Kies Pty Ltd v Martin Cellars Pty Ltd

[1993] ATMO 71

TRADE MARKS ACT 1955

DECISION OF A DELEGATE OF THE REGISTRAR OF TRADE MARKS

Re:Opposition by Martin Cellars Pty Ltd to the registration of Trade Mark application number 533734 in the name of Kies Pty Ltd.

Background

This issue arises for my decision out of the application, on 7 June 1990, by the above mentioned applicant, of Hoffnungsthal Road, Lyndock, South Australia, for the registration of the trade mark RED GUM in respect of, inter alia, "Wines" in class 33.

Acceptance of the application was advertised on 31 October 1991 in the Official Journal.  On 15 November 1991, as allowed under section 49 of the Act, the above-named opponent, of C/- Hincks & Smith, of 4 Robe Terrace, Medindie, South Australia, lodged Notice of Opposition to the registration of the application.  The grounds stated in the Notice of Opposition are that:

.The applicant is not the proprietor of the Trade Mark REDGUM under the provisions of Section 40(1)

.The applicant is not entitled to use or register the subject trade mark in respect of goods for which registration is sought in the present application.

.Any use of the subject trade mark would be contrary to law and therefore the subject trade mark should not be registered.

.Registration of the subject mark should be refused on the grounds that it is not clear that confusion or deception would not arise and as the burden of proof is on the Applicant, such burden has not been discharged.

.The subject trade mark would otherwise not be entitled to protection in a Court of Justice and should therefore not be registered.

.The Registrar should, in the public interest, withdraw acceptance of this application No A533734

.The Opponent asks for refusal of the application and costs in the matter of this opposition.

The hearing of this issue was before me in Adelaide.  The applicant was represented by Ken Maddern and the opponent was represented by Dr Paul Wyk.  And, rather than discussing the submissions of the attorneys, it will be of assistance if I dwell on the evidence in some detail.  The issue is, I believe, both unusual, and unusually complex.  One of the grounds for my decision relates in part to the complexity of the issues involved.

Evidence

The evidence consists of:

.          Evidence in Support

Statutory Declaration by Fernando Martin

(the "Martin 1 declaration")

Exhibit FM-1

Exhibit FM-2

Exhibit FM-3

Statutory Declaration by Alan Barry Chinner

(the "Chinner declaration")

Exhibit BAC-1

.          Evidence in Answer

Statutory Declaration by James Gilmour Irvine

(the "Irvine 1 declaration")

Exhibit JGI1

Exhibit JGI2

Statutory Declaration by Richard Kenneth Maddern

(the "Maddern declaration")

Exhibit RKM1

Exhibit RKM2

Exhibit RKM3

Exhibit RKM4

Exhibit RKM5

Exhibit RKM6

Exhibit RKM7

Exhibit RKM8

Exhibit RKM9

Exhibit RKM10

Statutory Declaration by Helen Margarat Napier

(the "Napier Declaration")

Exhibit HMN1

Exhibit HMN2

Exhibit HMN3

Exhibit HMN4

Exhibit HMN5

Exhibit HMN6

Exhibit HMN7

Exhibit HMN8

Exhibit HMN9

Exhibit HMN10

Exhibit HMN11

Statutory Declaration by Kenneth Ivan Kies

(the "Kies declaration")

Exhibit KIK1

Exhibit KIK2

Exhibit KIK3

Exhibit KIK4

Exhibit KIK5

Exhibit KIK6

Exhibit KIK7

Exhibit KIK8

Exhibit KIK9

Exhibit KIK10

Exhibit KIK11

Exhibit KIK12

Exhibit KIK13

Exhibit KIK14

Exhibit KIK15

Exhibit KIK16

Exhibit KIK17

Exhibit KIK18

Statutory Declaration by James Gilmour Irvine

(the "Irvine 2 declaration")

Statutory Declaration by Heinz Robert Thumm

(the "Thumm declaration")

.          Evidence in Reply

Statutory Declaration by Fernando Martin

(the "Martin 2 declaration")

Exhibit FM-4

Exhibit FM-5

Exhibit FM-6

Exhibit FM-7

Statutory Declaration by Lindsay Stanley

(the "Stanley declaration")

Exhibit LS-1

Statutory Declaration by Trevor David Jones

(the "Jones declaration")

The evidence shows the sorry state of affairs that arises when neighbours do business together and then fall out.

The Martin 1 declaration reveals the declarant to be a director of the opponent, Martin Cellars Pty. Ltd., which owns the business operating under the registered business name "Red Gum Vineyards" and formerly registered as "Kies Estate Winery".  The business, "Red Gum Vineyards", operates at Hoffnungstal Road, Lyndock and has, since 1984, sold wines labelled with the trade mark REDGUM, these wines being made from locally owned grapes.

The business was, states this declarant, originally owned by Karrawirra Wines Pty Ltd and/or Kies Pty Ltd.  (Kies Pty Ltd is, it will be remembered, the present applicant).  Regional Vineyards (SA) Pty Ltd purchased the business from Kies Pty Ltd on 22 June 1988.  This business was known as the Kies Estate Winery.  Included in the sale was the goodwill of the vendors' business of vineyard and winery carried on at Hoffnungstal Road, Lyndock and Barossa Highway, Lyndock under the name of Kies Estate Winery.  A memorandum of agreement between the vendors and purchaser is attached, in part, as an exhibit to the Martin 1 declaration and lists, "... all the benefits and advantage of the said business and the said business name including names of "Kies Estate", "Hoffnungstal Wines", "Red Gum Wines" and "Karrawirra Wines"."

The opponent, states the Martin 1 declaration, purchased the business from the Australia and New Zealand Banking Group Ltd, the mortgagee of Regional Vineyards (SA) Pty. Ltd., on 1 August 1990.  Since October 1990, the opponent has bottled wines bearing the trade mark REDGUM, the first such bottling being a blend of a 1987 Vintage Cabernet Sauvignon.  Further, wines bearing the trade mark REDGUM have been sold by the business in all years since the purchase of the business by Regional Wines (SA) Pty. Ltd.

The Martin 1 declaration also contains more; however, much of this is what could fall into the category of argument and inference.  I move now to the second declaration.

The Chinner declaration shows the declarant to have been a manager for Regional Vineyards (SA) Pty. Ltd.  He managed a sales outlet known as Kies Estate Cellars on the Barossa Highway between the dates of 22 June 1988 and 1 August 1990.  The beginning of this period of employment coincided with the purchase of the Kies Estate Winery on 22 June 1988.  The declarant goes on to state that the business, Kies Estate Winery, produced, bottled and sold wines bearing the mark REDGUM in 1988 and not 1989.  It sold bottles of REDGUM wine in 1988 and 1989: such sales through Kies Estate Cellars ceased in  April 1989.  Regional Vineyards (SA) Pty. Ltd. experienced financial difficulties and were placed into receivership in Jun 1989.  The Chinner declaration alleges, as indeed did the Martin 1 declaration, that Kies Pty. Ltd., or other businesses associated with Mr Ken Kies, made no sales of REDGUM wines other than those where the mark had been affixed by Regional Vineyards (SA) Pty. Ltd. or its predecessor.  (I would point out, however, that the predecessor was Kies Pty. Ltd., or other businesses associated with Mr Ken Kies).

The declarant in the Irvine declarations is a wine making consultant.  In 1983, he states in the Irvine 1 declaration, he was approached by Kenneth Ivan Kies to prepare a proposal for the future development of the winery at Lyndoch and the adjacent vineyards.  He states that the document that he prepared at that time recognised the mark REDGUM and stressed that, in the future, emphasis should be placed on the mark.  He became General Manager of Karrawirra Wines Pty. Ltd. a company wholly owned and controlled by Kies Pty. Ltd., the applicant here.  His service in this capacity was between 1984 and 1988.  He states that during this period almost all the marks used during this time featured the word REDGUM, or words RED GUM, but after he left in September 1988, the marks were affixed by Alan Barry Chinner.  (Chinner, it will be remembered was the manager of Regional Wines (SA) Pty. Ltd.)  The Irvine 1 declaration goes on to state that wines presently made for sale by Kies Pty Ltd have the benefit of equipment at Chateau Yaldara and not those owned and operated by Martin Cellars Pty. Ltd.  The balance of the Irvine 1 declaration is not relevant to my decision, being, I believe, both opinion of the declarant and argument.

The Maddern declaration is by Richard Kenneth Maddern, a Patent Attorney of Adelaide.  He attests to the history of the making of applications to register the trade marks KARRAWIRRA and KIES, which are registered, and REDGUM, which did not proceed to registration  -. the latter having lapsed shortly after the winery was sold to Regional Vineyards (SA) Pty. Ltd.  The Maddern declarations then states that he was told by one Michael Calneggia, the General Manager of Regional Vineyards (SA) Pty. Ltd., that use of all marks except KIES ESTATE would be discontinued.  A letter, exhibited to the declaration, which is date stamped 18 December 1989, six months after the bankruptcy of Regional Wines (SA) Pty Ltd, signed by Mike Calneggia of St Huberts Wines Limited, a company associated with Regional Wines (SA) Pty Ltd, confirms that conversation.  The attorneys had earlier received instructions on 23 February 1989 from a company called Associated Liquor Merchants in Western Australia, another company associated with Regional Vineyards (SA) Pty Ltd, to transfer the trade marks to Regional Vineyards (SA) Pty. Ltd.  A deed of assignment was prepared in relation to the KIES trade mark and others, but not the mark in suit.

For various reasons, these assignments were not completed.  Before moving on, though, I will note that correspondence between the attorneys and Regional Vineyards (SA) Pty. Ltd., through Associated Liquor Merchants (ALM) was entered as exhibits to the Maddern declaration.  This correspondence bears repetition: a letter from a Graeme G. Harris, Company Secretary of ALM states, concerning the marks, says that:

In accordance with the terms of [the] agreement (I enclose a photocopy of paragraph 2(b) of that agreement) all trade marks, etc. were to be transferred to the Purchaser.

It would seem an oversight that this has not been done.

Would you therefore draw up all of the documents necessary to effect the transfer of all of the trade marks, business names, etc. held in the names of Karrawirra Wines Pty Ltd and Kies Pty Ltd to Regional Vineyards (SA) Pty Ltd and forward them to me for execution.

A letter in response to this from Mr Richard Catt, Patent Attorney, of R. K. Maddern and Associates was sent and states that there is enclosed with the letter two assignment deeds for the purpose of transferring the registrations of two trade marks to Regional Vineyards (SA) Pty Ltd., these being not the mark in suit as it was, of course, never registered.

The Maddern declaration also includes some photographs of the business operated by the opponent in Hoffnungstal Road adjacent to the vineyard operated by the applicant.

The Napier declaration amounts, in essence, to a character reference for the wines produced by Mr Ken Kies from his vineyard at Hoffnungstal Road, Lindoch.  I do not think that it is entirely relevant to these proceedings.  I will, however, note she states a differing address from the applicant, and that she has no financial interest in Kies Pty Ltd, while not revealing that she is Ken Kies' defacto wife.

The Kies declaration states that the declarant's great-grandparents settled in the area in 1857.  The area was called Karrawirra, which means 'forest of red gums' in the aboriginal language.  The declaration states that the conditions of the soil, underground water, slope of the terrain and climate are idea for grape growing.  Grapes were planted by the said ancestors in about 1880.  Kies Pty Ltd currently has about 80 ha of the land it owns under vines, producing 800 - 1000 tonnes of grape per year.  It is not clear, nor is it stated, that all of these 80 ha of vineyards are at Hoffnungstal Road; in view of the Martin 2 declaration, it is probable that the acreage is dispersed.  The grapes grown at Hoffnungstal Road are, asserts the declarant, regarded as being some of the best for wine-making.

In 1969, the declarant started making wines from the grapes grown in the vineyard under the mark KARRAWIRRA.  The wines were produced, until 1984, in a small winery adjacent to the Karrawirra vineyards on Hoffnungstal Road.  In 1980 the declarant was approached by a trader who requested that he cease using the mark KARRAWIRRA because of its alleged similarity to the mark of that trader.  This request was acceded to and the KARRAWIRRA mark was "anglicised" to REDGUM.  The vineyard was subsequently, alleges the applicant, known as the Redgum Vineyard.

Much of the balance of the Kies declaration is a detailed corroboration and rebuttal of the opponent's evidence.  I will refer to the other points salient to my decision now.

I understand from the declaration that a portion of the vineyard was sold to Regional Vineyards (SA) Pty Ltd.  On this portion stands the winery and some two hectares of vineyard.  These vines have apparently been removed.  Mr Kies does not believe that the mark REDGUM has been applied by either Martin Cellars Pty Ltd or Regional Vineyards (SA) Pty Ltd continuously between 1984 and 7 May 1990.  He states that he had sold grapes to Regional Vineyards (SA) Pty Ltd, however he has not been paid in full for them and is still owed $158,000.  He states that a Mr Andrew McLennand of Coopers and Lybrand has said that only the business name REDGUM was sold to Regional Vineyards (SA) Pty Ltd, not the eponymous trade mark, and that the business name had been abandoned by Regional Vineyards (SA) Pty Ltd.

(I would state here that the evidence provided by the opponent flies in the face of the latter assertion).

The Kies declaration states that Martin approached him before he purchased the winery and asked if Kies was interested in buying the winery back.  On hearing that Kies was not interested, Martin purchased the winery  [the purchase was finalised on 1 August 1990].  Kies was subsequently told that he was going to call the winery Twin Valley and did not mention the name Red Gum.  Some weeks later Kies was informed of the decision to call the winery Red Gum Twin Valley and states that he then informed Martin of his application to register the mark.

Much of the balance of Mr Kies' declaration I consider to be argument based around section 28 of the Act.  Some of the balance is also either not relevant or goes very much to the sense of aggrievement that pervades his declaration and what he sees as the behaviour of his erstwhile business 'partners'.

The Irvine 2 declaration and the Thumm declaration are both basically testimonials to the declarants knowledge of the Kies Pty Ltd wines from the REDGUM vineyard, that Red Gum grapes are premium quality grapes and that wines made therefrom have won a number of prizes.

The Martin 2 declaration is fundamentally a rebuttal of the Kies declaration.  He exhibits to his declaration the agreement of sale between Martin Cellars Pty Ltd and ANZ Banking Group Limited which included the business name REDGUM VINEYARDS and the plant, equipment and stock.  Amongst the assets purchased was a book labelled Grape Intake 1979 -.  The majority of grapes purchased were from Kies Pty Ltd and not Red Gum Vineyard.  The relevant pages of this document are exhibited to the declaration.  The inference is, I believe, that much of the grape processed at the winery by Ken Kies was not, in any event from the Red Gum Vineyard but, rather, from other Kies family vineyards such as those managed by a Mr Peter Kies who is the applicant's son.

The Martin 2 declaration states that the topic of a trade mark for the opponent to use had come up on at least two separate occasions with Mr Ken Kies: the first time Mr Martin has not said anything about the mark he was intending to use; the second time, allegedly around 6 May 1990, Mr Martin informed Mr Kies that he intended to use the mark REDGUM.  On 7 May 1990 Mr Kies applied to register the trade mark.  (However, the sale between ANZ Banking Group Limited and the opponent did not occur until August 1990.  So it is possible that either Martin is mistaken or that he was at the property prior to the sale).

Subsequently, whatever the true version of events, the relationship between the parties soured.  There are, in the Kies and Martin declarations, similarly differing accounts of attempts at settlement of the dispute.  Significantly, perhaps, it appears to be common ground that the terms of settlement discussed involved the payment of a sum of money from Martin to Kies.  However, the interpretation of this as indicating that Kies does have a proprietory right in the mark would, of course, be fraught with danger.

The Martin 2 declaration asserts that if Andrew McLelland of Coopers and Lybrand told Mr Kies that the mark REDGUM had not been sold, that statement could only be taken in the context of the other registered trade marks which had been sold to Regional Vineyards (SA) Pty Ltd.

There is much more evidence.  However, I do no think that a detailed recital of the remainder of it will materially add in any way to my decision.

Discussion

I believe that it is virtually impossible, in the absence of extensive cross-examination of the declarants, to determine the true course of events here.  However, I believe that it is possible to decide the issue and that it is quite obvious that the issue must be decided against the applicant for two reasons.  However, I will return to these later.

It seems to me the course of events was this:

In about 1983, Mr Kies realised that he had problems with the joint operation of a winery, through Karrawirra Pty Ltd, and a vineyard, or vineyards, that was managed by his company, Kies Pty Ltd.  It is difficult to say what these problems might have been as there is no evidence on this topic.  James Irvine was employed as consultant on the problems and recommended some solutions to whatever the problems were and was appointed as a manager of the winery.

However, it is probable that the winery continued to suffer from problems and a decision was eventually made to split the property and sell the winery and some two hectares of associated vineyards as a parcel.  It would appear that the intention of Ken Kies at this time was to supply grapes to the winery and not to make wine.  In short, he was, he thought, ensuring that his grapes had a market and that he could concentrate on growing grapes.

Regional Vineyards (SA) Pty Ltd was found as a purchaser of the winery and the sale was completed on 22 June 1988.  As they were now going to run the winery, the agreement was understood by the parties to also assign or transfer the registered trade marks and business names associated with the winery to Regional Vineyards (SA) Pty Ltd.  It must be observed that the patent attorney for the applicant certainly appears to have believed at that time that the registered marks had been assigned or sold with the business and, indeed prepared documents that reflected this.  I believe that the unregistered winery marks must have followed the registered marks to the new owner of the winery and cannot see how they did not.

The obvious explanation for the statement by Coopers & Lybrand that they did not sell the mark REDGUM is that the mark is unregistered and as such does not constitute a saleable item.  It is quite possible though that the proprietorship of the mark did, at that time, change hands.

If this was not the case, Kies Pty Ltd appears to have acquiesced for a period of some eighteen months to two years to the use of its marks, both registered and unregistered, by another person.

However, Regional Vineyards (SA) Pty Ltd. encountered problems of their own, of a financial nature, and could not pay Mr Kies $160,000 for his grapes.  As a result of these, or of other debts, Regional Vineyards (SA) Pty Ltd. was placed into receivership.

Fernando Martin was apparently previously known to Ken Kies.  His business, Martin Cellars Pty Ltd, bought the winery business from the mortgagees.  The business name Red Gum Vineyards was a part of the agreement as was all of the stock, labels, machinery, equipment and so on.  Just where this leaves the trade mark REDGUM is unclear.

Decision

Sub-Section 40(1): Proprietorship
Section 40 of the Act states, inter alia:

(1)       A person who claims to be the proprietor of a trade mark may make application to the Registrar for the registration of that trade mark in Part A or Part B of the Register.

It follows from this that an opponent can dislodge the applicant's claims of proprietorship via evidence that at, or before, the date of application the opponent was using the same mark in respect of the same goods or services.  If the applicant cannot, or does not, refute the claim via the lodgement of its own evidence that establishes its own use which precedes that of the opponent (and, hence, shows its proprietorship in the mark) the opposition must succeed: see, for example, Shell Co of Australia Ltd v Rohm and Haas Co (1948) 78 CLR 601; or, Aston v Harlee Manufacturing Co (1960) 103 CLR 391.

There are three issues here for my consideration then.  The first is whether the marks at issue are the same marks; the second is whether the goods are the same goods; and, the third is who had the first use of the marks prior to the date of application.  As a corollary of the latter issue is the question of the status of the mark at the date of the application for registration of the opposed marks: if the applicant had had first use of the mark, had it effectively devolved the right to the use to another person?

The relevant date at which proprietorship must be determined is the date of application of the opposed marks which is 7 June 1990: Seven Up Co v O.T. Ltd (1947) 75 CLR 211.

I think that the marks and the goods involved here are the same marks and goods and there was no argument before me that they are not the same goods and marks.  Similarly, I do not think that there can be any question but that the applicant had the first use of the mark.  However, as I have noted, above, I believe that there is very good reason to conclude that the right to use the mark effectively moved from Kies to Regional Vineyards (SA) Pty Ltd. 

In Riv-Oland Marble Co (Vic) Pty Ltd v Settef SpA (1987) 10 IPR 402, (1988) 12 IPR 321, McGarvie J. concluded that proprietorship in a trade mark, having once been established, could be lost by intentional abandonment, acquiescence or estoppel, but not by mere disuse. He went on to look at the facts and stated intentions to "infer from this whether Settef formed an intention to abandon". It seems without doubt that Kies Pty Ltd did at the least acquiesce in the use of the mark in question by Regional Wines (SA) Pty Ltd. It seems also likely that Regional Wines (SA) Pty Ltd had formed an intention of abandoning the mark, but were prevented from doing so by their winery manager who, for whatever reason, kept on applying it to wines that he was producing.

Determination

I am not willing to conclude that the proprietorship of the mark has passed to Martin Cellars Pty Ltd, the opponent.  However, I am satisfied that the opponent has cast the applicant's claim to be the proprietor of the mark into serious doubt as it seems certain to me that proprietorship, at one stage, had passed to Regional Wines (SA) Pty Ltd., or, alternatively, that Kies Pty Ltd had given up its claim to proprietorship by acquiescing to the use of the mark by Regional Wines (SA) Pty Ltd

The second ground for refusing the application relies not so much on the argument of the parties, through their evidence and at hearing, but on the way that some of the material was argued.  This I am entitled to do under sub-section 50(2) of the Act.  A lot of the material and argument was aimed at sub-paragraph 28(a) of the Act in attempts by either party to show that the use of the mark by the other would confuse or deceive.  Material stressed the vineyards in question as being ideal for grapegrowing and growing ideal grapes.  The combination of micro-climate, soil type, sub-soil water, macro-climate, etc., were emphasised as being unique to the vineyard.  I note that the two parties now occupy what was once one property.  I am led to suspect most strongly that the mark is either becoming an indication of geographical origin or has become one.  The type of argument before me in Adelaide was not that the mark was indicative of a trade source of goods but indicative of the location where the grapes are grown and wine is made.  Whilst this is so, and whilst there are two persons occupying the property, both with a seemingly equal right to state the origin of their goods, the applicant cannot be held to have discharged the onus on it to affirmatively demonstrate its entitlement to registration.  It would seem that neither party can have their cake and eat it too:  the opponent cannot grow grapes at the location where it makes its wine - neither can the applicant make its wine where it grows its grapes.  Both parties have reason to claim the mark as an indication of geographical origin and in fact appear in the evidence to be doing so.

Accordingly, while I would be reluctant to find that the mark is a geographical word, the parties have put sufficient material in my way to strongly suggest that it is.  Whilst this is so, and whilst the application is in dubio, the registration of the mark must be refused which I now so do.

Costs
Having regard to my findings, that neither party has shown itself to be proprietor of the mark, and my alternative finding that is on grounds that were not argued at the hearing, I make no award of costs and each party may bear its own costs.

Ian Thompson
Senior Examiner
Trade Marks Hearings

19 August 1993