Kraft General Foods, Inc v Gaines Pet Foods Corporation

[1993] ATMO 83

TRADE MARKS ACT 1955

DECISION OF A DELEGATE OF THE REGISTRAR OF TRADE MARKS

Re:Opposition by Gaines Pet Foods Corporation to applications under section 23 by Kraft General Foods, Inc for the removal of registrations A171085, B197204 and B198943 from the Register.

Background.
On 23 June 1989, General Foods Corporation, the predecessor in business of Kraft General Foods, Inc., ("the applicant") of White Plains, New York 10625, in the United States, applied under section 23 of the Act for the removal of registrations A171085, B197204 and B198943 from the register in respect of all of the goods in respect of which they are registered; namely animal foods.  The proprietor of these registrations is Gaines Pet Foods Corporation of Harrison, New York in the United States ("the opponent").

The relevant period of time for the purposes of sub-section 23(1)(b), under which this issue was argued, is 23 May 1986 till 23 May 1989.

The proprietor opposed these applications under section 23 by a Notice of Opposition dated 22 November 1990.  On 14 February 1991 all Evidence in Support of the Opposition was lodged by the applicant.  All Evidence in Answer was lodged on 16 December 1991.  The total of the Evidence in Reply was lodged by 16 March 1993.

The evidence comprises:

Evidence in Support -
           *         Statutory declaration by Richard Kurland.

(The "Kurland" declaration)

Evidence in Answer -
           *         Statutory declaration by John H Calhoun

(The "Calhoun" Declaration)

Exhibit A
  Exhibit B
  Exhibit C

Evidence in Reply

*         Statutory Declaration by Joanne Christine Martin

(The "Martin" declaration)

*         Statutory Declaration by Deborah Johnson

(The "Johnson" declaration)

The hearing of this issue was before me in Sydney on 7 July 1993.  The applicant was represented by Mr Ken Niblett of the firm Spruson and Ferguson of Sydney.  The opponent was represented by Mr Trevor Stevens of the firm Davies Collison Cave, also of Sydney.

It is convenient for me to first discuss what the evidence shows.

The evidence
The Kurland declaration attests to a series of eight interviews with people in the trade who are connected with pet-foods in one way or another, either as buyers or makers of pet-foods.  These people informed Mr Kurland that they had no knowledge of pet-foods being sold under the mark GAINES in Australia.  However, three of the people interviewed indicated that they had heard of the mark's use in connection with pet-foods.  The Kurland declaration is silent as to Mr Kurland's occupation, experience  and qualifications.

The Calhoun declaration is made by the vice-president of the Gaines Pet Food Corporation.  He states that he has been associated with his company for five years and has full access to the records of his company.  His company makes a large range of dog foods and a smaller range of cat foods.

He states that the trade marks the subject of the application were originally registered in Australia by General Foods Corporation, the current applicant in section 23.  By deeds of assignment dated 4 June 1984, the marks were assigned from General Foods Corporation to Gaines Foods Inc, then though a series of company mergers of whom Gaines Pet Foods Corporation is the successor in business.  The marks were assigned from Gaines Foods Inc. through to Gaines Pet Foods Corporation.  The assignments were registered at the Trade Marks Office on 18 January 1990.

A similar chain of events has taken place in relation to the corresponding registrations in the United States.

The Calhoun declaration then attests to the use of the mark in the United States, a use which is in excess of $US200 million a year and then directs my attention to the mode of the use of the mark in exhibits of advertising attached to the declaration.

The declaration goes on to state that Gaines Pet Foods Corporation is a wholly owned subsidiary of the Quaker Oats Company.  In terms of an Asset Purchase and Sale Agreement dated 31 May 1985, the Quaker Oats Company covenanted not to manufacture, distribute or sell any dog foods directly or indirectly within Australia during a period of three years commencing 31 May 1985.  Another subsidiary of the Quaker Oats Company, Quaker Products Australia Limited, also covenanted not to manufacture, distribute or sell any dog foods directly or indirectly within Australia during a period of five years commencing 31 May 1985.  A copy of an agreement is exhibited to the declaration as Exhibit C and its substance and veracity were not disputed at the hearing.  However, the meaning and relationship of the document to this issue was a matter of debate at the hearing.

I would further add that the evidence shows that, in fact, there are two Asset Purchase and Sale Agreements: one of these is between the parties to this issue; the other is between Arnott-Harper Pty Ltd and Quaker Products Australia Limited and Luv Petfoods Pty Ltd and The Quaker Oats Company.  The first-mentioned Agreement is not in evidence and the second-mentioned agreement is in evidence.

The Martin declaration attests to the fact that the declarant is a legal practitioner working for the applicants representatives in these issue.  She attests that the applicant here is also the applicant in respect of an application for registration 513305 in Class 31 for goods including pet-foods.  Hence, she states, the applicant is a "person aggrieved" within the meaning of the Act.  There is a faxed letter from the applicant, signed by a Miss Gerry Gerwing annexed to the declaration which states, inter alia, that "we believe we are aggreived, (sic) because at the time of the transfer global rights except for Japan were assigned, but since it has become apparent there is no interest in the Gaines mark and we have since then developed an interest in the Gaines mark.  The assignees abandoned the marks by non-use."

The Johnson declaration is by an assistant secretary of the applicant.  She confirms that the applicant's predecessor in business sold the business in which the Gaines trade mark was used, and that the agreement contained a "non-compete" provision which was to run for five years from the date of closure of the agreement, namely from 5 June 1984 till 5 June 1989.  At no time, she states, were any specific arrangements or negotiations made with the purchaser in relation to the Australian trade marks.  Having determined that the GAINES mark was not used in Australia at the expiration of the "non-compete" term, the applicant decided to re-enter the Australian and New Zealand markets.

The submissions.
Mr Stevens submitted that the applicant is not a "person aggrieved" within the meaning of section 23.  There has been no demonstration in the application or early evidence that the applicant is a person aggrieved.  Furthermore, Mr Stevens stated, a deed of assignment dated 4 June 1984 makes it plain that the applicant assigned the marks to the opponent - hence the claim to be aggrieved is flawed since the applicant had assigned its marks earlier.

The words "person aggrieved" have, stated Mr Stevens, been used to denote a class of persons to whom standing is given to use a particular statutory procedure.  Mr Stevens drew my attention to Powells case (1894) 11 RPC 4, and Powell v Birmingham Vinegar Brewing Company Limited (1894) 11 RPC 563, in which the House of Lords stated that the person to be aggrieved ought to be in the same trade and that the legal rights of the person seeking the removal would, or might be, limited by the trade mark(s) remaining on the register. Mr Stevens stated that these two criteria had been applied constantly right through to Ritz Hotel v Charles of the Ritz 12 IPR 417, at 454, where McLelland J stated that following on those cases:

It is sufficient for present purposes to hold that the expression would embrace any person having a real interest in having the register rectified, or the mark removed in respect of any goods, as the case may be, in the manner claimed, and thus would include any person who would be, or in respect of whom there is a reasonable possibility of his being, appreciably disadvantaged in a legal or practical sense by the register remaining unrectified, or the trade mark remaining unremoved in respect of any goods, as the case may be, in the manner claimed.

Thus, Mr Stevens stated, it is not sufficient for the applicant to state that it has filed trade mark applications for the same marks and goods: the applicant must, he said, do something more, or show something more, to demonstrate that it is a person aggrieved in the sense of showing that it will be disadvantaged in a legal or practical sense.  Thus the mere filing of a trade mark application is an artificial means of bringing the applicant within the definition of being a person aggrieved. 

Persons who rely on this artifice, stated Mr Stevens, refer for support to Continental Liqueurs Pty Ltd v G F Heublein & Bro. Inc (1960) 103 CLR 422 at 428 where Kitto J. stated that:

The applicant has applied for registration of three trade marks consisting of or containing the word "SMIRNOFF" and the examiner has made adverse reports under s.33(2) on the ground, amongst others, that each of the proposed three marks so closely resembles the respondent's mark as to be likely to deceive.  That would suffice even by itself to give the applicant a locus standi.

That statement, and the conclusion drawn, below, should, submitted Mr Stevens, be read in the context of the words, below, immediately following and those preceding it that the applicant there was using the mark in relation to the goods:

In all the circumstances it seems to me too clear for argument that the applicant has a substantial business interest in getting the mark removed from the register.

Furthermore, the trade marks here at issue, said Mr Stevens, were acquired by the current proprietor from the applicant for removal.  This raises the question of the derogation of rights.  Mr Stevens then referred me to several text books which deal with the derogation of rights.  It is a general principle that a grantor must not derogate from his grant - he must not seek to take away with one hand what he has granted with the other.  Mr Stevens believed that principles of real property law could be applied in this instance.

The applicant has, submitted Mr Stevens, further failed to establish a prima facie case of non-use.  In Estex Clothing Manufacturers Pty Ltd v Ellis & Goldstein Ltd (1966) 116 CLR 254 Windeyer J stated, at pages 258-259:

It is for an applicant who seeks to have a mark removed to prove his case.  The onus is on him to show an absence of use in good faith during this period.  If persons who, by reason of their connexion with the relevant trade, might be expected to have seen or heard of the mark if it were used as a trade mark upon goods for which it is registered, swear that they had not seen or heard of it in use as a trade mark at any time during the relevant period, that is prima facie evidence of the fact which the applicant must prove.  Slight evidence may suffice at this stage, for the applicant has the task of proving a negative ...

Mr Stevens also referred me to the Trade Mark Examiner's Manual in this regard, and to the Revue Case [1979] RPC 27, at 29 where it was stated that, "In general the evidence of one individual will not be effective in discharging the onus on the applicant, unless the person is particularly well-placed and knowledgeable in the trade such as, for example an official in a relevant trade association." Mr Stevens then observed that the declaration of Richard Kurland is deficient in that it does not state what his trade is or how long he has been in that trade, or as to his qualifications or status. He interviewed a total of eight persons - five from major retailers and three from smaller outlets. It is clear, states Mr Stevens that only one of the interviews was an in-person interview, therefore the other persons interviewed could not have seen the marks in question. Three of the five persons interviewed stated that they had heard of the marks in suit [albeit this was not as marks used in Australia]. None of the persons made a sworn statement in terms of Estex, supra.  There is no record of the actual questions asked, no questions were apparently aimed at the national market and all of the persons interviewed were in Sydney.  Hence there has been no discharge of the onus on the applicant to demonstrate non use of the marks.

Mr Stevens then drew my attention to the Calhoun declaration which I have discussed, supra, under the heading, Evidence.  He also drew my attention to the considerable international reputation that the marks have in Australia, and drew my attention to the stated knowledge of the marks by the three interviewees in the Kurland declaration.  The opponent has, he stated, a definite intention to use the marks in Australia.

The opponent has been, stressed Mr Stevens, under a contractual obligation not to use the trade marks in Australia.  There has been, stated Mr Stevens, no use of the trade marks in Australia in the sense required by section 23 of the Act - however, this was a direct result of the opponent's obligations.

Mr Stevens then submitted that I have a discretion in relation to section 23 proceedings.  He referred me to the second edition of Australian Law of Trade Marks & Passing Off, by Shanahan, at page 275 where he cites Carl Zeiss Pty Ltd's Appn., (1969) 122 CLR 1, where Kitto J. ruled that the use of the word "may" in sub-section 23(1) involves a residual discretion to refuse removal in the face of all the issues required by the section being established. Such a exercise of my discretion might arise from, submitted Mr Stevens, the reputation enjoyed by the marks in this country: it would not be in the public interest to direct that the marks be removed from the register in the face of evidence that they are known in this country. It would neither be in the public interest to direct that the marks be removed from the register in the face of the fact that the non-use complained of arises from the compliance with contractual terms imposed by the present applicant. Similarly, stated Mr Stevens, if I am to consider the public interest in the exercise of my discretion, the balance must favour the opponent: the opponent does intend to use the marks in Australia.

Mr Niblett responded by referring me to Johnson declaration where the declarant states that there were no specific arrangements as to the disposition of the Australian marks.  The current proprietor did not purchase the rights to the use of the trade marks throughout the world.  There is an express exclusion as to the use of the trade marks in Japan, for example, and the proximity of that market to the Australian market makes an expansion into the Australian market logical.  This, and the application lodged by the applicant, does put the applicant into the situation of being a person aggrieved.

If the mark has been abandoned, the applicant is perfectly entitled to make application.  The fact that the mark has previously been on the register in the name of the party making application under either section 23 or application for registration is not in itself a bar to the success of either application.  The lengths of time involved is not a significant factor.

Mr Niblett submitted that it was his understanding of the "non-compete" clause in the agreement annexed to the opponent's evidence that it was only the seller of the business that had bound itself not to compete for five years in the Australian market.

The opponent had, in this light, quite adequate time to use the trade marks in Australia, stated Mr Niblett.  It had evinced no interest in doing so, apart from in connection with the opposition.

If the agreement was to be read the other way, that both parties had bound themselves not to compete in the Australian market for some five years, the opponent must, at the time of making the agreement, accepted that the marks would be vulnerable to removal for non-use, but voluntarily signed the agreement in that knowledge.

Mr Niblett submitted that this is not an appropriate forum for a determination of the proprietorship of the marks per se.

The evidence  of the Kurland declaration does, said Mr Niblett, in spite of its shortcomings, show that the mark is not used and was not used during the relevant period.  This type of evidence has been accepted by the office in prior section 23 applications.  Some of the interviews, attested to in the Kurland declarations, are with buyers for major retail networks - people who should have a knowledge of the state of the market throughout Australia.  In any event, the opponent has conceded the non-use of the mark: this being so the merits of the Kurland declaration become strictly academic.  Mr Niblett also referred me to the Estex decision, supra, wherein it was stated that even though the burden of proof of non-use lies with the applicant, all of the evidence must be taken into account when deciding the issue.  Therefore, submitted Mr Niblett, if there is an admission or concession in the evidence that the mark has not been used, that is something on which the applicant can rely.  This non-use has been admitted by the opponent.

Mr Niblett submitted that derogation of right in relation to real property is not applicable to trade mark issues as trade marks are personal property and not real property.

Discussion
Asset Purchase & Sale Agreements
Central to the submissions of both parties at the hearing was the non-competition clause in the agreement of sale between the parties.  The document that constitutes the Asset & Sales Agreement, between the parties before me, is not in evidence.  Evidence of that transaction is stated to be the assignment documents on each trade mark file, transferring the trade marks from one party to the other: these documents do not show the details of the first agreement, but corroborate the existance of an agreement.  I believe also that certain salient points of that Asset and Sales Agreement can be inferred from the Johnson  and Calhoun declarations.  The Johnson declaration states that there is a "non-compete" clause in the Agreement and that the period of time involved was from 5 June 1984 till 5 June 1989.  The Johnson declaration also states that at no time were any specific arrangements or negotiations made with the purchaser in relation to the Australian marks.  The applicant's predecessor in business retained the right to use the mark in Japan.  The declaration that there were no specific arrangements or negotiations concerning the Australian trade marks made with the purchaser is somewhat at odds with the fact that the marks were assigned to the purchaser and that assignment recorded in the Register.  Further, the statement that the applicant retained the right to the use of the mark in Japan appears to me to confirm that by express omission the applicant did not retain the right to use the mark in Australia.  If the "non-compete" clause had been quarantined to a specific country or number of countries, I am sure that the applicant would have brought this forward in evidence.  It seems to be a curious co-incidence that these applications in section 23 were lodged on 23 June 1989, just two weeks after the non-compete clause expired on 5 June 1989 and casts light on the Johnson declaration statement that, having determined that following the expiration of the "non-compete" clause the marks were not in use in Australia the applicant decided to re-enter the Australian market.  The Calhoun declaration confirms that the transfer of the trade marks to his company's predecessor was part of a world wide transaction.   Consequently, it appears fair to conclude that either the "non-compete" clause in that agreement was on a world wide basis generally, which extended to Australia although it was not specifically mentioned, or, that the applicant and/or the opponent at one time believed that it did.

I turn now to the second agreement, also containing a "non-compete" clause, that was made in Australia between the opponent and a person who is not a party to this issue.

This clause reads:

The Quaker Oats Company convenants with Purchaser that it shall not during a period of -

(i)one year

(ii)two years

(iii)three years

after the completion date,

and Vendor covenants with Purchaser that it shall not during a period of -

(i)one year,

(ii)two years,

(iii)three years,

(iv)four years,

(v) five years,

after the Completion Date

(a)directly or indirectly either alone, or in association or partnership with, or as an agent, member, shareholder or trustee, or as consultant or adviser or financier to any person firm association or corporation be engaged, concerned or interested anywhere in -

(i)Victoria

(ii)New South Wales

(iii)South Australia

(iv)Queensland

(v)Western Australia

(vi)Tasmania

(vii)The Northern Territory of Australia, or

(viii)Australian Capital Territory

in all or any of the trades or businesses involving the manufacture, distribution of sale of dog food.

The "vendor" is Quaker Products Australia Limited and the "purchaser" is Arnott-Harper Pty Ltd.

My duty as an administrative officer and my field of expertise does not include the interpretation of contracts.  However, I will observe that the language involved is plain, there are no legal phrases or definitions to be interpreted, or precepts to be applied.

Accordingly, I believe that I can find that the obligations of the parties to this agreement seem to be quite obvious.  The parties are bound not to compete in Australia for a period of three years to five years, depending on how the word "it" is to be read in the clauses that read: "The Quaker Oats Company convenants with Purchaser that it shall not during a period of", and, "and Vendor covenants with Purchaser that it shall not during a period of ...".  The word "it" might reasonably be read as applying to the vendor or purchaser, or both vendor and purchaser.  Whilst this is so, either of the parties to the agreement might reasonably expect and understand that they were disqualified from not only using these trade marks, but trading in any dog foods for a period of five years.  In fact, in view of the phrase, "all or any of the trades or businesses involving the manufacture, distribution of sale of dog food", the "non compete" clause might effectively prevent either party from dealing in any pet food for that period if the trades that make dog food also make other pet foods.

Accordingly, I find that in terms of the first agreement, between the parties here at issue, that there appears to be a very strong presumption that the parties were disbarred from competition with each other on a world wide basis, apart from Japan.  Accordingly, the opponent could not in terms of that agreement use its mark in Australia during the period 5 June 1984 to 5 June 1989..  In terms of the second agreement, I find that the opponent could not use the mark in Australia and satisfy its obligations under that agreement during the period 31 May 1985 to 31 May 1988.

Decision
Person Aggrieved
I do not think that I could seriously contemplate that a person who assigns or transfers his mark to another, as part of a business transaction, could, in the absence of an express condition in the agreement that the mark be used, and in the absence of fraud or some other wrongdoing on the part of the purchaser, state themselves to be aggrieved by its non-use within a period as short as five years.  I agree with the opponent that the satisfaction of the apparent minimum requirement to establish oneself as a person aggrieved in Continental Liqueurs, supra, the lodgement of identical, or substantially identical, or deceptively similar trade mark applications as those complained of, should be taken within the wider context of being materially disadvantaged by the registrations complained of in a business and legal sense.  In most instances, the lodgement of such applications to register will, prima facie, establish the applicant in section 23 as being a person aggrieved.  However, where it can be shown that the lodgement of such applications are tainted or foreshadowed by dealings such as those between the parties here, the Asset Purchase and Sale Agreement, without consideration of any "non-compete" clause, it becomes hard to accept such applications as being prima facie evidence of aggrievement.  I find some support for this view in the other cases cited by the opponent: Powell's case, the Ritz case and Continental Liqueurs, supra.  If, to interpolate from McLelland J.'s line of reasoning in the quote from the Ritz case, supra, the opponent successfully negatives the reasonable possibility of the applicant being appreciably disadvantaged in a legal or practical sense, the fact of the applications for registration placing the applicant into the position of being a person aggrieved must also be successfully negatived.  The marks complained of are, it must be observed, in exactly the same state as the applicant assigned them: unused.  It is difficult to see how the applicant could, within a period of five years, be aggrieved by the state of affairs that it had previously found acceptable for itself.

In this regard I therefore find that the applicant is not a person aggrieved.

Operating in addition to these considerations is the seeming fact that the non-use in the relevant section 23 period, from 23 May 1986 till 23 May 1989, was contributed to by the apparent operation of a non-compete clause in the Asset & Sales Agreement between the parties.  If my understanding of the situation is correct, I do not think that the applicant can complain of a situation that it has contrived to create.  If the situation exists, the applicant would be in more senses a person aggrieved if the opponent had used the marks.

In the latter sense, then, the applicant cannot claim to be a person aggrieved.

Non-Use
I further not not accept that the applicant has discharged the onus on it of showing that marks have not been used within the relevant period of time.  The Kurland declaration falls well short of establishing non-use in an opposed section 23 application: Kurland does not establish his bona fides, his experience or qualifications.  The declaration is silent as to the questions that were asked of the interviewees; there is no precise wording as to the instructions that Kurland received regarding his investigations; the interviewees were from a relatively small geographical area compared to the total market-pace in Australia.  The declaration does not say whether this was all of the persons interviewed or a representative sample, or just people who were found whose views matched the instructions that he had received.  Therefore, despite the opponent having, in fact, conceded the non-use, the applicant cannot be held to have discharged the prior onus on it.  In Estex, supra, I believe that Windeyer J.'s comments mean, in effect, that when the applicant has discharged the onus on it, the whole of the evidence should be considered.  As the applicant has not discharged the onus on it, I should not consider the whole of the evidence, whatever it might show.

Determination
I therefore cannot find that the applicant has established that the marks have not been used during the relevant periods of time as it has not discharged the onus on it to demonstrate the non-use.  Moreover, it has not established to my satisfaction that it is a person aggrieved, and, indeed, I have found that the applicant is not a person aggrieved by the registrations complained of in the sense required by the Act.  The applications under section 23 of the Act must, therefore, fail.

If I am wrong as to the applicant's standing, and as to its discharge of the onus on it, I have, alternatively, decided to exercise my discretion in these issues and dismiss the applications on this basis for the reasons that I will outline below.

Discretion
The opponent's case has been largely structured around its belief that the non-use complained of was the result of a contractual obligation placed on it by the applicant.  The existence of this obligation appears to have been confirmed in the Johnson declaration, as I have previously discussed, and was not seriously negatived by the applicant at the hearing.  I believe that the existence of the non-compete clause is evidence of the opponent's intention not to abandon the marks.  I think that this, in itself would be sufficient reason for the exercise of my discretion not to remove the marks.

Quite properly, the opponent did not argue in terms of an estoppel as such argument is out of my sphere of competence: R v Quinn & Another ex parte Consolidated Foods Corporation (1977) 138 CLR 1. However, I believe that the following quotation is a good statement of administrative policy, as opposed to law or equity:

A man shall not be allowed to blow hot and cold - to affirm at one time and deny at another - making a claim on those whom he has deluded to their disadvantage, and founded that claim on the very matters of the delusion.

Additionally, if the applications in section 23 were to be allowed and the marks removed from the Register, the applicant's application for registration, by which it sought to show that it was a person aggrieved, would be accepted and open to opposition.  If the current opponent decided to oppose the registration of that application, there is sufficient evidence before me to strongly suggest that there would be merit in the opposition.   There are, in the applicant's own evidence, the results of the Kurland series of interviews in which three people in the trade in Australia have stated that they know of the mark in Australia despite its non-use.  The mark therefore has a reputation in Australia.   This would go some way to satisfying the requirements stated in Seven Up Co v OT Ltd (1947) 75 CLR 203, at 211, by Williams J.:

Further, if at the date of the application for registration, the mark of the foreign trader, although it has not been used in Australia, has nevertheless become associated in the minds of the Australian public with goods because it has become associated in the minds of the Australian public with his goods because it has been advertised in publications which have circulated extensively in Australia or in some other manner, the Registrar is entitled to refuse to register the mark for such goods because it is likely to deceive.

However, I would not wish to prejudge the issue.

There is also the public convenience for me to consider.  I do not think that the public convenience will be served by allowing a non-compete clause in a contract to be used in this way.  The public in general, and trade in particular, depend on certainty in their dealings with each other.  There has been no indication that the non-compete clauses in the agreements in this issue are in any way unusual.  If they are a feature of trade at large, then trade at large must be able to place reliance on them and know that in entering into such agreements, they will not be later penalised for complying with their obligations.

I therefore exercise my discretion and, (if I am otherwise wrong in finding that the applicant is not a person aggrieved, and that the applicant has not discharged the onus on it of demonstrating the non-use complained of), I decline to order the removal of the marks at issue from the register.

I therefore dismiss the applications in section 23.

Costs
I think that costs may follow the event and the oppoent is therefore entitled to its costs in these issues.

Ian Thompson
Senior Examiner
Trade Marks Hearings

2 September 1993