E&J Gallo Winery v Lion Nathan Australia Pty Limited

[2009] HCATrans 317

[2009] HCATrans 317

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S189 of 2009

B e t w e e n -

E & J GALLO WINERY

Appellant

and

LION NATHAN AUSTRALIA PTY LIMITED (ACN 008 596 370)

Respondent

FRENCH CJ
GUMMOW J
HEYDON J
CRENNAN J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 8 DECEMBER 2009, AT 10.17 AM

Copyright in the High Court of Australia

MR I.M. JACKMAN, SC:   May it please the Court, I appear with my learned friend, MR M.J. DARKE, for the appellant.  (instructed Corrs Chambers Westgarth Lawyers)

MR F.M. DOUGLAS, QC:   May it please the Court, I appear with my learned friends, MR D.T. KELL and MR W.A.D. EDWARDS, for the respondent to the appeal and the applicant for special leave to cross‑appeal.  (instructed by Mallesons Stephen Jaques)

FRENCH CJ:   Yes, Mr Jackman.

MR JACKMAN:   I propose to take the Court initially to the material in the appeal books concerning the appeal which is in a fairly narrow scope.  The vast bulk of the material in the appeal books relates to my learned friend’s application for special leave to cross‑appeal.  Can I ask the Court to go first to volume 2 of the appeal books and to page 176 where your Honours will find a copy of the certificate of registration of trade mark.  Your Honours will note the number of the registered mark in the top right‑hand corner, 787765.  The mark was registered on 9 March 1999.  The registered owner at that time was Mr Michael Houlihan of California and the mark itself is a word mark, “BAREFOOT”, registered for wines, being goods in class 33.

Then if your Honours would turn back a page to page 175 you will see a certificate relating to the assignment of the registration to the subsequent owner, my client, E. & J. Gallo Winery, with effect from 17 January 2005.  My client was entered in the register as the subsequent owner.  That occurred contemporaneously with the completion of a sale of shares in the company Grape Links, Inc which traded under the business name Barefoot Cellars, that being a sale by Mr Houlihan and Ms Harvey to Gallo Winery.  The contract for sale is relevant to one of the points of contention that my learned friend raises and the terms of the contract are set out in volume 8 of the appeal books.  If your Honours would turn first to page 1707.

HEYDON J:   How do we know which is confidential and which is not, which parts?  This is a confidential volume.

MR JACKMAN:   It is.  It is marked as confidential but if put to the test, I am not sure that I could sustain any claim for confidentiality in relation to this agreement.  Certainly none of the clauses which were relevant to the agreement have anything in the nature of a trade secret or commercial sensitivity attaching to them.  On page 1707 there is the cover page for what is called a Stock and Brand Purchase Agreement dated 10 November 2004 between my client as buyer, Mr Houlihan and Ms Harvey as sellers and Grape Links Inc, otherwise known as Barefoot Cellars, being the company.

On the next page, 1708, clause 1.2 deals with the transfer of brand, that is, that there is to be a transfer of “the tradenames and trademarks listed on the attached Exhibit A” and all of that is referred to as “Brand” and exhibit A is at 1747 behind tab 2 and 1747 is headed, “EXHIBIT A TO STOCK AND BRAND PURCHASE AGREEMENT”.  The brands are set out and halfway down the page there is a list of “International trademark registration numbers” the first of them being the Australian mark for Barefoot “787,765”.

Then if your Honours would turn to page 1724, clause 2.24 deals with intellectual property.  There is a disclosure schedule referred to and that can be found on page 1782.  If your Honours could keep a finger at 1724 and 1782 gives a list of intellectual property.  The currently produced labels are six in number, the last of them being “Barefoot”.  At about line 26 there is a sentence that reads:

The Company –

Grape Links, Inc –

has the right to use the Barefoot trademark pursuant to the License Agreement (Wine) and License Agreement (Clothing) between Michael C. Houlihan and the Company dated November 20, 1995.

Then going back to 1724, clause 2.24.2 provides that:

The Company –

Grape Links, Inc –

owns or has the right to use all Intellectual Property necessary in the operation of its business, and all Intellectual Property necessary in the operation of its business consists only of the various items of Intellectual Property listed on Disclosure Schedule . . . In particular, the Sellers own the Brand which Brand the Company has the right to use pursuant to each of the two License Agreements dated November 20, 1995.

Then going through to 1733 ‑ ‑ ‑

CRENNAN J:   Were the licence agreements in evidence?

MR JACKMAN:   No, they were not tendered in evidence.  That is a point that my learned friend seeks to raise against us on his notice of contention.  We say their effect is sufficiently paraphrased in this agreement to see that there was a licence to use.  But what is of more direct relevance is the question of quality control by the trademark owner, Mr Houlihan, and I am going to come to that shortly.  On page 1732, clause 6.1.1 deals with:

Representations and Warranties.  All representations and warranties of the Company and the Sellers contained in this Agreement or in any statement, exhibit –

“exhibit” we emphasise –

certificate or document delivered by the Company or the Sellers under this Agreement shall be true, correct and complete in all material respects –

Clause 6.1.4 deals with a certificate to be given by the president, who was in fact Mr Houlihan.  The certificate itself is at page 1840.  I will not take your Honours to that, but can I take your Honours to the relevant exhibit dealing with the question of quality control which begins behind tab 6.  On page 1806 is a cover page for what is called exhibit E, being a consulting agreement”.  At 1807 the agreement is entered into on 22 November 2004 between my client and Mr Houlihan and Ms Harvey.  If your Honours then go to page 1811, clause 5(e) deals with quality monitoring of Grape Links, Inc products and it begins with a representation of fact:

As officers and shareholders of GLI, the Consultants –

that is Mr Houlihan and Ms Harvey –

established, maintained and are very familiar with the quality standards in effect over the past several years at GLI with respect to production, winemaking, bottling, packaging and distribution of GLI’s wine products and with respect to all other aspects of GLI’s operations.

Then there is an undertaking to continue to provide that quality control for a period of some 12 months. That is the quality control which, in our submission, satisfies section 8(3) of the Trade Marks Act and thereby constitutes Grape Links, Inc, or Barefoot Cellars as the authorised user of the trademark owner, Mr Houlihan.  There is no longer a notion of registered user.  One has to satisfy section 8 in order to be an authorised user.

CRENNAN J:   What is the date of the final closing?  Do we need to know that?

MR JACKMAN:   The final closing was in January 2005.  Can I just take that on notice and give your Honour a reference to that in due course.

GUMMOW J:   Page 1807 under “BACKGROUND” says that the closing was to be on 24 January.

MR JACKMAN:   Yes.  That is defined as “Final Closing”.  I am grateful to your Honour.  The other body of evidence which is relevant to the appeal concerns the shipment of wine which led to the wine being displayed for sale, offered for sale and sold in Australia.  There are two limbs to the evidence in that regard.  The first limb deals with a shipment from California to Germany, the second with the shipment from Germany to Australia.

As to the first, if your Honours would go back to volume 2 of the appeal books, at page 223 your Honours will see there an invoice by Grape Links, Inc to an entity referred to as “EINIG-ZENZEN” at line 19.  The invoice date towards the top right‑hand corner in the American convention is 14 February 2001.  Your Honours will see at line 31, 60 cases with a particular code were exported to Germany from California; that is White Zinfandel.  Then at about line 35, 530 cases exported to Germany of Zinfandel – that is the red.  The code then follows.

If your Honours then go to page 224 there is a document issued by the Department of the Treasury in the United States, Bureau of Alcohol, Tobacco and Firearms.  At line 20 it deals with an exportation to Germany.  At about line 35 there is a table.  The fourth column is headed “SERIAL NUMBER”.  The fifth entry, which begins with the code GLBN, et cetera, is the Barefoot California White Zinfandel – 60 cases of that.  Three entries below that are the 530 cases of the Red Zinfandel under the Barefoot label.

His Honour Justice Flick at first instance made a finding at paragraph 114 that the serial numbers shown in this document are the same as the serial numbers shown on the cartons of wine which were ultimately sold by a Victorian retailer, Beach Avenue Wholesalers, to my instructing solicitors in September 2007.  In other words, one would infer from that that exactly the same cartons of wine that are the subject of this shipment from California to Germany, two of those cartons ended up in Melbourne offered for sale by Beach Avenue Wholesalers. 

There are a couple of other documents that pertain to this shipment to Germany.  Back at page 217 your Honours will see a letter of 3 January 2001 from Barefoot Cellars to Dr Zenzen of Einig Zenzen, attaching some draft back labels for the wine and if your Honours turn the page to 218 the relevant labels are the bottom two on that page, the California Zinfandel made by Barefoot Cellars.  In the fine print at the bottom it indicates that it is:

Vinted and Bottled by Barefoot Cellars
Sonoma Country, California . . . 
Imported by Dr. Zenzen GmbH
Mainz Germany

The White Zinfandel label is in the bottom right‑hand corner to similar effect.

FRENCH CJ:   Now, is there anything about the terms and conditions of sale, apart from what appears on the invoice?

MR JACKMAN:   No, so it is unconfined in terms of its ultimate destination.  Obviously it was intended to be received in Germany, but what happened to the wine after that was completely open ended as far as the contractual material is concerned.

GUMMOW J:   I am not sure about that.  If one goes to page 224, so far as the US excise was concerned, line 20, the purpose was a “SHIPMENT FOR EXPORT TO ARMED FORCES OF THE U.S.”

MR JACKMAN:   No, there is no cross in that box.  These are alternatives; that is the first alternative which is not picked up.  The second alternative is exportation to Kaiserbesch, Germany, which is crossed.

HEYDON J:   There are actually five possibilities.

MR JACKMAN:   I am so sorry, your Honour is quite right, there are.

HEYDON J:   Or six or seven actually.

MR JACKMAN:   Yes.

CRENNAN J:   Just going back for a minute, at 218, that is the labels pursuant to which use of the mark is claimed.  Is that right?

MR JACKMAN:   They are the labels that were put on the bottles sent from California to Germany.

CRENNAN J:   That is a particular of use, so far as your case is concerned, is it?

MR JACKMAN:   Not quite.  It is then the offering for sale and sale in Australia of this wine which ‑ ‑ ‑

CRENNAN J:   I was referring more to the label.  It is the label that is the use of the registered trademark.

MR JACKMAN:   I stand to be corrected on this, but I do not believe that there is evidence as to the final state of the labels in Australia, that is, whether Beach Avenue Wholesalers added another back label on top of that or whether the back label simply existed in the form that your Honour sees on page 218.

CRENNAN J:   All I am wondering is whether there is something different on the front - how exactly is the use claim put in terms of the fact that the registration is the word alone?

MR JACKMAN:   The use claim is put on the basis that labels with the word “BAREFOOT” were affixed to the wine, that ‑ ‑ ‑

CRENNAN J:   This has Barefoot Cellars, you see.  So I am wondering about the front labels ‑ ‑ ‑

MR JACKMAN:   Yes.  I am sorry.  If your Honours want to see what the front label looks like, if your Honours go back there are many examples of it, but if your Honours ‑ ‑ ‑

GUMMOW J:   The back label is talking about a company.

CRENNAN J:   Yes, Barefoot Cellars.

GUMMOW J:   It is Barefoot Cellars put the label, et cetera.

MR JACKMAN:   Yes.  The company is the authorised user.

GUMMOW J:   We realise that, but the trademark is the word “Barefoot”.

MR JACKMAN:   That is so.  If your Honours go back to page 170 your Honours will see there the range of Barefoot wine that was made and the two bottles on the right‑hand side of the products that were offered for sale and sold in Melbourne.

CRENNAN J:   That is the particulars of use in respect of the registered trademark?

MR JACKMAN:   Yes.

CRENNAN J:   Yes, thank you.

FRENCH CJ:   The inference that this is what they looked like when sent to Germany is drawn simply from what, there was evidence as to that apart from what appears in the invoices and the ‑ ‑ ‑

MR JACKMAN:   There were in fact photographs of the bottles that were purchased in Melbourne by my instructing solicitors and I will find a reference.  I am not entirely sure whether they have been put in the appeal books, those photographs.  My learned junior says that they were not included in the appeal books but ‑ ‑ ‑

GUMMOW J:   Were they included in the exhibits?

MR JACKMAN:   They were.  Yes, they were indeed.

GUMMOW J:   The exhibits should be here.  They should have been got here from the Federal Court.

MR JACKMAN:   We do have some bottles of wine that were purchased in Melbourne here.  I can say this, the bottles themselves were never – there were photographs of the bottles.  The bottles themselves were not received into evidence but I will attempt to locate for your Honours the photographs of the bottles of wine as they were purchased in Melbourne.  If I can just take that on notice for the moment. 

HEYDON J:   Justice Flick found that the wine was imported by Beach Avenue Wholesalers into Australia in July 2002, right?

MR JACKMAN:   Yes.

HEYDON J:   Was that challenged in the court below and is it challenged in this Court?

MR JACKMAN:   No.  Can I then deal with the second limb of it, which is Germany to Australia, and ask your Honours to go to volume 7 at page 1629.  I am sorry, just to revert to the previous question, if your Honours go in volume 10 to page 2301 your Honours will see that in paragraph 184 his Honour Justice Flick has shown:

The labelling of the wine as purchased in 2007 from Beach Avenue Wholesalers –

That is the label that appeared on the front of the bottles.

CRENNAN J:   So just for one minute, the labels that are seen at page 170 are not the labels that were affixed in relation to bottles arriving in Australia, is that right?

MR JACKMAN:   Yes, I take your Honour’s point, there are some differences.  Your Honour should rely upon the label as shown at 2301 as correctly setting out the labelling which was on the bottles being sold in Victoria.

CRENNAN J:   That conforms to the exhibit in the Federal Court?

MR JACKMAN:   Yes, that is taken directly from the exhibit.  Now, at page 1629 is an invoice called in German a “rechnung” at line 22 from a German distributor with a different name from Einig Zenzen that imported the wine into Germany.  It is sent by Weinkellerei E. Philipp Deforth GmbH & Co and it is addressed to Beach Avenue Wholesalers in Braeside Victoria.  Your Honours will note at line 31 that the shipment was due to leave Rotterdam on 13 June 2002 and arrive in Melbourne on 12 July 2002.  It is a lengthy invoice.  On page 1632 are the relevant entries.  At about line 27 there is the Barefoot White Zinfandel, six cases, 72 bottles and in terms of euros it is at a price of 2.70.  Then the next entry at line 30 is the Barefoot Red Zinfandel, six cases, 72 bottles at €3.60.

Then his Honour Justice Flick found that that wine was duly offered for sale and to some extent sold by Beach Avenue Wholesalers beginning in the first sale which was in 2003 and the last sale that was evidenced was the sale on the instructions of my solicitors in September 2007.  Those findings were based on a set of invoices that we subpoenaed from Beach Avenue Wholesalers.  They begin at 1637.

At 1637 there is a tax invoice from Beach Avenue Wholesalers, Wine and Liquor Merchants to Liquor on Rathdowne in Carlton and six bottles of the White Zinfandel were sold and six bottles of the Red Zinfandel were sold.  The value is given, the wine equalisation tax accounted for, GST accounted for.  But your Honours will note that the date of this invoice, towards the top right-hand corner in landscape format, is 14 March 2003.  That falls outside the three year alleged non‑use period.  That three year period went from 7 May 2004 to 8 May 2007 and the sales in that period begin at page 1641 with an invoice to the Smithfield Tavern in Queensland.  The date is 15 October 2004, so it is after 7 May 2004.  The last entry on that page is a dozen bottles of “BAREFOOT RED ZINFANDEL”.

FRENCH CJ:   Was it 15 bottles that were sold altogether during the non‑use period?

MR JACKMAN:   No, 41.  There were 15 bottles sold up until the time of the transfer of the mark from Mr Houlihan to Gallo - 41 in total were actually sold, and there were 144 bottles that Beach Avenue Wholesalers offered for sale during that period.  Then, for example, if your Honours go to 1643 there is a further sale to Lonsdale St Auto Electrics on 16 December 2004.  The third last entry is “BAREFOOT RED ZINFANDEL”, three bottles.  Then 1644 there is a cash sale on 29 July 2005 of a single bottle of Barefoot Red Zinfandel. 

Then the last one I will take your Honours to, the set of invoices goes almost to the back of this volume.  If your Honours go to 1655, there is a tax invoice there addressed to Centre Euro Wines which we accept was a related company of Beach Avenue Wholesalers – related in the sense that it had common shareholders and directors in the ACT – and the fifth entry on the page is “BAREFOOT RED ZINFANDEL”, four bottles at 28.09. 

If your Honours go right through the set of invoices up to the end of the volume, there were a further 18 bottles that were given away, so 41 sales during the alleged non‑use period.  We submit that they were genuine sales in the ordinary course of trade and the offering for sale and the sales themselves are sufficient to constitute using good faith.  That is a point that arises from my learned friend’s notice of contention.  Our appeal is concerned with the question of use of a trademark in Australia and the factual background is, as we accept, that there is no evidence that Barefoot Cellars or Mr Houlihan or, for that matter, Gallo Winery knew that wine bearing the Barefoot label was actually being offered for sale and sold in Australia during the non‑use period.

There was a registered trademark in Australia and one would infer from that that there was some contemplation of a sale at some stage, if that be relevant, but there is no evidence of actual knowledge by the registered owner or authorised user that the wine was being offered for sale and sold during that period, and there is certainly no evidence that anybody relevantly knew about Beach Avenue Wholesalers.  It is our submission that the state of mind of the trademark owner or authorised user is irrelevant on the issue of trademark use.

HEYDON J:  That seems to be common ground.  Paragraph 37 of the respondent’s written submissions seem to accept that.

MR JACKMAN:  If that is so, then – my learned friend seems to hover between that concession on the one hand and a submission that the state of mind is relevant as objectively manifested in some way.  We find it difficult to understand how, if state of mind is irrelevant, it does not matter whether it is purely a subjective matter or an objective matter.  The knowledge or intention of the trademark owner or authorised user is simply irrelevant.  The relevant fact – and this is probably where we part company – is simply that the bottles of wine were affixed with the Barefoot mark as a badge of origin in the course of trade in Australia, and we submit that is sufficient.  My learned friend contends for some super‑added ingredient which, as we apprehend it, turns on some objective indicia relating to questions of knowledge or intention by the trademark owner or his authorised user.

The question involves an analysis of the Estex Case, both at first instance and on appeal, but before dealing with the question, what is use as a trademark in Australia, I want to deal initially with the more fundamental question, what is use as a trademark and in the 1995 Act the focus for that inquiry is on section 17 of the Act.

GUMMOW J:   Just before you get to that, Mr Jackman, at the moment there is still in force, is there, a stay on the expungement of your mark?

MR JACKMAN:   Yes, there is.

GUMMOW J:   That continues until when?

MR JACKMAN:   I think until judgment is delivered by this Court.  I will try to find a reference to that.  It is in volume 10, page 2373, paragraph 5.

GUMMOW J:   That is right.  That seems to be under the determination of the appeal.  Yes.  In this Court you are seeking a reversal of the orders made by Justice Flick in the end, are you not?

MR JACKMAN:   Yes.  The orders that we seek are at 2378 to 2379.

GUMMOW J:   Now, 3 and 5 of the orders made by the primary judge – that was the stay.  No, 3 was the expungement order and you want to get rid of that, then you want a declaration and an injunction, 6 and 7 on 2378.

MR JACKMAN:   That is right, yes.  That is because there is a finding of infringement in our favour by the Full Court which is the subject of my learned friend’s application for special leave to cross‑appeal.

GUMMOW J:   But if he did not succeed in getting that special leave what would happen?

MR JACKMAN:   Assuming that my learned friend’s notice of contention fails then we have a validly registered mark, we have an infringement of the mark by the respondent and we are entitled, we would submit, to the declaration and injunction and a remitter for puisne remedies to be assessed.

GUMMOW J:   The injunction you seek ‑ ‑ ‑

MR JACKMAN:   Paragraph 6, I think.

GUMMOW J:   No, that is the declaration.  Paragraph 7 is the injunction.  It looks like a passing‑off injunction.  Let us see what Mr Douglas says about all that.

MR JACKMAN:   Can I ask your Honours to go to section 17 of the 1995 Act which answers the question, “What is a trade mark?”  It is a slightly different question in form from what is use as a trademark, but the answer given by section 17 picks up the concept of use that:

A trade mark is a sign used, [relevantly] or intended to be used, to distinguish goods or services dealt with or provided in the course of trade by a person from goods or services so dealt with provided by any other person.

Relevant also to our appeal is subsection 7(4), the first definition being:

use of a trade mark in relation to goods means use of the trade mark upon, or in physical or other relation to, the goods (including second‑hand goods).

And subsection 7(3) that:

An authorised use of a trade mark by a person (see section 8) is taken, for the purposes of this Act, to be a use of the trade mark by the owner of the trade mark.

So they are used, for example, by Grape Links ‑ ‑ ‑

GUMMOW J:   There is a definition of “sign”, is there not, which is quite important?

MR JACKMAN:   Yes, there is a definition of “sign”.  I think that is ‑ ‑ ‑

HEYDON J:   Page 7.

MR JACKMAN:   Part of section 6, yes.

GUMMOW J:   It includes ‑ ‑ ‑

MR JACKMAN:   Includes relevantly words.  We are not concerned with the outer reaches of ‑ ‑ ‑

GUMMOW J:   Includes “sound or scent”.

MR JACKMAN:   Yes, there are some interesting outer reaches but they do not concern this appeal.  So the starting point, in our submission, is section 17, the concept of a sign used to distinguish goods dealt with in the course of trade from those of others, and one adds to that the principle that the question of trade mark use is an objective one in the sense that it is assessed from the perspective of members of the public endowed with ordinary intelligence.  It is not assessed by reference to the state of mind of the trademark owner whether manifested objectively or otherwise.

In Australia that proposition as to the objective meaning of trademark use was settled four years before Estex in Shell v Esso, if not before, in which Mr Justice Kitto dealt, of course, with the question of whether the television pictures of the oil drop figure constituted the use of a mark as a trademark which was resolved by asking whether in the setting in which they were presented the pictures would have appeared to the television viewer as possessing the characteristic of devices or brands which Shell was using to indicate a connection in the course of trade between the petrol and Shell and distinguishing Shell petrol from petrol sold by others in the course of trade. 

Now, Shell v Esso and the objective approach to trademark usage is simply taken as read in Estex and nothing in Estex qualifies or departs from it.  It is our submission, when we come to the question of use of a trademark in Australia, that where the course of trade crosses national borders the approach is the same.  The question is simply whether objectively viewed the mark was being used as a badge of origin distinguishing the goods of the owner or authorised user from the goods of others.  With that background I then come to deal with the decisions in Estex 116 CLR 254 in a little more detail.

GUMMOW J:   Before we get into that, is this on the 1955 Act?

MR JACKMAN:   This is on the 1955 Act, yes.

GUMMOW J:   Firstly it contained a registered user system which has gone, in the 1995 Act.  Secondly, the statute did not include what we now have in sections 7 and 8.

MR JACKMAN:   Yes, section 8 being the replacement regime for registered users.  I accept that.

GUMMOW J:   It is not necessarily against you but there was a sub‑text in Estex and the sub‑text was the trademark owner should have got an Australian registered user agreement and they had not.

MR JACKMAN:   That is very much subliminal because it does not feature in the reasoning as expressed.

GUMMOW J:   I realise that, but all the actors had a lot of mutually understood baggage.

MR JACKMAN:   I take your Honour’s point.

GUMMOW J:   That complaint, if you like, did not succeed.

MR JACKMAN:   Although the then statute differed in very subtle respects from section 17 in terms of what is a trademark, it did not differ materially.  Their Honours picked up the objective question of trademark use as lying at the heart of the question, what is use of trademark in Australia.  The particular submission that the Court was dealing with is paraphrased by Mr Justice Windeyer at page 266.  About two‑thirds of the way down there is reference to Mr Franki and the submission put that:

because the sale of the goods took place in London, the property passed there to the buyer, who in some cases was the London buying agent, and that therefore there was no use of the trade mark by the respondent in Australia.  The respondent, he said, had parted with its goods.  It had delivered them to some stipulated place somewhere in or near London; where they went or what was done with them thereafter by the buyer who then owned them, was a matter beyond the control of the respondent, a matter with which it was no longer concerned.  The respondent, he said, entered into no transaction in Australia.

A similar submission really is being put by the respondent in this case.  But what Sir Victor Windeyer said was:

All this is true enough.

This is the critical passage, we would submit:

But I think that to insist on it is to misapprehend the present case.  As a proposition of law it is no doubt perfectly correct that the goods when sold and delivered in London no longer belonged to the manufacturer.  But when it is said that a trade mark is used to distinguish the goods of one man from those of another, that abbreviated statement obviously does not refer to the goods of the owner of the mark in the sense of goods which he owns or possesses.  After the goods have been sold by him his mark may still, using the definition of trade mark in the Act, be used in relation to those goods for the purpose of indicating a connexion in the course of trade between them and him, the registered proprietor of the mark.  The manufacturer who sells goods, marked with his mark, to a warehouseman, wholesaler or retailer does not, in my view, thereupon cease to use the mark in respect of those goods.  The mark is his property although the goods are not; and the mark is being used by him so long as the goods are in the course of trade and it is indicative of their origin, that is as his products.  Goods remain in the course of trade so long as they are upon a market for sale.  Only when they are bought for consumption do they cease to be in the course of trade.  The concepts upon which the case turns are economic, commercial, business concepts concerning the marking and marketing of goods, rather than the provisions of the Sale of Goods Act concerning the passing of property.

That, in effect, is our submission that the mark was being used by Grape Links, Inc as authorised user for Mr Houlihan when the goods were in the course of trade in Australia and the mark was indicative of their origin, that is as his products or those of the authorised user.  Now the point is reinforced when one goes to page 268 in the middle of the page where his Honour says:

I do not think it necessary to go through all the cases that were cited to me ; Jackson & Co. v. Napper contains much that is instructive.

That is the only case that his Honour refers to as having relied upon.  The relevant passage was quoted by the Full Court at page 2348, if I could take your Honours to that.  In paragraph 41 at page 2348 reference is made to the judgment of Mr Justice Stirling, which begins:

Now, in considering that, I do not think I can do better than refer to what Lord Westbury said in McAndrew v Bassett ‑ ‑ ‑

GUMMOW J:   That is not a registered trademark case, is it?  McAndrew v Bassett?  I may be wrong.

MR JACKMAN:   It is probably not, given the ‑ ‑ ‑

GUMMOW J:   I do not think they had a registration system at the time ‑ ‑ ‑

MR JACKMAN:   ‑ ‑ ‑ age of it.  It is probably simply a decision applying the general law as conceived by the Courts of Chancery.

GUMMOW J:   I think so, yes.

MR JACKMAN:   But it refers to the essential ingredients of a trademark.  It culminates in the last four or so lines:

It seems to me, according to that passage from Lord Westbury’s judgment, that the trade mark has been used in England if you find that the articles marked with it have been actually vendible articles in the market in England; and that is the test which I proceed to apply . . . 

It is relevant because Sir Victor Windeyer applied that test himself in terms of use of a trademark in Australia, that is one simply needs to identify vendible articles in the market in Australia marked with the trademark as a badge of origin of the goods.

GUMMOW J:   We would need to know what the relevant provision was in the legislation being considered in 1886 as well, would we not?

MR JACKMAN:   Well possibly, except for this that the point I am making here is really to analyse the reasoning process of Sir Victor Windeyer and when his Honour said, in the middle of page 268, that “Jackson & Co. v. Napper contains much that is instructive” the form of expression in Jackson v Napper coincides almost exactly with the way in which his Honour expressed matters in that passage that I read from 266 to 267, that is looking at 267 point 2 or 3:

the mark is being used by him so long as the goods are in the course of trade and it is indicative of their origin, that is as his products.

Then his Honour refers in the middle of 268 to Rothmans v Wills which is said to have little bearing on this case and in the middle of 269 the case is distinguished:

In the Rothmans Case a person who was not the registered proprietor of the trade mark sold goods in America to consumers here.  At the point of sale in America the goods ceased to be goods in trade.  In the present case, a person who was the registered proprietor of the trade mark sold goods in England not to consumers, but to go into the market in Australia and there sold under the trade mark.

Similarly, we would submit, in this case the registered proprietor licensed and exercised quality control over the maker in California which put the goods into the course of trade via a wholesaler in Germany and they were still in the course of trade in Australia when Beach Avenue Wholesalers offered them for sale and succeeded to some extent in selling them.

FRENCH CJ:   Passing a property is relevant to anything, that is, just to passing property to the ultimate consumer.

MR JACKMAN:   Yes.

FRENCH CJ:   So it takes it out of the course of trade.

MR JACKMAN:   Yes.  I take your Honour’s point, because in Rothmans there were free on board sales in the United States to the consumers in Australia, therefore property passed in the United States, so that they ceased to be in the course of trade before the goods entered Australia.  Yes.  In the Full Court, if I can take your Honours to page 271 in the same volume, at the top of 271 Mr Franki’s submissions are paraphrased again pointing out:

the sales which it is proved were made by the respondent to the several Australian retail houses were made in England, the goods, in each instance, were the subject of an f.o.b. contract and, presumably, the property in them passed upon shipment in London.  That being so, it is said, there was no act of the respondent –

Pausing there, there is an echo of this submission in my learned friend’s use of the word “conduct” in his written submissions.  The word used here is “act”.  The submission was –

there was no act of the respondent in Australia which can be said to constitute a use by it in Australia of the mark.

Reference is made to a particular case and then it is said that:

to apply the reasoning in that case in solving the problem in the present case would be to misconceive the significance of the word “use” when it is used in relation to a trade mark.

Then, critically, their Honours go to the definition of “trademark”:

By the Act a trade mark means “a mark used or proposed to be used in relation to goods for the purpose of indicating, or so as to indicate, a connexion in the course of trade between the goods and a person who has the right, either as proprietor or as registered user, to use the mark, whether with or without an indication of the identity of that person” and “use” in s 23 –

the then non‑use section –

must be understood in this context.

That definition corresponds very closely to section 17 of the 1995 Act, taking your Honour Justice Gummow’s point that we no longer have registered users, rather, we have authorised users, and there are some subtle differences in the wording, for example, “connexion in the course of trade” has been replaced by synonymous language, but the essential point remains that trademark use depends upon the mark being used as indicative of origin of the goods in “the course of trade”.  Then their Honours say:

It denotation is not limited by any concept of the physical use of a tangible object –

the wine in this case or the women’s clothing in Estex.  Then the critical language appears –

we have no doubt that when an overseas manufacturer projects into the course of trade in this country, by means of sales to Australian retail houses, goods bearing his mark and the goods, bearing his mark, are displayed or offered for sale or sold in this country, the use of the mark is that of the manufacturer.

Now, in our respectful submission, that language is reflective of the facts in that case.  It does not limit the principle concerning trademark use in Australia to circumstances where one can find some projection, some throwing or casting, by the trademark owner into the course of trade in this country.

Now, what the Full Federal Court has done in the present case is to read those words, including the word “projects”, as though they were a statute and to attempt, as it were, an exposition by way of statutory construction of what the word “projects” means.  There are a couple of different strands in the reasoning of the Full Court.  The primary one, if I can ask your Honours to go back to volume 10 to the reasoning of the Full Court, appears at pages 2347 and following.  Paragraph 37 quotes from the passage that I have just read, and it is said in 38 that the High Court there:

identified two factors which . . . led to the conclusion that the respondent had used its marks in Australia.  The second . . . was that goods bearing the manufacturer’s mark had been displayed or offered for sale or sold in Australia.

In our submission, that is sufficient, and the Court correctly paraphrased the essence of our submission in the next sentence.  Then their Honours said:

However, that is not what the Full Court said.  Projection by the manufacturer of goods bearing its mark into the course of trade in Australia was the other factor which, together with the display, sale or offering for sale, led to the conclusion that there had been use of the mark in Australia by the manufacturer and its owner.  We think fairly plainly what the Full Court was saying was that for there to be use in Australia of the mark by the owner, the owner of the mark must have engaged in conduct of some type which the owner might reasonably contemplate would result in dealings with its goods marked with its mark in Australia while the goods were in the course of trade.

There is no recognition there that the notion of conduct or an act by the owner was the very thing that the High Court was seeking to reject.  That was the foundation of the submission being put by Mr Franki which the Court rejected just as Victor Windeyer had done.  But the Court there is introducing a concept of intention or knowledge on the part of the trademark owner.  It is doing so by referring to conduct which the owner might reasonably contemplate would result in dealings with its goods and the reasoning is further exposed in paragraph 43 where the Court deals with the authorities concerning “use of a trademark in Australia in” ‑ ‑ ‑

FRENCH CJ:   Is the Full Court, to use the words “might reasonably contemplate”, directing itself to an actual state of mind adverting to Australia on the part of the owner or something constructive?

MR JACKMAN:   That passage is rather ambiguous.  It is referring to conduct from which the state of mind might reasonably be inferred.  Paragraph 43 is a little clearer where the court says none of the authorities in this context:

proceed on any basis other than use in Australia involved or comprehended some act that was known either to have had, or potentially have, the result that the goods to which the mark was attached would be dealt with in some way within Australia in the course of trade.

CRENNAN J:   If you have a registered trademark in Australia and you make your goods available for export sales, so you are offering them for sale to an export market, is that sufficient conduct in any event?

MR JACKMAN:   On this reasoning we would say it is sufficient because ‑ ‑ ‑

CRENNAN J:   On this reasoning is what I meant, yes.

MR JACKMAN:   If this reasoning is correct, then it would be sufficient because the sales by the Californians to the Germans were completely open ended as to their ultimate destination.  There was no limit placed on the goods.

CRENNAN J:   Potentially there may be a sale or an offer for sale in the countries in which the mark is registered.

MR JACKMAN:   Quite, and presumably Mr Houlihan did not register the mark in Australia for no reason at all.  He must have contemplated at some stage that there would be some use of the mark in Australia.  But we say the reasoning is wrong in any event because what it is doing is focusing on the state of mind of the trademark owner evidenced by some act or conduct on the part of the trademark owner from which that state of mind was generated or might have been generated.  It is our submission that in putting the matter that way the Federal Court has lost sight of the High Court’s insistence that the central concept in this question is the question of use, that is, use of a trademark, which requires no more than that the goods are in the course of trade in Australia with a label affixed to them which is indicative of their origin.

There is a particularly odd adjunct to this reasoning in paragraph 47 where the Full Federal Court draws in section 27 of the current Act.  Section 27 deals with the entitlement of a person to apply for registration and 27(1)(b) sets out a number of alternatives.

CRENNAN J:   You said the current Act.  Are you talking about the 1995 Act?

MR JACKMAN:   Yes.  Section 27(1)(b) sets out a number of alternatives:

(i)the person is using –

that is, actually using at present –

or intends to use the trade mark . . . 

(ii)the person has authorised or intends to authorise another person to use . . . 

(iii)the person intends to assign the trade mark –

and so on.  In paragraph 47 what the Court seems to be doing is saying most of those concepts in 27(1)(b) pick up the concept of intention to use, and indeed they do.  The problem with the reasoning is that a general alternative to intention to use is that the person is actually using.  The statutory language jars if one incorporates in the concept of using some notion of intention to use because then one would not have the alternatives that the draftsman is plainly seeking to set out.

CRENNAN J:   What section 27 is really dealing with ensuring that the applicant for registration is genuinely the owner of the trademark, that is, the right to apply is linked to the intention to use.

MR JACKMAN:   Yes, quite, but one cannot read back from 27(1)(b) some notion that use of a trademark in Australia requires proof of an intention that the goods be on the market in Australia.

CRENNAN J:   All I am saying to you is section 27 deals with a very specific and quite different concern.

MR JACKMAN:   Yes.

GUMMOW J:   Notion of proprietorship.

CRENNAN J:   Notion of proprietorship, that is right – proper ownership.

MR JACKMAN:   Quite, yes.  I take your Honour’s point.  It has nothing to do, in my submission, with the question what is trademark use in Australia in the context of an overseas owner or authorised user of an Australian mark.  Before leaving this point there is, we would accept, one context where the question of trademark use may involve questions of intention by the owner or authorised user.  That is where the alleged trademark use is based on a display for sale or offering for sale by an overseas owner or authorised user – for example, over the internet or in a magazine which is published overseas and not commonly circulating in this country.

That is the kind of situation which was dealt with by Justice Merkel in Ward Group Pty Ltd v Brodie and Stone.  His Honour resolved that problem by reference to common law principles as to where statements are made.  So if one is offering for sale some goods from an overseas location the question is, where are those statements comprising the offer being made at a common law ‑ ‑ ‑

GUMMOW J:   What is the citation of Justice Merkel’s decision?

MR JACKMAN:   It is on my learned friend’s list.

HEYDON J:   I think it is 143 FCR 479 decided in 2005 – Ward Group Pty Ltd v Brodie and Stone PLC.

MR JACKMAN:   I am grateful to your Honour.  In that context, if one is looking at where statements on the internet or in foreign‑published magazines are made, one is concerned with where the maker of the statement intends them to be received.  That is a standard common law proposition.  It has no application in this case because the offering for sale in this case was by a merchant in Melbourne, so that the statements were being made in Australia.  It is not a case where the statements were being made offering goods for sale by a merchant located overseas.

GUMMOW J:   What was the issue in Ward Group?

MR JACKMAN:   At issue in Ward Group was whether there was trademark infringement ‑ ‑ ‑

GUMMOW J:   It was an infringement case, was it not?

MR JACKMAN:   ‑ ‑ ‑ by way of advertising on the internet.

GUMMOW J:   It was an infringement case.

MR JACKMAN:   It was an infringement case, but the question there was where was the use of the mark occurring; was it use in Australia?  Your Honour is quite right, it was an infringement case under the now section 120.

GUMMOW J:   Section 120 is always read as requiring an Act in Australia.  It does not say so, it is always read that way.

MR JACKMAN:   It does not say so but because of that basis on which section 120 is approached, the case is of some utility in looking at the question of use of a trademark for all purposes, not just for infringement purposes.

GUMMOW J:   So what did his Honour hold?

MR JACKMAN:   What his Honour holds is that the advertising of the goods over the internet was not an infringement in Australia because there was no intention that the statements made over the internet be received in Australia.

FRENCH CJ:   Except that the concept of use does import, at some level of generality, a notion of intention.  The notion of using something in the state of unconsciousness ‑ ‑ ‑

MR JACKMAN:   The notion of trademark use involves – trademark use in Australia involves no more than that goods are affixed with the label being distinctive of their origin and that the goods with that label are in the course of trade in Australia.  But if one is saying “I have used the mark in Australia because I have offered these goods for sale in Australia despite the fact that I am making those statements from an overseas location”, it is only then that one would look at questions of intention because of the common law principles as to the place where statements are made.

FRENCH CJ:   But if one, for example, sells an item bearing the trademark into a global marketplace, it is not adverse to your case, is it, that one does not necessarily contemplate – this I would understand to be your position – that it might end up being sold in Australia somewhere down the chain of distribution.

MR JACKMAN:   No, I accept that.

FRENCH CJ:   One can reconcile that with a notion of intentional projection at the outset on the part of the overseas owner.

MR JACKMAN:   If necessary one could, yes, but that is an alternative position to our primary submission which is that one simply does not ask about questions of knowledge or intention by the trademark owner.  One simply asks are the goods in the course of trade in Australia affixed with a mark which is distinctive of their origin.  There does seem to be a further line of reasoning by the Federal Court which appears in paragraphs 55 and 56 at page 2353.  Paragraph 55 begins with the proposition that we would not cavil with on its own:

the use of a trade mark is not use in a vacuum but rather it is use “in the course of trade by a person” . . . The remarks of Windeyer J in the above passage relied upon by Gallo require them to be understood in the context of a course of trade in Australia between a person, in that case the registered owner, and someone else not being the ultimate consumer.

GUMMOW J:   I do not follow that.  The last sale to the consumer is still a use in the course of trade.

MR JACKMAN:   Yes, quite.

GUMMOW J:   Well, what is being said?

MR JACKMAN:   But then in paragraph 56 what their Honours have said is:

In this case the course of trade was between Gallo and the wholesale company in Germany.  There was, objectively considered, no course of trade between Gallo and BAW or any other party in Australia.

That is a highly novel doctrine or proposition.

CRENNAN J:   It seems to suggest that you cannot have a chain of distribution for a mark in the course of trade.

MR JACKMAN:   Quite, and the real oddity is that Sir Victor Windeyer has been linked with that reasoning, whereas, what Sir Victor Windeyer said in the passage quoted in paragraph 52 by the Full Court is to the opposite effect, that is, the course of trade subsists through the hands of warehousemen, wholesalers, retailers.  The owner does not cease to use the mark as those economic steps are engaged in.  The owner is still using the mark for as long as the goods were in the course of trade.  If the Full Court is to be read as imposing some requirement that the course of trade be a direct relationship or some close relationship between the owner and the person in Australia, then, in our respectful submission, it is simply wrong.

CRENNAN J:   In a sense it is denying the authorised user provisions.

MR JACKMAN:   Quite, yes, we would accept that, because there the connection is simply between owner and authorised user and it would cut off at that point and exclude the rest of the course of trade which is where the mark has its economic impact.  Can I take the Court back to Estex for a moment to deal with a subsidiary point which, although it is not essential to our argument, we would submit assists the argument.  It concerns reasoning at page 271 in the Full Court’s decision in Estex.  At about point 8 on the page and really at the point at which I stopped reading previously there is a sentence that reads:

Indeed, in this case, the respondent is the only person who has the right to use the mark and the retailer to whom the goods have been sold for re-sale does not, in any relevant sense, use it.

Applying that reasoning in our case, when Beach Avenue Wholesalers offered the Barefoot wine for sale in Melbourne the mark was certainly being used by someone.  Applying that reasoning, it was not the retailer that was using it and, therefore, it could only have been the trademark owner or the authorised user, Barefoot Cellars.  But the position is somewhat more complicated by the fact that Mr Justice Aickin made some observations about that passage in the Pioneer Case. If I could take your Honours to 137 CLR 670. The particular passage is at page 688. At the top of the page his Honour deals with an argument that was put that Estex:

decided that a retailer who sold imported goods bearing an Australian registered trade mark did not use the mark, and that therefore a “distributor” did not use a mark which was already on the goods.  In my opinion the Estex Case is not authority for that proposition.  It is authority for the proposition that the foreign owner of an Australian mark uses it in Australia when he sells goods for delivery abroad to Australian retailers and those retailers import them into Australia for sale and there sell them.

That is an accurate paraphrase of the passage at page 271 referable to the facts of that case.  Then his Honour says:

It demonstrates that such a situation does not differ from that where he sells the goods for delivery in Australia to the retailer or where he advertises the goods in Australia.  It was not necessary in [Estex] to consider whether the retailer also –

we emphasise the word “also” –

used the mark because the only relevant question was whether the registered proprietor himself had used the mark in Australia.  There is no doubt that if the retailer had on the same basis imported goods other than those of the registered proprietor but bearing its mark, he would have used the mark by infringing it. 

That is established by Wills v Rothmans.  Then dropping down to about point 8:

Thus if Pioneer Australia had done no more than import the goods and sell them by retail it would have used the mark, but in fact it did much more as the evidence referred to above demonstrates.

Now, his Honour there is referring to ‑ ‑ ‑

GUMMOW J:   It would have used the mark as a trademark to indicate the connection between whom and the goods.  It is elliptical. 

MR JACKMAN:   Well, this is the problem.  His Honour does not expatiate on that and to say why Pioneer would be in a different category from Grace Bros and the other department stores involved in the Estex Case.  One way of reconciling the cases is to focus on the fact that Pioneer Australia was a wholly owned subsidiary of the Japanese manufacturer and that it is, in effect, a dedicated distributor selling a single line of products, being Pioneer goods, whereas a department store like Grace Bros considered in Estex is selling many thousands of product lines. 

Grace Bros would never be associating itself as the origin of goods, whether as maker or as merchant, because of the many thousands of product lines that it sells.  Similarly, a wine merchant selling many, many different kinds of wine would not, one would expect, be associating itself with the mark as the origin of the goods by way of being a dedicated merchant.

HEYDON J:   Apart from house brands.

MR JACKMAN:   Apart from house brands, yes, I accept that.  Pioneer Australia, on the other hand, as a dedicated distributor of Pioneer goods and as a member of the same corporate group as the maker, is in a sense using the trademark on that reasoning, identifying itself as the merchant of origin, even though its head company is the maker of origin.  We put that forward as a possible way of reconciling the dicta in the two cases.

CRENNAN J:   Well, Pioneer, I suppose, is a permitted user.

MR JACKMAN:   Yes.

CRENNAN J:   Being a wholly owned subsidiary.

MR JACKMAN:   Yes, it is certainly a permitted user as well, and that corresponds to some fairly routine reasoning in the parallel importation cases that the parallel importer of genuine goods does not use the mark because that merchant is acknowledging that the mark has been properly used by the overseas maker who has a fixed ‑ ‑ ‑

CRENNAN J:   Been placing it on the goods.

MR JACKMAN:   Yes.  But even if Sir Keith Aickin’s reasoning were regarded as having a general application to all importers who then retail goods, it is reasoning which we can live with because his Honour is there saying the retailer as well as the overseas maker is using the mark.  All we need to establish is that the overseas maker is using the mark as an authorised user of the trademark owner.

GUMMOW J:   Assume there had been counterfeit goods made in a foreign country with a mark on them and assume they are imported here and sold here by a retailer, the retailer is said to have infringed.

MR JACKMAN:   Yes.

GUMMOW J:   Why is that in terms of section 120?  You have to show the retailer is using “as a trademark”, et cetera.  He is not using “as a trademark” to indicate anything about the relationship between the retailer and the goods, is he?

MR JACKMAN:   The retailer may be, but the retailer is ‑ ‑ ‑

GUMMOW J:   It is not a house mark.  It is not being put forward as a house mark.

MR JACKMAN:   In that case, the question is, who is using the mark attached to the counterfeit goods.

GUMMOW J:   The question is what “use” means.  That is the question.

MR JACKMAN:   Yes.

GUMMOW J:   The notion of “use” is bound up – it is not a copyright case.

MR JACKMAN:   I accept that.

GUMMOW J:   It is a use in a particular character as a trademark to convey something to the person who sees it.

MR JACKMAN:   Yes, and the retailer in that case is conveying that these are goods which have their origin with the registered owner of the mark but we know that the registered owner is not using the mark.  We can rule the registered owner out as using the mark because these are counterfeit goods and the mark is then being used by all of those who are selling the counterfeit goods in the course of trade as though they were genuine goods of the trademark owner.

GUMMOW J:   Yes.  So the retailer is not using it as the retailer’s trademark, not indicating as a badge of origin of the retailer?

MR JACKMAN:   Not as a badge of origin of the retailer but as a badge of origin of the maker of the counterfeit goods and that, in the context of counterfeit goods, constitutes the retailer as a user of the mark along with everybody else associated with the course of trade of those counterfeit goods.

GUMMOW J:   If they are genuine goods, as they are here, how does the role of BAW fit into that analysis?

MR JACKMAN:   Applying Estex’s reasoning, BAW is not using the mark because BAW is acknowledging that Barefoot Cellars in California is the true origin of the goods and has applied the mark to its genuine goods.  So it is not independently using the goods.  It is simply acknowledging that they have been properly used by the maker of the goods in California.

GUMMOW J:   If you are right about all of this, how do the authorised provisions work?  They seem to assume the contrary to what you are putting to us because they seem to assume that what would be an authorised use, if not authorised, would be an infringing use.  That is what I am trying to get at.

MR JACKMAN:   Looking at section 8(1), and we are dealing here with Barefoot Cellars being the makers and bottlers of the wine, Barefoot Cellars is an authorised user of the mark if Barefoot Cellars uses the mark in relation to goods under the control of the owner which is then spelt out relevantly in subsection (3) as meaning that the owner exercises quality control over those goods.

GUMMOW J:   Yes, but the first question is, what does the phrase in 8(1) “uses the trade mark” mean?

MR JACKMAN:   “Uses the trademark” means affixes the mark as indicative of the origin of the goods.

CRENNAN J:   You would say the retailer is not using the marks upon the goods.  It just happens to be dealing with goods bearing the mark.

MR JACKMAN:   That is right.  We would accept that Beach Avenue Wholesalers was not an authorised user of the trademark owner.

CRENNAN J:   Pick up 7(4) ‑ ‑ ‑

MR JACKMAN:   Yes.  Beach Avenue Wholesalers is doing no more than acknowledging for its own commercial purposes that Barefoot Cellars is the true origin of these goods and has properly affixed the mark to the goods.  So it is not an independent use by the retailer.

GUMMOW J:   So if the goods were counterfeit goods and had come from New Zealand, BAW would not have been infringing.

MR JACKMAN:   No.  They would have been infringing.

GUMMOW J:   Why?

MR JACKMAN:   Because in the case of counterfeit goods the retailer is not there simply making an acknowledgement that the goods have as their true origin Barefoot Cellars.  The retailer there is one of the people in the course of trade who is wrongfully, by definition, selling the goods by reference to a false label.  The retailer of counterfeit goods is conveying that these goods were made by Barefoot Cellars when in fact they were not, and that is use of a mark, taking one into infringement under section 120.

Coming back then to the way in which one deals with the sentence of the High Court’s judgment in Estex using the verb “projects”, we refer in our written submissions to the view expressed in the leading texts in Australia, Shanahan and Lahore.  Can I hand up to your Honours copies of

the relevant passage in Shanahan.  I have not been able to trace it back to the first edition but I can indicate that this passage appeared in the second and third editions and appears similarly in the 4th edition.  At page 50 the authors quote from Sir Victor Windeyer’s judgment.  Then on 51 they quote a sentence of the Full Court’s judgment which uses the word “projects”.  It is then noted that:

It has been suggested that the words “projects into the course of trade in this country” assume “some knowledge or contemplation in the manufacturer” that the goods will reach the Australian market.  However, those words do not compel that interpretation, and such a requirement appears inconsistent not only with the objective nature of the test of use as a trade mark but also with the line of authorities flowing from Champagne Heidsieck et cie Monopole Society Anonyme v Buxton which establish that unauthorised “parallel importation” is not trade mark infringement for the sign is being used to indicate the registered owner’s products.

To take the language of Justice Clauson in the Champagne Case, a trademark is “a badge of the origin” not a “badge of control” and the mark is still being used to indicate that the products are those of the owner or authorised user of the mark even though the course of trade might now be well outside their control and, in a parallel importing case, even though the course of trade might actually conflict with the way in which the owner sought to exert control over the distribution of the goods ultimately knowledge, intention, contemplation and so on by the owner or authorised user, in our submission, are irrelevant.  We would respectfully adopt the approach taken in Shanahan to the High Court’s reasoning in Estex.  Unless there is anything further on which I can assist your Honours, those are my submissions on the appeal.

FRENCH CJ:   Thank you, Mr Jackman.  Yes, Mr Douglas.

MR DOUGLAS:   In our respectful submission the question arising on the appeal is a matter of statutory construction of section 92(4)(b), which requires four things.  The first of those matters is use.  The second of those matters is use in Australia.  The third of those matters is the timing of the use, which is during the non‑use period and the fourth of those matters is use by a particular person, which in this case is the registered owner.  So it has to be used by the registered owner and not by someone else.  Where used by a person other than the trademark owner, such as Barefoot Cellars in this case has relied on, attention must be paid to the statutory concept of authorised use and that is to be found, particularly ‑ ‑ ‑

GUMMOW J:   Sorry, could you say that again, Mr Douglas?

MR DOUGLAS:   Where use by a person, other than the trademark owner such as was Barefoot Cellars, they were not ‑ ‑ ‑

GUMMOW J:   I do not think it was relied on.  That is what I have been debating with Mr Jackman.

MR DOUGLAS:   What is relied upon, as we would understand it, your Honour, is authorised use by Barefoot Cellars of a mark which was owned by Mr Houlihan and so, therefore, the authorised use provisions are directly applicable to this appeal because unless ‑ ‑ ‑

CRENNAN J:   In relation to Barefoot Cellars?

MR DOUGLAS:   Yes.

GUMMOW J:   In relation to Barefoot Cellars?

MR DOUGLAS:   But that is the only use which is relied upon, as we understand it. 

GUMMOW J:   The bottle is in California.

MR DOUGLAS:   The bottle is in California.  It has a trademark applied to it.

GUMMOW J:   Yes, I see.

MR DOUGLAS:   It is being shipped to Germany.  We would say, at that point, the case is indistinguishable from Rothmans because the goods have been sold to Germany.  My learned friend says, “Well, look, there was no restriction at all upon where the bottles could be sent”, but likewise in Rothmans there was no restriction upon where the cigarettes could be sent.  This was simply a sale of wine to Germany.

So what they say, in essence, is this, that Mr Houlihan, I think he was a chairman of Barefoot Cellars or the company was traded under that name, was a registered owner of the mark.  He effectively authorised Barefoot Cellars to use the mark.  By virtue of the assignment to Gallo they are entitled to get the benefit of that use and that is the only use which is relied upon.  So if you then go to the authorised user provisions of the Act, you will see that:

A person is an authorised user of a trade mark if the person uses the trade mark in relation to goods or services under the control of the owner of the trade mark. 

So what they have to establish in the first place is that the use by Barefoot Cellars was use under the control of the owner of the trademark.  That was Mr Houlihan.  Subsection (2) is very important, in our respectful submission, in order to understand what is being contended for here.  It provides:

The use of a trade mark by an authorised user of the trade mark is an authorised use of the trade mark to the extent only –

Now, those words have got to be given real meaning, in our respectful submission, when one comes to consider the history of trademarks –

that the user uses the trade mark under the control of the owner of the trade mark.

Then subsection (3), which Mr Jackman relies upon, provides that:

If the owner of a trade mark exercises quality control over goods or services:

(a)dealt with or provided in the course of trade by another person; and

(b)in relation to which the trade mark is used;

the other person is taken, for the purposes of subsection (1), to use the trade mark in relation to the goods or services under the control of the owner.

So what Mr Jackman’s client has got to establish is that for particular goods in question or goods in relation to which Mr Houlihan exercised quality control and that subsequent to that in some way he exercised control over Barefoot Cellars so that their use of the trademark was an authorised use.  There are a number of deficiencies so far as the evidence is concerned, but I am going to glide over those for a moment, that is, deficiencies in the evidence supporting my learned friend’s case about whether Mr Houlihan had anything to do with the exercise of quality control.

CRENNAN J:   What is the force of the “if”(?) in subsection 3?

MR DOUGLAS:   In subsection (2), your Honour?

CRENNAN J:   Subsection (3).  In other words, does it only apply if the kind of control exercised as quality control, could subsection (2) apply if the kind of control exercised is safe financial control?

MR DOUGLAS:   Yes, but they did not rely upon financial control, your Honour.  You could control generally, I suppose, if you look at subsection (1), under the control of ‑ ‑ ‑

CRENNAN J:   So there was reliance on quality control?

MR DOUGLAS:   That is their case, your Honour, and their only case, quality control by Mr Houlihan.

CRENNAN J:   Through the consultancy agreement which we were shown.

MR DOUGLAS:   It was not a consultancy within, your Honour.  There were other companies involved.  I can take you to that, but I just want to deal with the matter a bit conceptually for the time being.

GUMMOW J:   In Estex, the registered proprietor was the actual manufacturer of the goods.

MR DOUGLAS:   It was, yes, your Honour.  So it was not an authorised use situation.  What is important to bear in mind, in our respectful submission, in reading Estex and reading what Sir Keith Aickin said in Pioneer, is the history of trademarks and the exercise of control by the registered owner.  If your Honours could go to Pioneer (1977) 137 CLR 670. I do not want to bore your Honours of history which you are all very familiar with, but just at the foot of page 680 you will see that Sir Keith said:

It is no doubt true that at one time, and in particular after the decision of the House of Lords in Bowden Wire Ltd v Bowden Brake Co Ltd, it was thought that any licensing of a mark placed its validity in jeopardy or indeed automatically made it incapable of remaining validly on the register.  Subsequent cases however have demonstrated that all that that case decided was that if a registered trade mark is licensed it may become invalid if it ceases to show a connexion in the course of trade with the registered proprietor or otherwise becomes deceptive.

Sir Keith then goes on to consider the history of the situation.  Now, after the original Trade Marks Acts, there were the registered user provisions inserted into the Acts which were considered by Sir Keith in that case.  But as your Honour Justice Gummow has said in Wingate (1994) 49 FCR 89 at page 119:

The whole system of registered users in Pt IX of the Act involves, to a degree, a legislative condonation of misleading conduct.

So that can be seen to have been an exception to the principles which developed prior to the introduction of registered users.  Under the 1995 Act we have gone one step further and we have allowed authorised users, but the legislature has been very concerned to make sure, having regard to the possibility of marks becoming deceptive if control is not exercised by the registered owner, to ensure that those provisions which deal with use by an authorised user make very clear that the user has to be under the control of the owner of the trademark and the authorised use is to the extent only that the user uses the trademark under the control of the owner.

Now, whatever be said about the situation up until the time when the goods were exported to Germany, and we would say that that is the end of the relevant course of trade, and the shipping documents contemplated that the goods would be sent to Germany if the goods were labelled on their back as good which were destined for the German market, and from that point of time the owner of the mark and, for that matter, Barefoot Cellars, but certainly the owner of the mark, had no possibility of exercising any control over those goods.

Thereafter, whatever be the situation in relation to use, as in Estex where the manufacturer was the owner of the mark, and we would say it is no different any way, when you are talking about an authorised use under the provisions inserted into the Act in 1995, there is simply no possibility that anything which happened to these goods after they left Germany and came to Australia, which happened, on the findings, without any knowledge on the part of the registered owner and without any evidence of any role played by Mr Houlihan, none of that can possibly, in our respectful submission, amount to use in Australia by the registered proprietor for the purposes of section 92(4).  That is putting my learned friend’s case at its highest.

CRENNAN J:   In Australia the mark is still operating, is it not, as a badge of origin in relation to the Californian interests?

MR DOUGLAS:   But that is not use by the registered proprietor.  If Chateau Lafite is sold fob in London for delivery into Australia, that presumably amounts to a use by Baron Philippe de Rothschild.  It may be stored for 20 years by a devotee of fine Bordeaux and subsequently may be re‑exported to some other market.  It may indicate that this was originally wine which was bottled at the Chateau by Baron Philippe de Rothschild, but that subsequent resale by auction in Sotheby’s and so on is not use by the registered proprietor in the relevant sense.

CRENNAN J:   I was talking more about the function of the mark as a badge of origin.  It is still functioning as a badge of origin.

MR DOUGLAS:   Yes, but there is, relevantly, no use by the registered proprietor for the purposes of section 92(4).

GUMMOW J:   Why?  Is this because – is the notion that the course of trade is finished, the course of trade inevitably finished in Germany?

MR DOUGLAS:   Rothmans would support that view, your Honour, because cigarettes do not have to be consumed.  Sir Dudley Williams in Rothmans referred to the fact that there was still the possible pleasure of smoking.

GUMMOW J:   But in Rothmans the sale was to consumers, was it not?

CRENNAN J:   Correct.

MR DOUGLAS:   Yes, but the sale was the sale in America, so the ‑ ‑ ‑

GUMMOW J:   I realise that, but to consumers.

MR DOUGLAS:   To consumers, yes.

GUMMOW J:   I do not think these – these German folk do not look like consumers.

MR DOUGLAS:   No, they are wholesalers, your Honour, but they were using the wines in wine shows and things of that nature.

GUMMOW J:   They were going to sell to somebody else.  There is no limitation on who they could sell to.

MR DOUGLAS:   Yes, your Honour, but ‑ ‑ ‑

CRENNAN J:   I mean, a trademark does not cease to be used by a registered proprietor simply because it goes through the hands of a chain of distributors.

MR DOUGLAS:   No, but the end course of this trade was, so far as the – well, let us deal with it from the point of view of a trademark owner.  So far as the trademark owner knew – assuming that he in fact was exercising quality control – so far as he knew, those goods were going to Germany.  After that he did not know what was going to happen to them, nor did he seek to ‑ ‑ ‑

GUMMOW J:   No, I think they were going to a wholesaler.  It does not matter where the wholesaler is at the moment - it could have been in New York City.

MR DOUGLAS:   Assuming he did know that they were going to a wholesaler – I must stress in this context that under the provisions of section 100(3) my learned friend bears the onus on all of these matters, although he denies that he does, but in our respectful submission, if one looks at the working paper in matters of that nature under – it is not for us to conjecture what was within contemplation, but if one looks at section 100(1)(c) it says:

any allegation made under paragraph 92(4)(b) that the trade mark has not, at any time during the period of 3 years ending one month before the day on which the opposed application was filed, been used, or been used in good faith, by its registered owner in relation to the relevant goods and/or services.

Now, what my learned friend, as we would understand, seeks to say, that if you have a sale of goods not to an ultimate consumer, let us say to a wholesaler of wine, then those goods remain in the course of trade until they are ultimately consumed, so that each use of the mark up until the time of that ultimate consummation is use by the registered proprietor of the mark throughout the whole of that period of time.

CRENNAN J:   Well, the mark is certainly functioning as the mark of the registered proprietor.

MR DOUGLAS:   Yes, but if that were the analysis - let us say at Estex, and it is perhaps useful to go to that case, if all one needed was the affixation of a trademark and sale by a retailer in Australia with no contemplation of any export to Australia, just the affixation in England and the ultimate sale in Australia, it could have been a very short judgment.  We would not have needed to go into the analysis which Sir Victor Windeyer went into which was largely adopted by the Full Court in their very short judgment.

My learned friend refers, in particular, to that paragraph at the top of page 267 and, of course, we agree with what is said in the last two sentences, that:

Only when they are bought for consumption do they cease to be in the course of trade.  The concepts upon which the case turns are economic, commercial, business concepts concerning the marking and marketing of goods, rather than the provisions of the Sale of Goods Act concerning the passing of property.

But, he then goes on to say:

Of course, the use which s. 23 speaks of is a use in Australia by the registered proprietor, a permitted use, that is by a registered user, being for this purpose equivalent to a use by a registered proprietor ‑ ‑ ‑

GUMMOW J:   But in the end it turns on the word “by” just like a lot in section 82 of the Trade Practices Act turns on the word “by” ‑ ‑ ‑

MR DOUGLAS:   Yes, a lot of “bys”, your Honour.  We could go to Marks v GIO immediately, your Honour.

GUMMOW J:   Yes, but that is the weasel word.

MR DOUGLAS:   But in order to satisfy himself about that matter he satisfied himself firstly that the transaction contemplated the export of the goods to Australia and in fact satisfied himself that they had in fact been sold in Australia upon arrival.  That is to be seen in the middle of page 266, where he says:

There is indeed positive and unchallenged evidence by affidavit that goods ordered from the respondent in fact arrived in Australia and were during the relevant periods offered for sale and sold by Australian retail houses with, as one would expect, their “EASTEX” marks and tags still on them.

In the discussion of Rothmans at the foot of page 268 at about point 8 he says:

The registered proprietor of the mark, W.D. & H.O. Wills, was in no way concerned in the transaction by which the goods reached Australia, although it was, by arrangement with the United States company which sent them, entitled to receive a royalty, or percentage of amounts which the American company received from sales to Australia.

I take that into the facts of the current case.  Assuming all other things against us in no way can it be said, on the evidence – and my learned friend bears the onus – that Mr Houlihan was in any way concerned with the transaction whereby the goods reached Australia.  He was concerned, on one hypothesis if, in fact, he was exercising quality control, with the transaction insofar as the goods reached Germany.  But beyond that he had no involvement at all and translating that into the provisions of section 8(2) he exercised no control over the goods during that period.

My learned friend, in order to make his case good, would have put evidence before the court which shows what happened in that 18 months whilst these goods lay fallow in Germany and were subsequently then re‑exported to Australia.  But there is no suggestion in the evidence that Houlihan did anything to exercise control in relation to that particular transaction.

GUMMOW J:   Section 83(1)(b), which is the section in the 1955 Act that has been considered in Estex, talked about no use by the registered proprietor.  Section 92(4)(b), differently drafted, it says “at no time during the period” did the owner use.

MR DOUGLAS:   Use the trademark.

GUMMOW J:   Yes.  I suppose it comes to the same thing.

MR DOUGLAS:   In my respectful submission, it does, your Honour.  Also when one goes to the ‑ ‑ ‑

HEYDON J:   Do you support Mr Franki’s argument in the Estex Case?

MR DOUGLAS:   About the transfer of property, your Honour?  Not about transfer of property.  When your Honour says that ‑ ‑ ‑

HEYDON J:   I am just looking at ‑ ‑ ‑

MR DOUGLAS:   Could I put it in a different context, your Honour, in this way, that often the passing of property can reflect the change of control.  So that whilst one cannot support it consistently with Estex, because the argument was rejected there, if property has in fact passed, as it did undoubtedly when these goods were sold to the importer in Germany, then what control could Mr Houlihan exercise over them?  So that the court would be entitled to take into account the passing of property as an indicia of the change of control from the registered owner.

CRENNAN J:   But a registered proprietor is not required to control distributors in the chain of distribution.

MR DOUGLAS:   Under section 8(2), if you want to rely upon it as an authorised use, your Honour, they do have to.  That is what section 8(2) requires.  They do not have to exercise control over distributors, so that effectively the use is not their use and they do not become liable for that use.

CRENNAN J:   But a sale or an offer for sale by a distributor can be the use of a trademark by a registered proprietor who has originally affixed that label or mark to the goods.  There is no doubt about that surely?

MR DOUGLAS:   Well, if you come under the authorised user provisions of the 1995 Act, your Honour.  There is no licence here, your Honour.  My learned friend has referred to a licence.  It is a licence to apply the trademark.  Even if you take the evidence to its fullest extent and accept that the bare notation in the asset sale agreement of the existence of a licence agreement, you could draw no inference other than that it was a bare licence.  We do not know what it says about control.  So my learned friend, in order to establish what your Honour is putting to me, has to establish that in some way the authorised user is subject to the control of a registered owner.

CRENNAN J:   What I am putting to you is really a different point which is there are many uses of trademarks occur in the context of there being distributors selling and offering for sale a product bearing a trademark.  It is completely unexceptional.  It does not in any way diminish the registered proprietor’s use of the trademark that it happens to go through the hands of the chain of distributors.

MR DOUGLAS:   But the question then would be whether in fact the use in any particular case is use by the registered proprietor.  I am not quibbling with what your Honour says, but one has to go back to – if the use by the registered proprietor or for purposes of section 92 you rely upon is use by an authorised user, that is Barefoot Cellars, you have to establish firstly that Mr Houlihan exercised quality control and be an authorised user only to the extent that Mr Houlihan exercised quality control and, applying the words of that subsection to the facts of this case, one cannot say that for the purposes of use as the expression is used in section 92(4), you cannot get there if you cannot establish control by Mr Houlihan.  The circumstances which your Honour is referring to, there would often be, I suppose, registered user agreements under the old provisions or licence agreements of sorts.

CRENNAN J:   They might be distributors pursuant to the registered user provisions.

MR DOUGLAS:   Yes.

CRENNAN J:   The distributors dealing with the goods then in no way diminishes the use of the mark as use by the registered proprietor because it is functioning as a badge of origin always in the hands of the distributors – in a way the distributor is irrelevant to the reputation and the fact that it functions as a badge of origin.

MR DOUGLAS:   Yes, but the question for the purposes of section 92 is whether there has been use by the registered proprietor.  You do not fulfil that by someone else importing the goods of a registered proprietor even if they have been branded with the brand of the registered proprietor.  There is an issue here which arises with the Champagne Case which is discussed by Justice Gummow in Wingate’s Case and some earlier authorities of this Court.  Of course the parallel importing cases have been explained on the basis that if a mark has been affixed to the goods by, let us say, a foreign registered proprietor then that does not amount to use of a trademark if those goods are brought into Australia by someone other than the registered proprietor.  In our respectful submission that is wrong and it has been wrong for a considerable period of time.  In Wingate 49 FCR 89 which I took the Court to before ‑ ‑ ‑

GUMMOW J:   I am not sure what you seek to get out of Levi ‑ ‑ ‑

MR DOUGLAS:   I will just go to it.  There is attention – it is the example which we give in our submissions which I think has to – if I can just go to our submissions.  In paragraph 43 of our written submissions, that is our submissions on the appeal, we say taken to its logical extreme Gallo’s theory of use necessarily entails that any foreign based manufacturer, who is not the registered owner of the mark in Australia but who may be the owner of a mark elsewhere, who applies a mark to the goods outside Australia and sells them outside Australia would be liable to be sued in Australia for infringement of a registered trade mark simply when minor quantities of its product, having been directed here by a third party and without the knowledge or intention of the foreign manufacturer, are found to have been available for retail sale in Australia. 

Now, section 123 would not save the foreign manufacturer from infringing the Australian registered trademark because the mark had not been applied by the registered owner of the Australian trademark.  The proper application of the ratio of Estex, as applied by Justice Flick and the Full Court in the present case, avoids such an extreme result.

We have this situation coming up quite often in the lower courts, cases like Montana Tyres and so on, cases your Honour would be familiar with.  So there is a real, if I could put it that way, tension between the parallel importing cases and the concept of use by registered proprietor, because if use by the registered proprietor does consist of simply applying a mark when the goods are originally produced and then there being subsequently imported into a country where the mark, let us say, is held in different hands, a la Rothmans Case, then the registered proprietor would be unknowingly and unwittingly infringing every time that that happened. 

The legislature in the 1995 Act has sought to deal with that situation by providing a defence in section 123 of consent by the registered proprietor of the Australian mark.  There are a number of authorities in the Federal Court dealing with corporate groups and marks being held in different hands and so on, most of which are referred to in the footnotes to our submissions.  But, in our respectful submission, this Court would be very reluctant to find that use by a registered proprietor amounts to nothing more than the affixation of a mark at a place of manufacturer and a subsequent importation without the knowledge of the foreign manufacturer.

That is why I was going to Wingate, because it is in that context, in our respectful submission, that one has to consider a couple of earlier decisions of this Court and the way in which the law on parallel importation coincides with the question of use by the registered proprietor.  So far as that is concerned, the Champagne Case was based on the idea that if the mark had been applied by the foreign registered proprietor, then it was not deceptive to market those goods in England even if in fact the foreign owner had not intended that those goods in that form be marketed in England.  There have been a number of cases to which have said that the Champagne Case was correctly decided, in particular, one decision of Justice Young involving the Baileys Irish Cream brand, which is referred to in our submissions. 

In Wingate, Justice Gummow, at page 120, looked at the history of the matter in a way which we consider to be instructive.  Under the heading: “Infringement, deception and passing off” he said:

Section 3 of the Act of 1875 and s 76 of the Patents, Designs and Trade Marks Act 1883 (UK) conferred upon the registered proprietor a “right to the exclusive use of the trade mark”. 

Section 39 conferred a similar exclusive right.  Then:

In Bale & Church Ltd v Sutton Parsons & Sutton and Astrah Products (1934) 51 RPC 129 at 143, Maugham LJ said of this provision:

“Do the words indicate that the right in question is limited to the identical mark, or does the right enable the owner to restrain the use of marks colourably resembling the registered trade mark so as to be calculated to deceive ordinary purchasers of similar goods?”

His Lordship went on to say that at one stage he thought this was an arguable point, but regarded the matter as now settled in favour of the wider proposition.

In Australia, this conclusion had been put in statutory form in s 53 of the Trade Marks Act 1905 (Cth) (the 1905 Act). Section 50 of the statute followed the terms of s 39 of the 1905 UK Act and described the monopoly as the right to “the exclusive use of the trade mark upon the goods in respect to which it is registered.” However, s 53 added:

“The rights acquired by registration of a trade mark shall be deemed to be infringed by the use, in respect of the goods in respect of which it is registered, of a mark substantially identical with the trade mark or so nearly resembling it as to be likely to deceive.”

It also was established in Australia and then in the United Kingdom, that use by a defendant not of the trade mark but only of a deceptively similar mark did not have the consequence that an action for infringement would fail if the acts complained of did not amount to passing off by the defendant.  In James Minifie & Co v Edwin Davey & Sons (1933) 49 CLR 349, the defendant was using a mark which, it was conceded, so closely resembled the plaintiff’s registered mark as to be likely to deceive. However, the activities of the defendant did not amount to a passing off: see at 357, 361, 362. Nevertheless, the High Court affirmed the decision of Cussen ACJ that there was infringement.

Although the point is not brought out in the judgments, in taking that view of the structure of the legislation, the High Court was somewhat at odds with what had earlier been decided in Schweppes Ltd v E Rowlands Pty Ltd (1910) 11 CLR 347. In that case the High Court appears to have proceeded on the footing that, under the 1905 Act, where reliance was placed upon deceptive similarity of the marks the infringement action was to be treated as a passing off suit.

Just following that through to the Champagne Case and to the parallel importing cases, we would say that James Minifie v Edwin Davey was an early recognition by this Court, and the Champagne Case was referred to in argument in that Court, although not referred to in the judgments, an early recognition by this Court that contrary to what would appear to be the underlying rationale of the Champagne Case you did not have to establish deception, it was simply the fact infringement was as defined the use of the mark.

That has now been dealt with, so far as Australia is concerned, by section 123 which gives the trader the right to say that the mark was applied with the consent of the Australian registered owner and that may be the same worldwide or it may not be.  The marks may be in the same hands or they may not be.

A conclusion contrary to the argument which we put would mean that in the example which we gave in our submissions, to which we have referred, if what happened in this case constitutes use by the registered proprietor they would be infringing under section 120 every time that was done without the consent of the registered owner in Australia and that surely is not the law.  I see, Justice Crennan, you have a puzzled look on your face.

CRENNAN J:   It just seems to me to contravene the basic principle that the trademark is the badge of origin in relation to the registered proprietor.

MR DOUGLAS:   We are not seeking to contradict that, your Honour.  All we are saying is that certain uses do not amount to uses by the registered proprietor.

CRENNAN J:   In your argument, in a sense, you are challenging that proposition.

MR DOUGLAS:   I do not believe I am, your Honour.

CRENNAN J:   You seem to be contending that once you have a use by someone who is neither a registered user nor an authorised – once you have got a dealing, sorry, not a use, because I think there is a distinction between a dealing with goods and a use of the trademark, and you seem to obliterate that distinction in this part of the argument.

MR DOUGLAS:   But a use of the trademark is not just some mere affixation of a mark upon the goods.

CRENNAN J:   No, but it is having it function in the course of trade as a badge of origin of the registered proprietor.  So it does not matter too much if it is in the hands of a distributor at a certain point.  It does not mean it is not being used at that point by the registered proprietor.  That is the gravamen of what I am putting.

MR DOUGLAS:   But if the Barefoot mark were in the hands of, let us say, Fosters here in Australia, and let us say it was Barefoot – with Barefoot and Gallo’s Barefoot Wine was exported here and there would be no consent from Fosters.  But let us say it is brought here by a third party, if the contrary of what I am putting is correct, then that is an infringement by Gallo which is not caught by section 123.  So that is why, in our respectful submission, for the purposes of determining what is meant by use in Australia under the similar provisions to section 92(4) which are under consideration in Estex, Sir Victor Windeyer and the Full Court was at pains to concern themselves with, well, what degree of control was the registered owner exercising in respect of the goods. 

They satisfied themselves that pursuant to the contracts – leave subjective intentions out of this – the goods were destined for Australia and were sold in Australia.  Now, all of that was perhaps not necessary, you may not need to have had the sale, and something less than that will sometimes suffice like advertising in Australia, but at least you know that the registered proprietor, to use the language of the judgment but not the language of the section, the registered proprietor has projected the goods into that country so that the registered proprietor can then be said to have used the goods so that if a question of infringement arises, yes, it is use by the registered proprietor but if they have been released into the course of trade elsewhere, and the trademarks are held in different hands worldwide, then a subsequent re-exportation of those goods to Australia, infringing the then registered mark of the then registered proprietor is not something for which the registered owner or registered proprietor is liable.

That is the way Estex works and it is logical and the illogicality in all of this, in our respectful submission, now is the somewhat benign view which courts – not this Court – but courts, both federal and State, took of the concept of parallel importing based upon the Champagne Case.  We would say that it was wrong to adopt the approach in those cases to say that when you have a foreign registered mark being used in this country which is infringing the mark held by someone else, that that does not amount to use in Australia.  It does, but you have the defence under section 123.  So far as we do not have world marks yet and maybe one day all of these marks will end up on one hand, but, in our respectful submission, that is the way to put it.

Now, moving on from that we have, in our written submissions, sought to set out the contentions upon which we rely if we be wrong in relation to the question of use.  So far as the exercise of quality control is concerned volume 2 is the ‑ ‑ ‑

HEYDON J:   Here we are talking about quality control in relation to the conduct of Barefoot Cellars?

MR DOUGLAS:   Yes, your Honour.

HEYDON J:   As distinct from what you have been talking about, which is quality control in relation to the activities of German exporters into Australia?

MR DOUGLAS:   Yes.  Your Honour, the evidence in relation to that is collected at paragraphs 54 and following.  Actually, before I do that, could I hand up an amended notice of contention which has been circulated and I think it is just a question of formality?  The original is on top.

FRENCH CJ:   This is what is at the back of your submissions, I think, is it?

MR DOUGLAS:   Yes, your Honour.  Commencing from paragraph 54 ‑ ‑ ‑

GUMMOW J:   Has this been filed?  Are you seeking leave to file this?  What are you doing?

MR DOUGLAS:   I am seeking leave to file that.

FRENCH CJ:   Is there any objection to that, Mr Jackman?

MR JACKMAN:   No, your Honour.

FRENCH CJ:   Yes, all right, you have that leave.

MR DOUGLAS:   Thank you, your Honour.  What my learned friend relies upon, as we would understand it, as constituting the finding by Justice Flick that quality control was exercised by Mr Houlihan, is to be found in paragraph 154 of Justice Flick’s judgment. 

All that does, that paragraph, the quality control relied upon by Gallo Winery, was the control originally exercised by Mr Houlihan when he owned Barefoot Cellars and later his retention as a consultant, his responsibilities including the monitoring of the quality of the wine.  That just recounts a submission or a contention we have put forward.  Justice Flick then goes on to say:

Section 8(3), contends Gallo Winery, is to be contrasted with s 8(4) and is to be given a more expansive operation.  The latter sub‑section contemplates circumstances where the “owner of the trade mark exercises financial control over” the “trading activities” of the person who deals with or provides the goods in relation to which the mark is used. That degree of control, it is said, emphasises the more expansive terms of s 8(3) where involvement in the trading activities is not required, but rather the more broadly expressed requirement that there be an exercise of quality control over goods.

It matters not, contends Gallo Winery, that Beach Avenue Wholesalers had no idea that such control had been exercised, because of the expansive terms of s 8(3). This provision, it was said, was to be contrasted with s 8(4) which is directed to control over the wholesaler – as opposed to control over the goods, as required by s 8(3).

Even though s 8(3) may be given a more expansive operation than s 8(4), it nevertheless remains necessary to satisfy the requirements of that sub‑section that the owner of the trade mark continues to “exercise quality control”.  The provision is not expressed in terms of an owner having at some time in the past “exercised quality control”; the provision is expressed in the present tense of an owner who “exercises quality control”.

At no time during the period 2004‑2007, or for that matter at any point of time after the wine was shipped from California to Germany in 2001, did Mr Houlihan exercise any quality control over the wines exported.

So his Honour has taken a temporal view of the matter and said, well, the quality control was exercised, if at all, before the exportation of the goods in 2001 and that is not quality control to which the Act relates.  We do not find that reasoning entirely satisfactory but it does reflect, in our respectful submission, a problem which my learned friends have which is this, that there are only two sales which took place before completion in January 2005.  That is sales by Beach Avenue Wholesalers.  So what they seek to do in relation to those sales is to say there was an exercise of quality control by Mr Houlihan up to the point of exportation and then we can rely upon the subsequent retail sale of those goods by Beach Avenue Wholesalers.

In relation to the later sales they would put it, as we would understand it, that whilst that happened at a time under Gallo’s stewardship, nonetheless, a bit like a springing use, those later sales come forward to constitute use so that if Mr Houlihan relevantly exercised control they can be taken into account for the purposes of use.  That is a difficult question on which we have no ready answers but we submit that at least the subsequent uses do not amount to any relevant use which Gallo can rely upon and we have also taken a point in our written submissions that they do not plead use by Gallo as distinct from use by Houlihan.

Now, so far as that is concerned, let us in any event work out precisely what Mr Houlihan did because, in our respectful submission, Justice Flick made no finding in relation to it and the Full Court found it unnecessary to deal with that point.  That is in their judgment at paragraph 61 where they say:

It is unnecessary in this appeal to consider the effect of s 100 in the face of a finding correctly made that there had not been use of the registered mark in Australia, or because of Lion Nathan’s allegation of non‑use, to consider what precisely Gallo would have had to establish in opposition to the revocation application having regard to s 100(3).  Also, given this conclusion, it is unnecessary to deal with the question of use in good faith raised by Lion Nathan as a ground of removal: s 92(4)(b)(ii) and also two issues raised by Lion Nathan in its amended notice of contention, namely that any use was by Gape Links Inc which was not an authorised user and the trade mark used was not the registered mark BAREFOOT but rather was that word in conjunction with an image of a bare foot.  We should, however, note that our conclusion that there was no use of the mark in Australia, necessarily means there was no use in good faith.

Firstly, my learned friend has taken you to the entry in relation to the licence agreement.  That is appeal book, volume 8.

HEYDON J:   He took us to volume 2.  Does it matter which volume we go to?

MR DOUGLAS:   Page 1782.  That is:

The Company has the right to use the Barefoot trademark pursuant to the License Agreement (Wine) and License Agreement (Clothing) between Michael C. Houlihan and the Company dated November 20, 1995.

He also took you to, relevantly, clause 2.24 on page 1724 and to representations and warranties clause in 6.1.1.  If you go to volume 2, you will find Mr Kalabokes’ first affidavit at page 119.  He refers in paragraph 12 to the acquisition and at the foot of paragraph 12 says:

The business was carried on by Grape Links, Inc –

the principles were Mr Houlihan and Bonnie Harvey, who was his partner –

under the trading name “Barefoot Cellars”, by which I refer to it in this affidavit.  Although the business consisted of producing, bottling and marketing wine under the BAREFOOT brand and design (described below), Barefoot Cellars engaged contractors to produce and bottle the wine.  It owned no plant and equipment and its principal assets were the brand, design, associated intellectual property and goodwill.  Barefoot Cellars’ headquarters was located in Santa Rosa, California and it distributed BAREFOOT wine through third party distributors within and outside the United States.

So we gather from that that Barefoot Cellars engaged contractors to produce and bottle the wine.  He then sets out in paragraph 13 what his responsibilities included:

managing the due diligence on the acquisition; assessing the viability of the acquisition . . . negotiating the formal terms . . . liaising with Michael Houlihan and Bonnie Harvey who continued to act as consultants in relation to the business for a period of time following the acquisition; and coordinating a team of Gallo Winery executives responsible for the integration of different aspects of Barefoot Cellar’s business with Gallo Winery’s.

He then gave evidence in paragraphs 18 and 19 in relation to sales prior to Gallo Winery’s acquisition and at paragraph 26 there is an interesting passage of evidence which is relevant, in our respectful submission, to my learned friend’s submission.  One of the problems which arose in the case was that there was a Mr Logan who had a registration in respect of a bare foot and Gallo was reluctant to market their wine in Australia for so long as Mr Logan had this registration and they ultimately came to a resolution of the situation by paying him a substantial sum of money for it.

GUMMOW J:   Where do we see that?

MR DOUGLAS:   You will see it in paragraph 26, your Honour.  He says:

The major trade mark issue concerned a bare foot design used and registered by Logan Wines Pty Ltd (“Logan”) (a company registered in New South Wales, Australia) in a number of countries around the world, including the European Union, Mexico, Australia and New Zealand.  Now shown to me and attached as Exhibit CK10 to this Affidavit are true and correct copies of Logan’s Australian and European Community trade mark registrations for that design.  The design was remarkably similar to the BAREFOOT design which Gallo Winery had acquired from Barefoot Cellars.  Barefoot Cellars and Logan had been contesting their respective rights in these designs for several years prior to Gallo Winery’s acquisition of Barefoot Cellars.  Logan had successfully opposed Barefoot Cellars’ application to register its bare foot design as a trade mark in New Zealand and had warned Barefoot Cellars not to use the design in Australia.

Then in paragraph 30 and 31, it says:

Gallo Winery commenced negotiations with Logan in January 2005.

FRENCH CJ:   They were concluded, I think that is referred to in 33, is it not?

MR DOUGLAS:   Yes.  I do not want to outstay my welcome, but it is really paragraphs 30, 31, 32, and his ultimate belief at the foot of that paragraph is:

I believed that negotiation was the only way Gallo Winery could resolve these trade mark issues with Logan and the use of the bare foot design in those jurisdictions without infringing Logan’s rights.

What we seek to get out that is this:  if my learned friend be right, this was used by – when Beach Avenue Wholesalers imported wine into Australia, that was used by a registered proprietor which would infringe Logan’s trademarks.

HEYDON J:   Are we on the appeal or the first ground of the notice of contention at the moment?  I thought we had stopped the appeal and we were looking at the first ground of the notice of contention.

MR DOUGLAS:   Yes, we did, your Honour, I got distracted.  I got distracted because I was on this affidavit and I considered that these paragraphs had some forensic value and so I thought I possibly had better draw them to the Court’s attention.

GUMMOW J:   Can you just go back to paragraph 26 on page 10.

MR DOUGLAS:   26, yes, your Honour.

GUMMOW J:   It refers to Exhibit CK10 which gives details of the Logan registrations.  We do not have it, do we, CK10?

MR DOUGLAS:   We have asked for the exhibits to be brought to the Court and I will make some inquiries, your Honour.

GUMMOW J:   I do not know why it was not produced, but anyhow, we need it.  If we are to evaluate all this we need to know what the Logan marks were.

CRENNAN J:   The position now, as I take it from 33, is that Gallo is the registered proprietor of what were formally the Logan marks in Australia.

MR DOUGLAS:   Yes, it is, your Honour.

CRENNAN J:   It sounds like it is a Barefoot design without a word.

GUMMOW J:   Yes.

MR DOUGLAS:   I am sorry, your Honour.

CRENNAN J:   It sounds like it is a trademark constructing of a Barefoot design without the word “Barefoot”.

MR DOUGLAS:   Yes.  If your Honour goes to volume 10 at page 2296 ‑ ‑ ‑

GUMMOW J:   We do not seem to have exhibit CK 16 either, do we?

CRENNAN J:   What page in volume 10?

MR DOUGLAS:   It is Justice Flick’s judgment, page 2296.

CRENNAN J:   Yes, thank you.

MR DOUGLAS:   As your Honour can see it is very similar to the Barefoot representation in the Barefoot Cellars mark.

HEYDON J:   If Gallo’s use in Australia were a use contrary to many of your arguments it would not cease to be a use because it was infringing Mr Logan’s trademark, would it?

MR DOUGLAS:   It would not cease to be a use.  No, it would still be a use.  It would be an infringing use.

HEYDON J:   What is the rhetorical point - to show that he and J Gallo Winery are commercial thieves?

MR DOUGLAS:   Effectively what they are trying to do in this Court, your Honour, is to rely upon what they considered at the time to be an infringing use in order to establish that they in fact use the trademark in Australia to avoid proceedings under section – the result which is then achieved in relation to the proceedings under section 92(4).

GUMMOW J:   Before we adjourn for lunch, Mr Douglas, you can take it on board that there is some unhappiness at the moment at the absence of exhibit CK 16 and the other exhibit I referred to – exhibit CK 10.

MR DOUGLAS:   I will seek to cure that in the afternoon, your Honour.

FRENCH CJ:   We will adjourn until 2.15 pm.

AT 12.45 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.16 PM:

FRENCH CJ:   Yes, Mr Douglas.

MR DOUGLAS:   In answer to what Justice Gummow was asking me about before lunch we have made some inquiries of the Registry and I understand that copies of exhibits CK14 and CK15 are being obtained.  We have also obtained ‑ ‑ ‑

GUMMOW J:   We have 10 and 16.

MR DOUGLAS:   And 16, yes.  We have also obtained of a relevant exhibit just one bottle of wine tendered in evidence and we have taken photographs of the bottle and I have given a copy to Mr Jackman.  So this is not an exhibit.  It is an aide‑mêmoire to what was actually in evidence.  So you will see that you have the Barefoot whites in ‑ ‑ ‑

GUMMOW J:   The back of the bottle is at the front of the bottle.

MR DOUGLAS:   But the next page is the front of the bottle.  I thought I would go to the second page first, framed by the bare foot and then the label on the back you will notice that it was vinted and bottled by Barefoot Cellars, Sonoma County, California and then imported by Dr Zenzen, GmbH, Mainz Germany.  So the back label, in relation to the importation of the goods into Germany, remained on the goods even though they were brought into commerce in Australia.

Now, at the luncheon adjournment I had taken the Court to the affidavit of Mr Kalabokes at page 130 to 131 and I had not taken the Court to paragraph 37 on page 132 where Mr Kalabokes says:

Although it required resolution of the Logan trade mark issues, I also believed that it was important that BAREFOOT wine be marketed in Australia using the bare foot design as well as the BAREFOOT brand.  There were a number of reasons for this.  First, from the documents I reviewed during the pre-acquisition due diligence, it was apparent that Barefoot Cellars had always used the BAREFOOT brand in conjunction with the bare foot design and, in fact, had made the design a focal point of its marketing and promotional materials.  Secondly, I was aware that Gallo Winery’s own market research on the BAREFOOT brand emphasised the importance of the bare foot design to its effectiveness. 

Lastly, paragraph 49 on page 136, it shows that what really prompted them to overcome their difficulties in relation to the Logan trademark was the fact that we had made an application for the removal of their trademark from the register.  He also swore a second affidavit, which is to be found in the same volume.  That is at page 280.  You will see in paragraph 5 he refers to the fact that it purchased wine, that is:

Barefoot Cellars purchased wine from various suppliers in Northern California. 

He attaches as exhibit CK28, which are to be found at pages 283 and following, the relevant wine supply contracts for the acquisition of wine.  They are all contracts dating from 2004 and you will see that they are all signed by the winemaker whose name was Jennifer Wall.  They go through to page 290.

Then at CK 29 there was Barefoot Cellars winemaking specifications and parameters.  That commences at page 293.  I am sorry, I meant to go to exhibit 29.  It commences at page 294.  You will see that that is a wine production services agreement and it is between Grape Links, Inc, the Californian corporation that has traded under the name Barefoot Cellars, and the Sonoma Wine Company.  If one looks at the definitions and the other provisions of that agreement, including its annexures, you will see that it was effectively SWC who carried out the services which could broadly be described as winemaking and quality control of wine on behalf of Grape Links.  There is a reference in the annexures to a person described as the SWC winemaker liaison.  That is at page 316, the fifth bullet point.  It says:

The SWC winemaker liaison assigned to GLI, as the “consulting winemaker” will be responsible for tasting each final bottling blend, prior to bottling, to ensure each blend is at its best possible state.

. . . 

The “consulting winemaker” will be one of the GLI key contacts at SWC. 

The other KEY CONTACT is the Client Services Manager.  This person is responsible for coordinating efforts between departments at SWC.  This person is responsible for client contract compliance and will be in charge of all operations at SWC being performed for GLI.

We would say the obvious inference from all of that is that Jennifer Wall is what is described as the SWC winemaker.  At page 146 of volume 2 in the third paragraph is a reference to:

Jennifer Wall, Barefoot Winemaker, was hired in September of 1995.

We would say that the obvious inference to draw is that she was the person described as the SWC winemaker in that document, particularly when you have regard to the fact that she signed for wine supply contracts and so on – I am sorry, the GLI winemaker.  The high point of my learned friend’s case is the consulting agreement which was entered into in November 22, 2004 which he took you to in‑chief and which commences at page 332 and in particular subparagraph (e) at page 336.  So there were no contemporaneous quality control documents tendered in evidence, bearing in mind that the wine was produced in 2001.  So all we have is what is said in subparagraph (e) to the effect that:

As officers and shareholders of GLI, the Consultants –

and that is a term that refers to both Ms Harvey and Mr Houlihan –

established, maintained and are very familiar with the quality standards in effect over the past several years at GLI with respect to production, winemaking, bottling, packaging and distribution of GLI’s wine products and with respect to all other aspects of GLI’s operations.

Firstly, that does not say that they had exercised quality control or that they exercised control in 2001 or prior thereto.  Secondly, it is an agreement which was entered into in 2004 for the purposes of the sale between Barefoot Cellars and Lion Nathan. 

There is no other evidence, in our respectful submission, which establishes that Mr Houlihan solely exercised quality control in respect of the wine in 2001 and there is certainly no evidence that he exercised quality control during the period after 2001 up until 2004 to 2007, when the wine was sold, or exercised any control whatsoever in respect of the wine.

Now, my learned friends, in our respectful submission, bore the onus of proof under section 100(3).  We have set out, in our written submissions, from paragraph 54 through to paragraph 66 the detailed reasons why we say that it was not established in this case that Mr Houlihan exercised quality control in respect of the wines, the subject of the export to Germany by Barefoot Cellars.

HEYDON J:   Do you accept that that fact which is stated in subparagraph (e), whether it be good enough or not, that fact is adequately evidenced by what is there said?

MR DOUGLAS:   That it goes in as evidence of the fact?

HEYDON J:   Yes, do you agree with that?

MR DOUGLAS:   The matter did not arise until final address.  I accept that the rules of evidence are such that once a matter goes in it goes in for all purposes.  That is the general principle, but ‑ ‑ ‑

HEYDON J:   Section 60 of the Evidence Act would make it in for the purpose desired.

MR DOUGLAS:   Yes.  I mean, some of the cases – and I could develop a submission if required – lay emphasis upon the purpose for which a tender was made and one would not have thought, necessarily, that one would be proving the exercise of good quality control in 2001 by the tender of a consultancy agreement which is part and parcel of the documents which affected an assignment in 2004 so that one would necessarily have to make objection during the trial.

But if the Court were to be against us on that and were to say well, objection had to be taken and if objection was not taken it goes in for all purposes, in our respectful submission, the evidence has very little weight and does not discharge the onus which section 100(3) requires to be discharged.  It was relevant in this case to prove the transaction, that is, the assignment of the marks, to Gallo.  It is not, for example, a six‑monthly management report or something like that which you would expect to be evidence of the fact. 

We say, in our submission, that it is not a representation.  It is to be found in a part of a consultancy agreement which is entitled, if you look at page 335, “CONSULTANTS’ REPRESENTATIONS, WARRANTIES AND COVENANTS”.  So, the first of those is a covenant, no infringement.  The second of those is a warranty and a representation that they have got authority to enter into the agreement.  The third of those is that there is no conflicting grant and the fourth of those is an indemnity.  When you look at (e), whilst the first part of it appears to seek to set out some facts which it seems as though they are really being set out for the purposes of fulfilling the covenant which is granted further down that paragraph where it says:

In said capacity, the Consultants shall regularly test GLI’s products, and shall supervise and implement all steps reasonably required –

So, in other words, those facts are set out there largely to give weight or substance to the covenant which was given as to the future.  We would say it is not, if I could put it that way, a business record of the fact that that did occur, but rather that they were prepared to represent that that occurred for the purposes of that covenant, and it should not be received in any other sense.

GUMMOW J:   That is a recital.

MR DOUGLAS:   I think it is more than a recital, your Honour.  I may have put it too highly when I said that, but it ‑ ‑ ‑

FRENCH CJ:   It might always read as a warranty of experience.

MR DOUGLAS:   It does, yes, that is effectively how it reads and, as we all know, people are prepared to say anything to get the benefit of an agreement.

HEYDON J:   That is a black reflection on human nature.

MR DOUGLAS:   It is a very sorry state of affairs, I am afraid.  But one would imagine that there were business records in existence.  One would imagine if the licence agreement in fact gave them some measure of control, they would have put it in evidence.  If Mr Houlihan had in fact exercised quality control rather than the winemaker, one would expect there would have been evidence of that fact, which could have been brought to bear.  It is not a case on which insufficient or inadequate resources have been brought to bear on either side, I would imagine.  I think we have probably put our case in relation to the reception of that evidence in the paragraphs which I have taken your Honours to.

CRENNAN J:   There is a reference at the top of the third line at 336, still on the quality monitoring of GLI products.  Inasmuch as it is a warranty in relation to quality it does state that the consultants are very familiar with the quality standards in effect over the past several years of GLI with respect ‑ ‑ ‑

MR DOUGLAS:   That is ‑ ‑ ‑

CRENNAN J:   I know it is 2004, but it is going back to past several years with respect to production of winemaking.

MR DOUGLAS:   But it is important, your Honour, is it not, that they use the words “established, maintained and are very familiar with the quality standards” but what you have to do is you have to exercise quality control?  Now, whether establishing and maintaining quality standards when you do not in fact exercise them, or is the establishment of them a sufficient exercise for the purposes of control that ‑ ‑ ‑

CRENNAN J:   I suppose, what does “maintain” mean is another query.

MR DOUGLAS:   Yes, it is very loose language if they were seeking to get the benefit of the section.  The other thing is, of course, it is the consultants, so it is both of them.  That arises in part because Ms Harvey and Mr Houlihan were both entitled to some of the registrations in the United States, as the evidence bears out, but only Mr ‑ ‑ ‑

CRENNAN J:   They were co‑proprietors there, were they?

MR DOUGLAS:   Yes, but only Mr Houlihan was the proprietor here.

CRENNAN J:   In Australia.

MR DOUGLAS:   Taken at face value you would not know which one of them actually exercised quality control.

HEYDON J:   Both.

MR DOUGLAS:   It is capable of explanation but my learned friend did not choose to explain it.

HEYDON J:   Just one other point, this is a promise to the future, to monitor the quality of goods and services produced.

MR DOUGLAS:   Yes.

HEYDON J:   Is it not implicit in (e) the idea that that was what they did in the past, and therefore their promise to the future can mean ‑ ‑ ‑

MR DOUGLAS:   No, your Honour.

GUMMOW J:   Yes.  The first sentence of (e) is a recital and it is upon the basis of the recital that they there hereby undertake.

MR DOUGLAS:   The recital is that they have “established, maintained and are very familiar with”.

HEYDON J:   We have done it.

GUMMOW J:   If one was drawing this in an Australian legal office, in times when things were done properly, it would have been a recital and then this would have followed.  We are in California, are we not?

MR DOUGLAS:   Even if you do get to the stage of exercising quality control, then the question is ‑ ‑ ‑

GUMMOW J:   The fact that it is a recital gives added force to what Justice Heydon is putting to you about section 60 of the Evidence Act.

MR DOUGLAS:   As between those parties it would be binding, your Honour, but whether it would be on third parties is another matter.

HEYDON J:   It is not a question of it being binding, it is just a question of whether it is a piece of evidence.

MR DOUGLAS:   It is capable of being a piece of evidence.  The question is whether, when you tender a transactional document in proceedings of this nature, a third party to the agreement has to be alert to the fact that it may possibly in final address be relied upon as evidence of the fact as against the third party, in other words, do they need to take the objection at that point of time?  It was certainly, I think, objected to in final address when reliance was sought to be put on it.

HEYDON J:   Justice Flick does not seem to have dealt with this particular piece of evidence.

MR DOUGLAS:   He did not find it ‑ ‑ ‑

HEYDON J:   You read out a passage ‑ ‑ ‑

MR DOUGLAS:   He seems to have taken a view that past quality control was not relevant.  Now, there is something in that.  I am not quite sure that we would put it the same way as Justice Flick put it, but that expression in subsection (2) of section 8, “to the extent that”.  So if one assumes the exercise or quality control, let us say up to the point of exportation to Germany, is anything which happens thereafter an authorised use?  No, we would say, because section 8(2) says that Mr Houlihan has to continue to exercise control over, and necessarily, once the goods have been sold and dispatched to Germany, that is the end of it.  So, whilst we would not adopt the same temporal break up which Justice Flick adopted in those paragraphs at 154 and following that I took the Court to, there is, in our respectful submission, a basis for saying that there is no use in Australia relevantly. 

HEYDON J:   This ground of the notice of contention does not speak of the use in Australia.

MR DOUGLAS:   Yes.

HEYDON J:   It is a limited period.  It says:

The Full Court should have held that neither the appellant nor its predecessor in title used Australian Registered Trade Mark . . . because Grape Links, Inc, trading as Barefoot Cellars, was not relevantly, or was not relevantly shown to be, an authorised user of the Appellant’s Mark, and/or any use of the Appellant’s Mark by Grape Links, Inc, trading as Barefoot Cellars, was not authorised use.

That is all pre-Germany really.  Certainly, simply immaterial to questions of what happened in Australia.

MR DOUGLAS:   But we do say that it must be shown that it was authorised use in Australia.

HEYDON J:   Well, your ground is too narrow then.

MR DOUGLAS:   Well, if we need leave, we would seek to amend it to deal with that, because it arises on our defence of the judgments down below, in our respectful submission, because the upshot of the judgments down below was that there was no use in Australia and we say that when you look at the provisions of section 8(2), if there was authorised use here, it was not shown to be authorised use in Australia.

HEYDON J:   Justice Flick seems, in paragraph 154 on page 229 of volume 10, on your submission - and I can see the force in it - to be recording a submission that the relevant control is that exercised by Mr Houlihan while he was owner of Barefoot Cellars and while he was a consultant.  He does not seem to be dealing with any wider argument of the type which was mentioned.

MR DOUGLAS:   The wider argument was raised, your Honour.  If I need to get the references to that I will take your Honour to them.  Having regard to the amended notice of contention which we handed up, it says:

The Full Court should have held that neither the appellant nor its predecessor in title used Australian Registered Trade Mark . . . in Australia during the period . . . because ‑

If there was any ambiguity in that notice of contention we would seek to make it clear that what we say is that where use by a person other than the trademark owner, such as Barefoot Cellars, is relied upon you must pay attention to the statutory concept of “authorised use” and that “authorised use” is defined by section 8(2) and correlates the use to the existence of control by the trademark owner and it is only authorised use to the extent that it is use under the control of the trademark owner and that when authorised use is relied upon to establish use by the trademark owner for the purposes of section 92(4)(b) it must be shown that the authorised use was itself use in Australia.

HEYDON J:   How can the trademark owner control trademark use once the goods have been sold?

MR DOUGLAS:   You could put a stipulation in the contract which said that they could not be – or seek to – sold in particular places.

HEYDON J:   How do you control it past, say, the German buyer?

MR DOUGLAS:   You may not wish to, your Honour.

HEYDON J:   Would you have some sort of chain ‑ ‑ ‑

MR DOUGLAS:   You may not wish to be liable for trademark infringement.  It may be, for example, that the licence agreement in this place – and the reason why it was not tendered was because it made it entirely clear that there was in fact no control.  If in fact there was a stipulation for control it may make them the trademark user in Australia for the purposes of Australian law, thereby making them liable for infringement.

So rather than it being a question of corporate policy whereby they say “We are not prepared to trade our goods until we have dealt with Logan”, they would be bound by the acts of third parties who had acquired their goods which, hypothetically at least, pursuant to the licence agreement they were capable of controlling but in reality had no control over at all.

That is why, in our respectful submission, decisions up to this point of time have made it abundantly clear that use by a trademark owner involves some connection between the territory to which the goods are to be sent and their relevant use.  Otherwise the trademark owner – and I am only repeating myself – is subject to the whims of persons who have bought their product in the past.

Even if the Court were to be satisfied, relying upon subparagraph (e) of the consultancy agreement, that that was some evidence as to what happened in the past.  In our respectful submission, when one looks at the provisions of section 8(2), none of the evidence establishes, when you read section 8(2) in conjunction with section 92(4)(b), that whatever use there was in Australia was use under the control of the trademark owner.  Also, Gallo relies upon the alleged use.  I know I have gone back into the use area and I apologise, your Honour, for doing that, but I have been distracted by the questioning from the Bench and by some thoughts which I have had in relation to it.  But Gallo relies upon an alleged use in the combination of the fact that Barefoot Cellars applied the mark and putting the goods into the course of trade by exporting them and, secondly, the fact that the goods later came to be sold in Australia.

Now, the mere fact of use of a mark in Australia does not prove use in Australia by the registered owner and the mere fact that an overseas registered owner affixed the trademark overseas and exported the goods does not establish use in Australia.  So the fact that one can identify both sets of circumstances and then combine them together does not mean that they are connected to each other in any relevant sense sufficient to establish trademark use by the registered owner.  There must be that connection between the act of a registered owner and the use in Australia in order to establish that the registered owner used the trademark in Australia within the meaning of section 92(4)(b).

GUMMOW J:   Looking at section 8 for a minute, authorised user, it employs the word “use” several times without geographical attachment.  Do you say anything about that, the absence of geographical attachment?  It is only a definition after all is said and done.

MR DOUGLAS:   Yes, well, I think one has to then go back to section 92(4) where there is the geographical attachment, your Honour, “     has not used the trade mark in Australia”, so that is where the geographical attachment is to be found.  And, of course, the definition in section 8 is relevant to a number of other provisions of the Act, apart from section 92, and so, therefore, it is perhaps not surprising that one does not find the geographical attachment in section 8.

Returning then to the first ground of contention, we say that this statement that Mr Houlihan and Ms Harvey “established, maintained and are very familiar with quality standards” is not evidence that they in fact exercised quality control as at February 2001.  There is evidence that Barefoot Cellars engaged contractors to produce and bottle the wine and its assets were “brand, design and goodwill” which I have taken the Court to at appeal book volume 2, 122.

There was the contract with Sonoma Wine Company for wine production and the obligations of SWC were owed to Barefoot Cellars, not to Mr Houlihan or Ms Harvey.  The winemaking specifications and parameters was written on the letterhead of Ms Wall and that is to be found at AB 2, 319 to 323 and only employees of Barefoot Cellars with any role in quality control.  There is the GLI winemaker and the GLI materials and production planner, neither of whom are identified by name.  There is some evidence that Jennifer Wall was a Barefoot winemaker from 1995.  I will not take the Court to it but it is at appeal book 2, page 146 and the wine supply contracts are all signed by Ms Wall and correspondence is addressed to her.  That is at appeal book 2, pages 281 and 284 to 292.

Could I say possibly in answer to a question which Justice Heydon asked me in relation to those words in subparagraph (e) of the consulting agreement, of course you have all of that other evidence as to what in fact occurred.  There is not much, but such evidence as there is as to what in fact occurred would suggest that it was not Mr Houlihan but Ms Wall who was exercising quality control in relation to its wine.

I would then wish to move on to our second notice of contention ground and that is the question of “use in good faith”.  Gallo relies upon an alleged use in Australia by Barefoot Cellars applying the mark in the United States of America and putting the goods into the course of trade by exporting them to Germany, combined with the fact that the goods ultimately came to be sold in Australia.  Now, “use in good faith” in the context of section 92(4)(b) means substantial and genuine commercial use to be ascertained objectively, having regard to the circumstances of use.

GUMMOW J:   Where does this word “substantial” come from?

MR DOUGLAS:   Your Honour’s judgment in Murray Goulburn, your Honour.  I stand to be corrected.

GUMMOW J:   This was reversed in the High Court, was it not?

MR DOUGLAS:   Not on this issue, your Honour.  The High Court dealt with the question arising under section 28(a) and 28(d) of the old Act.  It did not deal with this point.

HEYDON J:   What is the volume, Mr Douglas?

MR DOUGLAS:   It is to be found in the Intellectual Property Reports is the report I have, in 19 – it is in ‑ ‑ ‑

CRENNAN J:   1989, volume 14.

MR DOUGLAS:   Yes, volume 14 of the Intellectual Property Reports.  The relevant passage is at page 45.

GUMMOW J:   The expungement application failed, did it not, I thought?  It was Mr Justice Falconer in Concord, I think, 1987. 

MR DOUGLAS:   Yes.  So it is a passage in Concord.  Justice Falconer held that:

To be bona fide within the meaning of –

the equivalent provision in the British legislation –

use should be substantial and genuine, judged by ordinary commercial standards.  These standards have to be considered in relation to the trade concerned.

On the facts of that case, which involved a trademark for cigarettes, his Lordship concluded that the effort that had been made:

was intended to be only a temporary operation –

and the registered proprietor had –

not embarked upon in a genuine attempt to establish a course of –

trade under the trademark.  A comparable situation was found to exist by the Assistant Registrar in S Smith & Son Pty Ltd v Brown.  The evidence in the present case discloses, as I have indicated, quite a different course of conduct in the relevant period by the first respondent.  Your Honour then went on to deal with the evidence in that case.

GUMMOW J:   I think counsel much relied on Concord as the high‑water mark, but the facts did not reach that criterion. 

MR DOUGLAS:   Your Honour, that is that case.  In this case what you have is a situation where a trademark was registered some time ago, back in the 90s, they have never actually used the mark in Australia apart from the relevant use which is relied upon.

CRENNAN J:   It was a kind of orthodoxy that some use, as long as it was genuine, even a small amount of use, would be sufficient to defeat an application to remove.

MR DOUGLAS:   That is if the question is whether there was use, your Honour, but not on the question of whether the use was bona fide.  That really seems to be the point on which Justice Drummond’s ‑ ‑ ‑

CRENNAN J:   Yes, I see the distinction.

MR DOUGLAS:   In Woolly Bull which was – I will perhaps go to Justice Flick’s determination of this issue. 

GUMMOW J:   Is it here that bona fide contrasts with the situation where there is a token use effected simply in an effort to keep the trademark registration alive?

MR DOUGLAS:   They did not even do that here, your Honour.

GUMMOW J:   No.  They were not directing their minds to “Let’s put a few goods out there to keep it alive”.  That might not have been a bona fide use.  This is just in the ordinary course of trade, not a great deal of trade.  You have to fix on amount – forget about the authorities and think about the commonsense of it.  You have to say there is a certain quantity of trade, do you?

MR DOUGLAS:   I do not think even a quantity of trade would be a necessary ingredient of a test, your Honour.  What you have to have is, in our respectful submission, a genuine and bona fide marketing campaign targeting the market in Australia to use the market you have registered.  The policy which underlines this particular part of the law, in our respectful submission, is a policy which is intended to prevent people from registering marks which they do not intend to use and do not use. 

CRENNAN J:   But you do not have to have a marketing campaign to have genuine use.

MR DOUGLAS:   Well, you would have to exploit demand.

CRENNAN J:   You would have sales office to sell.

MR DOUGLAS:   Sales would be enough, yes, but that is targeted sales, in our ‑ ‑ ‑

GUMMOW J:   What do you mean by “targeted”?

MR DOUGLAS:   I meant targeted in the sense that you intend – you the registered proprietor intend to exploit that particular market.

CRENNAN J:   Sell in the course of trade.

MR DOUGLAS:   So in other words, there is an element of intention which does come into it when you are talking about bona fides.

FRENCH CJ:   It is a lot of content for good faith.  I mean, you end up with rather vague qualitative measures.  There is a lot to be said, is there not, for saying that that is good faith which is not colourable or in bad faith or, as Justice Gummow suggested another way of putting it, a transaction undertaken in order to keep the use or to fend off a challenge. 

GUMMOW J:   Are there not cases where that has happened?

MR DOUGLAS:   There are undoubtedly cases where that has happened.

GUMMOW J:   And it has been held that that was not bona fide use?

MR DOUGLAS:   Yes, your Honour.  There have not been many decisions in Australia on the matter.  But, so far as Justice Flick was concerned, if I can just go to that ‑ ‑ ‑

GUMMOW J:   That is why I think Justice Falconer’s decision is regarded as somewhat out of line of what had been the previous understanding in England.  That is why I think counsel in the Dairy Case fell upon it with some excitement.

MR DOUGLAS:   At page 2303, Justice Flick says at 189 and 190:

A single use during the non‑use period, it should be accepted, is sufficient:  Woolly Bull Enterprises Pty Ltd v Reynolds  . . . –

And “good faith” means a real as opposed to a token use in a commercial sense.  It requires a “substantial and genuine” use –

and then your Honour is referred to.  Now, so far as Woolly Bull is concerned, could I take the Court to that. It is in (2001) 107 FCR 166 and the relevant passage is really to be found at paragraph 15 through to paragraph 17. The last sentence in paragraph 17 is:

A single bona fide use of the mark in the relevant period is sufficient to answer an application for removal under both provisions.

But, of course, that conclusion is somewhat question begging, but it is a conclusion which Justice Flick relied upon because it incorporates the word “bona fide”.  So if, in fact, the sale is not bona fide, that wording is not of any real assistance.  Now, I accept for the purposes of use ‑ ‑ ‑

CRENNAN J:   It just shows that substantial could be very distracting in this context.

MR DOUGLAS:   Yes, but when you have a trade mark proprietor that has effectively done nothing to exploit its Australian market up until 2007 and is relying upon a round of incursion into this jurisdiction of about 100 bottles of wine and about 15 of which were sold before Gallo became the trade mark proprietor in 2005, one can see, in our respectful submission, that that is not a use which could in any way be described as a bona fide use unless you adopt the definition which Justice Gummow has proffered to me, unhelpfully, of a colourable use.

In our respectful submission, the concept of bona fide goes beyond the use of it in that way.  We have collected a few of the references to United Kingdom, European Union, Singaporean and New Zealand decisions in footnotes 56 and 57 which would, in our respectful submission, suggest that at least in other jurisdictions the concept of a merely colourable sale as distinct from substantial is not the interpretation which is favoured by other jurisdictions.

GUMMOW J:   That tobacco case is important, I think, from memory, Imperial Group [1982] FSR 72.

MR DOUGLAS:   I think we have a copy of that.  I am not sure if the Court has.  I am not sure that we notified to the Court that we would be relying upon that.

FRENCH CJ:   Yes, we have it.

GUMMOW J:   We have it, yes.

MR DOUGLAS:   You have it.

GUMMOW J:   Yes, that is right, it was a ghost mark.

CRENNAN J:   This is the thing, that colourable has attached to its meaning that there is something deceptive about a use or consciously wrong with a use.  In other words, it is used in contradistinction to bona fide.  In other words, you can have very small use in terms of the quantity of product sold which is not thereby colourable.  It is perfectly capable of being genuine.  You have to look at all the circumstances of the use.

MR DOUGLAS:   But it has to be a course of trade, your Honour.

CRENNAN J:   Yes, it has to be in the course of trade.

MR DOUGLAS:   So if your trade is not really with Australia because you are not exporting your goods to Australia ‑ ‑ ‑

CRENNAN J:   I thought you were concentrating on the 15 bottles in this context.

MR DOUGLAS:   Yes, but I do not think one can entirely divorce oneself from it.  It is not, for example, as if the evidence establishes that Germany was being used as a regional hub from which goods were then re‑exported to other countries.  I am not seeking to suggest to your Honours at all that you cannot have a situation in which Singapore is used as a regional hub for a number of South East Asian countries and that goods are sent from America to Singapore and then re‑exported.  One could establish that course of trade and of course that would then be, relevantly, both use and genuine use.

What I am saying is that so far as the evidence discloses these goods were imported into Germany by one company and they were exported 18 months later by another company.  We do not know what happened to them, but dealing with the specific question before us to say that that is – I may just be driving myself back to subparagraph (a) and not subparagraph (b), but to say that is a “use in good faith” by the registered proprietor because the registered proprietor, on the evidence, really had nothing to do with it.

Could I come back to that Imperial Group Case, your Honour?  If one looks at the other authorities which are referred to they do consider – just using a terminology as encapsulated in the footnotes, “merely spasmodic or temporary and non substantial in amount”, “not been put to genuine use”, “have as its essential aim the preservation or creation of market share for the goods”.  Then there is “a real commercial use on a substantial scale and in that sense genuine”.  Also, what Justice McGarvie said in Settef which is set out in paragraph 72 of our written submissions, where Justice McGarvie considered that it is a sale but not by way of trade “because of the small amount of material involved” and:

only if it is used with a view to facilitating or promoting the operation of a trading channel which in a business sense had already been opened to Australia.  The mark must be used for the purpose of trade …”

Those, I think, are the matters which I can put in relation to the ‑ ‑ ‑

GUMMOW J:   Is there anything in Dr Vaver’s article in the Osgoode Hall Law Journal?

MR DOUGLAS:   I have read it, your Honour, for the purposes of preparing for these proceedings but I did not find anything particularly interesting but I will look at overnight and see if I can ‑ ‑ ‑

GUMMOW J:   The other side of the coin is, of course, that the other trader can go and look up the register.  We are not talking about common law rights here, we are talking about a registered system.  If you are launching a product you might go and have a search.

MR DOUGLAS:   That happened in this case, your Honour.  The evidence was that a search was carried out and we found that there was a registration in relation to wine which Justice Flick refers to.  He accepted our evidence but it did not concern us because this was beer and not wine and we took it from there.  The fact that one can carry out a search, it is one way of finding out what the lie of the land is but this provision has been put there for a purpose and in our respectful submission at least some of the decided cases - and it has not got to a court of this eminence ‑ ‑ ‑

GUMMOW J:   If you make a search and you take a view of the legal significance, the result of the search, you take a risk, I suppose.

MR DOUGLAS:   Yes, your Honour.  Risks are inherent in everything one does.

CRENNAN J:   Someone obviously decided they were not goods of the same description.

MR DOUGLAS:   That is a subject matter which I am coming on to.  There is a third point which we raise in our grounds of contention which is that there is no evidence that the wine remained in the course of trade between the USA and Australia.  Again my learned friend has the onus of proof.  We have a situation in which the wine is bought by one company, brought into Germany, sold by another company.  Now, wine is a commodity.  I know that sometimes those in the wine trade talk about wines which are for drinking and those which are for collecting, but one can both collect and drink wines.  This concept of the ultimate consumer being the person who pops the cork on the bottle is a somewhat remote concept when one is talking about wine as a generality.  Some people buy wine, they cellar it, they may not drink it for 20 or 30 years.

HEYDON J:   This is not true of these wines; two or three euros.

MR DOUGLAS:   I do not know, your Honour.  Some people can be ‑ ‑ ‑

HEYDON J:   I will ask you this question.  Is that wine white or red?

MR DOUGLAS:   White, your Honour, but it is gradually oxidising.

HEYDON J:   It does not look white.

MR DOUGLAS:   I can tell your Honour from just looking at the bottle it would be undrinkable.

HEYDON J:   You say that is for cellaring, do you, collection?  Sale by Sotheby’s against the best wines of Bordeaux.

MR DOUGLAS:   Well, your Honour, all sauternes get that colour as well and they are very drinkable at a very old age.  But leaving that to one side, your Honour, the ‑ ‑ ‑

GUMMOW J:   It is Zinfandel, is it not, which is a particular type of wine from California?

MR DOUGLAS:   Yes, it is a rather fruity forward wine, your Honour.  I have to say that, your Honour.  But having said that, my learned friend is not capable of explaining what happened to that wine, or the evidence does not disclose what happened to it during that period of 18 months.  The fact that it is in different ownership, in our respectful submission, speaks volumes.  Wine can, as distinct one would expect from beer, end up in someone’s hands for a very long period of time before consumption, but, as Justice Heydon says, not this wine.  But there is no evidence as to how the wines came to be obtained from Einig-Zenzen by the different German company which sold them to BAW or what happened in the 16 month gap between when they were imported and when they were exported. 

That then takes me on to the fourth point which is that there was no use of the Barefoot mark as distinct from the word in conjunction with the device of the foot.  I do not need to take the Court back to those paragraphs from the affidavit which I read earlier this afternoon, but you will recall the reluctance that Gallo had to actually market the wine without the bare foot, because they regarded the bare foot as being integral to their brand.  That of itself, in our respectful submission, is a significant matter to take into account in determining whether the use of that brand was for the use of the brand “Barefoot” simpliciter, the word “brand”.

CRENNAN J:   The protection given by the registration would certainly cover that brand, that is to say, the registration of the word simpliciter.

MR DOUGLAS:   But the question is whether the word simpliciter was used.

GUMMOW J:   No, whether it was used, not whether it was used simpliciter.

MR DOUGLAS:   Sorry, your Honour?

GUMMOW J:   The question is whether the mark was used, not whether something else was used with it; that may mark, one of the things that marks registrations are often passing off.  Anyway, it is valuable to have registration.

MR DOUGLAS:   In our respectful submission, the question is, what is being used as a mark, a trademark in this case?  So when one looks at that, the question is, what is being used as the trademark?  Is it simply Barefoot or is it Barefoot with a foot or is it some other qualification of the images on the label?  There is a subsidiary question which is that even if – that is in the Shell Company sense, that is use of a trademark and that the only trademark which was used was the combination of the integers, does that amount to the use of Barefoot in Australia for the purposes of section 92(4)?         We say it does not.  It is similar to the decision of the Full Court in Colorado Group where Justice Allsop rejected a contention by the appellants that they had used the word ‑ ‑ ‑

GUMMOW J:   What is the citation of Colorado?

MR DOUGLAS:   It is 164 FCR 506 at paragraph 110, your Honour. Your Honours will see the mark, I think, at paragraphs 101 and 102. It says in paragraph 110:

Here, though the evidence was less than precise as to what the mark –

GUMMOW J:   What was the issue in the issue, Mr Douglas?

MR DOUGLAS:   It was not a section 94, your Honour.  It was an infringement case and you had a situation in which you had two traders which use the word “Colorado” as their mark.  One had used it on backpacks sold primarily to children and one had used it primarily on bags and travel goods, including backpacks.  So there was as question as to who was the proprietor of the mark “Colorado”, who was first in time.  But the proceedings were commenced in the Federal Court by one trader against the other alleging infringement of the registered trademark “Colorado” and the other respondent filed a cross-claim for revocation based on use made by the respondent of the same word. 

What happened was, if I recall the case, is that the primary judge held that the use by the respondent of the word “Colorado” on handbags, wallets and purses was not an infringement of the trademark and that the first appellant was not entitled to the benefit of the registered trademark for handbags, wallets and purses not being good to the same description.  So it is relevant on that question as well, that there was no passing off the contravention of section 52, but there was an argument that ‑ ‑ ‑

GUMMOW J:   There were depictions of a number of registrations.

MR DOUGLAS:   There are depictions of it at pages 101 and 102.

GUMMOW J:   Depictions where?

MR DOUGLAS:   And also from 94 and following.  So looking at the question of proprietorship ‑ ‑ ‑

GUMMOW J:   Which is the registration?

MR DOUGLAS:   Relevantly, your Honour, I think it is the one of a peak of a mountain in 102.

HEYDON J:   Those are just examples of use.  I mean, did the Full Court ever set out the actual mark, the register mark?

MR DOUGLAS:   It is more a finding we are relying upon analogously, your Honour, rather than looking at the law on the subject.  But it is really paragraph 110, which is important, where Justice Allsop finds and I think other members of the court agreed with him:

That device was part of the trade mark use; it had a capacity to distinguish.  It did not, in my view, operate as a separate mark, nor as a mere descriptor.  It operated as part of a combination with the word “Colorado”, in part reinforcing it.  In these circumstances, I agree with the primary judge’s concluded view that though the word “Colorado” is important in the impression, it cannot be said to have been used alone, rather than as part of a composite mark (with the device) to show origin.

GUMMOW J:   I think Justice Gyles’s judgment is probably worth close attention.

MR DOUGLAS:   What page is that, your Honour?

GUMMOW J:   Page 517, paragraphs 35 and 36:

The appellants claim proprietorship in the mark “Colorado” from 1982 onwards.  However, in practice, that word could not have been registered as a trade mark during most of that period.  It was virtually impossible to obtain registration of a geographical name ‑ ‑ ‑

CRENNAN J:   That is why there is so much emphasis on the device.

GUMMOW J:   Yes, exactly.

CRENNAN J:   You have to see that in context.

MR DOUGLAS:   But there is also in this case, if one looks at the affidavit material I have gone to, a lot of emphasis upon a device as well.

CRENNAN J:   But you can have a ‑ ‑ ‑

FRENCH CJ:   What was the registered trade mark?  Justice Allsop says at 46 “The registered mark is the word “COLORADO”.  He makes no reference to the device, I do not think.

MR DOUGLAS:   The number of registrations in respect of different categories of goods, your Honour.

FRENCH CJ:   He talks about the development of the logo later on at 50.

CRENNAN J:   One possibility is that the geographical word was disclaimed but the composite mark was registerable.  It is just a possibility, anyway.

FRENCH CJ:   At 54, “There has been no registration by the appellants of any mountain logo.”

GUMMOW J:   Anyhow, I think Colorado is a fairly rocky sort of analogy, really.

CRENNAN J:   You can have the addition of a device, as here, which does not substantially alter the identity of the mark as registered.

MR DOUGLAS:   Well, that is the question to be determined, I think, by the fourth ground of contention we would seek to raise as to whether it does substantially alter it.  Certainly it would, in our respectful submission, be evidence of Mr Kalabokes as to the central importance of the foot image is, as a matter of logic, very persuasive in this regard.  We would submit that the word “Barefoot” together with the foot image is not to be taken as use of a mark comprising the word “Barefoot” alone, pursuant to section 8(1).

Perhaps in that context, could I just also hand up another exhibit which has not been produced.  It is the annexure C to Rodney Debut’s affidavit of 7 April 2008 just to show what the nature of the packaging was and how it was used.  I am also asked whether you wish to take possession of this bottle of Zinfandel or whether the photographs are sufficiently descriptive ‑ ‑ ‑

FRENCH CJ:   Given what we have heard about it, I do not think we do, Mr Douglas.

GUMMOW J:   What is the point of this annexure C?

MR DOUGLAS:   It is to show the significance which was given to the foot.

GUMMOW J:   By whom?

MR DOUGLAS:   That is the carton in which the relevant wine came.

GUMMOW J:   Is this in evidence?

MR DOUGLAS:   It is in evidence, yes, your Honour.  I am conscious of the fact that these are matters which require leave, but should I just proceed to address the matters in the cross‑appeal?

GUMMOW J:   No.

FRENCH CJ:   I think we would be helped, Mr Douglas, if you were to tell us why you should get a grant of special leave.

MR DOUGLAS:   I thought we might be going to there, your Honour.  Your Honours, so far as goods of the same description are concerned, in our respectful submission, the Court misapplied the classic test in Southern Cross Refrigerating Co v Toowoomba Foundry and also showed no reason why they should diverge from the impression which had been formed by the trial judge.  If one looks at the decision of the Full Court, which is to be found in volume 10, it placed considerable emphasis upon the decision of Justice Burchett in Polo, if we go to paragraph 17 at page 2341.  So the factors relevantly set out in Southern Cross there is cited and the factors supporting a conclusion that they were goods of the same description and the factors supporting a conclusion that they were not goods of the same description are set out in paragraphs 17 and 18 on the following page.

When the Court came to consider the matter – the issue is looked at in paragraph 71 – they look at section 120(2) and then they go on to say:

However, these discrete questions arise in the context of determining, as the ultimate question, whether there has been infringement of the registered trade mark and, to that end, the object or purpose of the statutory prohibition on infringement is relevant.  It is to protect the statutory monopoly the registered owner has to use the registered trade mark as a badge of origin.  In the context of goods sold in the course of trade to the public, the question of whether the alleged infringement has arisen by the affixing of a deceptively similar trade mark is not divorced from the question of whether the alleged infringement has arisen by doing so in relation to goods of the same description.  One would have thought both questions necessarily require consideration of what members of the consuming public might perceive as a result of the use of the alleged infringing mark on the goods in question and whether they might be led to believe they were goods of the registered owner.  In this way, the following observations of Burchett J, relied on by Gallo, in Polo Textile Industries Pty Ltd v Domestic Textile Corporation Pty Ltd . . . are relevant to the present enquiry . . . 

In my opinion, the application of a principle so broadly stated requires some concentration upon the object which s 23(2) exists to serve.  That object seems plainly to be the avoidance of confusion and deception in the market place, which would be likely to arise should a mark become available for use by two or more different companies, which are unrelated, upon goods of the same description.

GUMMOW J:   That is a misstatement of principle there towards the bottom:

likely to lead to confusion or deception.

The classic language is “cause to wonder whether”, is it not?

MR DOUGLAS:   Yes, and also, your Honour ‑ ‑ ‑

CRENNAN J:   That is the Southern Cross language, anyway.

MR DOUGLAS:   ‑ ‑ ‑ the inquiry as to whether they are goods of the same description is necessarily anterior to whether they are likely to cause deception.  It seems to us as though there is clearly an error of principle there.

HEYDON J:   It seems to be an error in your favour.

GUMMOW J:   Yes.

MR DOUGLAS:   Not necessarily, as we would see it in this case, your Honour.  You have a situation in which – I know that the classes are not in any way conclusive but in the 1995 Act beer is treated entirely differently from other alcoholic beverages.  If one goes back historically, one can see that it was treated as an alcoholic beverage.  We have provisions in this Act which protect well‑known marks in section 120(3).  So if, for example, someone were to start selling the Domaine de la Romanee‑Conti’s wines under the label “VB”, apart from “Thank God it’s Friday”, one would be able to avail oneself of the fact that it is a well‑known mark.  Likewise of the reverse if someone decided to sell a beer which was described as Romanee‑Conti.

The essential aspect of it is, as we would see it, that there was evidence that beer and wine, these brands are owned by the same companies, or groups of companies, and obviously they are sold in various places, not necessarily together but in close proximity to each other and matters of that nature, but there was no evidence that brands for wine were used for beer products or visa versa.  So essentially what seems to have driven the result in the Full Court, as we would see it, is that people would necessarily think that because the products are both alcoholic beverages, that in some way because one is called Barefoot and the other one is called Barefoot they would be from the same origin.

Whether people would draw that conclusion or not, it seems to us that what is really happening by the application of Polo in this case is that the court is really not addressing the test of whether they are goods of the same description and just going straight to whether they are deceptively similar.  The way in which it is applied does not, as we would see it, favour us because we believe that when one looks at the Southern Cross test and one looks at the categories, one looks at the absence of cross‑branding in relation to beer and wine, that the only real connection between these beverages is the fact that they are both alcoholic beverages and for various reasons they have been treated separately in the regulations in classes 32 and 33.

FRENCH CJ:   I think the substance of what they did is to look at the list of factors which the primary judge found pro and con, then say, well, he said these were in favour and these were against and they simply had a not entirely congruent list of factors and went the opposite way.  It is not clear to me that the Polo issue intruded on what appears at 72 and 73 at 2360.  It just looks like an evaluative decision‑making process by reference to the constellation of competing factors.

MR DOUGLAS:   But if that is what they did do, what was wrong with what Justice Flick did?  In other words, it is a matter of impression.

FRENCH CJ:   You are putting up one evaluative decision against another and then going for another roll of the dice here, are you not?

MR DOUGLAS:   Yes, but ‑ ‑ ‑

GUMMOW J:   I think the answer is that in the Full Court it was a full appeal from Justice Flick.

MR DOUGLAS:   But even that court, when it is a question of impression, as this question is very much so, they do not really say that what Justice Flick did was wrong.  It was just that they came to a different conclusion and that would seem to us to be a wrong exercise of their appellate jurisdiction.

HEYDON J:   Your submission to the trial judge was in some position of advantage?

MR DOUGLAS:   Sorry, your Honour?

HEYDON J:   Your submission is that Justice Flick was in a position of advantage over the Full Court?

MR DOUGLAS:   Yes, he was, yes.

HEYDON J:   It is not an Edwards Hot Water Systems type of problem, is it, judging the appearance of things?  It is a question of examining various competing considerations.  The Full Court gave more significance to some than others.  It is a question of reasoning.

MR DOUGLAS:   As your Honour well knows – as to how far appellate intervention should go in cases of this nature are not entirely clear, but there certainly has been some emphasis, both in decisions of this Court and courts – and in the Full Federal Court and State appellate courts on the importance of the impression which the trial judge has formed in what is an evaluative decision.  The trial judge did get to see and hear all of the witnesses and all of the evidence.  It does seem to us if you look in the middle of paragraph 73, your Honour, at 2360, great emphasis was given to the fact that what:

consumers might see the goods as having the same trade origin –

which is the point I was making before.  It seems to us entirely the wrong test because you must actually look – when you are looking at whether it is goods of the same description you must apply the factors in Southern Cross.  When you apply the factors in Southern Cross, Justice Flick’s decision is eminently sensible; he came to one view, the Full Court seems to have come to another.  So to have this question determined against us, if I could put it that way, on the basis that:

consumers might see the goods as having the same trade origin –

seems to us – for that to be sitting there as part of a considered decision of a Full Federal Court, does not seem to us to be consistent in principle.       That is what I can say in relation to goods of the same description.

In relation to deceptively similar, I cannot press upon your Honours that you should take it simply because it is a matter of interest, and this is the first case which has come to this Court under the 1995 legislation, but there are aspects of the legislation which would suggest that this would be an appropriate case to bring up.  The tests are well established.  The interests of justice, however, would seem to suggest that if these other questions get a run we should be entitled to have these issues determined by this Court rather than them to be not determined along with all of the other questions which this Court has looked at.  The last time which this Court looked at a trademark case where the issue of deceptive similarity arose was Estex, I think, in the late 1960s.

There is also the fact that if these goods are goods of the same description, we get into an area which has been opened up by the infringement provisions of the Act because it is now an infringement, as it was not before, to use as a trademark a sign “that is substantially identical with, or deceptively similar to, the trade mark”.  That was not part of the pre-existing law. 

GUMMOW J:   Say that again. 

MR DOUGLAS:   The pre-existing infringement provisions ‑ ‑ ‑

GUMMOW J:   Section 62 of the 1955 Act. 

uses as a trade mark a sign that is substantially identical with, or deceptively similar to –

What it had to be though is in relation to goods in respect to which the mark is registered.  That is the change.

MR DOUGLAS:   Yes, that is the change.

GUMMOW J:   Not the first step.

MR DOUGLAS:   But so far as that change is concerned, it makes the provision and the question of deceptive similarity of some significance to be determined by this Court, as we would see it. 

GUMMOW J:   All explained by Justice Windeyer in Atlantic and Esso, is it not, deceptive similarity and substantially identical.

MR DOUGLAS:   The third point I think which arises in relation to this matter is the proviso to section 120 which is:

However, the person is not taken to have infringed the trade mark if the person establishes that using the sign as the person did is not likely to deceive or cause confusion.

Now, there was evidence as to how we used it.  It is in volume 9.  It is useful to go to, I think, 2144 to 2155, 2146.  We might just put the exhibit before the Court as well. 

GUMMOW J:   This appears in the appeal book at what page?

MR DOUGLAS:   It appears at 2144 to 2145, your Honour. 

FRENCH CJ:   I do not think we need the six pack.

MR DOUGLAS:   I do not think we do either, your Honour. 

MR DOUGLAS:   I am told it is a prototype, but as your Honour can see, it is no different from the original, or not significantly different.  Now, so far as section 120(2) is concerned, the proviso looks at the actual use that we have made of the mark, not potential future uses.  As your Honours can see, we have the Barefoot Radler mark applied to it, which is being presented for sale in retail outlets.  It is segregated from any potential sales of wine, although they are sold in the same stores.  It is very much a matter of impression, I think, for this Court and so far as the special leave question is concerned, the issue is not terribly exciting by itself, but it is part and parcel of this litigation and we would ‑ ‑ ‑

GUMMOW J:   We do not sit here to be excited, Mr Douglas.  If we had that hope, we would be in despair.

MR DOUGLAS:   I recognise that, your Honour, that is why I said that.  That leaves only one point, your Honour, which is ‑ ‑ ‑

CRENNAN J:   Your client has an application on foot, I suppose, for registration.

MR DOUGLAS:   We have an application on for registration, yes.  I think that then leaves the section 101 point ‑ ‑ ‑

GUMMOW J:   That, I imagine, will be opposed.

MR DOUGLAS:   Your Honour, there is lots of opposition proceedings following on from this.

CRENNAN J:   Will it be blocked prior to acceptance, even, possibly?

MR DOUGLAS:   It would take a while to get to this Court, I would have thought.  Can I then just deal with the section ‑ ‑ ‑

GUMMOW J:   No, we are not thinking about that.  The question is whether this controversy would really be finished?  This controversy is not going to be finished, I would think, between these parties.

MR DOUGLAS:   If there are oppositions to our registration of Barefoot, then ‑ ‑ ‑

GUMMOW J:   Or it is blocked.

MR DOUGLAS:   We will wait for another time to deal with that.  Could I just deal with the section 101 point?  It gives a court power to authorise the Registrar to remove a trademark and section 13 provides the removal is to be effective by making a notation in the register to the effect that all entries relating to the mark are taken to be removed.  The terms of the Act do not preclude the court ordering and the registrar notating that removal be taken to be effected from an earlier point in time.

Historically, removal for non‑use was regarded as a part of the jurisdiction to rectify the register.  Rectification serves the purpose of ensuring the register reflects the correct state of affairs where there has been non‑use leading to expungement.  The correct state of affairs is that since the date the application to expunge was filed the trademark has been liable to the removal which in fact occurred.

Now, what will happen in this case, if we are successful, as we were in the court below – if the order is only effective from the date of this Court’s orders, you have a situation which by dint of section 127 of the Act, you cannot sue for damages during the non-use period, but there is a claim for damages in a period after the expiration of a non-use period up until the time when the order for rectification is made.

That seems to us to be anomalous.  We have submitted that there is no reason why the Court could not make an order nunc pro tunc so that the order of the Court takes effect at the expiration of the non‑use period or one month thereafter.  I think we have put those submissions in writing and I do not need to add to them.  Those are matters which we would wish to address.

FRENCH CJ:   Thank you, Mr Douglas.  Yes, Mr Jackman.

MR JACKMAN:   Is your Honour calling on me to address the special leave application?

FRENCH CJ:   Yes, please.

MR JACKMAN:   Can I deal with the question of goods of the same description first of all?  If your Honours go in the Full Court judgment to paragraphs 72 and 73 there is there an orthodox application of the Southern Cross v Toowoomba tests.  Paragraph 72 identifies, I think, four factors in favour of the view that:

Lion Nathan’s beer and wine were goods of the same description -

the first being –

They were both alcoholic beverages and generally distributed by this same major wholesale distributors.

The second point is that this is not beer in a conventional sense.  It is what is called Radler beer, which has some lemon or lime flavouring added to it, the reason being it is:

intended to be an appealing alternative to wine and in developing the product, Lion Nathan deliberately set out to attract people who did not drink beer.  Indeed it was developed with the deliberate objective of enticing consumers who previously drank wine but not beer.

Indeed Lion Nathan’s own internal marketing material anticipates 22 per cent of the volume of demand for Radler beer will come from sales of wine, that is, they were substitutable products, and approaching the question of goods of the same description from a practical business point of view, the substitutability of the products, namely, Radler beer and wine as a highly relevant favour.  The third proposition deals with:

Producers of alcoholic beverages are no longer confined to the production of beer, as opposed to wine . . . Companies which were once brewers now market and distribute a range of products including beer, wine, spirits, cider and non‑alcoholic drinks. 

The fourth point being:

Wine and beer are now frequently distributed by the same retailers.  We agree that these matters point, and in our opinion point convincingly, to [the Radler] beer and wine being goods of the same description.

Then in 73 their Honours deal with factors which led the trial judge to the opposite conclusion being “of materially less significance”.  There are three of those.  One concerns:

the manner of manufacture of beer on the one hand and wine on the other.  While this clearly establishes that they are not the same goods, it is unlikely that this difference would be significant to the consuming public if, as his Honour found, large producers of alcoholic beverages produce a range of products.

The second factor was:

the specific manner of sale in restaurants on the one hand and retail outlets on the other.  If large producers of alcoholic beverages are producing a range of products then the fact that the wine might be sold in a slightly different way would not be a difference of significance to the consuming public who may come to consider the trade origins of Lion Nathan’s beer.

The third factor:

was the manner in which beer is consumed, that is drunk for its refreshing qualities, and not, like wine ‑ ‑ ‑

FRENCH CJ:   We do not need to get into the substance of the ground.  I think, bear in mind you are just addressing us on the character of the decision on which special leave is being sought.

MR JACKMAN:   Indeed, the one point I am seeking to highlight is that it is not a comparison between beer and wine.  It is a special kind of beer, specially formulated in order to attract wine drinkers towards the consumption of beer.  That is dealt with in a volume of the appeal books, volume 9, which if special leave is granted I will take the Court through in more detail to indicate the perceived substitutability of the two products.  But going back to paragraph 71, the court in two places in paragraph 71 indicates that the question of goods of the same description is a discrete question from the other questions in section 120(2), such as deceptive similarity.  That is said in the first line of 71 and again in the fifth line.

So the court is not eliding the two tests and should not be taken by its reference to Justice Burchett’s decision in Polo to be eliding the two tests.  Rather, the court is there focusing on the underlying rationale of the section as a whole applying the section in a practical businesslike way and in a way that recognises that the discrete questions one asks under the section combine together to produce an overall result under section 120(2).  So, in our respectful submission, there is no material error of principle.  What there is, is an orthodox application of Southern Cross v Toowoomba and paragraph 71, for its part, makes it clear that these are discrete questions, namely, goods of the same description being a separate matter from, for example, deceptive similarity or the other matters under section 120.

In that sense, in our submission, there is no question calling for the grant of special leave.  What there is, is a decision of fact depending on its particular facts and, in particular, the rather special fact in this case that a product that goes by the name of beer was specially formulated to be substitutable for wine and to take away from sales of wine. 

GUMMOW J:   What do you say about the projected ground 4?

MR JACKMAN:   On section 120(2), is it?

GUMMOW J:   On the effective date of removal.

MR JACKMAN:   I am so sorry.  Section 101(2), we say two things.

GUMMOW J:   I do not mean substantively, two questions, is it in any way already caught up in the other appeal?

MR JACKMAN:   No, it is an entirely separate matter.  The date that the order for removal takes effect from, that is entirely separate. 

GUMMOW J:   But if you succeeded on the other appeal it would not arise, would it?

MR JACKMAN:   That is so.

GUMMOW J:   We do not know the answer to that.  So do we not appropriately now reserve for further consideration, if need be, ground 4?  You want us to reject all these grounds right now?

MR JACKMAN:   Yes.

GUMMOW J:   I am putting to you that it may be premature to reject ground 4 now.

MR JACKMAN:   Well, on ground 4 – well, we submit, of course, as a matter of statutory construction, 101(2) is clear, that the order can only be made at the end of the proceedings.  But if we are wrong about that and my learned friend succeeds as a matter of construction, his contention then is that it becomes a discretionary matter for the Court as to when the order for removal takes effect and the problem for him there is that the trial judge said that if it is a discretionary matter, then his Honour would have exercised the discretion favourably to Gallo – that is in paragraph 11 at page 2317 – and there is no House v The King type error, which is sought to be shown. 

So ultimately it is a point of no practical significance to my learned friend because he has got to win not only on the statutory construction, but also to indicate error in what the trial judge said that the discretion would have been exercised favourably to Gallo, that is, for a later order for removal and he does not seek to do that.  That is why, in our respectful submission, the Court should refuse special leave to cross‑appeal on that ground now whatever may be the position as to the correct statutory construction.  But, in our submission, that is clear from the language of 101(2) in any event. 

Ground 2 deals with deceptive similarity.  In relation to that, there are concurrent findings of fact by the trial judge and the Full Court in our favour.  No question of principle arises.  The question of fact is whether the addition of the word “Radler” was so distinctive that it meant that Lion Nathan’s expression “Barefoot Radler” took away the deceptive similarity that there might otherwise have been.  Radler is not distinctive, it is simply descriptive of a particular type of beer not indicative of its trade origin.  As I submit, it is a question of fact as to which there are concurrent findings in our favour.  No question of principle arises.  The test is well established and there is no question of principle that arises.

The application of the proviso at the end of section 120(2) does not raise any question of principle.  My learned friend has not ventured any criticism of what the Full Federal Court said about that.  Its reasoning is in paragraphs 76 to 78.  We did not persuade the trial judge on that point but the trial judge’s reasoning was infected there by the view that the only thing that the two marks or signs had in common was the use of the word “Barefoot”.  That reasoning falls away once the question of goods of the same description is resolved in our favour because then it is not just the word “Barefoot” which is the one thing that the two had in common, it is also the fact that these are goods of the same description.

Once one adopts the Full Court’s view on goods of the same description, the trial judge’s reasoning on that proviso cannot stand because the two had far more in common than simply the use of the word “Barefoot”.  As to the image of the foot itself, that is no more than a pictorial representation of the word mark and reinforces the similarity, we would submit, between Lion Nathan’s Barefoot sign and our Barefoot mark.  For those reasons, in our respectful submission, special leave should be refused.

FRENCH CJ:   Mr Douglas?

MR DOUGLAS:   Your Honour, I do not wish to say anything in reply on the substantive grounds apart from the construction point of section 101(2).  The relevant paragraph that my learned friend referred to of Justice Flick’s judgment is to be found at page 2317, paragraph 11, and it is true that he did that.  But, of course, what has then happened is the matter has then gone on to appeal and the Appeal Court has determined it on the basis effectively that they had no power and not subject to any such proviso.  So if that is the state of the law, it would seem to us that it is a matter which should at least at some stage be considered by this Court.

FRENCH CJ:   Thank you, Mr Douglas.  The Court will adjourn briefly to consider what course it takes.

AT 3.56 PM SHORT ADJOURNMENT

UPON RESUMING AT 4.01 PM:

FRENCH CJ:   In our opinion, the first three grounds of the proposed cross‑appeal invite the Court to revisit evaluative findings of the Full Court, and in the one case in which an error of principle, if any, has been identified, it appears to lie in favour of the cross‑appellant.  No general question of public importance arises on these grounds.  The Court will reserve its decision on whether special leave should be granted on ground 4, but will allow argument to be put on the merits of that ground now.  Yes, Mr Douglas.

MR DOUGLAS:   Your Honour, the essential point that we would seek to put is, assuming the Court does have power, there is really no obvious reason why, when you have a statutory provision like section 127 which prohibits the recovery of damages during the period of non‑use, to effectively give the trademark owner a right to claim damages for infringement during the period after the expiration of that period of three years.  It is largely in our argument which goes to power.  So far as discretion is concerned, in that regard ‑ ‑ ‑

GUMMOW J:   In 127 the words “the court may not grant relief” means the court must not grant or cannot.

MR DOUGLAS:   Yes, your Honour.

GUMMOW J:   I would have thought so.  It is not permissive.  It is mandatory.

MR DOUGLAS:   Yes, your Honour.  So this idea of a springing right to an action for damages or an account of profits after that period is a somewhat surprising idea.  In their submissions, my learned friend has referred to some other provisions of the Act which seem to contemplate that in certain circumstances you can have retrospectivity, but they seem to be largely procedural matters, for example, section 52(5) and section 79 and procedural mistakes in section 84C.

There is really no equivalent as we would see it, precise equivalent, to section 101 and it just seems antithetical to us to have section 127 in the Act and to then give a right to claim a remedy for infringement thereafter.  It also means that you have a situation where a trader such as ourselves who is faced with the threat of damages for the duration of the proceedings brought under section 92(4) when grounds for revocation are very arguable, so there is this effective penalty which springs into existence for the duration of the period of the proceedings, notwithstanding ‑ ‑ ‑

GUMMOW J:   Mr Douglas, whereabouts is the section that actually gives the Court jurisdiction to remove?  Section 92 is talking about making an application, then there is a number of provisions – there is a provision for referral to the Court, but that is by the Registrar.

MR DOUGLAS:   There is 101(2), your Honour.

GUMMOW J:   Section 101(2)?

MR DOUGLAS:   So:

if, at the end of the proceedings relating to an opposed application, the court is satisfied that the grounds on which the application was made have been established, the court may order the Registrar to remove the trade mark from the Register ‑ ‑ ‑

GUMMOW J:   Now, there is authority that “may” means “may” under the 1955 Act.

MR DOUGLAS:   Yes, there is a discretion.  But the discretion is not enlivened in these proceedings, as I understand it.  They ran a discretionary argument at first instance but then abandoned it, your Honour.

GUMMOW J:   I see.

MR DOUGLAS:   And, in fact, one of the grounds on which they sought the exercise of a discretion was the Logan issue.  So, in other words, they said, “We have not been prepared to market the wine in Australia because of this registration, so please excuse us for not having used our mark”.  Apart from that, your Honours, I do not think there is anything other than procedural matters.

FRENCH CJ:   Thank you, Mr Douglas.  Yes, Mr Jackman.

MR JACKMAN:   Can I deal first with the reply on the appeal itself.  At a number of points my learned friend sought to distance himself from the argument that was put by Mr Franki, QC in the Estex Case, but in one important respect the argument proceeded along the same lines and that is the argument that was paraphrased by Sir Victor Windeyer at page ‑ ‑ ‑

GUMMOW J:   I am sorry to take you off your track, Mr Jackman, but we need to get this straight.  Section 101(2) does not seem to speak to this case, does it?

MR JACKMAN:   Because this is not an opposed application.

FRENCH CJ:   The removal application came up as a cross-claim.

MR JACKMAN:   That is right, rather than an application for registration.  Yes, that is so.

CRENNAN J:   The rectification application.

MR JACKMAN:   Yes.

GUMMOW J:   Anyhow, it can be looked at overnight.  We have to just make clear what the jurisdictional footing for all this was.

MR JACKMAN:   It is an opposed application for removal of a mark.  I will need to collect the various ‑ ‑ ‑

GUMMOW J:   Opposed application to the Court? 

MR JACKMAN:   Yes.  It began before the Registrar and was removed to the Federal Court and it was removed pursuant to section 94.  So an application was made to the Registrar under 92(1), that is an application for removal.  That was removed to the Federal Court and became a cross‑claim in the proceedings before Justice Flick.

GUMMOW J:   For infringement.

MR JACKMAN:   No, our claim was for infringement.  We were the applicant.  Our claim is for infringement.  They cross‑claimed ‑ ‑ ‑

GUMMOW J:   That is right, after referral.

MR JACKMAN:   After referral, yes.

GUMMOW J:   Could they not cross-claim without referral?  That is what Mr ‑ ‑ ‑

MR JACKMAN:   I imagine they could have done, but the question may simply have been who won the race to commence proceedings and the detail of that at the moment escapes me, but ‑ ‑ ‑

FRENCH CJ:   I see.  The jurisdictional facts, I suppose, at 18 of volume 1:

the Cross‑Claimant by its solicitor applied to the Registrar of Trade Marks to have the BAREFOOT trade mark removed –

so that sets up the – and then the referral is pleaded.

MR JACKMAN:   That is so, yes, and then in the meaning of 101(2), it was an “opposed application” for removal rather than for registration as such.  Then the court orders the registrar to remove the mark and section 103 then operates, and the registrar must comply with that order, must cause a copy the order to be – sorry:

A court making an order . . . must cause a copy of the order to be served on the Registrar and the Registrar must comply with the order.

I hope that answers the question.

FRENCH CJ:   Yes, thank you, Mr Jackman.

MR JACKMAN:   Going back to Estex at page 266, at the heart of Mr Franki’s argument was not simply the proposition about property and the goods having passed in the United Kingdom.  The ultimate proposition was that the English manufacturer had parted with its goods.  It delivered them to some stipulated place.  Where they went or what was done with them thereafter by the buyer who then owned them was a matter beyond the control of the respondent, a matter with which it was no longer concerned. 

The heart of the argument was the proposition that you could not have trademark use unless you also had control over the goods.  That really is the same argument that is being put now with one added overlay, and that is that my learned friend focuses the argument on section 8 and the authorised user provisions, rather than simply the concept of trademark use.

Now, trademark use remains, in our submission, a question of trademarks as a badge of origin, whether they are being applied by the registered owner or by an authorised user.  It is not a badge of control, except in this sense, that we need section 8 and the control that it speaks of so that the use by Barefoot Cellars inures to the benefit of the owner, originally Mr Houlihan.

Now, those authorised user provisions in section 8 do not require any control beyond the point of manufacture, that is, the point at which the mark is affixed to the goods.  They do not require that there be continued control over all the dealings in the goods while they remain in the course of trade.  That would have effected a revolution in trademark law, so the trademarks would then become a badge of control wherever there is an authorised user rather than a badge of origin.  The only control that is required under section 8 is at the point where the mark is being used by affixing the mark to the goods.  Neither the owner nor the authorised user then needs to control the goods as they pass down the line through the course of trade to retailer and ultimately the sale to consumers.

GUMMOW J:   Looking at 8(2), and looking at the position of the Californian operation, you say there was a use of the mark at the time it was vinted and bottled and labelled by the Californian operation?

MR JACKMAN:   Yes.

GUMMOW J:   You say that at that time and that activity in that place was under the control of the owner?

MR JACKMAN:   Of Mr Houlihan, yes.

GUMMOW J:   Even though that notion of control did not, as it were, run as a covenant with the goods into the hands of third and fourth parties in the course of trade?

MR JACKMAN:   Yes, that is so.  Neither the owner nor the authorised user has to be in control of the physical tangible object, being the goods as they pass through the course of trade.  The goods must still be affixed with the mark as indicative of their origin as they pass through the course of trade in Australia, but that is a use by the authorised user which enures to the benefit of the owner provided that the owner has exercised the control of which section 8 speak initially, which is not control over all the dealings in the goods, it is simply control over the use of the mark which is affixing the mark to the goods at the point of manufacture.

HEYDON J:   If I can put this forensically, you accept the legitimacy, although you deny the merits, of amended notice of contention ground 1, as it stands, which concentrates on Grape Links’ activities?

MR JACKMAN:   Yes.

HEYDON J:   But you see it as irrelevant on the appeal proper what happened thereafter?

MR JACKMAN:   That is so.

HEYDON J:   And you would, as it were, on quite fundamental grounds, oppose Mr Douglas’ invocation of authorised user activity beyond the point at which the goods were sold into Germany?

MR JACKMAN:   That is so, and the argument was that we would oppose any expansion of that notice of contention.  The argument is not one that was put that if one is looking at whether Grape Links, Inc was an authorised user, that question has always been approached by the parties in this case as a question of control at the point of manufacture.  Where there was an expansion in that is in dealing with another line of argument that we put but we no longer pursue, which is whether Beach Avenue Wholesalers was an authorised user.  In that regard can I take your Honours to volume 10 and to page 2292.  At the top of 2292 is a subheading for an issue that we no longer press, that is, the question whether Beach Avenue Wholesalers was an authorised user for Mr Houlihan.

FRENCH CJ:   That was your alternative pleading, I think.

MR JACKMAN:   That was an alternative pleading.  We are not pressing it now.  We appreciate that there was not the requisite degree of control over Beach Avenue Wholesalers and it was it in passing in dealing with that question that his Honour refers in paragraph 154 to:

The “quality control” relied upon by Gallo Winery was the control originally exercised by Mr Houlihan when he owned Barefoot Cellars, and later his retention as a consultant, his responsibilities including the monitoring of the quality of the wine.

His Honour then goes on to consider the position of Beach Avenue Wholesalers which no longer arises.  We do not seek, and we did not seek

before the Full Federal Court to revive the argument Justice Flick rejected as to whether Beach Avenue Wholesalers was an authorised user.

GUMMOW J:   On this question of control, I think overnight it would be useful to look at what was said by Justice Stephen in Time‑Life 138 CLR 534, particularly at page 551 about the patent situation, which is quite different, where conditions can run – the discussion of National Phonograph 12 CLR which went to the Privy Council.  This notion of control and running of goods is a slippery one, I think.  It has different answers in different parts of intellectual property law.

MR JACKMAN:   Yes.

GUMMOW J:   I understand what you say control has to mean in 8(1) and 8(2).

MR JACKMAN:   Yes.  It certainly does not mean control over the dealings with the goods as they pass down the line because that would in effect turn trademarks into a badge of control not a badge of origin and section 8 would have effected an unintended revolution in the law in that fundamental way.

FRENCH CJ:   MrJackman, can you tell us roughly how long you will take tomorrow?

MR JACKMAN:   I should think half an hour to an hour, perhaps – closer to half an hour.

FRENCH CJ:   All right.  There will be a reply on the contentions, I would think.

MR DOUGLAS:   There will be a few matters.

FRENCH CJ:   The Court will adjourn to 9.30 tomorrow morning for a pronouncement of orders and this matter at 10.15 am.

AT 4.20 PM THE MATTER WAS ADJOURNED
UNTIL WEDNESDAY, 9 DECEMBER 2009