First Quality Products, Inc v Dawyn Import & Export Pty Ltd

[2000] ATMO 21

TRADE MARKS ACT 1995

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

Re:Opposition by First Quality Products, Inc. to the registration of trade mark application number 744314 in the name of Dawyn Import & Export Pty. Ltd. for the trade mark FEMTEX in class 5

Background

On 18 September 1997, Dawyn Import & Export Pty Ltd (the applicant) filed an application to register the word FEMTEX as a trade mark in respect of:

Sanitary preparations and adult incontinence products in this class including tampons; briefs; diapers; nappies; undergarments; pads; pants; adult wetwipes; shields; incontinence pads; guards; napkins and towels.

After examination of the application, it was accepted and advertised as such in the Australian Official Journal of Trade Marks of 22 January 1998.  On 21 April 1998, a notice of opposition to registration of the mark was filed by First Quality Products, Inc (the opponent).  It contains a number of grounds upon which the opponent proposed to rely.  In the written submissions made on behalf of the opponent by its attorneys before the hearing of the opposition, the opponent advised that it would pursue only the grounds based on sections 58 and 59 of the Act.

The hearing was held in Canberra.  The opponent was not represented at the hearing, but written submissions were received by me from the opponent's patent and trade mark attorneys of Watermark, Melbourne.  Ms Therese Burke of Phillips Fox, lawyers of Sydney, appeared for the applicant.  Ms Burke had also forwarded to me written submissions before the hearing. 

The evidence
A statutory declaration by Heros Minassian forms the evidence in support.  Mr Minassian is the vice president of International Sales of the opponent company.  He refers to the details of two opponent's pending applications in class 5 for the word FEMTEX.  An affiliate of the opponent manufactures tampons bearing the mark on behalf of the opponent, who has used the mark in the United States of America in relation to those goods since 1995.  The applicant had approached the opponent by a letter, exhibited by the declarant, with a view to becoming a distributor of the opponent's goods, including tampons, in Australia.  Exchanges of letters between the declarant and Hammer Zhao, for the applicant, followed, copies of which are annexed to the declaration.  Mr Minassian held a meeting with Mr Zhao in Sydney when, as he declares, he informed Mr Zhao that the opponent was in the process of registering the mark FEMTEX in Australia and told him that it had already obtained a registration in New Zealand.  Subsequently, Mr Zhao wrote to the opponent advising that he had applied for registration of the mark in Australia three days after the said meeting.  Mr Minassian says that at no stage while corresponding, or during the meeting, had the applicant been authorised or permitted to apply for registration of the mark in Australia for tampons. 

Three statutory declarations comprise evidence in answer.  The first of these is made by Hammer Zhao, the director and general manager of the applicant company.  In stating that the applicant's mark has been used in Australia since 1994, he explains that, after receiving samples of disposable panties from a company in Hong Kong, he devised the mark FEMTEX, affixed it to the samples and distributed some of the goods to his wholesale and retail customers.  He sold approximately half of the packages and the rest he gave away for free.  Mr Zhao recounts, in particular, visits to two persons to whom he sold a package for $1.00 each of the disposable panties.  Referring to the meeting with Mr Minassian, he says that the proposal to register the mark in Australia by the applicant expressed by him during the meeting had met with approval.  No samples of the tampons bearing the mark FEMTEX and other products under a different mark received from the opponent had been sold by the applicant, there being no permission from the Therapeutic Goods Administration.  According to Mr Zhao, the reason for applying to register the mark in Australia was to safeguard its position as the first user of the mark in Australia, not to safeguard the applicant's interests while importing into the country the tampons bearing the mark, as asserted by Mr Minassian.   

Ty Ly, a director of Heng Heng Co, wholesaler of grocery products, and Jipu Huang, proprietor of a take away shop in Collaroy, in their respective statutory declarations support some of the statements made by Mr Zhao.  In each case, a visit is recalled by the declarants when they had been offered for sale a packet of the disposable panties under the mark.  Both had bought the sample.  Mr Ly adds that he had requested details of the product, which he had subsequently received.  

Evidence in reply consists of a statutory declaration by Mr Minassian, the same person whose declaration forms the evidence in support.  Mr Minassian says that Mr Zhao had incorrectly stated in his declaration that the opponent had no intention to sell its product in Australia before Mr Zhao had contacted it and encloses documentary evidence to rebut this claim.  He points to the inconsistencies in Mr Zhao's explanation for applying to register the mark, pointing to the letter of 1 December 1997, where Mr Zhao justifies the application as forcing the opponent to deal with the applicant, which differed from the earlier claim relating to the applicant's first use of the mark. 

Submissions and analysis
S.58 - Applicant not owner of the mark
In the written submissions, on behalf of the opponent, the attorneys have directed my attention to the basic principles governing the question of ownership of the mark, as set out by Deane J in Moorgate Tobacco Co Ltd v Philip Morris Ltd and Another 3 IPR 545 at 556. Reference is also made to an unpublished Trade Marks Office decision Horphag Research Limited v Egbert Mensse Schwitters, issued on 25 July 1998.  It was clear from the evidence, the attorneys submit, that the applicant wished to enter into a distributorship agreement to import and market goods in Australia, including tampons bearing the trade mark FEMTEX.  To this end, samples of the tampons were sent to the applicant, as well as brochures and price lists, prominently displaying the mark in the case of tampons, and there had been every intention by the opponent to introduce tampons into the Australian market place specifically under the mark.  The attorneys submit that the negotiations between the parties had broken down merely because the applicant had, towards the end of those negotiations, applied for registration of the mark in Australia without any authority or consent from the opponent.  That action had been considered by the opponent to be a hostile act, particularly as the applicant was not prepared to withdraw its application after being requested to do so.  The attorneys further submit that the circumstances in the present situation are significantly different from those in the Moorgate v Philip Morris case, because here there was a real intention by the opponent to trade in Australia through the applicant, who was most interested in becoming a distributor of the opponent's FEMTEX trade mark.  During the negotiations between the parties, no other trade mark but FEMTEX had been considered, the attorneys maintain.  Since the relationship was a quasi principal/distributor relationship, they submit, there was a fiduciary duty by the applicant towards the opponent.  That was in line with the precepts set out in Re Registered Trade Mark "Certina" (1970) 44 ALJR 191. In these circumstances, the attorneys say, the applicant had clearly misappropriated the opponent's trade mark, which was used in Australia by the opponent in a trade mark context to indicate a connection in the course of trade between itself and its products.

The attorneys direct my attention to the numerous references in relation to the mark being used on tampons in the correspondence between Mr Minassian and Mr Zhao, noting that no mention had been made of Mr Zhao having adopted the mark in 1994, nor any issue raised concerning ownership of the mark in respect of tampons.  They stress that, in a letter of 16 June 1997, the applicant had acknowledged receipt of the samples of tampons bearing the mark FEMTEX from the opponent.  Subsequent correspondence showed, it is further submitted, that everything was ready for a sale to take place with respect to a shipping container of tampons, and that it was surprising therefore that Mr Zhao had applied for registration of the mark without any prior consultation with the opponent.  Mr Zhao's explanation as to applying for registration of the mark implied that the applicant wished to protect its interests while it was involved in the distribution of the FEMTEX tampons for and on behalf of the opponent.   

In the submissions on behalf of the applicant, Ms Burke said that the law regarding proprietorship of the mark was clear, i.e that, in the absence of any prior use of the mark, the owner was the first person who applied to register the mark in Australia.  In view of the principles enunciated in Shell Co (Aust) Ltd v Rohm and Haas Co (1949) 78 CLR 60, the applicant was entitled to registration of the subject mark in respect of the goods for which it has applied. There had been prior use of the mark FEMTEX by the applicant in 1994 in respect of some disposable underpants, Ms Burke said. She did not think it was necessary to consider the question as to whether that use of the mark had been in the ownership sense, because that had already been conceded by the opponent in its submissions.

Ms Burke said that the applicant disputed the opponent's assertion that it had demonstrated sufficient use for it to establish ownership rights in respect of tampons simply by supplying samples and advertising material to the applicant during the course of the negotiations.  Such acts could be characterised as no more than discussions, Ms Burke submitted, drawing a comparison with Settef S.p.A. v Riv-Oland Marble Company (Vic) Pty Ltd (1987) 10 IPR 402, where, she said, negotiations had been held with a potential distributor, to whom sample products and brochures had been sent, but who was later judged unsuitable to handle the product. These were considered to be no more than preliminary discussions rejected in Moorgate v Philip Morris, supra, as establishing use of the mark.  In the present case, the applicant conceded that discussions had taken place, but the parties had not, at the date of the application, settled on any pricing structure for the orders.  There had been a few samples of the tampons sent to the applicant, Ms Burke said, but nothing was released onto the market place, and no evidence of any other sort of use in respect of tampons had been shown.  For one reason or another, the applicant was judged unsuitable as a distributor, the reasons for that being, according to the opponent, the fact that the applicant applied to register the mark itself, Ms Burke submitted.  Thus, fairly and squarely, the circumstances were those of Settef v Riv-Oland.   If that was the case, Ms Burke contended, then the opponent had no prior use of the trade mark in Australia upon which it could challenge the applicant's right to ownership of the mark.  However, if it were to be found that the opponent had used the mark, then that use was limited to tampons, Ms Burke submitted.  It then became a question of whether or not tampons and disposable underwear are "the same kind of thing" and, indeed, whether any, or some, or all the goods in the specification are the same kind of thing as tampons, or disposable underwear, having regard to the principles in the Re Hicks' Trade Mark (1897) 22 VLR 636 and Freighter (Australia) Pty Ltd v Freightliner Corporation (1992) AIPC 90-862. Submitting that disposable underwear and incontinence products, generally in the nature of pants, tampons and pads, were sold very close together in the same sections of pharmacies and supermarkets and were made by the same manufacturers, Ms Burke came to the conclusion that the goods were "the same kind of thing".

Section 58 reads:

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

Under the current Trade Marks Act, the term "ownership " is to be read in the same sense as "proprietorship" in terms of Trade Marks Act 1955.  In relation to ownership of a mark, the initial onus is on the applicant for registration, as provided in s.27, which states:

27.(1)         A person may apply for the registration of a trade mark in respect of goods and/or services if:
(a)   the person claims to be the owner of the trade mark, and
(b)   one of the following applies:

(i)the person is using or intends to use the trade mark in relation to the goods and/or services;

(ii)the person has authorised or intends to authorise another person to use the trade mark in relation to the goods and/or services;

(iii)the person intends to assign the trade mark to a body corporate that is about to be constituted with a view to the use by the body corporate of the trade mark in relation to the goods and/or services.   

The concept of ownership of a trade mark has been explained by McGarvie J in Settef v Riv-Oland, supra, at 413:

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.

Thus, the person who claims ownership of a mark must establish first use of it in Australia in relation to the goods nominated in the application for registration of the mark.  For a person to upset ownership of the mark, that person would need to show earlier use of an identical or substantially the same mark as that of the applicant and that that use was for the same kind of goods as those of the applicant - Carnival Cruise Lines Inc v Sitmar Cruises Ltd (1994) AIPC 91-049 and Shell v Rohm & Haas, supra.   

The opponent is challenging the applicant's right to ownership of the mark FEMTEX only in respect of tampons on the basis that it had intended to place tampons under the mark onto the Australian market through a distributorship arrangement with the applicant, and that it had made the preparations in shipping a consignment of the goods for that purpose.  Essentially, it submits that these actions, together with the potential distributors obligations to its principal/manufacturer should be considered as use of the mark FEMTEX in Australia for tampons by the opponent.

In Moorgate v Philip Morris, supra, Deane J. explains what type of use would be valid for consideration of the ownership question, at 557:

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 by sale in Australia under the mark (Re Registered Trade Mark "Yanx"; Ex parte Amalgamaged 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 material 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.     

The opponent concedes that some use of the mark has been shown by the applicant, before filing of the application on 18 September 1997, in respect of "women's disposable panties".  Indeed, the applicant's evidence demonstrates that such goods were sold in 1994, albeit in very small quantities, but those sales are sufficient to establish use of the mark in Australia by the applicant - Seven Up Co v O.T. Ltd (1947) 75 CLR 203 211. Neither the applicant nor the opponent has pointed to any use of the mark in Australia for tampons. At this juncture, it would be relevant for me to say that, while appreciating the applicant's submissions on this question, I do not consider disposable pants and tampons to be "the same kind of thing". According to the opponent's evidence, the FEMTEX tampons are a feminine hygiene product. Such goods may be found in the same trade outlets, offered for sale in close proximity and originate from the same source as disposable underwear for women, but the nature and purpose of the goods are too dissimilar for those products to be regarded as the same kind of goods, or even goods of the same description. Thus, the applicant would not be entitled to claim right to ownership of the mark in respect of tampons purely on the basis of prior use of the mark on women's disposable pants.

The opponent's evidence shows that, during the process of negotiating with the applicant concerning the distributorship in Australia of the opponent's goods, the applicant had received the opponent's brochures, detailed information on pricing and the opponent's distribution policy, as well as samples of the tampons bearing the mark FEMTEX.  The applicant expressed satisfaction with the opponent's products (letter of 16 June 1997), and subsequently, in a letter dated 23 July 1997, announced, "We really want to purchase your FEMTEX tampons", suggesting that, if the prices were reduced, then the applicant would put in an order for "a 20' full container load". To this the opponent responded with a counter proposal in a letter reproduced here:

There is no indication whatever that the above offer was not acceptable to the applicant.  The opponent supplied the necessary documents relating to importation of the goods into Australia to the applicant and the Australian authorities.  In a letter of 4 August 1997, the applicant advised the opponent that it had applied for a "listing number" in relation to the FEMTEX tampons, which appears to have been the only outstanding requirement before the goods were to be sent to Australia.  As far as the opponent was concerned, all the preparation of the consignment had been completed; it was awaiting the final order from the applicant, together with the advice on the shipping arrangements.  This process, I believe, goes beyond merely supplying samples and literature to the opponent, or discussions between the parties on the possibility of the goods under the mark being released for sale in Australia.  Whilst the opponent could not demonstrate the actual ordering and dispatching of the goods - Re Registered Trade Mark "Yanx"; Ex parte Amalgamated Tobacco Corp Ltd (1951) 82 CLR 199, nor did not produce and invoice and shipping documents relating to consignment of the goods under the mark - "Thunderbird" Trade Mark 1A IPR 511, in my opinion, its evidence has established "an existing intention to offer or supply goods bearing the mark in trade", as stated by Deane J in the passage from Moorgate v Philip Morris, quoted above.  

Neither in the correspondence between the applicant and the opponent, nor in the evidence in answer, has the applicant implied that the opponent may not be the owner of the mark.  In rejecting the opponent's request to withdraw the application but suggesting that the applicant could transfer the mark to the opponent, in the letter of 1 December 1997, the applicant appears to acknowledge the opponent as the owner of the mark.  Mr Zhao, in his declaration, defends the applicant's position in relation to filing the application to register the mark for tampons as an act of protecting its interests as the first user of the mark in Australia.  However, as discussed previously, it has used the mark only in relation to disposable panties.  I agree with the opponent's submissions that an obvious reason for this move would be that the applicant wished to ensure protection while it was operating in Australia in its capacity as the distributor of tampons for the opponent.  This could be read in Mr Zhao's justification for the application following the breaking down of the negotiations, in the letter of 1 December 1997, as:

We do not want to made (sic) any problems and confusion between our companies.  We just want to made (sic) money, but you know, as a distributor of Femtex tampons in Australia, we haven't any written contract with your company, so we have to found (sic) something to safeguard our interests.  Otherwise we cannot do anything at all.  

There is no question of any formal agreement existing between the applicant and the opponent as to the distributorship of the FEMTEX tampons.  However, the developments resulting from the correspondence exchanged between the parties before the filing of the application, particularly the letter of 23 July 1997, indicate a manufacturer/distributor relationship, and therefore the existence of a fiduciary obligation by the application to the opponent - Imagic Inc. v Futuretronics (Aust) Pty Ltd (1983) AIPC 90-117. In addition, I also refer to the words of Hearing Officer Homann in Horphag v Schwitters, supra, at 22:

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 1991, also Blackadder v Good Roads (supra).

In view of all the foregoing, I do not think the applicant is entitled to claim rights in ownership of the mark FEMTEX for tampons.  Consequently, I find that the opponent has succeeded in its opposition on the s.58 ground as far as it relates to tampons.

S.59 - Applicant not intending to use the mark
In relation to this ground, the attorneys for the opponent submitted that the correspondence exhibited to Mr Minassian's declaration showed that there was no intention by the applicant to use the mark in Australia , because the only reason for filing the application was to protect its interest, vis a vis third parties, who might, at some future date, enter into an agreement with the opponent, which would be in the applicant's disinterest.  Any use of the trade mark FEMTEX in Australia with respect of tampons would, if the distributorship arrangement proceeded, be use by the opponent as the distributor, who was merely importing and marketing the opponent's FEMTEX branded tampons in Australia. 

Ms Burke, for the applicant, responded to these submissions saying that, under the current Trade Marks Act, there was a presumption that the making of an application for registration was regarded as prima facie intention to use the mark.  That principle was also supported by Aston v Harlee Manufacturing Co (1960) 103 CLR 391, where it was laid down that the Registrar was not called upon to institute an enquiry as to the intention of the applicant, and that the burden rested on the opponent to prove the absence of the intention. By making this application, Ms Burke said, the applicant had stated an intention to use the mark in respect of all the goods covered by the application. There might be a deficiency in the evidence in that the statement referred to the intention to use the mark on disposable underwear. If that was a deficiency, Ms Burke said, perhaps it should be rectified by a declaration as to use or intended use. She submitted that that in itself was not sufficient to discharge the opponent's burden in proving no intention to use the mark by the applicant.

Ms Burke contended that it was pure speculation that the only reason why the applicant applied to register the mark was to safeguard its interest as a prospective distributor of the FEMTEX tampons in Australia, as submitted by the opponent.  That, she said, would be inconsistent with the applicant simply protecting its rights as the owner of the mark. 

In conclusion, Ms Burke made a general comment, saying that it was interesting to note that, when the present application first came to the opponent's attention in November 97, the opponent filed an application which did not include tampons, that omission having been rectified only on 25 March 1998 by filing an application to cover those goods.  As to costs, Ms Burke submitted that each party should pay its own costs, should it be found necessary to amend the statement of goods by excluding tampons, otherwise costs should follow the cause. 

The relevant section in relation to this issue states that:

59.  The registration of a trade mark may be opposed on the ground that the applicant does not intend:
      (a)       to use, or authorise the use of, the trade mark in Australia; or

(b)to assign the trade mark to a body corporate for use by the body corporate in Australia;

in relation to the goods and/or services specified in the application.

This section provides that, by applying for the trade mark, the applicant has made a claim as to use or intention to use the mark in respect of the goods specified in the application - s.27(1)(b), which is set out in this decision under the considerations relating to s.58.  By accepting the subject mark for registration the Registrar was satisfied, within the meaning of s.33, that the applicant had the requisite intention to use the mark on the goods of the application. 

In opposition proceedings, the onus rests on the opponent to rebut such claims - Aston v Harlee Manufacturing Co, supra, as mentioned by Ms Burke.  Here the opponent has not questioned the applicant's claim as to use or intention to use the mark FEMTEX in respect of all the goods nominated in the application, except in relation to tampons, on the grounds that no use of the mark could have been contemplated by the applicant, because, in the opponent's view, the purpose for applying for registration of the mark was to safeguard the interests of it as a potential distributor.  This is denied by the applicant.  I have found, however, that the applicant's claim to ownership of the mark for tampons has been overturned by the opponent.  It follows, I think, that any allegation as to intention to use the mark in respect of those goods cannot be sustained in the present case.  

Conclusion
In this opposition, the opponent has succeeded on both grounds relied upon at the hearing - those based on sections 58 and 59 - as far as they relate to the goods "tampons".  Accordingly, I allow the applicant twenty-one days (21) from the date of this decision to amend the statement of goods of this application by deleting the item "tampons".  If the goods are not amended, as proposed by me, I will be obliged to refuse the application. 

Costs
In these proceedings, the opponent has been only partially successful.  In such circumstances, I have decided that the parties concerned should bear their own costs. 

Vija Zars
Hearing Officer
14 March 2000