The decision of the Federal Court in Calico Global Pty Ltd v. Calico LLC,  FCA 2096, which was issued on December 21, 2018, is a reminder for trademark owners to ensure that, even if a mark is in use, if such use is by a third party with consent, the mark may be vulnerable to cancellation for non-use if the statutory definition of “authorized use” is not met.
The appeal was of a decision of the Delegate of the Registrar of Trade Marks (the delegate) who decided that “Calico” (Reg. #1005184) in the name of Calico Global Pty Ltd (Calico Global) should be removed for non-use with respect to Class 44 medical services. During the proceedings, Calico Global narrowed its services in this class to the provision of advice and information regarding diet, nutrition, exercise, and fitness. The applicant for removal of the trademark from the register, Calico LLC, had filed an application covering various medical information and consultancy services in Class 44.
The original owner, Kevin Owens, assigned the CALICO mark to his company, Calico Pty Ltd, which granted an exclusive license to a related company, Calico Global, to use the mark. Mr Owens was managing director of both entities. Calico Pty Ltd later assigned the mark to Calico Global. However, the delegate found no use on the basis that the assignment/license did not show that the Calico entities had been “authorized users” during the relevant period. The delegate declined to exercise its discretion to maintain the mark on the register.
Under Section 7 of the Trade Marks Act 1995, authorized use of a mark is deemed use of a mark by the registered owner. Section 8 of the Act provides that a person is an “authorized user” of a mark if the mark is used under the control of the owner and such use is only under the control of the owner. The definition of “under the control of” is not exhaustive, but includes if the owner exercises quality control over the goods/services provided in trade by a third party and in relation to which the trademark is used, and if the owner exercises financial control over the third party’s trading activities.
In the appeal decision, the Federal Court noted there was no evidence that:
- Calico Global had fulfilled its obligation to clearly indicate that it was a licensed user of the mark;
- Calico Pty Ltd ever gave any direction or guidance about the way the mark was to be used;
- Mr Owen or Calico Pty Ltd had financial control over Calico Global’s trading activities; or
- Calico Pty Ltd ever authorized Calico Global to use the mark.
Neither Mr Owens, Calico Pty Ltd, nor Calico Global could show use of the mark with respect to medical services. The only examples of use related to fitness, exercise, and nutrition, and none of those would have been sufficient to protect the mark with respect to medical services.
The Federal Court refused to exercise its discretion to allow the Class 44 services to remain on the register as the owner was found to have engaged in bad faith conduct, including toward Calico LLC. This included conduct to interfere with Calico LLC’s bona fide use of its mark and to deliberately cause confusion by feigning the provision of services which the registered owner did not actually provide.
The decision and some earlier decisions on “authorized users” are a warning for rights holders to review license agreements and use arrangements to ensure use that is authorized will withstand a non-use action. It also confirms that when a trademark owner has engaged in bad faith conduct, it is unlikely to be able to rely on discretionary defenses to non-use.
This article first appeared here in the INTA Bulletin and was reprinted with permission from the International Trademark Association (INTA).