Authorised use by licensee - theoretical control sufficient, for now, to defend non-use action

Australia

In Skyy Spirits LLC v Lodestar Anstalt ([2015] FCA 509), a single judge of Australia's Federal Court has found that licensors need have only theoretical control over a licensee for the licensee to be an "authorised user" under Australia's Trademarks Act 1995 (Cth). However, Justice Perram's judgment has set the stage for a potential appeal on this point or future cases to revisit this issue, as his Honour made it plain that he considered the precedent by which he was bound was wrongly decided. 

If the current authorities are overturned, licensors of marks used in Australia will need to review how they exercise control over licensees to ensure that some control is exercised. For the time being, however, theoretical control reserved for a licensor through a licence agreement is sufficient for the licensee's use to be "authorised use", such that the licensee's use will assist in defending a non-use removal application.

Skyy Spirits LLC is the current owner of the Wild Turkey brand used for bourbon. Lodestar Anstalt is the maker of Wild Geese Irish whiskey. For the past 15 years, the owners of the two brands have been in global conflict regarding the Wild Geese brand.

In around 2005, Skyy's predecessors in title sought removal for non-use of a registration for WILD GEESE owned by Lodestar. Coincidentally, an Adelaide winemaker, Mr O'Sullivan, who had been using WILD GEESE in relation to his wine, had filed an application to register WILD GEESE and also a non-use removal application against Lodestar's registration. O'Sullivan and Skyy's predecessors struck a deal in which O'Sullivan assigned all of his rights in the WILD GEESE trademark and it was licensed back to his company exclusively in perpetuity in return for payment of $1.

The present case concerned Lodestar's non-use removal action against Skyy's WILD GEESE registration that had been assigned and licensed back to O'Sullivan. Lodestar contended that Skyy had not used the mark in Australia during the three-year period prior to the removal application being filed. Skyy relied on Sullivan's use under licence to defend the application.

The principal issue to be determined was whether Sullivan's use of the WILD GEESE mark was use as an "authorised user" under the act. Use by an authorised user is taken to be use by the trademark owner and would, therefore, defend Skyy's registration. 

The act provides that a person is an "authorised user" if they use the trademark "under the control" of the owner.  Examples of control provided in the act are the exercise of quality control and/or financial control.

Skyy's licence agreement with O'Sullivan's company contained clauses requiring O'Sullivan to provide samples of the wine for quality testing "upon request" and that the wine must always be of sufficient quality to receive approval for export by the Australian Wine and Brandy Corporation. Skyy had never requested samples prior to or during the relevant three-year period which the non-use application concerned. Further, O'Sullivan gave evidence that the obligations in the licence agreement had no impact whatsoever on his wine making processes.

Justice Perram found that Skyy had exercised no actual control over O'Sullivan's company's use of the WILD GEESE trademark or any quality control over the wine, leaving nothing more than "theoretical" control.

Reviewing the prior cases, Justice Perram discussed how the concept of 'authorised user' was introduced in the act and how the analysis of authorised use under the current Act may differ from that under the Trademarks Act 1955. Absent the binding Full Federal Court authority of Asia Television Ltd v Yau's Entertainment Pty Ltd ((2002) 54 IPR 1) (Yau's), Justice Perram would have read "control" in the act to mean to exercise restraint or direction over another – not merely having the capacity to control. This would have led to Skyy's registration being removed for non-use. 

Ultimately, although Justice Perram considered that Yau's was wrongly decided, his Honour was bound to follow that decision, allowing Skyy's registration to remain in place.

Licensors should continue to watch this case, as the basis for an appeal has been clearly spelled out by Justice Perram, and the conflict's long history suggests that an appeal to the Full Federal Court is likely. 

If this decision is reversed and Yau's overturned, licensors will need to ensure they actively exercise control over licensees in Australia to ensure they have the benefit of "authorised use" provisions in the act.

Lisa Ritson and Liam Nankervis, Ashurst, Sydney

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