The Federal Court recently handed down its decision in Calico Global Pty Ltd v Calico LLC. This decision highlights the potentially fatal consequences of not updating the IP Australia register to reflect a change in trade mark ownership.
The decision also serves as a reminder of the fundamental importance of ensuring that the owner of a trade mark (such as the registered owner or an unregistered assignee) exercise sufficient control over the use of the trade mark by a licensee.
The key issues in dispute arose out of a ‘non-use’ proceeding brought against a registered trade mark.
The Trade Mark Act 1995 (Cth) (TM Act) requires that the registered owner is the party which must rebut the presumption that the registered trade mark has not been used during the relevant non-use period.
However, where the trade mark has been assigned and used by the assignee, but the assignment has not been recorded (ie, the true legal owner of the trade mark is not registered as the owner), the Registrar or Court may, in considering all the circumstances, treat the use by the unregistered assignee as use by the registered owner.
When a registered trade mark owner wishes to defeat a non-use claim, it may rely on the certain use by another party if that other party is an ‘authorised user’. Use by an authorised user of an unregistered assignee can also be taken into account when determining whether an unregistered assignee has used a registered mark.
An authorised use of a trade mark will occur where the owner has exercised control over the use of the mark by another. This control can include quality control over the goods and services which are provided in association with the trade mark or financial control over the user’s ‘trading activities.
As the recent case of Lodestar demonstrated (see our update here), the registered owner or an unregistered assignee must typically demonstrate that it has exercised actual control over use of the trade mark by the user.
Mr Kevin Owens sought registration of the word CALICO as a trade mark on 7 June 2004 in respect of services in classes 41 and 44 (registration number 1005184) (184 Mark) and was the registered owner of the 184 Mark on the IP Australia register until 27 May 2014.
On 19 July 2011, Mr Owens assigned the intellectual property in the ‘Calico concept’, including the 184 Mark, to Calico Pty Ltd (Calico), which would remain the unregistered assignee until 27 May 2014 (despite the assignment taking place some three years earlier).
Calico, on the same day, entered into an exclusive licence agreement with Calico Global Pty Ltd (Global).
Calico LLC, a United States company, applied to register its CALICO trade mark with IP Australia with a priority date of 18 September 2013 in a range of goods and services, including services in class 44. On 15 May 2014, Calico LLC initiated a ‘non-use’ proceeding for removal of the services in class 44 of the 184 Mark. The relevant date for the purpose of rebutting the non-use proceeding was the three year period between 15 April 2011 to 15 April 2014.
At first instance, the delegate of the Registrar found that there had been no authorised use to overcome the non-use proceeding.
As a consequence, the services in class 44 of the 184 Mark were removed.
Global appealed the decision.
Issues on appeal
Although there was a range of issues which were considered by the Court on appeal, there was particular analysis of the legislative scheme under the TM Act concerning trade mark ‘use’ in the context of a non-use proceeding.
Specifically, Global appealed the decision and sought to rely on:
- use by Mr Owens, as the registered owner and as the ‘directing mind’ of both Calico and Global – Global asserted that Mr Owens had exercised sufficient control over the use of the 184 Mark by Global such that use by Global was ‘authorised use’ of Mr Owens; and
- use by Calico, as unregistered assignee, in that Calico exercised sufficient control over the use of the 184 Mark by Global such that use by Global was ‘authorised use’ of Calico.
Use of the 184 Mark by Global
Authorised use of Mr Owens
At trial, Global accepted that there was no evidence of any act or use by Mr Owens or Calico that exhibited any actual instance of control by either of them in relation to Global’s use of the 184 Mark.
The Court reasoned that by assigning the 184 Mark to Calico from 19 July 2011, Mr Owens was precluded from using the 184 Mark as the registered owner and had distanced himself from exercising any active or practical quality or other control over the services in relation to which the 184 Mark was used.
In other words, the Court appears to suggest that a registered owner who disposes of its rights to the trade mark will have great difficulty in asserting that it has maintained sufficient control over the use of the trade mark by others in order to establish that it has used that mark.
Authorised use of Calico
As there was no actual use by Mr Owens or Calico, Global instead argued that as Mr Owens was managing director of Calico, which controlled Global, it could be inferred that due to Mr Owens position within Calico, Calico authorised the use by Global through the exclusive licence.
This was not accepted by the Court. The Court concluded that Calico has a distinct legal personality to that of Mr Owens, and the mere fact that he had 50% of the share capital in Calico which was in turn controlled Global, did not establish that Calico, through Mr Owens, had exercised control of any use of the 184 Mark by Global.
As Global was not able to establish that Calico (through Mr Owens) exercised any control over the use of the 184 Mark by Global, any use by Global was not the ‘authorised use’ of Calico.
As such, without the registered owner or the unregistered assignee exercising control over Global’s use of the 184 Mark, Global’s appeal was dismissed on these points (and ultimately all other grounds of appeal).
Although the Court ultimately found that the 184 Mark had not been used in respect of the services in contention (on a separate issue before the Court), this decision raises more fundamental issues regarding the consequences of not recording the proper ownership of a trade mark, and ensuring that the owner (whether as the registered owner or the unregistered assignee) exercises actual control over the use of the trade mark by another.
Although the TM Act allows for the Registrar or Court to consider use by the unregistered assignee to rebut an allegation of non-use, such a decision is not made as a matter of course, and the court must consider all circumstances before ‘treating’ the use by the unregistered assignee as use by the registered owner.
As such, it is imperative for a trade mark owner to ensure that the public register properly shows the owner of the trade mark and, when exercising control, that this control arises from the registered owner, and not to seek to rely on indirect control through a managing director or majority shareholder.