Following the recent case of Lodestar Anstalt v Campari America LLC [2016] FCAFC 92, trade mark owners who don’t exercise actual control over licensee’s use of a trade mark risk their registrations being removed for non-use, even though the licensee is actually using the mark.

The case is part of the long-running dispute concerning the WILD GEESE and WILD TURKEY trade marks for whiskey products. As part of that dispute, a predecessor of Campari had previously purchased a trade mark registration for the WILD GEESE brand from an Australian winery, Wild Geese Wines Pty Ltd. It immediately licensed the use of the mark back to the Wild Geese Wines for $1. The licence included basic quality control provisions such as that the mark only be used in relation to products which met Australian Wine and Brandy Corporation export approval, and permitted the licensor to request samples for testing. This kind of licence is often referred to as a “bare” licence as it included token quality control terms, but the licensors never actually conducted any checks to make sure the wine met the relevant standard such as requesting samples, nor did they take any other steps to control use of the mark. In practical terms, Wild Geese Wines continued to use the mark exactly as it had before the assignment. Campari became the owner of the WILD GEESE registration following assignments and a merger.

Lodestar sought removal of Campari’s trade mark registration on the basis that it had not been used for the statutory three year period. Campari argued Wild Geese Wines’s use of the mark within that period was authorised use under the Trade Marks Act on the basis Campari was entitled to control use of the mark under the licence, and that this was sufficient to defeat the removal proceedings. At first instance, the Court felt bound by the Full Federal Court’s decision in Yau’s Entertainment Pty Ltd v Asia Television Ltd (2002) 54 IPR 1 to conclude that “a mere theoretical possibility of contractual control is sufficient to constitute authorised use” and found in Campari’s favour. On appeal, a 5 judge bench of the Full Federal Court disagreed that Yau was authority for the proposition that a theoretical possibility of control was sufficient to establish authorised use, and found that there had been sufficient control over Wild Geese Wine’s use to establish authorised use. As Katzmann J remarked at [184]-[185]:

…the use of a registered trade mark by an authorised user will only be taken to be use by the registered proprietor of the mark if the registered proprietor exercises control over the use of the mark during the period in question so as to maintain a connection in the course of trade between the goods or services and the registered proprietor. In a case where a registered proprietor of a trade mark is relying on use by an authorised user, it is still necessary to demonstrate that the trade marks indicate a connection in the course of trade with the registered proprietor. … control is the defining feature of the connection where the trade mark is used by an authorised user.

A bare licence to use a trade mark, particularly a perpetual licence, would not be sufficient. Without more, it would amount to a divestment of control.

The Full Court therefore ordered the registration to be removed for non-use.

The decision will have wide ranging implications. Bare licences are in relatively common use, including in the assignment and licence back context (such as in settlement of disputes as for Wild Geese Wines), in the merger and acquisition context (including as part of separation of businesses), and in intra-group licensing arrangements. Following Lodestar Anstalt v Campari America, it will be critical for all licensors to ensure they make efforts to exercise their control rights under trade mark licences. This could include exercising audit powers so as to establish financial control, or requesting samples of use of the trade mark or site inspections to establish quality control. However, Nicholas J also remarked at [132] that the question would remain as to whether the trade mark owner had exercised “real or genuine control as opposed to something that was merely token or colourable.” This may suggest that even a licensor who makes token efforts to exercise (say) quality control provisions under a licence may not succeed in establishing authorised use by a licensee.