Federal Court issues guidance on important ‘non-use’ issues

Australia

In Austin Nichols & Co Inc v Lodestar Anstalt ([2011] FCA 39, February 4 2011), the Federal Court of Australia has provided useful guidance in relation to three important issues that commonly arise in non-use actions.

The case concerned the trademark WILD GEESE, which had been registered by Lodestar Anstalt in respect of non-alcoholic and alcoholic beverages. Austin Nichols & Co Inc and Wild Geese Wines Pty Ltd each applied for the removal of WILD GEESE on the grounds of non-use (albeit that the relevant three-year non-use periods differed slightly). However, by the time the matter was heard by the court, the two applicants (by a series of transactions) had transferred all their respective interests in their trademarks and their removal applications to Rare Breed Distilling LLC. Nonetheless, Rare Breed’s success or failure on appeal was dependent on the merits of the two original applicants’ grounds for removal.

Both the applicants and Lodestar agreed that there were three issues for determination:

  • whether the applicants had established standing as a ‘person aggrieved’ in respect of all the relevant goods;
  • whether Lodestar had established that there were 'obstacles' preventing its use of WILD GEESE within the meaning of Section 100(3)(c) of the Trademarks Act during the relevant non-use periods; and
  • whether the court should exercise its discretion under Section 101(3) of the act to refuse to remove the WILD GEESE mark.

The 'standing' or 'person aggrieved' issue was largely conceded and confined to whether Austin Nichols had standing in respect of its removal application in relation to non-alcoholic drinks. This issue arose because Austin Nichols produces only alcoholic drinks. However, following the majority of the High Court’s judgment in Health World Ltd v Shin-Sun Australia Pty Ltd (for further details please see "Meaning of 'aggrieved person' under Section 88(1) clarified"), the court held that Austin Nichols satisfied the definition of a ‘person aggrieved’ because it operated in the same trade as Lodestar, namely as a producer and seller of alcoholic drinks (whisky). Accordingly, their general 'trade rival' status was determinative of standing, and the fact that Austin Nichols was not involved in the production of non-alcoholic drinks did not defeat that standing. Applying the High Court’s 'liberal construction' test in Health World to the facts of this case, the court went on to state that there was no requirement that Austin Nichols evidence any intention to use a trademark in the production of non-alcoholic drinks, nor that it needed to prove any disadvantage arising from Lodestar’s registration of WILD GEESE.

Lodestar accepted that it had not used the WILD GEESE mark during the non-use periods. However, it submitted that there were three 'obstacles' to its use and that, accordingly, it was entitled to rebut the allegation of non-use. The first obstacle, Lodestar submitted, was the effect of the “multiplicity of proceedings” in a wide range of jurisdictions between Lodestar and Austin Nichols concerning the WILD GEESE mark. Despite acknowledging that “[t]he effect of litigation on the commercial behaviour of a company cannot be underestimated”, the court held that Lodestar had not demonstrated any “causal link” between its involvement in ongoing worldwide litigation and the specific non-use of the WILD GEESE mark in Australia. Quite the opposite, the court thought that the cause of Lodestar’s non-use of the mark in Australia resulted from its deliberate decision to develop other international markets in priority to establishing its market in Australia.

Secondly, Lodestar submitted that it encountered “considerable difficulties” in arranging for production of its whisky. However, this submission was inconsistent with the evidence that such “difficulties” had been overcome during the non-use period and that Lodestar had adopted a commercial strategy of establishing markets in Europe before attempting to establish its market in Australia.

Thirdly, Lodestar relied upon the fact that it also encountered “difficulties” in promoting and selling its WILD GEESE whisky at trade fairs held in Cannes in 2002, 2003, 2004 and 2005. The court dismissed the relevance of these difficulties because they were (a) experienced outside Australia, (b) in relation to only one fair location, and (c) demonstrated no causal link with the non-use of the mark in Australia.

Lodestar’s final submission was based on Section 101(3) of the act, which confers on the court a broad discretion to allow a mark to remain on the Register even if the grounds for removal have been established. After reviewing the well-known authorities on Section 101(3), the court, on balance, exercised its discretion in favour of retaining WILD GEESE on the Register. The significant matters which the court considered to be important in exercising its discretion were:

  • The mark had not been used at all prior to the commencement of the relevant non-use period and was not used until three years after the end of that period. These factors, the court said, weighed “heavily against” exercising its discretion in favour of Lodestar.
  • The period of non-use, although fulfilling the requirements of Section 92(4)(b) of the act, was not thought to be “substantial” (in particular, having regard to the periods of non-use in earlier cases).
  • Wild Geese whisky had attained a limited profile in Australia (albeit after the end of the non-use period) based on sales (approximately 120 cases) between late 2008 and mid-2010.
  • Such exposure, although small, could amount to a degree of brand recognition on the part of the public that might lead to confusion should the mark be removed.
  • Lodestar had appointed a sales consultant for Australia, New Zealand and Fiji in 2009.
  • Despite delays in its use, Lodestar plainly did not abandon its intent to use the mark to market its whisky in Australia.
  • Accordingly, maintaining the mark on the Register would not be detrimental to the ‘purity’ of the Register.
  • Lodestar had made substantial use of the mark in other jurisdictions both during and after the relevant non-use period.
  • No evidence was produced concerning the prospect of confusion should the mark remain on the Register, nor of any public mischief in maintaining it. The lack of such evidence was not considered to be “determinative” of the exercise of its discretion. However, any evidence to the contrary clearly would have been relevant in the court’s deliberations.

The court noted that the commercial impact of exercising its discretion in favour of Lodestar is that Wild Turkey whisky, Wild Geese wine and Wild Geese whisky will (or may) co-exist in the marketplace. Anyone confused?

Julian Gyngell, Kepdowrie Chambers, Wahroonga

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