The implications of a failure to exercise control in trade mark licence agreements

On 28 June 2016, the Full Court of the Federal Court of Australia handed down a landmark judgment, revealing trade mark owners risk forfeiting their registered trade marks if they fail to exercise actual control over the use of those marks by licensees.

Campari America (Campari), who owns the Wild Turkey trade mark and sells Wild Turkey Bourbon, faced a challenge to its registered trade marks 'Wild Geese' and 'Wild Geese Wines' on the basis of non-use. The challenge came from Lodestar Anstalt (Lodestar), who sought removal of Campari's registration after it prevented the registration of its own 'Wild Geese Whiskey' brand.

This 'battle of the birds' centred on section 92(4)(b) of the Trade Mark Act 1995 (Cth) (the Act), which enables a trade mark's registration to be removed where the registered owner has not used the trade mark in Australia for a period of three years, ending one month before the filing date of the application.

With the onus being on the owner of the trade mark to rebut the application, Campari argued 'use' was established through an exclusive, perpetual licence to Wild Geese Wines Pty Ltd (WGW), which uses the trade mark on wine that it manufactures and distributes in Australia. Campari further submitted this arrangement was an example of 'authorised use', which requires the trade mark to be used by a third party, under the 'control' of the registered owner.

Did Campari exercise 'control' over the use of the trade marks?

Campari's ability to successfully rebut Lodestar's application rested on the court's interpretation of 'control'. Of particular importance was whether Campari was required to have exercised 'actual' or 'theoretical' control over the use of the trade mark subject to the licence agreement with WGW.

At first instance, the primary judge found that the trade mark licence agreement between Campari and WGW satisfied 'authorised use', as 'a mere theoretical possibility of contractual control was sufficient to constitute authorised use'.

However, this interpretation was overturned on appeal, with the Full Court of the Federal Court unanimously finding that 'actual' control is required. In further bad news for Campari, the court also determined that Campari had failed to reach this threshold. For example, even though the licence agreement imposed quality control over the use of the marks, there was no evidence to suggest Campari had exercised any genuine control over the licensee's use of the marks - not a single sample had been requested in the alleged non-use period.

As such, the Court found that WGW's use of the trade mark 'Wild Geese' was not an 'authorised use' for the purposes of the Act, leaving Campari unable to rebut the removal for non-use application.

Withstanding a challenge

It is now clear that a bare licence to use a trade mark, particularly a perpetual licence, will not be sufficient to rebut an allegation of non-use under s.92(4)(b) of the Act.

Even trade mark licence agreements which impose conditions on the use of the marks (such as quality or financial control), will not withstand a challenge. Registered proprietors must also be able to demonstrate they have actively exercised that control and enforced those obligations, satisfying a court that they have actual control over that mark.

Stringent record keeping is key. A registered owner who licenses a mark without being able to establish an ongoing connection to it, will end up cooking its own Goose.