Pierson?s Pro-Health Pty Ltd v Allan Sutton - [2012] ATMO 52

TRADE MARKS ACT 1995

DECISION OF A DELEGATE OF THE REGISTRAR OF TRADE MARKS WITH REASONS
Re:Opposition by Piersons Pro Health Pty Ltd to application under section 92 of the Act by Allan Sutton to remove trade mark number 1134519 (1, 3, 5) - ALLAN SUTTON'S ORIGINAL COLLOIDAL SILVER - in the name of Pierson’s Pro-Health Pty Ltd.

Delegate: Heath Wilson

Representation: Opponent: David Thompson of Counsel instructed by Lord and Company, Patent and Trade Marks Attorneys
Applicant: Peter Tierney, Legal Practitioner.

Decision: 2012 ATMO 52
Application for removal under section 92(4)(a) – court proceedings existing at the time of filing – ‘fictitious or colourable use’ – application for removal dismissed - costs awarded against applicant.
Background

On 8 September 2006, Piersons Pro Health Pty Ltd (‘the opponent’) applied to register the trade mark below (allocated trade mark no. 1134519):

(‘the opponent’s trade mark’)

The specification of goods for the opponent’s trade mark currently reads:
Class 1: Chemicals used in agriculture horticulture and forestry chemical substances for preserving food stuffs

Class 3: Substances for laundry use, soaps, perfumery essential oil cosmetics hair lotions dentifrices

Class 5: Pharmaceutical, veterinary and sanitary preparations materials for dressing disinfectants preparation for destroying vermin fungicides herbicides; colloidal silver preparation in liquid form for the use of water sanitization
The trade mark was advertised as accepted in the Australian Official Journal of Trade Marks on 18 January 2007. Subsequently, on 17 April 2007 the trade mark was opposed under section 52 of the Trade Marks Act 1995 (‘the Act’) by a company named Suttons Global Health Pty Ltd. On 4 September 2007, the opposition was withdrawn and the trade mark proceeded to registration.
On 21 January 2010, Mr Allan Sutton (‘the applicant’) applied for the removal of the opponent’s trade mark under subsection 92(4)(a) of the Act in relation to all of the goods for which the trade mark is registered. The application form for trade mark removal contains a formality requirement to the effect:
It is understood that proceedings concerning the trade mark are not pending in a court.
The current removal application was opposed by the opponent on 4 June 2010 and evidence was filed and served in these proceedings by both parties.
After the opponent and applicant served their respective written submissions, I heard the matter in Canberra as a delegate of the Registrar of Trade Marks on 20 March 2012. David Thompson of Counsel appeared for the opponent instructed by Lord and Co., Patent and Trade Marks Attorneys. Peter Tierney, Legal Practitioner appeared for the applicant.
Discussion
Section 92 of the Act relevantly states:
Application for removal of trade mark from Register etc.
(1)Subject to subsection (3), a person may apply to the Registrar to have a trade mark that is or may be registered removed from the Register.
(2)The application:
(a)must be in accordance with the regulations; and
(b)may be made in respect of any or all of the goods and/or services in respect of which the trade mark may be, or is, registered.
(3)An application may not be made to the Registrar under subsection (1) if an action concerning the trade mark is pending in a prescribed court, but the person may apply to the court for an order directing the Registrar to remove the trade mark from the Register.
Note:For prescribed court see section 190.
(4)An application under subsection (1) or (3) (non‑use application) may be made on either or both of the following grounds, and on no other grounds:
(a)that, on the day on which the application for the registration of the trade mark was filed, the applicant for registration had no intention in good faith:
(i)to use the trade mark in Australia; or
(ii)to authorise the use of the trade mark in Australia; or
(iii)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 to which the non‑use application relates and that the registered owner:
(iv)has not used the trade mark in Australia; or
(v)has not used the trade mark in good faith in Australia;
in relation to those goods and/or services at any time before the period of one month ending on the day on which the non‑use application is filed;
The first issue canvassed at the hearing related to the existence of pending court proceedings when the applicant filed the non-use application. Under section 92(3) of the Act, a non use application may not be made if an action concerning the trade mark is pending in a prescribed court. In that event, a person may instead apply to the prescribed court for an order directing the Registrar to remove the trade mark from the Register.
The decision in the Federal Magistrate’s Court of Pierson’s Pro-Health Pty Ltd v Silvex Nominees Pty Ltd[1] was made on 12 March 2010. The action concerned an alleged infringement of the trade mark the subject of this non-use application (registration no. 1134519). The applicants before the court (which included Pierson’s Pro-Health Pty Ltd) were unsuccessful, appealed on 6 April 2010, and the matter was ultimately resolved via consent orders on 29 April 2011. While Mr Sutton was not one of the parties involved in the court action, section 92(3) does not require the parties for the removal action and the court proceedings to be identical, only that the pending court action concern the trade mark.
[1] Pierson’s Pro-Health Pty Ltd & Ors v Silvex Nominees Pty Ltd & Anor (No.2) [2010] FMCA 121.
Accordingly, the current application for removal was made at a time when an action concerning the trade mark was still pending in the Federal Magistrates Court. However, I find that there are a number of reasons why this fact does not invalidate the non-use application before the Registrar. The crucial factor was conceded by Mr Thompson, being that the Federal Magistrates Court is not listed as a prescribed court under section 190 of the Act and is not relevant for the purposes of 92(3).
While it is unlikely to be the case here, it is possible that a removal applicant may be unaware of court proceedings concerning the trade mark at the time of the application. I am also mindful of the fact that the matter had progressed to a point where a hearing was imminent with the parties already having filed and served all their evidence and submissions. The fact that the opponent has left this particular argument to such a late stage in the proceedings works against it. To determine the application as ‘not made’ or to refer the matter to the court at this stage would not only inconvenience the parties but would be detrimental to the public interest. In any event (and as I have already said), the argument fails the threshold test as the Federal Magistrates Court is not (in the legislation as it stands) a ‘prescribed court’.
Intention and the Use of the Trade Mark
The statutory declarations from both applicant and opponent detail the history of the business relationship between the applicant and directors of the opponent (Mr and Mrs Franklin). In 2003, the applicant and the Franklins orally entered into a distribution agreement whereby the applicant manufactured the colloidal silver solution sold by the Franklins. In 2005, the manufacturing of “Allan Sutton’s Original Colloidal Silver” commenced.[2] On 1 April 2006, Australian Colloidal Silver Pty Ltd (‘ACS’) was incorporated with Mr Sutton and the Franklins as directors. The parties differ on whether the goodwill (and rights in the opponent’s trade mark) had passed to the opponent.
[2] Statutory Declaration of Allan Kingsley Sutton dated 28 February 2011 (Annexure K).
The relationship between the applicant and the Franklins soon deteriorated for a number of reasons and the applicant wrote to them on 26 September 2006 ceasing the business relationship and resigning as director of ACS. He wrote:[3]
You did not, either at the time of our initial agreement or at the establishment of Australian Colloidal Silver Pty Ltd, pay any sum of money to acquire the rights whatsoever to Allan Sutton’s original Colloidal Silver – the product, its label, its reputation, my name or goodwill.
[3] Statutory Declaration of Allan Kingsley Sutton dated 28 February 2011 (Annexure I).
Mr Tierney conceded during the course of his submissions that the opponent had demonstrated use of the trade mark prior to 21 December 2009. However, he argued that, because of the circumstances surrounding the ownership of the trade mark, the intention and the trade mark use were ‘colourable’ and could not have been ‘in good faith’. Mr Tierney further submitted:
…Gallo[4] offered no real explanation of the exceptions to acting in good faith, other than that the Court referred to the expressions “fictitious or colourable use”. Whatever those expressions might mean … Gallo is certainly not authority for the proposition that use of a Trade Mark to the requisite level of commerciality absolves any colourable purpose. Otherwise, quite clearly the words “in good faith” in the Act would be otiose.
[4] E & J Gallo Winery v Lion Nathan Australia Pty Ltd [2010] HCA 15; (2010) 241 CLR 144; (2010) 86 IPR 224 at [62] (‘Gallo’).
I will address this argument later in my reasons. For the moment, demonstrated use of a trade mark in good faith prior to the removal application is sufficient to discharge the onus on the opponent under section 92(4)(a) of the Act. Failing that, a clear statement of intention to use the trade mark in good faith will shift the onus to the applicant.[5] The opponent has declared its intention in registering the trade mark as an attempt to protect its product labels from what it considered to be unauthorised trade mark use.[6] Mr Franklin (director of the opponent) declares:
PPH [the opponent] applied to register the Mark when it discovered that others were using brands similar to the PPH Label to compete with it, and in order to protect that goodwill, as well as investments in its business. I deny that in these circumstances PPH did not apply for registration in good faith. I also deny that it has since used the Mark other than in good faith…
[5] Structureco Inc v Starite Distributors Pty Ltd (2000) 49 IPR 209 and Bunter v Hobarama LLC (2005) 67 IPR 216 (at 222).
[6] Statutory declaration of Grenville George Franklin dated 30 June 2011 (at paragraphs 55-56).
In addition to the above statement, the opponent provides evidence of trade mark use within the statutory declarations of Mr Franklin dated 1 September 2010 and 30 June 2011. Mr Franklin attests that the opponent has been using its trade mark since 11 April 2006 continuously on bottles containing colloidal silver. Colloidal silver is a liquid suspension of microscopic particles of silver and has, according to the opponent, been used as an anti-bacterial agent or as an alternative health remedy. It is therefore possible that the opponent’s trade mark may be applied on or in relation to the goods in classes 1, 3 and 5 of the specification.
The first Franklin declaration exhibits pharmacy catalogues from January 2009 bearing the opponent’s trade mark and advertisements placed in industry magazines in or around this time. An invoice from January 2004 for colloidal silver products was issued in the Piersons’ Pro-Health business name, but the owner of this business name is a different entity to the opponent (which was incorporated in April 2006).
The approximate sales figures of the opponent’s product between April 2006 and December 2009 are substantial. The quantum of sales shown by the opponent may inform a decision on good faith because use of a trade mark which is not for the purpose of establishing goodwill and is aimed solely at frustrating other traders is not likely to be substantial. In addition, many sales of the opponent’s product occurred before the business relationship between the opponent and the applicant broke down and I find that they do not constitute instances of token use of the trade mark.
In the face of the opponent’s trade mark use and a positive statement of intention at the time of filing, the onus is on the applicant to rebut the proposition that the use and intention in filing the trade mark were in good faith.
‘In Good Faith’
With regard to the applicant’s main argument, it is necessary to address the context in which the expressions ‘in good faith’ and ‘fictitious or colourable use’ have been considered by the courts. Under section 92, Drummond J in Woolly Bull Enterprises Pty Ltd v Reynolds[7] found “the expression "use in good faith" has a well understood meaning in this context, viz, real, as opposed to token, use in a commercial sense.” In Edwards v Liquid Engineering 2003 Pty Ltd[8] Gordon J stated (with emphasis added):
Having considered the evidence led, and submissions made, I was poised to answer that question in the affirmative and uphold the appeal, on the basis that "good faith" for the purposes of s 92(4) requires no more than genuine intent to use a mark for commercial purposes; it does not involve any element of honesty or subjective good intentions: see generally E & J Gallo Winery v Lion Nathan Australia Pty Ltd [2008] FCA 934 at [187] - [192] (examining the meaning of "good faith" under related provisions of the TMA). However, during the course of the hearings it became apparent that what LE 2003 really wanted, and should have applied for in the first place, was the expungement of the registrations by Edwards under s 88 of the TMA on the basis that Edwards was not the owner of the unregistered marks: ss 52 and 58 of the TMA. I therefore delayed giving judgment in VID 934 of 2006 so that a separate application could be brought on that basis and the matters resolved together.
[7] Woolly Bull Enterprises Pty Ltd v Reynolds [2001] FCA 261; (2001) 107 FCR 166; [2001] AIPC 91-713; (2001) 51 IPR 149 at [16].
[8] Edwards v Liquid Engineering 2003 Pty Ltd [2008] FCA 970 at [8].
The Full Federal Court in Liquideng Farm Supplies Pty Ltd v Liquid Engineering 2003 Pty Ltd[9] upheld the above reasoning and said (emphasis added in bold):
Gummow J considered the meaning of the expression "use in good faith" as a criterion for infringement in Johnson & Johnson Australia Pty Ltd v Stirling Pharmaceuticals Pty Ltd (1991) 30 FCR 326 at 354, pointing out that:
There is, in relation to the comparable provisions in the British Act of 1938, authority to the effect that in order to qualify as such use there must be a real or genuine use in a commercial sense, rather than colourable activity and "token" use designed to lead trade rivals to think that the registered proprietor was using its mark in a way which gave it the protection of the legislation.
See also E & J Gallo Winery v Lion Nathan Australia Pty Ltd [2008] FCA 934; [2008] 77 IPR 69 at [99] - [707] and the authorities there referred to.
We were directed to several other authorities which took a broader view of the expression but insofar as they conflict with the above authorities we do not consider they were correct.
In the present case having regard to the above authorities, we do not consider that her Honour erred when she observed at [8] of her reasons that s 92(4) of the Act requires no more than a genuine intent to use the mark for commercial purposes, and that the reference to bona fide intention to use is not sufficiently wide to encompass the circumstances of the present case.
[9] Liquideng Farm Supplies Pty Ltd v Liquid Engineering 2003 Pty Ltd [2009] FCAFC 7; 175 FCR 26; (2009) 79 IPR 437 (at [54]) (‘LiquidEng’)
The High Court of Australia affirmed the interpretation of ‘in good faith’ in the decision of E & J Gallo Winery v Lion Nathan Australia Pty Ltd[10] stating:
In "Concord" Trade Mark ("Concord"), Falconer J relied on Lawton LJ's summary of the findings in the Electrolux case in Imperial Group:
"According to the judgments given in this court in that case [Electrolux] a bona fide use should be 'ordinary and genuine' (per Lord Evershed MR at p 36), 'perfectly genuine', 'substantial in amount', 'a real commercial use on a substantial scale' (per Jenkins LJ at p 41) and not 'some fictitious or colourable use but a real or genuine use' (per Morris LJ at p 42)."
[10] E & J Gallo Winery v Lion Nathan Australia Pty Ltd [2010] HCA 15; supra at [62].
The above reference to the expression ‘fictitious or colourable use’ arises from the comments of Morris LJ in Electrolux Ltd v Electrix Ltd[11] who used it in this context:
The Legislature, in my view, had in mind that someone could not gain immunity from attack by asserting use when there was really only some fictitious or colourable use and not a real or genuine use.
….
It is, of course, clear that when the phrase “bona fide” is used, its context must be considered when deciding what is its meaning.
[11] Electrolux Ltd v Electrix Ltd (1954) 71 RPC 23 (at 42).
Morris LJ stopped short of providing specific examples of ‘colourable use’, but the expression ‘fictitious or colourable’ has since been adopted in the British case of Imperial Group Ltd v Philip Morris & Co Ltd[12] and (as seen above) in Gallo. In those instances it is employed in relation to use that cannot be described as real or genuine (or ‘bona fide’) including use manufactured solely to defeat an application for non-use. For the opponent’s use of the trade mark and its intention to be established as ‘colourable’ and not bona fide, it must have been for a purpose other than deriving profit and establishing goodwill[13] in the course of trade.
[12] [1982] FSR 72.
[13] Imperial Group Ltd v Philip Morris & Co Ltd (supra) at 82-83 per Shaw LJ.
Upon reviewing the legal precedent on this issue, I agree with Mr Tierney that it cannot be said that trade mark use “to the requisite level of commerciality absolves [or exonerates] any colourable purpose” but ‘colourable purpose’ should not be interpreted as expanding upon the definition of ‘in good faith’ accepted by the courts. In particular, I note the refusal of the Full Federal Court in LiquidEng to take a broader view of ‘good faith’ over and above a demonstrated genuine intent to use the trade mark for commercial purposes. At the risk of repetition, use in good faith does not involve a consideration of “honesty or subjective good intentions”.
The opponent’s trade mark incorporates the name of the applicant and the evidence shows that the applicant has manufactured and sold colloidal silver in Australia under a number of business names (incorporating the name ‘Sutton’) since 1998. The Sutton declaration also purports to show that the opponent’s trade mark was developed and first used by the applicant.
Mr Tierney argued that the intention of the opponent in applying to register the trade mark was solely to trade on the goodwill and reputation in the applicant’s name, that this is a colourable use and not in good faith. The applicant annexed a copy of the decision in Pierson’s Pro-Health Pty Ltd & Ors v Silvex Nominees Pty Ltd & Anor (No.2) (supra) where Lucev FM was not convinced by Mr Franklin’s version that the goodwill (including the trade mark) was sold via oral agreement to the opponent. While there was no evidence of the purchase by the Franklins of intellectual property or goodwill in Mr Sutton’s colloidal silver products the Federal Magistrate Mr Lucev commented [at 112]:
There is sufficient evidence … for the Court to conclude that some goodwill or reputation did exist in the colloidal silver product produced by Pierson’s and bearing the Pierson’s Trade Mark [no. 1134519] (albeit that the Franklins never paid for such goodwill).
Mr Tierney also highlighted the comments of the Hearing Officer in the unreported opposition matter Pierson’s Pro-Health Pty Ltd v Allan Sutton.[14] On the evidence before her, the Hearing Officer favoured the applicant’s version of events and said[15]:
I do not accept Mr Franklin’s account of how the trade mark of registration 1134519 was designed and first used. I am satisfied from the applicant’s evidence that Alan Robert Hicks designed the trade mark on the applicant’s instructions... Mr and Mrs Franklin may have applied the Allan Sutton’s Original Colloidal Silver labels to bottles of colloidal silver in January 2004 but that was on the applicant’s instructions. I am satisfied that he, not the Franklins, was the first to use the trade mark in Australia.
[14] Pierson’s Pro-Health Pty Ltd v Allan Sutton (2 May 2011)
[15] The Hearing Officer’s use of the words “opponent” and “applicant’ corresponds with the parties as I have defined them in this decision.

However, the Hearing Officer also found that:
Notwithstanding this, the opponent is the registered owner of the trade mark and the evidence shows the applicant has not been associated with the sale of goods labeled Allan Sutton’s Original Colloidal Silver since late 2006.
While the comments of Lucev FM and the Hearing Officer are noted, I find that they do not bear on the ultimate question under section 92(4)(a) of the Act. There is clearly doubt over the sale of goodwill in the trade mark but the fact that there was some pre-existing goodwill in Mr Sutton’s name (and the trade mark) does not negate the opponent’s intention to further establish goodwill in its trade mark. As addressed by Gordon J[16], an action under section 92 of the Act is not the appropriate place to determine the ownership of a trade mark. It is more suited to section 58 of the Act. Such an action was available to the applicant during the opposition period under section 52 and may be still be available via an application to the court under section 88 of the Act.
[16] Edwards v Liquid Engineering 2003 Pty Ltd [2008] FCA 970 (supra).
Even were I to find that the trade mark did not belong to the opponent at common law (and I would hesitate to do so on the evidence before me) it would not necessarily follow that the opponent lacked the intention to use the trade mark in good faith or that the opponent’s commercial use of the trade mark should be discounted. The opponent intended at the time of filing (and had in fact commenced) to use the trade mark in a commercial sense and the intention and use was not, in my determination, ‘fictitious or colourable’.
Decision
Section 101 of the Act provides:
Section 101: Determination of opposed application—general
(1)Subject to subsection (3) and to section 102, if:
(a)the proceedings relating to an opposed application have not been discontinued or dismissed; and
(b)the Registrar is satisfied that the grounds on which the application was made have been established;
the Registrar may decide to remove the trade mark from the Register in respect of any or all of the goods and/or services to which the application relates.
(2)Subject to subsection (3) and to section 102, if, at the end of the proceedings relating to an opposed application, the court is satisfied that the grounds on which the application was made have been established, the court may order the Registrar to remove the trade mark from the Register in respect of any or all of the goods and/or services to which the application relates.
(3)If satisfied that it is reasonable to do so, the Registrar or the court may decide that the trade mark should not be removed from the Register even if the grounds on which the application was made have been established.
(4)Without limiting the matters the Registrar may take into account in deciding under subsection (3) not to remove a trade mark from the Register, the Registrar may take into account whether the trade mark has been used by its registered owner in respect of:
(a)similar goods or closely related services; or
(b)similar services or closely related goods;
to those to which the application relates.
The opponent has discharged the onus of establishing the intention to use trade mark no. 1134519 in good faith in Australia. I find that the application for removal under s92(4)(a) of the Act has not been successful and is dismissed.
Costs
The opponent has been successful and I award costs against the applicant in the amounts allowable under Schedule 8 of the Trade Marks Regulations 1995.

Heath Wilson
Hearing Officer
Trade Marks Hearings
30 May 2012

Delegate:	Heath Wilson
Representation:	Opponent: David Thompson of Counsel instructed by Lord and Company, Patent and Trade Marks Attorneys Applicant: Peter Tierney, Legal Practitioner.
Decision:	2012 ATMO 52 Application for removal under section 92(4)(a) – court proceedings existing at the time of filing – ‘fictitious or colourable use’ – application for removal dismissed - costs awarded against applicant.