Chettleburgh v Seduce Group Australia Pty Limited
[2014] NZHC 2220
•12 September 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-485-004517 [2014] NZHC 2220
BETWEEN GARY GWYN CHETTLEBURGH
Appellant
AND
SEDUCE GROUP AUSTRALIA PTY LIMITED
Respondent
Hearing: 19 and 20 August 2014 Counsel:
DL Marriott for Appellant
CL Elliott QC for RespondentJudgment:
12 September 2014
JUDGMENT OF FOGARTY J
This judgment was delivered by me on 12 September 2014 at 4.30 p.m., pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date: ………………………….
Solicitors: James & Wells, Auckland
Peter McDonald, Auckland
CHETTLEBURGH v SEDUCE GROUP AUSTRALIA PTY LTD [2014] NZHC 2220 [12 September 2014]
Introduction
[1] The appellant and the respondent both sell women’s fashion garments using the same mark, SEDUCE. The appellant trades in New Zealand. The respondent trades principally in Australia but has been trading for some periods of time in New Zealand. In 2006 the appellant successfully registered SEDUCE as a trade mark under the Trade Marks Act 2002 (the Act). It is deemed to have been registered on
16 January, being the date of the application. In September 2007, the respondent applied to register the mark. That application was blocked because of the prior registration.
[2] The respondent then applied for a declaration of invalidity which was lodged on 22 October 2008. The parties have been litigating the issue since then.
Litigation History
Earlier decisions
[3] Prior to this appeal there have been two decisions by Assistant
Commissioners under the Act and a High Court decision.
[4] The first decision was the Assistant Commissioner’s decision dated
20 September 2011. The Tribunal granted SGAPL’s application for a declaration of invalidity, finding that SGAPL, not Mr Chettleburgh, was the owner of the relevant mark as at 16 January 2006, being the deemed date of registration.1
[5] Mr Chettleburgh appealed to the High Court which overturned the decision of the Tribunal because it found there had been procedural unfairness.2 The High Court found that the questions of true ownership had not been clearly pleaded. The High Court referred the proceeding back to this Tribunal for a second hearing, limited to
examining three questions:
1 Chettleburgh v SEDUCE Group Australia Pty Ltd T34/2011. (First instance decision.)
2 Chettleburgh v SEDUCE Group Australia Pty Ltd [2012] NZHC 2563 at [68]. (Appeal from first instance decision.)
(a) At the relevant date, was SGAPL the true owner, as defined in the
High Court’s judgment, of the trade mark SEDUCE?
(b)If SGAPL was the true owner, is there a discretion under s 73 of the Act which could be exercised by declining to make the declaration of invalidity sought, notwithstanding the finding of true ownership?
(c) If there is such a discretion, how should it be exercised? [6] The High Court did not identify any issue estoppel.
Decision under appeal
[7] The Tribunal’s second decision, delivered on 12 March 2014 by Assistant
Commissioner Waldren, answered these questions as follows:
1SGAPL, not Mr Chettleburgh, was the true owner of the SEDUCE trade mark in New Zealand in relation to women’s fashion clothing at the relevant date.
2There is no discretion under s 73 of the Act which could be exercised by declining to make the declaration of invalidity sought, notwithstanding the finding of SGAPL as the true owner of the trade mark.
3If there were such a discretion which it is found that there is not, it should be exercised in exceptional circumstances; and
4There are no exceptional circumstances which would justify not declaring the registration of the relevant mark invalid.
Accordingly, I declare that trade mark registration number 741487 SEDUCE is invalid, and direct that, under s 74 of the Act, the registration be treated as if it had not been registered and the trade mark register is to be altered accordingly.
[8] As to questions (b) and (c), Assistant Commissioner Walden discussed the question of discretion in two parts: firstly, examining as a matter of law whether or not there was a discretion, and answering “no”; and secondly, examining on the assumption there was such a discretion, how it would be exercised and found there are no exceptional circumstances in this case which would favour overriding the public interest in having the New Zealand Trade Marks Register properly reflect the true ownership of the relevant mark at the relevant date.
This appeal
[9] Mr Chettleburgh has appealed. Pursuant to s 173 of the Act and r 20.18 of the High Court Rules, this appeal is by way of a rehearing. The Court has all the powers of the Commissioner. The Supreme Court has confirmed that the High Court is required to come to its own view when deciding appeals from the Assistant Commissioner of Trade Marks.3
Ownership issue
[10] The ownership grounds of appeal were:
(a) That there was use and/or an assertion of ownership of the SEDUCE
trade mark by the respondent prior to 16 January 2006;
(b)That the Commissioner had erred in finding the respondent had not abandoned the SEDUCE trade mark, by reason of not selling goods in New Zealand during the period June 2003 to 16 January 2006; and
[11] In the decision under appeal, the Commissioner set out the requirements for a legitimate claim for ownership of an unregistered mark:
[13] The requirements4 for a legitimate claim to ownership of an unregistered trade mark are that:
(1) There is no prior use or prior assertion of [ownership].
(2) [SGAPL] is using or has sufficiently definite intention to use the [SEDUCE] mark.
(3) There is no fraud or breach of duty involved.
[14] It appears that requirements 1 (prior use) and 2 (using or sufficient intention to use) are in issue.5
[12] As to the prior use requirement, Assistant Commissioner Walden found:
3 Austin, Nichols & Co Inc v Stitchin Lodestar [2007] NZSC 103 at [3] and [5].
4 Aqua Technics Pool and Spa Centre New Zealand Limited v Aqua-Tech Limited [2007] NZCA
90 at [14] to [18], which followed Newman v Table for Six(1996) Ltd 44 IPR 269 at 278 (HC)
citing Brown and Grant, The Law of Intellectual Property in New Zealand (Butterworths, 1989).
5 Appeal from first instance decision at [48].
[32] I find that it is established that there was prior use by SGAPL (through its trading company, Gloss Star Pty Ltd and/or New Zealand distributor, Ball Agencies Limited)6 of its SEDUCE trade mark (which is effectively identical to the relevant mark) on and/or in relation women’s fashion clothing (which are the relevant goods) in New Zealand during the periods 1997 to 2000 and June 2001 to June 2003 (which are before the relevant date of 16 January 2006). Accordingly I find that SGAPL meets the first requirement (prior use).
[13] As to the second requirement of use or sufficient intent to use:
[44] Accordingly, I find that SGAPL meets the second requirement that it had a sufficiently definite intention to use the relevant mark at the relevant date because it had not abandoned its SEDUCE trade mark in New Zealand.
Grounds of appeal
[14] Positively, the appeal before this Court argued that Mr Chettleburgh had acquired substantial common law rights in the SEDUCE trade mark in New Zealand and had done so prior to any resumption of use by the respondent.
Chronology of trading
Appellant’s trading
[15] The respondent is an established Australian company. At the present time it has over 50 stores in Australia and also sells through David Jones and Myers.
[16] The Australian company sold SEDUCE branded fashion garments into New Zealand via a wholesaler, Ball, between 2001 and 2003. That relationship broke down and the respondent did not begin selling to New Zealand retailers again until March 2006. However, between 2003 and 2006, there were a large number of listings on Trade Me of resales of SEDUCE Australia branded garments. Then in March 2006, the respondent began making direct wholesale sales to retailers from Sydney. In that sense, it re-entered the New Zealand market.
Owner – its relevance and meaning
[17] Section 5(1) of the Trade Marks Act 2002 relevantly defines “owner” as:
6 Section 7(2) of the Act applies.
(a) means a person who has applied for the registration of a trade mark;
and
…
(d) In relation to an unregistered trade mark, means the person who owns all of the rights in the mark.
[18] It is important to grasp immediately that, by these definitions of “owner”, the statute distinguishes between ownership of a mark which is unregistered, and being the owner after the trade mark is registered.
[19] The statute does not define the criteria by which a judgment can be made that a person owns the rights in the (unregistered) mark.
[20] SGAPL’s application was for a declaration that the registration in favour of M Mr Chettleburgh is invalid. It relied on s 73 of the Act which provides:
73 Invalidity of registration of trade mark
(1) The Commissioner or the Court may, on the application of an aggrieved person (which includes a person who is culturally aggrieved), declare that the registration of a trade mark is invalid to the extent that the trade mark was not registrable under Part 2 at the deemed date of its registration.
(2) Despite subsection (1), the registration of a trade mark that has acquired a distinctive character after its registration must not be declared invalid even though the trade mark was not registrable under section 18(1)(b), (c), or (d) at the deemed date of its registration.
(3) The Commissioner or the Court, as the case may be, may refuse any application for a declaration of invalidity that is vexatious.
[21] The concept of an owner of an unregistered mark is not a common law concept. Rather, it is statutory. Therefore it is not possible to turn to the common law to find the criteria by which this conclusion is reached. This is because the common law protected trade marks predominantly by way of providing the remedy of the tort of passing off. The essence of the tort of passing off is that the tortfeasor has conducted business in such a way as to pass his products or services off as those provided by a successful rival whose products or services attract goodwill. The property being protected is the goodwill of the business advertised by the trade name or mark.
[22] Therefore I have found it important to grasp that the concept of a person “owning” an unregistered mark is statutory. Embedded in the definition of “owner” s 5(1)(d) is the concept that there can be a mark capable of being owned in its own right but which is unregistered. In short, a person can own an unregistered trade mark. Further, by deploying the concept of “owner” to the legitimate user of an unregistered trade mark, Parliament imports the inference that the owner has rights in respect of a trade mark, prior to its registration under the Act.
[23] Mr Chettleburgh obtained its registered trade mark by making an application under this Act by a process governed by Part 3, particularly subpart 2. Section 32(1) relevantly provides:
32 Application: how made
(1) A person claiming to be the owner of a trade mark or series of trade marks may, on payment of the prescribed fee (if any), apply in the prescribed manner (if any) for the registration of the trade mark or series of trade marks used or proposed to be used in respect of the following:
(a) particular goods or services within 1 or more classes: (b) particular goods and services within 1 or more classes.
[24] By prefacing its proposition, a person “claiming,” s 32(1) of the Act reflects the possibility that more than one person can claim to be the owner of a trade mark, that is, a single distinctive trade mark so that there can be a legitimate dispute as to who is the owner. This is such a dispute.
[25] Section 32(1) does not presume that the claimants’ application will be granted. The statute does not provide, however, a process whereby competing applications will be processed simultaneously. Nor does the statute provide criteria for resolving a dispute as to ownership. Those criteria have been established by case law, essentially establishing a “first in time” principle.
[26] Counsel agreed that the text, Shanahan’s Australian Law of Trade Marks and Passing Off,7 can and should be relied upon for its exposition of this concept of ownership. I rely on the 2012 (fifth) edition.
[27] Relevant passages are:
The Trade Marks Act 1995 (CTH) supplements rather than displaces the common law and provides to some degree for the orderly resolution of competing statutory and common law claims to ownership.8
“At common law a person who uses a trade mark may thereby acquire the right to preclude its use by others, that right being, however, an adjunct of the goodwill of the business in which the trade mark is used and incapable of separate existence.”9
But while first use may not of itself support an action for passing off or breach of s 52 (of the Trade Practices Act 1974 (CTH), it should at least establish a qualified right to continue that use in the face of the claims of those coming later and should also be enough to defeat most conflicting claims to statutory ownership.10
The title conferred by the 1995 Act is not contingent on actual use of the trade mark.11
But what is essential to a valid claim to ownership is that no other person has acquired a prior right to use the trade mark in Australia for the goods or services in question.12
[28] Shanahan’s goes on to discuss the application of the first in time principle, dividing the cases between “Piracy cases”13 and “Non-piracy cases”.14 It cites the High Court of Australia decision in Seven Up Co v OT Ltd15 decision under the heading “Piracy cases”, but not under the subsequent heading “Non-piracy cases”. As we will see, there is a dispute between the parties on this appeal as to whether this is a piracy or non-piracy case. Williams J in Seven Up said
… in the absence of fraud it is not unlawful for a trader to become the registered proprietor under the Trade Marks Act of a mark which has been used, however, extensively, by another trader as a mark for similar goods in
7 Mark Davison and Ian Horak, Shanahan’s Australian Law of Trade Marks and Passing Off
(5th ed. Thomson Reuters, 2012).
8 At 10.05.
9 At 10.505. “GE” Trade Mark [1972] 1 WLR 729; [1973] RPC 297, at 325 (L).
10 At 10.505, Farley (Aust) Pty Ltd v JR Alexander & Sons (Qld) Pty Ltd (1946) 75 CLR 487.
11 At 10.510..
12 At 10.510.
13 At 10.515.
14 At 10.510.
15 Seven Up Co v OT Ltd (1947) 75 CLR 203.
a foreign country, provided the foreign mark has not been used at all in Australia at the date of the application for registration. But the position is different if at that date the mark has become identified with the goods of the foreign trader in Australia because those goods have been brought into Australia by the foreign trader himself or by some importer or in some other manner. The court frowns upon any attempt by one trader to appropriate the mark of another trader although that trader is a foreign trader and the mark has only been used by him in a foreign country. It therefore seizes upon a very small amount of use of the foreign mark in Australia to hold that it has become identified with and distinctive of the goods of the foreign trader in Australia. It is not then a mark which another trader is entitled to apply to register under the Trade Marks Act because it is not his property but the property of a foreign trader. …
Further, if at the date of application for registration, the mark of the foreign trader, although it has not been used in Australia, has nevertheless become associated in the minds of the Australian public with his goods because it has been advertised in publications which have circulated extensively in Australia or in some other manner, the registrar is entitled to refuse to register the mark for such goods because it is likely to deceive. If it has been registered the court may rectify the register on the ground that the mark is wrongly entered on the register. (In re Remfrey’s Trade Mark (1897) 23
VLR 44; Radio Corporation Pty Ltd v Disney (1937) 57 CLR 448).
(Emphasis added.)
[29] Our Court of Appeal in Pioneer Hi-Bred Corn Co v Hi-Line Chicks Pty Ltd16 cites this same passage by Williams J in Seven Up. Woodhouse J for the Court went on to say:17
This is a clear statement that use is not necessary. Local advertising may be sufficient to cause confusion in the local market and it need not be related to goods actually sold in that market. That aspect of the case was not adverted to in the judgment of the Full Court, but Williams J is clear on this point.
[30] Thus it is apparent from the comment in from Shanahan and the dicta in Pioneer, that the criteria for ownership as it is found in the trade marks legislation in the UK, Australia and New Zealand depends upon use of the mark. And that first use of the mark creates the proprietorship18 or ownership. This principle is confirmed in the decision of the Court of Appeal in Aqua Technics Pool and Spa
Centre New Zealand Ltd v Aqua-Tech Ltd:19
16 Pioneer Hi-Bred Corn Company v Hi-Line Chicks Pty Ltd [1978] 2 NZLR 50 (CA)
17 At 69.
18 This was the concept used in the now repealed Trade Marks Act 1953.
19 Aqua Technics Pool and Spa Centre New Zealand Ltd v Aqua Tech Ltd, above n 4, at [14] – [18].
[14] The proprietor of a trade mark in New Zealand is the first person to use that mark in New Zealand, see Philip Morris (NZ) v Liggett & Myers Tobacco Co (NZ) Ltd (No 3) (1978) 1 NZIPR 195 (SC).
[15] The parties agree that the requirements for a legitimate claim to proprietorship under s 26 of the 1953 Act are as set out in Newnham v Table for Six (1996) Ltd (1998) 44 IPR 269 at 278 (HC) citing Brown and Grant, The Law of Intellectual Property in New Zealand (1989) at [2.8], that is:
(1) There is no prior use or prior assertion of proprietorship.
(2) The applicant is using or has sufficiently definite intention to use the mark.
(3) There is no fraud or breach of duty involved.
[16] Here there is no question of fraud or breach of duty. The focus is on whether Aqua-Tech used the mark in relation to the pools before use by the appellant and the related question of whether Aqua-Tech was using or had sufficient definite intention to use the mark.
[17] As to the type of use required to maintain a claim to proprietorship based on use, again, there is no dispute between the parties about that. The approach is described in Moorgate Tobacco Co Ltd v Philip Morris Ltd (No
2) (1984) 156 CLR 414 at 432 as follows:
The prior use of the trade mark which may suffice, at least if combined with local authorship, to establish that a person has acquired [in a particular country] the statutory status of “proprietor” of the mark, is public use [in that country] of the mark as a trade mark, that is to say, a use of the mark in relation to goods for the purpose of indicating or so as to indicate a connection in the course of trade between the goods with respect to which the mark is used and that person … .
[18] Section 2(2)(a) of the 1953 Act is relevant to this issue. The effect of s 2(2)(a) is that the sign that comprises the trade mark must be use of a sign “upon, or in physical or other relation to, goods”.
[31] Mr Elliott QC did not choose between a piracy or non-piracy analysis, but invited the Court to lean to a piracy analysis. He argued that this Court should be sceptical of the evidence of Mr Chettleburgh, particularly that he commenced using the SEDUCE mark in New Zealand in ignorance of prior use of SEDUCE. For example:
Mr Chettleburgh’s evidence is highly selective. In particular, we are not told what investigations Mr Chettleburgh made and why he did not pick up the retail sales that had been made throughout the country. It is noteworthy that Mr Chettleburgh referred to “other retailers” – because the Trade Me evidence points to significant sales of SEDUCE branded products in New Zealand throughout the period 1999 to 2006. In terms of the appellant’s bonefides, with the benefit of the new evidence, it is not unreasonable to
infer that Mr Chettleburgh’s evidence was worded with deliberate care so as to sidestep this issue and focus only on sales through the retail trade and to ignore a significant exposure of the trade mark in New Zealand.
[32] In reply, Mr Marriott for Mr Chettleburgh submitted that there were a number of relevant issue estoppels arising out of findings by the Assistant Commissioner in the first case which were not challenged on the appeal to the High Court before Woodhouse J. He referred particularly to the following findings concerning Mr Chettleburgh’s awareness of SGAPL’s mark. At [34] and [35] of the first decision, the Assistant Commissioner says:20
34.It appears that SGAPL relies on: (1) the use of its SEDUCE mark in New Zealand during the period June 2001 to June 2003; and (2) its spillover reputation from Australia for its SEDUCE mark, including its website: considered the evidence before me, I find that SGAPL has not established that, at the relevant date, there was an awareness of its SEDUCE mark in the relevant market. Here are my reasons:
35.1the use of SGAPL’s SEDUCE mark in New Zealand (at the relevant date) appears to have been for two years (which is a relatively short period) and it involved selling ladies fashion garments wholesale to a single New Zealand importer (paragraph 10 of the Mimis declaration). There is no evidence concerning: (1) the number of units that were sold to New Zealand purchasers of ladies fashions; (2) the actual New Zealand trade channels for these garments; and (3) how those garments were promoted to New Zealand purchasers. I note that even experienced New Zealand clothing retailers were not aware of SGAPL’s SEDUCE mark in the New Zealand market at the relevant date:
35.2there is insufficient detail concerning SGAPL’s use of its SEDUCE mark and its SEDUCE stores in Australia to inform a determination concerning the level of awareness of that mark in the Australian market. There is also no evidence concerning: (1) travel statistics between Australia and New Zealand; (2) how likely New Zealand visitors to Australia would be left with an awareness of SGAPL’s SEDUCE mark; and (3) whether this awareness would be of a sufficient scale to cross the relatively low threshold referred to in NV Sumatra Tabacco Trading Company v British American Tabacco (Brands) Incorporated21 bearing in mind the size and nature of the relevant market for the relevant mark, which appears to be larger than the relevant market for SGAPL’s mark.
20 First instance decision, above n 1.
21 NV Sumatra Tobacco Trading Company v British American Tobacco (Brands) Incorporated
[2010] NZCA 24 at [77].
[33] These findings come under consideration of the topic of “awareness” of
SGAPL’s mark.
[34] Then, under a consideration of s 17(2) of the Act, which provides:
17 Absolute grounds for not registering trade mark: general
(2) The Commissioner must not register a trade mark if the application is made in bad faith.
The Commissioner made these findings in the first decision:
51 The relevant circumstances are:
51.1at the relevant date, SGAPL was the owner (in terms of paragraph (d) of the definition of owner in section 5(1) of the Act) of the relevant mark in New Zealand on the basis of prior use during the period June 2001 to June 2003. It was not until early 2006 that GGC decided to adopt the SEDUCE trade mark (paragraph 12 of the Chettleburgh). SGAPL resumed use of its SEDUCE mark around March 2006:
51.2SGAPL and GGC appear to be independent traders. This does not appear to be a case where there was a business relationship or connection between the two traders on the basis of which the knowledge of one trader could be imputed to the other trader:
51.3in early 2006, GGC was not aware of any clothing ever having been available in New Zealand under the SEDUCE trade mark (paragraph 12 of the Chettleburgh declaration). However, I note that “there is no prohibition on a trader registering a foreign mark for use in New Zealand, in circumstances where there has been no prior use of the mark in New Zealand:22
51.4it appears that GGC became aware of SGAPL in mid 2007 (paragraph 27 of the Chettleburgh declaration), and SGAPL (through its lawyers) became aware of GGC’s presence in the New Zealand market in September 2007 (exhibit GGC-8 of the Chettleburgh declaration):
51.5experienced New Zealand clothing retailers were not aware of SGAPL’s SEDUCE mark in the New Zealand market at the relevant date:
51.6SGAPL did not have a trade mark application/registration for the relevant mark in New Zealand, which could have alerted GGC or any other trader to SGAPL’s presence in the New Zealand market.
22 Valley Girl Co Ltd v Hanama Collection Pty Ltd (2005) 66 IPR 214.
52.I have also found that SGAPL has not succeeded on its ground of invalidity under section 17(1)(a) of the Act on the basis that SGAPL has not established that there was an awareness of its SEDUCE mark in the relevant market at the relevant date. Therefore, in my view, it must follow that this ground of invalidity must immediately fail to the extent that it is based on SGAPL’s reputation for its SEDUCE mark.
53.In the circumstances set out at paragraph 51 to 52, I am not satisfied that GGC’s application for registration of the relevant mark was conduct that fell short of reasonable standards of commercial behaviour. It is my view that, on the evidence before me, GGC did not know, and, in the circumstances, could not reasonably have been expected to know, about SGAPL’s prior assertion to ownership of the relevant mark in New Zealand when GGC made its trade mark application.
[35] As we have seen, the case was sent back to the Tribunal on the ownership issue, but Mr Marriott submitted there is issue estoppel in respect of para 53.
[36] In the second hearing none of the deponents were cross-examined. This concerned me inasmuch as Mr Elliott was inviting me to “suspect” that Mr Chettleburgh must have known of SEDUCE Australia and his move to register SEDUCE as a trade mark in New Zealand was a pre-emptive act to secure that label in New Zealand for himself. This submission was allied with Mr Elliott’s submission that where there is an established mark offshore, then the courts will require very little evidence of use within the domestic jurisdiction, justifying priority of registration. Mr Elliott relied on the first paragraph of the quote from Williams J in Seven Up set out above. Yet, as we have seen, Shanahan places this dictum as applicable to “Piracy cases”, which classification assumes awareness of the rival mark.
[37] I agree that the passages I have cited from the first judgment could raise an issue estoppel sufficient to prevent Mr Elliott arguing in these proceedings that Mr Chettleburgh, when applying to register the SEDUCE mark, was attempting to appropriate the mark of the respondent, or that he must have known of the use of that mark in Australia and, separately, in New Zealand. However, that decision was appealed to the High Court. One of the issues under appeal was:
(e) If the Commissioner was entitled as a matter of law to determine the question of ownership, did SEDUCE Group give adequate notice of
this issue to Mr Chettleburgh? A closely related issue is whether there is unfairness to Mr Chettleburgh in the way in which this issue was dealt with in the course of the hearing.
[38] Woodhouse J accepted Mr Marriott’s submissions that the evidence would be different if the question of true ownership had been clearly pleaded. That led to this conclusion:
[68] I accept Mr Marriott’s submissions to the essential effect that, if the questions of true ownership had been clearly pleaded, the approach on Mr Chettleburgh’s behalf, including evidence adduced for him and decisions on cross-examination of Seduce Group witnesses, were likely to have been different.
[69] The conclusions to this point are sufficient to justify an order that the proceeding be remitted to the Commissioner for a new hearing on the question of ownership. There is a separate reason for the same order. This is that the way in which the hearing proceeded resulted in unfairness to Mr Chettleburgh. Mr Marriott acted for Mr Chettleburgh before the Assistant Commissioner as well as acting for him on his appeal. Mr Marriott, on this appeal, said that the first reference to s 32(1) in a document from Seduce Group was a reference in the written submissions for Seduce Group which Mr Marriott received on the day of the hearing. Section 32 is mentioned twice without any significantly developed submission in that regard. Mr Marriott raised with the Commissioner the fact that there had been no prior statement by Seduce Group that it was seeking to rely on s 32(1). Mr Marriott’s advice to me was that the Assistant Commissioner did not overrule what amounted to Mr Marriott’s objection that there was very late notice. Nor did she indicate that argument should be developed for Mr Chettleburgh on the point, or that Mr Chettleburgh was in any way at risk on the point. Before me, Mr Elliott did not take issue with any of Mr Marriott’s advice and in that regard I note that Mr Elliott was supported in the hearing before me by Mr Cumming, the patent attorney who appeared for Seduce Group before the Assistant Commissioner. (Emphasis added.)
[39] As underlined, the first sentence of [69] refers to “a new hearing on the question of ownership”. There is no qualification to the order for a rehearing. It was open to both parties to start again. Issue estoppel does not apply in this context.
[40] This analysis is confirmed by an examination of the judgment under appeal. There is nothing in the judgment which suggests that any issue estoppel point was sought or taken arising out of the first decision.
The interpretation of Seven Up
[41] Mr Marriott disputed the Commissioner’s reliance on the dictum of Williams J in Seven Up that a very small amount of the use of the foreign mark is sufficient. He submitted that this test applies only when the context is a one trader trying to appropriate the mark of another. In short, Mr Marriott argued that that test applies only on proof of piracy.
[42] Under the heading “Non-piracy cases” Shanahan argues: 23
Although those cases in which the High Court ordered rectification on grounds of prior use involved the purpose of an appropriation of a foreigner’s trade mark, it would seem from the High Court’s formulation the requirement of “authorship” that the “piracy” cases merely illustrate a general principle and that prior use will establish ownership regardless of the origin of the parties, where there is no
ques ti on of pi rac y and wher e the latt er ’s cl ai m t o owner shi p i s made
in good faith. (Emphasis added.)
The learned authors go on to cite a large number of cases, including among the most recent, the New Zealand decision of Automobile Club De L’Ouest ACO v South Pacific Tyres New Zealand Limited.24
[43] Before me counsel relied upon the decision of Valley Girl v Hanover Collection.25 This was, however, a piracy case as the appellant did not seek to displace the conception that this was a case of appropriation of a foreign mark.26
[44] In Automobile Club, Wild J relied on the second paragraph in the dictum of Williams J in the Seven Up case cited above. That paragraph can be read as applicable to the single question of determining priority of use without the need to form any ethical judgment as to the proprietary behaviour of the user of either mark. Shanahan relies on a case, Karu Pty Limited v Jose27 where, for the Full Court, Drummond J referred to a special rule which allowed foreign users to prove
ownership by de minimus use of the mark which would be insufficient to establish
23 Shanahan’s Australian Law of Trade Marks and Passing Off, at10.520.
24 Automobile Club De L’Ouest ACO v South Pacific Tyres New Zealand Limited (2006) 70 IPR
639.
25 Valley Girl v Hanover Collection, above n 22
26 At [2].
27 Karu Pty Limited v Jose [1994] 53 FCR 15; (1994) 30 IPR 407 (FC).
proprietorship in Australia of a mark devised in Australia28 and concluded that the
High Court’s formulation of the requirement of authorship:29
Merely illustrate[s] a general principle and that prior use will establish ownership regardless of the origins of the parties, where there is no question of piracy and where the latter’s later user’s claim to ownership is made in good faith.
[45] Accordingly, I propose to use that morally neutral test. This is particularly because, as I repeat, I do not think that there is any basis to view the position of Mr Chettleburgh with suspicion, particularly because Mr Chettleburgh was not cross- examined.
[46] In this appeal, Mr Marriott, for Mr Chettleburgh, challenged the affidavit evidence of sales of SEDUCE branded garments by SGAPL between 2001 and 2003. He submitted the only evidence of use is “their assertions”. He said:
Put simply, the respondent SGAPL made a statement regarding alleged sales of product over a two-year period ending in June 2003 and then sought to infer, solely from that statement, that there was genuine use of SEDUCE in relation to the type of goods covered by the registration. That evidence regarding use is entirely unsupported by any evidence whatsoever as to the level of awareness that it generated, even from representatives of the relevant market, or even from representatives of the respondent company. (Emphasis added.)
[47] On the other hand, the appellant produced evidence from himself and from members of the relevant market as to their lack of awareness of any prior use by the respondent.
[48] Those submissions were in the face of a statutory declaration by the General Manager of SGAPL, Ms E Mimis, that the SEDUCE group had independent retail clients in New Zealand and first began selling in New Zealand in 2001. She refers to registration of the trade mark in Australia and, as to sales in New Zealand, says:
My company was selling ladies fashion garments wholesale to a New Zealand importer or agencies from June 2001 until June 2003. Garments sold all carried the SEDUCE trade mark as well as having swing tags
28 At 20 – 21.
29 Blackadder v Good Roads Machinery Co Ltd (1926) 38 CLR 332; Re reregistered trade mark Yanx ex parte amalgamated Tobacco Corp Ltd (1951) 82 CLR 199; Thunderbird Products Corp v Thunderbird Marine Products Pty Ltd (1974) 131 CLR 592.
attached to those garments. Packaging and delivery documents all carried the SEDUCE trade mark.
From the records of my company, I am able to say that the wholesale amount of sales over this period amounted to AUS$300,000.
Sales and media promotion of the trade mark SEDUCE in New Zealand during this period were handled by all agencies.
[49] With the exception of the very last sentence, there is no doubt that Ms Mini was qualified to give that evidence by way of affidavit.
[50] SPGAL’s agent, Ball, was distributing to the following retail outlets in New Zealand: Cleo’s, Indigo Fashions, Octo, Smith & Caughey’s, Ruby Blanch, Mia Style, Modes of Br, Regalia DES, Paua R, Rex Royale, Seahorse, The Dressing, Julie Rice, New Dax, J Ballantynes, Rocks Socks Affair, Hamilton and cash sales.
[51] I am satisfied these sales were made and am satisfied that the stocks for sale would have been viewed by many more persons than those who actually purchased them so that the brand would become known by shoppers in such anchor department stores as Smith & Caughey in Auckland and J Ballantyne in Christchurch and other parts of the South Island.
[52] This is not a case of proof of facts to the criminal standard of beyond reasonable doubt. Ms Mimis was not cross-examined. Assistant Commissioner Walden accepted that evidence, and so does this Court. There is simply no basis therefore for the submission that the only evidence of use is in the nature of bare assertions.
[53] Ms Mimis went on to deal with the period from March 2006. It was her evidence:
Subsequent sales to customers in New Zealand have been handled directly through my company’s Sydney head office. The following customers were serviced on a direct basis from the Sydney head office:
1 Vibe Apparel – commenced March 2006
2 Frankie Clothing Company – commenced September 2006
3 Wunderland – commenced September 2006
4 Wildpair – commenced September 2007.
Annexed hereto and marked EM5 is a true copy of the customer transactions.
[54] Again, there can be no doubt that this is evidence. This is not mere assertion. I am satisfied from this evidence that SGPAL was selling SEDUCE branded garments into New Zealand through the company’s Sydney head office from March
2006.
[55] The question then becomes whether or not the mark was abandoned in the period 2003 to 2006. There is no evidence that SGAPL abandoned the mark in Australia, let alone via its parent company, Gloss Star, abandoning the mark in 27 other countries where it is registered. Ms Mimis gave that as the number of companies and added:
SEDUCE group has accounts with Macys, Kitsons, Fred Segal and several boutique stores in the United States of America.
[56] The common law has a policy of protecting property rights. It leans against abandonment. There is no commercial reason as to why SGAPL should abandon selling the SEDUCE garments in New Zealand. That is counter-intuitive. There is no suggestion in the evidence that the sales into New Zealand between 2001 and
2003 were not profitable. There is every suggestion that during the period from
2001 to 2006, sales were ongoing in Australia. On that basis, extra sales, whether they be to New Zealand or any other country, are likely to be economically efficient and thus offering a good profit margin.
[57] I do not think there is any basis for saying that the mark was abandoned in New Zealand, either directly or by reason of a decision not to do business in New Zealand. Addressing the period between 2003 and 2006, Ms Mimis said:
My company and its SEDUCE brand is well known in New Zealand as evidenced by sales on Trade Me. Unfortunately, garments from GGC are also being sold on Trade Me and causing confusion. Some sellers seek to distinguish my company’s garments by using the phrase “SEDUCE (Australia)”.
[58] She then produced a whole volume of copies of advertisements from Trade
Me that was placed before the Assistant Commissioner. These were attached to a
declaration from an employee of Trade Me Limited. There were two declarations. One, annexed search results concerning the use of the word SEDUCE in relation to women’s wear prior to 2007. The other presented the view counter data for each of the search results. That latter data is difficult to interpret, as Ms Leslie explained, as it will include visits made to the site by Trade Me staff and/or the seller themselves checking on and/or maintaining their listing.
[59] Trade Me listings are designed to capture viewers looking for fashion labels without necessarily specifically looking for the SEDUCE label. So we find that in some of the Trade Me listings the garment is labelled SEDUCE but in other lists the garment may not be so labelled, and also that a search for SEDUCE may have produced a list of other labels in the listing in order to catch the viewer looking for high fashion labels such as Ralph Lauren, Laura Ashley, Versace and La Coste. What is notable is that these listings frequently include SEDUCE. These listings disclose brand awareness in New Zealand of SEDUCE. Otherwise there would be no point of introducing SEDUCE into the list. They show a presumption by the person listing the add on Trade Me that there will be people out there looking for SEDUCE garments and those persons might be interested in the particular garment for sale, even though that is not a SEDUCE garment.
[60] This evidence demonstrates a brand awareness in New Zealand of SEDUCE during the period 2003 to 2006. Commissioner Walden similarly summarised this evidence though she appears to have used the Trade Me evidence more narrowly than I have, she concluded:
[31] It appears that there are numerous listings for SGAPL’s SEDUCE branded women’s fashion clothing, which was offered for sale in New Zealand before the relevant date. It appears that this clothing was offered for sale by third parties who had purchased the clothing in Australia or from New Zealand retailers. I consider the sales by third parties on Trade Me does not constitute prior use of the SEDUCE trade mark by SGAPL as these sales could not be said to be under the control of or authorised by SGAPL. However, I consider that this Trade Me evidence deals with on sales into the New Zealand market and shows that the SGAPL’s SEDUCE branded women’s fashion clothing was circulating in the New Zealand market before the relevant date.
[61] That led to the finding by the Assistant Commissioner quoted above. 30 She then went on to deal with the abandonment. Assistant Commissioner Walden agreed that there were no direct sales in the period June 2003 to 16 January 2006. But she did not consider that abandonment could be readily inferred. She said:
In this case there is no evidence of SGAPL ever decided that no longer to use the SEDUCE trade mark and brand and had decided to use another brand name or trade mark for its women’s fashion clothing.
In my view, the evidence points to SGAPL’s retention of its SEDUCE brand and trade mark, particularly in the light of SGAPL’s trading activities in the Australian market, and on the on-sales into the New Zealand market (albeit by third parties). So SGAPL’s SEDUCE brand of women’s fashion clothing (SGAPL’s goods) before the relevant date as established by the Trade Me evidence.
[62] I would put it slightly differently. I would say that, in the light of the Trade Me marketing, it would be counter-intuitive to suggest that SGAPL would ever have decided to abandon use of the SEDUCE brand in the New Zealand market when it is plain that vendors on Trade Me were assuming that the SEDUCE brand had an appeal to the New Zealand market.
[63] For these reasons, slightly different from the Assistant Commissioner, I agree, first, that there was prior use by SGAPL before use by Mr Chettleburgh and, secondly, there was no abandonment of use prior to 16 January 2006.
[64] These findings are sufficient to justify the finding made by the Commissioner which she expressed as follows:
Accordingly, I find that SGAPL was the true owner of all the rights in the
SEDUCE trade mark at the relevant date. [16 January 2006]
Court’s discretion
[65] The discretion ground of appeal was that the Commissioner erred in finding there was no discretion under s 73 of the Act which could be exercised by declining to make the declaration of invalidity sought by Mr Chettleburgh.
[66] Mr Marriott submitted than even if SGAPL is found to have been the true owner of the SEDUCE mark in New Zealand, before Mr Chettleburgh, that this is a case where the Court ought to exercise their discretion not to declare Mr Chettleburgh’s trade mark invalid.
[67] This argument is based on the proposition that the statute reserves a discretion to declare a prior trade mark invalid where there has been an earlier first use of the mark by another, which has not been abandoned. The argument relies upon the use of the word “may” in s 73(1).31
[68] In the earlier High Court decision in this case, Woodhouse J had this to say:
[61] I nevertheless record a tentative view that s 73(1) does require the Commissioner, or the Court, to consider as a matter of discretion whether a declaration of invalidity should be made notwithstanding a relevant finding in favour of the s 73 applicant.
[62] It is relevant that grounds for invalidity that could be established under s 73 will range from those in respect of which there would be no real discretion to decline a declaration of invalidity, to those where the applicant may have established technical grounds for a declaration, but where the underlying merit favours the respondent who holds the current registration. The former will include cases where the applicant under s 73 establishes that at the relevant date there was an absolute or relative ground for not registering the mark. Under the various provisions dealing with absolute and relative grounds for not registering trade marks, the Commissioner “must not” register the mark if an absolute or relative ground exists. There would be no real scope for exercise of a discretion if an absolute or relative ground is established on a s 73 application, except to the extent that there is some specific discretion provided in ss 17 to 29.
[63] On the other hand, a case such as the present illustrates circumstances of fact which could raise questions of relative merit. The facts here, on the available evidence, indicate a relatively short period of use of the mark in New Zealand by Seduce Group, no clear evidence that the goods were put into the market to any great extent, with this followed by a reasonably substantial period of no actual use of the mark at all. Coupled with this are the Assistant Commissioner’s firm conclusions on the absolute and relative grounds for the challenge by Seduce Group. A number of Mr Marriott’s submissions on the question as to whether Seduce Australia was an aggrieved person could also apply to questions going to the exercise of a discretion under s 73. There may be other areas of enquiry relevant to exercise of a discretion, including the fact that Seduce Group did not register its mark in New Zealand some time before June 2003 and as to why it did not respond to Mr Chettleburgh’s application in January 2006 until October
2008. There will be further areas of enquiry in this broad context, but being
matters not explored or fully explored by Mr Chettleburgh for reasons I now come to.
[69] Earlier, in the decision of Friskies Ltd v Heinz Wattie Ltd32 Ronald Young J
had held that a residual discretion could exist.
[70] Mr Elliott submitted that when “may” is used in legislation, it could have two possible interpretations. First, it could afford a discretion in relation to whether or not to exercise a power or, secondly, requiring a decisionmaker to be satisfied of something before exercising a power, in effect creating a threshold test for deciding the matter.
[71] In the Court of Appeal decision of Tyler v Attorney-General33 the Court was considering s 90 of the Social Security Act 1964 which provided:
90 Community wage: grounds of hardship
(1) The chief executive may grant a community wage under section 89 to a person who meets the criteria in section 89(1), but who does not meet the other criteria in that section, if –
(a) The person is suffering hardship; and
(b) The person is not qualified to receive any other benefit; and
(c) the person is unable to earn sufficient income to support the person and his or her spouse and any dependent children.
(2) Despite section 91, the chief executive may, during the period between the end of one academic year and the start of the next, grant a community wage under section 89 to a full-time student.
[72] In his analysis of the problem, Richardson P having set out the relevant statutory provisions, said:
[25] Following the statement of purpose (s 87) and the overview of Part 2 (s 88), s 89 provides for the availability of a community wage, ie “entitlement” where all the criteria of s 89 are satisfied and where none of the disqualifications in s 91 applies. By contrast with the language of entitlement, s 90 uses the traditional language of discretion “may grant” for those no entitled and subject to its provisions. As Windeyer J said in Finance Facilities Pty Ltd v Commissioner of Taxation of the Commonwealth of Australia (1971)
32 Friskies Ltd v Heinz Wattie Ltd [2003] 2 NZLR 663.
33 Tyler v Attorney-General [2000] 1 NZLR 211.
127 CLR 106 at p 134: “While Parliament uses the English language the word ‘may’ in a statute means may ... but ... the particular context of words and circumstance [may] make it not only an empowering word but indicate circumstances in which the power is to be exercised – so that in those events the ‘may’ becomes a ‘must’.
[73] I would lay emphasis on the reference to “the particular context of words and circumstance”.
[74] All statutory duties and powers have to be exercised in good faith and for their proper purpose. A given context may mandate a course of action even though the power is expressed to be discretion, as in “may”.
[75] The only reason I can see for the difficulty of recognising a discretion in this provision is that it is very unlikely to be exercised. The common law of passing off is designed to avoid market confusion, and because that is part of the purpose of the Trade Marks Act, and because of the concept of ownership of a mark, it is difficult to grasp how the purposes of the trade marks legislation could be achieved by declining to invalidly declare a trade mark which had without justification been registered earlier.
[76] As this judgment endeavours to explain at the outset, this legislation contemplates that there can be a context between persons claiming ownership of the same mark. But it does not contemplate co-ownership of the same mark in products and services competing with each other. That, indeed, would cause confusion, anathema to the underlying purpose of protecting the property and goodwill associated with the mark.
[77] Accordingly, in my view, the correct approach to s 73(1) is that the presence of the word “may” has to be noticed but the task should be approached as one of applying s 73(1) to achieve the purpose of the legislation.
[78] That takes one to the context and merits analysis of applying s 73(1) in favour of Mr Chettleburgh, notwithstanding the finding that SGAPL had prior use of the mark in New Zealand and had not abandoned that. The argument for the exercise
of the discretion in this Court was based on the proposition that SGAPL had clearly discontinued use of the mark in New Zealand by at least 2003, only two years after it started and did not recommence use until 2006. This is an argument for abandonment, a finding made against Mr Chettleburgh by the Commissioner in the earlier part of the analysis. Then coupling the renewed contention of abandonment, it argues that there was no residual representation as a result of any prior use.
[79] The markets for goods and services demonstrate that trade marks have longevity independent of actual sales of products and services. Frissbees may go out of fashion and sales of Frissbees might be discontinued. There is nothing to stop the owner of the Frissbee mark relaunching the product some years later in the full knowledge that the brand awareness will still be there amongst the target market.
[80] Another way of attesting this essential hostility to the concept of abandonment is to examine the tort of passing off. Say “Frissbee” is a mark owned by a company which goes into liquidation. The liquidation is complex. The sales of Frissbees stop during the liquidation. The liquidator decides that the Frissbee mark is of considerable value and sells the mark to another toy manufacturer who then relaunches Frissbees back onto the market some years later. While the liquidation was in progress and prior to the sale, however, someone else, relying on the liquidation of the Frissbee company, launches a Frissbee product on the market. Why? Because the Frissbee mark carries with it goodwill facilitating sales of the product.
[81] The test of prior use carries within it a recognition, garnered from the history of the tort of passing off, that trade names and marks come to be associated in the consumer’s mind with the quality of the product. So that the name has worth whether or not at any particular time products so named are being sold. Were Mr Chettleburgh to be given an advantage of the word “may” against a finding that SGAPL ceased to use the mark between 2003 and 2006, Mr Chettleburgh would still be obtaining the benefit of the goodwill associated with the SEDUCE mark created by SGAPL. They would be getting, to that extent, a free ride on the mark utilising the goodwill created by SGAPL. That goodwill ought to remain the property of SGAPL.
[82] The Commissioner did not use this reasoning but clearly was impressed by the continuing awareness in the New Zealand market of the SEDUCE brand as a result of SGAPL’s business activity in the market. Clearly, the Commissioner identified the ongoing association in consumers of SEDUCE with SGAPL’s products. Assistant Commissioner Walden found:
[71] I consider that SGAPL’s evidence establishes that SGAPL sold its SEDUCE branded women’s fashion clothing in New Zealand during the periods: (1) 1997 to 2000; and (2) June 2001 to June 2003. Subsequently, but before the relevant date [16 January 2006], SGAPL’s goods were sold by third parties on Trade Me, which shows that there was on-going exposure of
SGAPL’s goods i n the New Zea l and mar ket . (Emphasis added.)
[83] For these reasons, which are slightly different but in my view consistent with the reasoning of the Commissioner, I have come independently to the view that s 73(1) should be applied to declare that GGCL’s trade mark, registration number
741487 SEDUCE is invalid and direct that under s 74 of the Act, the registration is to be treated as if it had not been registered and the Trade Mark Register is to be altered accordingly. In short, this appeal is dismissed.
[84] After this judgment was drafted, Mr Elliott QC drew to my attention the decision of the Court of Appeal, North Face Apparel Corporation v Sanyang Industry Company Ltd..34 I have read that decision. It did not have to address the submission I received from Mr Elliott that I should be suspicious of the conduct of Mr Chettleburgh. Otherwise I read it as applying the same test of prior use I have identified from the case law. It seems to me that my reasoning is consistent with this
latest decision. I have not integrated it into the reasoning, as I think it is useful for my reasoning to be read as a resolution of the arguments made before me.
Result
[85] This appeal is dismissed.
34 North Face Apparel Corporation v Sanyang Industry Company Ltd [2014] NZCA 398.
Costs
[86] The respondent is entitled to costs. If the parties cannot agree costs, I will receive submissions limited to five pages, exchanged in advance.
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