First decisions on new ground of opposition issued

In Hard Coffee Pty Limited v Hard Coffee Main Beach Pty Limited ([2009] ATMO 26, April 1 2009) and Bombala Council v Wilkshire ([2009] ATMO 33, May 26 2009), IP Australia has issued its first two decisions on a new ground of opposition - that is, whether the application has been made in bad faith. 
In 2006 the Trademarks Act 1995 was amended to include a new ground of opposition under Section 62A: this provision states simply that a trademark application may be opposed on the basis that it was filed in bad faith. However, the Explanatory Memorandum to the Trademarks Amendment Bill 2006 (Cth) provided limited guidance as to the meaning of "filing an application in bad faith".
A similar provision is contained in Section 3(6) of the UK Trademarks Act 1994 and cases in that jurisdiction have looked at the issues of:
  • what might constitute an application filed in bad faith; and
  • whether proof of dishonesty is required to establish bad faith.
A number of UK cases, including William Leith New Century Marquees (SRISO/018/00)and Harrison v Teton Valley Trading Co ([2005] FSR 10),which were specifically considered by IP Australia in Bombala Council, appear to indicate that dishonesty is not an essential requirement. Instead, the UK cases show that it is relevant to consider standards of acceptable commercial behaviour.
In the first of the Australian decisions, Hard Coffee Pty Limited (the opponent) opposed applications filed by Hard Coffee Main Beach Pty Limited (the applicant) to register the trademarks HARDCOFFEE and HARDCOFFEE MAIN BEACH for coffee shop services, catering-related services, coffees and other beverages typically offered by coffee shops.
The opponent's evidence showed that the director and secretary of the applicant (Mr Raymond) had been the director of a company which purchased a coffee shop from the opponent in 2004. The coffee shop was one of a series of Hard Coffee coffee shops owned and operated by the opponent in Queensland. The terms of the business sale clearly specified that:
  • the Hard Coffee and Hard Coffee Main Beach business names and all intellectual property relating to the names were not included in the sale; and
  • the vendor (ie, the opponent) retained all title to these names.
IP Australia concluded that the applicant had applied to register the trademarks in bad faith. The applications were filed "in the face of rights that Mr Raymond had previously acknowledged". Having signed the business sale agreement, Raymond had a responsibility not to file the applications.
It was also relevant that the applicant did not respond to the opponent's evidence. Moreover, its failure to explain its adoption of the marks appeared to lend support to IP Australia's view that the applications were made in bad faith. The fact that the opponent had established rights in the HARD COFFEE mark and that the applicant had filed applications in respect of goods and services with an obvious link to the opponent's business also appeared to be relevant factors in this decision.
IP Australia suggested three scenarios in assessing what will constitute 'bad faith':
  • there is an element of intentional dishonesty;
  • there is a deliberate attempt, in filing the application, to mislead the registrar in some way; or  
  • where an applicant claims ignorance or naivety in relation to the circumstances in which the application was made, the issue will be whether a 'reasonable man', standing in the shoes of the applicant, should be aware that he ought not to have applied for the registration of the mark.
IP Australia also indicated that bad faith will not always involve the appropriation by an applicant of an opponent's mark and/or reputation. However, where the allegation is made on this basis, the respective marks will need to be substantially identical or deceptively similar.
While these scenarios provide assistance, the relevant tribunal considering the new ground of opposition will be guided by the wording of Section 62A. To prove that an application has been made in bad faith, an opponent might assert that although the applicant has otherwise satisfied the requirements for a valid trademark application, the circumstances in which the applicant did so were such that the latter should not, in good conscience, be entitled to register the mark. Such circumstances are not limited by any wording in Section 62A.
Arguably, it is important to be mindful of the distinction between:
  • the evidence which an opponent points to in support of an allegation of intentional dishonesty; and
  • an opponent's claim (perhaps in the alternative) that even if the applicant was not intentionally dishonest, it ought to have known that the application should not have been made.
In attempting to prove, on the balance of probabilities, intentional dishonesty on the part of the applicant, the opponent might refer to a range of facts and ask the relevant tribunal to infer from these knowledge and thus dishonesty on the part of the applicant. However, this is not the same as saying that the applicant 'should have known better' having regard to the circumstances.
In the second decision, Bombala Council opposed five trademark applications filed by Peter Wilkshire. The trademarks each comprised an arch bearing the words 'Platypus country' surmounting a rectangular panel with a description contained within it, and a depiction of a platypus arranged within the arch.
The evidence showed a fraught history between the two parties, with both sides claiming to have created an essentially identical trademark. Bombala asserted that it had designed the mark in 1997 with the assistance of Australian Geographic, an assertion which was supported by evidence detailing the development of the design by two different draftsmen. Bombala had itself applied to register the mark in 2003 and that application was unsuccessfully opposed by Wilkshire (who had already registered an almost identical mark). Wilkshire had appealed the registrar's decision in that opposition to the Federal Court, although the parties agreed to settle in 2007. 
As part of the settlement agreement, Wilkshire agreed not to threaten Bombala or Bombala's licensee with any form of action in relation to the use of Bombala's mark.  However, before the Federal Court had made the consent orders reflecting the agreed settlement, Wilkshire proceeded to file applications for the five opposed marks.
Although both parties claimed to have designed the mark, IP Australia concluded, on the basis of the evidence submitted by both parties, that it was more likely that Wilkshire had copied Bombala's mark than the other way around. IP Australia also noted that Wilkshire appeared to harbour 'ill will' towards Bombala and considered that this adversely affected the reliability of his evidence.  
In concluding that the applications had been filed in bad faith, IP Australia noted that:
  • Wilkshire had previously recognized the property of Bombala; and
  • a reasonable person would be aware that filing the applications after agreeing to the terms of settlement and while consent orders were pending with the court would interfere with Bombala's rights.
In these circumstances, IP Australia found that a reasonable person standing in Wilkshire's shoes would have been aware that he or she ought not to apply for trademark registration.  
Consistent with the UK authorities considered, this decision indicates that bad faith will be established where: 
  • "a person has applied to register a mark which he has previously recognized as the property of another with whom that person had a course of dealing or some other relationship" (William Leith New Century Marquees); or
  • the person had knowledge that what he or she was doing would be "regarded as bad faith by persons adopting proper standards".
In this second scenario, it appears that IP Australia embraced the formulation in Teton Valley Trading. In that case, the test for bad faith was confirmed by the UK Court of Appeal to be a combined subjective and objective measure whereby bad faith will be established in circumstances where, although the defendant does not regard its action as dishonest, it knows that it would offend the normally accepted standards of honest conduct. The standard of "acceptable commercial behaviour observed by reasonable and experienced persons in the particular commercial area" was adopted in that case.
Whereas Hard Coffee indicates that intentional dishonesty or a deliberate attempt to mislead the registrar will usually be necessary to establish bad faith, in Bombala Council IP Australia seemed to accept UK authorities supporting the proposition that intentional dishonesty is not a requirement for a finding of bad faith. 
This interpretation in the second case is consistent with the wording of Section 62A (which does not contain any reference to dishonesty) and is consistent with the forum in which trademark oppositions are conducted (which generally will not involve a discovery process and rarely involves cross-examination, thus making it difficult for an opponent to prove on the balance of probabilities that an applicant has been intentionally dishonest). A requirement of proving intentional dishonesty would likely render the new opposition ground of less use to rights holders that feel wronged by the conduct of another party in respect of their brand, particularly where the other party can be shown to have been on notice of the brand owner's rights.
David L Yates and Nicky Shanks, Allens Arthur Robinson, Sydney

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