Sapient Australia Pty Ltd and Sapient Corporation v SAP Aktiengesellschaft

[2002] ATMO 51

TRADE MARKS ACT 1995

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

Re:Opposition by Sapient Australia Pty Ltd and Sapient Corporation to registration of trade mark application 790648(9, 41, 42) - SAPIENT - filed in the name of SAP Aktiengesellschaft.

Background

Trade mark application 790648 consists of the word SAPIENT.  It was filed on 8 April 1999 by SAP Aktiengesellschaft ("SAP Ag") and seeks registration for a variety of goods and services as follows, in the specified classes of the International (Nice) Classification of Goods and Services.

Class 9: Computer software and hardware; data processing equipment and computers; magnetic data carriers, recording discs, floppy discs, CD-ROM; teaching apparatus and instruments in this class; computer chips; audio-video CD's; computer operating programmes, computer peripheral devices, computer memories; data media; smart cards; video cassettes and tapes

Class 41: Education, providing of training, cultural activities; all in relation to business, business management, management, business administration, computers, computer peripherals and computer software, information technology, intellectual property, telecommunications, science and technology, medical technology and science, technology management, stress management and therapy, personal development, lifestyle, relaxation and remedial techniques; the foregoing including post-graduate, further and advanced education and training

Class 42: Computer programming; computer software design; computer systems analysis, maintenance of computer software and hardware; consultancy in computer software and hardware; updating of computer software and hardware; computer and software rental, leasing access time to computer databases; recovery of computer data; consultancy in intellectual property and information technology; computer consulting; Internet services in this class

SAP Ag, the applicant for registration, trades in a system of business management (Enterprise Resource Planning, or ERP) software.  That package is very widely known under the trade mark SAP.  The product has gone through various versions, such as release 2 and, current at the time of these proceedings, release 3 or R/3.  In Australia, SAP Ag has a subsidiary company ("SAP Australia"), which is not a party to these proceedings.  SAP Australia distributes the SAP product in Australia and operates Sapient College.  Sapient College provides training in the use of the complex SAP product, sometimes in partnership with accredited universities.

Registration is opposed by two separate but related entities, Sapient Corporation ("Sapient") and Sapient Australia Pty Ltd ("Sapient Australia").  The former is an American company that provides consultancy services in relation to computer systems for larger corporate clients, using client-server rather than mainframe systems.  Sapient Australia is a wholly-owned Australian subsidiary of Sapient, doing similar work at a local level.  More detail of this appears below.

In what follows, I will speak of the opponents jointly, though their oppositions were filed separately.  Only where it is necessary, as in setting out the history of the parties, will I speak of either opponent separately.

The present opposition is not the first time that SAP Ag and Sapient Australia have clashed. SAP Ag and its subsidiary failed in Federal Court proceedings instigated against Sapient Australia. Those proceedings involved, inter alia, alleged infringement of three registered trade marks. These registrations are for the trade marks SAP and SAPIENT COLLEGE. The court matters are set down at [1999] FCA 1027 (1999), 45 IPR 169 and, on appeal, [1999] FCA 1821, (1999) 48 IPR 593.

The decision of Wilcox J was affirmed on appeal.  The findings set the scene, as it were, for the present matter.  Using that as a criterion, the most relevant findings are that:

• Sapient Australia had not infringed the marks SAP and SAPIENT COLLEGE trade marks registered by SAP Ag or SAP Australia.  The trade marks are readily distinguishable and are not deceptively similar to SAPIENT.

• The element COLLEGE made a significant difference to the trade mark of which it was a part, such that there was no infringement of the trade mark SAPIENT COLLEGE by use of either of the names Sapient Corporation or Sapient Australia.

• The material differences between the fields of commerce of the warring interests were narrowing.

In the interests of avoiding duplication, I will adopt relevant elements of the history of this matter formulated by French, Heerey and Lindgren JJ, on appeal.  While some of what follows is not absolutely germane to the current opposition matter, it is useful to re-state it, in order to set out the context of this opposition and the circumstances under which the two parties first came into conflict.

Sapient Australia was incorporated in Australia in 1998, advertised for staff on 30 March 1999 and established an office in April 1999.  It provides custom-designed computer systems for clients and some ancillary training.

SAP Ag was formed in Germany in 1972.  It produces and sells software systems and provides ancillary services.  From 1989 to 1999, its subsidiary, SAP Australia, traded under the name "SAP Australian Systems Applications and Products in Data Processing Pty Ltd".  It adopted its present name on 24 June 1994.

Under an agreement made in 1992, SAP Australia distributes some of the SAP Ag computer software products in Australia.  The principal product is an ERP software package called "SAP R/3".

ERP software is applied to planning for all aspects of the activities of an enterprise.  This extends to the planning and management of financial, manufacturing, sales, distribution and human resource functions.  SAP R/3 is a software platform that involves software applications based on application link enabling, electronic data interchange and the Internet.  It is a software platform on which companies can build integrated vendor-independent enterprise wide application and that the flexibility of its architecture will accommodate anything from a few to several thousand users.

Because of the range of clients who use ERP programs, all applications must be adapted to the needs of particular clients.  For this purpose, SAP Australia employs approximately 200 consultants who provide advice to customers concerning both the selection and implementation of SAP products.  The implementation component of the advice can take up to a year.  In addition to implementation, SAP Australia provides customers with advice about methods of upgrading, archiving, services and risk management and the availability of various software products.  These services are almost always provided to persons who are already using or propose to acquire SAP products.

In 1996, SAP Australia developed the idea of establishing a training college.  The college was intended primarily to provide training in relation to SAP products and information technology issues associated with them, and also to provide general computing training and a business curriculum.  The establishment of the proposed college was announced publicly in October 1996.  SAP Australia decided to adopt the name "Sapient College" for the proposed institution. 

The college opened its doors on 1 April 1997, at Gordon in Sydney.  It subsequently established operations in each of the Australian capital cities and in several countries in the Asia/Pacific region.  It also established relationships with a number of Australian tertiary institutions, primarily universities.  As a result, many of its students are exposed to SAP Ag products as well as to the name Sapient College.  Its name is linked to that of SAP Ag on that company's Internet home page.  Users are referred to a web page dealing with the college which has been well visited.  The college has enjoyed considerable publicity in the print media.  From its inception it has been strongly promoted in connection with the SAP name and logo and most of the promotional materials distributed in respect of the college carry the SAP trade mark as well as the trade mark SAPIENT COLLEGE.  They also usually bear the SAP logo.

Sapient opened for business in Massachusetts 1991.  Its business involves providing custom-designed computer systems for its clients with a focus on the client-server as opposed to the previously used mainframe solutions.  Rather than adopting a "time and materials" approach to consulting, Sapient applies a fixed price/fixed time method.  That approach to costing requires intense early work with clients to define the scope of each project.  This is a continuing characteristic of Sapient's services.

In December 1998, Sapient caused Sapient Australia to be incorporated in Australia as its subsidiary here.  On 30 March 1999 Sapient Australia advertised for staff and in April 1999 it opened its office under the supervision of Ludovic Lacourte, a Sapient employee, who became the chief executive of Sapient Australia.

Sapient had already had a number of contacts with the Australian market.  In February 1995 it had commenced implementation of a project called "Project Omega" for an American company, Digital Equipment Corporation (Digital). As part of that implementation it established a sales commissioning system for Digital in several countries, including Australia.  Various members of Digital's staff, including staff from Australia, attended workshop sessions run by Sapient in Boston from April 1995.  Sapient's name and logo were prominently displayed on those occasions.  They were also endorsed on the course materials.  A number of the staff of Sapient visited Australia to work with Digital on the implementation of Project Omega between late 1995 and the finalisation of that project at the end of 1996.

Also in the period 1995-96 Sapient carried out a project for an American supermarket company that involved contact with Woolworths Ltd in Australia.  As a result, Woolworths staff visited Sapient's offices in Massachusetts in early 1997.

In September 1997 Sapient was approached by Vanguard Investments, a United States corporation, for assistance in connection with a joint venture project between Vanguard and MLC Insurance called "Plum".  Mr Varady, a senior vice president of Sapient and the chief executive responsible for its overseas business activities and operations, agreed to advise on a technology budget for the joint venture.  He visited Australia for that purpose in October 1997 where he spent a week conducting a workshop and meeting various government officials and commercial leaders, including many MLC executives.  Down to the time of the hearing at first instance (in June 1999) he had since revisited Australia about a dozen times, partly in connection with that project but also to pursue other business opportunities.

In addition to expanding its geographical range and client base, Sapient had acquired a number of complementary businesses.  One of these was a Texas company, Exor Technology Inc, which had experience in the ORACLE ERP system, an integrated business system often included in Sapient's solutions for its clients.  That acquisition by Sapient occurred in December 1997.  The Texas company traded under its own name until June 1999, when its activities and those of some other acquired businesses were integrated into the Sapient's operations.

Mr Varady characterised Sapient's primary business as the provision of software consulting services.  He accepted that that description was very broad.  The consulting services in question were, however, consulting services of a particular kind that did not involve the sale of pre-made software applications.  The only software licensed was software written by Sapient itself, comprising general utility software solutions which were not financially viable as stand alone solutions.  Each of Sapient's solutions for its clients was highly customised and was unique to the client.  This resulted from Sapient's practice of early intensive client consultation and definition of the client's special business requirements.

Sapient's type of business was contrasted with the ERP system marketed by SAP Australia, the implementation of which involved taking a pre-made software package, then customising it and adapting it to the particular client's circumstances.  But if Sapient Australia were to be approached by a client that expressed an interest in ERP software, it was possible that the company would suggest, if appropriate, Oracle ERP software, with or without an Oracle database and other software.  So, for example, if someone wanted to set up a company in Australia selling books on the Internet, Sapient Australia would be able to provide consultative services with respect to the interface with the customer through the Internet and also back-office functions such as the processing of orders, invoices and the like.  ERP software would be relevant to those back-office functions.  The SAP ERP product and the Oracle ERP product were competing in the marketplace.

In relation to the provision of training services, Sapient would sometimes have members of a client's staff come to one of its locations to help them understand the application desired by the client.  There was not much training involved, however, because usually the client was engaged in building the proposed application with Sapient.  Sapient would also engage in a process of training trainers from within its client organisation.

Mr Varady had long known of SAP and had understood "that it was primarily a product company" and that most of the implementation of its products was undertaken by third parties.  Until the commencement of the proceeding at first instance, he was not aware of Sapient College.

Nigel Hutchinson, SAP Australia's Director Corporate Services, became aware of the existence of Sapient on or about 30 March 1999 when Sapient Australia advertised for staff for its new Sydney office.  It described itself in the advertisement as "a market and thought leader in the design and implementation of E-Commerce and Information Technology systems".  Mr Hutchinson telephoned the person named in the advertisement to express his concern over the use of the name "Sapient" in relation to such an entity.

Following correspondence, SAP Ag and SAP Australia instituted the court proceeding to which I have already referred.  In that proceeding, SAP Ag and SAP Australia were ultimately embarrassed by having no registered trade mark closer to Sapient's mark than the words SAPIENT COLLEGE.

Since that time, Sapient has obtained registration of the trade mark SAPIENT.  Partly on the strength of the court proceedings, it was able to do so despite the existence of the current application, which has an earlier priority date and is in the name of its adversary, SAP Ag.  SAP Ag did not, for whatever reason, oppose the registration of Sapient's application. 

Sapient, however, is determined to ensure that the current application is not registered in the hands of SAP Ag, in whose hands it would represent, it seems to me, a shift in the balance of power.  Sapient has therefore filed a Notice of Opposition and filed and served evidence in support of the opposition.  Sapient Australia has done likewise, relying on the same evidence as Sapient.

SAP Ag in its turn has relied on evidence in answer.  The total evidence can be detailed as follows:

The opponents' evidence in support. 

This comprises three declarations:

• Ludovic Lacourte dated 18 May 2000, with annexures A and B

• Desmond Varady dated 21 April 2000, with annexures A and B

• Holly Wright dated 19 June 2000, with annexure A

SAP Ag's evidence in answer: 

This consists of a single declaration by Catriona McPherson dated 19 June 2001.  That declaration annexes copies of affidavits, with selected annexures and exhibits, sworn by:

• Nigel Hutchinson on 14/6/99;

• John Cooper-Williams on 27/5/99; and

• John Warren on, 21/5/99;  

These affidavits were, in their original and complete form, part of the material before the Federal Court in the matters to which I have already referred.

Following this, the oppositions were listed for my hearing and decision, as a delegate of the Registrar of Trade Marks. 

When the matter came on for hearing, the opponents were represented by Stephen Burley of Counsel, instructed by Clayton Utz, solicitors.  He was accompanied by Dunja Poljak, a solicitor of that firm.  The applicant did not appear and has not made any written submissions.

Mr Burley pressed three grounds of opposition.

• that the applicant is not the owner of the mark (section 58);

• that the applicant does not intend to use or authorise the use of the opposed mark in relation to all of the goods and services specified in the application (section 59).

• that the opposed mark is substantially identical with or deceptively similar to a trade mark that, before the priority date of the opposed trade mark, had acquired a reputation in Australia such that the use of the opposed trade mark would be likely to deceive or cause confusion (section 60);

I will deal with those issues in that order.

Issues and Arguments

Ownership:

Under that heading, Mr Burley conceded that his client needed to show use of the same mark for the same kind of thing[1], prior to whichever was the earlier of either the filing date of this currently opposed application or first use by SAP Ag.  He argued that "same kind of thing" should be construed broadly for the purposes of oppositions under the Trade Marks Act 1995. 

[1] Carnival Cruise Lines Inc. v Sitmar Cruises Ltd, 31 IPR 375 and Re Hicks' Trade Mark (1897) 22 VLR 636 at 640.

Having looked at the evidence now put forward by the parties, I think that the finding of Wilcox J in the Federal Court is appropriate here, to the effect that Sapient first used its name in Australia at least as early as October 1996.  In deciding what is and is not trade mark use, I will inevitably give great weight to such a relevant decision.

Does SAP Ag have an earlier use of SAPIENT on which it can rely to defend its claim to ownership?  I find none in the evidence in answer, for the simple reason that the entire thrust of the actual evidence is to suggest that SAP Ag and its subsidiary use, not SAPIENT, but either SAP or SAPIENT COLLEGE as their trade marks.  I adopt the view of Wilcox J about the essential difference between the trade marks SAPIENT and SAPIENT COLLEGE.  Wilcox J described this as a "contextual significance".  In the present matter, I am required to look at the specifics of use by SAP Ag/SAP Australia, and I weigh this comment highly.  I also adopt the conclusion of the Federal Court, that the trade marks SAPIENT and SAPIENT COLLEGE are not even deceptively similar in the context of the services for which SAP Australia has both used and registered the latter mark.

Therefore, in my view, the use of the trade mark SAPIENT COLLEGE does not give rise to rights that can be used to defend an application to register a significantly different trade mark, SAPIENT.

If, that being so, the opponents have the first use of the trade mark SAPIENT, at a date before the filing date of the opposed application, for what goods and services does this give them rights?  Mr Burley argued that, with the broader infringement provisions of the current legislation, there was a need for a less stringent ownership test to be applied to opponents, since, now, the grant of a registration will interfere with a wider range of rights.  However, I am not convinced that the commencement of the 1995 legislation allowed ownership rights to be defeated where previously they would have stood.  Ownership is, in general, about particular things.  A trade mark is, in terms of s 17, an indication of the origin of particular products.  However, I do accept the general principle that this has always needed to be applied with common sense.  A shoemaker first using a trade mark on a pair of shoes, for instance, establishes an ownership right that surely cannot be limited to just the particular size and colour of the pair in question.  How far that right extends will possibly depend on an assessment of the circumstances of the trade in general and of the trader in particular.

Mr Burley proposed that I should find that SAP Ag's claim to ownership did not extend to the following goods and services.

(a)in class 9, computer software, computer operating programmes;

(b)in class 41, training in relation to: computers and business, management, business administration in relation to computers, computer software and information technology;

(c)in class 42 computer programming; computer software design, computer systems analysis, maintenance of computer software and hardware; consultancy in computer software and hardware; updating of computer software and hardware; computer and software rental, leasing access time to computer databases; recovery of computer data; consultancy in intellectual property and information technology; computer consulting and internet services.

I would have been assisted by the views of the applicant on this matter.  Having looked at the abbreviated version of the Federal Court material that is before me, I would, if the matter depended entirely on first use of the same mark for the same kind of thing, find Mr Burley's claim as good, with the exception of some elements of class 42.  However, there is another aspect to Mr Burley's argument that renders this problem nugatory.

There is another level to the question of ownership where this is said to arise by other than use as a trade mark.  This is the issue of intent to use.  As the matter was put by Fullagar J in Aston V Harlee Manufacturing Co. (1960) 103 CLR 391 at 398-399

Section 32 of the Act provides that any person claiming to be the proprietor of a trade mark may apply to the Registrar for the registration of his trade mark.  The right to registration depends, therefore, on proprietorship of a mark.  The conception of proprietorship, other than proprietorship acquired by a user which has made the mark distinctive of the applicant's goods, is a difficult conception, but it has been explained by Dixon J. in Shell Co. of Australia Ltd v Rohm and Haas Co[2], where his Honour refers to the history of the English legislation.  His Honour quotes Cotton L.J. as saying in In re Hudson's Trade Marks[3]: "The difficulty is this:  Is a man to be considered as entitled to the use of any trade mark when he has never used it at all?  That is a difficulty, but I think the meaning is this.  If a man has designed and first printed or formed any of those particular and distinctive devices which are referred to in the first part of s 10, he is then looked upon as the proprietor of that which is under that Act a trade mark, which will give him the right so soon as he registers it."[4].  Dixon J. then sums up the position by saying:  "It is clear enough from the course of legislation and of decision that an application to register a trade mark so far unused must, equally with a trade mark the title to which depends on prior user, be founded on proprietorship.  The basis of a claim to proprietorship in a trade mark so far unused has been found in the combined effect of authorship of the mark, the intention to use it upon or in connection with the goods and the applying for registration"[5].

[2] (1) (1949) 78 CLR 601, at pp.625 et seq.

[3] (2) (1886) 32 Ch.D., at p.319,320.

[4] (1949) 78 CLR at p.626

[5] (1949) 78 CLR at p.627

In the evidence, there is no suggestion that SAP Ag has ever used the trade mark SAPIENT, as distinct from SAPIENT COLLEGE, which it has used extensively.  That alone, of course, could not establish a lack of the requisite intention.  However, there is more to the matter than this.  SAP Ag is the source of the SAP product, and it is apparently important to it that there be a degree of demarcation between SAP Ag as a supplier and Sapient College, a training institution, even though, clearly, the training provided is in, or at least involves, the SAP product.  The college appears to be trying to balance an allusion to a connection with the parent company, on one hand, with a degree of independent standing.  The opponents understand full well the significance of the element COLLEGE.  The demarcation between the trade mark SAPIENT and SAPIENT COLLEGE is, in such a case, quite clear.  COLLEGE serves to stress that the services in question are the product of an institution.  They do not go out into the market wearing just a simple word mark.  This is what Wilcox J called "contextual significance".  Moreover, SAP Ag had become aware, just before the time of filing, there was a trader, Sapient, that was using the trade mark SAPIENT in relation to relevant goods.  For SAP Ag to file, shortly after such a discovery, a trade mark that is significantly different from the one that it has used suggests that the motive for the filing was purely tactical.

The evidence of use that has been filed will thus support an inference that SAP Ag's past use will continue and, further, that the present application was filed for tactical reasons only and not supported by any genuine intention to commence bona fide commercial use.  I do not say that Sapient has proved its case - it does not have the unenviable job of "proving a negative" - but if "slight evidence will suffice[6]" then it has done sufficient to shift the onus onto SAP Ag, requiring it to validate its intention.

[6] Estex Clothing Manufacturers Pty. Limited v. Ellis and Goldstein Limited, 116 CLR 254 at 258

It follows that I find that this ground of opposition is established.  Even if I am wrong in this, it is a matter that rises, in a more robust form, under the next ground.

Section 59 - that the applicant does not intend to use or authorise the use of the opposed mark

This ground is also one where an applicant's intention to use is relevant.  However, it is a ground written in the present tense and looks at the present state of the intention of the applicant.  The introduction of such a ground is consistent with the creation of s 108, which had no counterpart under the 1955 legislation.  Under s 108, a party defending an application may well be a different entity from the one who initially filed the application.  Thus, section 59 deals with current defects in intention to use, interlocking with s 58, under which the intention and facts at the time of filing are the relevant elements.

In the present case the name of the applicant is constant, so no such subtlety intervenes.  Even so the present tense of s 59 makes it substantially more dangerous for SAP Ag.

At the present time, SAP Ag has had the benefit of the decisions of the Federal Court in this matter.  It is well aware that Sapient exists, is prominent in its field and is likely to be more so.  For SAP Ag to change its pattern of past use would be to cause significant confusion, adding to the level of deception or confusion that might be inherent in this situation.  I do not infer from the evidence that SAP Ag has any intention to do so, and would be reluctant to make any such inference given the history of this matter.  Therefore, I am required to find that the ground of opposition under s 59 is also established.

Section 60: that the opposed mark is substantially identical with or deceptively similar to a trade mark that, before the priority date of the opposed trade mark, had acquired a reputation in Australia such that the use of the opposed trade mark would be likely to deceive or cause confusion

It may be unnecessary to decide the issue as I have already found two grounds of opposition established.  Lest the matter go elsewhere on appeal, I say that I do not find a s 60 ground established. 

Sapient had only just commenced to operate an Australian subsidiary at the priority date of the opposed application.  I do not doubt that such projects as it had been engaged in, or sought to be engaged in, were commercially significant to Sapient.  They were also known to a number of Australians.  I have, beyond this, allowed for the specialized and inter-related fields in which the opponents and SAP Ag operate.  In this IT-related area, I think it is fair to say that it is possible for a reputation to spread widely, quickly.  However, the evidence that this was so in the present case does not convince me.  It may be that Sapient's case suffers because the evidence was culled from material formulated for other purposes entirely.  However, the evidence suggests that, at the priority date, there were a few people who were very familiar with Sapient but that the bulk of the industry may not have been.  There is little to show that Sapient's level of commercial activity was broadly enough known, at 8 April 1999, that use of SAPIENT by SAP Ag would have led to a significant level of deception or confusion.

Conclusion

I have found two grounds of opposition established.  I refuse to register the application. 

I will allow the parties one month to make submissions on the extent to which I should award costs.  Prima facie, it seems to me that a single notice of opposition should have been filed in both names.  The filing of two separate oppositions was arguably little more than a duplication of process that should not be paid for by the unsuccessful party.  My present view is that the successful parties are not entitled, in a case such as this, to more than half each of their costs and expenses in terms of the official scale, including only half each of any fees paid to the Trade Marks Office. 

Terry Williams
Hearing Officer
Trade Marks Hearings
20 June 2002