Insights

Importance of Trade Mark & Benefits of Registration in Australia

Written by Natalie Bamber | Nov 19, 2019 9:30:09 AM

Blake Knowles, Principal at Spruson & Ferguson emphasises the importance of the due diligence process in trade marks as well as outlining the benefits of registering a trade mark in Australia. He has provided more insights into this topic at the IP Fundamentals Series Part 1 – Trade Marks, which is available to watch as an on demand recording.

The brand is often the most valuable asset of a business. It follows that correct selection of a brand, and securing appropriate protection, are crucial steps in starting a new venture on solid foundations.

Trade mark law is concerned with the protection of brands. A trade mark is a sign that performs a branding function, that is, to distinguish one person’s goods or services from those of another. Australian law affords protection to both registered trade marks (under the Trade Marks Act 1995) and unregistered trade marks (via the misleading and deceptive conduct provisions of the Australian Consumer Law, and the tort of passing off).

Due diligence has become increasingly important given the number of new businesses that start each year, and the significant growth in trade mark filings over the past two decades. In FYE 2019, 73,000 new trade mark  applications were filed in Australia. As at the time of writing this article, the Australian Trade Marks register stood at just under 800,000 pending and registered trade marks.

The register is also subject to increased cluttering by trade marks with very broad specifications of goods and services. Such marks can theoretically stay registered in perpetuity upon payment of renewal fees, in the absence of any private action to remove unused registrations for non-use. The sheer number of registered trade marks and the broad scope of many of these registrations can significantly complicate any risk assessment.

The aim of trade mark due diligence is two-fold. First, to determine whether the client has freedom to operate under a particular brand, having regard to (i) the potential for infringement of registered trade marks (or pending trade marks that may achieve registration), and (ii) the risks posed by unregistered trade marks. Second, to determine the prospects of achieving trade mark registration for the brand, as registration bestows powerful offensive and defensive intellectual property rights.

 

What rights are provided by a registered trade mark

A registered trade mark gives powerful legal rights to the owner.

The primary ‘offensive’ right is the right to sue others who make unauthorised use of the trade mark. The remedies available for trade mark infringement include an injunction against further infringing use, damages or an account of profits attributable to the infringement.

A registered trade mark is infringed not only by unauthorised use of an identical mark, but also by use of ‘deceptively similar’ marks for the same, similar, or closely related goods or services.

The tests for deceptive similarity involve considering whether an ordinary consumer relying on an imperfect recollection would be ‘caused to wonder’ whether goods bearing two marks may originate from the same trade source. In determining this, courts will have regard to the essential features of the respective marks and consider the look, sound, and meaning of the respective marks. No single factor is usually decisive.  Marks that share similar distinctive features are more likely to be confused than marks that share only similar descriptive features.

Rights in a registered trade mark are generally Australia wide, and do not rely on proof of reputation in order to enforce.

A registered trade mark also provides a strong ‘defensive’ right. A trade mark owner using their own registered trade mark (for the goods or services covered by the registration), has a statutory defence to allegations of infringement of other registered trade marks.

 

What rights are provided by unregistered trade marks?

The owner of an unregistered trade mark can seek to prevent others using an identical or similar trade mark by commencing action for misleading or deceptive conduct under the Australian Consumer Law, or the common law tort of passing off.

Unregistered trade marks are generally more difficult and expensive to enforce. It is generally necessary to prove some reputation in the trade mark, and to prove that the infringer’s actions are likely to mislead or deceive, rather than merely confuse. Rights in an unregistered trade mark can also be limited to a particular geographical region.

Use of an unregistered trade mark can also bestow the first user with a claim to ‘proprietorship’ of the trade mark at common law. Proprietorship can be used as a basis for challenging registration of an identical or substantially identical mark by another party. Proprietorship can also permit the first user to obtain their own registered mark, which provides strong enforceable rights.

As such, while unregistered trade marks are less powerful than registered marks, they cannot be ignored when providing due diligence advice.

 

Trade mark due diligence – freedom to operate

The purpose of ‘freedom to operate’ advice is to provide a quantification of commercial or practical risk to the client should they decide to proceed with use of a new brand.

The first step in the due diligence process is determining what exactly the brand is, and what goods or services will be provided under that brand. The next step is to conduct formal clearance searches. The final step is to provide an assessment of commercial risk, and recommendations for moving forward to registration.

Before a professional is engaged to conduct formal searches, the client should ideally do some research themselves, both on the IP Australia database and in Google. The client’s own searches are not a substitute for professional searches. However, they can be useful in flagging possible ‘dead end’ marks and avoiding unnecessary costs.

  1. Identifying the brand

Generally, most new brands incorporate a word or a combination of words. A client may also develop a graphic logo to be used as a complimentary brand.

A word and logo should for the purposes of due diligence be treated as separate trade marks (unless the ‘logo’ is simply a stylised version of the word mark). There will invariably be times when one is used without the other (for example, a logo cannot be used as part of a domain name), and the risk assessment must take this into account.

Not all brands are words or graphic logos. Theoretically, anything can qualify as a trade mark, including shapes, sounds, colours, aspects of packaging, scent, or combinations of such things. However, words and logos make up the vast majority of trade marks used in Australia.

 

  1. Identifying the goods and services

A trade mark is registered for particular goods and/or services.

These goods or services are classified into groups, with 34 different classes of goods and 11 classes of services. However, the scope of rights is not determined by which classes are nominated, but by the specific goods or services listed in those classes.

In contrast, the scope of rights in an unregistered trade mark depends on the extent to which a trade mark has been used in relation to certain goods or services.

Determining what goods or services a client’s mark will be used for is important to properly focusing the search and properly assessing commercial risk.

 

  1. Where to search

The scope of a search will depend on the client’s budget and expectations.

Assuming the client wants a relatively comprehensive search, this would encompass an extensive search for pending and registered trade marks that are identical or deceptively similar to the client’s mark and cover the same, similar, or closely related goods or services. It would also encompass some searches for unregistered trade marks being used in Australia.

The relevant trade marks databases to search generally include:

  • Australian Trade Marks Register
    • Identify identical and deceptively similar marks in classes covering the client’s goods and services, and other classes for similar goods or services.
    • Identify identical or near identical marks in unrelated classes. Such marks may pose a risk if they are well known or famous.
  • Madrid Protocol International Register search
    • Identify pending marks filed in Australia via the Madrid Protocol, an international filing system managed by the World Intellectual Property Organisation (WIPO), which do not yet appear on the Australian Trade Marks Office Database.
  • Global Brand Database
    • Identify potentially conflicting marks filed in some foreign countries in the previous six months that may be filed in Australia claiming ‘convention priority’ (i.e. a backdated filing date based on the foreign filing date). Note: comprehensive searches of Global Brand Database are impractical and cost prohibitive, and as such are generally limited in scope for practicality and budget reasons.

Once a search for conflicting pending and registered trade marks is completed, a search can be conducted for potentially conflicting unregistered trade marks.

Due to the more limited scope and risk posed by unregistered trade marks, and in the interests of keeping searches within a reasonable budget, a search for unregistered trade marks generally focuses on identical or near identical marks, and may include:

  • Google searches
  • ASIC searches for relevant company or business names
  • White Pages or Yellow Pages searches
  • Online marketplace searches (e.g. Ebay, Alibaba etc).
  • Searches of large retailer websites (e.g. Woolworths, Coles, Harvey Norman etc)
  • App Store searches (particularly if goods are software)
  • Social media searches (Facebook, Twitter)

There is no set formula for conducting searches. The scope of every search will be determined by the mark, the goods or services, and the experience and intuition of the searcher.

 

  1. Assessment of risk

Most trade mark searches will reveal some trade mark rights that pose a potential risk to the client. Determining the practical or commercial risk posed by such marks is crucial to providing useful advice to a client.

Quantifying the level of risk is a matter of preference for the practitioner. Many practitioners will quantify risk as being either Low, Medium, or High.

Where a trade mark poses a low risk, it is generally a risk that is commercially acceptable. Where an earlier mark poses a high risk, it generally means there is a high likelihood of a legal dispute, and the strong possibility the client will lose. A medium risk is somewhere in between, and the client may be able to take some action (such as obtaining their registered trade mark), that will push the risk into the ‘low’ category.

An assessment of risk involves balancing legal v commercial factors.

Legal factors focus on the risk of being held to infringe the earlier mark based on the applicable legal tests, and include considering the closeness of the respective trade marks and the goods/services, and any potential defences available.

Commercial factors focus on the likelihood of a dispute with the owner of the earlier mark. Relevant considerations include whether the parties are focused on different markets and would likely perceive a commercial conflict, the respective size and resources of the parties, and the potential vulnerability of a registered trade mark to removal or restriction for non-use.

Trade mark litigation can be very expensive, and the risks involved in commencing proceedings are significant. This ‘litigation firewall’ prevents many disputes from reaching the courts. Where a case for infringement is arguable, but not assured, a negotiated outcome is the most likely end to a dispute.

 

  1. Fictitious example

A client proposes to use the mark THE STORM CHASERS as a trade mark for merchandise associated with their popular children’s television series.

The client states their goods of interest are ‘clothing and accessories’. The term accessories could include a disparate array of goods. The client specifies the accessories are sunglasses, jewellery, and bags. The goods are intended for children between the ages of 6-11, and are relatively low priced.

Together, the client’s goods fall across four separate classes, class 9 (eyewear), class 14 (jewellery), class 18 (bags), and class 25 (clothing and apparel).

The searches for pending and registered trade marks will focus on the above classes, and also classes containing similar goods or closely related services (e.g. class 35 and 42, which cover retail services).

Searches reveal an earlier registered trade mark for STORM (Classes 9, 14, 18, and 25). The goods are identical to those of interest to the client.

The owner of STORM could allege that STORM is a distinctive word with no direct relationship to the goods. As such, the fact that it is wholly encompassed as the ‘essential feature’ of THE STORM CHASERS mark renders the two marks deceptively similar.

The contrary argument is that although both marks share the word STORM as a distinctive essential feature, they also have significant visual and aural differences, and different meanings.

Research also indicates that the owner of the earlier mark is interested in adult fashion and accessories, in a higher price bracket to the goods that will be sold by the client. The client’s goods are only likely to be sold online, on a website that is specifically set up for promoting the television series of the same name.

On balance, there is an arguable case for trade mark infringement. However, there does not appear to be a strong commercial conflict between the parties, and the goods will be sold via different trade channels. Taking all factors into account, the commercial risk associated with use of the trade mark is low. Any trade mark infringement claim would be speculative, and there do not appear to be obvious commercial reasons for an infringement claim to be brought.

Even though the infringement risk may be low, a trade mark examiner may consider that the marks are deceptively similar and object to registration of THE STORM CHASERS.

However, there would be good prospects for overcoming such an objection. Legal arguments could be filed that argue confusion is unlikely based on the differences in the marks when considered as a whole. The examiner could also be referred to other co-existing trade marks that contain the word STORM and cover similar goods.

A search for unregistered trade marks reveals some use of STORM CHASERS in relation to merchandise sold by storm chasing groups in the USA, and as the name of a café in Margaret River, Western Australia. As the US websites only indicate localised usage, and the café in Margaret River provides very different services, the risk in Australia posed by these unregistered marks is negligible.

Overall, the due diligence assessment indicates the mark is available for use, subject to low commercial risks, and there are good prospects for obtaining registration of the mark in Australia. Assuming the client is prepared to accept a low level of risk, they may proceed with commencing use of the trade mark in Australia.

If registration of THE STORM CHASERS can be obtained, this also will provide a statutory defence to infringement of the earlier STORM registrations.

 

Registrability and trade mark registration process in Australia

An application to register a trade mark is relatively straightforward procedure.

An application is filed with IP Australia, designating relevant information including the trade mark owner/s name and address, trade mark, and goods and/or services.

The date on which the trade mark application is considered filed is the date from which rights in the registered trade mark will commence.

The trade mark is generally examined within 6-8 months after filing, based on current wait times. Expedited examination can be requested if there are pressing legal or commercial reasons. This reduces the wait time to around 3-4 months.

The IP Australia “TM Headstart” service provides a useful fast-track method for obtaining a preliminary assessment of registrability (5-7 days after filing), followed by expedited examination (3-4 weeks later). The TM Headstart service is very useful for obtaining a quick answer from IP Australia, but also has some drawbacks including a delayed filing date and a requirement that goods or services be selected from pre-determined terms published by IP Australia (the list of terms is very extensive, but not applicable to all situations).

During examination, an examiner will look to see whether the trade mark should be rejected on various grounds listed in the Act. The main grounds are whether the trade mark is deceptively similar to an earlier mark, or whether the trade mark is non-distinctive. Other grounds include whether the trade mark is potentially confusing (based on an inherent connotation), whether it is scandalous, or whether it is offensive or contrary to law in some way.

If an objection is raised, the applicant has fifteen months to seek to overcome this. This period can be extended if necessary.

If the trade mark is accepted, it will be advertised for opposition for a period of two months. If no opposition is filed, the trade mark will generally be registered within 1-2 weeks of the end of the opposition period. Less than 5% of trade mark applications in Australia are opposed.

IP Australia will generally not register a trade mark until at least six months has passed since filing. This is due to Australia’s international obligations regarding trade marks that may be filed in Australia claiming convention priority from earlier filings overseas.

There are some pitfalls associated with the registration process. A trade mark must be filed in the name of a person or persons who have a valid claim to proprietorship of the mark under common law. The issue of proprietorship can be complex. However, the filing of a mark in the name of a person without a valid claim to proprietorship can result in an invalid trade mark registration.

It is also crucial to ensure the goods and services are described correctly. As the scope of enforceable rights and defensive rights provided by a registered trade mark is based on the goods and services covered, an error or omission in the goods or services can have significant consequences.

Blake Knowles is currently Principal of the Trade Marks Team at Spruson & Ferguson Brisbane (incorporating the trade mark practices of predecessor firms Cullens and Fisher Adams Kelly Callinans), Blake joined Cullens in 2010 and was elevated to partner in 2014. Blake is a specialist in trade mark due diligence, registration, oppositions and dispute resolution. Prior to joining Cullens in 2010, Blake held a number of positions at the Australian Trade Marks Office. Blake was a Principal Examiner of Trade Marks, and also Assistant Director of the Trade Marks Hearings and Oppositions section. In his role at IP Australia, Blake was responsible for developing practice and procedure, including authoring parts of the Trade Marks Office Examination Manual. Blake has also represented the Australian Government at international conferences in the field of intellectual property. As a former Principal Examiner, Blake is an expert in Australian Trade Marks Office practice.  You may connect with Blake via email  blake.knowles@spruson.com or LinkedIn