The Supreme Court of New Zealand has held that there is no discretion to retain a trade mark registration in the face of a successful revocation "non-use" action, in Crocodile International Pte Ltd v Lacoste  NZSC 14. The Court also deemed the trade mark registration in this case to be revoked from 12 December 1999 – over 17 years before the decision issued!
Crocodile International Pte Ltd (Crocodile International) is a Singapore Company, whose predecessors or related entities have used various crocodile logos in relation to clothing in Asia, since 1947. In 1961 a related party (Crocodile Garments) registered the Crocodile Logo shown below in New Zealand for clothing, under Registration No. 70068.
Lacoste is a well known clothing manufacturer that also sells a range of clothing under a crocodile logo, which had been sold in New Zealand since 1983.
In 2003 Lacoste and Crocodile Garments entered a settlement agreement to resolve global issues relating to intellectual property and which assigned rights to the Crocodile Logo from Crocodile Garments to Lacoste, effective June 2004.
Why were the parties in the Supreme Court?
In 2008 Crocodile International sought revocation of Lacoste's Crocodile logo on the basis that Lacoste had not used the logo - including during the period 12 December 1996-12 December 1999, a time period when Crocodile Garments was actually the owner of the registration.
Lacoste accepted that it had never used the Crocodile Logo in that specific form, but maintained that it had used similar crocodile trade marks that had the same distinctive character as the Crocodile Logo, including the logo shown below:
The proceeding is the latest in a number between Crocodile International and Lacoste in New Zealand, as the parties have wrestled over ownership of crocodile images in relation to clothing.
In the first instance, in a hearing before the Trade Mark Registry the Assistant Commissioner found in favour of Crocodile International, rejecting Lacoste's argument that the "central message" of the Crocodile Logo and the Lacoste Logo were the same and finding that consumers would perceive differences between the marks as sufficiently striking and memorable to alter the distinctive character of the trade mark. However that decision was overturned by Collins J. upon appeal in a decision upheld by the New Zealand Court of Appeal, on the basis that the Lacoste Logo and others were sufficiently close to the Crocodile Logo for that registration to be maintained. The case was then further appealed to New Zealand's highest court, the Supreme Court of New Zealand.
How similar must a trade mark be, to constitute use of the registered mark?
A critical issue in the case was whether the Lacoste Logo was sufficiently close to the Crocodile Logo to constitute use of that logo, notwithstanding that the former does not include the stylised word "CROCODILE".
The Supreme Court rejected the concept of focussing upon a "central idea and message" (as has been previously applied by the High Court and Court of Appeal), preferring the Assistant Commissioner's approach of a "global appreciation" of the trade mark. It held that the Lacoste Logo omitted one of two essential elements of the Crocodile Logo – namely the stylised word "CROCODILE".
The Court distinguished the case from the Australian High Court decision in E&J Gallo Winery v. Lion Nathan Australia Pty Ltd  HCA 15, which had held that the addition of the image of a foot to the trade mark BAREFOOT did not change the identity of the BAREFOOT trade mark, as the products would still be identified by the term BAREFOOT. The Supreme Court noted that in the Australian case the word mark as registered remained as a core element, and that
If the company had trademarked a particular image of a foot and used a quite different image of a foot on their products, the result would in our view have been different.
In contrast, the Supreme Court concluded the missing word element was essential, and that use of the Lacoste Logo did not constitute use of the Crocodile Logo:
In our view, the distinctive character of [the Crocodile Logo] has two essential visual elements: the stylised word and the crocodile device. The fact that one of the essential visual elements is missing….would in itself likely mean that the use of the Lacoste trade marks is in a form differing in elements which mean that the distinctive character of [the Crocodile Logo] is altered. When the significant differences in the depiction of the crocodile are added, this conclusion is, in our view, inescapable.
Is there a difference between removing elements from a registered mark rather than adding elements to that mark, when assessing whether the mark has been "used"?
The Supreme Court held that the distinctive character of a registered mark is more likely to be retained if elements are added to it, rather than if elements are removed – "with each additional embellishment the totality of the trade mark having a distinctive character is still present, whereas, if elements are removed, the distinctive character in that totality may be more easily eroded".
Reputation matters, when assessing whether a mark has been used
The Supreme Court also found that reputation plays a significant part in any assessment of distinctive character, to conclude "that a strong reputation in a trade mark may mean that greater changes can be made before distinctive character is lost than would be the case for a less established brand".
This is a departure from existing New Zealand trade mark law. Whilst it may create some legal uncertainty, it does perhaps better reflect the practicalities of the modern marketplace and how consumers actually perceive trade marks within the marketplace.
New Zealand Assistant Commissioners may know best, in trade mark cases
Glazenbrook J. recognized the Assistant Commissioner's expertise in trade mark matters, and acknowledge that
given the wide range of trade mark decisions that Commissioners are called upon to make, they may be expected to have a broader and more nuanced appreciation of the trade marks register than judges … This may mean that, where an appeal raises this type of issue, the Appellate Court should hesitate to depart from the Commissioner's qualitative assessment
Is there any discretion to retain a trade mark registration, if a non-use action has been established?
The Supreme Court went on to consider whether it had any discretion to retain registration of the Crocodile Logo, in view of Lacoste's use of other Crocodile trade marks in New Zealand. The notion of discretion was considered equivocal in New Zealand, notwithstanding that a decision of the High Court had held that there was indeed such discretion by virtue of the word "may" (rather than "must") in the relevant section of the Trade marks Act 2002 (Cure Kids v National SIDS Council of Australia Ltd).1
The Supreme Court held that there was no discretion in New Zealand to retain a trade mark registration if the elements of a non-use action had otherwise been satisfied. This finding is consistent with UK Law (from which the New Zealand Act is derived), and provides greater certainty in relation to the application interpretation of non-use actions in New Zealand.
The situation is different in Australia, as the equivalent Australian legislation expressly provides for such a discretion, in certain circumstances. This has led to some uncertainty in Australian non-use cases in which the Trade Mark Registrar's discretion has often been applied to retain a trade mark registration, even if a non-use case has been established.
Lacoste loses its crocodile – 17 years before the judgment!
The Supreme Court held in favour of Crocodile International and deemed registration of the Crocodile Logo to be revoked from 12 December 1999 – over 17 years before the decision issued and when Crocodile Garments was recorded as the owner of the Crocodile Logo.
Take home points for Trade Mark Owners
Owners of New Zealand trade mark registrations should ensure that their registered marks have been used in New Zealand within three years of their registration date or risk losing the registrations if challenged, as there is no discretion once the non-use has been made out. The case also demonstrates the extent to which a New Zealand trade mark registration can be removed retrospectively - sometimes years before a revocation action has even been lodged (as in this case), if appropriate circumstances exist to warrant retrospective removal of the registration.