indeed the considerations outlined above suggest the contrary.

In answer to Mediaquest’s concerns about the uncertainty this would give rise, Emmett J pointed out at [56] that:

the scheme of the Act is not proprietorship by registration but registration of proprietorship. Registration under the Act is only prima facie evidence of ownership, as is provided by s 210. The registered owner is always susceptible to action being taken under Part 8 to revoke a trade mark that should never have been registered, or to substitute the true owner of the trade mark for that of a wrongful claimant. True ownership of a trade mark is a defence to infringement proceedings brought under the Act.

That is, registration was only prima facie evidence of ownership. Accordingly, all registrations were subject to an inherent level of uncertainty.

One interesting aspect of his Honour’s approach is that it does not appear to be based on the power conferred by s 81. Rather, it seems to have a much more fundamental underpinning in “jurisdictional error”.

No doubt, there is a sense here that the Court is not interested in technicalities that would force all of these types of disputes to be brought before it rather than knocked on the head in the Office. One might wonder, however, why the Registrar does not require documentation signed by the assignor as well as the assignee in the first place. This may well become more of an issue with the recordal of security interests as the Registrar’s practice is apparently to allow an interest to be recorded by the person claiming to have taken out a security interest alone.

Mediaquest Communications LLC v Registrar of Trade Marks [2012] FCA 768

  1. At the moment, as a result of Emmett J’s decision, Mr Brailsford is shown as the owner, but (presumably) Mr McInnes’ firm is shown as the address for service.  ?
  2. It is not clear from the judgment whether the agreement was in terms limited expressly to the US rights or this is an inference from the limited rights then existing.  ?
  3. The nature of the agreement is not specified in the judgment.  ?

Mediaquest v Registrar Read More »

Another round in the plain packaging tobacco war

Leave a Comment / Trade, Trade marks / / / , , , , ,

This is a bit behind as it happened over the break:

The “tobacco plain packaging” legislation became law last December and, as you will recall, Philip Morris Asia has initiated an arbitration proceeding under the Australia-Hong Kong Investment Treaty.

Australia filed its “defence” late in December, alleging that Philip Morris Asia bought the assets in question after the Government’s plans were known and so hasn’t lost any value:

Prof. Davison has a typically wry report

Philip Morris’ complaint and Australia’s “defence” are available via here.

 

Another round in the plain packaging tobacco war Read More »

Registering a trade mark in bad faith

1 Comment / Trade marks / / / , , , , , , ,

Dodds-Streeton J has handed down what appears to be the first detailed judicial consideration in Australia of what constitutes making an application for a trade mark in bad faith contrary to s 62A.

Sports Warehouse Inc. and Fry both sell tennis products online using trade marks based on TENNIS WAREHOUSE.

Sports Warehouse started first, in 1984 in California although in time its business expanded and in 1994 it went on line. Eventually, its sales expanded internationally including to Australia.

Fry had successfully opposed Sports Warehouse registering TENNIS WAREHOUSE.

Sports Warehouse successfully opposed Fry registering:

However, Dodds-Streeton J has now upheld Fry’s appeal.

The grounds of opposition included that the trade mark lacked capacity to distinguish, that it was confusingly similar to Sports Warehouse’s trade mark and also that the application was made in bad faith.

The s 62A ground was based on the fact that, before Fry adopted its trade mark, its principal, Mr Fry had done a Google search and come across Sports Warehouse’s website. He also used some photographs from Sports Warehouse’s website for his own site. However, he said that before he adopted the name his wife had done a trade mark search to confirm it was not an “international” trade mark. Further, he acknowledged at [21]:

there was potential that some people would confuse the websites (at least at the point of the domain name) and acknowledged that he chose the name partly for that reason, but denied that he hoped to use Sports Warehouse’s reputation in order to boost early sales.  He also denied that he believed the name TENNIS WAREHOUSE would cause customers aware of Sports Warehouse’s website to think that the Fry Consulting website was an arm or affiliate of Sports Warehouse.

Dodds-Streeton J noted that, when introduced in 2006, the EM had included a number of examples of bad faith:
  • a person who monitors new property developments; registers the name of the new property development as a trade mark for a number of services; and then threatens the property developer with trade mark infringement unless they licence or buy the trade mark;
  • a pattern of registering trade marks that are deliberate misspellings of other registered trade marks; and
  • business people who identify a trade mark overseas which has no market penetration in Australia, and then register that trade mark with no intention to use it in the Australian market and for the express purpose of selling the mark to the overseas owner.

(The last example may be contrasted to the “sharp”, but previously legitimate, practice of registering such a mark and operating a business in Australia – see [20] here.)

The concept in s 62A, however, was not limited to those examples. Her Honour drew substantial guidance from a number of English cases (and consideration of those decisions in the Office) on s 3(6) of the Trade Marks Act 1994 (UK) which adopted a “combined test” involving both subjective and objective elements:

dishonesty requires knowledge by the defendant that what he was doing would be regarded as dishonest by honest people, although he should not escape a finding of dishonesty because he sets his own standards of honesty and does not regard as dishonest what he knows would offend the normally accepted standards of honest conduct.

and

The words “bad faith” suggest a mental state. Clearly when considering the question of whether an application to register is made in bad faith all the circumstances will be relevant. However the court must decide whether the knowledge of the applicant was such that his decision to apply for registration would be regarded as in bad faith by persons adopting proper standards.

Accordingly, her Honour considered:

  1. Bad faith, in the context of s 62A, does not, in my opinion, require, although it includes, dishonesty or fraud. It is a wider notion, potentially applicable to diverse species of conduct.
  2. The formulation in United Kingdom authority of bad faith as falling short of the standards of acceptable commercial behaviour observed by reasonable and experienced persons in a particular area is, in my view, an apt touchstone. An overly literal application may, however, tend to negate the relevance attributed to the applicant’s mental state in the combined test preferred in Harrison.
  3. Further, in my view, mere negligence, incompetence or a lack of prudence to reasonable and experienced standards would not, in themselves, suffice, as the concept of bad faith imports conduct which, irrespective of the form it takes, is of an unscrupulous, underhand or unconscientious character.

Dodds-Streeton J rejected the proposition that it was enough that Fry knew of Sports Warehouse’s trade mark and usage.

While her Honour regarded Fry’s conduct as exploitative, the factor which saved it in the end was an exchange of correspondence between the parties. After Sports Warehouse learnt of Fry’s use and demanded it stop on the basis of its international trade mark, Mr Fry had challenged it to provide proof of the international trade mark. Sports Warehouse said it would do so the next day but, her Honour found, never did so. At [174]:

  1. In circumstances where:

(a) Mr Fry unequivocally indicated his willingness to cease using TENNIS WAREHOUSE if Sports Warehouse provided evidence of its entitlement, and sought a prompt response, so that if necessary he could change the name prior to significant business development and expenditure on advertising;

(b) Mr Fry did not acknowledge Sports Warehouse’s ownership or rights in Australia and Kenny J did not find that Mr Fry did not believe his assertions about the implications of a business name search, although they were misconceived;

(c) Sports Warehouse, despite undertaking to do so, did not provide any documentation or evidence of its entitlement or rights to the “TENNIS WAREHOUSE” mark, the subsequent application to register which in Australia was unsuccessful. It failed to make any further contact or objection until Fry Consulting again initiated contact two years later; and

(d) During that period, in the absence of any further objection or contact from Sports Warehouse, Mr Fry proceeded to develop his business using the words “TENNIS WAREHOUSE”, to which he added the word “AUSTRALIA”, and subsequently commissioned Mr Hughes to design a tennis ball logo, resulting in a composite mark,

it was difficult to accept that Fry’s conduct fell short of what would be acceptable commercial behaviour (especially, one might add, where Fry did not lodge its application until 2 years after Sports Warehouse said it would provide its proofs the next day).

Fry Consulting Pty Ltd v Sports Warehouse Inc (No 2) [2012] FCA 81

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More plain packaging for tobacco products

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Back in July, the Government introduced the Tobacco Plain Packaging Bill and related legislation.

As you will recall it generated quite some controversy as it effectively bans the use of some types of trade marks and severely restricts the way others can be used. It has passed the House and, now that the Senate’s Legal and Constitutional Affairs committee has recommended the Trade Marks Amendment (Tobacco Plain Packaging) Bill be passed, is due to return to the Senate for passage, with the aim that all product on shelves on 1 July 2012 will comply with the new rules.

The Government has now released a second round of consultations on the form the packaging should take for cigars and other non-cigarette tobacco products.

Submissions should be received by 28 October 2011 with the resulting regulations expected to released in January 2012.

Consultation paper (pdf)

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Coke v Pepsi

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The war between Coke and Pepsi over the shape of a bottle is alive and well.

Last week the parties were in court fighting over discovery.

By the tie of the hearing what was actually in dispute was quite narrow. In the end, Dodds-Streeton J ruled that Coca Cola should be allowed to get discovery amongst other things from Schweppes, Pepsi’s bottler in Australia, relating to whether or not Schweppes had sought any indemnities from Pepsi, either before or after the proceedings commenced. Schweppes et al. conceded discovery relating to any request before proceedings commenced.

It was argued that such discovery was potentially relevant to the respondents’ state of mind on the basis of the Australian Woollen Mills‘ principle that a defendant who tries to pass off is giving a sort of expert evidence that deception or confusion can be expected.

Given the concession that discovery directed to requests before proceedings commenced and there was no suggestion that the further discovery was oppressive, Dodds-Streeton J considered that discovery of any requests made after proceedings were commenced was appropriate as:

in passing off and s 52 actions, the applicant’s reputation is to be assessed at the date of the conduct complained of. As Gummow J explained in Thai World Import & Export Co Ltd & Anor v Shuey Shing Pty Ltd & Ors (1989) 17 IPR 289 at 302, that principle reflects that the reputation is not to be taken to be eroded by infringing activities which occurred before proceedings are instituted.

Other cases appeared to consider that the relevant time in (what used to be called) s 52 actions was still unresolved, but in passing off the relevant time was when the respondent commenced its conduct. (See e.g. Playcorp v bodum [54] to [62]).

Dodds-Streeton J’s reason provide a fair bit more detail about the nature of Coca-Cola’s claims; not so much about Pepsi’s defence, although apparently it had been using its “new” bottle shape since 2007 (that of course would still be well within the 6 year limitation periods).

The orders may also provide you with a useful starting point for discovery requests:

Coca-Cola Company v Pepsico Inc [2011] FCA 1069

Coke v Pepsi Read More »

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