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HWL Ebsworth Partner Nicholas Pullen and Special Counsel Gina Tresidder discuss whether a well-used trade mark can be removed for “non-use”. Gina will present on the topic, Commercialising IP: The Key Elements Every Lawyer Should Know, at the 10 Points in One Day in Geelong Conference on Friday, 1 March.
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The registered owner of a trade mark is not always the company actually using the trade mark. Depending on your asset protection and commercialisation strategies, the trade mark could be:
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- Registered to a holding company and used by a trading company;
- Used by a licensee or franchisee of the registered owner; or
- A recent acquisition not yet recorded as yours on the Trade Marks Register.
In these circumstances, even well-used registrations could be vulnerable to removal for ‘non-use’ if the registered owner is not effectively controlling use of the trade mark. This has been highlighted by several recent cases, including Calico Global Pty Ltd v Calico LLC[1](the Calico case), where the registered owner of the trade mark assigned the trade mark to a second company, who licensed it on to a third company.
The Calico case is discussed in more detail below, and we set out a checklist to ensure your well-used trade mark registrations are protected.
The Calico Case
In the Calico case, Calico Global Pty Ltd (Calico Global) unsuccessfully appealed the Registrar’s decision to remove one of the classes of services from its ‘calico’ trade mark registration. The court was not satisfied that Calico Global had used the trade mark in relation to the targeted services, being a variety of medical and health services in Class 44.
However, even if Calico Global had been using the trade mark in regard to medical and health services, this may not have saved the registration. This is because Calico Global had not ensured its use was under the ‘control’ of the registered owner.
The trade mark was originally registered from 7 June 2004 in the name of Kevin Owens. On 19 July 2011, the registration was transferred by way of an assignment deed to Calico Pty Ltd (Calico), a company of which Kevin Owens was the sole director. On the same day, Calico granted Calico Global an exclusive licence to use the trade mark.
The assignment of the registration to Calico was not recorded on the Register until 27 May 2014, after the non-use removal application was filed by US company, Calico LLC. Accordingly, to defeat the removal action, Global needed to show use of the trade mark by registered owner Kevin Owen in the pre-assignment period or by unregistered owner Calico in the post-assignment period. However, the only party using the mark for the purposes of defending the registration appeared to be Calico Global.
The Trade Marks Act 1995 (Cth) does provide for unrecorded trade mark assignments. Subsections 100(2) and 100(3) state that where a trade mark has been assigned but the assignment has not been recorded, use by the assignee will be sufficient to prevent the registration being removed for non-use, provided that:
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- The use was in good faith and in accordance with the terms of the assignment; and
- The Registrar or the court believe it is reasonable, having regard to all the circumstances of the case, to treat the use of the trade mark by the assignee as having been a use of the trade mark by the registered owner.
However in this case, the assignee, Calico, had not used the trade mark, and was actually precluded from using the trade mark by the exclusive licence it granted to Calico Group.
The Act also provides for an ‘authorised use’ of a trade mark to be treated as a use by the owner of the trade mark[2], the owner in this case being Calico. However, use of a trade mark is only an authorised use to the extent that it is under the ‘control’ of the owner of the trade mark.[3] Two non-exhaustive examples of ‘control’ are given by the Act, namely, if the owner of the trade mark exercises:
1. Quality control over goods or services in relation to which the trade mark is used;[4] or
2. Financial control over the user’s relevant trading activities.[5]
With regard to quality control, Calico Global’s use of the trade mark was subject to the licence agreement with Calico. However, Justice Rares affirmed the comments of Besanko J in Lodestar Anstalt v Campari America LLC,[6] that ‘the mere fact that the registered owner granted a licence, or revocable authority, to use the trade mark would not be sufficient, of itself, to establish control over the grantee’s use of the trade mark within the meaning of s8’.[7]
In this case, the licence granted to Calico Global required it to:
clearly indicate in all its correspondence and dealings that it was acting as Calico Pty Ltd’s licensee (cl 4(a)(iii)); and observe any directions or instructions that Calico Pty Ltd might give it (cl 4(a)(v)).[8]
However, there was no evidence that Calico had ever given any directions or instructions to Calico Global regarding the use of the trade mark, or that Calico Global had ever complied with its obligation to indicate it was acting as a licensee of Calico.
Justice Rares concluded that:
on the evidence, neither Kevin Owens, nor Calico Pty Ltd, exercised any actual or other control over Global’s use of the 184 mark at any time during the first or second periods.[9]
With regard to financial control, even though Kevin Owens was the Managing Director of both Calico and Calico Global, and Calico owned 64.8% of the issued shares in Calico Global, the court held that neither Kevin Owen nor Calico had financial control over Calico Global’s trading activities.
Notwithstanding that use had not been established, the court did have discretion to maintain the trade mark on the Register if it deemed it to be reasonable in all the circumstances.[10] However, the court determined it was not appropriate to exercise the discretion in this case, given that the use relied on by the Calico Group was not made in good faith but rather to increase the likelihood of confusion in the market and pressure the respondent to come to a deal.
Checklist
The take-home message from this case is that your trade mark registrations are not safe just because they are being used by a company with permission from, or a relationship with, the registered owner. You should ask yourself the following questions:
Have all trade mark assignments and acquisitions been recorded?
If you came to own the trade mark by way of an assignment from the registered owner, you should record the assignment as soon as possible. Many assignments are not recorded for years, and sometimes it can be necessary to record strings of assignments many entities long. Recordal can be particularly complicated where documents have been lost and entities no longer exist. Avoid these challenges by promptly recording all assignments, both in Australia and overseas.
If recordal has been delayed then you must ensure the trade mark has been used in good faith by the assignee in accordance with the terms of the assignment, so that you can take advantage of section 100(3) of the Trade Marks Act.
Are your trade marks used under the ‘control’ of the registered owner?
It is important to check that your trade mark use falls into one of the following categories:
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- Current use in good faith by the registered owner itself;[11] or
- Current use in good faith by an ‘authorised user’ of the trade mark under the control of the owner of the trade mark.[12]
In regard to category (a) above, the requisite ‘control’ can be, but is not limited to:
1. Quality control: as noted above, merely issuing a licence or granting authority to use a trade mark is not sufficient to exercise quality control over the trade mark. You need to have actual control ‘as a matter of substance’.[13] This could be demonstrated by either:
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- actions of the registered owner, for example, giving directions regarding use of the trade mark from time to time or requiring samples and proposed uses to be submitted and assessed; or
- executing a licence agreement:
that sets in detail a quality standard to be achieved. The details in the agreement may be such that it is not necessary for the registered owner to give directions or instructions from time to time. The licensee, aware of its obligations, may faithfully comply with those obligations without any entreaties or demands from the licensor.[14]
It would be prudent to do both to be in the best position to defend your trade mark registrations;
2. Financial control: financial control has generally been deemed to be present where there is a parent-subsidiary relationship between the entities or the entities share common corporate control. However, it is not enough for the registered owner and the trade mark user to simply be part of the same corporate group. In the case of Trident Seafoods Corporation v Trident Foods Pty Limited[15](the Trident case), where the registered owner of the trade mark was the subsidiary rather than the parent company, the court held the registered owner did not have financial control over the trading activities of the parent company. Accordingly, care needs to be taken, particularly where parties have different shareholdings or management.
Is it nonetheless reasonable for your registrations to be maintained?
If your use of the trade mark does not fall under any of the above categories then it may be possible to avail yourself of the court’s discretion under section 101(3) of the Trade Marks Act to maintain a registration if it is satisfied it is reasonable to do so.
This discretion has historically been applied when companies are part of the same corporate group but the registered owner does not have the requisite financial control referred to above.
Ultimately, the registrations in the Trident Case were maintained due to the court’s exercise of this broad discretion. However, this was not a foregone conclusion and the court considered a variety of factors in satisfying itself it was reasonable to apply. The Calico case shows that where bad-faith is involved it is unlikely the registration will be maintained.
Conclusion
If your trade mark use does not fall into one of the categories in the above checklist, you should seek legal advice as to whether your trade mark may be vulnerable to cancellation for non-use, and what steps you can take to strengthen your position.
Partner Nicholas Pullen is highly regarded for his specialist expertise in the media and communications sector, providing clients with advice across defamation, privacy, trade practices, information technology and intellectual property matters. Nicholas acts for a range of media and publishing organisations, especially in the television, radio, print and book publishing, online publishing and advertising industries. He is also active in other industries requiring expertise in knowledge management and in the protection or exploitation of IP and data. Nicholas has been named in Best Lawyers Australia for Defamation and Media Law and Entertainment Law. Doyle’s Guide names Nicholas as a “recommended” lawyer for Technology, Media and Telecommunications Law in Victoria. Contact Nicholas at npullen@hwle.com.au or connect via LinkedIn
Special Counsel Gina Tresidder specialises in the areas of Intellectual Property and Information Technology. Gina advises on all aspects of Intellectual Property, including trade marks, designs, patents, copyright, trade secrets, confidential information, domain names and trade practices matters. Gina has extensive experience assisting clients to manage the full lifecycle of their Intellectual Property from searching and availability opinions, to managing Australian and international portfolios to commercialisation, enforcement and disputes. Gina also has significant expertise in structuring a range of software and technology agreements for both acquirers and suppliers of IT services and products. Gina acts for clients in a range of industries including retail, franchising, fashion, insurance, financial services, government, technology and software. Before joining HWL Ebsworth, Gina worked in a specialist Intellectual Property law firm in Japan, and was also seconded to assist the Global IP Counsel of a leading gaming company. Contact Gina at gtresidder@hwle.com.au or connect via LinkedIn
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[1] [2018] FCA 2096.
[2] Trade Marks Act 1995 (Cth), s 7(3) (‘Trade Marks Act’).
[3] Ibid s 8(2).
[4] Ibid s 8(3).
[5] Ibid s 8(4).
[6] [2016] FCAFC 92.
[7] Ibid 31.
[8] Calico Global Pty Ltd v Calico LLC [2018] FCA 2096, 86.
[9] Ibid 117.
[10] Trade Marks Act, s 101(3).
[11] Ibid s 92(4)(b).
[12] Ibid s 8(1).
[13] Lodestar Anstalt v Campari America LLC [2016] FCAFC 92, 97
[14] Ibid 98.
[15] [2018] FCA 1490.
Important Disclaimer: The material contained in this publication is of a general nature only and is based on the law as of the date of publication. It is not, nor is intended to be legal advice. If you wish to take any action based on the content of this publication we recommend that you seek professional advice.
