Although correct according to current law, an invalidation decision in New Zealand creates uncertainty for brand owners and may indicate a need for reform of existing legislation.
In Chettleburgh v Seduce Group Australia Pty Ltd(1) Seduce Group Australia Pty Ltd successfully applied to the assistant commissioner of trademarks to invalidate a registration in the name of Gary Chettleburgh for SEDUCE, covering clothing in Class 25. Seduce Group's application to invalidate the registration was based on its own earlier use of SEDUCE for the same goods. Seduce Group had used SEDUCE in relation to clothing between June 2001 and June 2003, although it then ceased using the mark until March 2006 (after Chettleburgh had filed his application in January 2006).
The assistant commissioner held that Seduce Group's invalidity action failed under the following sections of the Trademarks Act 2002:
- Section 17(1)(a), which provides that a mark must not be registered if its use would be likely to deceive or cause confusion;
- Section 17(1)(b), which provides that a mark must not be registered if its use is contrary to law; and
- Section 25(1)(c), which provides protection for well-known marks, including unregistered marks.
The action failed on these grounds because Seduce Group was unable to establish that it had a significant reputation in SEDUCE at the filing date of Chettleburgh's application.
In spite of the above, and the fact that the section had not been pleaded, Seduce Group succeeded under the ownership provisions of Section 32, which state that only a party claiming to be the owner of a trademark may apply to register that mark. The assistant commissioner held that although Seduce Group had not used the mark between June 2003 and March 2006, it had been the first to use SEDUCE for clothing in New Zealand and had not abandoned the mark. Therefore, Chettleburgh was not the owner of the SEDUCE mark and his registration was held to be invalid.
The decision may be troubling for new trademark applicants. Use which had ceased well before the application date, was not widespread and was of a relatively short duration appears to have given Seduce Group long-lasting rights in the trademark, despite its inability to establish any reputation in the mark. However, the decision - although surprising - is consistent with earlier New Zealand authorities.
It is established law in New Zealand that the proprietor of a trademark is the first party to use that mark in New Zealand.(2)This is the case even where another trader has used the mark elsewhere.(3) Proprietorship is established when the following three requirements are met:
- There is no prior use or prior assertion of proprietorship;
- The applicant is using the mark or has sufficiently definite intention to do so; and
- No fraud or breach of duty is involved.(4)
This does not mean that actual trade or dealing in the goods is necessary; rather, an offer to trade in the goods is sufficient.(5) The threshold is low - in Australia, a single use has been held to establish a sufficient claim to proprietorship.(6)
Although the New Zealand courts have not considered the point, there is Australian case law to the effect that a claim to proprietorship of a trademark may be established only where the prior user can show that its mark - that is, the mark on which it relies as being owned by itself - is identical or substantially identical to the mark under consideration. The position in both Australia and New Zealand is that to succeed in an ownership dispute, the prior user must show prior use for goods or services that are identical or virtually identical to those covered by the relevant application or registration.
The proprietor of a trademark cannot be deemed to have abandoned the mark merely through non-use; for proprietorship of a trademark to be abandoned, a deliberate intention must be shown.(7) The issue of what constitutes a demonstration of a deliberate intention to abandon is unclear; however, the Australian Trademarks Office has held that a company, in ceasing use of a trademark and rebranding, had abandoned the earlier mark, and that its claim to retain an interest in the mark rested on a bare assertion.(8)
In the current case, the fact that Seduce Group eventually recommenced use of the SEDUCE mark was considered sufficient evidence that it had never abandoned the mark, despite the fact that it recommenced use only after Chettleburgh's application had been filed.
Under the relevant law, there is scope for considerable uncertainty for traders that wish to adopt new marks - there is no way of knowing for how long a prior user of a mark may be able to claim rights in such a mark after it has ceased to use it. Clearance searching may not find historical use of the mark by other traders, but historical use may be sufficient to block or invalidate a new registration.
In addition to creating uncertainty, the law sits awkwardly with other provisions in the act, including the non-use provisions contained in Section 66. Under this section, a mark can be revoked if it has not been used in relation to the relevant goods or services for an uninterrupted three-year period. However, under the proprietorship provision, an absurd situation can occur: if Party Y revokes Party X's registration on the grounds of non-use, and achieves its own registration, that registration may be vulnerable to attack by Party X on the grounds that it, rather than Party Y, is still the proprietor of the mark.
The decision also highlights another oddity: had Seduce Group never ceased use of the SEDUCE mark, Chettleburgh's use from 2006 onwards might have been sufficient to establish that despite Seduce Group being the rightful proprietor of the mark, he was entitled to a registration under the doctrine of honest concurrent use, as embodied in Section 26 of the act. However, because Seduce Group did not use the mark during the relevant period, this doctrine could not come into play.
In New Zealand, rights in a mark may be acquired through use on the marketplace, if such use is sufficient to establish a reputation. These rights can be enforced through the tort of passing off and the Fair Trading Act 1986, a piece of consumer protection legislation which prohibits traders from engaging, in the course of business, in "conduct that is likely to mislead or deceive". Potentially, Chettleburgh may have acquired rights in SEDUCE through his use on the market, although Seduce Group was still the proprietor under the act. It would be an interesting (and bizarre) situation if Chettleburgh could prevent Seduce Group from using the SEDUCE mark under passing off or the Fair Trading Act, while at the same time Seduce Group was able to prevent Chettleburgh from holding a registration for the mark.
At first sight, this decision may be considered surprising, but it is not incorrect under the law as it stands. Nonetheless, the fact that such provisions sit so awkwardly alongside other provisions of the Trademarks Act, and the uncertainty that this may create for traders, could indicate that legal reform is desirable.
In the meantime, the decision demonstrates that for traders clearing new marks, a significant degree of caution may be warranted in assessing unregistered use by other parties of the same mark, where such use may either have ceased or be current but de minimis, as such use may still be sufficient to establish proprietorship in the mark under Section 32.
For further information on this topic please contact Jude Antony or Damian Broadley at A J Park by telephone (+64 4 473 8278), fax (+64 4 472 3358) or email ([email protected] or [email protected]).
(1)  NZIPOTM 34, September 20 2011.
(2) Philip Morris (NZ) v Liggett & Myers Tobacco Co (NZ) Ltd (No 3) (1978) 1 NZIPR 195 (SC).
(3) Valley Girl Co Ltd v Hanama Collection Ply Ltd (2005) 66 IPR 214.
(4) Newnham v Table for Six (1996) Ltd 44 IPR 269 at 278 (HC).
(5) Malibu Boats West, Inc v Catanses  FCA 1141, August 18 2000; Riv-Oland Marble Co (Vic) Pty Ltd v Setted SpA (1988) 19 FCR 569; and Melco New Zealand Limited v Oasis Corporation  NZIOTM 42, August 15 2002).
(6) Thunderbird Products Corp v Thunderbird Marine Products Pty Ltd (1974) 131 CLR 592 at 602.
(7) Mouson & Co v Boehm (1884) 26 Ch D 398; Malibu Boats West, Inc v Catanses; Riv-Oland Marble Co (Vic) Pty Ltd v Setted SpA; and Melco New Zealand Limited v Oasis Corporation.
(8) Lucas Finance Pty Ltd v Dig This Enterprises Pty Ltd  ATMO 35, June 20 2007.
An earlier version of this update first appeared in World Trademark Review, part of the IP Media Group.