Two years on from Lodestar Anstalt v Campari America LLC [2016] FCAFC 92 (the Lodestar Case), trade mark owners are still at risk of having their trade mark registrations removed from the trade mark register by not exercising actual control over their licensees on the use of the mark.

The Lodestar case had major implications for Australian trade mark owners who do not use a trade mark themselves, but license the use of the trade mark to their licensees. In the event that the trade mark is challenged for non-use, the trade mark owner may not be able to rely on use by its licensee to overcome the challenge if it had not exercised “actual control” over its licensee’s use of the trade mark. The court in Lodestar held that a mere theoretical possibility of contractual control exercisable by the trade mark owner was not sufficient to constitute authorised use for the trade mark. “Actual control” may take the form of “quality control” over the goods and services, or “financial control”, and a court will consider the facts of each case to determine whether actual practical control was present.

In Calico Global Pty Ltd v Calico LLC [2018] FCA 2096, the relevant trade mark owner had its mark removed for non-use. Importantly, the use of the mark by the Licensee did not qualify as “authorised use” due to lack of control by the trade mark owner.

Background

On 7 June 2004, Kevin Owens (Owens) registered the word “CALICO” as a trade mark in respect of services in classes 41 and 44 (the Trade Mark).

On 19 July 2011, Mr Owens assigned all intellectual property in “the Calico System”, including the Trade Mark, to Calico Pty Ltd (Calico). On the same day, as the assignee of the Trade Mark, Calico entered into an exclusive licence agreement with Calico Global Pty Ltd (Global) under which Global had exclusive use of the Trade Mark. The assignment to Calico was, however, not registered until around three years later, on 27 May 2014.

Mr Owens was the managing director of both Calico and Global. Mr Owens also owned 50% of Calico which in turn controlled Global.

In September 2013, Calico LLC (Calico LLC), a United States company, was launched internationally and applied to register its CALICO trade mark with IP Australia with a priority date of 18 September 2013 for a range of goods and services including services in class 44.

Calico LLC applied to the Registrar on 15 May 2014 for removal from class 44 of the Trade Mark based on “non-use”.

In order to defeat Calico LCC’s allegations of non-use, Global had to prove that the Trade Mark had been used either:

  1. from 15 April 2011 to 19 July 2011 by Mr Owens (the then trade mark proprietor); or
  2. from 19 July 2011 to 15 April 2014 by an authorised person being Calico (the unregistered assignee) or Global (Calico’s licensee).

The delegate of the Registrar found that there had been no authorised use to overcome the non-use proceeding and class 44 of the Trade Mark was removed. Global appealed the decision.

Judgement

The Non-Use Issue

The court was not satisfied from the evidence presented that Calico had used the Trade Mark for the services listed under Class 44 “Medical Services” including health or research services. The services advertised on Calico Global’s website and iPhone application were limited to exercise, fitness and nutritional services. Further, it was evident that any references to medicine or health services did not appear until after 19 September 2013 and Justice Rares concluded that the latter references were not genuine commercial uses and were only published by Calico for the purpose of bolstering their claim for proceedings against Calico LLC.

Importantly, His Honour noted that there was no evidence of any act or use by Mr Owens or Calico that demonstrate actual instance of control by either of them in relation to Global’s use of the Trade Mark. The assignment of the Trade Mark by Mr Owens to Calico demonstrated that he had distanced himself from any practical control over the use of the Trade Mark.

In regards to Global’s claim that Mr Owen’s position as Calico’s manager director inferred that Calico, through him and the licence, controlled Global’s use of the Trade Mark, Rares J rejected this argument and concluded that Calico had a distinct legal personality from Mr Owens and the mere fact that Mr Owens was the managing director of both Calico and Global and owned 50% of Calico which controlled Global, was not sufficient to establish that he exercised actual control of the Trade Mark.

The Discretion Issue

Calico Global also submitted that it would be reasonable for Rares J to exercise the discretion afforded by s101(3) not to remove the Trade Mark from class 44 of the Registry. Despite failing to prove its case to rebut Calico LLC’s allegations of non-use, Global relied on what it argued was genuine and “extensive” use of the Trade Mark. It argued that removal of the mark from this class would “likely lead to confusion” and this was a basis for Rares J to exercise reasonable discretion.

His Honour disagreed. He concluded that Global, Calico and Owen had not acted in good faith because they had begun using the mark after the launch of Calico LLC to pressure the company and Google into a commercial agreement for their gain. Rares J also noted that he feared this would continue if Global were to retain their registration. Rares J disputed Global’s claim that there would be confusion if the mark was removed from class 44 because Global had not used the mark in relation to these proposed services in the three-year period. For these reasons, Rares J was not convinced that it is reasonable that the registration of the Trade Mark in class 44 should remain in place. His Honour’s reasoning implied that there may have been a different outcome in the exercise of his discretion had there been actual genuine good faith use during the relevant periods.

Key Points

This case demonstrated and reaffirmed that:

  • use of a trade mark by a company with permission from or a relationship with the registered owner or assignee alone is insufficient to establish “authorised use” by the registered owner or assignee;
  • a trade mark is only used under the ‘control’ of a registered owner or assignee under the Trade Mark Act if there is “actual” quality and/or financial control and the courts will consider a variety of factors to determine this;
  • a financial interest of 50% of the trade mark owner which in turn control the licensee may not be sufficient to establish “financial control” or other form of control, even though the person holding the financial interest is the managing director of the trade mark owner; and
  • trade mark owners who do not use the trade mark but grant a licence for a related or third party to use a trade mark must actually exercise control over how the licensee uses the mark in relation to the relevant goods and services.