The Federal Court has ordered Henley Constructions to stop using its name because it is deceptively similar to ‘Henley Properties’, a trade mark used by a competitor.

How Henley Constructions lost a closely fought legal contest to keep its name is found in the decision of the Federal Court of Australia in Henley Arch Pty Ltd v Henley Constructions Pty Ltd [2021] FCA 1369 (5 November 2021), a decision by Justice Anderson.

#1 How was Henley Constructions chosen as a name?

Patrick Sarkis was looking for a name for his new construction company. Initially, the projects were to be in Sydney, but his aim was to become Australia’s biggest builder and developer.

Mr & Mrs Sarkis searched the internet to compile a list of names. According to the Court:

“Mrs Sarkis in 2006 conducted Google searches of names already in use in the construction industry and then assessed if adding the words “Developments” or “Constructions” to them meant they were available names to register as company names with ASIC.”

Mr Sarkis consulted with his accountant, his solicitor, family, relatives, friends and contractors. They all liked the name Henley. His accountant registered Henley Constructions Pty Ltd with ASIC on 13 December 2006. They thought that if the company name was available for registration with ASIC, they could build their brand around it.

But there was already a company in the building industry with ‘Henley’ in its name. The Court said:

“Mr and Mrs Sarkis knew of the Henley Properties Group, knew of the website www.henley.com.au, knew that Henley Arch was an existing business operating in Victoria, South Australia and Queensland in respect of the building and construction of homes and proceeded to register the name “Henley Constructions” notwithstanding that those names were likely to mislead or deceive consumers into thinking that there was a connection with them.”

It was more than a poor choice of name. The Court said:

“The use of the name “Henley Constructions” has been tainted by that dishonesty from the date of adoption.”

#2 The Henley Arch Trade Marks

Henley Arch was founded in 1989 in Melbourne. The origin of its name was not explained.

Since the mid-1990s, Henley Arch has built both ‘contract’ homes and ‘spec’ homes for owner-occupiers and investors. In Victoria, South Australia, Western Australia and Tasmania, it used the registered business names Henley Homes and Henley Properties. In Queensland, it used the ‘Plantation Homes’ brand and in New South Wales, the ‘Edgewater Homes’ brand, with references to the Henley brand in its marketing materials. It builds more than 2,000 homes per year.

On 18 December 2006, it filed for 3 trade marks: HENLEY, HENLEY WORLD OF HOMES and  for Building and construction services (class 37); and Architectural, engineering, design, drafting and interior design services (class 42). The trade marks were registered.

In 2016, it filed for 3 more trade marks: HENLEY ESSENCE, HENLEY RESERVE and HENLEY COLLECTION for similar services. The trade marks were registered.

In addition, since 2005 it has used various devices such as

  

The Henley Properties Group has a domain name, a website and social media presence on LinkedIn, Instagram, Pinterest, Facebook, YouTube and the Vimeo streaming platform.

#3 The Henley Constructions business

The first project undertaken by Henley Constructions was 24 residential units in a property development at Camperdown in Sydney, which commenced in early 2007 and was completed in June 2008.

In the years that have followed, Henley Constructions has completed over 20 projects. It has focused mostly on the construction of residential unit blocks with about 25 units and some mixed use, commercial units and private home construction and renovations in and around suburban Sydney.

It has not registered any trade marks. It has a domain name (henleyconstructions.com.au), a website and a social media presence. It has a logo.

In 2017 it adopted a new logo in which the word ‘Henley’ was more prominent: 

The logo and the words “HENLEY’ and ‘HENLEY CONSTRUCTIONS’ were used on its website, on social media, on marketing materials, signage at developments including on fencing, on cranes, in galleries, and as hashtags

#4 The Cease and Desist letter

On 13 April 2017, Henley Arch sent Mr Sarkis of Henley Constructions a letter headed: UNAUTHORISED USE OF HENLEY TRADE MARK.

After outlining the facts, the letter stated:

“It is our view that your use of “Henley Constructions” and “Henley” infringes our trade mark and is also misleading. These are matters that can be the subject of legal action against your company.

We consider that this matter can be resolved by you agreeing to change your company’s name and cease using “Henley” in the promotion of your services.”

The letter was prompted by an email from a supplier to Henley Properties which provided a hyperlink to a news story which referred to Henley Constructions. In his email the sender wondered whether Henley Constructions “[m]ight be just another business in Sydney that goes by the name of Henley?”. 

This was the first time that Henley Properties Group became aware of Henley Constructions.

Instead of changing its name, Henley Constructions responded by “ramping up” its branding (see above) and website.

In 2017, its total advertising spend was ten times higher than 2016, comprising $86,500 for “marketing and website design, uniform attire”, $33,000 for “crane signage”, $5,280 for “site safety mesh” and $198 for the “1300 HENLEY phone number”. These are examples:

The Consideration by the Court

It is beyond the scope of this article to closely analyse the lengthy judgment, which consists of 1005 paragraphs. This is a selection of issues and findings:

A registered trade mark provides powerful protection against names or logos which are substantially identical or deceptively similar. [see s 120(1) Trade Marks Act 1995 (Cth)]

In this case, the question was: “Was there a reasonable probability of deception or confusion?” between the name - Henley Constructions and the trade marks registered by Henley Arch?

  • Some of the uses were not trade mark uses – such as the phone word 1300HENLEY or HENLY or HNLY on a licence plate of a vehicle.
  • But the use of the logo and the mark (the name) “HENLEY CONSTRUCTIONS” in all other places were trade mark uses. The Court found that the logo and the mark were substantially identical to “HENLEY”, “HENLEY PROPERTIES” and the other “HENLEY” trade marks, on the basis that the word “Henley” is the “dominant cognitive cue”.
  • They were also deceptively similar on the basis that “a number of persons will be caused to wonder whether building and construction services provided under the Henley Constructions mark came from the owner of the Henley Properties mark.”
  • The Court found that Henley Constructions has used, and uses, its logo and mark as a badge of origin (a brand) to distinguish its building and construction services from other building and construction businesses’ services, and so the requirements of s 120(1) were satisfied.

A claim was made for breach of the Australian Consumer Law (ACL). The Court found that “a consumer of building and construction services is likely to be led into error, and be misled into the belief that Henley Constructions is affiliated, sponsored, approved or licensed by Henley Arch such that its conduct contravenes ss 18, 29(g) and 29(h) of the ACL.”

Henley Constructions raised the trade mark defence of ‘right to register’, relying upon the fact that although it and Henley Properties were in the building and construction industry, they built different buildings - Henley Constructions built multi-dwelling residential apartment buildings while Henley Properties built detached and semi-detached houses.

  • The Court did not agree: “In my view, the building and construction of multi-dwelling residential apartment buildings is the “same kind of thing” as the building of single dwellings (whether detached or shared wall) that are not apartments.”, the difference being that “apartments are built on top of each other, rather than side by side” as single dwelling houses or terrace houses are. Further, “there is a degree of overlap in the building steps”, and architects and builders are licensed to build all types of buildings.

Henley Constructions asserted that the trade marks should be cancelled because “Henley” was not distinctive – that it was a descriptive geographical name (there are suburbs of “Henley”, “Henley Brook” and “Henley Beach”) and was a surname (Henley or Henly).

  • The Court did not agree: It found that “Henley” had “become distinctive of the building and construction services provided by Henley Arch”.

Analysis - What should Henley Constructions have done?

The turning point in this case was the Cease and Desist letter in 2017. Proper legal advice at that time would have highlighted the risks of continuing to use the name and being caught up in legal proceedings, versus the inconvenience of changing the name.

The letter was no idle threat. An internet search would have revealed that Henley Arch had been to the Federal Court many times to successfully enforce its copyright and trade mark.

Instead, Henley Constructions “ramped up” its marketing and promotion of the name, and Henley Arch commenced legal proceedings.

ASIC registration gives no protection to a brand name

Certainly until the Cease and Desist letter, it was harsh to say the use of “Henley Constructions” was ‘tainted by dishonesty’ from the start, when it was a lack of good legal advice that led it to believe that ASIC registration was enough to give it rights to use the name.

Even today, on the ASIC name search website, the only warning given is that: “You can't register a company name that is similar or identical to a name that is already held.”

There is no warning on the ASIC website that registration of a name does not confer a right to use and there is no link to the business.gov.au/registrations web page which contains a good explanation of the protection a trade mark can give.

What should a business do to protect its name?

There are three forms of protection every business should use to protect its name and logos:

  1. Register a company name with ASIC – the name should be chosen carefully to be distinctive (not geographical) and not identical to or similar to the name of any other business in the same field.
  2. Register a domain name as a .com.au, and if available as a .com as well.
  3. Register a Trade Mark to cover the goods and services provided.

Register variations of the name – in this case, Henley Arch had not registered ‘Henley Constructions’, even though it could have done so before 2006.

The recommended searches before settling on a name (search the whole and each part) are:

  • ASIC business and company name
  • trade mark searches
  • internet searches (that is, Google searches)
  • searches of any websites arising from internet URLs compromising the name
  • domain name searches of the “Whois database” for “.com.au” domain names
  • searches of the Yellow Pages and White Pages directories for any listings

And now for comments from a brand marketer -

How to Rebrand After Losing Your Brand to a Competitor

Marketing commentary by Michael Field from EvettField Partners

The difference between a brand, a company name, logo and trade mark is not understood by many people in the business community. It surprises me how often business owners will rely on their accountant or marketing agency to manage business registrations or IP protection.

Brand and brand protection is a specialist area that requires expert advice from a suitably qualified legal specialist, experienced in navigating the complex landscape of business registration and IP protection.

What’s branding all about?

Branding is a process which should be followed whether it is the creation of a new brand, the evolution of an existing brand or rebranding after a business disaster or brand loss due to legal challenge.

At EvettField, we have created the 4D’s of branding

  • Distinctive – make it unique and memorable, yet easy to say and remember
  • Descriptive – it does not need to be literal, however taglines can assist describe what you do, for who and your unique point of difference
  • Desirable – it must be attractive and generate desire for the product or service
  • Defensible – it must be uniquely yours, available and able to be protected and defended with traditional legal defences including trademarks, usage etc. 

Jeff Bezos, founder, and CEO at Amazon says: “A brand is what people say about you when you’re not in the room.”

You have made a big mistake. How do you recover from a brand loss?

Conducting a rebrand after losing the right to use a brand due to a legal challenge or any other reason is a little trickier.

  • You need to communicate the brand name change, and the reasons for it to your existing customers, suppliers, media commentators and the general public.
  • You need a skilled communication expert to develop a marketing and communications plan which addresses the issue, acknowledges the shortcomings, communicates the changes, promotes the benefits of the name change and revitalises the brand and market perception in the process.

Putting time, effort and money into branding repays itself many times over. Not only does good branding attract customers, but also a goodwill premium when the business is sold.