Lodestar Anstalt v Campari America LLC  FCAFC 92 (28 June 2016)
The Full Federal Court comprising Allsop CJ, Greenwood, Besanko, Nicholas and Katzmann JJ upheld Lodestar’s appeal and set aside the orders made by the primary judge, Perram J which means the original Registrar’s decision directing the trade marks to be removed from the Register stands.
The decision of Perram J is reported here.
It will be recalled that an Australian company, Wild Geese Wines Pty Ltd (WGW) was granted a royalty free, exclusive and perpetual licence to use the WILD GEEESE WINES and WILD GEESE trade marks in Australia for wines, in return for transferring ownership to the overseas entity involved with WILD TURKEY bourbon. This Australian company had used these trade marks during the relevant three year non use period, but the issue was whether this use was authorised by the registered owner of these trade marks at the relevant time.
At first instance, Perram J personally considered that more than theoretical contractual control is required, but felt obliged to follow earlier Full Federal Court authority of the Yau case and found in favour of the registered owner in holding that the use by the Australian company was sufficient to defend the trade mark registrations even though no actual control had been exercised by the registered owner.
The main judgement in the appeal was given by Besanko J, with Nicholas and Greenwood JJ agreeing and adding some additional comments. Allsop CJ agreed with Besanko and Nicholas JJ. Katzmann J also agreed the appeal should be allowed and provided separate reasons.
Besanko J acknowledged that the authorised use provisions introduced into the 1995 Act were intended to give recognition to the retention of the basic concept, already well-established in the Australian and English cases, of the need for a sufficient connection in the course of trade between the owner of the trade mark and the goods or services of the licensee. The exercise of quality control should be taken to be a sufficient connection.
At paragraph 94, his Honour concluded that “the Full Court in Yau did not analyse in detail the issue of the control necessary to satisfy s 8 of the Act. The Court did not say in express terms that a mere theoretical possibility of contractual control was sufficient to satisfy s 8 of the Act. In my opinion, a particular material fact in Yau was the fact that ATV provided the programs on master tapes from which copies were made and then used by Yau’s Entertainment. That was undoubtedly a high degree of control over the goods to which the trade mark was applied and used by Yau’s Entertainment. That was control for the purposes of s 8 of the Act. To the extent that the Full Court said that a contractual power of title selection was without more authorised use for the purpose of s 8, I think that was obiter dictum.” Consequently, the Full Court’s decision in Yau was not such as to bind Perram J on the issue of authorised use.
At paragraph 95, Besanko J went on to state “the meaning of “under the control of” in s 8 is informed by the principle stated by Aickin J in Pioneer, that is to say, that the trade mark must indicate a connection in the course of trade with the registered owner. The connection may be slight, such as selection or quality control or control of the user in the sense in which a parent company controls a subsidiary. It is the connection which may be slight. Aickin J was not saying the selection or quality control or financial control which may be slight”.
Further, at paragraph 97, his Honour commented “I think control in s 8 means actual control in relation to the use of the trade mark and it means actual control in relation to the trade mark from time to time. I think (as the primary judge did) that that is the primary meaning of the word, and the English cases, so far as they go, support that conclusion. Control involves questions of fact and degree as does the notion of a sufficient connection. There must be control as a matter of substance. For example, I do not think that it could be suggested that the mere fact that the registered owner granted a licence or revocable authority to use the trade mark would be sufficient without more established control within s 8.”
Besanko J stressed that the critical factors are the provisions of the licence and the conduct of the parties during the relevant three year non use period. In this case, the quality control provisions in the licence is that the wine be of sufficient standard to obtain export approval by the Australian Wine and Brandy Corporation (AWBC). “At no time during the relevant period did Austin Nichols contact Mr O’Sullivan about the wine he was making or selling or both. There was never any request by Austin Nichols for samples under cl 3.1 or for the product to be supplied to the Australian Wine Research Institute under cl 3.2. Austin Nichols never asked Mr O’Sullivan for any information about the use of the trade marks or Mr O’Sullivan’s wine making operations generally. There was no monitoring by Austin Nichols and nothing to suggest that Austin Nichols took steps to ascertain whether the terms in cl 3 were being complied with.” His Honour concluded that the use relied upon was not sufficient to satisfy the requirement of authorised use under the 1995 Act.
Greenwood J, while agreeing with Besanko J, did comment, at paragraph 22 that “a conclusion was not open on the evidence before the primary judge that the licence agreement was “not intended by the parties” to it to deliver “anything but the appearance of control” to the Wild Turkey interests, on the footing that that conclusion is “amply borne out” by the “fact” that the quality control clause emanated from Mr O’Sullivan’s side. That finding is not supported, in my respectful opinion, by Mr O’Sullivan’s evidence and no claim is made that the licence agreement was or is a sham. Nor, respectfully, was the AWBC quality control protocol, when adopted, “entirely theoretical”. Nor did it have “no footing in reality”, when propounded by Mr O’Sullivan and adopted for the purposes of the licence agreement according to the evidence of Mr O’Sullivan. He seemed to have a rational basis for believing that the AWBC protocol represented an objective assessment benchmark. As it turned out, it proved to be illusory and failed to reflect any proper control by the owner of the trade marks of the quality of the Australian wine product manufactured and sold by WGW in Australia using the trade marks in the period 27 August 2007 to 27 August 2010.”
Nicholas J provided some additional comments on the concept of use of a trade mark in good faith.
At paragraph 119, his Honour pointed out that “the structure of s 92(4) of the Act makes clear that the trade mark may be removed not only where it was not used by the registered owner in the relevant period, but also where it was not used by the registered owner in good faith. An authorised use in the relevant period will only defeat a non-use application if it amounts to a use in good faith by the registered owner. And while s 7(3) deems an authorised use to be a use of the trade mark by the owner, it does not deem such use to be use in good faith. Applying s 92(4)(b), the question is whether the registered owner has used the mark in good faith. The registered owner carries the onus of proof.”
Further, at paragraph 120, his Honour noted the cases have established that good faith requires “the trade mark use relied upon by the registered owner must be “real commercial use” or “ordinary and genuine use” and not “some fictitious or colourable use” if it is to defeat a non-use application. At the same time the authorities have recognised that the motives of the registered owner are largely irrelevant. Use of a trade mark will still be use in good faith even if engaged in for the sole purpose of protecting the owner’s trade mark registration from attack for non-use provided that the use is real and genuine.”
Nicholas J commented “the terms of the licence agreement coupled with a consideration of the circumstances in which it came into existence and the evidence concerning the lack of steps taken under it during the non-use period reveal that Wild Geese Wines Pty Ltd’s (“WGW”) use of the trade marks during the non-use period were not the subject of any real or genuine control by the registered owner.”
His Honour pointed out, at paragraph 131, that “the appellant did not put its case on the basis that there had been no use in good faith by the registered owner of the trade marks. Its submissions were directed to establishing that the marks were not used under the control of their owner in the sense required by s 8 of the Act and that, consequently, there was no use by the registered owner. I therefore would not decide this appeal on the basis that, if there was use by the registered owner, it was not use in good faith.” His Honour went on to note, at paragraph 132, that “in considering whether or not the registered owner has exercised sufficient control over another person’s use of a mark so as to defeat an attack on the grounds of non-use, it is important to recognise that the boundary between “use” and “use in good faith” by the registered owner cannot be defined by a bright line. This is because the question whether there has been any use by the registered owner may itself depend on whether the control it is said to have exercised was real or genuine control as opposed to something that was merely token or colourable.”
At paragraph 133, Nicholas concluded “in my opinion the licence agreement upon which the respondent relied to establish that the registered owner used the registered marks in the non-use period did no more than establish token or colourable “quality control” arrangements. There was, in my view, no use by the registered owner of the “Wild Geese” trade marks during the relevant period.”
Katzmann J gave separate reasons for also allowing the appeal.
Her Honour agreed with Besanko J that Yau is not binding authority for the proposition that a mere theoretical possibility of contractual control is sufficient to constitute authorised use and that Yau is distinguishable on its facts.
On the issue of control, her Honour concluded, at paragraph 183, “in my opinion, under the 1995 Act the use of a registered trade mark by an authorised user will only be taken to be use by the registered proprietor of the mark if the registered proprietor exercises control over the use of the mark during the period in question so as to maintain a connection in the course of trade between the goods or services and the registered proprietor. In a case where a registered proprietor of a trade mark is relying on use by an authorised user, it is still necessary to demonstrate that the trade marks indicate a connection in the course of trade with the registered proprietor.”
The licence agreement made no practical difference to the way WGW conducted its business and, on the evidence, the inference that the registered owner was uninterested was a compelling one.
At paragraph 202, Katzmann J concluded “in all the circumstances, I am not satisfied that the Wild Turkey interests proved that during the non-use period the registered owner of the Wild Geese trade marks (whether Austin Nichols or Rare Breed) exercised any control over their use by WGW. Consequently, in this period the marks did not signify a connection between the products sold by WGW and the registered owner of the trade marks and the use of the marks by WGW was not authorised use and therefore use by the registered owner for the purpose of the Act.”