Whose mark is it anyway?

30 April 2020

A decision handed down last week by the Full Court of the Federal Court1 affirms a line of reasoning that has a number of implications for trade mark owners. The potential to forfeit valuable branding rights as a result emphasises the importance of obtaining appropriate legal advice before filing trade mark applications, engaging in transactions where trade marks are a key asset or seeking to enforce trade mark rights.

Ownership of unregistered trade marks

At common law, the owner of a trade mark is the first person who either:

  • Uses the trade mark in Australia in relation to particular goods or services; or
  • Files an application to register the trade mark in Australia in relation to particular goods or services.2

Therefore, if a trade mark has been used in Australia, but never registered in Australia, the owner will be the first user.

Unlike registered trade marks, which can be assigned to a new owner by a written instrument such as an agreement or deed, the courts have held that ownership of unregistered trade marks can only be transferred together with the goodwill of the associated business.3

This was highlighted in a case we reported on last year following the sale of Kraft’s peanut butter business to Bega. Kraft claimed that it retained ownership of ‘trade dress’ (or ‘get-up’), which consisted of peanut butter jars with yellow lids and labels showing a large peanut shape in red or blue colours on a yellow background. Because the trade dress amounted to unregistered trade marks, the Federal Court held that ownership of them had passed to Bega along with the goodwill in the business.4 The Full Court has now affirmed that decision after an appeal by Kraft.5

The importance of identifying the correct applicant

One of the implications of this is the importance of ensuring a trade mark application is filed in the name of the correct entity.

If an application is being filed before the trade mark has been used in Australia, the applicant must either:

  • Intend to use the trade mark in relation to the specified goods and services;
  • Have authorised, or intend to authorise, another person to use the trade mark in relation to the goods and services; or
  • Intend to assign the trade mark to a company that is about to be constituted, and that company will use the trade mark in relation to the goods and services.6

If the trade mark has already been used in Australia before filing the application, it is imperative to ensure the named applicant is the owner of the unregistered trade mark at common law. In this respect:

  • By filing an application, the applicant is representing that they are the owner of the trade mark;7
  • If the application is accepted by IP Australia, it can be opposed by a third party on the grounds that the applicant is not the owner of the trade mark;8
  • Even if not opposed, the resulting registration can be invalidated if it is later determined that the applicant was not the owner at the time of filing the application.9

For example, issues can arise if an application is filed in the name of a company but the trade mark was first used by a director before the company was formed, or if there are multiple companies within a corporate group and the wrong one is named as the applicant.

Even if it is an innocent mistake, it may not be possible to correct this by simply purporting to assign the trade mark application or registration back to the first user because the courts may consider the applicant does not enjoy rights in the trade mark to begin with. This is illustrated by earlier case in which an individual named Mr Pham sought to register a trade mark that had not previously been used in Australia. The trade mark was then used by Pham Global Pty Ltd, a company of which Mr Pham was the sole director. Another party successfully opposed the application on the grounds that Mr Pham not the owner of the trade mark as he had never intended to use the trade mark personally, nor had he licensed its use to the company. Mr Pham sought to overcome this by attempting to record assignment of the trade mark to the company, but the Court held that this was invalid because Mr Pham was not the owner of the trade mark to begin with and therefore was not entitled to assign any rights in it.10 As Greenwood, Jagot and Beach JJ stated in that judgement:

‘it is essential that the initial applicant on the filing date be the owner of the mark. Otherwise, the applicant cannot transfer ownership of the mark by an assignment… when not in fact the owner of the mark.’11

Deficiencies in registrations may not become apparent until some time after a trade mark has been registered. If the registered owner attempts to enforce rights in a registered trade mark, the alleged infringer may counter by seeking to have the registration invalidated and undermine the infringement claim. Thus, failing to carefully consider who is the correct applicant before filing a trade mark application may prove to be a fatal flaw.

The value of registered trade marks

The benefits of trade mark registration include:

  • The registered owner enjoys enforceable statutory rights for trade mark infringement under the Trade Marks Act 1995 (Cth). Without such rights, a person who has established a reputation in an unregistered trade mark may be able to pursue an action for the civil tort of ‘passing off’ or prosecution under provisions of the Australian Consumer Law relating to misleading and deceptive conduct or making false and misleading representations; however, these causes of action are generally much more difficult to establish than trade mark infringement;
  • The owner’s exclusive rights in the trade mark are recorded on the Australian Trade Marks Register, which can act as a strong deterrent against other traders adopting similar trade marks in relation to similar kinds of goods and services;
  • Registered trade marks are discrete assets that can be sold and assigned to a new order independently of the goodwill in the underlying business. For example, if Kraft had registered the peanut butter jar trade dress as a trade mark, it could have retained this as a separate asset after selling its peanut butter business to Bega, and avoided the expense and uncertainty of subsequent legal action;
  • Registered trade marks can also be licensed to third parties, provided the registered owner maintains effective control over the goods or services connected with the trade marks. In the Kraft case, the Federal Court accepted Bega’s argument that unregistered trade marks cannot be licensed independently of the underlying goodwill of the business12, and the Full Court did not disturb this finding on appeal.13

These benefits all rely on having a valid trade mark registration. Thus, if a trade mark has been registered in the name of the wrong person or entity, it will be on a rocky foundation that could ultimately be destroyed.

HWL Ebsworth has extensive experience in helping businesses protect, licence and enforce their intellectual property (IP) rights, including advising on business sale transactions involving IP assets. Please contact a member of our team to find out more on how we can assist you.

This article was written by Matt Craven, Partner, Scott La Rocca, Senior Associate, and Anahita Faili, Law Graduate.

1 Kraft Foods Group Brands LLC v Bega Cheese Limited [2020] FCAFC 65.
2 Shell Co (Aust) Ltd v Rohm and Haas Co (1948) 78 CLR 601, at 627 per Dixon J.
3 JT International SA v Commonwealth (2012) 250 CLR 1.
4 Kraft Foods Group Brands LLC v Bega Cheese Limited (No 8) [2019] FCA 593.
5 Kraft Foods Group Brands LLC v Bega Cheese Limited [2020] FCAFC 65, at [122].
6 Trade Marks Act 1995 (Cth), s 27(1)(b).
7 Trade Marks Act 1995 (Cth), s 27(1)(a).
8 Trade Marks Act 1995 (Cth), s 58.
9 Trade Marks Act 1995 (Cth), ss 84A and 88.
10 Pham Global Pty Ltd v Insight Clinical Imaging Pty Ltd [2017] FCAFC 83, at [32].
11 Pham Global Pty Ltd v Insight Clinical Imaging Pty Ltd [2017] FCAFC 83, at [40].
12 Kraft Foods Group Brands LLC v Bega Cheese Limited (No 8) [2019] FCA 593, at [169].
13 Pham Global Pty Ltd v Insight Clinical Imaging Pty Ltd [2017] FCAFC 83, at [129].

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