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  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.
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”.
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. Contact me for 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.
© Margaret Ryan, Melbourne, Australia, 2019