Lodestar Anstalt v Campari America LLC [2016] FCAFC 92

On 28 June 2016, by unanimous decision, a five-member bench of the Full Court of the Federal Court held that Campari America LLC (Campari) was not exercising actual 'control' over use of its trade marks WILD GEESE and WILD GEESE WINES under a licence agreement, for the purposes of section 8 of the Trade Marks Act 1995 (Cth) (the Act).

Campari has sought leave to appeal to the High Court, so there may be a further chapter yet in this saga.

The Full Court decision provided guidance on the interpretation and application of the "authorised use" provisions in section 8 of the Act.Should the Full Court decision stand, the implications of this decision could be significant in that licensors will now likely have to show evidence of actual control over use of their marks by licensees, by not only imposing certain conditions on licensees in trade mark licence agreements, but also ensuring that licensees comply with those conditions.The decision will also likely impact trade mark protection strategies, such as holding trade marks in a non-trading entity that licenses the marks to a trading entity.

Background

In 2000, Lodestar Anstalt (Lodestar), the owner of Wild Geese Whiskey, registered the word mark WILD GEESE and, at about the same time, an Australian wine company, Wild Geese Wines Pty Ltd (WGW), applied to register WILD GEESE and WILD GEESE WINES (together, the WILD GEESE marks).Lodestar’s registration was cited against WGW’s WILD GEESE marks.In an attempt to overcome this citation, WGW filed an application for removal of Lodestar’s mark.

Campari (formerly Austin Nichols in these proceedings), the owner of Wild Turkey bourbon, also filed a non-use application against Lodestar.An agreement was reached between Austin Nichols and WGW, whereby Austin Nichols would acquire through assignment the WILD GEESE marks from WGW as well as WGW’s interests in its removal application, and Austin Nichols would license back the WILD GEESE marks to WGW under a perpetual and exclusive licence agreement to use the trade mark in connection with the manufacture and distribution of the Australian wine.

Austin Nichols was successful in its removal action against Lodestar, and subsequently secured registration of the WILD GEESE marks. Lodestar then sought cancellation of the WILD GEESE marks' registrations for non-use on the basis that neither Austin Nichols nor WGW had used the marks in the preceding three years. Lodestar contended that Austin Nichols had not been exercising actual control over the WILD GEESE marks under the licence agreement with WGW. For Campari to defeat the removal application, it needed to prove that WGW used the WILD GEESE marks under the control of Campari.

Procedural history

The Delegate of the Registrar of Trade Marks granted Lodestar’s application for removal of the WILD GEESE registrations on the basis of non-use.On appeal, the primary judge held that there had been use of the WILD GEESE marks during the relevant period and that use was to be taken as use by the registered owner.Accordingly, he made orders to set aside the Delegate’s decision.

The primary judge made this decision because he considered he was bound by the earlier decision in Yau’s Entertainment Pty Ltd v Asia Television Ltd [2002] FCAFC 78 (Yau), wherein it was held that “a mere theoretical possibility of contractual control [is] sufficient to constitute authorised use” for the purposes of section 8 of the Act.The 5 member bench of the Full Court of the Federal Court heard the subsequent appeal in 2015.

Decision of the Full Court of the Federal Court

The Full Court of the Federal Court unanimously allowed the appeal with costs.

In giving the lead judgment, Besanko J did not consider that the primary judge was bound by the decision in Yau.Besanko J noted that there must be a connection in the course of trade between the registered owner of the trade marks and the authorised user, and that connection may be slight (see Pioneer Kabushiki Kaisha v Registrar of Trade Marks (1977) 137 CLR 670). However, control must be "actual" control in relation to the trade marks, and it must be exercised from time to time.Therefore, the mere existence of a licence agreement was not considered sufficient “use” under the Act.Theoretical control, which was never exercised, was not sufficient to constitute “control” under section 8 of the Act.

Campari was found not to have exercised the requisite control over WGW’s use of the trade marks because it did not monitor WGW's use of the marks.Even though the licence agreement contained a quality control provision (that the wine be of a sufficient standard) and a clause preventing WGW from exporting wine, there was no evidence to suggest that Austin Nichols took steps to ascertain whether these clauses were being complied with and these clauses practically had no effect on the way WGW ran its business.

Implications

It will be important for entities whose IP is held in a separate vehicle to ensure trade marks are subject to sufficient "control" for the purpose of the Act, so that this use can defeat a non-use application. The mere existence of a licence agreement between the registered owner and the licensee will not be enough to constitute "use" of a trade mark and therefore preclude the licensed mark from vulnerability to non-use removal applications.More established control of the marks must exist, meaning perhaps that the registered owner must show some sort of financial control over the licensee's trading activities or quality control over the marks.

Until the outcome of the appeal is known, trade mark licensors and licensees should be minded to review all existing trade mark licence agreements.This case highlights the need to draft trade mark licence agreements to ensure that a licensor who authorises others to use its trade marks has procedures in place to exercise actual control of its marks under those agreements. Further, there will need to be evidence of actual control, which would likely mean documented evidence of such control being exercised. Consideration should also therefore be given to whether setting up separate entities to hold IP may cause issues if these entities never actually enforce the terms of the licence pertaining to control of the trade marks.