Marley (U.K.) Limited, Re

[1991] ATMO 21

TRADE MARKS ACT 1955

DECISION OF A DELEGATE OF THE REGISTRAR OF TRADE MARKS

Re:Application No. 479248 to Register a Trade Mark in the Name of MARLEY (U.K.) LIMITED

Application No. 479248 was lodged on 6 January 1988 in the name of MARLEY (U.K.) LIMITED, a British company, of London Road, Riverhead, Sevenoaks, Kent TN 13 2DS England.  The application was endorsed to the effect that it was made under the provisions of para 45(1)(b) of the Act which is as follows:

45.(1) An application for the registration of a trade mark may be accepted, and the trade mark may be registered, notwithstanding that the applicant does not use or propose to use the trade mark -

.....

(b)if an application has been made for the registration of a person as a registered user of the trade mark and the Registrar is satisfied that the proprietor intends the trade mark to be used by that person in relation to those goods or services and is also satisfied that that person will be registered as a registgered user of the trade mark immediately after registration of the trade mark.

An examiner's report on the application was issued on 2 May 1989 which, inter alia, required the applicant to lodge the necessary documents under para 45(1)(b).  In due course, on 8 February 1990 the applicant lodged, in accordance with sub-s.74(2) of the Act an application to record THE MARLEY COMPANY (N.Z.) LIMITED, a New Zealand company, of Mahia Road, Manurewa, New Zealand as registered user of the mark together with the prescribed statutory declaration.  Sub-section 74(2) is in the following terms:

(2)Where it is proposed that a person shall be registered as a registered user of a trade mark, the registered proprietor and the proposed registered user shall apply in writing to the Registrar and shall furnish him with a statutory declaration made by the registered proprietor, or by some person authorized to act on his behalf and approved by the Registrar -

(a)giving particulars of the relationship, existing or proposed, between the registered proprietor and the proposed registered user, including particulars showing the degree of control by the registgered proprietor over the permitted use which their relationship will confer and whether it is a term of their relationship that the proposed registered user will be the sole registered user or that there will be any other restriction as to persons for whose registration as registered users application may be made;

(b)stating the goods or services for which registration is proposed;

(c)stating any conditions or restrictions proposed with respect to the characteristics of the goods or services, to the mode or place of permitted use or to any other matter; and

(d)stating whether the permitted use is to be for a period or without limit of period, and, if for a period, the duration of the period,

and with such further documents, information or evidence as is required under the regulations or by the Registrar.

The examiner objected that clause 5 of the declaration did not meet the requirements of the sub-section in that it did not give particulars showing the degree of control over the permitted use of the mark.  He added that the Registrar needed to be satisfied that the proprietor would maintain a connection with the goods and the manner in which the mark would be applied.  He called for a supplementary declaration setting out those particulars.
         The relevant clauses of the declaration are as follows:

3.The Proprietor is a wholly owned subsidiary of MARLEY plc of London Road, Riverhead, Sevenoaks, Kent TN13 2DS, England.

4.The User is a wholly owned subsidiary of MARLEY (OVERSEAS) LIMITED of London Road, Riverhead, Sevenoaks, Kent TN13 2DS, England, and the said MARLEY (OVERSEAS) LIMITED is a wholly owned subsidiary of the said MARLEY plc.

5.The appointment of the User as a Registered User is subject only to the following conditions and restrictions:-

The Trade Mark is to be used by the Registered User in relation to the goods only so long as the

Proprietor and the Registered User are controlled by MARLEY plc.

The applicant's attorney submitted in reply that as a result of the relationship between the various companies Marley plc directly controlled the applicant company and the proposed registered user.  He referred the examiner to the well known textbook The Law of Trade and Merchandise Marks by Dr S. Venkateswaren, Eastern Law House Private Ltd, Calcutta, 1963.
     Dr Venkateswaren, a former Controller-General of Patents, Designs and Trade Marks, commenting on s.49(1)(a) of the Indian Trade and Merchandise Marks Act, 1958, which is in identical terms to s.74(2)(a) of the Australian Act, says, at p.607: "The forms of control forming the basis of a registered user application may be financial control, control by agreement or patent licence agreement".  He then goes on to give some illustrative examples of forms of control, as follows:

"The Trade Mark is to be used by the Registered User only so long as the Registered User is completely controlled by the Registered proprietor".

"The Trade Mark is to be used by the Registered user only so long as both the Registered user and the Registered Proprietor are completely controlled by X and Co. Ltd.".

"The Trade Mark is to be used by the Registered User in relation to the goods only so long as the Registered Proprietor controls X and Co. Ltd. and X and Co. Ltd. control the Registered User".

"The Trade Mark is to be used by the Registered User only so long as the Registered proprietor owns sufficient share capital of the Registered User to enable the Registered proprietor to efficiently control the Registered user".

"The Trade Mark is to be used by the Registered User only so long as the Registered Proprietor holds sufficient of the share capital of the Registered user to elect the majority of the Directors of the Registered User".

"The trade mark is to be used by the Registered user (who is to be the sole registered user while he remains registered) in relation to the goods only if they have been manufactured by him in accordance with specifications and standards of quality prescribed from time to time by

the Registered proprietor and only so long as the Registered proprietor has the right and is permitted to inspect the goods and methods of manufacturing them on the premises of the Registered user at any time".

"The Trade Mark is to be used by the Registered user (who shall be the sole registered user so long as he remains registered), in relation to the goods made in accordance with the specifications or standards of quality laid down or directions given by the Registered Proprietors, and only so long as the Registered user remains substantially controlled subsidiary company of the Registered proprietors and Registered proprietors have the right to inspect the goods and the methods of their manufacture on the premises of the Registered users and to require samples of their goods to be submitted for the Registered Proprietor's approval before sale".

"The Trade Mark shall be used by the Registered User (who shall be the sole registered user so long as he remains registered) only in relation to goods purchased from the Registered Proprietor and only if the manner of use of the goods is in strict conformity with the standards supplied by the Registered Proprietor and only so long as the Registered Proprietor has the right at any time to investigate and assure himself that this is being so done".

While it will be noted that the second of these examples coincides exactly with clause 5 of the applicant's declaration the examiner required the applicant to lodge a supplementary declaration containing a statement setting out a form of control along the lines of that set out in the sixth of the given examples, that is, a statement as to quality control of the goods. To this the attorney replied drawing attention to the words "completely controlled" in the first example. These words, he argued, included all forms of control, not only financial control but also quality control. In his subsequent report the examiner maintained the objection stating that the Registrar had to be satisfied that the proprietor maintains a connection in relation to the goods in the course of trade. This could be achieved by satisfactory quality control over the permitted use. Since this was lacking in the proprietor's supporting declaration the application could not be accepted. The attorney challenged the examiner to point to any reference to the words "quality control" in s.74. He submitted that the quality of goods was a matter of the relationship between the parties and that quality was not a relevant consideration under the Trade Marks Act which only required a connection in the course of trade between the proprietor of the mark and the goods. This, he said, was satisfied in the present case. He therefore requested that the matter be set down for hearing.
         The matter came on before me in Melbourne on 18 September 1990.  Mr Keith Callinan of Callinan Lawrie, patent attorneys, appeared for the applicant.
         Mr Callinan reiterated his submission that the registered proprietor and the registered user were both fully controlled by MARLEY plc which was therefore in a position to control all aspects of the operations of the proprietor and the proposed user including control over the use of the mark.  In these circumstances, he argued, the requirements of s.74(2)(a) were satisfied because "the degree of control by the registered proprietor over the permitted use which their relationship will confer" is fully stated in the description of the relationship between the applicant and the proposed user.
         In their commentary on s.28 of the UK Trade Marks Act from which s.74 of the Australian Act is derived and s.28(4)(a) which is identical with s.74(2)(a) of the Australian Act the authors of Kerly's Law of Trade Marks and Trade Names, 12th edition, say:

Control by the proprietor

It seems clearly to be the intention of the section (as it was the intention of the Departmental Committee of 1934) that users should only be registered where the Registrar is satisfied that the proprietor is in a position properly to control the use of the mark by the user.  No particular form of control is specified.  It is recognised that the Registrar will allow registration in three particular cases - where the proprietor has control of the user (in particular, where the user is a subsidiary company of the proprietor); where the marked goods will be made under

licence under the proprietor's patents; and where an agreement between the parties entitles the proprietor to prescribe standards of quality for the marked goods.  Presumably these three types of control are equally appropriate for service marks.  But these recognised forms of relationship are in no way exhaustive, and it would seem that the Registrar's minimum standards of control are somewhat slight.  It is, in any case, impossible for the Registrar to ensure that the proprietor does in fact exercise any control, or even that the parties contemplate that he should; the Registrar can secure only that the possibility of control is in law there.  (There should be provision for terminating the registration if control ceases to be possible.)  It will be noted that each of the three relationships mentioned creates some possibility that the proprietor can ensure that the mark remains in some sense his.  (It is recognised that in this respect the relationship of patentee and licensee may leave something to be desired, unless the licence agreement gives the patentee control over the licensee's specifications.)  If in actual working the proprietor fails to exercise the control that is open to him, he may, in some cases, endanger his registration.  The validity of the registration, however (see the preceding section), will depend rather on questions of reputation than who is responsible in fact for determining the quality of the goods.

There is a clear distinction drawn here between cases where the proprietor has control of the user and those where an agreement between the parties entitles the proprietor to prescribe standards of quality for the goods.  In each of these cases (apart from the case of a licensee under a patent) it is recognised that the Registrar will allow registration.  This same distinction is drawn by Venkateswaren in the passage quoted above where the illustrative examples of forms of control are clearly intended to be alternatives.  Also to be noted in the above passage from Kerly is the recognition that "the Registrar can secure only that the possibility of control is in law there".
         Again, in Chowles and Webster's South African Law of Trade Marks, Company Names and Trading Styles, 2nd edition, Butterworths, Durban, 1972, in commenting on s.48(4)(a) of the South African Act, which is in terms identical with the same provision in the UK and Australian Acts, the authors say, at p.l180:

The "relationship" between the parties

In practice the relationship between the parties which is considered by the Registrar to meet the requirements of sub-s.(4)(a) can take one of three forms, being such that adequate control can be exercised over the use of the trade mark by virtue of -

(a)shareholding;

(b)a patent licence;

(c)an agreement between the parties.

The Registrar considers that so long as the effective control of the proprietor and the registered user vests in the same party by virtue of a controlling financial interest, that party is in a position to ensure that the standards of quality established by the proprietor of the mark will be maintained.  He will then enter the registered user upon such facts being set out on oath and the entry normally will endure only so long as the financial control is maintained.

Similarly, in the case of goods manufactured under a patent licence, it is presumed that they will be manufactured strictly in terms of the patent licence and the patent specification, thereby protecting the public against possible deception.  It is readily conceivable, however, that while goods manufactured by different persons under a patent licence will of necessity be the same in their nature, there is no automatic assurance that they will be the same in quality.  A modern theory is that an important function of a trade mark is to serve as a guarantee of quality and not solely as an indication of origin.  If this is accepted, and the introduction of "registered user" provisions in the statute goes a long way towards doing so, it seems doubtful whether a bare patent licence should be accepted as furnishing the degree of control requisite for the protection of the public interest.

The third form of control, by way of an agreement between the parties, is the form most commonly adopted.  The agreement usually stipulates the goods or services in respect of which the trade mark is to be used, that these goods will be manufactured or the services rendered strictly in conformity with the directions, specifications, formulae or other instructions furnished by the proprietor, that the proprietor will receive samples of the goods and have the right of rejection and that he will have access to the premises on which the goods are made or in which the services are rendered.  Further clauses usually stipulate that the agreement will terminate on non-compliance or at a specified date and also whether or not other registered users may be appointed.  The agreement may also provide that the registered user waives the right given by sub-s.48(3) to take proceedings for infringement.

Once again a clear distinction is drawn between the same three classes of relationship, and, once again, in the case of a controlling financial interest the Registrar considers that so long as the effective control of the proprietor and the registered user vests in the same party that party is in a position to ensure that the standards of quality established by the proprietor of the mark will be maintained.  He will then enter the registered user upon such facts being set out on oath.  In the present case those very facts have been set out in the statutory declaration of the applicant for registration of the user.  That situation is contrasted with one where the form of control is by way of agreement in which case the methods of quality control to be exercised by the proprietor and observed by the user must be stipulated before the Registrar can be satisfied that the connection between the proprietor of the mark and the goods will be maintained.
         In all three of the above jurisdictions, then, it is sufficient to enable a user to be registered that both the proprietor and the proposed registered user are wholly controlled by a third party, that is, that party is in a position to ensure the standards of quality established by the proprietor will be maintained.  This enables the Registrar to be satisfied that the proprietor is in a position properly to control the use of the mark by the user.  This in my view is the correct approach.  It entails, I believe, a recognition that in the case of a controlling financial interest the requirement of s.74(2)(a) that the proprietor of the mark give "particulars of the relationship" including particulars showing "the degree of control by the registered proprietor over the permitted use which their relationship will confer" are not separate and distinct requirements.  The latter is inherent in the former and inseparable from it.  The examiner appears to have taken the view that the provision contains two distinct requirements which must be met in every case.  I have stated my conclusion that this is not so.  It is sufficient that the proprietor establish that a controlling financial interest places it in a position to control the use of the mark by the user.  It must also of course be made a condition of the user remaining registered that that relationship continue.  In the case of an agreement between two independent parties methods of quality control by the proprietor which enable the Registrar to be satisfied that the proprietor is in a position properly to control the use of the mark must of course be stipulated in the declaration or in the agreement itself.
         It follows that in my opinion the applicant has fulfilled the requirements of s.74(2)(a) of the Act and that the application for registration is therefore entitled to be accepted in accordance with the provisions of s.45(1)(b).

(M.A. HOMANN)
Hearing Officer
5 April 1991