High penalties for misrepresentations

Penalties for making false or misleading statements about goods and services can be substantial.  Maximum penalties have dramatically increased from $1.1 million for companies to a maximum of the greater of:
  • $10 million; or
  • 3 times the value of the benefit received by the company from the breach; or
  • if the value of the benefit cannot be determined, 10% of the company’s turnover for the previous 12 months.

The law covers a wide range of misrepresentations including false representations:

  • that goods or services have a particular standard, quality, value, grade or performance characteristics;
  • that goods are new or have a particular composition or place of origin;
  • regarding testimonials for goods or services;
  • regarding the availability of spare parts;
  • regarding the existence or effect of any warranty, guarantee or remedy;
  • regarding the sponsorship or approval of goods or services or of the supplier.

Thus it is more important than ever that claims on websites, contractual material and the packaging and advertising of products and services are correct.

I can provide advice on product and service claims before publication to assist clients in minimising the risks of liability for misleading statements.

This article provides general information only, and is not intended as legal advice specific to your circumstances. Please seek the advice of a legal professional if you have any particular questions.

Is a descriptive trade mark the best mark for your business?

Businesses often choose a trade mark that exactly describes their business or product eg Smith & Co Plumbing, being the plumbing business run by Mr Smith.  There is nothing wrong with this.  The name is easy to remember and easily searchable.  If the business is likely to remain a small, family owned business that will never take legal action against anyone else with a similar name, it is a perfectly satisfactory name.

However, if the business has ambitions to grow and may wish to stake out its territory against similar businesses, a descriptive mark is perhaps not such a good idea.  This is because names that are descriptive (Plumbing) as well as names that include common surnames (Smith) are generally not registrable as trade marks before the Trade Marks Office.  Even if they do achieve registration (eg because of long and extensive use eg McDonalds) the registration may provide only limited protection against a business with a similar name because small differences may be sufficient to distinguish the two businesses.  The reason is that, as a matter of policy, trade marks law does not allow businesses to monopolise common names and words that other traders are likely to want to use as trade marks.

I acted in a trade mark opposition against an application for the logo mark: for non-alcoholic drinks.  Although the application was accepted by the Trade Marks Examiner, the decision was overturned because the word “ICY” was a synonym of the word “cold” and so descriptive of a cold drink.  The word could not work as a trade mark because other traders would want to use the mark or something similar for cold drinks.

Similar difficulties apply to descriptive words used as trade marks even if they are not registered.  The Sydney Building Information Centre Ltd tried to stop another company, Hornsby Building Information Centre Pty. Ltd., from using its name.  Customers were confused about whether the two were connected.  However, the High Court held that the problem arose not because of any misleading conduct by the Hornsby Centre, but because the Sydney Centre had chosen such a descriptive name in the first place.

The best trade mark is a mark that has an indirect reference to the business/goods or services but is sufficiently clever/vague that it does not directly describe them eg TUB HAPPY for washable clothes.

I can provide advice on the registrability of a proposed trade mark or the invalidity of a registered trade mark.

The Curious Case of Pinnacle and the Bikinis – Part 3 – Costs

Intellectual property ownership

Intellectual property is designed to provide a business with a commercial advantage.  It builds a wall of exclusivity around a product so that competitors cannot sell products with the same trade mark or that are covered by the owner’s patent or registered design.

 

IP enforcement

But there may be some who wish to breach the wall and get a share of that competitive advantage.  Then, if the product and its protection are worth it, the IP owner needs to defend the wall by sending letters of demand to infringers, negotiating settlements and, sometimes, suing a recalcitrant infringer.  The legal costs of this defensive activity are costs of the business, like R&D or marketing expenses.

 

IP enforcement action is therefore a commercial undertaking.  Its main aim is to stop the infringing conduct – stop the damage to the business – repair the wall.  If money is obtained from the alleged infringer, that is a good result and will typically be used to offset the legal costs incurred.

 

But IP court action (litigation) is not intended to be a money-making exercise.  There are no million-dollar payouts as may occur in personal injuries litigation.  A business must understand the risks of litigation, and what it is trying to achieve, before pressing the IP litigation button.

 

IP litigation

I would never lightly recommend that a client sue an infringer.  Many years ago, when I was a law student, I did work experience at a solicitor’s office.  The partner said to me words that I have never forgotten:

 

The job of a lawyer is to keep their client out of court.

 

I have blogged about the Pinnacle Runway v Triangl trade mark infringement case here and explained how it demonstrates the risks of litigation here.  Justice Murphy has delivered his third judgment in the case: Pinnacle Runway Pty Ltd v Triangl Limited (No 3) [2020] FCA 1379 (25 September 2020).  It shows, in tragic detail, what can go wrong in litigation.

 

Pinnacle v Triangl – brief facts

Pinnacle accused Triangl of infringement of the trade mark DELPHINE, which was registered for swimwear.  Before litigation was commenced, Triangl agreed to stop using DELPHINE for its bikinis and not use it again, but without offering compensation.  One would have thought Pinnacle’s commercial objectives had been achieved.  However, it chose to sue Triangl in the Federal Court and lost.

 

Legal costs

There have been several curious aspects of this litigation noted in my blogs, but, curiouser and curiouser, whilst the case is being appealed – and the result may be overturned – both parties requested the trial Judge to determine their liability for the other side’s legal costs arising from his Honour’s original decision.  The reason for this, Justice Murphy surmised was:

 

… because the costs incurred by the parties are so substantial in comparison to the damages that could have been recovered, the issue of costs looms large in the appeal.

 

Unfortunately, this case appears to have become mostly about the legal costs.   It exemplifies the need for caution in suing in the first place, and its corollary, trying to exit litigation under a settlement that is not ideal, but can be tolerated.

 

Paying the other side’s legal costs

When one party sues another for IP infringement, normally the successful party will be entitled to a proportion of the costs that they must pay to their lawyers. (In Pinnacle v Triangl the Judge estimated this to be about 60% of actual legal costs).  However, in some circumstances, a Court can award “indemnity costs”, which will pretty much cover all their legal costs.  A common situation where this can occur is where one party has made a settlement offer to the other side and the offer has been unreasonably rejected.

 

As Pinnacle was unsuccessful, it would ordinarily be ordered to pay about 60% of Triangl’s legal costs.  In Pinnacle No 3 Triangl claimed that it was entitled to more of its costs – indemnity costs – because it had made a series of settlement offers that Pinnacle had rejected.

 

Purpose of litigation

Parties to Federal Court litigation should not conduct the litigation however they like.  Section 37M of the Federal Court Act 1976 (Cth) (the Act) provides for the “overarching purpose” of litigation, which is to facilitate the just resolution of disputes as “quickly, inexpensively and efficiently as possible”, including:

 

… the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.

 

The Act requires the parties to conduct the proceeding in a way that is consistent with the overarching purpose and, if they fail to do so, the Court can penalise them when it decides who is to pay the legal costs.

 

By the end of the case, Pinnacle had spent approximately $281,000 in costs, according to Justice Murphy’s estimate, whereas, if it had been successful, it could have been awarded about $2,500 in damages.  Unsurprisingly, the Judge considered that these costs were disproportionate to the value of what was being litigated.

 

The settlement offers

During the course of the litigation, Triangl had made three settlement offers – of $40,000, $45,000 and $70,000.  Pinnacle made one counter-offer of $56,000 shortly after Triangl’s $40,000 offer.  Triangl estimated that its offers were split $2,000 for damages and the rest for Pinnacle’s legal costs.

 

The problem was that Triangl’s two later offers did not come in quick succession.  The $45,000 offer was made four months after its $40,000 offer, and the final $70,000 offer was made about eight months after the $40,000 offer, nine days before the trial commenced.  By the time that Triangl increased its $40,000 offer by $5,000, Pinnacle’s legal costs had increased by about $30,000, so, financially, the negotiations were going backwards for Pinnacle.

 

Was Pinnacle unreasonable to reject Triangl’s offers?

Justice Murphy held that it was unreasonable for Pinnacle to reject each of Triangl’s monetary offers.  Pinnacle needed to come to grips with the weaknesses in its case, which were apparent by the time the $40,000 offer was made.  There was a real risk that Pinnacle would lose the case.

 

Pinnacle did not trust the profit figures that Triangl had disclosed for the sale of its bikinis (a common sentiment in litigation). However, Justice Murphy noted that, on the facts as known by Pinnacle, if successful, Pinnacle would only be entitled to, at best, a proportion of Triangl’s profits (not all) and there was a real risk that damages would be “paltry”.

 

Indeed, excluding irrelevant legal costs, the $40,000 offer probably covered both possible damages and Pinnacle’s recoverable legal costs at that time.  Pinnacle also knew that, if it rejected the $40,000 and continued with the litigation, its legal costs position would only worsen.  Justice Murphy considered that Pinnacle, by rejecting Triangl’s three monetary offers and counter-offering $56,000, was hoping to get a better offer – but this did not come.

 

Justice Murphy held that Pinnacle had to pay Triangl’s legal costs on the standard (roughly 60%) basis until the $40,000 offer, and on an indemnity basis afterwards.  This was in addition to paying its own lawyers’ costs.

 

Conclusion

The Pinnacle litigation shows that it can be difficult for a party to extricate themselves from litigation, if, for example, they believe that the other side is being unreasonable or is unwilling to negotiate, or a settlement offer is inadequate.  Care must always be taken in pressing the litigation button in the first place.  Once litigation has commenced, however, it is crucial to consider the process commercially, weighing up the potential risks and benefits as they are known at the time, always with a keen eye on what the party set out to achieve as well as the running tally of its own legal costs and those of the other side.

 

This article provides general information only, and is not intended as legal advice specific to your circumstances. Please seek the advice of a legal professional if you have any particular questions.

Appeal court flushes away ACCC claims on flushable wipes

The Full Court of the Federal Court has rejected the appeal by the Australian Competition and Consumer Commission (“ACCC”) in its unsuccessful case against Kimberly-Clark (“K C”), where the ACCC claimed that K-C had made misrepresentations about its “flushable” wipes.

Facts
K-C made wipes (moist towelettes) from fibres that were hydroentangled, or blasted by fine jets of water so as to bond the fibres together. K-C designed the wipes so that they could break down with agitation in water, such as when the wipes passed through the sewerage system.

K-C labelled the wipes with terms such as “flushable” and “safe to flush”. In one instance, K C stated that the wipes “will break up in the sewerage or septic system like toilet paper”. However, this last statement was immediately clarified by saying that in extreme cases just one sheet could plug a toilet. K-C went on to make recommendations as to use, including not to flush more than two sheets at a time.

The ACCC claimed that these statements were misleading because, it said, the K-C wipes caused, or contributed to, harm to household plumbing and public sewerage systems by causing blockages.

The trial judge held that K-C had not made misrepresentations. This was essentially because the ACCC had not been able to prove that K-C’s wipes caused, or contributed to, any harm to sewerage systems, or even presented a materially greater risk of harm than toilet paper (which was accepted as “flushable”).

Appeal
The ACCC appealed this decision but was unsuccessful. The Full Court held that the trial judge had not made any errors and had properly considered the various arguments made by the ACCC.

Much of the evidence at trial showed problems caused by wipes generally (that were not supposed to be flushable) rather than identifying any damage caused by wipes that were designed to be flushable, such as K C’s wipes. The Full Court noted that even toilet paper can cause blockages.

K-C had argued that its flushability claims were supported by the fact that its wipes passed the tests of the INDA/EDANA GD3 Guidelines. These were tests of flushability that had been developed by industry. The ACCC strongly disputed the legitimacy of these Guidelines, but the Full Court held that the trial judge was correct to accept the Guidelines as a reasonable benchmark for making a claim of flushability, in the absence of substantial evidence that the K-C wipes caused harm.

The trial judge accepted that K-C’s wipes did not break down as easily as toilet paper but there was insufficient proof of harm. The Full Court held that where K-C had stated that its wipes would break up “like toilet paper”, the fact that K-C had immediately qualified this statement was sufficient to prevent any misrepresentation.

Too late to change case
In the appeal the ACCC argued that the K-C wipes were not suitable for flushing down the toilet because there was a real risk that they could cause harm. The Full Court rejected this argument because this was not how the ACCC had run its case during the trial. Rather, the ACCC’s claims against K-C were made on the basis that the wipes caused actual harm (which it failed to prove). The Full Court noted that, if the ACCC had relied on the lower standard of “real risk of harm”, K-C might have introduced different evidence to defend this different claim. It was now too late for the ACCC to try to change its case.

There was also a late suggestion by the ACCC that K-C’s wipes could harm septic systems. Again, the Full Court rejected this argument because it was too late – the ACCC had run its case on the basis that harm was caused to sewerage systems, not septic systems.

Implications
This decision is helpful to suppliers of wipes that are designed to be flushable, but it is limited to its facts – to the case that the ACCC was trying to prove. Importantly, however, the Full Court approved the trial judge’s acceptance of the INDA/EDANA GD3 Guidelines as to flushability, provided that there is no evidence of actual harm caused by the wipes in question.

The ACCC was unable to uncover evidence of harm caused specifically by the K-C wipes. There could be a different result if hard evidence were to emerge that particular wet wipes labelled as “flushable” were causing blockages in sewerage systems to a greater extent than ordinary toilet paper.

In addition, the decision does not explore the impact of K-C flushable wipes on domestic septic systems.

Moving forward
Sections 18 and 29 of the Australian Consumer Law (“ACL”) prohibit misleading representations about goods or services. Businesses can be liable to anyone who suffers damage because of the misrepresentations, but, in addition, a misleading representation can be an offence under section 151 of the ACL. Breaches can give rise to substantial monetary penalties (which can be in the millions of dollars depending on the circumstances). The ACCC can prosecute offences under the ACL and recover these penalties.

Whether any particular labelling or marketing claims can be considered to be misleading depends on the precise claims made and their context (including surrounding words and images). But for now, the term “flushable” should be available for use in Australia if:

(a) a suppler can prove that its “flushable” products pass at least the INDA/EDANA GD3 Guidelines;
(b) the marketing and labelling refer to these Guidelines (to explain what the supplier means by “flushable”);
(c) there are no actual problems with the flushability of the products; and
(d) the supplier does not make comparisons with toilet paper, such as that the products are similar to toilet paper or will disintegrate in a similar manner to toilet paper.

However, given that this is a controversial and well-litigated area, legal advice should be sought before making flushability claims.

Attempts are currently being made to establish an Australian Standard on flushability. If a Standard is established, this may alter what can be said on labelling and marketing materials.

This article provides general information only, and is not intended as legal advice specific to your circumstances. Please seek the advice of a legal professional if you have any particular questions.

The Internet is not the Wild West – (although it can seem to be)

Some people seem to think that no laws apply to the Internet – or that anything that appears on the Internet is free to be copied and used however they like. This is not true.

Much of the material on the Internet is protected by copyright laws, both in Australia and around the world. Certain material, especially if posted on social media sites, may be designed or intended to be shared, such as funny cat videos and other memes. But this is not true of everything on the Internet.

Some websites, such as Shutterstock, permit downloading of images and videos for a fee. Other websites are essentially advertisements for their business and may also enable sales through the website. These businesses would not expect that material on their website could be copied and used, for example, by a rival trader.

Even material intended to be shared on social media may not be able to be re-purposed. A funny cat video shared by the cat’s owner cannot normally be taken and incorporated in a compilation of cat videos on a YouTube channel without permission.

An example of unlawful copying from the Internet, with expensive consequences, was the case of Henley Arch Pty Ltd v Del Monaco [2019] FCCA 3848 (13 November 2019). A photo was taken of a floor plan of a Henley Arch project home found on the Henley Arch website by either Mr Del Monaco or a friend. Mr Del Monaco then emailed the image to his builder and instructed them to prepare plans and build a house in accordance with the floor plan.

The photo, the further plans and the house were all infringements of Henley Arch’s copyright in the floor plan (copyright in a 2D drawing can be infringed by a 3D building). Mr Del Monaco was held to have authorised the plans and building the house and so had infringed Henley Arch’s copyright. He was ordered to pay compensation of $42,000 plus $4,800 in interest. He also had to pay $40,000 in “additional damages” which the Judge ordered to show her condemnation of all persons who consider it “’all right’ to appropriate copyright”. Mr Del Monaco is also likely to be required to pay a portion of Henley Arch’s legal costs.

Downloading an image or other copyright material from the Internet can seem so simple and easy. However, if this is done to save time and money instead of seeking the permission of (and possible payment to) the copyright owner, this can have very serious consequences, especially if the material is then exploited commercially.

This article provides general information only, and is not intended as legal advice specific to your circumstances. Please seek the advice of a lawyer if you have any particular questions.

© Margaret Ryan, Melbourne, Australia, 2020
Liability limited by a scheme approved under Professional Standards Legislation

The Curious Case of Pinnacle and the Bikinis – Part 2

Pinnacle Runway Pty Ltd v Triangl Limited [2019] FCA 1662 (10 October 2019) is a curious case in more ways than one. I have previously blogged about the relevance of the case to trade marks law – here.  The case is also a cautionary tale about the risks of litigation.

Facts
The applicant, Pinnacle, sent Triangl a letter of demand alleging infringement of its trade mark DELPHINE registered for swimwear.  Triangl ceased using DELPHINE on bikinis within three weeks of receiving the letter of demand and agreed to desist from the allegedly infringing use prior to litigation commencing.  Normally this would be considered a successful result to a trade marks dispute and the matter would often stop there.  However, Pinnacle proceeded to sue Triangl.  Justice Murphy started his judgment with the following words:

These are ill–advised proceedings in respect of alleged trade mark infringement and cancellation of a trade mark, and there is no clear winner.

His Honour held that there was no trade mark infringement, and Triangl’s cross-claim to remove the DELPHINE mark from the Trade Marks Register failed.  Justice Murphy also stated that:

Even if Pinnacle had been successful in its claim, its damages entitlements were not worth the powder and shot.

Nonetheless Pinnacle has filed an appeal.

Compensation
Pinnacle was a relatively young brand at the time.  While it had launched a DELPHINE range of women’s fashion that included bodysuits and leotards, Justice Murphy found that it had not sold any swimwear under the DELPHINE trade mark.  Thus, Pinnacle was unable to claim compensation for lost sales of swimwear. 

Pinnacle’s lack of a substantial reputation (only having been in the market for a year), and the fact that Triangl’s bikinis were not inferior-quality counterfeits, meant that any damage to Pinnacle’s reputation was de minimis.  If Pinnacle had established that Triangl had infringed its mark (which it failed to do) Justice Murphy would have awarded only $2,500 for damage to its reputation.

Additional Damages

Many applicants in intellectual property (“IP”) cases seek additional damages.   This is because they can be substantially higher than the amount of compensation awarded. Additional damages essentially punish the respondent and deter future infringements.  However, there usually needs to be flagrant conduct by the respondent.  This can be either in the act of infringement itself, such as a respondent knowingly infringing and cynically pursuing their own benefit, or following infringement, including acts of dishonesty or flagrant disregard of court orders.

Pinnacle claimed $25,000 in additional damages.  However, these damages were rejected altogether by Justice Murphy.  Triangl had not known about the Pinnacle trade mark before receiving the letter of demand.  It ceased selling its DELPHINE bikinis 10 days after the letter of demand’s deadline, which his Honour considered was not an excessive delay. 

Triangl’s director initially denied Pinnacle’s claim.  He raised the difficulty of serving court documents on Triangl (based in Hong Kong) and suggested that the cost of the dispute would not be worth Pinnacle’s while.  Justice Murphy did not think that this was flagrant conduct.  The director was simply trying to persuade Pinnacle not to take the matter further. 

In addition, there was no benefit to Triangl in using the name DELPHINE.  Sales of its bikinis actually increased once the name was changed from DELPHINE to DELILAH.

Account of profits
An alternative measure of compensation is an account of the profits made dishonestly by the alleged infringer.  This was not claimed by Pinnacle.  An account of profits requires that the alleged infringer knowingly infringed the trade mark in question.[1]    However, if the alleged infringer were able to establish that they were an “innocent infringer”, they would only be liable for an account of profits made after they knew of the trade mark owner’s rights (such as after receiving a letter of demand). 

Risks of litigation
Litigation can be unpredictable and costly, as well as distracting senior executives from the business.  In IP litigation the main remedy usually sought is an injunction to stop the respondent’s infringing conduct – to stop the damage being caused to the applicant.  Often the potential monetary compensation will not be substantial and can be exceeded by legal costs.  Additional damages are not awarded in every case.  Although most cases settle before a hearing, legal costs can build up quickly and recovering money from the alleged infringer can often become about recovering costs already paid. 

Once litigation is commenced, it can be difficult for a party to extricate itself from the court case unless the parties agree to settle.  This is because withdrawing from the case without the consent of the other side can make the party liable for a proportion of the other side’s legal costs.  One party may feel that the other side’s settlement offer is simply unacceptable.  Nonetheless, most cases do settle and Justice Murphy was critical of the parties in the Pinnacle case for not having settled this dispute. 

What to think about before litigation
When contemplating suing someone for IP infringement it is essential that:

  • the objectives of the litigation are clearly defined;
  • the value to the business of the infringed IP is assessed – is it worth the effort?
  • the risks are understood, including:
    • potential costs;
    • possible exposure to liability to the other side;
    • any possibility that the IP could be removed from its Register; and
  • a realistic assessment is made of what a win might look like and what a loss might look like;

so far as they can be determined at this early stage.  (As the litigation goes on more information can come to light and may change these assessments.)

Lawyers can assist their clients in this process to try and ensure that the client who wishes to commence IP litigation understands what they are getting into. 

This blog entry provides general information only, and is not intended as legal advice specific to your circumstances.  Please seek the advice of a lawyer if you have any particular questions.

Liability limited by a scheme approved under Professional Standards Legislation

© Margaret Ryan, Melbourne, Australia, 2020


[1] Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25 at 35-36; [1968] HCA 50 at [23].

The Curious Case of Pinnacle and the Bikinis

Facts
The case of Pinnacle Runway Pty Ltd v Triangl Limited [2019] FCA 1662 (10 October 2019) considered whether Pinnacle’s trade mark DELPHINE, which was registered in class 25 for clothing, headwear and swimwear, was infringed by use of the word DELPHINE as a style of one of Triangl’s bikinis. 

Triangl sold a range of approximately 35 styles of bikini over the Internet.  These were all displayed on a page of its website when the “View All” button was clicked.  Each bikini would appear above the style name for that bikini. One of these styles was called DELPHINE.  Clicking on the “New Arrivals” button of Triangl’s website would take a consumer to a selection of four new bikini styles – PALOMA, LOTTE, BIBI and DELPHINE.  

Triangl’s DELPHINE bikini was sold in three colour/pattern variants – FIORE, FIORE ROSA and FIORE NERO.  One internal page of its website showed all three variants with the words DELPHINE FIORE, DELPHINE FIORE ROSA and DELPHINE FIORE NERO in small writing.  Clicking on the DELPHINE FIORE ROSA bikini image displayed the following internal page.

Triangl also sent direct email communications to three persons who had signed up on its website.  These communications included the following image:

Pinnacle claimed that these uses of the word DELPHINE infringed its trade mark registration.

Evidence showed that, within the women’s fashion industry, style names, which were frequently female names, were used as product names because this was more convenient than using a number or code.

Decision
Justice Murphy held that there was no trade mark infringement of Pinnacle’s mark because Triangl had not used DELPHINE as a trade mark.

Reasoning
The Pinnacle case is a demonstration of the principle that, for trade mark infringement, context is all-important.[1]  At first blush, the way the word DELPHINE is used in the two images above looks like use as a trade mark.  It is not used as a description.  It is capitalised and prominent.

Pinnacle’s marketing evidence referred to TOYOTA which has sub-brands such as YARIS, COROLLA and RAV4.    A consumer may refer to any of these without using the corporate brand name TOYOTA.  However, the Judge considered that the situation was different in the fashion industry, where many hundreds of products are named after women’s names.  There was also evidence that consumers do not remember fashion style names and only remember the head brand.   A similar situation arises for different colours of paints and different styles of carpets and other floor coverings. 

Justice Murphy held that consumers were likely to scroll through Triangl’s numerous bikini styles on its website, showing their different style names, and understand that Triangl offered a range of bikini styles, each with a name, including DELPHINE, but that TRIANGL was the source of the bikinis.  His Honour rejected the argument that DELPHINE and the rest of the 35 names were sub-brands like YARIS, COROLLA and RAV4. 

Justice Murphy commented that, in Triangl’s marketing, the word DELPHINE was never used without the brand TRIANGL.  Normally this would not assist a defendant as it is well established that use of an infringing mark as a trade mark in conjunction with the defendant’s trading name does not avoid infringement.  (This can, however, be relevant to the separate action for passing off.[2])

However, the critical issue was whether DELPHINE was used as a trade mark.  Section 17 of the Trade Marks Act 1995 (Cth) provides:

 A trade mark is a sign used, or intended to be used, to distinguish goods or services dealt with or provided in the course of trade by a person from goods or services so dealt with or provided by any other person.

His Honour considered that Triangl did not use DELPHINE as a trade mark, or badge of origin, to distinguish Triangl’s bikinis from the bikinis of other traders, but rather to differentiate between products within the Triangl brand. 

Use as a trade mark
“Use as a trade mark” is probably the most difficult concept in trade mark law.  It is hard to explain to a client how a word exactly the same as the registered trade mark that appears in relation to goods exactly covered by the registration (as was the case here) does not infringe a mark.[3]

All cases turn on their own facts.   The manner of use of the allegedly infringing mark in its context must be analysed carefully. Is it used to show that goods or services come from a particular source, even if the source is not known, or is it used for some other purpose, such as a description or, as here, as a code to identify a style?  The distinction recognised by Justice Murphy between a style and a trade mark can be difficult to draw and Pinnacle has appealed this decision.  The Full Court decision will be very interesting if the matter proceeds to a hearing. 

This blog entry provides general information only, and is not intended as legal advice specific to your circumstances.  Please seek the advice of a trade marks professional if you have any particular questions.

Liability limited by a scheme approved under Professional Standards Legislation

© Margaret Ryan, Melbourne, Australia, 2020


[1] Shell Co of Australia Ltd v Esso Standard Oil (Australia) Ltd [1963] HCA 66; (1963) 109 CLR 407 (26 July 1963) Kitto J [4].

[2] Saville Perfumery Ltd v June Perfect Ltd (1941) 58 RPC 147.

[3] See for example Re Johnson and Johnson Australia Pty Limited v Sterling Pharmaceuticals Pty Limited [1991] FCA 310 (the CAPLETS case).

I paid for it – why don’t I own it? – the copyright trap

If your business commissions a graphic artist to create a logo and brand collateral for the business, who owns the copyright in the artwork?  Have you thought about this?

It is important that businesses do think about this when commissioning third parties to create artistic works and literary works.  These works can include:

  • logos;
  • artwork and wording on product packaging and brand collateral;
  • product information such as manuals;
  • photographs;
  • advertising; and
  • social media.

This is because the default position in Australia is that the author or his/her employer will own the copyright, not the commissioning party.  This usually comes as a shock to most businesses because they assume that “if I pay for it, I own it”.  In order to own the copyright, it is normally necessary to obtain a written copyright assignment from the author or his/her employer, such as the graphic design company or advertising agency.

It is best that this be done at the start of the engagement, when the business can exercise the maximum leverage over the author/employer.  If the author is not prepared to assign the copyright, the business can go elsewhere.

If there has not been a copyright assignment, the business can still use the copyright material for the purpose for which it was prepared.  However, problems can arise if the business wishes to use the material for a different purpose – for instance, instead of just using artwork on shopping bags, caps and T-shirts promoting the products, the business wants to use the artwork on a wide range of merchandise to be sold separately.  Without a copyright assignment or an agreement from the author to use the artwork in such a broad way, the business would need to go back to the author and ask for permission to do this – and possibly pay an additional fee.

The question of ownership of copyright often comes up when someone else is copying the logo or collateral of the business.  This may amount to a copyright infringement, which can be a useful claim for the business to be able to make to stop the infringing conduct.  However, unless the business owns the copyright (or at least has a written exclusive licence to use the copyright) the business cannot make this claim.  It is often at this time that a lawyer will suggest that the business try and get an assignment of the copyright.  However, this may not be so easy if there is no ongoing relationship with the author or the author is difficult to locate.  Alternatively, the author may be prepared to assign the copyright but only for a (sometimes substantial) fee.

It is recommended that a business think about copyright ownership at the outset of commissioning artistic or literary works so that they can agree in writing on who owns the copyright.  This is best practice for businesses who understand that copyright is an important business asset.

This information sheet provides general information only, and is not intended as legal advice specific to your circumstances.  Please seek the advice of a legal professional if you have any particular questions.

Liability limited by a scheme approved under Professional Standards Legislation

© Margaret Ryan, Melbourne, Australia, 2020

Information to help businesses self-file trade mark applications

Many businesses are filing their own trade mark applications, which can save costs as opposed to using an attorney firm who can provide a full service throughout the process.  However, there are areas in the application process where professional help is a real advantage. 

I am an experienced trade marks attorney and my services are an alternative to either going it alone or engaging a full-service trade marks attorney firm.  You keep control of your application, filing and monitoring it yourself, but you can seek my expert advice at any stage of the process.  I charge on a fee-for-service basis, providing advice when you actually need it, avoiding the high fees that can be associated with large firms. 

Trade marks
A trade mark is something that is used by a business to distinguish its goods or services from those of other traders eg words, a name, a logo or even a shape, colour, sound or scent – although these last ones are more difficult to register than words and logos.  That means that if a mark is completely descriptive of the goods or services or is a term of praise for the goods or services, eg AWESOME ELECTRONICS, the trade mark can be very difficult to register without adding more distinctive material to the mark or filing evidence of use.

Trade marks are effectively in a queue on the Trade Marks Register.  Earlier marks have priority over later marks.  This is one reason to file for trade mark registration sooner rather than later.

Choosing a trade mark, checking whether it is available to be used (and does not infringe another’s rights) and selecting the goods and services for which registration is to be sought are complex issues and professional advice is recommended.  Making a mistake in any of these areas can harm the rights of the business.  I can advise on all of these issues.

eServices
Once you have decided on the trade mark and the goods and/or services that you wish to cover, for a business to file a trade mark application itself, you will need to register for eServices, the Trade Marks Office’s (“TMO”) online lodgement service.  Then you can lodge your trade mark application online and the TMO corresponds with you online via eServices.  The TMO is part of IP Australia, which also registers designs, patents and plant breeder’s rights.

The TMO provides a lot of helpful information about filing trade marks at https://www.ipaustralia.gov.au/trade-marks.  Information about eServices can be found at: https://www.ipaustralia.gov.au/eservices-registration-overview.

Images
You can type in a word mark or upload an image, eg a logo, onto eServices.  A word mark gives wider protection because you can use the word in a variety of fonts and styles, but an image can sometimes be easier to register.  You can upload the image in black and white or colour, but, even if the image is in colour, the trade mark will normally be registered in all colours.  This is the widest protection because, if someone uses a similar mark to yours for similar goods or services, it may still infringe your registration even if their mark is in a different colour.  It is possible to limit the mark to a certain colour or colours, in an endorsement, but this will narrow the protection of your registration

Two ways to file a trade mark
There are two ways to file a trade mark application:

  1. a standard application; and
  2. a Headstart application.

The TMO compares the two types of application at: https://www.ipaustralia.gov.au/trade-marks/applying-for-a-trade-mark/how-to-apply-for-a-trade-mark.

Main differences between a standard and a Headstart application
The main difference between a standard application and a Headstart application is that a Headstart application receives a pre-assessment by a Trade Marks Examiner.  You will receive a report which tells you if the Examiner has found any other similar marks on the Trade Marks Register for similar goods or services.  These might block your application (although there can sometimes be ways of overcoming a citation of a prior mark). 

Any similar mark revealed by the Headstart pre-assessment could also alert you to the possibility that your proposed mark might infringe a third party’s rights.  It is important to know this before you commit to using the mark and investing heavily in it, because you could receive a letter from the other trade mark owner requiring you to stop sales.  An alternative way of finding out whether your proposed mark is likely to infringe someone else’s rights is to have a professional trade mark search conducted.  I can arrange for this to be done.

The Examiner may also raise other problems with the application, such as whether your chosen mark is too descriptive to be registered. It is possible to amend the application at this stage in light of the Examiner’s comments before it is officially filed. 

One disadvantage of a Headstart application is that you must choose your goods and services from the “Picklist” (see below), whereas a standard application gives you the option of using the Picklist or allowing you to use your own description of your goods and/or services.  

A Headstart application costs slightly more than a standard application where the Picklist is used (because of the pre-assessment), but is very useful for self-filers.  It can include telephone assistance from the pre-assessment Examiner.  If you wish to use your own description for your goods and/or services in the standard application, there is an additional cost per class.  A Headstart application may also be processed more quickly than a standard application.     

The Picklist and selecting your goods and/or services
The Picklist is an electronic list of over 60,000 types of goods and services which will cover most goods and services that businesses wish to sell.  However, sometimes it is better to give a more specific description to particular goods or services.  In this case, you will need to file a standard application.

The list of goods and services which form the Picklist is found on the page headed Trade Marks Classification Search: http://xeno.ipaustralia.gov.au/tmgns/facelets/tmgoods.xhtml. A link to this page can also be found at the bottom of the trade mark search page: https://search.ipaustralia.gov.au/trademarks/search/quick under the link “Goods and Services”.  

There are 34 classes of goods and 11 classes of services.   These classes do not necessarily group like goods or services together.  What you are interested in may cover more than one class.  TMO filing fees depend on the number of classes that you apply for – ie the larger the number of classes, the higher the cost.  If this cost is an issue, you may need to decide which class or classes are the most important to your business immediately.  If your application is granted, you may file another application for additional classes at a later time.

It is possible to search the Picklist for the goods and/or services that you are interested in.  However, there may be different ways to describe the same thing, so that, if your search shows in a nil result, try a different term.  

The tabs “Classes of Goods” and “Classes of Services” set out what are called the “class headings”.  They are a brief summary of what is contained in each class but they will give you an indication of which classes are likely to be of interest to you.  If you click on a particular class number from these class headings, you will see the whole list of goods or services in that particular class.

Selecting the goods and/or services to be covered in your application is not as easy as it looks, even if you use the Picklist.  For example, “promotional marketing” in class 35 does not refer to the promotional marketing that you do for your own goods or services.  Rather, it refers to where you are providing promotional marketing services to others, as would a marketing consultant.  There is no need to include “promotional marketing” in your application if you do not provide this service to your customers. 

Creating your own description of your goods and/or services, instead of using the Picklist, can also be difficult and you may accidentally combine goods and/or services from more than one class.  After discussing what your business does in detail, I can advise on the most appropriate goods and services to be covered by your application and how they should be described. 

Examination
Regardless of what type of application you file, your trade mark application will be examined by a Trade Marks Examiner to see if it is registrable and meets formal requirements.  If there are no problems with your application, the TMO will advise you that your application is accepted, via eServices.

Not all trade applications are accepted straight away or at all, even if they have gone through the Headstart process (although this reduces the risk of rejection).  If there are problems with your application, the Examiner will send you an “Adverse Report” setting out what the problems are.  This does not mean that the application will never be accepted but that you need to address the Examiner’s concerns. 

Sometimes it is necessary to file evidence of the use that you have made of your trade mark to show that the mark is capable of distinguishing your goods/services from those of other traders.  Sometimes the Examiner may cite a prior registered trade mark or pending trade mark application, and it may be possible for you to persuade the Examiner that the other mark and/or its goods/services are sufficiently different to your mark or take other actions to overcome the concern.

This is where professional advice can be very important.  The Examiner may suggest one way to fix the problem, but a professional may suggest an alternative that better suits the interests of your business.  I have the experience to provide this advice.

Extensions of time
You have 15 months from the date of the Examiner’s First Report to get you application ready for acceptance.  If you have not been able to do this by this deadline, it is possible to extend the deadline for a maximum of a further six months, at a cost of $100 a month in TMO fees.  There is no need to provide any reason for these extension applications.  Thus, you have a total of 21 months to achieve acceptance of your application.  It is essential that you comply with any TMO deadline or your application will lapse.

There may be other circumstances where you need an extension of time on specific grounds.  If this becomes necessary, professional advice should be sought

Oppositions
Once an application is accepted, it will be advertised in the Trade Marks Journal, to give anyone else who has concerns about the application time to file a Notice of Intention to Oppose.  This person is called the opponent.  The opponent should follow this Notice within a month by a Statement of Grounds and Particulars, setting out the reasons why they oppose your trade mark application. 

Within one month of you being given the Statement of Grounds and Particulars via eServices, you must file a Notice of Intention to Defend the opposition to your application, unless you are prepared to abandon the application.  Your application will lapse if you do not file this Notice.

If the opposition is successful, your application will be refused in part or whole, although it is possible to appeal the refusal to a court.  If the opposition fails, your trade mark will be registered, unless the opponent appeals the TMO decision.

Trade mark oppositions are complex and it is best to seek professional help.  I am experienced in conducting trade mark oppositions and can provide you with advice on the best way forward.

Registration
If your application is accepted, there is no further TMO charge for registration of the trade mark. 

A trade mark is renewable every 10 years for a TMO renewal fee that depends on the number of classes.  If you are still using your trade mark after 10 years, it is very important to renew the registration or your business will lose a valuable right. Thus, you must make sure that your contact details are kept up to date on eServices.

This information sheet provides general information only, and is not intended as legal advice specific to your circumstances.  Please seek the advice of a trade marks professional if you have any particular questions.

Liability limited by a scheme approved under Professional Standards Legislation

© Margaret Ryan, Melbourne, Australia, 2019

Unity of purpose – new test for control of trade mark use

The Full Court of the Federal Court has overturned a finding that a trade mark owner did not control the use by its parent company of its marks: Trident Seafoods Corporation v Trident Foods Pty Ltd [2019] FCAFC 100 (20 June 2019).  This decision is significant because it provides a more flexible, less legalistic, approach to what amounts to control of trade marks within a corporate group.

The Facts
Trident Foods was the owner of two trade mark registrations for the word TRIDENT.  These marks were blocking Trident Seafoods’ application to register a logo mark including the word TRIDENT.  Trident Seafoods tried to remove the word mark registrations from the Trade Marks Register on the basis of non-use.

The TRIDENT marks were, in fact, being used by Trident Foods’ parent company, Manassen.  The companies had common directors, operated from the same business premises and were part of the same corporate group.  Manassen’s TRIDENT products were labelled “Registered trade mark of Trident Foods Pty Ltd”.

Non-use
It may come as a surprise to some trade mark owners that, if a registered trade mark is not used, it can become vulnerable to being removed from the Trade Marks Register for non-use.  The Trade Marks Act adopts a “use it or lose it” approach, wanting to declutter the Register of unused marks.

Control of trade mark use
If someone uses a trade mark under the “control” of the owner, that is called “authorised use” and this will protect the trade mark from being removed from the Register for non-use. A previous Full Court decision had held that “control” required actual control.  It was not sufficient to have a licence agreement which included provisions for control of the licensee’s use that were not, in fact, exercised. 

Trial judge’s findings
The trial judge in the Trident case held that, because Trident Foods was a wholly owned subsidiary of Manassen, it could not control its parent.  The fact that the two companies had common directors did not, on its own, allow Trident Foods to control its parent.  There were no examples of actual control by Trident Foods over Manassen’s use of the TRIDENT marks.  This meant that the trade marks were not used by Trident Foods during the non-use period and were vulnerable to be removed from the Register.

The Full Court’s findings
The Full Court overturned this finding and held that the question was not whether one company controlled the other but whether Trident Foods had control over Manassen’s use of the TRIDENT marks.  The fact that the two companies had the same directors was significant, given that the directors of Trident Foods had a duty to maintain the value of the trade marks (which had a book value of $10 million).  Trident Foods necessarily controlled Manassen’s use of the marks by reason of the fact that it owned the marks and its directors, who were also Manassen’s directors, must have had one common purpose – to maximise sales and to enhance the value of the brand.  The two companies therefore operated with a “unity of purpose” regarding the use of the trade marks. 

The lack of evidence of actual control exercised over Manassen’s use was unsurprising, in the Full Court’s opinion, given the relationship between the companies.  The Full Court also accepted one director’s evidence that it was unnecessary to give directions to Manassen, as supporting the finding of the unity of purpose of the two companies.

Significance of decision
The Full Court’s decision will be very welcome to many corporate trade mark owners where the registered owner is often not the holding company.  Several recent decisions, including that of the trial judge in the Trident case, seem to have taken a strict legal approach to corporate groups, finding sufficient control where the user is a wholly owned subsidiary of the trade mark owner, but finding a lack of control in other corporate structures.  The Full Court has taken a more realistic approach to corporate groups and has implemented a new “unity of purpose” test to determine whether owner and user are in lock step regarding the use of trade marks.

Arm’s length licences
Nonetheless, where a user is not related to the trade mark owner, as in an arm’s length licence agreement, care needs to be taken that actual control over the licensee’s use is exercised, and is recorded so that evidence can be produced if the owner needs to defend a non-use action.  I can provide advice on measures to protect a trade mark owner from the loss of valuable registered rights.


This blog entry provides general information only, and is not intended as legal advice specific to your circumstances.  Please seek the advice of a trade marks professional if you have any particular questions.

Liability limited by a scheme approved under Professional Standards Legislation

© Margaret Ryan, Melbourne, Australia, 2019