Becon Pty Ltd v Fast Company Distributors, Inc

[2010] ATMO 104

TRADE MARKS ACT 1995

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

Re:Opposition by Becon Pty Ltd to registration of trade mark application 1150876(25) (International Registration Designating Australia No 903985) - DRAGON DEVICE - filed in the name of Fast Company Distributors, Inc

Delegate:	Jock McDonagh
Representation:	Opponent: Edward Heerey of counsel instructed by Middletons Lawyers Holder: Benjamin Fitzpatrick of counsel instructed by Davies Collison Cave Patent and Trade Mark Attorneys
Decision:	2010 ATMO 104 Reg. 17A.29 opposition – Grounds pursued under sections 42(b), 58 & 60 not established – IRDA to proceed to protection. Costs awarded against opponent

Background

1. Fast Company Distributors, Inc (“the holder”), a company based in the United States of America requested protection in Australia for the following international registration designating Australia (“IRDA”):

   Application number:           1150876 (IRDA 903985)
   Filing date:  23 October 2006
   Advertised accepted:            22 February 2007

   Goods:Class 25: Jeans, shirts, jackets, hats, caps, mock turtle-neck sweaters, gloves, T-shirts

   Trade Mark:

2. Section 189A of the Trade Marks Act 1995 (“the Act”) governs the consideration of IRDAs.  This section makes provisions for the regulations to “provide for such matters as are necessary to enable the performance of the obligations of Australia, or to obtain for Australia any advantage or benefit, under the Madrid Protocol.”

3. Notice of opposition to the protection of an IRDA is governed by the provisions of regulation 17A.29 of the Trade Marks Regulations 1995 (“the regulations”).

4. On 3 May 2007, Becon Pty Ltd (“the opponent”) filed a Notice of Opposition (“the notice”). The notice canvassed most of the grounds of opposition allowable under the Act. These grounds are applicable to an IRDA by virtue of regulation 17A.31(3). However, at the hearing, Mr Heerey advised that the opponent would only be pursuing grounds under the provisions of sections 42(b), 58 and 60 of the Act. For completeness, as they were not pressed by the opponent, I note that none of the other grounds claimed on the notice have been established.

5. The parties served and filed evidence as shown below:

Declarant	Status	Date, Known as
Evidence in Support
Grant Charles Mackintosh	Managing Director of Opponent	31 August 2007, Mackintosh-1
Evidence in Answer
Mike Sears	Manager of Holder	23 July 2008, Sears-1
Megan Baxter	Vice President and Operations Manager of Holder	24 July 2008, Baxter-1
Megan Baxter	As above	1 August 2008, Baxter-2
Mike Sears	Manager of Holder	24 August 2008, Sears-2
Megan Baxter	Vice President and Operations Manager of Holder	25 August 2005, Baxter-3
Larry Schlekewey, Jr	Graphic artist	9 September 2008
Evidence in Reply
Grant Charles Mackintosh	Managing Director of Opponent	25 March 2009, Mackintosh-2
Anthony Brooke Watson	Solicitor	25 March 2009
Opponent’s Further Evidence
Grant Charles Mackintosh	Managing Director of Opponent	15 December 2009, Mackintosh-3
Holder’s Further Evidence
Karla Cornett	Executive Assistant to Holder	11 February 2010

1. The matter came before me as a delegate of the Registrar of Trade Marks, in Melbourne on 11 June 2010. The opponent was represented by Edward Heerey of counsel instructed by Middletons Lawyers. The holder was represented by Benjamin Fitzpatrick of counsel, instructed by Davies Collison Cave Patent and Trade Mark Attorneys.

2. As a result of supplementary submissions filed by the holder’s representatives following the hearing, I allowed the opponent time in which to respond to these supplementary submissions. Therefore, the hearing was adjourned and recommenced on 2 July 2010 for reception of submissions.

   Summary of relationship between parties

3. There is a great deal of material filed in the matter regarding the goods of the parties and the relationship between the parties. While the opponent’s first evidence in support of its opposition, Mackintosh-1, made no mention of the holder or its business relationship with the opponent, as the evidence phases progressed more details were to be uncovered. I will summarise those details that seem not to be contradicted by either party.

4. The holder is a textile company located in North Carolina in the United States of America. It was founded in 1993 and produces protective clothing primarily targeted at motorcyclists.

5. In about 1995, the holder developed “Draggin’ Jeans”, which are denim trousers incorporating knitted Kevlar. This material is said to provide motorcyclists with the same level of protection as leather protective clothing. The holder filed a patent in May 1997 for the material with the US Patents Office, which was granted in July 1999.

6. In 1997, the then owner of the holder Mr Hal Baxter met with Mr Grant Mackintosh the managing director of the opponent. In 1997, Mr Mackintosh was also a director of Consolidated Apparel Industries Pty Ltd (“CAI”). It is common ground between the parties that Messrs Baxter and Mackintosh entered an oral – “handshake” - agreement with respect to CAI manufacturing and selling goods made from the holder’s Kevlar material.

7. Exhibit 10 of Baxter-1 is a very poor quality reproduction of a CAI fax sent by Mr Mackintosh of the opponent dated 13 October 1997. It does refer to Mr Mackintosh’s intention to manufacture and market the holder’s products in Australia and New Zealand. It also refers to the payment to the holder of 6% of net selling price on a quarterly basis.

8. There is dispute between the parties as to the scope of the agreement. Mr Baxter died in a motorcycle accident in 2001, thus his recollection of details is unavailable. Mr Mackintosh is quoted as saying to Australian Financial Review in July 1998 that “he hired Calder to personally trial a type of jeans from the US that he’s manufacturing under licence – so-called “Draggin Jeans” with crash padding in the form of knitted fabric sewn into the backside and knees”: Baxter-1, Exhibit 13. Mr Mackintosh also acknowledges the provenance of “Draggin Jeans” in Mackintosh-1, Exhibit C.

9. There seems to be no argument that the agreement initially involved the holder providing the knitted Kevlar material to the opponent for the purposes of the opponent manufacturing protective clothing. As mentioned earlier, the opponent was to pay of 6% of net sales to the holder. This has also been referred to as a “royalty” payment.

10. In February 1998, CAI commenced setting up for production and sale of “Draggin Jeans” products. At the same time, the opponent applied to register the word trade mark DRAGGIN JEANS (registration 754929) with this office and established an Australian corporation Draggin Jeans Pty Ltd.

11. In July 1999, the opponent sold CAI and Draggin Jeans Pty Ltd, along with the DRAGGIN JEANS trade mark, to Bradmill Textiles Pty Ltd; however, in October 1999, the opponent purchased Draggin Jeans Pty Ltd and the DRAGGIN JEANS trade mark from Bradmill.

12. Since 1999, the opponent has manufactured “Draggin Jeans” in Australia and sold them in Australia and throughout the world, with the exception of the USA. The opponent appears to have expanded the range of garments produced from the knitted Kevlar material and made them according to the opponent’s own designs.

13. The evidence suggests that it is common ground that from the commencement of the opponent’s use of “Draggin Jeans” material and products in Australia, the holder provided labels it used on its own products for use by the opponent. The labels were based on the following design:

14. Larry Schlekewey, Jr declares that in 1993 he designed and drew the logo shown above on instructions from the holder. He further declares that he intended to assign copyright in the work to the holder in 1993 and has executed a deed (dated 30 August 2007) to confirm the assignment to the holder.

15. The evidence from both parties demonstrates that the holder provided knitted Kevlar material to the opponent until some time in 2001. Karla Cornett provides correspondence from another, nearby in North Carolina, knitted Kevlar manufacturer that states that it provided knitted Kevlar material to the opponent between August 2001 and March 2002.

16. Apart from two emails in May 2002 from a Tommy Kinkaid of the holder to Mr Mackintosh (Baxter-1, Exhibits 14 and 18) there is no correspondence provided by either party evidencing the business relationship until Exhibit 19 of Baxter-1, being an email exchange between Mike Sears (formerly of the holder) and Mr Mackintosh in March 2006. However, in Mackintosh-2, Mr Mackintosh refers to a 2003 email from Tommy Kinkaid that forwarded an expression of interest from a German company wishing to distribute “Draggin Jeans” in Germany. The email is not exhibited, but allegedly quotes Mr Kinkaid as telling Mr Mackintosh “this would be in your area”.

17. The opponent, in Mackintosh-3 Exhibit D, relies on an affidavit by Karla Cornett in Canadian Trade Marks Office that exhibits an email dated 23 May 2001 that concludes with the sentence “Today is the last payment of royalty”. The opponent submits that this demonstrates that whatever licence agreement had been in place beforehand was thereby terminated.

18. On the other hand, the holder submits that Ms Cornett’s comment meant to indicate that the holder had received no further royalty payments as at that date, with an inference that more was expected from the opponent.

19. The comment is certainly not clear and both interpretations are arguable. However, I do note that the same email also refers to future shipments of shirt material, as does another email in the same exhibit that also refers to “dj kevlar” and a June [2001] shipment. This leads me to believe that there was still an effective business relationship between the parties and tends to contradict assertions that the holder was no longer supplying its patented material to the opponent (see for example Mackintosh-2 paragraph 16).

20. To assist the reader in understanding my decision-making with respect to the three grounds pursued at the hearing, I shall outline my understanding of the facts applicable to this opposition.

21. I am satisfied that in about 1993 the holder commenced a textile business that specialized in designing, manufacturing, marketing, and selling protective clothing primarily targeted at motorcycle enthusiasts. During the course of business, the holder developed “Draggin’ Jeans”, which are denim trousers incorporating knitted Kevlar. This material is said to provide motorcyclists with the same level of protection as leather protective clothing. The material was patented. See paragraphs 9 and 10 above.

22. I am satisfied that the “Draggin Jeans” trade mark that appears below was created by Larry Schlekewey, Jr in 1993 and that he assigned the copyright in the work to the holder.

23. In about October 1997, I am satisfied that Mr Mackintosh of the opponent and Mr Hal Baxter of the holder agreed that the opponent could manufacture and market “Draggin Jeans” products, bearing the “Draggin Jeans” trade mark under licence. The terms of the licence were not reduced to writing; however, it is clear that the licence included the payment of a royalty of 6% of the retail sales price of the “Draggin Jeans” products sold by the opponent.

24. I note that the holder supplied the patented Kevlar material to the opponent, along with design and marketing material, patches bearing the “Draggin Jeans” trade mark as shown in paragraph 27, and the bromide for the “Draggin Jeans” trade mark. Therefore, I consider it more likely than not that the holder intended to licence its intellectual property rights including technical information, knowhow and its “Draggin Jeans” trade mark to the opponent.

25. As for the territorial limits of the licence, I can only safely conclude that the licence was for commercial operations by the opponent in Australia and New Zealand but excluding the United States of America.

26. It is apparent that the opponent developed its own styles and designs for clothing made from the Kevlar material, which were less conservative than the original designs produced by the holder in the USA. These new designs continued to bear the “Draggin Jeans” trade mark.

27. While the evidence adduced in these proceedings suggest a deteriorating business relationship between the parties, particularly after the death of Mr Hal Baxter, there is no clear evidence of repudiation or termination of the licence.

28. To assist in identification of trade marks and/or devices referred to in the remainder of this decision, I shall use the following names for them:

“dragon device” “jeans device”

Discussion

34. The bulk of the opponent’s argument was with respect to the section 58 ground of opposition, that the holder was not the owner of the trade mark. The opponent also pressed the sections 60 and 42(b) grounds.

1. Section 58 of the Act provides:

   58  Applicant not owner of trade mark

   The registration of a trade mark may be opposed on the ground that the applicant is not the owner of the trade mark.

   Note:    For applicant see section 6.

2. The first person to use a trade mark in relation to particular goods or services or to apply to register it as a trade mark, whichever is the earlier, is the owner of the trade mark in Australia in relation to those goods or services.

3. The word “owner” is not defined in the Act, although there are numerous decisions where courts have considered its meaning. It is well established that in the absence of fraud the owner of a trade mark in Australia for particular goods or services is taken to be the first person to use it in the course of trade in Australia in relation to those goods or services.[1]  

   [1] Seven Up Co v OT Ltd (1947) 75 CLR 203

4. To succeed in an opposition under section 58, an opponent must demonstrate use in Australia by a person other than the applicant (or holder), before the priority date of the opposed IRDA (or before the first use of the IRDA, whichever is the earlier), of a trade mark which is at least substantially identical in relation to goods or services which are the same as, or the same kind of thing as the goods and/or services in respect of which registration of the opposed trade mark is sought.[2]

   [2] See Shell Co. of Australia Ltd. v. Rohm & Haas Co. [1948] HCA 27; (1949) 78 CLR 601; Carnival Cruise Lines Inc v Sitmar Cruises Limited [1994] FCA 936; (1994) AIPC 91-049; (1994) 120 ALR 495; Hicks’ Trade Mark (1897) 22 VLR 636;

5. The opponent submits that it has used the jeans device in Australia since 1998 for the same kind of goods sought to be covered by the IRDA. The opponent further submits that the jeans device was not covered by the licence agreement, or in the alternative its use was not “authorised use” pursuant to sections 7(3) and 8 of the Act, in that it was not under the control (quality, financial or otherwise) of the holder.

6. In my opinion the holder’s dragon device is not substantially identical to the jeans device. While it true that the jeans device incorporates the dragon device, one needs to consider the test propounded by Windeyer J in Shell Co. (Aust) Ltd v Esso Standard Oil (Aust) Ltd (1963) 109 CLR 407 at 414-415:

   In considering whether marks are substantially identical they should, I think, be compared side by side, their similarities and differences noted and the importance of these assessed having regard to the essential features of the registered mark and the total impression of resemblance or dissimilarity that emerges from the comparison

7. When one examines the dragon device, one is confronted only by the head, wings and claws of the dragon, along with blank space. However, the jeans device is dominated by the words “draggin jeans” in a fancy script; the parts of the dragon appear to me to be mere embellishments to the words, rather than essential features of the device. To me, the total impression is one of dissimilarity.

8. Even if the jeans device and the dragon device were at least substantially identical, the opponent has not established to my satisfaction first use of the mark in Australia as other than an authorised user under licence from the holder.

9. The next ground argued by the opponent was that under section 60 of the Act. As the application was filed after 23 October 2006, the provisions of section 60 as amended by the Intellectual Property Laws Amendment Act 2006 apply. The section reads:

   The registration of a trade mark in respect of particular goods or services may be opposed on the ground that:

   (a)another trade mark had, before the priority date for the registration of the first‑mentioned trade mark in respect of those goods or services, acquired a reputation in Australia; and

   (b)because of the reputation of that other trade mark, the use of the first‑mentioned trade mark would be likely to deceive or cause confusion.

   Note: For priority date see section 12.

10. To satisfy section 60 the opponent must establish, in relation to its jeans device trade mark:

    ·     Priority.

    ·     Reputation acquired in Australia before the applicant’s priority date.

    ·     Because of that reputation the use of the applicant’s trade mark would be likely to deceive or cause confusion.

11. There is no longer a need to establish the substantial identity or deceptive similarity of the trade marks to rely upon this ground of opposition, although such findings could be relevant to determining the likelihood of deception or confusion.

12. Reputation is to be assessed according to the test set out in McCormick & Company Inc v McCormick [2000] FCA 1335 by Kenny J at paragraph 81:

    What is intended by the word “reputation” in s 60? The word is defined in The Macquarie Dictionary as follows:

    reputation ... 1. the estimation in which a person or thing is held, esp. by the community or the public generally; repute ... 2. favourable repute; good name ... 3. A favourable and publicly recognised name or standing for merit, achievement, etc. ... 4. The estimation or name of being, having done, etc, something specified.

    Cf. The Oxford English Dictionary. In s 60, the word is, I think, apt to refer to “the recognition of the  McCormick  & Co marks by the public generally”.

    Does the evidence establish that in Australia before 9 March 1992 the  McCormick  & Co marks were recognised by the public generally and, because of that, the use by Mary  McCormick  of her marks would be likely to cause the public confusion, as for example, by the public’s mistakenly attributing a business connection between the two or attributing her product to the company?

13. Additionally, the test for proving reputation is that propounded in ConAgra Inc v McCain Foods  (Aust) Pty Ltd (1992) 23 IPR 193 at 234:

    But reputation within the jurisdiction may be proved by a variety of means including advertisements on television, or radio or in magazines and newspapers within the forum. It may be established by showing constant travel of people between other countries and the forum, and that people within the forum (whether residents there or persons simply visiting there from other countries) are exposed to the goods of the overseas owner …

14. In practice, it is commonplace to infer reputation from a high volume of sales, together with substantial advertising expenditures and other promotions, without any direct evidence of consumer appreciation of the mark as opposed to the product: McCormick & Company Inc v McCormick (supra) at paragraph 86.

15. Furthermore, as submitted by counsel for the holder, the opponent’s reputation must be considered in the context of its licence agreement with the holder and the fact that it commenced its operations using trade mark patches and promotional material supplied by the holder. I was referred to dicta by Barwick CJ in Bayer Pharma Pty Ltd v Farbenfabriken Bayer Aktiengesellschaft (1965) 120 CLR 285 at 323:

    It may be that, in some circumstances, what begins as a foreign manufacturer's mark may in time end as the registrable mark of the local distributor of that manufacturer's products or, for that matter, of that distributor's own manufactured goods. But in such cases, at least there must be a clear dissociation from the initial significance of the mark so as to warrant the conclusion that the mark has become exclusively indicative in Australia of the local distributor's goods.

1. It is clear from the evidence that the opponent initially marketed goods under its jeans device using the holder’s materials and in the same manner as the holder, to the extent of using the same “drag test” as the holder and even using the holder’s  complimentary close to correspondence - “Ride safe” – in the opponent’s own correspondence and promotional material.

2. The opponent has not provided any evidence of sales, advertising expenditures or other promotions. There is no evidence of a clear disassociation from the original significance of the mark.

3. Any reputation that the opponent might have established would be in “Draggin Jeans”, rather than the dragon device element. It is the “drag test” and the protective qualities of the goods that provide the foundation of the jeans mark and the opponent’s goods.

4. Counsel for the holder submitted that any confusion that might arise would have done so as a result of the opponent’s conduct as ‘assiduous infringer’ of the holder’s rights, in particular in its copyright in the jeans device. It would be contrary to the intention of the Act for a party to rely on its own wrong to establish a likelihood of confusion.

5. The opponent has neither established to my satisfaction that the holder assigned rights in the dragon device or jeans device, nor that it has established the requisite reputation in Australia, nor that there is a likelihood of deception or confusion.

6. The final ground of opposition pressed by the opponent was that under section 42(b) of the Act:

   42. An application for the registration of a trade mark must be rejected if:

   …
   (b) its use would be contrary to law.

7. The parties agreed that it is well established that this provision provides a ground of opposition to trade marks the use of which would amount to passing off or misleading or deceptive conduct in breach of sections 52 and 53 of the Trade Practices Act 1974 (“TPA”).

8. It was also common ground that the factual basis of this ground was relevantly the same as that relied on under section 60 of the Act; however, there is a higher threshold for the TPA breach than that under section 60. Counsel for both parties agreed that this ground could not stand in the face of section 60 not being made out. Thus, in these circumstances, this ground could not be made out if the section 60 ground was not made out. I therefore find that this ground has not been established.

   Decision

9. Regulation 17A.24 of the regulations provides:

   17A.24Final decision on examination

   (1)The Registrar must, after the examination, accept the IRDA unless he or she is satisfied that:

   (a)it is not in accordance with this Division; or

   (b)there are grounds for rejecting it.

   (2)The Registrar may accept the IRDA subject to conditions or limitations.

   (3)The Registrar must reject an IRDA, in whole or in part, if the Registrar is satisfied that:

   (a)it is not in accordance with this Division; or

   (b)there are grounds for rejecting it, in whole or in part.

10. As the opponent has not established any grounds for rejecting the IRDA, Under Part 17A.24(3)(b) of the Regulations, I decide to extend protection to IRDA 1150876 one month from the date of this decision in respect of the goods specified in class 25. If the Registrar has been served with a notice of appeal before that time, I direct that extension of protection shall not occur until the appeal has been decided or discontinued.

    Costs

11. The parties sought their costs.  As a general rule, costs follow the event; therefore, I award costs against the opponent according to the official scale.

    Jock McDonagh
    Hearings Officer
    Trade Marks Hearings
    18 October 2010