Five trade mark traps to avoid when launching a new brand

10 March 2021

Applying for trade mark registration is not always the first priority of a new business. However, in the rush to market, it is all too easy to overlook key steps in setting up brands for longer term success. It is often after a successful market presence is established that it becomes apparent that formal brand protection will be difficult or impossible to obtain, jeopardising market position and future growth.

Recent decisions of the Australian Trade Marks Office (ATMO) serve as reminders of the need to keep certain structural and evidential considerations in mind as part of the brand-creation process. By asking yourself the following five questions, you will go a long way to ensuring your business can register its trade marks when it needs to do so.

Can you prove use from day one?

In a recent ATMO case, an opposition failed because the opponent did not provide clear evidence that it had started using its unregistered trade mark before the filing date of the applications in question, which were for a substantially identical mark. The decision in Caddee Pty Ltd v Stretch Lab Franchise LLC [2020] ATMO 178 concerned applications for the word mark STRETCH LAB in Class 41 in respect of fitness training and similar services. The applications were opposed by a business providing similar services which claimed to have operated under the unregistered trade mark ‘The Stretch Lab’ since July 2018, just prior to the filing date of the applications in August and October of the same year. The opponent claimed that it was the owner of the mark because it was using it before the applicant and had a reputation in the mark that would cause confusion if the applicant’s marks were registered.

Significantly, the Delegate referred to social media screenshots dated 2019. Even though the screenshots showed that the opponent’s Facebook page was created in July 2018, the 2019 screenshots could not establish that the page had commenced using ‘The Stretch Lab’ at that time. The name could have been changed at any time before the screenshot was taken. Client comments and testimonials on various social media and other websites also were either undated or dated after the application filing dates, or did not refer to ‘The Stretch Lab’. This meant the opponent failed to prove prior use and ownership of the mark, or any reputation in the mark from the period prior to the application filing dates. The opposition was unsuccessful on this and other grounds and the marks proceeded to registration in the name of the applicant.

Proof of use of a trade mark is critical in a variety of circumstances under trade mark law, and this case demonstrates the importance of documenting use of the mark clearly and contemporaneously. Any business launching a new brand should take dated screenshots at the time of establishing social media pages and regularly thereafter, and keep clear, dated records of all marketing campaigns.

Who is the true owner?

Golden Cala Trading Est v Florian Mack [2020] ATMO 173 is a recent example of a common error made by trade mark applicants: registering the mark in the wrong name. Mr Mack, Chairman and director of Sky Optical LLC, applied for registration of a trade mark in his own name. Sky Optical sells contact lenses and other optical goods around the world.

Although Mr Mack claimed to have undertaken some steps preparatory to launching the business in Australia, including registration of a domain name, the Delegate was not satisfied that those steps amounted to use of the mark in Australia. Every other use in Australia was by the company, Sky Optical, rather than the individual, Mr Mack. As a result, Sky Optical was held to be the owner of the mark, but as it was not the applicant for registration of the mark, its registration in Australia was refused.

This shows the importance of carefully identifying which person or entity associated with a business is actually using a trade mark, and keeping clear records of that use.

Are your corporate group arrangements formalised?

Where a business is structured across a corporate group structure with multiple companies, it is common for the company which holds the business’ intellectual property rights (including trade marks) and the company actually using the trade marks to be different. This often occurs inadvertently and can result in an application being rejected on the basis that the entity applying for registration has not used, and does not intend to use, the mark.

Typically, a licence agreement will be put in place between the IP holding company and the operational company. Where a business has overlooked this formality early in the piece, such an agreement may be backdated so that it is said to be effective when the trade mark was first used. This is what the business in the Florian Mack decision mentioned above sought to do. Mr Mack and Sky Optical executed a licence agreement in February 2018 which defined a ‘Commencement Date’ in June 2015 and stated that the agreement was intended to ‘confirm and regularize the licensing situation which has existed since the launch’ of the business. However, the Delegate said that ‘the licence agreement cannot act to retrospectively make the first use of the Trade Mark by Sky Optical, use by [Mr Mack]’. It is therefore critical for businesses to formalise internal group licensing arrangements when they commence, or shortly afterwards.

It is possible to infer that a company uses a mark on behalf of another company in a corporate group if they have common directors and thus ‘unity of purpose’ at all relevant times: Trident Seafoods Corporation v Trident Foods Pty Ltd [2019] FCAFC 100. However, this also comes with traps. In the Florian Mack decision, Mr Mack contended that Sky Optical was his alter ego and that due to his control of Sky Optical, Sky Optical was an authorised user of the mark on behalf of Mr Mack. However, as Mr Mack did not provide evidence establishing his control of Sky Optical at all relevant times, this contention was rejected. A company structure where directors may change over time also creates a risk that, without an appropriate formal licence in place, an argument based on authorised use may fail.

Do you own copyright in your logo?

Whether you engaged a graphic designer to create the perfect on-brand logo for your business or paid cash to an art student to draw something by hand, you will not be entitled to register your business’ logo as a trade mark unless the designer has assigned copyright in the logo.

Copyright can only be assigned in writing signed by the owner of the copyright work, which in the case of a logo, will be the artist or designer who created it. If you have a contract with the designer, check to ensure it includes a clear assignment of copyright to your business and that you pay consideration to the designer under the contract. Otherwise, a copyright assignment deed should be entered into between the designer and your business. An assignment deed may also be necessary between companies within your corporate group to ensure that copyright in the logo is held by the entity applying for registration.

Are there any existing registered trade marks in your space?

While you probably made sure to look around your market segment prior to launch to confirm that your brand is distinctive, if you wait to register your trade marks, you may find that someone else gets in first.

If you have not registered your business’ trade mark, there is nothing preventing another business from applying to register an identical or very similar trade mark in respect of the goods or services you offer. You may have grounds to oppose the registration of that mark, for example on the basis of ownership of the mark or substantial reputation in the mark, if you used the mark first. However, if you do not take steps to oppose the registration or fail to establish grounds of opposition, the other mark may proceed to registration. The competitor may then seek to take action against your business for trade mark infringement, and although you may have defences available, this could prove a costly exercise.

If you decide to delay applying for registration of the trade marks underlying your brand, make sure to regularly check for new applications to register trade marks that may dilute your brand. This exercise should extend to all countries in which your business operates, or plans to expand into in the foreseeable future. If you do spot a problematic trade mark application, it may be possible to oppose registration or to obtain certain strategic advantages by applying for registration of your own business’ trade marks promptly.

HWL Ebsworth’s Intellectual Property team has extensive experience advising businesses on protecting their brand assets. Please contact a member of our team for further information on how we can assist you.

This article was written by Luke Dale, Partner and Nikki Macor Heath, Senior Associate.

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