Intellectual Property Law Update - Trade Mark owner restrained from use of its own mark

This dispute concerned the use of the name NAPPY LAND, and variants of that name, in New South Wales.  The Applicants alleged passing off, breach of the Australian Consumer Law (ACL) and breach of an agreement by the Respondent not to use the name in New South Wales.  The claim based on the alleged agreement was rejected on the evidence and is not further discussed in this note.

The case was unusual because the Respondent was the owner of a composite trade mark incorporating the words “Nappy Land”.  It also owned the registered business name “Nappy Land” and the domain name “http://www.nappyland.com.au”.  The Respondent, however, did not allege infringement of its registered trade mark.  The Respondent’s registered mark is depicted below (on the left) and the mark used by he Applicants in New South Wales is shown below right:

   

Interlocutory relief was initially sought on 18 and 21 November 2013.  Rather than resolving the matter on an interlocutory basis, the matter was brought on quickly for final hearing commencing on 3 December 2013.  Perhaps due to the limited time available, Flick J described the evidence relied upon by the parties as “vague“.

Trade mark registration no defence to passing off / breach of ACL

The Court dealt first with the Respondent’s submission that its trade mark registration was a complete answer to the Applicant’s claims in passing off and under the ACL.  The Court unequivocally rejected this submission saying:

Possession of a registered trade mark is … no defence to an action for passing off where the elements of that tort are present”

Similarly, it said that “the registration of a trade mark does not affect the operation and reach of s 18 of the Australian Consumer Law.“

This is uncontroversial.  As Gummow J said in New South Wales Dairy Corporation v Murray Goulburn Co-Operative Co Ltd (No 1) (1989) 86 ALR 549 at 570, and cited by the Court in the present case:

“Nor does the existence of a registration protect the registered proprietor from a passing off suit brought by one who maintains the use by the registered proprietor to be an invasion of his common law rights…“

Breach of the Australian Consumer Law

It was accepted that the Applicants “presently carry on business in New South Wales using the business name “Nappyland””. There is no discussion in the judgment, however, of any reputation generated by the Applicants with respect to that name.  It appears there was no evidence of any sales or advertising, for example.  Nevertheless, the Court must have accepted that the Applicants had some reputation vesting in the name NAPPYLAND in New South Wales in relation to the sale of nappies and other baby related products, primarily to childcare centres.

There was some evidence of actual confusion of the Applicant’s customers (presumably as a result of the Respondent’s use of the words NAPPY LAND though this is not clear) but this was described by the Court as “less than satisfactory“.

The Court pointed out that to prove a breach of s 18 of the ACL “there is a need to establish goodwill or reputation attaching to the relevant goods in the mind of the purchasing public, misrepresentation and damage or a likelihood of damage.”  It was expressed that the onus of establishing these elements lay on the Applicant’s.  Despite the “vague” nature of the “factual framework within which the Applicant’s sought relief“, the Court nevertheless expressed “[l]ittle hesitation” in concluding that the necessary elements had been made out.

This conclusion was based on five findings of fact:

1. The words NAPPY LAND (as used by the Applicants) and NAPPYLAND are sufficiently similar to cause confusion;
2. There was some (limited) evidence of actual confusion;
3. The potential for customers to be misled was increased when the words were used in oral communications;
4. The manner in which the Respondents responded to telephone enquiries did not serve to reduce confusion; and
5. The nature of the products and the potential for customer overlap also increased the risk of confusion.

Passing off

The Court considered that, given its finding on the ACL, it was unnecessary to consider the question of passing off.  It expressed the view however that “reliance on that cause of action would also have been successful” for essentially the same reasons.

Damages

While pointing out that a claimant must “do the best it can to place the relevant facts before the Court so that the process of quantifying damage remains an exercise of judicial – rather than arbitrary – power“, it also acknowledged that the Court must do the best estimate it can based on the evidence and that sometimes this might require a degree of “guesswork“.

The Court considered that the evidence of the loss and damage suffered by the Applicants was “less than satisfactory“.  It said that the Applicants had “failed to place before the Court any reliable factual information upon which any certain – or relatively certain – process of quantification can proceed.”  Notwithstanding all of the difficulties with the Applicants’ evidence, the Court considered $25,000 in damages to be “appropriate“.  No basis for this figure is included in the judgment.

Comment

The decision is problematic for the following reasons:

(a) the conclusion that the Respondent’s conduct was in breach of the Australian Consumer Law (and amounted to passing off) is not supported by any findings as to the reputation of the Applicant in relation to the words NAPPY LAND.  Proof of reputation is an element of the tort of passing off and it is well established that to show misleading or deceptive conduct via the use of a trading name which is similar to that of the claimant, the claimant must show that he has some reputation vesting in that name;

(b) the parties’ failure to address the problem of the Respondent’s trade mark registration appears to leave them in a position where the Respondent can immediately bring an action for trade mark infringement and, unless a cross-claim for invalidity is successful, such an action seems likely to succeed; and

(c) while the Courts must do their best to quantify damage even when the evidence is sparse,  this seems to be a case where the Applicant failed to produce any credible evidence despite it being open for them to do so.

* To view Ben Gardiner's blog, North Pole Bananas, or to sign up to receive email notifications each time a new post is published, please click here.