Valentine’s Day and nappies don’t usually appear in the same sentence.  However, in a decision handed down by the Federal Court on 14 February 2014 (CI JI Family Pty Limited v National Australian Nappies (NAN) Pty Limited [2014] FCA 79) the Federal Court has reminded trade mark owners that they cannot view their marks as an ace-in-the-hole when it comes to the question of misleading and deceptive conduct.   In that case, Justice Flick upheld an application to prevent a nappy manufacturer from using its registered trade mark in New South Wales.

The Applicant in this case was CI JI Family, which used the business name “Nappyland” in NSW and the following Logo:

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The Respondent was National Australian Nappies (“NAN”), which was the registered owner of a business name “Nappy Land”, a domain name and importantly for this case, the following composite trade mark, which incorporated the phrase “Nappy Land”:

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Justice Flick found that Nappyland was entitled to restrain NAN from using the name “Nappy Land” in New South Wales to promote its products – despite NAN’s trade mark ownership.  In finding in favour of Nappyland, Flick J confirmed that a registered trade mark does not necessarily work as a trump-card to a claim of misleading or deceptive conduct – these are two distinct areas of law which must be considered separately.

Nappyland’s claims were made on three bases:  it relied first upon an agreement said to have been entered into in 1999 between the parties under which NAN agreed not to use the name “Nappy Land” in NSW. It also claimed that NAN’s conduct was misleading and deceptive and sought injunctive relief and damages under section 18 of the Australian Consumer Law, as well as relief for passing off on the basis that a misrepresentation had been made as to a connection between the two businesses.

It is interesting to note in this case that Nappyland did not challenge the validity of the registered trade mark, the business name or the domain name, nor did the Respondents claim that the applicants had infringed the registered trade mark.

Justice Flick primarily addressed the issue under the Australian Consumer Law and expressed little hesitation in concluding that the use of “Nappy Land” and the use of the domain name had the potential to mislead and had in fact misled persons.  In discussing the potential for consumers to be misled, his Honour focused on the similarity of “Nappyland” and “Nappy Land” both in written form and when spoken aloud. This was not offset by the NAN’s use of the phrase “Nappy Land” (as opposed to the singular “Nappyland”).  Confusion was said to be further increased by the similarity in the products being supplied by the parties.

Having reached this conclusion, his Honour did not decide on the question of passing off, but noted that had this been necessary the court would have found that this was made out.  Emphasis was placed here on NAN’s “proactive marketing process” and the representation that its business was aligned with Nappyland.

In arriving at this conclusion, his Honour allowed evidence of actual confusion even though this was minimal, and found in favour of the Nappyland despite noting the “vague nature of the Applicants’ evidence”.

In respect of the agreement, Justice Flick found that it had not been made out:  his Honour was not satisfied that NAN had agreed not to use the name “Nappy Land” in NSW.

The decision should remind owners of trade marks that it’s not always sunshine and roses just because they own a registered trade mark. Importantly, as Justice Flick found, the “rights conferred upon the registered owner of a trade mark do not extend to a licence to engage in conduct which is misleading or deceptive or to engage in conduct which constitutes a passing off.” There is nothing in the Trade Marks Actwhich seeks to confine the application of the Australian Consumer Law.