Introduction

Successfully securing your valuable intellectual property rights is important.  But it is only part of the story.  If you fail to identify infringements of those rights and, importantly, take action to enforce those rights promptly, then those rights might be limited or lost. 

The recent decision of the Full Federal Court in Knott Investments Pty Limited v Winnebago Industries, Inc [2013] FCAFC 59 (Appeal) is an extreme example of delay in enforcing rights.  Notwithstanding its specific and slightly unusual facts, the case acts as a timely reminder that rights owners need to consider the implications of delaying taking steps when infringing conduct is identified.

Background

Winnebago Industries Inc (Winnebago) has been in the business of manufacturing and selling its Recreational Vehicles (RV's) since late 1959 under or by reference to the trade mark WINNEBAGO.  Winnebago sold its RV's initially in the United States, but subsequently expanded into other countries, although did not sell in Australia at the relevant times.  Winnebago was also the registered proprietor of the following trade mark in the USA:

Click here to view image.

In the late 1960's, Mr and Mrs Binns (the Binns) travelled to the USA, Canada and Mexico as tourists and noticed the substantial reputation of the WINNEBAGO branded RVs. 

In 1978, the Binns secured the Australian business name "Winnebago Industries" and commenced selling RVs under the mark WINNEBAGO in Australia.  Knott Investments Pty Limited (Knott) was subsequently incorporated by the Binns in 1982 and through Knott they continued to manufacture and sell RVs and campervans under the brand WINNEBAGO.  Additionally, use was made by Knott of a logo in the same form as the logo used by Winnebago.  

Winnebago first became aware that Knott was using the WINNEBAGO mark in 1985, but did not initially take any steps to enforce its rights.  Winnebago did nothing to stop Knott trading under the mark until 1991, which resulted in a "settlement" agreement between the parties in 1992.  This settlement agreement purported to maintain Winnebago's rights in Australia, whilst allowing Knott some limited rights to continue to use the WINNEBAGO mark in Australia.  

In approximately 2010 Winnebago made a decision to look to Australia for further expansion of its RV business.  It took steps against Knott seeking to have it cease any further use of the WINNEBAGO mark in Australia (including the logo).  

Decision at First Instance1 

  • Winnebago commenced proceedings against Knott for removal of Knott's trade mark which had been registered for WINNEBAGO in Australia in 1997, as well as passing off and misleading and deceptive conduct and was successful.  

In summary, his Honour, Foster J, determined that:

  1. Mr Binns had intentionally hijacked the WINNEBAGO mark to use in Australia, given its existing reputation in North America and Europe in the 1980's;
  2. At the relevant time (which Foster J considered to be at the time Knott commenced its relevant conduct, not at the time the proceedings were commenced by Winnebago) a significant and valuable reputation had been established for the WINNEBAGO mark, including spill over reputation into Australia;
  3. Given the existence of this reputation, it was likely that consumers may be misled into believing there was a connection between the Australian and USA WINNEBAGO brands, when there was not.  As such, Knott had engaged in passing off, misleading and deceptive conduct and making false representations under the relevant legislation in place at the relevant times (Trade Practices Actand Australian Consumer Law);
  4. There was no evidence accepted by the Court as to any consent given to Knott or Binns by Winnebago to use the WINNEBAGO mark in Australia in the manner it had, nor did the settlement agreement entered into in 1992 provide such consent; and
  5. Despite the extraordinary delay which had occurred in this matter, this was insufficient to deny Winnebago claiming relief against Knott.  The settlement agreement had, to some degree, protected the position of Winnebago and the Binns and Knott had proceeded to use the WINNEBAGO brand in Australia with full awareness and knowledge of the existence of Winnebago and its rights in the WINNEBAGO brand.

Knott was ordered to cancel the registration of its Australian WINNEBAGO mark on the basis that use of the mark was likely to deceive or cause confusion.  Further, it was a term of the settlement agreement that such a trade mark would not be registered in Australia.  Orders were made permanently restraining Knott (and its dealers) from using the WINNEBAGO mark (or any similar mark) in Australia in the future, as well as any business, company and domain names which contained the WINNEBAGO mark.  

The Appeal  

Knott appealed this decision.  The key issue for the Full Federal Court was the issue of delay by Winnebago to take action.  That is, a delay of 25 years after becoming aware of the infringing conduct.  Additionally, the Full Federal Court considered the reputation that the Binns and Knott had established in WINNEBAGO during the delay.

Peculiar to this case was the 1992 settlement agreement.  Absent this agreement it seems likely that Winnebago may have had a harder task to explain its very long delay in taking steps in this matter to preserve its rights.  As to the settlement agreement however, the Full Federal Court agreed with Foster J's determination that the agreement did not permit Knott or the Binns to register or use the WINNEBAGO mark in the manner which had occurred or authorise them in any way to do so.

Turning to the issue of delay, the terms of the settlement agreement did not support Knott's contention that it was now too late for Winnebago to bring proceedings and to permit it to do so was unjust.  To the contrary, the settlement agreement should have put Knott and the Binns on clear notice that Winnebago had not given up any of its rights and that if continued use was to be made in Australia of the WINNEBAGO mark, then it was done with the risk of a future "tap on the shoulder" by Winnebago still looming large.  The defences of laches, acquiescence and delay were rejected by Allsop CJ and Jagot J (who also noted that Knott had renounced these issues at the trial) but not specifically by Cowdroy J. 

Notwithstanding the rejection of these defences based on the issue of delay, the Full Federal Court ultimately considered that the relief granted by Foster J was not in all of the circumstances just and fair.  Particularly giving due consideration to the fact that Knott had, over a long period of time, established its own significant reputation in the WINNEBAGO brand – independent of USA Winnebago – against a background of extraordinary delay (with full knowledge of the conduct) on the part of Winnebago.  The factual issues peculiar to this case, primarily the delay in Winnebago taking steps and watching from afar (with full knowledge) the building of the Knott Winnebago business in Australia during that period, meant that it was appropriate in this case to review the reputation which Knott had built up in WINNEBAGO in Australia.  Normally, the party infringing a trade mark or other get up would not benefit from any such use.  In this case however the Full Federal Court considered it fair to determine that some of the reputation established by Knott in the WINNEBAGO mark in Australia was as a result of its own efforts and not a consequence necessarily of mis-use of the WINNEBAGO brand associated with the USA company.

Jagot J made the point that Winnebago did nothing to prevent Knott from continuing the conduct complained of and in that time, Knott continued to grow its business and establish a reputation using the WINNEBAGO mark, such that the business had grown to a point where it had sold approximately $560 million worth of vehicles in Australia, received many awards, had a significant network of dealers throughout Australia and employed 215 people.  On this basis, if Winnebago was now permitted to enter the Australian market (unencumbered by Knott or any continued use by it of the WINNEBAGO mark) in effect Winnebago would be leveraging off the reputation and goodwill which Knott had actually independently developed in Australia for over 30 years.  Chief Justice Allsop made similar comments, considering that it would be unjust to allow Winnebago to step in and take advantage of the reputation established by Knott during Winnebago's delay.

The Full Federal Court determined that a complete restraint against Knott (and its dealers) as to any continued use of the WINNEBAGO mark in Australia was unreasonable, particularly because of the lengthy delay which had occurred in Winnebago taking steps to commence proceedings.  In the Court's discretion it limited the injunctive relief granted by Foster J, to the effect that Knott would be permitted to continue to use the WINNEBAGO mark in Australia in a manner which distinguished Knott and its goods and services from those of the USA Winnebago.  This disclaimer as to the source of goods and services needed to be clear in Knott's advertising, promotion and marketing materials as well as on the goods (RVs) themselves.  

As to Knott's Australian WINNEBAGO trade mark, the Full Federal Court maintained the orders made by Foster J, agreeing that the trade mark should be cancelled.

Conclusion

Taking enforcement steps is a significant decision for any business.  There must be a balancing between protecting the intellectual property which is being mis-used and the effect on the brand and underlying business if mis-use is not prevented and the commercial realities and cost of taking steps including litigation.

In Foster J's judgement2, reference was made at [114] to a letter sent on 30 November 1992 by Winnebago to its Australian lawyers, which included the following:  

While we are obviously interested in persuading or compelling Mr Binns to cease using the subject marks in Australia, I really do not think that we can justify any additional expense. We are not selling our products there nor do we have any plans to do so. There has in the past been some indication that Mr Binns was experiencing some financial duress and perhaps with any luck he will go broke. In any event, at least for the time being, I think we will just continue to monitor this situation …

Many businesses who have tacked infringement or related issues will also have considered similar strategies to the above.  This case (although extreme as to the length of delay) is an example of where the implementation of such a strategy failed, to the extent that the original trade mark owner (Winnebago) can no longer own or exploit its own brand on a monopoly basis in Australia (having allowed another to use it and build up its own reputation in the same brand).  As noted above, but for the settlement agreement in 1992, it is very likely that the strategy would have failed altogether to the extent that, had Winnebago tried to enforce its rights or use its trade mark in Australia, then it may have been prevented from doing so by Knott, on the basis of the reputation and associated rights Knott would have argued it had established in Australia.  The Court may well have agreed with Knott, had those been the facts of the proceedings before the Court.  This case highlights and reinforces that brand owners must take care in delaying any steps to protect its intellectual property and associated rights.

Melissa Corbutt