Court upholds brand ownership by US company, but permits distinguishing use by defendant

Following the trial decision in Winnebago Industries Inc v Knott Investments Pty Ltd (No 2) [2012] FCA 785, the Full Federal Court on appeal has upheld the brand ownership of the WINNEBAGO mark by US company Winnebago Industries, 30 years after the brand was first used by the Australian defendant without the authorisation of the US brand owner. Given, however, the defendant’s long use without legal action by Winnebago Industries, the Full Court has permitted the defendant to continue to use the Winnebago name and logos provided that clear, prominent and proximate disclaimers distinguish the Australian company’s vehicles sufficiently to protect consumers.

It remains to be seen whether, in practice, the court’s ruling results in commercial impracticability such as to effectively prohibit use by the Australian defendant, and whether the court’s efforts at protecting consumers from deception are effective or not.

Winnebago Industries, a famous US company, began manufacturing and selling motor homes in the 1960s. Since then, Winnebago Industries has sold over 400,000 vehicles and has exported them to Canada, the United Kingdom, continental Europe and Japan, but not yet to Australia.

In 1978 an Australian, Bruce Binns, began trading under the name Winnebago Industries. In 1982 his company Knott Investments Pty Ltd took over the business and began to manufacture and sell motor homes bearing the Winnebago brand and stylised Winnebago logos.

In 1985 Winnebago Industries became aware of Knott’s activities, Binns having travelled to industry fairs in the United States and introduced himself as the “president of Winnebago”, much to the surprise of employees of the US company. Winnebago Industries objected to Knott’s activities and subsequently entered into a 1992 settlement agreement under which Knott agreed not to associate itself with Winnebago Industries and not to apply to register WINNEBAGO as a trademark in any country, including Australia.

Knott continued to use the Winnebago brand in Australia and, in 1997, registered the Winnebago logo as a trademark. In 2010 Winnebago Industries commenced proceedings against Knott and its dealers in the Australian Federal Court seeking injunctions to restrain Knott’s continued use of the Winnebago name and logos and to cancel Knott’s registered trademark.

Although Winnebago Industries had no registered trademark in Australia (its early trademark application was rejected on geographic grounds), Winnebago Industries was able to bring proceedings against Knott for passing off and statutory misleading and deceptive conduct. These proceedings show that, notwithstanding the absence of a registered trademark in Australia, brand owners may still take action against improper usage of their marks through the protections afforded by the tort of passing off and consumer protection laws designed to protect consumers from misleading and deceptive conduct and other unfair practices.

At trial, Justice Foster found that a substantial number of potential consumers in Australia would have been aware of the US company, Winnebago Industries, and its motor homes in June 1982, when Knott commenced its unauthorised use of the brand.

Further, notwithstanding the long period before Winnebago Industries acted to commence legal action against Knott, this did not amount to disentitling delay by way of estoppel, laches or acquiescence. Justice Foster ordered injunctions restraining Knott from continuing to use Winnebago names and logos and cancelling Knott’s registered trademark. His Honour considered that the settlement agreement was, in effect, a “standstill” agreement in which Winnebago reserved its right to take legal action and Knott had at all times continued its use with “eyes wide open” to the risk of subsequent legal action by the US company.

Knott’s arguments on appeal to the Full Federal Court were that:

• the relevant time for assessing Winnebago Industries’ reputation was in 1982 (when Knott took over Binns’ business) and not in 1978 (when Binns started trading);
• at either date, Winnebago Industries did not have sufficient reputation in the name and brand Winnebago in Australia to found its causes of action; and
• Winnebago Industries’ delay in commencing proceedings should deny it all relief.

In Knott Investments Pty Ltd v Winnebago Industries Inc ([2013] FCAFC 59), the Full Court upheld Justice Foster’s findings on all issues save for the relevant date for assessing reputation. The Full Court found that the relevant date for assessing Winnebago’s reputation was 1978 (when Binns first registered the business name Winnebago Industries). In any event, the court found that, at that date, Winnebago Industries had sufficient reputation in Australia. Despite Winnebago having never exported Winnebago-branded vehicles to Australia, the Full Court accepted Justice Foster’s findings as to spillover reputation, as a result of the extensive sales of the vehicles in the United States and other countries, film, television and print media references to the US company and its motor homes from the 1960s onwards and historical statistics about travel between Australia and the United States.

Notwithstanding these findings, given the long period before Winnebago Industries commenced its action during which Knott continuing to use the Winnebago name, developing goodwill in its business by reason of use of that name, fairness required that the relief available to Winnebago Industries should take account of those special circumstances. The court concluded that Knott ought to be permitted to continue to use the Winnebago name and logos provided that appropriate disclaimers distinguished Knott’s vehicles and business from those of Winnebago Industries. 

In an unusual procedure, the Full Court then embarked upon a separate contested written and oral hearing as to the specific terms of the injunctions and disclaimer. Issues arising included:

• Would the disclaimer have to appear on a Winnebago branded vehicle?
• Should Knott be permitted to use the distinctive Winnebago logos, or just the name?
• Would Knott be permitted to use the name Winnebago in a business or corporate name?
• What should be the wording of the disclaimer?
• Should Knott be required to have consumers sign an acknowledgement that the disclaimer had been explained to them before buying or hiring a vehicle?

In Knott Investments Pty Ltd v Winnebago Industries Inc (No 2) ([2013] FCAFC 117), the Full Federal Court ruled on these various issues.

In his reasons for judgment, Chief Justice Allsop, with whom Justice Cowdroy and Justice Jagot agreed, emphasised that “the primary guiding principle of the injunctive relief should be, so far as possible, the protection of the public from being misled”. The Full Court considered that this central aim together with Winnebago Industries’ “trade reputation requires orders to be made that will prevent any continuation of the capacity of Knott to mislead”.

In advancing the key consideration of protecting the public, the Full Court ordered that, while it would be unreasonable to place a permanent restraint on the use of the WINNEBAGO mark, and even the logos, due to Winnebago Industries’ delay in bringing the action, a clear, prominent and proximate disclaimer must be adopted in accordance with the wording proposed by Winnebago, namely:

“This vehicle was not manufactured by, or by anyone having any association with, Winnebago of the United States.”

The disclaimer proposed by Winnebago was adopted by the Full Court because it was seen to focus “on the essential negative of the message: that the vehicle manufactured by Knott is NOT associated with Winnebago USA”.

The Full Court ordered that the disclaimer must appear in radio and television advertisements in the form of a 10-second voiceover. As well, the Full Court ordered that the disclaimer must appear on all vehicles, as well as promotional material. Consequently, although the WINNEBAGO mark may still be used by Knott, the commercial impracticability of the disclaimer, especially on the vehicles themselves, may act as a major deterrent to the continued use of the mark by Knott.

In addition to the disclaimer, the Full Court also ordered that Knott must obtain from consumers hiring or purchasing a Knott Winnebago branded vehicle a signed form acknowledging they have been told there is no connection.

On the question of costs, the Full Court ordered that Knott should pay 75% of Winnebago’s costs of the trial and the appeal to reflect that “undoubtedly, the appellants have lost on almost all issues”. The claim for damages has been remitted to the trial judge for review and determination.

In one way, this was an unusual case with the issue of reputation going back so far in time. In another way, it is an increasingly common phenomenon that globalisation is fast making the world a smaller place.

For brand owners, this helps in a small faraway market like Australia. Winnebago Industries won the case and got its trademark back 30 years down the track, based on a reputation through globally accessible material.

As to the court’s efforts in drafting disclaimers and rules to prevent consumer confusion, assuming the defendant uses the name under the disclaimer rules, the jury remains undecided.

Odette Gourley, William Daymond and Asa Lam, Corrs Chambers Westgarth, Sydney

Corrs Chambers Westgarth acted for Winnebago Industries Inc in these proceedings