Advantage Group Ltd v Advantage Computers Ltd

IN THE COURT OF APPEAL OF NEW ZEALAND

CA136/02

BETWEEN	ADVANTAGE GROUP LIMITED
First Appellant

AND	ADV E-COMMERCE LIMITED
Second Appellant

AND	ADVANTAGE RETAIL SOLUTIONS LIMITED
Third Appellant

AND	ADVANTAGE COMPUTERS LIMITED
Respondent

Hearing:	9 and 10 September 2002
Coram:	Gault P Keith J Glazebrook J
Appearances:	J R F Fardell QC, A I van Melle and J W J Graham for Appellants A H Brown QC and J M Doherty for Respondent
Judgment:	7 October 2002

JUDGMENT OF THE COURT DELIVERED BY GAULT P

The respondent, Advantage Computers Ltd (ACL), is the registered proprietor of the trade mark ADVANTAGE in Classes 9 and 42. ACL protested that the first appellant, Advantage Group Ltd, and its two subsidiary companies were infringing these registrations. In due course consolidated proceedings for infringement and for removal of the registrations from the Trade Marks Register were heard in the High Court before Chambers J. In a judgment delivered on 28 June 2002, he dismissed the challenge to the validity of the registrations and found in favour of ACL on its infringement claims. Injunctions and ancillary relief were granted against each of the three appellants. Subsequently a stay of execution pending appeal was granted.
The appellants, conveniently referred to together as Advantage Group, have challenged the decision in three respects. They contend that the Judge was wrong to find that the trade mark ADVANTAGE was sufficiently distinctive to be registered in respect of all of the goods and services covered. They contend also that the Judge tested the question whether the marks were wrongly registered, contrary to s16 Trade Marks Act 1953 (the Act), as at the wrong date. If those grounds are unsuccessful, they say the Judge was wrong to find infringement, rejecting their defence that their use of “Advantage” was bona fide use of their own name within s12(a) of the Act.
ACL’s applications to register the trade mark were filed on 20 October 1992. When faced with initial objections that the mark lacked distinctiveness in relation to the goods and services for which registration was sought, ACL filed evidence of use of the mark. The applications were subsequently advertised with a view to registration and, after opposition from a party unconnected with these proceedings proved unsuccessful, the mark was registered in Part A of the Register in March of 1999. Pursuant to s28(1) of the Act the date of registration is deemed to be the date on which the applications were filed.
The registration in Class 9 is No 222333 in respect of a statement of goods reading:
Apparatus for recording, transmission or reproduction of sound or images; facsimile apparatus and facsimile equipment including facsimile modems; electronic apparatus for the input, output, processing, recordal, storage and retrieval of data; electronic control systems; personal computers, computers, and computer programmes; computers which incorporate facsimile modems; computer hardware and peripheral apparatus; computer software in this class; storage apparatus including disk drive; magnetic data carriers, recording disks; disks, tapes and other media for the recording of information or bearing recorded information; parts, fittings and accessories in this class for all of the above goods.
The registration in Class 42 is No 222341 in respect of:
Retail services in relation to computers, facsimile apparatus, facsimile equipment, facsimile modems and computer related goods; computer rental; leasing computer databases; computer programming; computer hardware and software design; computer consultancy including computer hardware consultancy; computer systems engineering.

Validity of the registrations

Mr Fardell QC mounted a carefully balanced argument. Knowing his own clients have applied to register the word ADVANTAGE as a trade mark, he contended that the word “is on the borderline of being absolutely unregistrable”, thereby keeping open the possibility of registration being obtained on strong evidence that over a long period the mark has acquired distinctiveness in relation to particular goods or services.
It was submitted that, because the word “advantage” is laudatory or descriptive, it does not qualify for registration under s14(1) of the Act. It does not contain or consist of at least one of the essential particulars there identified. The relevant ones are:

(d)A word or words having no direct reference to the character or quality of the goods or services, and not being according to its ordinary signification a geographical name or a surname:
(e)Any other distinctive sign, but a name, signature, or word or words, other than such as fall within the descriptions in the foregoing paragraphs (a), (b), (c), and (d), shall not be registrable under the provisions of this paragraph except upon evidence of its distinctiveness.

These must be read with s14(2) and (3):

(2)For the purposes of this section “distinctive” means adapted, in relation to the goods or services in respect of which a trade mark is registered or proposed to be registered, to distinguish goods or services with which the proprietor of the trade mark is or may be connected in the course of trade from goods or services in the case of which no such connection subsists, either generally or, where the trade mark is registered or proposed to be registered subject to limitations, in relation to use within the extent of the registration.
(3)In determining whether a trade mark is adapted to distinguish as aforesaid, the Commissioner or the Court may have regard to the extent to which –
(a)The trade mark is inherently adapted to distinguish as aforesaid; and
(b)By reason of the use of the trade mark or of any other circumstances, the trade mark is in fact adapted to distinguish as aforesaid.

When asked what character or quality of the goods and services in ACL’s registrations are directly referred to by the word “advantage”, counsel offered “innovation” “commercial superiority”, “competitive edge”, “adaptability”, “strategic edge”. He said that “advantage” is the type of word traders in technology-related businesses may like to use in slogans.
Usage to convey these meanings or in slogans would be directed not to the goods or services themselves but to benefits flowing as consequences of use of the goods or services. “Advantage” does not mean “innovation” or “commercial superiority”. In certain overall descriptive contexts the word may be related to those notions. But its descriptiveness when used as “ADVANTAGE computers” or “ADVANTAGE retail computer services” is indirect at best. It suggests desirable attributes not of the goods or services themselves but of outcomes if they are used. The word therefore is not in the same category of laudatory epithets that are wholly unregistrable such as “best” or “perfection” (In re Joseph Crosfield & Sons Ltd [1910] 1 Ch 130).
It is apparent from the opening words of 14(1)(e) (“Any other distinctive sign …”) that the element of “distinctiveness” is necessary in each of the essential particulars in the preceding paragraphs. The likelihood that other traders in the course of their businesses quite naturally would employ the word “advantage” in contexts relating to the goods and services with which we are concerned would justify the approach of the Commissioner of Trade Marks in requiring evidence of distinctiveness and proceeding under s14(1)(e) rather than allowing registration under s14(1)(d) without such evidence.
That approach seems consistent with other registrations granted in New Zealand for the mark ADVANTAGE in respect of other goods. It is also consistent with registrations granted under corresponding legislative provisions in Australia and England, as appears from the evidence of Mr Knowles, an experienced solicitor and patent attorney.
For Advantage Group, Mr Fardell submitted that the evidence of distinctiveness as at the date of ACL’s applications was insufficient to justify the grant of registrations for the broad statements of goods and services they cover. Before this Court he no longer sought removal of the registrations. His objective was to obtain orders for rectification of the Register by narrowing the statements of goods and services to carefully formulated statements designed to exclude goods and services of interest to his clients.
Chambers J was not persuaded that any restriction of the goods and services in the registrations should be ordered. After reviewing the evidence filed in support of the application before the Commissioner, and additional evidence given in the High Court directed to the use of the mark by ACL up to 30 October 1992 (which Mr Fardell accepted could be considered) the Judge said:
Mr Brown, with the meticulousness which was the hallmark of his presentation of Advantage Computers’ case, produced for me an analysis of the evidence relating to Advantage Computers’ use of the mark up to 1992. He listed the 12 categories of goods referred to in trade mark 222333 and the 7 categories of services listed in trade mark 222341. He then, by each category, listed the evidence of use given by Messrs Ward, McGillivray, and Platt, together with documentary evidence appearing in the common bundle. Mr Brown also included references to relevant parts of Mr Fardell’s cross-examination of the witnesses. I have checked that schedule against the evidence. I am satisfied that the Commissioner’s decision was correct. Advantage Computers did not overstate what activities it had been carrying out prior to registration. Advantage Computers had utilised the Advantage mark in a much broader way than Mr Fardell suggested. I note too that much of Advantage Computers’ evidence as to the precise goods and services listed in their trade marks was unchallenged in cross-examination.
Those findings of fact will not readily be disturbed on appeal.
Mr Fardell did not contest that there was evidence of use by ACL of the trade mark ADVANTAGE prior to October 1992 in respect of each category of goods and services listed in the registrations. His challenges were to the sufficiency of the use to establish distinctiveness for such a laudatory word and to the width of the generalised descriptions of those categories.
As was pointed out by Fletcher Moulton LJ in the Perfection case (para [9] above; p147), the extent of proof of acquired distinctiveness in any particular case will depend on the strength of the objection to its inherent distinctiveness.
In this case we do not accept counsel’s contention that the word “advantage” is on the borderline of being wholly unregistrable. We consider that evidence of a reasonable period of use in trade in relation to the goods and services concerned, supported by evidence of its recognition in the trade as a trade mark of the proprietor, would suffice to prove that it in fact operated to distinguish those goods and services. The evidence establishes that the word was adopted for the business name by the predecessor to ACL in 1984. Under that name computers assembled from imported components, and software for use in them, were marketed from that time. The business grew from small beginnings. The company was incorporated in 1986. Promotional activities by reference to the name “Advantage” began in the same year. By the end of 1988 annual sales reached $1m in value. Growth from there was such that by the end of 1992 annual sales were over $6m. The range of products expanded and software programming consultancy services were developed substantially after October 1987.
We find no ground for differing from the Commissioner and the Judge on the length of use and its sufficiency to prove distinctiveness of this mark.
We turn to the issue of the range of goods for which registration can be justified on the evidence of use of the mark. As Mr Brown QC pointed out, the statute refers to evidence of distinctiveness not evidence of use. Section 14(3)(b) refers to “use … or … any other circumstances”. A trade mark may be found to be distinctive of the goods or services of a trader even though it has been used for a short period or in a small way in relation to those goods or services. It may be another in a distinctive family of marks to which distinctiveness will readily attach. The goods or services may be close to those for which the mark already enjoys distinctiveness: see e.g. Esso Trade Mark [1972] RPC 283. It may form part of a well-known business name but have been used in only a limited extent as a trade mark.
The circumstances of trade in the goods or services will be relevant. Proof of distinctiveness among purchasers of expensive or specialised goods may be easier than among purchasers of low cost, widely purchased goods.
We do not understand the authorities to require registration to be limited precisely to goods or services on which the mark has been used. Reasonable generalisation does no more than recognise the reality of the market place. Distinctiveness proved in relation to raspberry jam will flow over to other jams. That is recognised in the amendment to the infringement provisions in the Act to capture as infringements use in relation to similar goods or services. There are limits, of course. Proved distinctiveness in relation to jam could not justify a registration covering all foodstuffs.
Mr Fardell drew our attention to an information circular issued by the Commissioner in July 2000 stating:
Limitation of Software in a Trade Mark Specification
Proposal
An objection to registration will be raised under section 20 of the Trade Marks Act 1953 for all applications where the specification includes the terms “software”, “computer programs” or the like. The Office will request that the specification be limited by stating the purpose of the software, or similar.
Rationale
Trade mark protection for computer programs and software is increasingly sought after. The purpose of, or uses for, computer programs and software are many and diffuse. In order to facilitate the acceptance of trade marks on unrelated or discernible goods and services, limiting the specification to reflect their use is appropriate. This practice will mirror current practice on limitations for retail and wholesale services.
We were referred also to comments on the wide scope of “computer software” in the judgment of Laddie J in Mercury Communications Ltd v Mercury Interactive (UK) Ltd [1995] FSR 850, 864. In a judgment dismissing a summary judgment application he recognised that some limitation of a registration for non-use was arguable.
Neither of these references provide direct support for the submission that ACL’s trade mark was wrongly registered as at October 1992, though they suggest the possibility that such broad registration may be more difficult to obtain now and may be difficult to retain in the face of a claim for rectification of the Register by the exclusion of some goods or services for non-use.
Developing his argument, Mr Fardell attempted to have us descend into the detail proposed, to settle statements of goods and services that would free Advantage Group from infringement. This was an exercise far removed from the practical approach appropriate for the registration and infringement of trade marks. This became apparent in the course of exchanges between members of the Court and counsel in connection with the proposed limitation to certain specified software “all being standalone software packages designed for use in relation to, solely, desktop solutions consisting of only personal computers and LAN connected personal computers”. When referred to material of the Advantage Group website describing the designing for a client on an intranet system of internal communications, counsel accepted that the distinctions he was seeking to draw between the two businesses broke down.
Counsel also sought to draw a distinction between the businesses of ACL and the Advantage Group in the services they currently provide by reference to the different business “solutions” they offer. He attempted to distinguish between systems in which electronic communications by which transactions are effected include means for effecting payment and those that do not. However, in the provision of consultancy and computer software services, in relation to which the trade marks are used, such difference in effect for their customers has no real relevance. The services offered by each party at the point at which the trade marks are used are the same. The argument equates with a competing seller of computers claiming to distinguish its business by reference to a disk-writing function in the computers it sells.
We found this exercise of attempting to fashion statements of goods and services in the registrations to exclude the goods and services offered by Advantage Group to be quite artificial and largely irrelevant to the central issue before us. That is whether ACL was entitled to the registrations granted on the basis of the evidence of distinctiveness prior to October 1992. If so, the fact that Advantage Group infringes those registrations is a consequence, not a reason to restrict the registrations.
We are not persuaded that on appeal we should attempt to pare back the statements of goods and services by reducing the degree of generalisation to something close to the range of goods and services on which the mark was actually used and which were generalised in a way apparently satisfactory to the Commissioner at the time. To do so would be, in effect, to enter upon an attack on the ground of non-use before that is open under s35 of the Act (i.e. after the mark has been on the Register for five years).
The evidence discloses use by ACL of the trade mark ADVANTAGE extensively prior to October 1992 in relation to a wide range of computers and computer equipment and an extensive consultancy practice in the design of computer systems and the hardware and software employed in them, provided to a range of customers in various fields of business.
In our view, the statements of goods and services in the registrations were not inappropriate at the relevant date. Developments in the technology, particularly the increasing commercial use of the internet, have meant that the broad statements encompass more than might have been recognised at the time of registration. But that does not mean the registrations were wrongly granted. Assisted by the detailed submissions of Mr Brown we have reviewed the evidence of the range of goods and services in relation to which ACL used the mark ADVANTAGE prior to October 1992. We are satisfied the Judge was right not to attempt to substitute more detailed and restricted statements of goods and services in the registrations. Mr Fardell focussed on the item in the Class 9 registration “electronic apparatus for the input, output, processing, recordal, storage and retrieval of data”. This extends to goods offered by Advantage Group. Evidence proved sales by ACL prior to the date of the trade mark applications on a range of computers, computer components and “peripherals” and related equipment. The generalised statement is not unreasonable in that light; particularly since, as Mr Brown pointed out, this part of the statement is expressed conjunctively.
In the course of the hearing it was noted that ACL was not claiming infringement by Advantage Group’s sale and servicing of equipment for effecting “eftpos” transactions – direct debiting and crediting of funds at point of sale by electronic means. The view is taken that the goods involved are not covered by the registration in Class 9 or are not so similar as to give rise to infringement. These issues are not before us. Should it transpire that use of the identical mark on similar goods erodes the distinctiveness of the mark (and we are not to be taken as indicating it will), or that the registrations cover goods or services on which the mark is not used by ACL, the registrations may become vulnerable for attack in the future. That cannot avail Advantage Group in this proceeding however.

Section 16: the relevant date

As originally notified, this ground of appeal was that the Judge, in determining that the registrations were not granted in contravention of s16(1) of the Act, tested the likelihood of deception or confusion at the wrong date. The relevant part of that section reads:
Prohibition of registration of deceptive, etc., matter –
(1)It shall not be lawful to register as a trade mark or part of a trade mark any scandalous matter or any matter the use of which would be likely to deceive or cause confusion or would be contrary to law or morality or would otherwise be disentitled to protection in a Court of Justice.
It was submitted that it is at the date on which the mark is actually entered on the Register, not the deemed date of registration, that the lawfulness of the registration is to be determined. In the course of oral argument counsel acknowledged the difficulties with this submission. It has not been supported in New Zealand nor in England where the same provision existed for nearly a century. It would seem inconsistent with ss28 and 73 of the Act. It is contrary to the clear view expressed in this Court in Pioneer Hi-Bred Corn Company v Hy-Line Chicks Pty Ltd [1978] 2 NZLR 50, 61. It would also present real practical difficulties for the Commissioner who would be required, in effect, to re-examine applications at the time of grant.
In oral argument, Mr Fardell preferred to rely on the point raised, but not resolved, in the judgment of this Court in McCain Foods (Aust) Pty Ltd v Conagra Inc (CA176/01, judgment 6 June 2002, paras 31 – 33 and 57). A passage in Kerly’s Law of Trade Marks and Trade Names (12^th ed) para 10.27, cited in Tiffany & Co v Fabrique de Tobac Reunies [1999] 3 SLR 147, 163, suggests the possibility of a discretion by which the Commissioner might refuse to grant registration if, between the date of application and the date of grant, circumstances have developed bringing use of the mark within the prohibition in s16(1). As was indicated in the McCain case, such a discretion is difficult to reconcile with the Act. But it is again unnecessary to reach a final view. We are satisfied that even if there were such a discretion, there are no grounds on which it should have been exercised adversely to ACL at the time its registrations were actually granted. The argument for Advantage Group was simply that between the date of ACL’s applications and the date of grant Advantage Group commenced to use the identical mark on goods and services for which the registrations were eventually granted. But the likely confusion arising from that is the very focus of the claim for infringement of the registrations once granted. Once that infringing use has been restrained there will no longer be likely confusion or deception. To refuse registration on this ground would be to encourage competitors to enter the market in the period between application and registration for the very purpose of denying legitimate traders registration of their trade marks. The argument advanced for Advantage Group in this respect tends to reinforce the view seemingly formed by Chambers J that the much larger Advantage Group has simply tried to shoulder ACL aside to overcome the inconvenience presented by its trade mark registrations.
Although it had not been notified as a ground of appeal, Mr Fardell argued that even at the date of the registrations at October 1992, there was a likelihood of deception or confusion such that registration was contrary to s16. That cannot be accepted in light of the clear findings of Chambers J that the predecessor of the first appellant did not commence use of ADVANTAGE as a brand name for any goods until well after 1992. This point cannot succeed.

Bona fide use of a person’s own name

S12(a) of the Act reads:
Saving for use of name, address, or description of goods or services –
No registration of a trade mark shall interfere with -
Any bona fide use by a person of that person’s own name or of the name of that person’s place of business, or of the name, or of the name of the place of business, of any of that person’s predecessors in business; or
This Court, by a majority, determined in Anheuser Busch Inc v Budweiser Budvar National Corpn (CA158/01, judgment 19 September 2002), that this section applies to companies notwithstanding s13. That judgment had not been delivered at the time of the hearing of this appeal. We heard full argument on whether s12 does apply to the use of company names. Chambers J held that it does not, but went on to find that it would not assist Advantage Group even if it did.
We do not need to revisit the issue because we are satisfied the Judge was correct to conclude that the companies in the Advantage Group are not protected by the exclusion from infringement provided by s12(a) in any event.
The Judge reached his view in relation to the use by ADV E-Commerce Ltd on the ground that the word “Advantage” was not part of that company’s name. He noted that counsel effectively conceded that this company could not rely on s12(a).
With reference to Advantage Group Ltd and Advantage Retail Solutions Ltd, the Judge held that their use of “Advantage” was not bona fide. He said:
In the case of Advantage Retail Solutions, I consider their use of the Advantage mark was not bona fide. That company was incorporated in May 1999 and did not acquire its present name until July 1999. By that time, the people behind Advantage Retail Solutions were fully aware of Advantage Computers’ trade marks and the goods and services in respect of which they gave protection to the Advantage name. A different name for the company could easily have been chosen, as it was for ADV E-Commerce. But, regardless of the company name, the decision obviously taken by the Advantage Retail Solutions board and management to use the mark Advantage was not bona fide in light of their knowledge of their competitor’s trade mark and its complaint about Advantage Group companies using it.
Advantage Group Limited adopted that name in 1994. There is no suggestion that at that time Advantage Group and Advantage Computers were competitors. That situation did not come about until 1999 when Advantage Group changed commercial direction, the details of which I shall provide later in this judgment. It was at that point that Advantage Group and its newly acquired businesses (which were turned into subsidiaries) made a decision to persist with using Advantage as a mark, even though they knew of Advantage Computers’ trade marks and the areas of protection. Advantage Group had been told by their lawyers that their own wish to register Advantage (in some form or other) as a trade mark was unlikely to succeed because it would conflict with Advantage Computers’. To persist with use of the mark Advantage after receiving such advice was not bona fide.
Those are findings of fact with which we would not interfere unless clearly wrong or unsupported by the evidence. However, we are able to reach the same conclusion simply by reference to the manner of use of “Advantage” by Advantage Group. The use quite plainly is not use of the respective corporate names of the companies in the group but as a trade mark used to identify the group of companies and the goods and services they offer.
The argument for Advantage Group was no less than that s12(a) protects use of a single word taken from a corporate name and prominently presented with the first letter in logo form as the masthead for the business of the parent company and each of its subsidiaries. After reviewing exhibits of stationery, websites and other promotional material we are quite satisfied that the usage of which ACL complains cannot on any reasonable view be regarded as use by these companies of their own names.
To the extent that comments in the judgment of Laddie J in the Mercury Communications case might be construed widely enough to encompass use in the manner we have been presented with, we are compelled to disagree. It would enable the exclusion to destroy the value of trade mark registrations. In fact we do not read his judgment as going that far.
Counsel sought to draw from the Mercury judgment support for the general proposition that if a company, or group of companies, has become known by an abbreviation of a company name, that abbreviation can qualify for the protection of use of a person’s own name. That is some distance from the circumstances Laddie J was discussing of omitting “limited” or “plc” or foreign equivalents.
Advantage Group has the further problem with this argument that it has sought to rely not on a name by which it has become known, but on the badge it has selected for itself and used in its promotions. This approach is commonly referred to as lifting oneself up by one’s bootstraps.
To determine the scope of the protection available to companies under s12(a) as broadly as contended for in this case would be quite inconsistent with the approach adopted in the recent Anheuser Busch case. That represents, in our view, the appropriate balance between trade mark rights and the entitlement to use company names giving proper weight to the interests of the public. Confusion and deception of the public is not to be encouraged.
We do not accept, as contended for by Mr Fardell, that bona fide use within s12(a) is to be tested wholly subjectively. Counsel accepted it would not be so tested in the context of s12(b), but sought support in English authorities for a subjective approach under para 12(a). In the Anheuser Busch case, this Court favoured the approach adopted in the corresponding Australian case. That approach is colourfully captured in McCarthy on Trademarks and Unfair Competition (4^th ed), para 13.22:
Almost all of the modern decisions have shifted the emphasis away from the defendant’s subjective mental state, and have placed prime importance upon the issue of likelihood of confusion and consequent consumer deception. That is, the objective facts of probable customer confusion are more important than trying to determine what was going on in the defendant’s mind. The New York Court of Appeals stated that “fraud or deliberate intention to deceive or mislead the public” is not necessary in the personal name cases. The court concluded that: “The bona fides of [defendant’s] intentions do not change the applicable principles. The objective facts of this unfair competition and injury to plaintiff’s business are determinative, not the defendant’s subjective state of mind” (David B Findlay Inc v Findlay 18 NY 2d 12 (1996)). The California Court of Appeals stated flatly that where the junior user is using his own name, “Actual fraud, i.e., planning or contrivance, by the junior user is not necessary” (MacSweeney Enterprises Inc v Tarantino 235 Cal App 2d 549 (1965)). As an Arizona court observed, if the public is likely to be confused, the injury is not alleviated by the junior user’s honesty of purpose: “Both the first user and the public may be as readily wounded by the ostrich as the fox” (V J Doyle Plumbing Co v Doyle 120 Ariz 130 (Ct App 1978)).
For these reasons, and those given by Chambers J, we are not persuaded that s12(a) protects Advantage Group from the infringement claims.
The appeal is dismissed. The stay granted in the High Court lapses.
The respondent is entitled to costs which we fix at $10,000 together with disbursements including the reasonable travel and accommodation expenses of counsel approved, if necessary, by the Registrar.

Solicitors:
Chapman Tripp Sheffield Young, Auckland, for Appellants
Gresson Grayson & Calver, Hastings, for Respondent

[2002] NZCA 282

7 October 2002