Build-A-Bear Workshop, Inc HC Wellington CIV 2007-485-196

[2007] NZHC 1893

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2007-485-196

UNDER  the Trade Marks Act 2002

IN THE MATTER OF     Trade mark applications nos 711676,

711677, 732343 and 732344

AND IN THE MATTER OF  Appeals from the decisions of the Assistant Commissioner of Trade Marks in T 1/2007 and T 12/2007

AND  BUILD-A-BEAR WORKSHOP, INC Appellant

CIV 2007-485-775

AND UNDER                  The Trade Marks Act 2002

IN THE MATTER OF     Trade mark applications nos 732343 and

732344

AND IN THE MATTER OF  an appeal from the decision of the

Assistant Commissioner of Trade Marks in

T 12/2007

AND  BUILD-A-BEAR WORKSHOP, INC Appellant

Hearing:         15 June 2007

Appearances: C S Chapman for Appellant

Judgment:      21 June 2007 at 1 pm

JUDGMENT OF MILLER J

[1]      Build-a-Bear Workshop, Inc wants to register a three dimensional heart shape

as a trademark in classes 28 and 35, which cover respectively (a) toys, including

V BUILD-A-BEAR WORKSHOP, INC HC WN CIV 2007-485-196  21 June 2007

plush  toy  animals,  soft  body  infant  toys,  stuffed  toy  animals  and  dolls  and accessories, and (b) retail store, mail order and mail order catalogue services and retail store services rendered via a global computer network, all in the fields of stuffed toy animals etc.

[2]      After considering the application and before advertising it, the Intellectual Property Office of New Zealand (IPONZ) gave notice of the Commissioner’s intention to reject the applications on the ground that the mark  is ineligible for registration because it has no distinctive character.   Reasons were given.   An oral hearing was held before Assistant Commissioner Walden, who held that the mark lacked distinctive character and should not be registered.   Build-a-Bear Workshop appeals from that decision.

[3]      There are two appeals, because Build-a-Bear Workshop responded to one of IPONZ’ concerns about its first application by filing a second, slightly modified, application.  They raise the same issue, and Mr Chapman was content to deal with them as one.

The mark

[4]      The mark was depicted and described in the application as follows:

The mark consists of a three-dimensional shape of a heart as shown in the representations (A being the front view – back view being the same, and B being the side view in the direction of the arrow the opposite view being the same).

[6]      As Mr Chapman accepted, the heart shape is generic and there is nothing in the shape or description to limit its size, colour, material, or use.

Was the application rejected prematurely?

[7]      Mr Chapman submitted that the Assistant Commissioner acted prematurely. Had there been any risk of legitimate use by trade competitors of the appellant, that would have been revealed when the application was advertised.   This submission requires that I say something about the scheme of the legislation.

[8]      The  Commissioner  is  obliged  under  s.39  to  examine  an  application  to determine whether it complies with the requirements of the Act, which include s.18:

Non-distinctive trade mark not registrable

(1)    The Commissioner must not register— (a) a sign that is not a trade mark:

(b)     a trade mark that has no distinctive character:

(c)      a trade mark [ ] that consists only of signs or indications that may serve, in trade, to designate the kind, quality, quantity, intended purpose, value, geographical origin, time of production of goods or of rendering of services, or other characteristics of goods or services:

(d)     a trade mark that consists only of signs or indications that have become customary in the current language or in the bona fide and established practices of trade.

(2)       The Commissioner must not refuse to register a trade mark under subsection (1)(b), (c), or (d) if, before the date of application for registration, as a result of either the use made of it or of any other circumstances, the trade mark has acquired a distinctive character.

[9]      If the Commissioner  concludes that  an  application  does  not  comply,  the applicant must be given an opportunity to respond or amend the application.  If the

Commissioner remains of the same view, he or she must tell the applicant, with written reasons if the applicant requests them.  The applicant can call for a hearing at that point under s.176 of the Act and RR69 and 70 of the Trade Marks Regulations

2003.   It can submit evidence at the hearing.   If the applicant fails to satisfy the Commissioner that it has complied with the Act’s requirements for registering a trademark, the Commissioner must reject the application.

[10]     Where the Commissioner is satisfied that an application complies with the Act’s requirements, the Commissioner must accept it and then advertise it.   Any person may file written notice of opposition; if that is done, the applicant must file a counter-statement if it wishes to pursue the application.   The Commissioner must hear  the  parties,  if  so  required,  and  determine  whether  and  subject  to  what conditions, if any, the mark is to be registered.

[11]    Section 50 provides that the Commissioner must register a mark if the Commissioner has accepted it and it  is unopposed, or an opposed application is decided in favour of the applicant.

[12]    This summary highlights several features of the statutory scheme.   The Commissioner has a duty to consider whether an application complies with the Act, whether or not anyone opposes it.  That is understandable, since registration confers a monopoly on the owner of the mark.   There is a public interest involved.   The Commissioner must be satisfied that the mark is eligible for registration before it is allowed to proceed to advertising, and if no notice of opposition is filed the Commissioner must register the mark.   It follows that the Commissioner’s initial consideration of the application before it is advertised is in no sense a preliminary hearing.  The test is the same as that which is applied after an opposed proceeding. That is, the Commissioner must be satisfied that the mark complies with the requirements of the Act.  The onus is on the applicant throughout, and the applicant may insist on a hearing at which it is able to submit evidence.

[13]    The Commissioner’s reasons for giving notice of intention to reject the applications were set in a letter of 24 January 2007 from IPONZ.  The Commissioner noted the applicant  intended that  the pictorial representation of the  mark  would substantially illustrate the mark, which was governed by the written explanation. Subject to substitution of the words “illustrated” with “shown”, the written explanation was acceptable.

[14]   The Commissioner reasoned, however, that the mark lacked distinctive character.  The Commissioner adopted the test for distinctiveness set out in W & G du Cros Limited’s Application [1913] AC 624 and concluded that:

The Applicant’s mark is not particularly eye catching, unusual or even memorable.  The mark is a simple shape of a heart that is more likely to be seen by the public as a toy rather than as a badge identifying the origin of the goods or services.  Therefore, I am of the view that other traders are likely, in the ordinary course of their business and without any improper motive, to want to use the mark, or some mark nearly resembling it, in relation to their own toys, dolls and accessories and retail or mail order of the aforesaid goods.

[15]     The Commissioner rejected a submission that other traders do not use a heart sign to designate goods and services.  The Commissioner had undertaken what was described as a quick internet search, which disclosed other traders using three dimensional heart shapes in relation to toys and dolls.  Six examples were given. The shape would not create the necessary link with the goods and services of Build-a- Bear Workshop, because the use of the heart device or three dimensional heart shape in relation to toys and dolls is prevalent.  Other traders also use the heart shape to promote their toys and dolls.   The Commissioner observed that shapes that do not differ significantly from the norm had been held to lack inherent distinctiveness in a number of cases.   Accordingly, the Commissioner reasoned that the mark might hinder or embarrass other traders in what they might without improper motive want to do: COLORCOAT Trademark [1990] RPC 511, 516.

[16]     Assistant Commissioner Walden wrote two decisions, one dated 19 March

2007 and the other 15 January 2007.  They are substantially identical, but there are minor differences because the second decision was issued on written submissions, without a hearing.   The first decision followed a hearing at which the Assistant Commissioner was shown a model of the heart. (It was not produced on appeal.)

[17]     The Assistant Commissioner recorded no evidence had been filed in support of the applications, but referred to correspondence between IPONZ and Build-a-Bear Workshop and to the submissions.   She noted that the onus is on the applicant to establish that its mark is eligible for registration.   She recorded that the written description of the applicant’s mark is intended to be limited by the pictorial representations, and that the appellant was willing to amend the description.   For purposes of this judgment, I assume that it will be amended as set out in paragraph [5] above.

[18]     Turning to the question of distinctive character, the Assistant Commissioner recognised that she must keep in mind how any fair use of the mark in relation to goods or services covered by the applications would  be understood by those  to whom it would be presented in the course of trade:  McCain Foods (Aust) Pty Ltd v Conagra Inc [2002] 3 NZLR 40, 50. She held that the mark is a shape and therefore qualifies as a sign for purposes of the definition in s.5 of the Trade Marks Act 2002. This mark was capable of distinguishing “at the definition of trademark level”, but that is likely to mean something different to “has no distinctive character” under s.18(1)(b). For that proposition she referred to Fredco Trading v Miller (2004) 65

IPR 653, 661.  Her conclusion on that point is not in issue.

[19]     Turning to the test of distinctiveness, the Assistant Commissioner held:

Whether or not the applicant is likely to be successful in establishing that the mark is eligible for trademark registration still appears to depend on the test in W & G du Cros Ltd’s Application (1913) 30 RPC 660 at 672:

The applicants’  chance  of  success  in  this  respect  must,  I  think, largely depend upon whether other traders are likely, in the ordinary course of their business and without any improper motive, to desire

to use the same mark, or some mark nearly resembling it, upon or in connection with their own goods.

The test in du Cros was approved by the Court of Appeal in McCain at 44 for proceedings concerning the eligibility for registration of the word combination “Healthy Choice”, which were governed by the Trade Marks Act 1953.

[20]     Turning to an evaluation of the mark, the Assistant Commissioner noted that its scope is broad because it will be registered for all colours, it could be flexible or hard, and the shape could be of any size.   She concluded that the mark  lacked inherent distinctiveness for the reason that other traders are likely, in the ordinary course of their business and without any improper motive, to want to use the same mark  or something  resembling  it  on  or  in  connection  with  their  own  goods or services.  She reasoned that the heart shape is a simple one that in itself lacks identity and unusual connotation, that the scope of the mark is broad, that the scope is not confined to packaging of the goods but could be part of the goods, that this last objection could not be met by excluding toys in the shape of a heart as the applicant offered to do, that the heart  shape carries a universal understanding or message (messages of love or affection), that there are actual examples of other traders using the heart for their toys and retail toy services, and that there is no evidence of use of the mark in New Zealand which could overcome the above concerns by showing that the mark had acquired a distinctive character in practice.

The appeal

[21]     The appeal is by way of rehearing:   s.173(b) Trade Marks Act 2002.   The Court must  give weight to the Commissioner’s decision,  which  is discretionary: Stitching Lodestar v Austin, Nichols & Co [2006] NZCA 61.

[22]     Mr Chapman accepted that there is no evidence of prior use.   Rather, he contended  that  the  mark  is  inherently  capable  of  indicating  trade  source  to consumers, citing In Re Powell’s Trademark [1893] 2 Ch 388, 403, AD2000 Trade Mark [1997] RPC 168, 175, and Cycling (IS) Trade Mark Application [2002] RPC

729, 743.  I accept that these cases correctly state the test of “distinctive character” in

s.18(1)(b), which is whether the mark is endowed by nature with the capacity to communicate trade source.

[23]     Counsel  next  contended  that  the  Assistant  Commissioner  erred  in  her statement of the test of distinctiveness.  She referred to the following passage from Lord Parker’s speech in W & G du Cros Limited’s Application (above, at 635):

The applicant’s  chance  of  success  in  this  respect  must,  I  think,  largely depend upon whether other traders are likely, in the ordinary course of their business and without any improper motive, to desire to use the same mark, or some mark nearly resembling it, upon or in connection with their own goods.

[24]     Counsel argued, however, that the Assistant Commissioner failed to refer to the words preceding that passage:

The applicant for registration in effect says:  ‘I intend to use this mark as a trademark, ie, for the purpose of distinguishing my goods from the goods of other persons,’ and the Registrar or the Court has to determine before the mark  be  admitted  to  registration  whether  it  is  of  such  a  kind  that  the applicant, quite apart from the effects of registration, is likely or unlikely to attain the object he has in view.

[25]     Accordingly, Mr Chapman submitted, the Assistant Commissioner did not enquire  whether  the  mark  was  inherently distinctive,  but  rather  focused  on  the question whether other traders are likely to desire to use the same mark.

[26]     I reject this submission.  While the Assistant Commissioner did not set out the entire passage from the speech of Lord Parker, it is plain that she appreciated that the question in issue was distinctiveness, and the use that is being made (or could be made) of the heart  shape by other traders is a measure of distinctiveness.    She recorded that the applicant had to establish that, at the relevant date, the mark had inherent distinctiveness.

[27]     Mr Chapman further submitted that when applying the test, the Assistant Commissioner looked at whether it is possible that other traders would use the mark, rather than whether it is likely that they would do so.   Again, I reject these submissions.  In each paragraph of her reasoning, the Assistant Commissioner made it clear that she was considering whether  it  was likely that  other traders would

legitimately wish to  use the mark,  or whether  they will  in  fact  wish  to  do  so. Acknowledging this, Mr Chapman contended simply that in the final analysis the Commissioner wrongly concluded that it is likely that other traders will use the mark when it is at best possible that they will do so.

[28]     Expanding  on  this,  Mr  Chapman  emphasised  that  the  mark  is  a  three dimensional shape that will be used to denote the appellant’s products or services.  It is not a two dimensional image, and so would not be sewn onto a toy.  Nor is it a functional part of any of the appellant’s goods.  Rather it is a label or badge of origin that may (or may not) be discarded by the user.  As a label, the shape is eminently capable of distinguishing goods.  He gave the example of a line of clothing, which would be distinctive if labelled with a heart shape.  The sign does not correspond to the shape of the appellant’s goods or their packaging, nor does it add value.  It is not descriptive  of the  goods or  services,  nor  does  it  carry any  message  other  than provenance.  He submitted that use of heart images or devices in these ways would not infringe the mark, and so would not inhibit use of such images or devices by other traders.

[29]     However, the mark is not limited to a label or mark of origin.  Rather, it is a three dimensional shape that may be of any size or material, and may be used in any way.  The Assistant Commissioner’s conclusion that it is capable of being used as a toy or part of a toy in its own right seems unassailable.  And while the heart shape might  well  distinguish  clothes  or  other  goods  with  which  it  is  not  normally associated, the question in this case is whether it distinguishes Build-a-Bear’s toys from other toys.  The evidence before the Assistant Commissioner showed that it is frequently associated with toys, no doubt because it evokes the love or affection that parents are wont to show their children.  On the evidence before her, the Assistant Commissioner’s conclusion that it is likely that other traders will want to use the mark for legitimate purposes was almost inevitable.

[30]     I accordingly agree with the Assistant Commissioner that the mark is not inherently capable of distinguishing Build-a-Bear Workshop’s goods or services. The appeal is dismissed.

"In accordance with r 540(4) I direct the Registrar to endorse this judgment with a delivery time of 1 pm on the 21st day of June 2007."

F Miller J

Solicitors:

Wackrow, Williams & Davies, Auckland for Appellant