Best Australian and New Zealand trade mark cases of 2012
Published on 25 Feb, 2013
2012 was an important year for parallel importing cases in Australia. The Full Federal Court affirmed on two occasions that a breach of territorial manufacturing restrictions by a licensee will prevent an Australian importer of those goods from arguing that the trade marks have been applied with consent of the trade mark owner. However, this approach will not assist for goods manufactured legitimately within the licensed territory and sold in the licensed territory but which subsequently find their way out of the licensed territory. The decisions turn very much on their individual facts, as is often the case with parallel importing cases. The Courts have also ruled on important matters such as use of building names in trade mark applications, demonstrating prior use by predecessors in title and the existence of local Australian reputation in respect of marks which have not been actively or extensively used in Australia. In New Zealand, the Courts have provided further guidance on confusion in relation to similar trade marks and the proper time for admission of evidence.
What follows is a summary of the most important trade mark cases of 2012.
1. Paul’s Retail cases: parallel importing and territorial restrictions
Paul’s Retail Pty Ltd failed twice in 2012 to defend trade mark infringement claims arising from the promotion and sale in Australia of goods manufactured overseas.
1A. Paul’s Retail Pty Ltd v Sporte Leisure Pty Ltd  FCAFC 51
Greg Norman Collections Inc (GNC) granted an Indian company named BTB Marketing Pvt Ltd (BTB) a licence to apply the words “Greg Norman” and a stylised shark logo (the Greg Norman Marks) to clothing manufactured by BTB for the purpose of distribution in India only. BTB manufactured merchandise bearing the Greg Norman Marks specifically to fill an order from a company outside of India, knowingly in breach of its licence with GNC. Paul’s Retail Pty Ltd (Paul’s) subsequently imported that merchandise from the company located outside of India and sold it in Australia.
Federal Court first instance decision
GNC sued Paul’s for infringement of GNC’s Australian trade mark registrations for the Greg Norman Marks, claiming that Paul’s had used the marks in Australia as trade marks in respect of goods for which the marks were registered without the consent of the trade mark owner. The primary judge found that Paul’s had infringed the Australian trade mark registrations for the Greg Norman Marks. Paul’s appealed the decision to the full Federal Court.
Given that BTB was a licensed manufacturer of GNC, Paul’s sought to rely on s123 of the Trade Marks Act 1995 to defend the trade mark infringement claim. Section 123 provides that a person who uses a registered trade mark in relation to goods similar to those for which the mark is registered does not infringe the mark if the mark has been applied to the goods with the consent of the registered owner of the mark. In addition, Paul’s asserted that the case ofChampagne Heidsieck et Cie Monopole Société Anonyme v Buxton  1 Ch 330 established a principle that there can be no infringement of a registered trade mark in respect of the importation and supply of “genuine goods”.
Full Federal Court decision
On appeal, Paul’s also sought leave to argue that it had not used the marks “as trade marks” in the sense required by s120 of the Trade Marks Act 1995 because it did not use the marks to indicate that the goods originated from Paul’s. However, the Court refused to consider Paul’s argument on this point. The Court held that it would be inappropriate to consider the issue on appeal because Paul’s conceded at first instance that it had used the marks “as trade marks” (so that Paul’s could rely on s123 as a defence) and did not provide an adequate explanation for withdrawing that concession.
The Court agreed with the primary judge that Paul’s had infringed the Greg Norman Marks and dismissed the appeal. In particular, the Court agreed with the primary judge’s view that a registered owner would not usually be considered to consent to the application of its mark to goods if the manufacturer, at the time of applying the mark, knows that the goods will be supplied in a manner not authorised by the trade mark owner (in this case, outside of the authorised territory in breach of the licence). On that basis alone, s123 did not apply because the owner of the registered marks had not consented to their application to the particular merchandise distributed by Paul’s.
The Court also held that the Champagne Heidsieck principle did not apply because the relevant goods were not goods upon which the marks were properly used and therefore could not be considered “genuine goods”. No doubt the Court would have considered that s123 and Champagne Heidsieck applied if BTB manufactured the goods in accordance with the terms of its licence with GNC or otherwise without knowledge, at the time the goods were manufactured, that the goods were for supply outside of the authorised territory in breach of the licence.
1B. Paul’s Retail Pty Ltd v Lonsdale Australia Ltd  FCAFC 130
Lonsdale Australia owns various Australian trade mark registrations for or incorporating LONSDALE and/or a stylised lion logo (the Registered Marks). The Registered Marks were previously owned by Lonsdale Sports Ltd, a related entity of Lonsdale Australia.
Lonsdale Sports owns similar trade mark registrations in Europe. Lonsdale Sports licensed Punch GmbH to manufacture and distribute clothing bearing specific Lonsdale marks (the Licensed Marks) in Europe only (but allowing manufacture in China provided all clothing was sold in Europe). Punch agreed with Unicell Limited, a Cyprus company, to manufacture Lonsdale clothing in China and sell it to Unicell on an “Ex-Warehouse China” basis. Paul’s offered the clothing for sale in Australia having obtained it from a US company supplied by Unicell. Two of the three marks applied to the clothing by Punch were not in the form of the Licensed Marks. The clothing Paul’s distributed was of lesser quality than the clothing distributed by the authorised Australian distributor.
Lonsdale Australia claimed that Paul’s had infringed the Registered Marks by importing and selling the Punch clothing in Australia and sought an injunction to prevent further sale of the goods in Australia.
Federal Court first instance decision
Gordon J held that Paul’s had infringed the Registered Marks by importing into and selling in Australia clothing bearing the same or similar marks without Lonsdale Australia’s consent. Justice Gordon distinguished the Registered Marks from the Licensed Marks by noting that the relevant question was whether Paul’s had infringed the Registered Marks in accordance with s120, not whether Paul’s had sold goods bearing the Licensed Marks. In other words, the question was whether Paul’s had infringed Lonsdale Australia’s Australian trade mark rights.
Justice Gordon also held that the Champagne Heidsieck principle did not apply as Lonsdale Australia (the registered owner of the Australian marks) did not apply any mark to the clothing sold by Paul’s. It was also questionable to what extent the Punch goods were “genuine” given that Punch produced products of an inferior quality to those distributed in Australia by Lonsdale Australia’s authorised distributor and which in many cases did not bear the actual Licensed Marks. In any case, Gordon J took the view that the Champagne Heidsieck principle is only relevant to s123 and does not apply to s120, noting that since the Champagne Heidsieckdecision the courts have affirmed that parallel importing can constitute trade mark use by an importer.
Whether Lonsdale Australia consented to the application of the Registered Marks to the goods sold by Paul’s was a question of fact. Paul’s bore the onus of proving the necessary consent. Justice Gordon identified three ways in which consent has traditionally been established under s123 – (i) through chain of title or supply chain; (ii) through related entities within the same corporate group; and (iii) other conduct. In this case, Paul’s failed to establish consent by Lonsdale Australia because: (a) Punch, which applied the marks, was not a member of the same corporate group as Lonsdale Australia; (b) there was separate ownership and licensing of the Australian and European Lonsdale marks and separate manufacture of clothing to which the relevant marks in each jurisdiction were applied; and (c) there was no evidence suggesting that Lonsdale Australia played any role in the manufacture of the goods supplied by Paul’s or the application of any mark to or in relation to those goods.
Full Federal Court decision
The Full Federal Court considered that the sale of the Lonsdale clothing from Punch to Unicell occurred in China although Unicell was based in Cyprus. The Court upheld the decision of Gordon J noting that to the extent Paul’s relied on the licence between Lonsdale Sports and Punch as establishing consent, the application of the marks by Punch for the purpose of selling the goods outside of the licensed territory could not be considered within the limited consent given by Lonsdale Sports. The Court also agreed that Paul’s could not rely on theChampagne Heidsieck principle to “fill the gap” in their case, having failed to make out the relevant consent for the purposes of s123.
Given the above, Paul’s was held to have infringed the Registered Marks. In a clear warning to Australian importers, the Court concluded that “the language of ss120 and 123 of the Act leaves little room for doubt that an importer who sells goods which bear the same marks as have been registered as a trade mark under the Act is liable to an action for infringement by the registered owner if those marks were not applied by the registered owner or with its consent”.
2. Facton Ltd v Toast Sales Group Pty Ltd: parallel importer strikes back
Issues concerning trade mark infringement and the defence afforded by s123 of the Trade Marks Act 1995, particularly in the context of parallel imports, were again considered by Middleton J in the case of Facton Ltd v Toast Sales Group Pty Ltd  FCA 612.
G-Star owns various Australian trade marks for a stylised “G” logo and the words G-STAR and G-STAR RAW (in word only form and with the “G” logo) registered in relation to clothing, jewellery and similar fashion accessories. None of the trade marks is registered in relation to retail or wholesale services.
Between 2009 and 2011, Toast Sales conducted 12 “pop up” warehouse sales of clothing and accessories from different brands, including G-Star. These were temporary sales conducted in various locations such as hotel lobbies, university campuses and vacant retail spaces. All G-Star branded products sold by Toast Sales were genuine.
Toast Sales sourced G-Star branded clothing for the first six sales from Denim Enterprises Pty Ltd, an Australian company that was not a related entity of G-Star but operated all G-Star stores in Australia (the Denim Enterprises Sales). Toast Sales sourced G-Star branded clothing for the remaining six sales from a Greek company named Pantelis, which was a licensee and authorised distributor of G-Star in Europe (the Pantelis Sales). Pantelis was only permitted to distribute G-Star branded products to retailers approved by G-Star under the terms of its licence with G-Star.
Toast Sales generally promoted its “pop up” sales by posting flyers, emailing promotional materials to its members and advertising through its website. With only one exception, all promotional materials referred to “Toast Sales” and generally listed the G-Star marks in conjunction with other brands. Toast Sales used the G-STAR RAW (with “G” logo), G-STAR (with “G” logo) and G STAR (word only) trade marks (the G Star Marks) in its promotional materials. Following receipt of a letter of demand from G-Star claiming copyright infringement in the “G” logo, Toast Sales ceased using the “G” logo and used only the words “GSTAR” or “G STAR” in its promotional materials for the Pantelis Sales.
Trade Mark infringement claims by G-Star
G-Star claimed that Toast Sales had infringed G-Star’s registered Australian trade marks by:
a) in respect of the Denim Enterprises Sales, using the G Star Marks in advertising materials to (i) promote the sale of goods and (ii) promote retail services; and
b) in respect of the Pantelis Sales, using the words “GSTAR” or “G STAR” in its advertising materials and using the G Star Marks on the Pantelis goods without G-Star’s consent.
Toast Sales sought to rely on s123 as a defence to the extent that use of the G Star Marks in relation to the Pantelis goods would otherwise infringe G-Stars registered Australian trade marks. In contrast to Paul’s Retail v Sporte Leisure, Toast Sales did not seek to rely on theChampagne Heidsieck principle.
Trade Mark Infringement
Section 120 of the Trade Marks Act 1995 states that a person infringes a registered trade mark if that person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to goods in respect of which the trade mark is registered or services that are closely related to registered goods.
Section 123 of the Trade Marks Act 1995 states that, despite s120, a person who uses aregistered trade mark in relation to goods or services that are similar to goods or services for which the trade mark is registered does not infringe the registered trade mark if the trade mark has been applied to, or in relation to, the goods or services with the consent of the registered owner of the trade mark.
Denim Enterprises Sales – Use as a trade mark
Justice Middleton held that Toast Sales did not infringe G-Star’s Australian trade marks by using the G Star Marks in promotional materials for the Denim Enterprises Sales because Toast Sales had not used the G Star Trade Marks “as trade marks” in the manner required by s120.
Citing the full Federal Court decision of Coca-Cola Co v All-Fect Distributors Ltd (1999) 96 FCR 107, Middleton J noted that the alleged infringer must use the trade mark to indicate the origin of the goods or services in itself rather than in the registered owner of the trade mark to infringe a registered trade mark. In this case, Middleton J held that Toast Sales used the G Star Trade Marks in the promotional materials to indicate that the goods it was selling included G-Star goods, not that those goods originated from Toast Sales.
Justice Middleton also held that although Toast Sales used the G Star Trade Marks in the course of promoting retail services, such use was not for the purpose of indicating the origin of those retail services. Any suggestion that the G Star Marks were used to indicate the origin of the retail services was refuted by: (a) the clear references to “Toast Sales” in almost all Toast Sales promotional materials; (b) the listing of the G Star Marks in those materials with other clothing brands; (c) the transient nature of the sales; and (d) the fact that goods such as G-Star clothing are commonly sold through various retail channels not operated by the trade mark owner (such as department stores). Justice Middleton considered that such use simply indicated that Toast Sales was offering G-Star products for sale.
Pantelis Sales – Consent
Despite Toast Sales’ claims to the contrary, G-Star argued that it did not consent to the use of the G Star Marks or the words “GSTAR” or “G STAR” on or in relation to the Pantelis goods sold by Toast Sales because G-Star’s licence with Pantelis did not permit Pantelis to distribute those goods to Toast Sales.
G-Star sought to rely on Sporte Leisure discussed above. In that case, the trade mark owner was held not to consent to the use of its trade marks on goods which the licensee manufactured specifically for distribution to a country to which distribution was prohibited by the terms of the licence.
Justice Middleton rejected G-Star’s submissions, noting that a natural reading of s123 and the decision in Sporte Leisure make it clear that consent by the trade mark owner must be assessed as at the time the goods were manufactured (ie at the time the trade marks are applied to the goods). In this case, G-Star’s trade marks were applied to the Pantelis goods by Pantelis in accordance with the licence and therefore with the consent of G-Star at the time the goods were manufactured. Unlike in Sporte Leisure, the goods were not initially manufactured with the intention of being distributed to Toast Sales in breach of the licence.
Interestingly, Middleton J questioned the extent to which the defence under s123 applied to Toast Sales’ use of the words “GSTAR” or “G STAR” given that they are not “registered trade marks” as referred to in s123. However, Middleton J did not further pursue this issue since G-Star accepted at trial that s123 applied to all marks used by Toast Sales.
G-Star was ultimately unsuccessful with all of its trade mark infringement claims. It was also unsuccessful with its claims that Toast Sales had engaged in misleading and deceptive conduct and otherwise made representations in breach of the Australian Consumer Law. While Toast Sales conceded that it had infringed copyright in the G Star Marks used in respect of the Denim Enterprises Sales, Middleton J exercised his discretion not to award an account of profits as G-Star had provided insufficient evidence of Toast Sales’ profit attributable to the copyright infringement.
The G-Star case was decided before the second Paul’s Warehouse case – Paul’s Warehouse v Lonsdale Australia (see above). However, the result is consistent with the Lonsdale decision given the Court’s finding above in the G Star case that at the time of manufacture, the trade marks had been applied by the authorised licensee within the scope of its licence. Therefore, the trade marks were applied with the consent of the trade mark owner. In contrast, in the second Paul’s Warehouse case (Lonsdale), the manufacture of the clothing and affixing of the marks in China for the purpose of sale outside Europe (the licensed territory) was not permitted. So consent from the trade mark owner could not be inferred.
3. Mantra IP v Spagnuolo: Can a building name be registered as a trade mark?
In Mantra IP Pty Ltd v Spagnuolo (2012) 205 FCR 241, the Federal Court held that an invented word being the name of an “iconic” high rise residential building, should not for that reason be refused trade mark registration. The case is likely to revive interest in the registration of building names as trade marks by developers, property managers and accommodation providers.
Q1 is the name of an “iconic” high rise building on the Gold Coast, Queensland. The building developer, Sunland, coined the name “Q1” and registered a number of Q1 logos as trade marks.
Sunleisure operated a resort within the building. It was also the letting agent in relation to 193 apartments in the building. The Q1 logo marks were later assigned to Sunleisure. It subsequently became part of the Mantra group, a large accommodation provider.
Mantra IP Pty Ltd, Mantra’s IP holding company, applied to register “Q1” as a trade mark in relation to accommodation, travel booking, hotel and resort services. Various parties opposed the applications, including Mr Spagnuolo. He was the letting agent for a number of apartments in the building.
A delegate of the Registrar of Trade Marks allowed the opposition on the ground that “Q1” had a geographical connotation and therefore its use would be likely to deceive or cause confusion: section 43, Trade Marks Act 1995.
Federal Court decision
Mantra IP successfully appealed to the Federal Court. The judge, Justice Reeves, held that the Q1 mark should not be refused registration on the grounds of non-distinctiveness, being contrary to law, deceptive connotation or non-ownership: sections 41(3), 42(b), 43 and 58,Trade Marks Act 1995.
Non-distinctiveness: Justice Reeves followed an earlier decision, MID Sydney Pty Ltd v Australian Tourism Co Ltd. There the Full Court considered that the words “The Chifley Tower” were inherently distinctive because they were not part of the “common heritage” of the English language unlike the names of towns, suburbs and municipalities. Similarly, Justice Reeves held that “Q1” did not have any association or signification with a geographic place and was therefore inherently distinctive.
Deceptive connotation: Justice Reeves held that, as a coined word, “Q1” lacked inherent meaning. Accordingly, there was no relevant connotation and, further, no consequential deception or confusion.
Contrary to law: the Court held that use of the “Q1” would not cause a member of the public to believe that Mantra had exclusive rights to provide the specified services in the building. Use of the mark was therefore not contrary to section 18 of the Australian Consumer Law.
Non-ownership: the Court was satisfied that the rights to “Q1” mark were assigned by Sunleisure to Mantra, and that Sunleisure had used the mark since completion of the building. Mantra was therefore the owner of the “Q1” mark.
The Mantra IP v Spagnuolo case suggests that a coined name of a building is not a geographic name, even if the building becomes a well-known landmark, and can therefore be the proper subject of a registered trade mark. Developers, property managers and accommodation providers should consider whether the names of properties under management together with services provided in connection with that name may be protected through trade mark registration.
4. Millennium & Copthorne v Kingsgate: Use of a trade mark by a predecessor
Millennium & Copthorne International Ltd v Kingsgate Hotel Group Pty Ltd (2012) 97 IPR 183 highlights the difficulty faced by a party in showing prior use of a trade mark by a predecessor in title, including by members of corporate groups.
Millennium applied for the following mark in respect of hotel, accommodation and reservation services.
Kingsgate Hotel opposed the application as the owner of this registered trade mark for similar services.
The delegate of the Registrar of Trade Marks allowed Kingsgate’s opposition to Millennium’s application on the ground that Millennium’s mark was deceptively similar to Kingsgate’s mark and that there was prior continuous use by Kingsgate’s predecessor in title: sections 44(2) and 58A Trade Marks Act 1995.
Federal Court Decision
The Federal Court upheld Millennium’s appeal on the ground that the two marks were not deceptively similar and, hence, section 44(2) was not made out. For the same reason, the ground of prior reputation raised by Kingsgate on appeal (section 60), was also not made out.
Prior continuous use
Despite concluding that the two marks were not similar, the Court considered each party’s case of prior continuous use by its predecessor. Kingsgate claimed that its parent, Kildair, purchased the Kingsgate Hotel in Melbourne. The Court held that there was no evidence that Kildair had assigned the Kingsgate mark to Kingsgate. It could therefore not be said that Kildair was Kingsgate’s predecessor in title.
Millennium claimed that it was part of the M&C corporate group and that another member of the group, Kingsgate Investments, had purchased the Hyatt Kingsgate Hotel in Sydney from a third party, Summit Properties. There was no evidence of an assignment of the Kingsgate mark from Summit Properties to Kingsgate Investments. It could therefore not be said that Kingsgate Investments was Millennium’s predecessor in title.
Millennium also pointed to bookings made at its Sydney office under the Kingsgate mark for New Zealand hotels operated by MCNZ, a New Zealand company in the M&C corporate group. The Court found that there was some use of the Kingsgate mark by MCNZ, but there was no evidence to show that MCNZ had assigned the Kingsgate mark to Millennium. It could therefore not be said that MCNZ was Millennium’s predecessor in title.
Accordingly, if the marks were deceptively similar, neither party made out its prior continuous use case.
Honest concurrent use
The Court considered Millennium’s honest concurrent use case: section 44(3), Trade Marks Act 1995. The Court had regard to the honesty of Millennium’s use, its expansion into Australia, the low likelihood of confusion and the relative inconvenience to the parties. The Court held that, if the marks were deceptively similar, Millennium’s mark should be registered on the ground of honest concurrent use.
The Millennium v Kingsgate case reinforces the importance of documenting transfers of registered and unregistered trade marks in business sale transactions, as it can affect the substantive rights of a successor of the business. This should be the case even where the parties to the transaction are members of the same corporate group.
5. Winnebago Industries, Inc v Knott Investments Pty Ltd (No 2)  FCA 785
Winnebago, a US corporation, had manufactured motor homes since the 1960s. There was little dispute that by the mid-1970s it had developed a substantial reputation in North America and Europe. However Winnebago had never sold or advertised products in Australia. In 1982, Knott began using the WINNEBAGO mark on motor homes in Australia, following a visit by its principal, Mr Binns, to the USA during which he became aware of WINNEBAGO motor homes.
Winnebago became aware of Knott’s activities in 1985. In 1991, negotiations with Knott resulted in a 1992 settlement agreement under which Knott agreed not to seek trade mark registration in Australia, or use the trade mark outside Australia. The agreement did not contain any promise by Winnebago not to take action against Knott. In 1997 Knott obtained registration of the WINNEBAGO mark in Australia.
In 2010, as it wanted to enter the Australian market, Winnebago demanded that Knott cease using the WINNEBAGO mark. When it refused to do so, Winnebago commenced proceedings for passing off, breach of the Trade Practices Act/Australian Consumer Law, copyright infringement, breach of the settlement agreement, and seeking cancellation of Knott’s Australian trade mark registration.
Passing off/breach of consumer legislation
The primary issue under these heads was whether by 1982 Winnebago had reputation in Australia. The Court accepted without difficulty that by 1982 it had substantial reputation elsewhere, and was prepared to infer that some visitors to Australia and Australians travelling overseas would have been aware of the WINNEBAGO name, and as a result, news of Winnebago would have spread in Australia.
The Court found that the most telling evidence of Winnebago’s Australian reputation was the actions of Mr Binns himself in adopting the name in Australia. It held that Mr Binns had intentionally hijacked the name to obtain the benefit of Winnebago’s reputation. In doing so, Mr Binns considered that there would be a ‘good smattering’ of people in Australia who were aware of Winnebago and its motor homes.
Having found that Winnebago had the requisite reputation at the relevant date, the Court easily concluded that Knott had engaged in passing off and breach of the relevant consumer laws as a result of its misrepresentation of a connection with Winnebago.
The Court rejected Knott’s contention that relief should be refused on the basis of estoppel or delay. It rejected Mr Binn’s evidence of a conversation in which he claimed that Winnebago had agreed that Knott could use the Winnebago in Australia. It further found that the 1992 settlement agreement was a ‘stand still’ agreement designed to leave the parties in the same position and reserve Winnebago’s rights as at that point. Given that Knott was also quite happy with such arrangement at the time, it held that in the very special circumstances of the case, the delay from 1991 did not warrant the refusal of relief.
Winnebago claimed copyright in its logo marks and the word WINNEBAGO. The Court held that evidence of originality and the chain of development of the logos were insufficient to support the claim. There was also insufficient originality in the name WINNEBAGO (the name of a town in the USA) to justify copyright protection. The claim accordingly failed on this basis.
Cancellation of registered trade mark
Given the Court’s findings in respect of Winnebago’s reputation in Australia in 1982, and the evidence which demonstrated that it had become significantly more well known in Australia by 1997 when the trade mark was applied for, the Court accepted the claim for cancellation of the registration.
Knott has appealed the case to the Full Federal Court, where it is due to be heard in March 2013.
6. Austin, Nichols & Co Inc v Lodestar Anstalt  FCAFC 8
In 2005, Austin Nichols applied to remove Lodestar’s trade mark registration for WILD GEESE on the grounds of non-use over a three-year period – section 92(4)(b) of the Trade Marks Act 1995. That section is subject to s100(3)(c) which allows a mark to remain on the Register where there were obstacles preventing use during the relevant period, and s101(3) which grants a discretion to the Registrar or Court not to remove the mark if satisfied it is reasonable to do so.
Lodestar conceded that it had not used the mark but argued that there were obstacles to use or alternatively, that the s101(3) discretion should be exercised to allow continued registration of the mark.
Decision of the Delegate and Justice Cowdroy of the Federal Court
The Registrar’s Delegate refused to remove the mark and on appeal to the Federal Court of Australia, Justice Cowdroy agreed.
Full Federal Court decision
The only issue for the Full Federal Court was the basis on which Justice Cowdroy had exercised the discretion to allow the mark to remain. Austin Nichols claimed that the primary judge had made three different errors: that he had applied the wrong legal test, that irrelevant considerations were taken into account and/or that he mistook a fact upon which he relied in reaching his conclusion.
Applicable legal test
The Court rejected the argument that there was any error in the legal test applied. In particular, it affirmed the statutory test that the Court must be positively satisfied that it is reasonable to exercise the discretion, and found that on a fair reading of the judgment, the primary judge was well aware of this test.
Austin Nichols claimed that the following irrelevant matters were taken into account by the primary judge: the interests of the trade mark owner, Lodestar’s use of the trade mark after expiry of the statutory non-use period and Lodestar’s intention not to abandon the trade mark.
The Full Court found that all three matters were appropriate considerations. The discretion under section 101(3) is a broad one, limited only by the subject matter, scope and purpose of the legislation and in particular, Part 9 in which the non-use provisions are situated.
Mistake as to the facts
The Full Court held that the primary judge had erred in finding that the mark had acquired a reputation and profile in Australia such that confusion might arise if it were removed. It emphasised that the registered owner bears the onus of proof in establishing that a mark should remain on the Register. Lodestar had not proven that its international reputation in the mark extended to Australia. There was no direct evidence of awareness in the market, and insufficient evidence of sales and marketing to infer such awareness. There was also no evidence as to why confusion might arise if the mark were removed.
Exercise of the discretion
Having determined that the discretion had been incorrectly exercised by the primary judge, the Full Court substituted its discretion. While there was evidence of some use, it was nearly eight years after registration, and not until three years after the non use application had been filed. It was also confined to a two year period during which time there had been few sales and little promotion of the mark. Furthermore there was no evidence to suggest Lodestar had used the mark on similar or closely related goods. In the absence of any likelihood of confusion resulting from removal there was no good reason why the mark should remain on the Register and the Court ordered it to be removed.
2012 NEW ZEALAND TRADE MARK CASES
1. The Scotch Whisky Association v The Mill Liquor Save Ltd  NZHC 3205
The Mill sought registration of the trade mark MACGOWANS in class 33 for “whisky flavoured spirits, none of which being whisky”. The Scotch Whisky Association unsuccessfully opposed registration before the Assistant Commissioner of Trade Marks and appealed to the High Court.
The Association relied on two grounds of opposition. Firstly, that the mark breached sections 17(1)(a) and (b) of the Trade Marks Act 2002 on the basis that use of the mark was likely to cause consumers to be confused or deceived into thinking that the goods were Scotch Whisky or to otherwise be confused as to the origin or nature of the goods. Secondly, on the basis that there was no intention to use the mark in respect of the goods specified, in breach of section 32(1) of the Act.
Admission of reply evidence
The Assistant Commissioner refused to admit five statutory declarations adduced by the Association in reply, in which each deponent attested that they thought the MacGowans product looked like “whisky”. She held that the evidence was not “strictly in reply”. Justice Kos noted that the evidence arguably was in reply to the Mill’s evidence that the Association had not produced any evidence of confusion. However he upheld the Assistant Commissioner’s refusal. He noted that the opponent is often in the best position to lead evidence of alleged deception and confusion. Since the applicant had no right file rejoinder evidence to the reply evidence, it would be unsatisfactory for the applicant to have to file its evidence of non-confusion while having no chance to respond to reply evidence alleging confusion. This was particularly so given the applicant has the burden of proof in establishing the mark should be registered.
Likelihood of confusion
Justice Kos ruled, by a “relatively narrow margin”, that it was unlikely a substantial number of purchasers would be confused by use of “MACGOWANS” on the relevant goods. Gaelic names have become ubiquitous in New Zealand. The mere adoption of a Gaelic name is not distinctive of a Scottish product. Even if purchasers wondered at the origin of a MACGOWANS labelled whisky flavoured product, the price difference would dispel any impression that the product was Scotch whisky. Finally Justice Kos referred to the lack of direct authority in support of the Association’s position and the Australian Federal Court decision in Scotch Whisky Association v De Witt  FCA 1649. In that case, an opposition to GLENN OAKS on a similar basis was refused. Justice Kos concluded that this lack of authority suggested that the law has been careful to avoid converting a de facto geographical association into a monopoly in the absence of demonstrable confusion.
Intention to use in respect of spirits
Section 32(1) of the Act requires that an applicant intends to use the mark on the goods for which registration is sought. The Association contended that “spirits”, as defined in the Australia New Zealand Food Standard Code, must contain at least 37 per cent alcohol by volume. The Mill’s MACGOWANS product was a 13.9 percent alcohol by volume “concoction of water, distilled spirit, sugar, colour, flavour and preservative” and therefore, the Association argued, was not a “whisky flavoured spirit”.
Justice Kos agreed, rejecting the Mill’s claim that the word “spirits” had a more general meaning encompassing any distilled alcoholic liquor. He held that the specification must be interpreted through the eyes of a Trade Mark Examiner and trade mark attorneys, not the purchasing public, and that they were likely to use the technical meaning derived from the relevant Food Standard. Even if a broader ‘ordinary view’ were taken, the product would have to be capable of being labelled as spirits. It was telling that the Mill’s product was originally labelled as “light spirits” but that this description had been removed because of a concern that the product would not comply with the relevant food standard, and that the Mill itself had accepted in its evidence that the product was not “spirits”.
The appeal was upheld on this basis and registration of the mark refused.
2. Roby Trustees Limited v Mars New Zealand Limited  NZCA 450
Roby applied to register a device mark, OPTIMIZE PRO ‘Lead the Pack’, for dog rolls (dog food) in class 31. Mars, Roby’s major competitor, opposed registration claiming that the proposed mark was likely to cause confusion with its device and word marks for OPTIMUM and OPTIMUM ‘Nutrition for Life’. The claim was based on section 17(1)(a) (confusion as a result of use of Mars’ marks), section 25(1)(b) (confusion arising from Mars’ registered marks) and section 25(1)(c) (prejudice to a well known mark) of the Trade Marks Act 2002. The Assistant Commissioner allowed registration. The High Court allowed Mars’ appeal, refusing registration. Roby appealed to the Court of Appeal.
Application for admit further evidence
In the Court of Appeal, Roby sought to adduce additional evidence that Nestle had been permitted after the relevant date to register the marks OPTISTART and OPTIHEALTH in class 31. It contended that this contradicted Mars’ claim in the High Court to exclusivity of the prefix “OPTI-”. Although the evidence was not fresh, the Court of Appeal allowed the new evidence as Mars’ evidence had conveyed the impression that confusion might result if another party used the “OPTI-“ prefix in connection with pet food.
Likely confusion in light of use of the Mars marks – section 17(1)(a)
As there was no challenge to the Assistant Commissioner’s finding that Mars had substantial reputation for its marks in New Zealand, the only issue was whether confusion was likely to result.
While the Court recognised the well established principle that the first part of mark is generally the most important, it noted other marks in the same class beginning with OPTI-. In its advertising and packaging Mars also used the mark OPTIMUM ‘Nutrition for Life’ in which the word ‘optimum’ acted as an adjective. This indicated that the ‘Nutrition for Life’ element of Mars’ mark was also important.
On the other hand, the Court found that dog roll is at the lower end of the pet food market and was likely to be bought casually or on impulse. This increased the risk of confusion, as did the fact that Mars was discontinuing its product, which meant that consumers would not view the competing products side by side. Most retail purchases would be made in supermarkets which meant that the visual impression was most important. The Court also accepted that the idea of each mark was the same – that of a quality or premium product. However it found that there was nothing inherently distinctive in such an idea.
In light of these considerations, the Court agreed with the Assistant Commissioner that the marks were aurally and visually different, even in the shortened versions, which they considered, in the case of Roby’s mark, to be likely to be OPTIMIZE PRO, not OPTMIZE. It did not accept, as contended by Mars, that the evidence established that the word “optimum” had become so associated with Mars as to lose its ordinary descriptive meaning. Furthermore the additional “PRO” and “Lead the Pack” elements of the Roby mark clearly distinguished it from the Mars marks.
Interestingly, Mars had adduced evidence before the Assistant Commissioner of the purchase by Mars’ solicitors of an OPTIMIZE PRO dog roll on a supermarket website. A Mars OPTIMUM dog roll was delivered instead, although the invoice confirmed sale of an OPTIMIZE PRO dog roll. In a conversation with a customer service representative of the supermarket, the representative suggested that the person filling the order could not tell the difference between the two rolls and sent the wrong one. This evidence was ruled inadmissible by the Assistant Commissioner as hearsay and this conclusion was not contested in the Court of Appeal. Had evidence from relevant person(s) at the supermarket itself confirming such confusion been adduced, the existence of actual confusion may have had an impact on the decision.
Likely confusion in light of registered Mars marks – sections 25(1)(b) and (c)
In light of the conclusion in relation to section 17(1)(a) of the Act, the Court concluded that the same result followed in respect of any fair and notional use of Mars’ registered marks. These grounds also therefore failed and the mark proceeded to registration.