Primary judge erred in exercising discretion not to remove mark from register

Australia

In Austin Nichols & Co Inc v Lodestar Anstalt ([2012] FCAFC 8, February 21 2012), the Full Court of the Federal Court of Australia has held on appeal that the primary judge had erred in exercising his discretion to allow Lodestar Anstalt's trademark to remain on the register notwithstanding that the substantive grounds for removal for non-use had been established.

Section 92 of the Trademarks Act 1995 provides for a trademark to be removed from the register if the registered owner has not used it for a continuous period of three years. However, the court retains a discretion under Section 101(3) not to remove the mark. This appeal was concerned with the proper exercise of that discretion.

In order to succeed in their appeal, the appellants had to show that the primary judge had acted on a wrong principle, allowed extraneous or irrelevant matters to guide or affect him, mistook the facts, or did not take into account a material consideration or that, upon the facts, the judgment was unreasonable or plainly unjust, so that a substantial wrong must have occurred. 

On appeal, the Full Court held unanimously that the primary judge had identified the correct test but that, in the application of the test, he had made a finding of fact that was unsupported by the evidence. The Full Court further thought that “[t]hat fact was critical to the way in which he exercised the discretion”.

The foundation for the conclusion of the primary judge that the trademark should not be removed from the register had been his finding that the mark had acquired a reputation and profile overseas and in Australia, such that confusion might result if the mark was removed. The Full Court thought that there were two problems with this finding. First, there was insufficient evidence for the finding concerning reputation in Australia because Lodestar had not proved that the international profile was known to Australian consumers. Second, neither the source of the postulated confusion nor the reason for it was identified.

Reputation in this context is commonly inferred from evidence such as a high volume of sales and substantial advertising and promotional expenditure. However, in this case, there was neither direct evidence of consumer appreciation of the mark nor sufficient evidence from which reputation could be inferred. The Full Court was satisfied that the evidence was sufficient to establish that the mark had acquired an international profile; however, it thought that the evidence of any penetration of the brand into the Australian market was “weak” and “certainly not enough to show that confusion could arise if the mark were removed from the register”.

The Full Court was also of the view that, even if the evidence had been sufficient to establish reputation, the primary judge had not explained why public confusion might follow if the mark were removed. The appeal was thus allowed and the court ordered Lodestar’s trademark to be removed.

Julian Gyngell, Kepdowrie Chambers, Wahroonga

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