Onus and standard of proof in Section 41 appeals explored

Australia

In Sports Warehouse Inc v Fry Consulting Pty Ltd ([2010] FCA 664, June 25 2010), the Federal Court of Australia has dismissed an appeal against a decision of a delegate of the registrar of trademarks in which the latter had allowed an opposition to the registration of the mark TENNIS WAREHOUSE in Class 35 of the Nice Classification in respect of “online retail services featuring tennis clothing, tennis footwear, tennis gear, tennis equipment, tennis accessories, and tennis sport bags”.

The two substantive issues were:

  • whether the mark was “capable of distinguishing” the designated services from the services of other persons; and
  • the onus and the standard of proof in an appeal based on Section 41 of the Trademarks Act 1995 (Cth).

In relation to the first issue, the court agreed that the mark TENNIS WAREHOUSE had “no visually distinctive features” and was a simple combination of the purely descriptive words ‘tennis’ and ‘warehouse’. This conclusion was not defeated by applicant Sports Warehouse Inc's argument that, read literally, ‘tennis warehouse’ was not descriptive because:

  • its services did not involve providing a warehouse for the game of tennis itself; and
  • the words did not convey the fact that the services were provided over the Internet and not from a physical warehouse.

Despite these arguments, the court was satisfied that TENNIS WAREHOUSE was apt to describe a service that distributes tennis clothing, tennis equipment, tennis accessories and the like to retail customers.

The court also considered that, as at the application date, there was “some degree of likelihood” that another trader, actuated only by proper motive, would want in the future to use ‘tennis warehouse’ to describe its services. The mark was not, therefore, "inherently adapted" to distinguish.

Finally, even though the court was satisfied that the mark was not devoid of all distinctiveness, its inherent distinctiveness was “very low” and, as such, required proof of a concomitant degree of acquired distinctiveness in order to justify registration under Sections 41(5) or 41(6) of the act. Sports Warehouse relied on a range of different uses of TENNIS WAREHOUSE in order to establish acquired distinctiveness, including use on its website, in promotional materials and as its domain name ('tennis-warehouse.com'). In relation to the latter, opponent Fry Consulting Pty Ltd argued that a domain name is only an address on the Internet, which provides a link to Sports Warehouse’s website and, even if the trademark is comprised within the domain name, that is not use “as a trademark” (ie, as a badge of origin). The court acknowledged that Australian authority on this issue is “sparse”, but accepted that the “better view” is that use in a domain name may constitute use of a trademark. This is consistent with CSR Ltd v Resource Capital Australia Pty Ltd ([2003] FCA 279), which was a case of cybersquatting. In that case, Justice Hill addressed the issue and stated that:

[t]here could be a threatened infringement if one were to take seriously the suggestion that [the respondent] intended to engage in the sugar trade. Clearly, however, that was not the real intention of [the respondents], who at no time used or intended to use the domain names as trademarks in relation to either goods or services.”

The mere registration of a domain name will not of itself amount to the use of the mark within the name “as a trademark”. However, in this case, the court found that the domain name was being used as a sign for Sports Warehouse’s online retaining service and that it would be likely to be understood by the public as a sign for those services.

Although the court was prepared to accept certain evidence of Sports Warehouse’s use of TENNIS WAREHOUSE, the evidence also showed that TENNIS WAREHOUSE was used in close association with a TW logo, which was more prominent than the words themselves. In these circumstances, the moderate proven use of TENNIS WAREHOUSE did not support a claim of acquired distinctiveness in the words alone.

As regards the second issue, Sports Warehouse argued that, to prevent registration, Fry Consulting, as the opponent, had to show that the trademark should clearly not be registered. Fry Consulting argued that that its onus was only the ordinary balance of probabilities standard. Sports Warehouse relied on a passage in Lomas v Winton Shire Council ([2002] FCAFC 413; [2003] AIPC 91-839), where a Full Court of the Federal Court said that:

"on appeal under Section 56, the court should consider whether the trademark should clearly not be registered. Only if so satisfied should the court decide to uphold an opposition.”

That statement has led to a number of decisions at first instance in which the court has accepted that an opposition should be upheld only if the court is satisfied that the trademark should clearly not be registered. However, the court in this case decided that this is not the correct approach, and instead adopted the reasoning of Justice Gyles in Clinique Laboratories Inc v Luxury Skin Care Brands Pty Ltd ([2003] FCA 1517) and Pfizer Products Inc v Karam ([2006] FCA 1663), and of Justice Sundberg in Chocolaterie Guylian NV v Registrar of Trademarks ([2009] FCA 891), in which it was held that the ordinary balance of probabilities standard is applicable in an appeal such as the present.

The standard of proof issue is relevant only if the onus of proof falls on the opponent. Generally speaking, at the opposition stage and on appeal from a decision on an opposition, the opponent bears the onus of establishing a ground of opposition. However, that is not the position when one is determining an opposition based on Sections 41(5) and (6) because these provisions place the onus on the applicant for registration, rather than on the opponent. That is, these provisions require the applicant for registration to “satisfy” the registrar (Section 41(5)), or “establish” (Section 41(6)), that the relevant criteria are met. Where the act requires the registrar to be “satisfied” of any matter, it requires that he or she be persuaded of the matter according to the balance of probabilities. Under Section 41(5), the registrar must thus be persuaded by the applicant, on the balance of probabilities, that the trademark does or will distinguish, having regard to the considerations in Section 41(5)(a). The standard is the same under Section 41(6), where the applicant must establish, on the balance of probabilities, that the mark does distinguish “because of the extent to which the applicant has used the trademark before the filing date”.

Sports Warehouse failed to satisfy the court on the balance of probabilities in relation to the matters specified in Section 41(5)(a) and the appeal was thus dismissed.

Julian Gyngell, Kepdowrie Chambers, Wahroonga

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