Egbert Mensse Schwitters v Horphag Research Limited

[1998] ATMO 37

Trade marks act 1955

Decision of a delegate of the registrar of trade marks with reasons

Opposition by HORPHAG RESEARCH LIMITED to Application No 585452 in the Name of EGBERT MENSSE SCHWITTERS

Background

Mr Egbert Mensse Schwitters, a Dutch national, (Mr Schwitters), applied on 28 August 1992 for the registration of the word mark pycnogenol in respect of the goods "pharmaceutical products, including particular food supplements in this class", being goods in International Class 5.  The application was duly examined and accepted for registration, the acceptance being advertised on 16 September 1993.

On 16 March 1994 notice of opposition to the registration of the trade mark was given pursuant to s49 of the Act by Horphag Research Limited, a company existing under the laws of Guernsey, Channel Islands (Horphag).  (Although the Trade Marks Act 1995 commenced on 1 January 1996, as provided in the transitional provisions of Part 22 of that Act the provisions of the repealed Trade Marks Act 1955 continue to govern this opposition.  Accordingly, unless otherwise specified, any reference to the Act in this decision is a reference to the Trade Marks Act 1955.)  The grounds of opposition set out in the notice were widely drawn but essentially centred on a claim by Horphag to the proprietorship of the trade mark by virtue of prior use in Australia and therefore that the use of it by the applicant would be likely to cause deception or confusion and would otherwise be contrary to law.

Both parties served and filed evidence in support of their respective positions.  It consists of the following:

v  Evidence in support

• declaration of David Bertram Fitzpatrick, registered patent attorney, made 16 December 1994, with Exhibits A, B and C

• declaration of Charles Haimoff, the majority shareholder of the applicant company, made 16 February 1996, with Exhibits A-J (the first Haimoff declaration)

v  Evidence in answer

• declaration of Egbert Mensse Schwitters, the applicant, made 17 May 1996, together with Exhibits A-U

• declaration of Brian Marsden Murray, registered patent attorney, made 21 May 1996, with Exhibit BMM-1

v  Evidence in reply

• declaration of John Booth, made 20 May 1997, with Exhibit A

• declaration of Ian Brighthope, medical practitioner, made15 May 1997, with Exhibits A-D

• declaration of Wayne Coote, managing director, made 14 May 1997, with Exhibit A

• declaration of John Maher, made 14 May 1997, with Exhibit A

• declaration of Vince Rimmer, managing director, made 14 May 1997, with Exhibits A-C

• declaration of W Lamar Rosquist, chiropractic physician, made 14 May 1997, with Exhibits A and B

• declaration of Charles Haimoff, made 13 May 1997, with Exhibits U-ZB (the second Haimoff declaration)

• declaration of Michael Moers, executive vice president, made 20 May 1997

• declaration of Nikitis Mangeris, company president, made 20 May 1997

• declaration of Marvin S Gittes, attorney at law, made 20 May 1997, with Exhibits A-G

• declaration of Anthony Willis, solicitor, made 5 June 1997, with Exhibits A-E

• declaration of Charles Haimoff, made 12 November 1996 (the third Haimoff declaration)

v  Further evidence

The opposition by Horphag Research Limited to application 585452 in the name of Egbert Mensse Schwitters was set down for hearing in Canberra on 27 August 1997.  Mr Richard Cobden of counsel, instructed by Spruson & Ferguson, patent attorneys, appeared for Mr Schwitters and Mr Anthony Willis of Dunhill Madden Butler, solicitors, for the opponent Horphag.

Mr Willis began by making an application for special leave to adduce further evidence pursuant to reg 47 of the Trade Marks Regulations made under the Act.

After hearing submissions from both parties on the question of the admissibility of the further evidence I adjourned the hearing and, on 3 November 1997, I issued a decision allowing the following further evidence:

• a declaration of Kimberly Flynn, executive secretary, of Rahway, NJ, United States of America, with Exhibit A, made 22 August 1997

• a declaration of Louis Clayton Jones, attorney at law, of London, KY, United States of America, made 25 August 1997

• a declaration of Ron Pollard, farmer and animal breeder of Young, New South Wales, made 26 August 1997

• a declaration of Anthony Willis, made 22 August 1997 together with Exhibits F, G and I, and a further declaration of Mr Willis made 26 August 1997, less the Exhibits

v  Evidence in reply to the opponent's further evidence

• a declaration of Robert George Parry Williams, solicitor, made 12 September 1997

• a declaration of Arthur Macaro Echano, medical scientist and nutritional consultant, made 23 September 1997

• a declaration of Lorrae Wilcox, magazine editor, made 1 December 1997

• a declaration of Norman Zivin, of 1185 Avenue of the Americas, New York, New York, United States of America, attorney at law, made 1 December 1997, with Exhibits A &B

• a declaration of Egbert Mensse Schwitters, of 20 Boulevard Rainier III, Monaco, made 26 November 1997

• a declaration of Fay Anne Pollard, housewife, made 17 December 1997.

The hearing was resumed on 25 and 26 February 1998 and then adjourned to 19 March 1998.  Mr Willis and Mr Cobden appeared on each occasion.

At the centre of the dispute between the parties in this matter are substances known as proanthocyanadins which are extracted from plants, in particular from the bark of the maritime pine tree, or Pinus maritima, which grows and is harvested in commercial quantities in and near the coastal districts of the southwest of France, and which are claimed to have therapeutic properties.  Although there is a degree of dispute as to the history of the development and commercialisation of these substances Horphag's version of events, drawn from the Haimoff declarations, is briefly as follows:

• Horphag was founded in 1925.

• In 1969 a group of French scientists, Professors Masquelier and Michaud and Messrs Jean Laparra and Ellian Barraud, described a process for the extraction of proanthocyanadins from plants.  In the same year they set up a company, Centre d'Experimentation Pharmaceutique (CEP) in France to further investigate the process.  At the same time they were granted a patent for the extraction process from pine bark.

• In 1970 the same group established the Societe Civile d'Investigations Pharmacologiques d'Aquitaine (SCIPA) to exploit the patent.

• In 1971 CEP appointed Interhorphag (which later became Horphag Overseas Ltd and then Horphag Research Limited the present opponent) as exclusive distributors of the product PROCYANIDOLIQUES OLIGOMERS.  There was no mention in the contract of the PYCNOGENOL trade mark or any reservation of CEP's rights, if any in relation to that trade mark.

• During the 1970's Horphag commenced marketing (outside of France) of pine bark extract in bulk as an ingredient for the manufacture of therapeutic goods for human consumption.

• In 1979 Professor Masquelier and others used the word "pycnogenols" to describe the chemical compound but at that time it was not used as a trade mark.

• In 1982 the contract between CEP and Horphag was extended to give Horphag distribution rights throughout the world with the exception of France.  Once again there was no mention of pycnogenol as a trade mark or any reservation of CEP's rights to the name.

• In 1986 a further agreement confirmed Horphag's exclusive marketing rights to pine proanthocyanadins everywhere but in France and giving Horphag freedom to choose its marketing methods.  No mention was made of trade marks.

• In 1989 another company, Societe Civile pour l'Expansion de la Recherche en Phytochimie Appliquee (SCERPA) was formed by CEP and registered pycnogenols in France as a trade mark

• In 1990 Horphag entered into a contract with Holland Health (HH), a company associated with Mr Schwitters, giving it, HH, the exclusive right to manufacture finished dietary products made with pycnogenol brand pine bark extract in Holland and to market the finished product throughout the world using the trade mark pycnogenol at its discretion.  Horphag was to register the trade mark in those countries where HH was using the mark and HH was to provide information about its actual or proposed customers and use of the mark.  Mr Schwitters began to sell the finished product using pine bark extract from Horphag under the trade mark endoclair, in association with pycnogenol, in Australia through Wagner Pro Biotics and International Health Promotions, companies associated with a Mr Hans Wagner.  At the same time Mr Schwitters applied to the Australian Therapeutic Goods Administration (TGA) for permission to import the product sold under the endoclair trade mark into Australia.  In the same year Horphag withdrew HH's right to use pycnogenol.

• In 1991 pycnogenol brand pine bark extract was sold in Australia by Reseau International from the United States with the permission of Horphag.  A Mr Ron Pollard became a distributor of Reseau in Australia

• On 28 August 1992 Mr Schwitters applied to register pycnogenol in Australia.

• In 1994 another company, Kaire Australia, began Australian sales of pycnogenol.

Mr Schwitters in his declaration contests the above outline of the history of the dealings between the various parties at a number of points.  In particular he claims that

• Horphag was never more than a distributor of CEP's pine bark extract and had no right or title to the trade mark pycnogenol.

• The trade mark pycnogenol was coined by Professor Masquelier in 1979 and was never used exclusively by Horphag having been used for many years by companies associated with himself. Also, Professor Masquelier had expressly forbidden Horphag to register the word pycnogenol as a trade mark as SCERPA had been formed for that purpose.

• Before the date of the application the trade mark pycnogenol was never used in Australia, the product being sold under the trade mark endoclair.

• Mr Schwitters had applied to register the trade mark in Australia with the explicit consent and proxy of Professor Masquelier, the inventor of the trade mark.  Moreover, his company INC Agency Bv had acquired all the shares in CEP and acquired the French registration owned by SCERPA.  With Professor Masquelier's proxy he had registered the trade mark in many other countries.

• In the absence of a TGA import permit Wagner could not possibly have legally marketed the endoclair product in Australia and, even if he had, the use would have been of endoclair and not of pycnogenol.

Submissions and Discussion

Given the above background the central issues that would appear to fall to be decided, and which were addressed by Mr Willis and Mr Cobden, are:

§  the intention of Mr Schwitters to use the trade mark pycnogenol in Australia (s6 of the Act);

§  proprietorship of the trade mark in Australia (s40);

§  fraud; and

§  the effect of s28 of the Act.

Mr Willis submitted that although the matter appeared to be complex it was in fact quite simple: Mr Schwitters had committed "trade mark fraud" in applying to register the trade mark pycnogenol because he was a mere distributor of goods under contract to Horphag.  He had on various occasions conceded that Horphag was the owner of the trade mark in correspondence between the parties.  He had been the recipient of confidential information in relation to the goods.  He was aware of the worldwide reputation in the mark.  However, I will deal with each of the issues mentioned in turn.

intention to use the trade mark

At the same time Mr Willis questioned the intention of Mr Schwitters to use the mark, basing himself on the expression "used or proposed to be used" in the definition of "trade mark" in s6 of the Act.  He argued that if there was a real doubt as to the intention of an applicant to use the trade mark applied for then the onus shifted to the applicant to prove his intention: Ducker's Trade Mark (1928) 45 RPC 397 at 402. In this case there was sufficient doubt, he said, as to the intention of Mr Schwitters as at the date of application to shift the onus to him. This doubt was raised because of the lack of any reference in the evidence to an intention to use the mark personally, the failure to register with the TGA, the lack of any company or manufacturing facilities in Australia. At p13 of his declaration, for example, Mr Schwitters states that INC, another company associated with himself, and its current Australian distributor COLHAVEN, had chosen to wait with the use of the pycnogenol trade mark in Australia until COLHAVEN received the official TGA approval. Further, he states at p15 of the same declaration, that when COLHAVEN ultimately received the TGA registration it (COLHAVEN) immediately commenced on the promotion, sales and distribution of goods under the trade mark pycnogenol. At Exhibit U to this declaration is a sample of packaging used by COLHAVEN showing the use of pycnogenol in conjunction with the words Vitis vinifera in relation to capsules containing grape seed extract.  In relation to the question of the intention to use the trade mark Mr Willis referred also to cases such as Aston v Harlee Manufacturing Co (1960) 103 CLR 391 at 401; Olympic Committee v Baxter & Co (1996) 36 IPR 621 at 631; Titan Manufacturing Co Pty Ltd v Coyne (1991) 22 IPR 613; Paintmaster Products v Lewis Berger & Sons (1925) 25 AOJP 1915; Turkovic v Triple Leisure Limited (1993) AIPC 90-998; Rolewa Rentals P/L v Champagne Moet et Chandon (1985) AIPC 90-238; Michael Sharwood & Partners Pty Ltd v Fuddruckers Inc (1989) AIPC 90-596.

The starting point for a consideration of the question of the intention of an applicant to use the trade mark applied for is the words of Fullagar J. in Aston v Harlee (supra), at 401:

"There is another element mention by Dixon J in the Shell Co's Case*, which is stated as essential to the proprietorship of an unused trade mark.  That element is the intention of the applicant for registration to use it upon or in connexion with goods.  As to this I need only say that I do not regard his Honour as meaning that an applicant is required, in order to obtain registration, to establish affirmatively that he intends to use it.  There is nothing in the Act or the Regulations which requires him to state such an intention at the time of application, and the making of the application itself is, I think, to be regarded as prima facie evidence of intention to use.  I cannot think that the Registrar is called upon to institute an inquiry as to the intention of any applicant, and I think that, on an opposition or on a motion to expunge, the burden must rest on the opponent, or the person aggrieved, of proving the absence of intention.  Again, I do not think that "intention" in this connexion ought to be regarded as meaning an intention to use immediately or within any limited time.  A manufacturer of (say) confectionery would, I should suppose, be entitled to register three trade marks in relation to confectionery, though he intended only to use two of them and had not made up his mind as to which two he would use.  If he in fact does not use any of them for the period specified in s 72, the mark or marks may be expunged under that section.  On the other hand, a manufacturer of confectionery, who had no intention of ever manufacturing motor cars, might be held disentitled to register a mark in relation to motor cars: the effect of In re Registered Trade Marks of John Batt & Co.+, is I think, correctly stated in the first paragraph of the headnote to the report of the case before Romer J and the Court of Appeal."

* (1949) 78 CLR 627

+ (1898) 2 Ch 432; 1899 AC 428

(The statement referred to from Batt's case reads: "A Trade Mark cannot properly be registered for goods in which the Applicant does not deal or intend to deal.") 

The fact that Mr Schwitters has no company registered here or no manufacturing facilities here is quite irrelevant.  In cases in which registration has been refused or a mark expunged on the ground that the applicant or registered proprietor had no bona fide intention to use the mark, such as Re Registered Trade Marks of John Batt & Co 15 RPC 534; In the Matter of Ducker's Trade Mark 45 RPC 397; Rolewa Rentals Pty Ltd v Champagne Moet et Chandon (1985 AIPC 90 - 238 and Sharwood v Fuddruckers 15 IPR 188 there was clear evidence that the proprietor of a registered mark or the applicant for registration could not have had a bona fide intention to use the mark either because they had trafficked in the marks or because they did not have the capacity in a business sense to carry out such an intention or because the application for registration was merely speculative. In each case the application was refused or the mark expunged in respect of all of the goods or services.  It is not appropriate in opposition proceedings for the Registrar to instigate an investigation in detail of the use or intention to use in respect of each and every item which might be covered in the applicant's specification and that the lodgment of the application and the applicant's statement of use or intention to use must on the principles explained in Aston v Harlee be accepted as prima facie evidence of the relevant use or intention to use.  The onus must be on the opponent to lead evidence showing a lack of intention or incapacity to use the mark for the relevant goods.

As to the delay in commencing the use of the trade mark, Mr Willis relied on what was said in Ducker's Trade Mark 45 RPC 397, at 402:

I agree that the goods need not be in being at the moment, and that there is futurity indicated in the definition; but the mark is to be a mark which is to be definitely used or in respect of which there is a resolve to use it in the immediate future upon or in connection with goods.  I think that the words "proposed to be used" mean a real intention to use, not a mere problematical intention, not an uncertain or indeterminate possibility, but a resolve or settled purpose which has been reached at the time when the mark is to be registered.

However, in Paintmaster Products v Lewis Berger & Sons (1925) 25 AOJP 1915 the Registrar expressed the view that an applicant might properly elect to delay use pending the outcome of the application for registration.  In that case it was said (at 1921) that:

The first of the three real issues which the opponent has raised against the applicants' mark with which I propose to deal relates to the fact that the applicants can claim no user for their proposed trade mark.

It is true that the applicants do not make any claim to have ever used "Paintmaster" as a trade mark for paints and varnishes, but the fact remains that application 106,606 has been made.  While there is a definite onus on the applicants to show that their mark should proceed to registration, the lodging of an application for registration of a trade mark gives an inchoate right to its exclusive use.  (Shell Company of Australia Limited v Rohm and Haas and Company Limited  (Ditrene case), 78 CLR 601).

I think that the applicants have shown that they have an honest intention to use their trade mark and that the fact that they have not yet used the mark (although a period of four years has passed since they lodged their application) does not in my opinion establish that they have been dilatory in exploiting their inchoate rights.  In his evidence before what is well-known as the Herschell Committee, Edmund Johnson showed that many applicants prefer not to use a mark practically in trade until it is registered.  When I take into account the applicants' claim that they intended to use the mark on new types of paints and varnishes and that much time and preparation would be involved in ensuring that their venture would be successfully effected on the scale an enterprise of their kind would launch, I am satisfied that their rights arising from the fact of the lodgement of their application cannot be extinguished at this stage on the grounds that they have shown no intention to use the mark.  The applicants obviously trade on a grand scale.  There is every reason to accept their claims that they are actually preparing to place new types of paints and varnishes on the market and that those goods will bear "Paintmaster" as their trade mark if their application is registered.

In the case of pharmaceutical products the applicant is legally bound to delay use of the mark in the course of trade until official approval for the marketing of the goods has been obtained.

All in all I cannot find that Horphag has discharged the onus on it of proving a lack of intention on the part of Mr Schwitters to use the trade mark pycnogenol in Australia or the lack of the requisite connection in the course of trade.

proprietorship

Mr Willis firstly submitted that Mr Schwitters was not entitled to claim to be the proprietor of the trade mark pycnogenol on the ground that on a number of occasions he had acknowledged the proprietorship of Horphag.  At Haimoff Exhibit B, for example, is a copy of a fax signed by Mr Schwitters but on the letterhead of MERCHANT INTERNATIONAL, Brokers and Consultants, dated 23 July 1989, in which he says:

Dutch Bio Farmaceutics [a business contracted to produce the finished product from the raw material for Mr Schwitters] agrees not to sell the raw material to any other party.

Please confirm to me, Merchant International, that Horphag does not put any restrictions on Merchant International to market and sell its finished pycnogenol product(s).

Horphag's response dated 28 August 1989 at Exhibit C:

Dear Mr Schwitters

IT IS OUR PLEASURE TO CONFIRM TO YOU THAT YOU MAY SELL ANYWHERE IN THE WORLD DIETARY PRODUCTS MADE WITH OUR EXCLUSIVE PYCNOGENOL EXTRACT OF PINE BARK, PROVIDED YOU ABIDE BY OUR QUALITY STANDARDS.

Haimoff Exhibit J is a letter signed by Mr Schwitters dated 19 March 1990 on MERCHANT INTERNATIONAL letterhead in which he states:

In my letter of August 28 1989 I have already confirmed that the raw material I buy from Horphag will only be used for dietary products.  Such dietary products I may sell in all proper distribution channels without any restrictions.

As far as I am concerned these shall be the rules between Horphag and me in selling your pycnogenol all over the world.  I wish to honor your, Horphag's and Masquelier's pioneer work, investments and dedication, and if there is a "score to be settled" I will always do so.

Again, at Exhibit ZA is another letter on Holland Health letterhead dated 8 June 1990 in which Mr Mulder and Mr Schwitters propose the conclusion of an agreement between HH and Horphag.  They say:

A matter of special interest is our use of your "pycnogenol" trade mark.

At Haimoff Exhibit V is a copy of a letter dated12 September 1990 and signed by Mr Schwitters and Peter Mulder, his partner, on Holland Health letterhead which includes the following

Pycnogenol is not only the tradename (proprietary name) of Horphag's raw material, but it is also the brandname which some distributors put on their finished product.

In consumer-markets consumers are reached with brandnames and not with ingredient-names.

The only exception to this rule is the American Health Food market, which is an ingredient-market in which people look for ingredients rather than for specific brands.

These ingredients are marketed under their generic (nonproprietary) names.

In the case of Horphag's Pycnogenol, this would be under "oligomeric proanthocyanadins" (as per Horphag's U.S. Patent).

They go on to ask whether "Horphag has protected the 'pycnogenol' trademark in" a number of countries, including Australia.

This evidence showed, said Mr Willis, that by contract and course of dealing between the parties, Mr Schwitters agreed that Horphag was the proprietor of the pycnogenol mark throughout the world.  He could not therefore claim to be the proprietor of the mark himself pursuant to s40 of the Act.

He relied on the following statement from Kronborg Isager v Boboli International Inc [1990] AIPC ¶90-702 at 36,521:

Regardless of use, the right to register a foreign mark is restricted to those who cannot be said to owe any duty to the proprietor of the foreign trade mark.  Thus the trade mark of a foreign company may not properly be registered in Australia by its agent or by an Australian importer of its goods or by an employee of the importer. 

Mr Cobden pointed out that that passage was obiter but did not take issue with it as a general proposition, although he said that in the particular application of it in each case there must be a close focus on the content of the :"duty" raised.  In this case, he said, Horphag relied on a past commercial relationship between itself and Holland Health (not Mr Schwitters).  He also made the following points:

• The relationship had come to a complete end a considerable time before Mr Schwitters lodged the present application for registration.

• The relationship was with HH , not with Mr Schwitters.

• Under what law did the relationship arise?  The law of the Netherlands, of the European Community or of some other place?

• What duties if any arise in such a relationship under the law of that place? What is the precise content of those duties?

• What consequences, if any, flow from a breach of any such duty?

• Did the relationship and any associated duties extend to Australia?

• What are the consequences of that relationship being terminated in the way that this one was?

Mr Cobden concluded that there was no evidence of any credible kind on which Horphag could assert that there was a relevant "duty" in the sense in which that word must be read in the Boboli case, supra.

Mr Willis also referred to cases such as Riv-Oland Marble Co v Settef SPA (1980) 19 FCR 570; Aston v Harlee (supra); Gynomin Trade Mark [1961] 15 RPC 408; Re the Registered Trade Mark "Yanx"; Ex Parte Amalgamated Tobacco Corporation Limited (1951) 82 CLR 199; Wham-O Manufacturing v Lincoln Industries Ltd [1985] 7 RPC 127; Hospital Products v US Surgical Corp (1984) 156 CLR 41; Blackadder v Good Roads Machinery Company Inc (1926) 38 CLR 332.

I think it is sufficient to say that as at the date of lodgment of the application there is, as far as I can see, no evidence of any fiduciary relationship between Mr Schwitters and Horphag or of any duty owed by Mr Schwitters to Horphag.  Any relationship between Holland Health and Horphag had long been terminated.  The agreement with Holland Health relied on by Horphag is dated 28 June 1990.  On 5 December 1990 Horphag wrote to Holland Health in the following terms (Haimoff Exhibit T):

Dear Sirs

We have learned through Selectchemie AG [ a distributor of Horphag] that you have failed to pay for the 40 kgs that you received through Selectchemie AG and that you refuse normal payment.

We must advise you therefore that you are no longer authorized to use on any of your packs or literature any references to either the trademark "Pycnogenol" or to our US patent nr 4.698.360

Over and beyond this we reserve all rights to prosecute.

The other matters raised by Mr Cobden are questions of foreign law, French, Dutch or European Union, and are beyond my competence to decide.

The second leg of Mr Willis' argument was that Horphag was the proprietor of the trade mark by virtue of being the first person to use the mark in Australia.  That use consisted of:

a)sales, or offer of sales of goods, under or by reference to the pycnogenol mark, to Mr Wagner;

b)sales, or offer of sales of goods, under or by reference to the pycnogenol mark, by Mr Wagner; and

c)sales, or offers of sales, of goods under or by reference to the pycnogenol trade mark, by Reseau International to Australians (including Mr Pollard and Mr Echano).

d)Sales, or offers of sales, or holding of samples by Australians; and

e)International promotions and publicity.

Mr Hans Wagner was a distributor and retailer of therapeutic products in Australia and New Zealand through businesses known as International Health Promotions (IHP) and Wagner Pro Biotics.  Mr Schwitters was introduced to Wagner late in 1989 by a third party and communications between the two ensued.  According to Haimoff para 27 Wagner subsequently obtained small quantities of "Endoclair/PYCNOGENOL" pine bark extract tablets and "Pycnogenol scientific, advertising and sales literature".  He imported the tablets in sufficient quantities for evaluation, test marketing and making of sales presentations to professional associates and retailers in the trade in Australia and New Zealand.  The tablets were imported under the trade mark endoclair but the promotional literature referred extensively to pycnogenol and the benefits of pycnogenol pine bark extract.  Haimoff Exhibit E is a copy of the packaging used for the goods.  It bears the words "Manufactured by Holland Health b.v. for Wagner Pro-Biotics" with addresses in Sydney and New Plymouth, New Zealand.  Mr Schwitters pointed out that nowhere on the packaging did the word "pycnogenol" appear and took exception to the use throughout the Haimoff declarations of the expression "Endoclair/PYCNOGENOL" as an attempt to mislead as to the use of pycnogenol in Australia.  While conceding that Wagner did not have the approval of the TGA to sell the tablets or capsules on an unrestricted basis to the general public Haimoff claimed that in anticipation of obtaining such approval he, Wagner, began preparing the Australian market by test marketing and distributing the product on a limited basis to "professional associate customers" and retailers in the trade and to people who consulted him personally about their health.  Mr Schwitters denied that in the absence of a TGA import permit any official test marketing ever took place.  He referred to the relevant provisions of the Therapeutic Goods Act 1989 (Cth). These are ss20 and 21 of that Act:

20. (1) A person who is the sponsor of therapeutic goods must not knowingly
or recklessly:

(a)  import the goods into Australia for use in humans; or

(b)  export the goods from Australia for use in humans; or

(c)  manufacture the goods for supply in Australia for use in humans; or

(d)  supply the goods in Australia for use in humans;

unless:

(e)  the goods are registered goods or listed goods in relation to the
person; or

(f)  the goods are exempt goods or are the subject of an approval under
section 19.

Penalty: $24,000.

…

(3) Where:

(a)  the importation or exportation of goods is prohibited under subsection
(1); and

(b)  the Secretary notifies the Comptroller-General in writing that the
Secretary wishes the Customs Act 1901 to apply to that importation or
exportation;

the goods are, for the purposes of that Act, to be taken to be prohibited
imports or prohibited exports, as the case may be.

Offence relating to wholesale supply

21. A person must not knowingly or recklessly supply in Australia
therapeutic goods for use in humans (other than listable devices), being goods
of which the person is not a sponsor, to another person who is not the
ultimate consumer of the goods unless:

(a)  the goods are registered goods or listed goods; or

(b)  the goods are exempt goods or are the subject of an approval
        section 19.

Penalty: $12,000.

In accordance with s3 of the Act

"sponsor", in relation to therapeutic goods, means:

(a) a person who exports, or arranges the exportation of, the goods from Australia; or

(b) a person who imports, or arranges the importation of, the goods into Australia; or

(c) a person who, in Australia, manufactures the goods, or arranges for another person to manufacture the goods, for supply (whether in Australia or elsewhere);

but does not include a person who: (d) exports, imports or manufactures the goods; or (e) arranges the exportation, importation or manufacture of the goods, on behalf of another person who, at the time of the exportation, importation, manufacture or arrangements, is a resident of, or is carrying on business in, Australia;

Section 7 of the Act provides that:

7. (1) Where the Secretary is satisfied that particular goods or classes of goods:

(a) are or are not therapeutic goods; or

(b) when used, advertised, or presented for supply in a particular way, are or are not therapeutic goods;

the Secretary may, by order published in the Gazette, declare that the goods, or the goods when used, advertised, or presented for supply in that way, are or are not, for the purposes of this Act, therapeutic goods.

(2) The Secretary may exercise his or her powers under this section of his or her own motion or following an application made in writing to the Secretary.

(3) A declaration under this section takes effect on the day on which the declaration is published in the Gazette or on such later day as is specified in the order.

Section 8 provides that:

8. (1) Where a person satisfies a person authorized by the Minister to issue certificates under this section that goods are not intended for therapeutic use the person so authorized may issue to the other person a certificate that this Act does not apply to the goods

(2) A certificate under the last preceding sub-section may be issued

unconditionally or subject to conditions.

(3) Where a condition subject to which a certificate under this section is issued is not complied with, the person to whom the certificate was issued shall be deemed to have committed an offence against this Act.

It was not suggested that a declaration under s7 or a certificate under s8 was ever applied for or obtained by any party.  Nor was it suggested that any party ever obtained registration for the goods by the Therapeutic Goods Administration until COLHAVEN achieved such registration well after the date of the application.  Horphag never claimed to have used the mark itself in Australia.  Rather, the use claimed was use by means of distributors whose use inured to the benefit of Horphag.

The concept of proprietorship was explained by McGarvie J in Settef v Riv-Oland Marble 10 IPR 402 at 413:

"Acquiring proprietorship

At common law (which in the present context is treated as including the principles of equity), property in a trade mark could only be acquired by public use of the mark as a trade mark.  The right of the proprietor of a trade mark was to prevent its use as a trade mark by other persons.  The original remedy for the protection of this right was an injunction to restrain infringement.  Principles as to the way in which the discretion should be exercised to protect a trade mark by injunction were settled by the Court of Chancery.  The cases which settled these principles established the types of trade marks in which a person would be recognised as having a right of property which would be protected by injunction: G E Trade Mark [1973] RPC 297 at 324-7 per Lord Diplock.

The basic common law principle is that the first person who uses a trade mark of an appropriate type within a country becomes the proprietor of the mark there: Re Registered Trade Mark "Yanx"; Ex parte Amalgamated Tobacco Corp Ltd (1951) 82 CLR 199 at 203; Thunderbird Products Corp v Thunderbird Marine Products Pty Ltd (1974) 131 CLR 592 at 603; Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) 59 ALJR 77 at 83. A person who becomes proprietor of a trade mark in this way is entitled at common law to restrain a person who later commences to use the trade mark.

The proprietor is not entitled to restrain a later user who is an honest concurrent user of the trade mark.  For example, a person who innocently commences to use the trade mark, unaware that this infringes the proprietor's right is an honest concurrent user.  At common law neither the proprietor nor the honest concurrent user could restrict the other from using the trade mark, but each could restrain a usurper who used the mark: G E Trade Mark, supra, at 326.  The rights of concurrent users are discussed in more detail later.

In considering who, within s.40(1) of the Act, was at the time of Settef's application for registration the proprietor of the trade mark, one considers who at common law was the proprietor in Australia: The Shell Co of Australia Ltd v Rohm & Haas (1949) 78 CLR 601 at 625 and 627. Settef claims to be the first person to have used the trade mark in Australia and therefore to have been proprietor at common law in Australia.

Use of the trade mark by Settef overseas gave it no right to proprietorship in Australia.  Any use at all in Australia gave it that proprietorship: the Thunderbird case (1974) 131 CLR 592 at 600.

The fact that a manufacturer is proprietor of a trade mark overseas and has earlier used it overseas does give it a forensic advantage in a contest between it and an Australian distributor who claims proprietorship of the trade mark.  There is authority that a court will regard slight use in Australia by the overseas proprietor as sufficient to give it proprietorship of the trade mark in Australia: The Seven Up Co v O T Ltd (1947) 75 CLR 203 at 211; Aston v Harlee Manufacturing Co (1960) 103 CLR 391 at 400; Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) 59 ALJR 77 at 83."

The right to claim proprietorship of a mark within the meaning of s.40(1) therefore depends on first use of the mark in Australia.  The meaning of the word "use" in the Act (and there is no relevant difference between the concept of use at common law and that used in the Act) is to be understood in the context of the definition of "trade mark" in s.6(1) of the Act: W D & H O Wills (Australia) Ltd v Rothmans Ltd (1956) 94 CLR 182 at 191; Estex Clothing Manufacturers Pty Ltd v Ellis & Goldstein Ltd  (1967) 116 CLR 254 at 271.  That definition is as follows:

"trade mark means ‑

(a)except in relation to Part XI, a mark used or proposed to be used in relation to goods or services for the purpose of indicating, or so as to indicate, a connexion in the course of trade between the goods or services 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 ; ...

The word "use" itself is defined in s.6(2) as follows:

(2)In this Act ‑

(a) references to the use of a mark shall be construed as references to the use of a printed or other visual representation of the mark; and

(b) references to the use of a mark in relation to goods shall be construed as references to the use of the mark upon, or in physical or other relation to, goods.

It is essential therefore that the use relied on by a person claiming proprietorship of a mark be use for the purpose of indicating or so as to indicate a connection in the course of trade between the relevant goods and that person.  As to the use of the mark by an overseas manufacturer exporting goods to Australia Windeyer J. observed in the Estex case (supra) at 271:

"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."

What constitutes a connection in the course of trade for establishing prior use of a mark in Australia was discussed by the High Court in Moorgate Tobacco v Philip Morris 3 IPR 545 at 557:

"To establish prior use of the mark in Australia, Moorgate relies upon evidence that, during or in connection with discussions between Loew's and Philip Morris about the introduction of the low tar and nicotine cigarette in Australia, packets of cigarettes and associated advertising material displaying the name "KENT GOLDEN LIGHTS" were handed personally, or in one instance sent by mail, to representatives of Philip Morris in Australia.  That evidence indicates that there were at least three occasions on which such cigarette packets and advertising material were so delivered.  At the times when those items were so delivered, there was no intention on the part of Loew's that it would itself trade in the goods in Australia.  Nor, for that matter, had it been decided what name would be used if Philip Morris were, under licence from Loew's, to commence to manufacture and market the goods in Australia at some indefinite future time.

The court was referred to a large number of cases and to some administrative decisions in which consideration has been given to what constitutes a use or user of a trade mark for the purposes of the statutory notion of proprietorship of the mark before registration.  The cases establish that it is not necessary that there be an actual dealing in goods bearing the trade mark before there can be a local use of the mark as a trade mark.  It may suffice that imported goods which have not actually reached Australia have been offered for sale in Australia under the mark (Re Registered Trade Mark "Yanx"; Ex parte Amalgamated Tobacco Corporation Ltd, supra, at 204‑5) or that the mark has been used in an advertisement of the goods in the course of trade (Shell Co of Australia v Esso Standard Oil (Australia) Ltd, supra, at 422).  In such cases, however, it is possible to identify an actual trade or offer to trade in the goods bearing the mark or an existing intention to offer or supply goods bearing the mark in trade.  In the present case, there was not, at any relevant time, any actual trade or offer to trade in goods bearing the mark in Australia or any existing intention to offer or supply such goods in trade.  There was no local use of the mark as a trade mark at all; there were merely preliminary discussions and negotiations about whether the mark would be so used.  The cigarette packets and associated advertising were delivered to Philip Morris to demonstrate what Loew's was marketing in other countries and what Philip Morris might market, under licence from Loew's, if it decided to manufacture and trade in the goods in Australia and to use the mark locally at some future time.  There was no relevant trade in the goods in Australia and the delivery of the cigarette packets and associated material to Philip Morris did not, in the circumstances, constitute a relevant user or use in Australia of the mark "KENT GOLDEN LIGHTS" for the purpose of indicating or so as to indicate a connection in the course of trade between the new cigarettes and Loew's."

In order to establish use in the relevant sense then it must be possible to identify an actual trade or offer to trade in the goods bearing the mark or an existing intention to offer or supply goods bearing the mark in trade.  In the Moorgate case the Court found that there had been no actual trade or offer to trade in goods bearing the mark in Australia or any existing intention to offer or supply such goods in trade.  There was no local use of the mark as a trade mark at all; there were merely preliminary discussions and negotiations about whether the mark would be so used.  Likewise, in W.D. & H.O. Wills (Australia) Ltd v Rothmans Ltd (1956) 94 CLR 182 cigarettes under the relevant trade mark were available in America. An Australian company having some association with the American manufacturer transmitted orders from Americans living in Australia to the American company. The cigarettes were purchased and paid for in the United States-i.e. no money was sent from Australia. They were then sent direct to the purchasers in Australia. The Australian company took no part in the importation but received a commission. The cigarettes were labelled as having been made in the United States for the Australian Company. The High Court held that there was no use of the trade mark in Australia because all "trade" in the goods took place in the United States. Trading ended once goods were purchased or otherwise acquired for consumption. On the other hand in the Thunderbird case (1974) 131 CLR 592 the importation of one unit as a prototype for the purpose of building and selling the goods in Australia was held to be use in Australia by the exporter. The Australian manufacturer who received the unit was not entitled to register the trade mark. Also, in Blackadder v The Good Roads Machinery Co. (1926) CLR 332 an Australian company imported machinery from the United States bearing the American exporter's trade mark. The Australian company removed the exporter's trade mark and put its own trade mark on the goods before sale. Although purchasers never saw the exporter's trade mark, the exporter was held to have used it in Australia.

In the absence of fraud it is not unlawful for a trader to become registered proprietor of a trade mark which has been used, however extensively, by another trader as a trade mark for similar goods in a foreign country, provided there has been no use of the foreign trade mark in Australia at the date of application for registration (per Williams J. in The Seven Up case).

Regardless of use, the right to register a foreign mark is restricted to those who cannot be said to owe any duty to the proprietor of the foreign trade mark.  Thus the trade mark of a foreign company may not properly be registered in Australia by its agent or by an Australian importer of its goods or by an employee of the importer.  Any such registration will be invalid even if the agent is honestly registering to protect the principal, or if the goods have never been sold in Australia bearing the trade mark (the "Certina" case (1970) 44 ALJR 191, also Blackadder v Good Roads (supra).

The question for decision therefore is whether the transactions relied on by the opponent constitute use of the mark in light of the principles set out above.

In the Thunderbird case it was not clear that the name "Thunderbird" appeared on the boat itself.  Nevertheless, Jacobs J. found that use of the trade mark in correspondence, invoices and shipping documents relating to the consignment of the goods to Australia was a sufficient use.  In following this decision McGarvie J. in Settef v Riv-Oland was prepared to infer, in the absence of any indication that any consignment of goods shipped from Italy to Australia did not arrive, that the consignments reached the consignees.  In the present case there is no direct evidence of use of the trade mark pycnogenol on packaging, invoices receipts etc.  The evidence consists of alleged use on promotional material and on the evidence of witnesses.

The evidence relied on by Horphag comprises two separate and distinct series of events.  The first consists of alleged use by Mr Schwitters and Hans Wagner and his businesses which Mr Willis referred to as the "Australian Connection via Wagner".  The second consists of alleged use by an American company, Reseau, which Mr Willis called the "Australian Connection via Reseau".

The Wagner connection is said to have taken place during the years 1989-90 and consisted of sales to customers in Australia of goods by International Health Promotions and Wagner Pro-Biotics which were exported to Australia by Holland Health.  John Booth states in his declaration that he had been "involved" in the health foods and therapeutic goods industry in Australia since 1979, and from June 1988 to March 1995 was employed as Product Manager of IHP which traded as Wagner Pro-Biotics of which Wagner was the chief executive officer and effective owner and controller.  Wagner also operated and controlled a New Zealand company, also known as Wagner Pro-Biotics.  That company was a wholesaler and retailer of health foods and therapeutic goods and had a large mail order business.  Mr Booth states that Wagner entered into commercial arrangements with Mr Schwitters in 1990 to import "EndoClair/pycnogenol" capsules with a view to marketing and selling them in Australia and New Zealand.  He further states that he personally witnessed numerous sales of the product from the Sydney office to customers including professional associates of Wagner and people who consulted him, Wagner, about their health.  Wagner was accustomed to refer to the goods as pycnogenol rather than to the trade mark endoclair.  He did not offer the capsules for retail sales to the general public but Australian customers would contact Wagner in Australia or New Zealand in person or by mail or telephone.  Sales were made on a commercial basis and payments were made to Wagner.  In October 1990 Wagner arranged for a submission to be prepared to the TGA to gain a licence to import pine bark extract capsules into Australia.  That application was refused.

Dr Ian Brighthope states that he is a qualified medical practitioner specialising in nutritional and environmental medicine and that he has for many years studied and promoted the benefits of anti-oxidants.  He says that he first became aware of pycnogenol in 1992 or early 1993 through an associate who had imported pine bark extract from Horphag in around 1989/90.  That associate's application to the TGA was also not successful, or was not pursued.  The rest of his declaration is largely matters of opinion as to the market awareness of pycnogenol and the likelihood of deception or confusion.

Mr Wayne Coote states that he is the managing director of Pathway International, a company that specialises in the supply of "speciality health care ingredients".  He states that in 1996 he was engaged by Charles Haimoff of Horphag to supply pycnogenol pine bark extract in Australia.  Like Dr Brighthope Mr Coote refers to the personal importation scheme whereby individuals may import products which are not listed by the TGA for their personal use.  This is an exception to the provisions of the Therapeutic Goods Act 1989.

John Maher states that he was hired in 1990 by Wagner to assist him with the marketing of endoclair.  He states that endoclair was the brand name used by Wagner but that Wagner told him that the capsules contained pycnogenol pine bark extract and that pycnogenol was a trade mark owned by Horphag.  Wagner, he says, used pycnogenol to promote the product in Australia in 1990 and 1991, that in 1990 he commenced marketing, promoting and selling "EndoClair/pycnogenol" tablets on a limited basis.

Dr W Lamar Rosquist states that he is a "chiropractic physician" and that he first became aware of pycnogenol in January 1992 through personal use and has dispensed it to his patients since 1992.  His first visit to Australia to promote pycnogenol was in 1995 when he found that pycnogenol was "reasonably well-known".

Of the declarants above only Mr Booth and Mr Maher definitely refer to events prior to the application date of 28 August 1992.  Dr Brighthope's declaration contain matters of hearsay to which I can give little weight.  Both Messrs Booth and Maher refer to a double-sided Data File issued by WAGNER PRO-BIOTICS headed "endoclair Pine Bark Extract".  It is true that the word pycnogenol appears twice on the obverse, once in reference to the nature of Oligomeric Proanthocyanadins, in the statement:  "This unique raw material is trade marked as:

O.P.C. - 85  Pycnogenol  endoclair

However, this statement is clarified further down the page:

Marketed as Pycnogenol endoclair has already been introduced in North America, France, Finland, Holland, Germany Italy, Singapore, Korea, Argentina and Switzerland.

Clearly, the reference is to the trade mark used in the overseas countries mentioned, in relation to the goods manufactured from pine bark extract and not to trade mark use in relation to the goods to be marketed in Australia.  There is no reference to pycnogenol on the endoclair packaging, a copy of which is produced by Mr Haimoff himself at Exhibit E.  Moreover, the description of the product in the Wagner Pro-Biotics price list is "Endoclair Herbal Antioxidant.  Each capsule contains 42.5 mg OPC".

The reverse side of the Data File consists of a paper by a Steve S Choi who is described as a certified nutritionist and member of SCN (Society of Certified Nutritionists).  Mr Choi uses the word pycnogenol freely in describing the characteristics and benefits of the pine bark extract.  However, at the bottom of the page occurs the statement:

Pycnogenol is the european equivalent of ENDOCLAIR

I cannot therefore find that use to be trade mark use in relation to goods to be marketed in Australia.

On the whole I find that there is a lack of evidence as to the use of pycnogenol by Mr Schwitters or Wagner as a trade mark in Australia in relation to the relevant goods before the date of the application for registration

The second leg of Mr Willis' argument supporting the claim to first use relies on the Reseau connection.

Vince Rimmer states that he has been the managing director of Kaire Australia, a marketing company with associated offices throughout the world including New Zealand and the United States, since November 1994.  His company distributes pycnogenol from Horphag.  Mr Rimmer states that he is aware that pycnogenol has been sold into Australia since at least early 1991 by a company called Reseau International.  He further states that when he came to Australia he discovered that pycnogenol was not listed with the TGA and that therefore the product could not be retailed here.  Distributors of the product were therefore forced to rely on the personal importation scheme and Kaire continued to do so.  That scheme, he says, is not a loophole in the law but a valid mechanism which enabled people to import therapeutic goods into Australia for personal use even though they were not listed with the TGA.  Kaire Australia facilitated purchases of pycnogenol for its associates from Kaire in New Zealand.

Nikitis Mangeris states that he is president of Kaire International Inc (Kaire) which he founded in October 1992.  Prior to that he was Executive Vice President of Reseau International, a multi-level marketing company which included in its product line pycnogenol pine bark extract and sold those products in the United States, Canada, England, Australia and other countries.  Reseau obtained tablets and capsules containing pycnogenol pine bark extract from North West Marketing which in turn obtained pycnogenol from MW International Inc which he understood to be the exclusive distributor of pycnogenol for Horphag in the United States.  He states that he personally supervised the sale of pycnogenol pine bark capsules and tablets to Australia as early as 1991.  With Horphag's permission Reseau sold pycnogenol capsules and tablets in Australia to health care professionals and members of the general public by mail order from 1991 until he left the company in late 1992.

Michael Moers states that he is Executive Vice President of MW International Inc (MW) which since 1991 has provided companies such as North West Marketing with pycnogenol pine bark extract.  That company transformed the extract into capsules and tablets and provided them to Reseau, which then sold them to consumers.  From 1991, he says, Reseau sold the capsules under the brand name pycnogenol to health care professionals and members of the general public in Australia, in addition to sales made in the United States and Canada where Horphag is the registered owner of the trade mark pycnogenol.  He confirms that Mr Mangeris, as Executive Vice President of Reseau, was ultimately responsible for sales of products made from pycnogenol pine bark extract in countries such as Australia.

Louis Clayton Jones states that he is an attorney at law and during the period 1991 to 1994 was the chief executive officer of Reseau.  Reseau received its pycnogenol finished product, after 1991, from independent manufacturers each of which was required by Reseau to purchase its raw material from MW which was the North American distributor of pycnogenol raw material.  In 1991, he says, he was aware of and personally supervised sales of pycnogenol tablets and capsules to distributors in Australia, among whom were Arthur M Echano and Ronald J Pollard.  The pycnogenol products sold in Australia were sold in the same packaging in which they were distributed in the United States and visibly portrayed the pycnogenol trade mark.  The original shipping documents and other records pertaining to Reseau's shipments of pycnogenol to Australia prior to August 1992 were destroyed by water damage resulting from a flood suffered by Reseau in the winter of 1993.

Ron Pollard states that he was introduced to pycnogenol pine bark extract in 1991 by a distributor for Reseau while in the United States.  He applied to become a distributor himself with the intention of being able to order the product from Australia on his return.  To the best of his recollection he ordered consignments from Reseau on at least one occasion in early 1992 and possibly on other occasions during that year.  The deliveries of the product were made in good order in early 1992.  In 1992 he returned to the United States and recalls there were other Australians there who were interested in the product

Kimberly Flynn states that she is currently in the employ of MW and has the title of Executive Secretary and has been employed by MW since December 1991.    She states that as part of her duties she was responsible for the regular maintenance of the MW files pertaining to pycnogenol, including brochures. She is personally aware that the two-page document bearing the MW company name entitled "Standard Terms and Conditions-of Sale" - effective 3/31/91 [ie 31. 3 91] - was retrieved from MW's 1991 files of pycnogenol.  She exhibits a copy of this document as Exhibit A.  She says that the document was regularly distributed to customers and potential customers of pycnogenol in the United States and elsewhere.  The relevant part of the document referred to by Ms Flynn seems to be as follows:

H) ALL LABELS, PACKAGING, AND PROMOTIONAL LITERATURE MUST DISPLAY THE TRADEMARK SYMBOL "TM" AT THE UPPER RIGHT-HAND CORNER OF THE NAME, "PYCNOGENOL" WHEREVER THE NAME OCCURS IN OR ON THE LABELING, PACKAGING AND LITERATURE.  IN ADDITION THE PHRASES

HORPHAG RESEARCH LIMITED, ST PETER PORT, GUERNSEY, CHANNEL ISLANDS, UK

PROTECTED BY US PATENT # 4,698,360 AND INTERNATIONAL PATENTS.

MUST APPEAR ON SAME AT A LOCATION CHOSEN BY THE MARKETER.

As with the so-called Wagner connection the Reseau connection produces no direct evidence of the sale of goods of the relevant type in Australia under the trade mark pycnogenol in the form of packaging, advertising, invoices etc.  The only evidence is secondary evidence of the sort outlined above.  There is no evidence of the use of pycnogenol as a trade mark in the course of trade in Australia by any other person.  As to sales to Australian consumers by way of the personal importation scheme WD & HO Wills (Australia) Limited v Rothmans Limited (1956) 94 CLR 182 per Dixon CJ, McTiernan, Williams, Webb and Taylor JJ is directly in point. In that case individual consumers imported cigarettes from the United States for personal consumption. The Court said:

The offer to purchase, the sale, the payment and the delivery of the goods to the purchasers, either f.o.b. or by placing them in the post, all took place in the United States.  The import licences were granted to the concerns or persons in Australia to whom the goods were consigned.  The appellant took no part whatever in the importation.  The transaction, so far as it or the British-American Tobacco Co was concerned, was complete when the goods were consigned to the purchasers.  The smokers in Australia were not interested in any cigarettes except those being sold in the United States under the name "Pall Mall".  These were the cigarettes they were seeking and they were prepared to complete the purchase there and have the cigarettes consigned to Australia at their own risk.  After the cigarettes had been purchased, paid for and consigned to the purchasers from the United States to be carried by ship or post or by some other means of conveyance to Australia the purchasers were alone interested in the goods.  When they arrived, there remained for the purchasers the pleasant task of smoking them.  The cigarettes were not imported for sale.  They were imported for consumption.  The cigarettes that reached Australia for consumption by the Australian purchasers were in no different position from cigarettes which a traveller might have purchased in the United States and brought with him to Australia for his own consumption here.  If a purchaser instead of smoking the cigarettes had attempted to resell the packets he would of course have used the trade mark and would have been liable to be sued for infringement under s53 of the Trade Marks Act.  But that would have been an unlawful use of the trade mark by the purchaser and not a use by the proprietor of the trade mark and it is the latter use only with which we are concerned.

In our opinion the whole trading in the cigarettes took place in the United States. It was there and there only that the trade mark "Pall Mall" was being used for the purposes of trade. When the goods left the United States they were no longer in the course of trade. Trading in them had finished. They had been consigned to the consumer and were at his risk. To repeat the words of Lord McMillan: "After goods have reached the consumer they are no longer in the course of trade. The trading in them has reached its objective and its conclusion in their acquisition by the consumer" [1945] AC at 97.

And in answer to the objection that the sale of cigarettes was made on behalf of Wills the Court said:

But this would not be a use of the mark in Australia.  It would be a use of the mark in the United States where the goods were offered for sale and sold.  It was only there that the mark was being used for the purposes of trade.  The appellant was not offering for sale or selling any Pall Mall cigarettes in Australia either directly or indirectly.

As to the two Australian "distributors" mentioned in the Clayton Jones declaration, Mr Echano states in his declaration that he did not become a "distributor" for Reseau until early in 1993 following a visit from his father from the United States.  On joining he received one bottle of a product called ANNEDA and payment was made in the USA, in American dollars.  He states that he did not order any product from Reseau thereafter and the statement made by Clayton Jones that he purchased pycnogenol tablets and capsules is wrong.  Mr Pollard does not say that he ever attempted to resell the goods.  Indeed, the whole tenor of his declaration is that he wanted the goods for his own consumption.  Furthermore, in his declaration Robert Williams declares that he spoke to Mr Pollard by telephone on 8 September 1997 and had a conversation with him to the following effect:

He said:  "Hello"

I said:  "Good evening, I was after Ron Pollard"

He said:  "Speaking"

I said:"My name is Robert Williams.  I am a solicitor with Andersen Legal.  Did you recently provide a declaration in relation to a dispute over the trade mark pycnogenol?"

He said:"Yes I did."

I said:"I was wondering if you would mind answering a few questions for me in relation to your declaration.  I am on the other side in that matter, and after reading your declaration there are a few things I am no sure about."

He said:"That is fine."

I said:"In paragraph 2 you say that you joined Reseau International (Reseau)."

He said:"Yes I did."

I said:"Where did you join, in the USA or when you got back to Australia?"

He said:"I think I signed the distributor agreement whilst I was still in Clearwater."

I said:"Did you buy the pine bark product whilst you were in the USA?"

He said:"Yes, I bought some whilst I was in Clearwater and I brought some back with me to use in Australia."

I said:"Did you order any more once you were back in Australia?"

He said:"Yes I think I did."

I said:"Did you pay someone here in Australia or did you send your order back to the USA?"

He said:"No I sent it back to the USA."

I said:"How did you pay for it?"

He said:"It seems most likely it was with a credit card.  At that time I still had a cheque account with a bank in Clearwater, the bank changed its name to AM Southbank but I cannot remember what it was called then.  I could have paid with a cheque drawn on that account but I think I just used a credit card and filled out the details and the amount in US dollars on the order form."

I said:"So you paid in US dollars rather than Australian dollars?"

He said:"Yes."

I said:"Did you just buy the product for your own use or did you resell it to others?"

He said:"I was not going to sell it at the time I was not totally committed to it.  I still use the product but I buy it from Kaire.  Kaire sends it from New Zealand so it is quicker than obtaining it in the USA and then having it sent out to Australia."

I said:"Do you remember when Reseau went out of business?"

He said:"Not really, as I had switched to Kaire while Reseau were still operating."

I said:"Look I really appreciate the time you have taken tonight.  I just have one last question for you.  In paragraph 3 of your declaration you say you returned to Australia in late 1991, are you able to remember any more specifically than that?"

He said:"Not really.  I know it was still during 1991 as I was not over in the US for the Christmas/New Year period."

Clearly, this is hearsay and should be given only the weight due to it as such.  However, taken together with Mr Pollard's own declaration and that of his wife, below, it seems extremely unlikely from the three pieces of evidence that Mr Pollard ever sold any product bearing the trade mark pycnogenol.

Fay Anne Pollard, wife of the above Ron Pollard, has made a declaration in which she states that in or about March 1990 her husband purchased on his visit to the United States from a company named Reseau International one sample each of products which she describes as follows:

(a)   ANNEDDA™ (Facial Crème);

(b)   ANNEDDA™ (PYCNOGENOL FROM FRANCE);

(c)   ANALOE™; and

(d)   FORMULA FRS™ (PYCNOGENOL and Essential Trace Elements).

There is some discrepancy in the date of Mr Pollard's trip to the US.  However, as she states that the containers were still in their possession one thing is clear, that the contents were intended for personal use and not for resale.  She states that pycnogenol™ was listed on the label as an ingredient in the first, second and fourth of the products listed.

Mr Rimmer concedes in his declaration that the only means of selling the goods in Australia was through the personal importation scheme which I have found not to be a use in the course of trade in Australia

I must therefore conclude that there is no factual evidence of the use of the trade mark pycnogenol in Australia by any person in the course of trade prior to the date of Mr Schwitters' application to register the word.  Furthermore, any sales of pine bark extract in Australia under that trade mark or any other would have been contrary to the Therapeutic Goods Act 1989 and therefore illegal.  On this aspect of the matter Mr Cobden argued that no inference of any sales should be drawn from what would have been a criminal offence.  As a matter of public policy, he said, opposition to the registration of the mark should not be allowed on the basis of an illegal act.  There was no evidence of even that slight use that the courts would be quick to accept, as it was stated in the Seven Up case, supra.  Mr Cobden referred to Robinson's Settlement, In re Gant v Hobbs (1912) 1 Ch 717 at 725 per Cozens-Hardy MR:

The transaction is illegal under the Money-lenders Act.  That has been decided by this Court, and the authority which was cited by Mr Terrell - Scott v Brown, Doering, McNab & Co - to which no reply has been or could be given, is extremely in point on that question. There Lindley LJ giving the leading judgment, says: "ex turpi causa no oritur actio"  This old and well-known legal maxim is founded in good sense, and expresses a clear and well-recognised legal principle, which is not confined to indictable offences.  No Court ought to enforce an illegal contract or allow itself to be made the instrument of enforcing obligations alleged to arise out of a contract or transaction which is illegal, if the illegality is duly brought to the notice of the Court, and if the person invoking the aid of the Court is himself implicated in the illegality.  It matters not whether the defendant has pleaded illegality or whether he has not.

If I am wrong in my conclusion that there is no evidence of the use of the trade mark in Australia before the relevant date, and there was in fact use of the trade mark and that use was by Mr Schwitters or Holland Health then Horphag relies on an "exclusive agent agreement" between Horphag (manufacturer) and Holland Health (licensee) made on 28 June 1990 by which Holland Health became the "exclusive agent" of Horphag.  A copy of the agreement is at Exhibit C of the declaration of David Bertram Fitzpatrick.  Some of the relevant terms are set out below:

WHEREAS HORPHAG RESEARCH LTD seeks distributors which will make finished products with the raw material.

AND WHEREAS HOLLAND HEALTH B.V. seeks to be identified as the sole and exclusive Dutch manufacturer for Pycnogenol raw material powder for the requirements of Dietary products with all rights and privileges attendant thereto.

NOW THEREFORE, the parties intending to be legally bound do hereby agree as follows:

2      The product is defined as Pycnogenol pine bark extract in powder form…

13(1)Manufacturer licenses licensee to be the exclusive manufacturer of finished dietary products made with the product in the Netherlands, Belgium and Luxembourg (Benelux).

14(1)Manufacturer unconditionally gives to licensee the right to market and distribute under licensee's brandnames finished dietary products made with product all over the world, without limitations.

(2)At the discretion of licensee, licensee may make use of manufacturer's registered trademark "pycnogenol" to designate manufacturer's product, as described in section 2, provided that the word Pycnogenol is followed by the indication TM

18(1)This agreement contains the entire agreement between the parties…

19Manufacturer shall not acquire any rights to any trademark, copyright, or other property developed by licensee.

21Arbitration [in case of dispute] will take place according to the rules of the above-mentioned Act [the Swiss Federal Act on International Law of December 1987]

The venue of arbitration is Geneva.

The Court of arbitration will rule in equity.

Horphag contends that any use by HH or Mr Schwitters in Australia should accrue to Horphag by virtue of this agreement.  As I pointed out above, Horphag effectively terminated the agreement on 5 December 1990 so that any use that might possibly inure to the benefit of Horphag would have to be use between those two dates.  There is no evidence of any such use.  Moreover, the interpretation of the agreement is governed by foreign law, French, Dutch, Swiss or European Union, as to which there is no evidence before me .

fraud

A closely related matter to that above is the question of fraud.  Mr Willis argued that this case was a simply a case of fraud.  Mr Cobden submitted that every allegation of fraud must be rejected as fraud was not pleaded.  He said that the rule that fraud must be pleaded and particularised with great precision is now embodied in the Rules of Court of the various superior courts (see eg the Federal Court Rules O 12 r 5).  This is a codification of the common law rule.  As was said in Joseph Constantine Steamship Line, Ltd v Imperial Smelting Corporation Ltd [1942] AC 154 at 192 per Lord Wright:

There is, for example, no presumption of fraud.  It must be alleged and proved:

And in Wallingford v Mutual Society (1880) 6 App Cas at 697 per Lord Selborne, LC:

With regard to fraud, if there be any principle which is perfectly well-settled, it is that general allegations, however strong may be the words in which they are stated, are insufficient even to amount to an averment of fraud of which any Court ought to take notice.  And here I find nothing but perfectly general and vague allegations of fraud.  No single material fact is condescended upon, in a manner which would enable any Court to understand what it was that was alleged to be fraudulent.  These allegations, I think, must be entirely disregarded; and the conclusion is that it is only for the purpose of taking the account that any defence ought to be admitted in this case.

In the same case per Lord Hatherley at 701:

There is the question of fraud upon which I said I should touch in one moment.  Now I take it to be as settled as anything well can be by repeated decisions, that the mere averment of fraud, in general terms, is not sufficient for any practical purpose in the defence of a suit.  Fraud may be alleged in the largest and most sweeping terms imaginable.  What you have to do is, if it be matter of account, to point out a specific error, and to bring evidence of that error, and establish it by evidence.  Nobody can be expected to meet a case, and still less to dispose of a case, summarily upon mere allegations of fraud without any definite character being given to those charges by stating the facts upon which they rest.

And, in the same case per Lord Watson at 709:

My Lords, it is a well-known and a very proper rule that a general allegation of fraud is not sufficient to infer liability on the part of those who are said to have committed it.  And even if that were not the rule of Common Law, I think the terms of Order XIV would require the parties to state a very explicit case of fraud, or rather of facts suggesting fraud, because I cannot think that a mere statement that fraud had been committed, is any compliance with the words of that rule which require the Defendant to state facts entitling him to defend.  The rule must require not only a general and vague allegation but some actual fact or circumstance or circumstances which taken together imply, or at least very strongly suggest, that a fraud must have been committed, those facts being assumed to be true.

See also Middleton v O'Neill (1943) 43 SR (NSW) 178 at 184 per Jordan C; Banque Commerciale SA, in Liquidation v Akhil Holdings Ltd (1991) 169 CLR 279 at 285 per Mason CJ and Gaudron J:

It has long been recognised that fraud may take a variety of forms and is, on that account, incapable of precise definition.  See, eg, Draper v Dean (1679) Finch 439[ 23 ER 239]; Reddaway Banham [1896] AC 199 at 221; Allcard v Skinner (1887) 36 Ch D 145 at 183. The variety of matters which may constitute fraud prevents any construction of the proviso to s69(1) of the [NSW Trustee Act] which would require a defendant to negate fraud. That variety effectively deprives a party who may or may not have acted fraudulently from ascertaining precisely what must be negatived. Indeed, it is this feature of fraud which underlies the rule of practice, now embodied in Pt 15 r 13 and Pt 16 r2 of the Rules, that fraud must be pleaded specifically.

Mr Willis responded that fraud was sufficiently raised in the notice of opposition in the grounds dealing with the proprietorship of the mark under s40 of the Act, the grounds dealing with the use of the mark being contrary to law and not entitled to protection in a court of justice under s28 of the Act and in the ground invoking the exercise of the Registrar's discretion.  Secondly, he submitted that the matter was sufficiently raised in the first Haimoff declaration so as to put the applicant on notice, which was the essential matter. There was no ambiguity about the opponent's intention to argue fraud, which was an ingredient of natural justice whether pleaded or sufficient notice otherwise given to the other side.  There was no requirement, he said, that fraud be pleaded in a notice of opposition as long as the applicant was otherwise aware that the matter would be argued.  This tribunal was not a court of law which was bound by the procedural rules of pleadings.  Mr Schwitters should have been aware of the charges made against him because of international litigation concerning the trade mark.  In this case fraud was the gist of the matter and a key element of certain parts of the case.  Other allegations in the opposition depended on the intention to defraud.  Fraud was not the cornerstone of the case against Mr Schwitters but merely an element of other grounds.

While I agree with Mr Willis that this tribunal is not a court and so is not bound by rules of court as to pleadings, it seems to me that the weight of authority is that the necessity that fraud must be specifically alleged and particularised is a rule of common law, which this tribunal ought to follow.  The grounds set out in the notice of opposition do not allege fraud and I do not think that that allegation can be inferred from the grounds relating to proprietorship of the mark or matters under s28, or to the application of the Registrar's discretion.

section 28

Section 28 of the Act is in the following terms:

28. A mark-

(a) the use of which would be likely to deceive or cause confusion;

(b) the use of which would be contrary to law;

(c) which comprises or contains scandalous matter; or

(d) which would otherwise be not entitled to protection in a court of justice,

shall not be registered as a trade mark.

Mr Willis briefly addressed paras (b) and (d), relying mainly on submissions made in respect of other grounds of opposition such as illicit appropriation by Mr Schwitters, fraud, blameworthy conduct etc.  His principal submission was in relation to para (a) of the section and in particular the relevant date at which the likelihood of deception and confusion falls to be considered.  He referred to the judgment of Kitto J in the leading case of Southern Cross Refrigerating Co v Toowoomba Foundry Pty Ltd (1954) 91 CLR 592 in which His Honour listed a number of criteria to be considered in the application of s114, the predecessor of s28, of the Trade Marks Act 1905 Kitto J there said, at first instance:

a)    in all applications for registration of a trade mark the onus is on the applicant to satisfy the Registrar (or the Court) that there is no reasonable probability of confusion;

b)   it is not necessary in order to find that a trade mark offends against the section, to prove that there is an actual possibility of deception leading to a passing off.  While a mere possibility of confusion is not enough - for there must be a real, tangible danger of its occurring ... it is sufficient if the result of the user of the mark will be that a number of persons will be caused to wonder whether it might not be the case that the two products come from the same source.  It is enough if the ordinary person entertains a reasonable doubt;

c)    in considering the possibility of deception, all the surrounding circumstances have to be taken into consideration.  (This includes the circumstances in which the goods will be bought and sold, and the character of the probable purchasers of the goods);

d)   in applications for registration, the rights of the parties are to be determined as at the date of the application;

e)    the onus must be discharged by the applicant in respect of all goods coming within the specification in the application ... and not only in respect of those goods on which the applicant is proposing to use the mark immediately.  And the onus is not discharged by proof only that a particular method of user will not give rise to confusion.  The test is, what can the applicant do if it obtains registration?

Mr Willis' submission was that the words of Kitto J in para (d) above had subsequently been misinterpreted and that what he had said was to be taken as referring only to the rights of proprietorship and did not include issues raised by s28 because they were not issues of rights.  He argued that there is no right to registration other than when a number of hurdles have been crossed.  In this case the act of applying for registration gave Mr Schwitters the ability to claim that he was the proprietor of the mark, and in that sense the date of application was relevant.  Mr Cobden submitted that the matter was res judicata because in my decision of 3 November 1997 on the application for special leave to adduce further evidence I had rejected certain material which had been published after the date of application as irrelevant to the issue of reputation.  However, I agree with Mr Willis that that decision concerned the interlocutory point of special leave and the matter of the relevant date was not argued and not ruled upon.  Mr Cobden also submitted that the argument that the competing positions of applicant and opponent under s28(a) did not involve "rights" was erroneous because the "right" to be determined under s28(a) is the prevailing right of another trader to the reputation concerned.  He also pointed to a large number of cases in which the date of application had been applied as the relevant date: Re Application by Simac SpA Macchine Alimentari (1987) 10 IPR 81 at 90-91; Sizzler Restaurants International Inc v Sabra International Pty Limited (1990) 20 IPR 331 at 336; Untell Pty Limited v Manenti Holdings Pty Limited (1992) 23 IPR 641 at 646; Armor All Products Corporation v CRC Chemicals Australia Pty Limited (1992) 25 IPR at 322;Supacenta Pty Limited v Vesudi Pty Limited (1996) 36 IPR 399 at 406; Sizzler Restaurants International Inc v Grater Seven Pty Limited 38 IPR 201 at 207, 210.

But I think the most cogent argument against Mr Willis' submission is that proprietorship was simply not an issue in the Southern Cross case. Kitto J said, at 594:

The application for registration was lodged on 23 April 1947, and it is in relation to that date that I must consider the evidence which has been adduced on this appeal.

He went on to say:

I shall put s25 [the earlier equivalent of s33] out of the way at once, because I agree with the Law Officer in thinking that it is quite inapplicable to this case.

That was so because the respective goods of the applicant and opponent were quite different.  For that reason and because it was found that there were a number of Southern Cross marks registered for different classes of goods, proprietorship could not be an issue.  His Honour went on to say:

I am concerned, therefore, to consider only s114…

It follows that everything he had to say from then on was in relation only to s114.  For example, at 598:

But I put aside altogether these "Southern Cross" marks owned by others than the appellant, because there is nothing in the evidence concerning them to lead me to discount the powerful case made by the appellant, to the effect that, because of the reputation its goods had acquired under its registered marks at the relevant date in 1947, there was then a serious likelihood that confusion would arise if a "Southern Cross" mark were to be used by anyone else upon refrigerators. [Emphasis added]

This is quite unambiguous.  The relevant date for determining the opponent's reputation for the purposes of s114 was the date of application in 1947, some 6-7 years before the High Court hearing.  Nothing that Kitto J had to say on this matter was disturbed by the judgment of the Full Court of Dixon CJ and McTiernan, Webb, Fullagar and Taylor JJ.

I have therefore to consider the opponent's reputation in the trade mark pycnogenol as at the date of application for registration ie 28 August 1992.  Mr Willis submitted that the initial onus was on the applicant to demonstrate that the use of the mark was not likely to be deceptive or confusing.  This is at odds with what was said in Nettlefold Advertising Pty Ltd v Nettlefold Signs Pty Ltd (1997) 38 IPR 495. At 501 Heery J set out the applicable legal principles under s28 of the Act:

With one major exception, the legal principles applicable to this case are not in dispute. They may be summarised as follows:

(i) The opponent bears the initial onus of establishing a reputation in its mark sufficient to found an objection under s 28: Arthur Fairest Limited's Application (1951) 68 RPC 197.

(ii) However, once this onus is discharged the burden shifts to the party seeking registration: Eno v Dunn (1890) 15 App Cas 252 at 261, Jafferjee v Scarlett at 119.

(iii) The rights of the parties are to be determined as at the date of application for registration (here 27 July 1989): Southern Cross Refrigerating Co v Toowoomba Foundry Pty Ltd (1953) 91 CLR 592 at 594.

(iv) The onus is on the party seeking registration to satisfy the Court that there is no reasonable possibility of deception or confusion: Southern Cross at 594-5.

(v) In order to defeat the application for registration it is not necessary for the opponent to establish that there is an actual probability of deception which will amount to a passing-off. While a mere possibility of confusion is not enough - for there must be a real, tangible danger of it occurring - it is sufficient that the result of the user of the mark will be that a substantial number of persons will be caused to wonder whether it might not be the case that the two products come from the same source. It is enough that the ordinary person entertains a reasonable doubt: Southern Cross at 594-5, 608, The Kendall Co v Mulsyn Paint & Chemicals (1963) 109 CLR 300 at 305.

(vi) In considering the issue of deception all the surrounding circumstances must be taken into consideration. The factors to be considered include the circumstances in which the marks will be used, the circumstances in which the goods will be bought and sold and the character of the probable purchaser of the goods: Jafferjee v Scarlett at 120;

(vii) A probability of confusion, if it is real, is sufficient even though the confusion may be unlikely to persist up to the point of, and be a factor in, inducing actual sales: Southern Cross at 495. There may be confusion or deception in the minds of persons to whom the mark is addressed, even if actual purchasers will not ultimately be deceived: Re Hack's Application (1940) 58 RPC 9 at 103-104.

(viii) It is not enough for the party seeking registration to negative the likelihood of confusion in relation to the actual trade carried on by the opponent at the time of the registration and to the manner in which the latter then uses his mark. The applicant must also take into account all legitimate uses which the opponent may reasonably make of his mark within the ambit Reckitt & Colman (Australia) Ltd v Boden (1945) 70 CLR 84 at 94, Southern Cross at 608.

(ix) The question whether the use of a mark is likely to deceive or cause confusion is in the end a question of impression and common sense; it is a "jury question" in which the judge is entitled to give effect to his or her own opinion as to the likelihood of deception or confusion: Murray Goulburn Co-operative Ltd v New South Wales Dairy Corporation (1990) 24 FCR 370 at 377.

This summary of the legal principles applicable to s28(a) of the Act not only affirms once again that the relevant date is the date of application but also makes it clear that the initial onus is not on the applicant but on the opponent to establish a reputation in its mark even though the ultimate onus may be on the applicant to demonstrate that there would not be a reasonable probability of deception or confusion.  The test is the well-known one stated by Evershed J. in Smith Hayden & Co Ltd's Application (1946) 63 RPC 97:

Having regard to the reputation acquired by the [opponent’s trade mark] is the Registrar satisfied that the mark applied for, if used in a normal or fair manner in connection with any goods covered by the registration proposed, will not be reasonably likely to cause deception and confusion amongst a substantial number of persons?

So what evidence is there of a reputation in the word pycnogenol which might be said to accrue to Horphag so as to disentitle Mr Schwitters to registration of the trade mark?  There is the evidence of Dr Brighthope, for example, who states that he first became aware of the existence of pycnogenol in late 1992 or early 1993 through an associate.  He goes on to state that he regularly presents lectures on the anti-oxidant properties of procyanadins . He says further that during his research he has become well acquainted with pycnogenol brand pine bark extract and is aware that pycnogenol brand pine bark extract enjoys a "strong market awareness" in Australia.  Moreover, from his experience in delivering lectures and speaking with people in the industry and consumers, the name pycnogenol was "strongly associated" with Horphag Research Limited and pine bark extract.  He goes on to state, furthermore, that he is aware of pycnogenol brand pine bark extract being sold in Australia through the personal importation scheme. 

Mr Willis placed much reliance on a "Health Update" by a company called Blackmore's which is a supplier of health food products.  In this publication, which is undated, a Mr Philip Daffy, Director of Research and Development, states that "Pycnogenol is the trademarked name for a group of OPCs extracted from the bark of the maritime pine tree."  He goes on to say:

In Australia, however, Pycnogenol is also used to describe a grape seed extract from a French supplier which may cause some confusion.  For the sake of simplicity in this bulletin, any mention of Pycnogenol relates to maritime pine bark extract - pine bark is not permitted as a listable ingredient and cannot yet be sold over the counter.

Mr Willis submitted that I should take the equivalent of judicial notice of the standing and reputation of Blackmore's in the relevant market for health care products, but I cannot really see how this evidence advances the case of the opponent.  As I have explained above in relation to the first use of the trade mark in Australia, I can find no convincing evidence of use of the trade mark here, let alone evidence of a reputation which can be ascribed to Horphag.

This is typical of the evidence on this aspect of the matter, general statements as to the "market awareness" of the product, generally hearsay statements as to the knowledge of the trade mark and most of it relating to a period well after the date of application and most of it opinion evidence.  Dr Brighthope states, for example

I am of the opinion that the use of the trade mark pycnogenol by a company not supplying pine bark extract from Horphag to be very misleading.

Again, Wayne Coote states:

I am strongly of the view that any use of the trade name pycnogenol to describe anything other than Horphag's pine bark extract is extremely misleading given the reputation of the trade mark pycnogenol in Australia and overseas.  In the industry the trade mark pycnogenol is intimately associated with Horphag and its pine bark extract.

Vince Rimmer states, in identical terms:

I am strongly of the view that any use of the trade name pycnogenol to describe anything other than Horphag's pine bark extract is extremely misleading given the reputation of the trade mark pycnogenol in Australia and overseas.  In the industry the trade mark pycnogenol is intimately associated with Horphag and its pine bark extract.

As to opinion evidence of this sort I would make the following comments.

In Addley Bourne v Swan and Edgar, Ld 20 RPC 105 Farwell J said, at 118:

It only remains then to call the evidence of people who can say that they themselves would be deceived.  Now it is obviously extremely difficult to get any such evidence.  Nobody likes to admit that he is so extremely foolish, as in many cases he would have to do.  The result is that unless it is left to the eyesight of the Judge to judge for himself, there is practically no evidence open to the Plaintiff in an action of this sort.

He went on to say (1903) 1 Ch 211 at 224:

It appears to me that there is also another reason against the admissibility (that is, of expressions by witnesses of the opinion that a particular mark is or is not calculated to deceive the public), and that is that I do not see how you can call any individual to give what is in truth expert evidence as to human nature, because what they are asked in this form of question is, not what would happen to them individually, but what they think the rest of the world would be likely to suppose or believe.  They are not experts in human nature, nor can they be called to give such evidence, and, apart from admissibility, one cannot help feeling that there is a certain proneness in the human mind to think that other people are perhaps more foolish than they really are.  I do not think that Carlyle is alone in his estimate of the intelligence of the majority of the inhabitants of these islands.  Therefore that is ruled out as a matter of evidence.

In Claudius Ash, Sons & Co Ltd v Invicta Manufacturing Company Ltd (1911)28 RPC 597 at 608 Buckley LJ said:

To my mind, in all these cases the judge necessarily must proceed upon evidence .  You cannot put to any particular witness the question: “Is this article calculated to deceive?”.  That is for the judge to determine - it is the point in issue; you can only ask a witness: “Would this deceive you?” And if he says it would, then ask him how it deceives him.  Of course that would involve all the various articles which are sold in the trade, but it is for the judge to determine upon the evidence adduced by persons competent to give evidence upon the subject, and to give evidence which satisfies the mind of the tribunal, that they, or certain of them, are deceived or to assign reasons why they would be deceived, and then it is for the judge to say whether there is deceit or not.

The judgment in  Bourne v Swan & Edgar, supra, was approved by the High Court of Australia in Don v Burley (1916) 22 CLR 136. Barton J quoted the passage cited above and went on to say:

I am of the same opinion.  I do not think that much value is to be attached to such declarations concerning the likelihood of deception as we have in this case, and, in fact, I think they are not evidence on that question.   I judge by my eyesight , and I think that there is no likelihood of deception arising out of the use of these two devices concurrently.  I do not think that a person of ordinary intelligence - and that is really the hypothetical purchaser - would be likely to be deceived, or, as I put it in William Charlick Ltd v Wilkinson & Co Proprietary Ltd 16 CLR 370 at 377, “Looking at these two labels not placed closely in juxtaposition and putting oneself as nearly as possible in the position of an intending purchaser, it seems to me that a person having an ordinary recollection of one label would not be deceived into asking for a packet bearing the other label, seeing it in a shop. I am talking of a person of ordinary sense, not such a person as Farwell J spoke of in the passage I have quoted”. Using my own observation and intelligence in the way I am called upon to do in a case of this sort, I do not think that a person of ordinary intelligence and memory would be deceived after first seeing one of these labels and then within a reasonable time seeing the other. He would not take one for the other....There is a common supposition that the criterion is, would an ignorant customer be deceived? That is not the criterion.

In Thomas Bear & Sons (India) Ld v Prayag Narain & Jaggennath (1941) 58 RPC 25, a decision of the Privy Council, Viscount Maugham said:

Evidence of actual deception may be available, and if available may be very valuable.  There is no such person as an expert in human nature, and it is now well settled that a witness cannot be called to say that it is likely that purchasers of the goods will be deceived.  This can only be a matter of opinion formed after the dispute has arisen and too often without any judicial consideration of the opposing contentions.  On the other hand a person who is accustomed to buy the articles in question may be called to say that he would himself be deceived, and cross-examination will often show what weight should be attached to such a statement.

A more recent case in which the same principle was affirmed is Mothercare UK Ltd v Penguin Books Ltd [1988] RPC 113. In that case Dillon LJ said, at 116:

The question whether there is a misrepresentation, like the question whether there is a likelihood of deception, is a question for the tribunal and not a matter for a witness.

There is one recognised exception to the acceptability of evidence as to the likelihood of deception and confusion.  It was stated by Lord Evershed in George Ballantine & Son v Ballantyne Stewart & Co [1959] RPC 273 at 280:

It is no doubt true ... that the question whether a mark is likely to cause confusion or lead to deception is the question for the court’s decision and, accordingly, that it is not legitimate for a witness to state or suggest, by way of evidence, expressed in general terms, the answer which it is the court’s duty to give.  But it is, in my opinion, going too far to say that a witness expert in the trade which is involved in the proceedings before the court, may not legitimately say, in giving evidence, that according to his experience of how the business in which he is and has been concerned is conducted, traders or customers will adopt certain characteristics or practices; though the weight to be attached to such evidence must always be a matter for the court.

A similar view was expressed by Lord Diplock in “GE” Trade Mark” [1973] RPC 297 at 321:

My Lords, where goods are of a kind which are not normally sold to the general public for consumption for domestic use but are sold in a specialised market consisting of persons engaged in a particular trade, evidence of persons accustomed to dealing in the market as to the likelihood of deception and confusion is essential.  A judge, though he must use his commonsense in assessing the credibility and probative value of the evidence is not entitled to supplement any deficiency in evidence of this kind by giving effect to his own subjective view as to whether he himself would be likely to be deceived or confused.  In the instant case this would apply to the large industrial electrical machinery ... But where goods are sold to the general public for consumption or domestic use, the question whether such buyers would be likely to be deceived or confused by the use of the trade mark is a “jury question” ... The judge’s approach to the question should be the same as that of the jury.  He, too, would be a potential buyer of the goods.  He should, of course, be alert to the danger of allowing his own idiosyncratic knowledge or temperament to influence his decision, but the whole of his training in the practice of the law should have accustomed him to this, and this should provide the safety which in the case of a jury is provided by their number.

This exception was applied by Knox J in Island Trading Co and Others v Anchor Brewing Co and Another [1989] RPC 287 to admit opinion evidence from persons in the relevant trade.

On the other hand, however, in Bayer Products Ld v A Wander Ld (1947) 64 RPC Wynn-Parry J said of such evidence:

A number of persons, all members of the Pharmaceutical Society of Great Britain, have made statutory declarations on behalf of the Appellants in which they say that, if a product is put on the market under the name “Diasil”, there is bound to be confusion between the two marks.

Such evidence as this is, in my view, quite inadmissible, and I leave it entirely out of account in considering this matter.

On behalf of the Respondents a number of persons, enjoying the same qualification, have each expressed the view for himself that he would not confuse the two names if used in regard to two different pharmaceutical preparations.

This type of evidence has the initial advantage of being admissible and, on the view that I take of the matter, is not without importance.

Being a potential buyer of the goods here in question and having no idiosyncratic knowledge or temperament to declare it seems that I should treat the question whether such buyers would be likely to be deceived or confused by the use of the applicant’s trade mark as a “jury question”.  However, these cases were of course all court cases and it is commonly said that the Registrar acting as a tribunal in opposition proceedings is not bound by the strict rules of evidence as they apply to a court.

In Anthony Hordern & Sons Ltd v Hotels Arcadia Ltd (1934) 4 AOJP 767 in an appeal to the Law Officer from the decision of the Registrar in an opposition the argument in effect was confined to the question whether or not evidence was improperly received and acted upon by the Registrar.  It was contested by the appellant that the Registrar on the hearing before him was bound by the legal rules of evidence and that he had admitted statements as evidence which, according to those rules, were inadmissible as evidence.  It was further contended that, if regard were had only to such matters as were legally admissible as evidence before the Registrar, the opposition should not have succeeded and that the application should have been granted.  The appellant submitted that the word “evidence” had a technical meaning and that when that word was used in a statute or regulation, then, unless the contrary intention appeared, either expressly or by necessary implication, the word must be given its technical meaning, and that this imported that only such matters as were admissible in accordance with the legal rules of evidence were receivable before the Registrar.  It was said also that in opposition proceedings, at least, the Registrar was required to proceed quasi-judicially.

The Law Officer found some support for the appellant’s arguments, at 768:

Some support for the appellant’s argument is found in the proposition stated in Halsbury’s Laws Of England, Volume 13, p.419, paragraph 580 that - “the necessity of applying the law of evidence presupposes two things -

(a) The existence of a Court, or of some tribunal, in the nature of a Court, whose duty it is to ascertain the facts;

(b) An issue to be determined”

No authority is cited in Halsbury for the above proposition.  It is, however, in accordance with statements of text-writers on the Law of Evidence-see Phipson 7th Ed. pp. 1 and 2; Best 9th Ed. p20; Powell 9th Ed. p. 29.  But even if the proposition be well-founded, the question arises whether or not the Registrar in opposition proceedings is a “tribunal in the nature of a Court”.

He went on to say, at 769:

For purposes other than judicial proceedings , the word “evidence” has a very wide and general meaning ... If the Registrar is not a “tribunal in the nature of a Court”, or if, in other words, proceedings before him are not “judicial proceedings” then it appears clear that the rules laid down by the Courts regarding the admissibility of evidence, have no application in such proceedings

As I have previously stated, the matter is a very important one affecting seriously the administration of the Trade Marks Act

He also referred to the wording of ss42, 43 and 44 of the Trade Marks Act 1905 and said, ibid:

It will be observed that the function of the Registrar, of the Law Officer, and the Court respectively, under Sub-section (2) of each of those Sections, is stated in substantially the same words, and this supports the contention that the Registrar, in respect of opposition proceedings, is a tribunal in the nature of a Court.

On the other hand, from the decisions of the High Court and of the Privy Council, on the interpretation of Section 71 of the Constitution, it would appear that no part of the judicial power of the Commonwealth is vested in a tribunal such as the Registrar, and that he is not a federal Court within the meaning of that Section

In the event, however, it was not necessary for the Law Officer to decide the question in the appeal because at the close of the hearing counsel for the respondent requested him to concede the technical question raised by counsel for the appellant and to find on the facts.  He therefore expressed no opinion on the question whether the Registrar, on the hearing of opposition or other proceedings before him, is bound by the legal rules as to the admissibility of evidence.  He did go on, however, to reject every statement which consisted of hearsay, or of opinion, or of an irrelevant matter.

The similarity in the wording of ss42-45 of the 1905 Act relied on in the Anthony Hordern case, supra, gave rise to an action challenging the power of the High Court to hear appeals from the Registrar in opposition cases  In Farbenfabriken Bayer Aktiengesellschaft v Bayer Pharma Pty Limited (1959) 101 CLR 652I it was claimed that the legislature had attempted to confer an administrative function on the Court, that the purported jurisdiction to decide appeals from the Registrar was not in aid of the exercise of judicial but of administrative power. Dixon CJ said, at 658:

The statute might have drawn a clear distinction between on the one hand the administrative decision to give effect to an opposition and refuse registration or to overrule an opposition and grant registration and on the other hand a jurisdiction conferred upon the Court to entertain a challenge to the administrative decision and determine judicially that the title to registration did or did not exist and to do so by a binding and enforceable decree. If that had been done no difficulty could be found in treating the provision conferring such a jurisdiction upon the Court as a valid exercise of the legislative power conferred by s76(ii) or s77(iii) [of the Constitution] as the case might be...But the distinction was not maintained in the language which the legislature adopted with reference to the registrar, the Law Officer and the Court in ss42 to 45...In other words, the contention advanced before us is to be attributed to the use by the legislature of the same or similar terms in describing the administrative power which ss42 and 43 purport to confer and the judicial power which ss44 and 45 purport to confer. It is not surprising that similarity of expression has given rise to the argument that one or the other provision must be bad; and since it is not assumed that judicial power has been conferred on administrative officers the contention is that the truth must be that it was intended to confer an administrative power on the Court.

His Honour went on to conclude:

There is therefore in s44 a provision which is apt to confer judicial power and relates to a fit subject for judicial power; the subject involves a matter within the meaning of s76(ii) of the Constitution; in the character of the provision itself, in the manner in which the power is to be exercised or in the subject no reason can be found for denying that it forms a proper exercise of the constitutional power conferred by that provision and the provision contained in s77(iii) of the Constitution.

However, in another case involving the same two parties, Farbenfabriken Bayer Gesellschaft v Bayer Pharma Pty Limited (1964-65) 113 CLR, a differently constituted High Court held that the Registrar of Trade Marks or an Assistant Register, exercising a delegated authority, acting under s21 of the Trade Marks Act 1955, that is, the power to amend a registered trade mark, exercises a quasi-judicial function which affects the rights of private persons and in a proper case he may be controlled by prohibition.  On that occasion the Court said:

Counsel also submitted that prohibition would not go to the Assistant Registrar because, so he contended, his functions under s21 were purely administrative.  In support of this contention he referred us to R v Commissioner of Patents; Ex parte Weiss (1939) 61 CLR 240, in which there was some discussion of the question whether prohibition would, in any circumstances, lie to the Commissioner of Patents. Latham CJ and Evatt J rejected the view that it would not, while Starke J thought that the particular function which the Commissioner had performed in that case was a purely administrative one, not involving any duty to act judicially, and that the writ would not lie. It seems to us, however, to be beyond question that the Registrar or an Assistant Registrar, exercising a delegated authority, acting under s21 of the present Act, exercises a quasi-judicial function which affects the rights of private persons and that in a proper case what he does may be controlled by prohibition.

In the Weiss case referred to by the Court, which concerned a patent opposition, Latham CJ had approved the proposition of Atkin LJ in R v Electricity Commissioners (1924) 1 KB 171 where that Lord Justice in dealing with both certiorari and prohibition had said:

It is to be noted that both writs deal with questions of excessive jurisdiction, and doubtless in their origin dealt almost exclusively with the jurisdictions of what is described in ordinary parlance as a court of justice.  But the operation of the writs has extended to control the proceedings of bodies which do not claim to be, and would not be recognized as, courts of justice.  Wherever any bodies of persons having legal authority to determine questions affecting the rights of subjects, and having the duty to act judicially, act in excess of their legal authority they are subject to the controlling jurisdiction of the King’s Bench Division in these writs.

In R v Quinn and Another; ex parte Consolidated Foods Corporation (1977) 138 CLR which was a return of an order nisi granted to Consolidated Foods for prohibition against the Registrar to show cause why a writ of prohibition should not issue prohibiting him from proceeding further in certain applications made under s23 of the Trade Marks Act 1955 for the removal of trade marks for non-use, it was argued that the legislature had purported to confer a judicial power on the Registrar.  This was the reverse situation to that in the Bayer case, supra, where it was contended that an administrative power had purportedly been conferred on the High Court. The Court held unanimously that s23 did not confer a judicial power on the Registrar and that the order nisi should be discharged. Aickin J said, at 21:

In my opinion the present case differs from the Bayer case only in that the jurisdiction in s23 of the Act is conferred by a single expression, ie “High Court or the Registrar may... order etc”, upon a judicial body and a non-judicial body in the alternative, whereas the jurisdiction in the 1905 Act is conferred on a judicial body by separate sections (ss44-45 and ss42-43 respectively) but in virtually identical language. In the Bayer case, as in this case, “it is not surprising that similarity” [identity] “of expression has given rise to the argument that one or other provision must be bad” though the attack is made on the power of the Registrar and not on the power of the Court.

I am unable to see any material distinction between the provisions dealt with in the Bayer case and the provision now in question. The fact that the former dealt with an opposition to registration of a mark and the latter with an application to remove a mark from the register for non-user is not a sound basis for distinguishing them.  The provisions, and the nature of the function to be performed, are not materially different.

It is for those reasons that I am of the opinion that this case is concluded by the Bayer case and that the order nisi should be discharged.

The decisions in the above cases are not at all easy to reconcile but I think it can be said at least that the function of the Registrar in opposition proceedings is an administrative one but that in certain circumstances he may be obliged to act judicially or, alternatively, that the power he exercises is a quasi-judicial one.  The position which has traditionally been taken by the Registrar is that he acts as an administrative tribunal and is not therefore bound by the strict rules of evidence  For example in Re Application by Simac SpA Macchine Alimentari (1986-1988) 10 IPR 81 the Chief Assistant Registrar said, at 87:

I appreciate that I must be cautious first in deciding whether I can take into account any of this evidence of instances of alleged actual confusion, and secondly, assuming that I can take evidence of an instance into account, in deciding what weight, if any, should be placed on that evidence.  The evidence is at least "second hand", and in some cases "third hand".  None of the persons allegedly confused has put a declaration in evidence.  On a strict application of the rules of evidence, I do not think that any of the material would be admissible.  However, an administrative tribunal such as the Registrar or his delegate is not bound by the strict rules of evidence.  It was said by Lord Denning MR in T.A. Miller Ltd. v. The Minister for Housing and Local Government and Another [1968] 1 WLR 992 that a tribunal (of this kind) is master of its own procedure provided that the rules of natural justice are applied, and that tribunals are entitled to act on any material which is logically probative, even though it would not be evidence in a court of law. Similarly Deane J., sitting in the Federal Court of Australia, issued a judgement including the following paragraph:

"These technical rules of evidence, however, form no part of the rules of natural justice.  The requirement that a person exercising quasi‑judicial functions must base his decision on evidence means no more than it must be based upon material which tends logically to show the existence or non‑existence of facts relevant to the issue to be determined, or to show the likelihood or unlikelihood of the occurrence of some future event the occurrence of which would be relevant."

(See Minister for Immigration & Ethnic Affairs v. Pochi 31 ALR 666 per Smithers, Evatt and Deane JJ).

Similarly, in Strata Welding Alloys Pty Ltd v Charles & Reid Associates (1985-87) 9 IPR 539 at 541 the Chief Assistant Registrar observed:

It was agreed at the outset of the hearing that all 3 applications would be dealt with as one, the grounds of opposition and the evidence being common to all 3.  It was also acknowledged by both sides that the ordinary rules of evidence do not apply in proceedings of this nature, the hearing officer having the authority to receive material not normally receivable by a Court but giving it only such weight as its nature deserves.  For example, first hand factual evidence will be given greater weight than hearsay or argumentative matter.  Both Mr. Simos and Mr. Ireland submitted that the other party's evidence is susceptible to criticism on the latter grounds.  It is appropriate for me to note at this point that I have been guided, when considering the evidence before me in these proceedings, by the observations of Lord Denning M.R. in TA Miller Ltd v The Minister for Housing & Local Government (1968) 1 WLR 992, and of Deane J. in Minister for Immigration & Ethnic Affairs v Pochi 31 ALR 666, to the effect that tribunals of this kind are entitled to act on any material which is logically probative, provided that the rules of natural justice are applied, and both sides have had a fair opportunity to comment upon or contradict any such material.

On the other hand the Assistant Comptroller in Bayer v Wander, supra, acting for the Comptroller-General had no compunction about ruling the opinion evidence of members of the Pharmaceutical Society of Great Britain as inadmissible:

The opponents’ trade declarants all refer to their knowledge of the mark “Alasil”, and the express view that if a product under the name “Diasil” were introduced into the same market confusion would be bound to ensue, but they do not speak, as would be expected, to their own personal reactions in this regard.  It seems that the confusion which their evidence is intended to establish falls for consideration both under Sec 11 and Sec 12, but in my view the opinions expressed by these declarants on the question of likelihood of confusion are in any event inadmissible for the purpose for which they were tendered, since they merely suggest the conclusion at which I am to arrive, namely, as to whether or not deception or confusion would be likely because of the resemblance between the two marks concerned.

It appears to follow that while I am not bound to rule inadmissible opinion evidence on the very issue which I am required to decide, that is, the likelihood of deception or confusion arising from the applicant's trade mark, I think I am entitled in light of the strong condemnation by the courts of such evidence to give that evidence no probative weight at all.  I intend to treat the opinion evidence in the declarations of Dr Brighthope, Mr Coote and Mr Rimmer in that way.  All have expressed opinions as to the likelihood of deception or confusion of the general public by the use of the applicant's mark, which is the very matter which I have to decide.  In the absence of convincing, objective evidence of the reputation alleged to have been acquired by the opponent Horphag before the relevant date, 28 August 1992, I am bound to find that it has not made out a case under s28(a) of the Act.  In those circumstances it is not necessary for me to make a finding on the alleged blameworthy conduct of Mr Schwitters in applying for the registration of the trade mark in Australia.

Conclusion

I have found against Horpag on each of its grounds of opposition and on the question of fraud which was not raised as a ground of opposition.  I therefore dismiss its opposition to the registration of the trade mark pycnogenol by Mr Schwitters and award costs , including the costs of the hearing on the application for special leave to adduce further evidence, against Horphag.  In the absence of any appeal from this decision, therefore, the trade mark should be registered.

Michael Homann
Hearing Officer

25 July 1998