Aldwin Paige Limited v Wilfred Owen Investments Limited

[1997] ATMO 58

TRADE MARKS ACT 1955

DECISION OF A DELEGATE OF THE REGISTRAR OF TRADE MARKS, WITH REASONS

Re:      Opposition by WILFRID OWEN INVESTMENTS LIMITED to an          application under section 23 of the Act by ALDWIN PAIGE LIMITED to          remove the trade mark of registration number 304446 from the Register in the      name of GLENHAVEN INVESTMENTS PTY LTD

As provided in the transitional provisions of Part 22 of the Trade Marks Act 1995, the provisions of the Trade Marks Act 1955 continue to govern this opposition.  Accordingly, unless otherwise specified, any reference to the Act in this decision is a reference to the Trade Marks Act 1955.

The trade mark of registration number 304446 is LIP-COTE, registered in respect of “cosmetics for the lips being a clear lip gloss and not being lip-stick”. 

An application under the provisions of section 23 of the Act to remove the trade mark from the Register was lodged on 21st March 1995 by Aldwin Paige Limited (the applicant).  The application was opposed on 16th July 1996 by Wilfrid Owen Investments Limited (the opponent).  An assignment of the mark from the opponent to Glenhaven Investments Pty Ltd was recorded on the Register in January 1997.

In its application for removal, the applicant has relied on the grounds that the trade mark was registered without an intention in goods faith that it should be used by the registered proprietor in relation to the goods specified, and that, in fact, there has been no use in good faith of the trade mark for the time being earlier than one month before the application.  Further, that up to one month before the date of the application, a continuous period of not less than three years had elapsed during which the trade mark was registered and during which there was no use in good faith of the trade mark in relation to the goods by the registered proprietor.  These allegations are denied by the opponent in the notice of opposition. 

Evidence
The evidence comprises:
Evidence in support
*         Statutory declaration by Geoffrey Pearce.
Evidence in answer

*         Statutory declaration by David Gough Owen with exhibits A to H
           *         Statutory declaration by Bradley Martin with exhibit A
           *         Statutory declaration by Paul Lyon Mortlock, together with exhibits

A to C 
Evidence in reply

*         Statutory declaration by Edwin David Wylie with exhibits A to C
           *         Statutory declaration by Hugh Clifford Matthews with exhibits A to
  K
           *         Statutory declaration by John Michael O’Brien with exhibits A and   B 
           *         Statutory declaration by Jordan Saw
           *         Statutory declaration by Christopher Placid Higgins

Further evidence from the opponent:

*         Statutory declaration by Barry Wilfrid Owen with exhibits A and B 

Evidence in reply to the further evidence:
           *         Statutory declaration by Peter N Franke with exhibit PNF1.

A hearing on the matter was held on 7th July 1997 in Sydney.  The applicant was represented by Mr Peter Franke of Watermark, patent and trade mark attorneys of Sydney.  Mr Sean McManis of Spruson & Ferguson, also patent and trade mark attorneys of Sydney, appeared for the opponent.

Submissions
Mr Franke first stated that the applicant for removal intended to pursue the ground that the trade mark, up to a month before the date of the application, was unused for a period of three years and that the applicant would also rely on the issue of lack of good faith, as stated in its application for removal.

It was common ground between the parties, Mr Franke continued, that the trade mark had been used during the period in question.  The present removal action was unusual, however, in that it concerned the question of whether the registered trade mark had been used by or in any way under the control of the registered proprietor.

The applicant’s fundamental case was based on the argument that, following the transfer of the business of a company to the applicant in 1991, the subject mark had been used by the applicant without any accounting to the opponent.  Since the mark had been assigned to the applicant, there was no control or licensing of the applicant.  Any use which occurred did not have a connection in the course of trade with the opponent, Mr Franke said.

There had been discussions between the parties, resulting in the sale and purchase agreement being executed in December 1991 between the opponent and Mr O’Brien as the agent for the applicant.  The issue in dispute in the present proceedings largely related to that agreement and actions subsequent to the agreement.  He also believed that it was common ground that the entity Wilfrid Owen (Sales) Pty Ltd had no direct connection with either of the parties; formerly it had been the distributor of the LIP-COTE products in Australia for the opponent and since 1991 it was distributing for the applicant.  For a time the applicant continued with packaging essentially as used by the opponent, subsequently adopting new packaging which he proposed to tender as evidence together with a formal declaration.  In this regard Mr McManis did not raise any objection.  A further relevant point, Mr Franke said, was the fact that on 10th May 1995, the opponent wrote to the applicant to terminate the alleged manufacturing and trade mark licence agreement included in the sale and purchase agreement of 1991. 

On the question of whether the applicant was a person aggrieved, Mr Franke submitted that the applicant used the mark on the goods in question and claimed to be its true proprietor at common law and under the registration.  Further, the applicant was the registered proprietor of the mark in New Zealand and had dealt with the mark for some five and a half years in trade in Australia.  From the applicant’s point of view, the opponent was refusing to honour the transfer of goodwill and therefore had failed to fulfil the agreement.  Since proprietorship and use of the mark were disputed, there could be no clearer case of the applicant being aggrieved.  

For establishing a prima facie case, Mr Franke referred to Mr Pearce’s declaration, which, he said, clearly stated that the declarant was unaware of any use of the mark.  In response to the opponent’s evidence challenging this statement, the applicant would submit that, if it were necessary to produce evidence to dispute a prima facie case, then ipso facto it must be a prima facie case.  The burden of proof shifted then to the opponent to show use of the mark in Australia during the relevant period.   

According to Mr Franke, the opponent’s case required at least the following specific points: first, that it was the proprietor of the mark; second, that the applicant’s use of the mark was as a licensee if, in fact, the opponent was the true proprietor; and third, that the use of the mark was such as to maintain a connection in the course of trade between the goods bearing the mark and the opponent. None of these matters had been made out by the opponent, Mr Franke argued.  

Turning to the sale and purchase agreement under contention, Mr Franke first noted that the subject trade mark was not included under the schedule as one to be transferred and assigned under the relevant special conditions of sale, clause C.  From the tenor of the document he drew the conclusion that the goodwill would have included the goodwill associated with the mark in Australia.  This was assigned to Mr O’Brien as the agent for the applicant, and Mr Franke argued that any exclusions would have been specified, given that goodwill of any business was a significant part of its assets.  The relevant special conditions clause did not mention goodwill, but it was the position in common law that if goodwill in a business is transferred then it carries with it all common law rights in the trade mark.  The purpose of special conditions clause F was to grant the opponent some particular limited rights which are encompassed in the term “sole marketing rights”, conditional upon the vendor agreeing to contract or manufacture the LIP-COTE product in Australia to the purchaser.  Marketing rights could not in any way be said to be rights in proprietorship.  Such rights would not extend to the right to manufacture, import, sell or distribute the product, but would extend only to investigation of and recommendations as to the available markets for the product in the relevant territory.  This interpretation was consistent with special condition E(b), whereby the purchaser was to negotiate the terms of manufacture and supply of the business product to Wilfrid Owen (Sales) Pty Limited.  There was no suggestion that the opponent had any role in that process, or that it was required to approve the agreement.  These two conditions indicated that complete distribution sale rights could not be granted to the opponent, because condition E(b) contemplated a distribution agreement between the applicant and Wilfrid Owen (Sales) Pty Limited.  Accordingly, the opponent was not the proprietor of the mark and the specific detail of the subject trade mark was simply inadvertently omitted from the agreement.

Concerning the question of a license agreement and use of the mark in the course of trade, Mr Franke submitted that there was nothing resembling such an agreement.  There was no suggestion by either party that there were any royalty payments owing, or liable to be owing.  It was not apparent how the opponent was deriving revenue from the alleged licence from the applicant which had been in place since December 1991.  There had, in fact, been no control by the opponent over packaging, formulation, or promotion of the product.  If there had had been a license, some sort of activity would have been expected between the licensee and the opponent.  The content of the correspondence between the opponent and Wilfrid Owen (Sales) Pty Ltd (exhibits D, E and F of Mr David Owen’s declaration) was not pertinent, as there was no change of the quality or packaging of the product, despite the concerns expressed by Wilfrid Owen (Sales) Pty Ltd.  Furthermore, that company was not even strictly a party to the agreements. 

Concerning discretion, Mr Franke submitted that the opponent had not attempted to explain its own non-use of the mark or to show use by its licensees under its control.  The opponent had clearly acquiesced in the applicant’s use - in fact, such use by the applicant without any accounting or control by the opponent had always been the intention of both parties.  It had acted in bad faith in refusing to assign the registration to the applicant, leaving the applicant with little option but to apply for removal of the registration.  

The applicant sought costs in the matter.

Mr McManis first briefly discussed the onus in the present proceedings with reference to Polo Textile Industries Pty Ltd and Another v Domestic Textile Corporation Pty Ltd 26 IPR 246 and Estex Clothing Manufacturers Pty Ltd v Ellis and Goldstein Ltd (1966) 116 CLR 254. In light of the finding in “Revue” Trade Mark [1979] RPC 27 that, unless a person was particularly well-placed and knowledgeable in the trade, the applicant’s evidence to establish a prima facie case of non-use should rest on more than the testimony of one individual, Mr McManis questioned the scope of Mr Pearce’s knowledge in his capacity as a managing director of a company which merely imports and distributes the bottle and components for the product supplied by the applicant. Mr Pearce’s statements that he was unaware of any use of the mark apart from the applicant’s use contradicted the evidence from both parties. His company may be a contract manufacturer, but a person in Mr Pearce’s situation did not have the requisite knowledge of the market to establish a prima facie case, Mr McManis said. In his opinion, since the applicant had not discharged the onus on it, there was no need to consider all the other evidence and for support he referred to Kraft General Foods Inc v Gaines Pet Foods Corporation 28 IPR 617.

Mr McManis argued vigorously against the applicant’s claim that it was a person aggrieved, citing Ritz Hotel Ltd v Charles of the Ritz Ltd (1988) 12 IPR 417 and Kraft Foods Inc v Gaines Pet Foods Corporation 34 IPR 198 for general principles on the matter. At the date of application for removal of the mark the applicant itself was using the mark under an agreement with the opponent, he explained. Furthermore, during the period between lodging the removal application in March 1995 and the time of serving it in June 1996, there was no evidence of negotiations, nor any reason given for the delay in the service. The purpose of the application, he said, was to secure rights in the mark, which quite clearly were not granted under the sale agreement. Subsequent to termination of the agreement the applicant sought to pursue the removal, because its rights had been terminated. Mr McManis then referred to Kraft General Foods v Gaines Pet Foods, supra.  In that case the hearing officer had found that, where the lodgment of the application for removal was “tainted or foreshadowed by dealings such as those between the parties here, the asset purchase and sale agreement, without consideration of any ‘non-compete’ clause, it becomes hard to accept such applications as being prima facie evidence of aggrievement”, submitting that the present situation was similar.  The party seeking removal of the mark knowingly entered into an agreement, whereby it was agreed that all manufacture of the product would be contracted to the applicant.  If the opponent had contracted somebody else to manufacture or had set up its own establishment, then that would have been quite contrary to the agreement that existed between the applicant and the opponent. 

Turning to use of the subject mark, Mr McManis said that in the present case the connection in the course of trade was maintained through the contract manufacturer.  The opponent’s situation was similar to that in “Bostitch” Trade Mark (1963) RPC 183 which had been cited with approval by Aickin J in Pioneer Electronics Corporation & Another v The Registrar of Trade Marks 17 ALR 43. In the present case, the product was manufactured by the applicant in accordance with the previous manner of manufacturing, produced in the same fashion, and in the initial period, the packaging referred to the opponent. Consequently, there could not have been any deceptive use of the mark, as per the “Bostitch” case.  If a proprietor wished to maintain control over a product, one of the ways to achieve it would be to monitor the product through its distributor who was well placed to look after sale of the product.  Copies of letters annexed to Mr David Owen’s declaration concerning a problem with the applicant demonstrated an ongoing relationship between the opponent and the distributor.  If the opponent had lost interest in the mark it was hard to see the reason for that exchange of correspondence.  

With reference to the statements contained in Mr Barry Owen’s declaration, which relates to the arrangements and discussions that took place leading up to the sale agreement, Mr McManis disputed the applicant’s interpretation of the agreement, particularly emphasizing no mention of the mark in schedule B.  He further argued that the allegation that in the agreement there was somehow an intention to grant rights to the opponent was incorrect as there was no reference to the word “grant” in the agreement.  In fact, both parties acknowledged the situation that the vendor (the opponent) had sole marketing rights and that the purchaser (the applicant) was to manufacture, under contract.  He questioned Mr O’Brien’s interpretation of marketing rights.

Responding to Mr Franke’s subsequent enquiry as to the benefit gained from the contract manufacture arrangement, Mr McManis stated that it was part of the whole sale and purchase agreement.  There had been a very substantial consideration changing hands: as part of the agreement the opponent arranged distribution of the product in Australia, and it agreed that the applicant could manufacture the product.  However, it was also expressly agreed and acknowledged by the purchaser that the opponent would maintain rights in respect of the subject trade mark in Australia, the position of the vendor simply being that of a contract manufacturer.  From the way in which the sales agreement was intended to operate as explained by Mr Mortlock it was clear that the proper interpretation was that the applicant was to contract or manufacture LIP-COTE for export for sale in Australia, and that by incorporating the terms of the supply agreement the opponent, as the proprietor of the mark, was to stand in place of the party under whose instructions the products was to be manufactured.  Quality control provisions and technical support provisions were incorporated in the supply agreement.  

On the question of discretion, Mr McManis relied on Kraft General Foods v Gaines Pet Food, supra, submitting there was an obligation to contract the manufacture to the applicant.  Furthermore, the opponent took steps to maintain the connection in the course of trade and to ensure the product was sold in accordance with its desires.  If the applicant were to apply to register the mark, the opponent was likely to oppose its registration, given prior use and reputation of the mark.  In relation to the public interest, Mr McManis argued that, in the present circumstances, the contract manufacturing agreement was an acceptable commercial arrangement, and in the evidence the opponent had attempted to show what the arrangement was understood to be between the parties.  If such an arrangement was held to be vulnerable to a removal action, then it would cause substantial commercial uncertainty.  Another relevant factor was use of the same formulations of the product by the applicant and the opponent which had avoided public deception.  As further reasons for exercise of the Registrar’s discretion, based on “Hermes” Trade Mark [1982] RPC 425, Mr McManis mentioned the opponent’s lack of intention to abandon the mark, pointing out that its use continued subsequent to conclusion of the contractual arrangements and residual reputation, given the extent of the mark’s use.

Mr McManis requested costs to be awarded to the opponent. 

Discussion
As the principal issue in these proceedings revolves around the interpretation of the wording of certain clauses in the Agreement for Sale and Purchase of Business, dated 5th December 1991, I will quote at the outset the contentious clauses which are identified as ‘Special Conditions of Sale’:

C.    On the possession date the Vendor shall transfer and assign to the Purchaser         all the Vendors interest in the licenses, patents trademarks and formulae as
      specified in Schedule B annexed hereto.

...

E.    This agreement is subject to and conditional upon:

(a)       the Christchurch City Council granting planning consent to the   Purchaser to locate and use LPG storage tanks and associated   equipment at the business premises on terms and conditions in all   respects satisfactory to the Purchaser by the 20th December 1991

(b)       the Purchaser negotiating terms of manufacture and supply of the   business products to Wilfrid Owen Sales Pty, Australia (sic) in all   respects satisfactory to the Purchaser by the 20th December 1991.

It is acknowledges by the Vendor that these conditions are inserted for the sole benefit of the Purchaser who shall have the absolute right to waive either or both at his election.

F.    The purchaser acknowledged that the vendors shall be entitled to sole                   marketing rights in respect of Lip-Cote in Australia provided however that
      the vendor agrees to contract all manufacture of Lip-Cote in Australia to the
      purchaser such contract to be on the same terms and conditions as are       presently contained in the agreement between the vendor and Wilfrid Owen      (Sales) Pty. Limited for Roux Manufactured Products supplied by the   vendor for distribution by Wilfrid Owen (Sales) Pty. Limited in Australia.

G.   The vendor hereby covenants not to register any of the trademarks set out in
      Schedule B hereof in any jurisdiction where they are not now registered. 

“Person aggrieved”
The basic premise of the concept “person aggrieved”, which has since been applied by the High Court in Australia in a number of cases, was established in Powell’s Trade Mark (1894) 11 RPC 4, where Lord Watson said, at p 8:

“In my opinion, any trader is, in the sense of the Statute, “aggrieved” whenever the registration of a particular trade mark operates in restraint of what would otherwise have been his legal rights.  Whatever benefit is gained by registration must entail a corresponding disadvantage upon a trader who might possibly have had occasion to use the mark in the course of his business.  It is implied, of course, that the person aggrieved must manufacture or deal in the same class of goods to which the registered mark applied, and that there shall be a reasonable possibility of his finding occasion to use it.  But the fact that the trader deals in the same class of goods, and could use it, is, prima facie, sufficient evidence of his being aggrieved, which can only be displaced by the person who registered the mark, upon whom the onus lies, showing that there is no reasonable probability that the objector would have used it, although he were free do so.”  

In Ritz Hotel v Charles of the Ritz, supra, McLelland J defined the meaning of a “person aggrieved” contemplated in sub-sections 22(1) and 23(1), at p 454, as

“... the expression would embrace any person having real interest in having the register rectified, or the trade mark removed in respect of any goods, as the case may be, in the manner claimed, and thus would include any person who would be, or in respect of whom there is a reasonable possibility of his being, appreciably disadvantaged in a legal or practical sense by the register remaining unrectified, or by the trade mark remaining unremoved in respect of any goods, as the case may be, in the manner claimed.”

The applicant bears the responsibility of establishing that it is a “person aggrieved” for the purpose of sub-section 23(1) of the Act.  The time for determining whether the applicant is a person aggrieved is the date of the application for removal of the mark from the Register, see Ritz v Charles of the Ritz, at p 455.  In the present case, such application is dated 20th March 1995 and was lodged at the Trade Marks Office on 21st March 1995.  At that time the special condition clause F of the agreement for sale and purchase between the applicant and the opponent was still in force, as the notice of termination which was to take effect on 31st December 1995, was served on 11th May 1995 (exhibit G of Mr David Owen’s declaration).  There is no evidence adduced by the applicant to support its claims to be a “person aggrieved” such as, in most instances, a pending application for an identical or substantially identical mark the registration of which was blocked by the mark sought to be removed, together with material indicating intention to use the mark (see Kraft Foods v Gaines Pet Foods, (supra); instead it relies on the submissions that it has manufactured and continues to manufacture the product under the LIP-COTE mark and claims proprietorship of the mark in Australia, based on its interpretation of the special conditions clauses in the sales and purchase agreement.  Clearly, if the applicant believes that the agreement has granted it rights to proprietorship of the mark and is, in fact, manufacturing not only the same class of goods but the goods of the present application, then it qualifies as a “person aggrieved” in light of the interpretations embraced in the above-quoted authorities. 

I find therefore the applicant to be a person aggrieved.

Prima facie case
It is well established that the onus of proof that a trade mark has not been used during the relevant period in terms of section 23 rests with the applicant for removal of the mark.  In Estex Clothing v Ellis and Goldstein, supra, Windeyer J said, at pp 258-259:

“It is for an applicant who seeks to have a mark removed to prove his case.  The onus is on him to show an absence of use in good faith during the period.  If persons who, by reason of their connection with the relevant trade, might be expected to have seen or heard of the mark if it were used as a trade mark upon goods for which it is registered, swear that they had not seen or heard of it in use, as a trade mark at any time during the relevant period, that is prima facie evidence of the fact which the applicant must prove.  Slight evidence may suffice at this stage, for the applicant has the task of proving a negative and the registered proprietor is probably in a better position to prove user than is the applicant to prove non-user.  But if evidence be given for the respondent to controvert the applicant’s prima facie case, then when all the evidence is complete the question is still, has the applicant proved his case?”

For the prima facie case the applicant has relied on one statutory declaration by Geoffrey Pearce, who is the managing director of Scental Pacific Pty Ltd, with twenty years experience in the field of manufacture, retail and distribution of cosmetic products in Australia.  He says that his company has been importing and distributing the bottle and components for the products under the subject mark supplied by the applicant for at least three years and knows of no other use of the mark in Australia in relation to any cosmetic products apart from the applicant.  His statement that he was not aware of any use of the mark by the opponent at the time of his declaration, 13th September 1995, or any other time, was challenged by the opponent.  Given the evidence that the mark has been in use in Australia for more than forty years, when considering the following sentence in the declaration: “I believe that if there had been any such use [by Wilfrid Owen Investments Limited in Australia in relation to any type of cosmetics] since January 1992 it would certainly have come to my attention”, I do not think there is any doubt that Mr Pearce was focussing his mind on use of the mark during the critical period, 21st February 1992 to 21st February 1995.

It is uncommon for a party on whom rests the onus of establishing prima facie case in section 23 proceedings to rely only on depositions of only one person.  Such evidence would be sufficient, however, if the deponent could satisfy the Registrar that he has appropriate experience in the relevant trade and is well acquainted with trade marks associated with that trade (see Revue case, supra) .  Given Mr Pearce’s long experience in the cosmetics industry generally and, more particularly, having been associated with LIP-COTE products within the period required under section 23, he is reasonably placed to attest as to his knowledge relating to use of the mark in Australia.  In the present circumstances, where the main conflict between the parties concerns the interpretation of the sale and purchase agreement, I believe Mr Pearce’s evidence is sufficient for the purpose of the applicant discharging the initial onus in suggesting non-use of the mark in the relevant three year period.  

Use of the mark
The applicant has argued that, as the common law trade marks of a business are not separable from goodwill, it follows that the sale and purchase agreement was effective to transfer the common law rights associated with the subject mark.  A company would not assign the goodwill in the business to which a trade mark related without also assigning the registration.  If a company wished to separate the goodwill and the registration, it could not be done by implication, it maintained.  I believe such an interpretation could be acceptable had it not been for clause C in the special conditions for sale, which refers to trade marks specified in schedule B.  This schedule lists twenty applications/registrations in New Zealand and two overseas registrations, one being a registration for the mark HAPPY FEET in Australia.  There is no reference to the trade mark LIP-COTE in Australia.  Mr O’Brien who, as an agent of the applicant, has signed the agreement, contradicts Mr David Owen’s and Mr Barry Owen’s statements that rights in respect of the mark were to be retained by the opponent.  Mr O’Brien asserts that it had been the joint understanding of the parties at the time of preparing the agreement that the opponent was to transfer its trade mark and intellectual property rights of LIP-COTE in Australia to the applicant and that the mark had been omitted from the schedule inadvertently.  However, the listing of the opponent’s New Zealand trade marks, which were to be transferred to the applicant, had been prepared by the opponent’s trade mark attorneys and a copy was made available to Mr O’Brien.  Schedule B had been prepared by Mr O’Brien’s solicitors, White Fox and Jones, who, following further negotiations between the parties, reported that two (sic) Samoan and one Australian registration were to be added to schedule B, as indicated in a copy of their letter of 27th November 1991 attached to Mr Barry Owen’s declaration.  It is difficult to comprehend that in the process of preparing and finalising the agreement, the contract having been discussed by the parties concerned and involving their legal representatives, such a valuable asset as the registration of the relevant trade mark in Australia would be excluded from the schedule in error.  Furthermore, the change of name from Wilfrid Owen (NZ) Limited to that of the present opponent, which was recorded on the Register in July 1993, would support the contention that the mark was not proposed to be assigned to the applicant.  

The applicant has further argued that the opponent’s interpretation of the mark LIP-COTE not being transferred to the applicant is incorrect, having regard to the special conditions clause F in the agreement which gives the opponent “sole marketing rights in respect of Lip-Cote in Australia”.  If the subject mark was not to be transferred to the applicant, then there would not have been any need for this acknowledgment, the applicant has submitted.  At para 13 of his declaration, Mr O’Brien explains what he understood by the insertion of this term into the agreement:

“From my perspective, I was happy to agree that Mr Owen and his company should maintain the marketing rights in Australia.  To that end, a clause was inserted in the agreement for sale and purchase.  I refer to clause (F) in the Special Conditions of Sale.  In terms of that clause, Aldwin Paige Limited acknowledged that Wilfrid Owen Investments Limited would be entitled to sole marketing rights in respect of LIP-COTE in Australia.  Marketing did not include the import, sale, or distribution of the product - it simply extended to an investigation of, and recommendations as to, the available markets for the product.”

I must agree with the opponent’s view that the term “marketing” has wider connotation than what is embraced in Mr O’Brien’s understanding of the word.  In The Macquarie Dictionary, second edition, it is defined: “n. 1. the total process whereby goods are put on the market.  2. the act of buying or selling in a market”.  A more detailed application of the term is found in The McGraw-Hill Dictionary of Modern Economics, third edition:

“A related group of business activities whose purpose is to satisfy the demands for goods and services of consumers, businesses, and government.  The marketing process includes estimating the demand, producing the product, pricing the product to satisfy profit criteria, and promoting and distributing the product.  In addition, fulfilling warranty and service obligations, both explicit and implicit, is considered by many to be part of the marketing process.  Underlaying the basic philosophy of marketing is the concept that a customer should have a choice in most types of buying situations.  Under these conditions, the individual or business firm involved in any stage of marketing a product must seek to make its product more attractive to customers than products of competing firms.”

In view of these definitions and in the absence of any clear indication as to what was contemplated by the parties in using the term “sole marketing rights” at the time of the agreement, it is impossible to accept Mr O’Brien’s narrow interpretation of it.  Adopting the meaning of the term in its ordinary parlance, sole marketing rights would infer that the mark was to be controlled by the opponent.

Although the choice of wording in special conditions clause F leaves much to be desired, in my opinion, it is not so ambiguous as to be interpreted in the manner submitted by the applicant, i.e. that it was the applicant who intended to grant rights to the opponent, rather than that the applicant had sole marketing rights in respect of the mark on condition that the applicant becomes a contract manufacturer in Australia on the same terms contained in a specified agreement.

It has been pointed out by the applicant that the Supply Contract for Roux Manufactured Products did not exist at the time of signing the sale and purchase agreement.  Mr O’Brien in his declaration, however, does not deny that he had agreed upon the form of the contract and held a copy of it on 5th December 1991.  This contract, dated 31st December 1991, between the opponent - Wilfrid Owen (NZ) Limited at that time - and Wilfrid Owen (Sales) Pty Limited to manufacture goods for a third party, contained a number of provisions, including terms and quality control.  It is noted that there is no reference in the contract to any licensing agreement.    If the opponent retained the mark LIP-COTE, then, according to the supply contract, which is confirmed by statements in the declaration by Mr Mortlock, the opponent’s solicitor, the applicant was to assume the role of a contract manufacturer, supplier and packer.  The product was to be supplied to Wilfrid Owen (Sales) Pty Limited for distribution.  In these circumstances use of the mark would accrue to the opponent as its proprietor in Australia. 

At this point it would be pertinent to refer to Australian Law of Trade Marks and Passing Off, second edition, by D R Shanahan, where, at p 310, the author explains use by an agent or a “contract manufacturer” as:

“As the essential purpose of a registered user entry is to ensure the reservation to the registered proprietor of an appropriate power of quality control, there should be no need to register a “licensee” to whom responsibility for the product has not in fact been surrendered.  The position is clearest in the case of the so-called “contract manufacturer” who supplies goods to the order of the trade mark proprietor.  Here the product is marketed by the trade mark proprietor, who thereby takes responsibility for the product and is entitled to arrange its manufacture in any manner suitable, and indeed the involvement of such a “contract manufacturer” is for relevant purposes very much akin to that of an employee of the proprietor.”

The existence of a contract manufacturing arrangement then constitutes use of the mark by the registered proprietor.

In order to show control over the subject mark and a connection in the course of trade with the mark, the opponent has relied on correspondence by it with Wilfrid Owen (Sales) Pty Limited during the relevant period.  This has been challenged by the applicant who maintains that the opponent would need to demonstrate a connection with the party applying or using the mark, i.e. with the applicant.  Mr O’Brien has acknowledged that, following the sale of the business, the product was distributed “using the package and product material previously used by Wilfrid Owen Investments Limited” which demonstrates that the product continued to be used in accordance with the existing formulation and in a manner acceptable to the opponent.  Since mid 1994, however, as shown in Mr Franke’s exhibit, the packaging bears the applicant’s name.  In a copy of a letter annexed as exhibit D to Mr David Owen’s declaration, Wilfrid Owen (Sales) Pty Limited acknowledges ownership of the mark by the opponent and expresses a desire to continue distributorship of the product in Australia.  In other letters reference is made to changes in packaging and formulation of the product, even though there is no concrete evidence as to the opponent’s dissatisfaction that the product failed to meet the standard or quality in accordance with the Roux agreement.    In a letter of 19th May 1994, however, Wilfrid Owen (Sales) Pty Limited reports to the opponent, inter alia:

“Following our recent meeting I am pleased to confirm that we have now notified Aldwin Page of our intention to return faulty product.

We have also indicated that we wish to return to the original approved formulation.  They have been requested to quote on supply of uncartoned product.

I feel that we should now proceed to develop new cartons and display shippers.  Samples of possible designs will be forwarded to you shortly.”  

This evidence is contradicted by Mr O’Brien, who does not accept that the applicant was made aware of the opponent’s concerns about the changes in packaging and the product, attributing the suggestion concerning the changes to include sunscreen in the product to Mr Higgins of Wilfrid Owen (Sales) Pty Limited.

From the said correspondence and the meeting mentioned in the letters, which cover part of the critical period under section 23, it seems obvious that the opponent expressed interest in the product and, in fact, monitored its quality by ensuring it was manufactured in accordance with the agreed formulation and marketed properly, as it was entitled to do being the registered proprietor of the mark, even if its concerns about the product were conveyed to the applicant through the distributor.  Once the product complied with the expected requirements there would have been no need for further contact.  I therefore agree with Mr McManis that the opponent established the necessary connection in the course of trade by using the mark is such a manner so as to prevent deception or confusion, as discussed in “Bostitch” and Pioneer v Registrar cases, both supra.   The lack of direct communication with the applicant could be explained by the existing conflict between the parties.

Having regard to my comments, I do not accept the proposition that the applicant has discharged its onus in showing non-use of the mark in question by the opponent between 21st February 1992 and 21st February 1995.  

Conclusion
I have found that the applicant for removal is a “person aggrieved” and that it has demonstrated a prima facie case.  The applicant has failed to establish to my satisfaction that the opponent was not the proprietor of the subject mark and that it did not use the mark by maintaining a connection in the course of trade with the product bearing the subject mark during the relevant period.  Accordingly, I dismiss the application under the provisions of section 23.

The opponent is entitled to its costs in these proceedings.

Vija Zars
Hearing Officer

30th October 1997