In the third article of our series looking at some of the key issues for trade mark owners and their advisors operating in and entering the Australian market, we provide some tips for exercising proper ‘control’ over trade marks.
Registered trade marks are not always used by their owners, as they are often licensed by the owner for use by other entities.
Aside from the commercial importance of retaining control to preserve and increase the value of your mark, when authorising use of the mark by another party, it is crucial that the other party be an ‘authorised user’ for the purposes of the Trade Marks Act 1995 (Cth) (Trade Marks Act).
An ‘authorised use’ of a trade mark will be considered use by the owner. An authorised use occurs where the owner has exercised sufficient control with respect to such use. If the other party’s use of the trade mark is not an ‘authorised use’ for the purposes of the Trade Marks Act, then this use will not be considered use by the owner.
Consequently, in the absence of sufficient control, another person may be able to successfully apply for the mark to be removed from the register, on the basis that it has not been used by the owner for a period of three years.
Owners should always be alert to the possibility of such action, particularly if they are looking to enforce their trade mark rights. Future trade mark applicants may also seek to remove the registered mark on the basis of ‘non-use’ in order to overcome the owner's prior registration if it is blocking the new application before IP Australia.
Section 8 of the Trade Marks Act provides a non-exhaustive list of what constitutes ‘control’ by a trade mark owner, with two specific examples being:
- quality control over the goods and services provided by the authorised user; and
- financial control over the relevant trading activities of the authorised user.
Where a licence agreement is entered into with an unrelated party, the mere existence of a right to exercise quality control will not be enough to demonstrate sufficient control. The owner must exercise actual control over the licensee’s use of the trade mark (for instance, by requiring the licensee to provide samples of the relevant products for inspection and approval), as opposed to the mere right to control.
The position can differ where a trade mark is licensed for use within a corporate entity, depending on the specific circumstances. For instance:
- where a parent company authorises use by its wholly owned subsidiary, financial control may exist; and
- if a trade mark is licensed to a related entity which shares common directors, sufficient control may exist if the two companies operate with a ‘unity of purpose’.
Given the uncertainty that often exists in relation to the sufficiency of control of a licensed mark, it is often advisable that a formal written licence agreement be entered into and processes put in place for the exercise of actual control to occur.