Tackling the problem of proprietorship

In Chettleburgh v Seduce Group Australia Pty Ltd [2011] NZIPOTM 34 (September 20 2011) Seduce Group Australia Pty Ltd successfully applied to the assistant commissioner of trade marks to invalidate a registration in the name of Gary Chettleburgh for SEDUCE covering clothing in Class 25. Seduce Group's application to invalidate the registration was based on its own earlier use of SEDUCE for the same goods. Seduce Group had used SEDUCE in relation to clothing between June 2001 and June 2003, although it then ceased using the mark until March 2006 (after Chettleburgh had filed his application in January 2006).

The assistant commissioner held that Seduce Group's invalidity action failed under the following sections of the Trade Marks Act 2002:

• Section 17(1)(a) - a mark must not be registered if its use would be likely to deceive or cause confusion;
• Section 17(1)(b) - a mark must not be registered if its use is contrary to law; and
• Section 25(1)(c) - protection for well-known marks, including unregistered marks.

The action failed on these grounds because Seduce Group was unable to establish that it had a significant reputation in SEDUCE at the filing date of Chettleburgh's application.

In spite of the above, and the fact that the section had not been pleaded, Seduce Group succeeded under the ownership provisions of Section 32, which provide that only a person "claiming to be the owner of a trade mark" may apply to register that mark. The assistant commissioner held that even though Seduce Group had stopped using the mark from June 2003 to March 2006, it had been the first to use SEDUCE for clothing in New Zealand and had not abandoned the mark. Therefore, Chettleburgh was not the owner of the SEDUCE mark and his registration was held to be invalid.

The decision may be troubling for new trade mark applicants because use which had ceased well before the application date, was not widespread and was of a relatively short duration appears to have given Seduce Group long-lasting rights in the trademark SEDUCE, in spite of the fact it was unable to establish any reputation in the mark.  However, although surprising, the decision is consistent with earlier New Zealand authorities.

Establishing proprietorship

It is established law in New Zealand that the proprietor of a trademark is the first person to use that mark in New Zealand (Philip Morris (NZ) v Liggett & Myers Tobacco Co (NZ) Ltd (No 3) (1978) 1 NZIPR 195 (SC)). This is the case even where another trader has used the mark elsewhere (Valley Girl Co Ltd v Hanama Collection Ply Ltd (2005) 66 IPR 214). Proprietorship is established when the following three requirements are met:

• There is no prior use or prior assertion of proprietorship;
• The applicant is using or has sufficiently definite intention to use the mark; and
• There is no fraud or breach of duty involved (Newnham v Table for Six (1996) Ltd 44 IPR 269 at 278 (HC)).

This does not mean actual trade or dealing in the goods is necessary; it is sufficient that there is an offer to trade in the goods (Malibu Boats West, Inc v Catanses [2000] FCA 1141 (August 18 2000); Riv-Oland Marble Co (Vic) Pty Ltd v Setted SpA (1988) 19 FCR 569; Melco New Zealand Limited v Oasis Corporation [2002] NZIOTM 42 (August 15 2002)). The threshold is low and in Australia, even a single use has been held to establish a sufficient claim to proprietorship (Thunderbird Products Corp v Thunderbird Marine Products Pty Ltd (1974) 131 CLR 592 at 602 per Jacob J).

While the New Zealand courts have not considered the point, there is Australian case law to the effect that a claim to proprietorship of a trade mark may be established only where the prior user can show that the mark it relies on as being owned by itself is identical or substantially identical to the mark that is under consideration. It is also the position in both Australia and New Zealand that to succeed in an ownership dispute, the prior user must show prior use for the same or virtually the same goods or services as those covered by the relevant application/registration.

Establishing abandonment

The proprietor of a trade mark cannot be deemed to have abandoned the mark merely through non-use. For proprietorship of a trade mark to be abandoned, a deliberate intention to abandon it must be shown (Mouson & Co v Boehm (1884) 26 Ch D 398; Malibu Boats West, Inc v Catanses [2000] FCA 1141 (August 18 2000); Riv-Oland Marble Co (Vic) Pty Ltd v Setted SpA (1988) 19 FCR 569); Melco New Zealand Limited v Oasis Corporation [2002] NZIOTM 42 (August 15 2002)). Quite what constitutes a demonstration of a deliberate intention to abandon is unclear; however, the Australian Trademarks Office has held that a company that had ceased use of a trademark and rebranded had abandoned the earlier mark, finding that its claim to retain an interest in the mark rested on a bare assertion (Lucas Finance Pty Ltd v Dig This Enterprises Pty Ltd [2007] ATMO 35 (June 20 2007)).

In the current case, the fact that Seduce Group eventually recommenced use of the mark SEDUCE was considered sufficient evidence that it had never abandoned the mark, despite the fact it recommenced use only after Chettleburgh's application had been filed.

Implications

Under the relevant law, there is scope for considerable uncertainty for traders wishing to adopt new marks. There is no way to know for how long a prior user of a mark might be able to claim rights in it after it has stopped that use. Clearance searching may not find historical use of the mark by other traders, but historical use may be sufficient to block or invalidate a new registration.

In addition to creating uncertainty, the law sits awkwardly with other provisions in the Trade Marks Act, including the non-use provisions contained in Section 66. Under this section a mark can be revoked if it has not been used in relation to the relevant goods or services for an uninterrupted three-year period. However, under the proprietorship provision, an absurd situation can occur: if party Y revokes party X's registration on the grounds of non-use, and achieves its own registration, that registration may be vulnerable to attack by party X on the grounds that it, rather than party Y, is still the proprietor of the mark.

Another oddity highlighted by this decision is that had Seduce Group never ceased use of the mark SEDUCE, Chettleburgh's use from 2006 onwards might have been sufficient to establish that despite Seduce Group being the rightful proprietor of the mark, he was entitled to a registration under the doctrine of honest concurrent use, as embodied in Section 26 of the act. However, given that Seduce Group did not use the mark during the relevant period, this doctrine cannot come into play.

Finally, in New Zealand, it is possible to acquire rights in a mark through use of the mark on the marketplace, if such use is sufficient to establish a reputation. These rights can be enforced through the tort of passing off and the Fair Trading Act 1986, a piece of consumer protection legislation which prohibits traders from engaging in the course of business in "conduct that is likely to mislead or deceive". Potentially, Chettleburgh may have acquired rights in SEDUCE through his use on the market, although Seduce Group was still the proprietor under the act. It would be an interesting (and bizarre) situation if Chettleburgh were able to prevent Seduce Group from using the mark SEDUCE under passing off or the Fair Trading Act, while at the same time it was able to prevent him from holding a registration for the mark.

Conclusion

At first sight, this decision may be considered surprising; however, under the law as it stands, it is not incorrect. The awkward manner in which this law sits alongside other provisions of the Trade Marks Act, and the uncertainty that it can create for traders, may indicate that law reform is desirable.

In the meantime, this decision demonstrates that for traders clearing new marks, a significant degree of caution may be warranted in assessing any unregistered use by other parties of the same mark that may have either ceased or be current but only de minimis; this use may still be sufficient to establish proprietorship in the mark under Section 32.