PLANET FITNESS LIMITED / AND PFIP INTERNATIONAL, LLC /Cross-

[2024] NZHC 2745

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2024-485-000213

[2024] NZHC 2745

UNDER

the Trade Marks Act 2002

IN THE MATTER

of an appeal against a decision of the

Intellectual Property Office of New Zealand dated 12 March 2024, [2024] NZIPOTM 10

BETWEEN

PLANET FITNESS LIMITED

Appellant/Respondent

AND

PFIP INTERNATIONAL, LLC

Respondent/Cross-Appellant

Hearing:	31 July 2024; further submissions 23 August 2024
Counsel:	G F Arthur KC and L J Cassidy for Appellant/Respondent C L Elliott KC and J T Kohu-Morris for Respondent/Cross- Appellant
Judgment:	25 September 2024

JUDGMENT OF LA HOOD J

Table of Contents

Appeal against a decision upholding opposition to a trade mark registration[1]

The Commissioner’s decision[5]

Approach on appeal[10]

The appeal[12]
Overview of the parties’ positions[12]

The issues[14]

What is the test for likely to deceive or cause confusion under s 17(1)(a) of the
Act?[15]

Was there a sufficient level of awareness in this case?[38]
Risk of deception or confusion[50]

Conclusion[55]

The cross-appeal  [56]

Overview of the parties’ positions[56]

PLANET FITNESS LTD v PFIP INTERNATIONAL, LLC [2024] NZHC 2745 [25 September 2024]

The issues[58]

The onus or burden of proof[59]
The test for bad faith[67]
Is bad faith established in this case?[76]

Conclusion[92]

Costs[93]

Appeal against a decision upholding opposition to a trade mark registration

[1]                 On 24 July 2019, a New Zealand company, Planet Fitness Ltd (the appellant), applied to register the trade mark “PLANET FITNESS” (a word mark) which was not yet registered in New Zealand. On 2  December  2019,  PFIP International,  LLC (the respondent) filed a notice of opposition.

[2]                 In a decision dated  12  March  2024,  the  Assistant  Commissioner  of  Trade Marks (the Commissioner) upheld the respondent’s first ground of opposition, and accordingly directed that the trade mark application not proceed to registration. The appellant appeals against the Commissioner’s decision to uphold the opposition on the basis that the use of the mark would be likely to deceive or cause confusion in breach of s 17(1)(a) of the Trade Marks Act 2002 (the Act).1 The respondent cross- appeals the Commissioner’s finding that the trade mark application by the appellant was not made in bad faith under s 17(2) of the Act.

[3]In summary, I dismiss the appeal for the following reasons:

(a)The test for likely to deceive or cause confusion under s 17(1)(a) does not contain a rigid requirement that there be awareness of the mark among a substantial number of people within the industry. A “not insignificant”  level  of  awareness  will  be  “sufficient  to  engage”    s 17(1)(a).2

(b)The evidence as a whole establishes sufficient awareness of the respondent’s mark in New Zealand to engage s 17(1)(a). The evidence includes that of New Zealand-based visits to the respondent’s website and YouTube channel, the respondent’s extensive sponsorship and

1      Planet Fitness Ltd v PFIP International [2014] NZIPOTM 10 [Decision under appeal].

2      Sexwax Inc v Zoggs International Ltd [2014] NZCA 311, [2015] 2 NZLR 1 [Sexwax].

promotion on the internet,  the  respondent’s  reputation  in  the United States, the number of New Zealanders who travel to the United States annually, and New Zealand witnesses with awareness of the respondent.

(c)In light of that evidence, the appellant has not established that there is no reasonable likelihood that use of the mark would cause deception or confusion.

[4]In summary, I allow the cross-appeal for the following reasons:

(a)Bad faith is a serious allegation, requiring clear evidence and careful analysis. Objective circumstances may allow bad faith to be established by inference. Where objective circumstances give rise to a prima facie case of bad faith, the presumption of good faith is displaced and the evidential burden shifts to the party applying for the mark.

(b)An approach should be taken to bad faith that accords with the purpose of the trade mark registration system. It will be an abuse of the system, and therefore bad faith, to intentionally target and impede the interests of third parties or to pursue aims unrelated to protecting marks intended to be used to communicate origin in the marketplace.

(c)I am satisfied that the application was made in bad faith. There is clear and cogent evidence of objective circumstances which, taken together, establish a prima facie case of bad faith. In the absence of evidence about how the appellant intends to use the mark, it can be inferred that the purpose of the application was to attempt to prevent the possible expansion of a competitor into New Zealand rather than to use the mark.

The Commissioner’s decision

[5]                 The respondent is a wholly owned subsidiary of Planet Fitness, Inc and an international  gym  operator,  principally  located  in  the  northern  hemisphere.  Its

opposition under s 17(1)(a) of the Act was premised on its use of PLANET FITNESS internationally in connection with fitness clubs and gyms.

[6]Section 17 of the Act provides:

17       Absolute grounds for not registering trade mark: general

(1)The Commissioner must not register as a trade mark or part of a trade mark any matter—

(a)the use of which would be likely to deceive or cause confusion; or

...

(2)The Commissioner must not register a trade mark if the application is made in bad faith.

[7]                 On 12 March 2024, the Commissioner issued her decision upholding the respondent’s s 17(1)(a) ground of opposition. The Commissioner found the respondent’s evidence clearly established that its PLANET FITNESS mark is known in the market for gym services in the United States and went on to consider the evidence of its social media and online presence to ascertain whether it established reputation (actual awareness) of the mark in New Zealand. The Commissioner held that the only evidence sufficient in magnitude to meet the threshold reputational requirement  for  establishing  awareness  of  the  PLANET  FITNESS  mark   in New Zealand under s 17(1)(a) was the data analysing New Zealand visitors to its website, which the Commissioner held was “not insignificant”.3 The Commissioner found that as the appellant’s mark is identical to the respondent’s mark and the goods and services of the respective marks are at least very similar, there could be no doubt that New Zealanders who are aware of the PLANET FITNESS mark would be confused or deceived in the sense of being likely to wonder whether there was some relation between the gym services marketed under the opposed mark and the respondent’s gym franchise.4 Thus, the respondent’s opposition under s 17(1)(a) succeeded.

3      Decision under appeal, above n 1, at [72] and [83]–[84].

4      At [86]–[87].

[8]                 The Commissioner proceeded to reject the respondent’s s 17(2) ground of opposition.5 The Commissioner found that the respondent failed to establish bad faith, noting that the fact that the appellant’s director, Mr Patchell-Evans, had considered becoming involved in the respondent’s business in 2007 did not suggest bad faith in applying for a mark in New Zealand in 2019.6

[9]                 As the respondent succeeded on its s 17(1)(a) ground of opposition, the Commissioner directed that the trade mark application not proceed to registration.7

Approach on appeal

[10]              The appellate approach articulated by the Supreme Court in Austin, Nichols & Co Inc v Stichting Lodestar applies.8 The appellate court must be persuaded that the decision under appeal is wrong,9 but must make its own assessment on the merits of the appeal.10 It is a matter for the appellate court to decide how much weight it places on the first instance decision,11 including whether deference is required due to any advantages the decision-maker had, such as hearing oral evidence,12 or subject matter expertise.13

[11]              In Crocodile International Pte Ltd v Lacoste,14 the Supreme Court noted that in appeals against decisions of the Commissioner, where the issues involve a comparison of trade marks, “given the wide range of trade mark decisions that Commissioners are called upon to make, they may be expected to have a broader and more nuanced appreciation of the trade mark Register than judges … this may mean that … the appellate court should hesitate to depart from the Commissioner’s qualitative assessment”. Although this case does not involve a comparison of trade marks, the weight to be given to the Commissioner’s decision is a matter for my

5      The Commissioner  also  rejected  the  respondent’s  grounds  of  opposition  under  s  17(1)(b), s 25(1)(c) and s 32(1) but these findings are not challenged on appeal.

6      At [98]–[100].

7      At [114]–[115].

8      Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 [Austin, Nichols].

9      At [5] and [13].

10     At [3] and [5].

11     At [3] and [5].

12     At [5] and [13].

13 At [5].

14     Crocodile International Pte Ltd v Lacoste [2017] NZSC 14, [2017] 1 NZLR 679 at [65]–[66].

assessment when forming my own view on the merits of the appeal. I note that the Commissioner heard no oral evidence that might require caution when departing from her findings, but clearly has subject matter expertise that may require the exercise of some caution.

The appeal

Overview of the parties’ positions

[12]              The appellant appeals on the grounds that there is no evidence that the respondent has a reputation in the trade mark PLANET FITNESS among a substantial number of gym-users and potential gym-users in New Zealand, or New Zealand consumers generally, and therefore has not established the first element required in   s 17(1)(a). Further, it is not likely that a substantial number of the entire New Zealand purchasing public would be deceived or confused into believing that there is a connection between the respondent’s Planet Fitness gyms and PLANET FITNESS clothing, footwear and headgear.

[13]              The respondent’s position is that the Commissioner reached the right conclusion on the first ground of opposition as the evidence shows a substantial number of New Zealanders in the relevant market were aware of PLANET FITNESS, and registration of the mark would be likely to cause deception or confusion in the New Zealand gym market and, by necessary association, clothing.

The issues

[14]The appeal raises the following issues:

(a)What is the test for likely to deceive or cause confusion under s 17(1)(a) of the Act?

(b)Was a sufficient level of awareness established to engage s 17(1)(a)?

(c)Given that level of awareness, can the appellant prove that its use of the mark would not be likely to deceive or cause confusion?

What is the test for likely to deceive or cause confusion under s 17(1)(a) of the Act?

[15]              The relevant principles are articulated in the three leading Court of Appeal decisions of Pioneer Hi-Bred Corn Company v Hy-Line Chicks Pty Ltd  (Pioneer),  N V Sumatra Tobacco Trading Company v British American Tobacco (Brands) Inc (Sumatra) and Sexwax Inc v Zoggs International Ltd (Sexwax).15 I have found Sexwax the most helpful because it is the most recent decision and extensively discusses Pioneer, which had been the leading case for more than three decades.16

[16]              I consider the Court’s approach in Sexwax emphasises that the statutory language should be the starting point, rather than judicial glosses on that language. Although the principles set out in the leading cases are important, it is also important to distinguish between general principles intended to guide the application of the      s 17(1)(a) test and binding statements about the content of the test. In this regard, the Court in Sexwax cautioned against overemphasis on the terminology used in the authorities:17

[49] Next, the Commissioner assesses the likelihood of deception and confusion. This is a fact-specific inquiry. It is a matter of assessing “practical business probabilities”, having regard to all the surrounding circumstances and the degree of similarity of the marks. Judicial decisions have established a materiality threshold for confusion or deception, requiring the applicant to prove that registration will not cause deception or confusion amongst a “substantial number of persons”. As courts in subsequent cases have noted, however, the terminology used in the judgments varies with the setting, and is ultimately a question of significance of the numbers in relation to the awareness of the marks in question.

(footnotes omitted)

15   Pioneer Hi-Bred Corn Company v Hy-Line Chicks Pty Ltd [1978] 2 NZLR 50 (CA) [Pioneer];    N V Sumatra Tobacco Trading Company v British American Tobacco (Brands) Inc [2010] NZCA 24, (2010) 86 IPR 206 [Sumatra]; and Sexwax, above n 2.

16 The Court in Sexwax, above n 2, also referred briefly to the Sumatra decision at [57].

17 Sexwax, above n 2.

[17]              In discussing the applicable principles established by Pioneer and the cases that followed, the Court in Sexwax noted:

(a)Section 17(1)(a) is a public interest provision designed to protect members of the general buying public in New Zealand as opposed to the commercial interests of competitors.18

(b)The comments in Pioneer that in determining whether a likelihood of deception or confusion exists all the surrounding circumstances have to be taken into account, including the circumstances in which the mark may be used, the market for the goods, and the character of those involved in the market.19

(c)The similarity of the mark with another trade mark in overseas countries is only relevant to the extent it bears on the likelihood of deception or confusion in New Zealand.20

(d)The people whose states of mind are material are the prospective or potential purchasers of goods or services of the kind to which the applicant may apply the mark and others involved in the purchase transactions.21

(e)It is not a requirement that all persons in the market are likely to be deceived or confused but equally it is insufficient that one person is likely to be deceived or confused. A balance must be struck and terms such as “a number of persons”, “a substantial number of persons”, “any considerable section of the public” and “any significant number of such purchasers” have been used.22

18 At [27].

19     At [29]; and Pioneer, above n 15, at [5].

20     At [29]; and Pioneer, above n 15, at [6].

21     At [29]; and Pioneer, above n 15, at [7].

22     At [29]; and Pioneer, above n 15, at [9].

[18]In relation to the last point the Court said:

[30]     … the varying expressions emphasise it is not always necessary that  a large number of people are likely to be deceived or confused. The requirement that a “substantial number” of individuals be at risk of deception or confusion is a judicial gloss, establishing that the s 17 threshold involves the exercise of judgment having regard to the commercial setting, comprising those who will be exposed to the applicant’s mark and those who know of the reputation the opponent’s goods enjoy.

(footnote omitted)

[19]              The Court noted that the inquiry begins with whether the mark has a reputation in New Zealand at the date of the relevant application.23 Such reputation need not be widespread as “it all depends on the nature of the marks and the goods to which it is applied”.24 Where the marks are used in respect of goods with only a very narrow or specialised use or purpose, the mark may be known only to a small number of people. Pioneer is a good example of this as it involved the sale of hatching eggs and breeding poultry to the poultry breeding industry, which meant it was only those in the industry who were aware of its existence and it was only amongst that class of persons that the reputation or awareness needed to be established.25

[20]              As already noted, the Court said the terminology used in the judgments as to the likelihood of deception and confusion varies,26 and it is ultimately a question of the significance of the numbers in relation to the awareness of the marks in question.

[21]              The Court went on to discuss a number of cases that illustrate the relationship between awareness/reputation and the concept of “substantial number of persons” who may be at risk of deception or confusion and concluded:

[54] These authorities demonstrate that the risk of confusion is properly measured by reference to those who may be exposed to the applicant’s goods and are aware of the opponent’s mark. Absent exposure to goods bearing the applicant’s mark, there will be no risk of confusion.

[22]              The Court noted that the courts have reached for the concept of the “market” to assist when inquiring whether a substantial number of persons are likely to be

23 At [48].

24 At [48].

25 At [48].

26 At [49].

confused but warned against the limited utility of the notion of the “market” despite it being employed in many cases.27 The Court said:

[57]  Notwithstanding the limited utility of  the notion of the “market”, it  has still been employed in many subsequent cases in New Zealand. It may be a convenient analytical tool through which to assess reputation and measure the risk of deception. However, the legislation does not refer to or insist upon a market definition and the exercise is not always required. It is most likely to assist where the goods of the applicant and the opponent are identical or close substitutes, so as to clearly fall into the same product markets. In other situations, a market reference may not be necessary.

(footnote omitted)

And concluded:

[65] The correct focus is on the awareness of the opponent’s mark in  relation to prospective purchasers of the goods to which its mark attaches and individuals and entities involved in that trade; not the entirety of the purchasing public of New Zealand. The question of likelihood of deception or confusion must then be assessed against that reputation, considering the fair, notional use of the goods bearing each of the marks. We now turn to that question of reputation in this case.

[23]              The Court emphasised the importance of not conflating the test for establishing a reputation or awareness “in an industry or in New Zealand” with the test for establishing whether a substantial number of persons are likely to be deceived or confused:28

[70] Further, we emphasise it is important not to conflate the test for establishing a reputation or awareness in an industry or in New Zealand, with the test for establishing that a substantial number of those persons are likely to be deceived or confused. Each of these aspects requires separate consideration. Assessment of reputation and awareness will occur first, taking into account the circumstances of trade of the opponent as a basis for comparison of the two marks, which must be regarded as notionally in use.

(footnotes omitted)

[24]              In dealing with the type of evidence required to establish reputation or awareness, the Court said:

[72] Zoggs’ focus on the empirical evidence as to viewing numbers, the reach of various movies and circulation or saturation of advertising of the particular product is misplaced. This Court in Pioneer Hi-Bred emphasised

27     At [57], including Sumatra, above n 15.

28 At [70].

“awareness” and “cognisance” are used in a broader sense. There, it was sufficient for this Court that a number of poultry keepers, and a grain and seed merchant knew of the opponent’s business at the date of application, and inferences could be drawn from analysis of the general standing of the opponent in international commerce  and  advertisements  circulated  in  New Zealand industry publications. There is no necessary requirement that there be extensive advertising in New Zealand, targeted to the New Zealand market. We noted earlier, at [50]–[52], other cases in which tangible risk of confusion was sufficient, absent empirical or actual evidence of confusion.

[25]              In conclusion on the issue of whether awareness or reputation had been established in that case, the Court said:

[77] We conclude that Sexwax has established a reputation for the MR ZOGS SEX WAX mark in New Zealand. When the Judge said that “none of this justifies a conclusion that the 2009 general buying public of New Zealand would have awareness of the logo”, he was answering the wrong question. There was no necessity for him to determine that the reputation of the MR ZOGS SEX  WAX  mark  existed  among  a  substantial  number  of  the New Zealand buying public. Rather, the question was whether, having regard to the reputation attaching to Sexwax’s mark, and in light of the potential products bearing the ZOGGS mark being advertised and sold in the classes for which it applied, there is a sufficient number of individuals aware of the opponent (Sexwax’s) mark, and exposed to the applicant’s (Zogg’s) mark, to engage s 17(1)(a). We are satisfied there is.

[26]              I heard argument and received supplementary submissions about whether these statements of principle, particularly those at [70] and [77], require:

(a)a reputation or awareness among a substantial number of people in an industry (the appellant’s position);29 or

(b)whether the reputation or awareness within the industry must simply be sufficient to trigger s 17(1)(a) and need not reach the level where a substantial number of people within the industry are aware of the mark (the respondent’s position).

[27]              The respondent submits that the concept of a substantial number of people applies only to the number of people who are likely to be deceived or confused from within the group of people already aware of the mark. Further, there is no requirement that a substantial number of people within the industry be aware of the mark – just a

29     I have used the word industry as opposed to market in accordance with Sexwax, above n 2, at [70].

sufficient number to trigger s 17(1)(a), following which there must be a substantial number of those aware of the mark who are likely to be deceived or confused.

[28]              The appellant submits that its position, that there must be awareness among a substantial number of people in the industry, is supported by the High Court and Court of Appeal decisions in Pioneer and the Court of Appeal decision in Sumatra. The appellant relies on Cooke J’s statements in the High Court in Pioneer “that at the date of the application the opponent’s mark was known to a substantial number of persons in or associated with the poultry industry in New Zealand” and “if it could only be inferred that a handful of persons in the industry were familiar with the opponent’s mark before 1963, the evidence of reputation might well be insufficient”.30 The appellant also submits that in Pioneer all three judges in the Court of Appeal required a reputation or awareness among either a substantial31 or sufficient32 number of prospective or potential purchasers of the goods.

[29]              The appellant also relies on a passage in Sumatra where the Court said that “the opponent will first have to identify the relevant market, then point to evidence showing that a substantial number of persons in that market have awareness, cognisance or knowledge of its mark”.33 However, there is no discussion of this precise issue in that case. The distinction drawn in that case was between the concepts of substantial reputation and mere knowledge or awareness. The High Court was overturned on the basis that it had required a substantial reputation rather than simply knowledge or awareness.

[30]              It seems to me the Court’s approach in Sexwax does not favour the adoption of strict rules when interpreting and applying the statutory language in s 17(1)(a). The likelihood of deception and confusion is fact-specific and is a matter of assessing the practical probabilities having regard to all the surrounding circumstances and the degree of the similarity between the marks.34 There is a materiality threshold but no rule that a substantial number of persons either within the industry or generally are

30     Pioneer Hi-Bred Corn Company v Hy-Line Chicks Pty Ltd [1975] 2 NZLR 422 (SC) at 432.

31     Pioneer, above n 15, per Richmond P at 53–54 and Richardson J at 74–75.

32     Woodhouse J at 57.

33     Sumatra, above n 15, at [77].

34     Sexwax, above n 2, at [49].

required to have awareness of the mark. Rather, the question is whether having regard to all relevant factors, “the use” of the mark “would be likely to deceive or cause confusion”.35

[31]              I accept Mr Arthur KC’s submission that if the test is that a substantial number of people within the industry are likely to be deceived or confused, it must follow that a substantial number of people within the industry must have awareness of the mark (otherwise they could not be deceived or confused). But I do not accept that is the test. I accept Mr Elliott KC’s submission that when the Court in Sexwax talked about a substantial number of people being deceived or confused, the focus is on deception or confusion of the group of people that are aware of the mark rather than the group of people who are involved in the industry. As already noted, the Court said that:36

[65] The correct focus is on the awareness of the opponent’s mark in  relation to prospective purchasers of the goods to which its mark attaches … The question of likelihood of deception or confusion must then be assessed against that reputation, …

(Emphasis added)

Then goes on to say:

[70] … we emphasise it is important not to conflate the test for establishing a reputation or awareness in an industry or in New Zealand, with the test for establishing that a substantial number of those persons are likely to be deceived or confused …

(Emphasis added)

[32]              The Court concluded that the question is whether there is a “sufficient number of individuals” aware of the mark “to engage s 17(1)(a)”.37 These statements, considered against the Court’s earlier comments about the fact-specific nature of the inquiry having regard to all the surrounding circumstances and the degree of similarity of the marks, does not support a rigid rule that there must be a substantial number of people within the industry who are likely to be deceived or confused.

35     Section 17(1)(a).

36     Sexwax, above n 2.

37 At [77].

[33]              This approach is consistent with the approach the experienced Commissioner took in this case.38 She noted:

52. It has been accepted by the courts that the threshold for market awareness is a relatively low one, and that all an opponent need demonstrate is “awareness, cognisance or knowledge” of the mark.

[34]              The Commissioner then noted that the respondent did not seek to establish it had used the PLANET FITNESS mark in New Zealand, but rather relied upon its strong global reputation to establish awareness of its mark here.39

[35]              The Commissioner did not place much, if any, weight on other evidence relating to the respondent’s widespread promotion of its Planet Fitness brand.40 But she did consider that the number of New Zealand visitors  to  the  respondent’s  Planet Fitness website for the 18-month period prior to the application date “while not overwhelming, cannot be dismissed as negligible”, and that “the numbers at around the relevant date are not insignificant in the New Zealand context”.41

[36]              The Commissioner’s language in these passages is consistent with my interpretation of the approach taken in Sexwax. The proposition that the level of awareness must be “not insignificant” accords with it being “sufficient to engage”     s 17(1)(a) and not with a rigid requirement that there be awareness among a substantial number of people within the industry. A not insignificant awareness within the industry will be sufficient to engage s 17(1)(a). I do not see any conflict between this approach and Cooke J’s statement in Pioneer that establishing awareness among a handful of people in the industry will not suffice. A handful of people would be insignificant.

[37]              However, even if I were to accept Mr Arthur’s argument that there is a requirement for a substantial number of people within the industry to be aware of the mark, I do not accept that the Commissioner’s finding of a “not insignificant” number would necessarily fall short of that threshold. The terms “substantial” and “not

38     Decision under appeal, above n 1.

39 At [53].

40     At [59]–[75]; Such as sponsorship of events or advertising within the United States, promotion on the internet and social media, and in magazines available in New Zealand.

41     At [68] and [72].

insignificant” are not incompatible. For example, in the context of the law of causation a substantial and operative cause has been equated with a “not insignificant” cause.42

Was there a sufficient level of awareness in this case?

[38]              I agree with the respondent that the appellant’s granular and empirical approach to the evidence is inconsistent with the approach articulated in Sexwax. I consider that the evidence as a whole establishes sufficient awareness to engage       s 17(1)(a).

[39]              I do not accept Mr Arthur’s criticism of the Commissioner’s reliance on the evidence of the website visits. I accept that Mr Vartanian, the respondent’s general counsel, made some errors in his statement when interpreting the Google Analytics report regarding visits to the respondent’s website. But I consider the errors were immaterial.43 I consider the report largely speaks for itself and did not require expert evidence for the Commissioner to draw the following inferences about what the data means:

71.At  the  hearing  and  in  written  submissions,  Mr  Arthur  criticised Mr Vartanian’s understanding of the analytics data as expressed in his evidence. Mr Vartanian refers to a certain number of “unique visitors” to the website, whereas the actual analytics data refers to both “users” and “new users”. While I agree with Mr Arthur that Mr Vartanian’s evidence could have been more clearly expressed, I consider it clear from the analytics data that “users” represents individuals who have accessed the website and “new users” are first time visitors to the website. These are distinguishable from the total number of visits to the site or (in the words of the analytics report) total “sessions”. Consistently with this, the total number of sessions reflected in the data is higher than the number of users who have visited the website.

[40]              There has been no application by the respondent to adduce further evidence on appeal, expert or otherwise, to suggest that these inferences were incorrect. Accordingly, the uncontested evidence is that there have been more than 10,000 (even taking the lower figure for “new users”) unique (as opposed to repeat) visits to the respondent’s website from New Zealand between January 2015 and July 2019 and

42 For example, the requirement that a defendant’s actions be a substantial and operative cause of death in cases of culpable homicide has been held to mean a “not insignificant” cause: Perry v R [2018] NZCA 595 at [56]–[63]; and R v Tomars [1978] 2 NZLR 505 at 510 (CA).

43 Decision under appeal, above n 1, at [71].

more than 4,500 such unique visits in the 18-month period prior to the application in July 2019.

[41]              Mr Arthur submits that  many  of  these  visits  could  have  been  from  North American visitors to New Zealand looking for a gym while in New Zealand. Beside the fact this appears to contradict Mr Arthur’s submission that most people visiting a country are likely to use a hotel gym, it is inherently implausible to suggest that this volume of website visits can be explained by North American visitors looking to access a gym while holidaying in New Zealand.

[42]              I do not accept Mr Arthur’s submission that the average session duration (less than one and a half minutes) and average pages viewed (one to two) means the visitors may not have gained awareness of the mark. The website’s first page prominently promotes the brand, using the name PLANET FITNESS or PLANET nine times. I consider the Commissioner was correct to find that the website visits are “sufficient in magnitude” to meet the awareness threshold in s 17(1)(a).44

[43]              I share the Commissioner’s concerns about the inferences that the respondent says can be drawn from the social media evidence (Facebook, Twitter and Instagram). But I do not have quite the same level of concern in respect of the evidence of awareness through New Zealanders accessing the respondent’s Planet Fitness YouTube channel, or through magazines available in New Zealand,  or  through  New Zealanders travelling to the United States.

[44]              Turning first to the social media evidence. I agree with the Commissioner that little weight can be placed on Mr Vartanian’s attempt to draw conclusions about likely awareness through social media platforms based on the proportion of New Zealanders accessing the website and YouTube channel. I also accept Mr Arthur’s submission that the most that could be said is that if the level of traffic on the social media platforms matches that of the website, it would be in the range of 0.005 per cent of the total traffic, which provides user numbers in the hundreds rather than in the thousands.

44 At [70].

[45]              The evidence is that the respondent’s Planet Fitness brand is one of the largest, fastest-growing and most recognised gym brands in North America. Mr Vartanian also provided evidence of Planet Fitness’s extensive sponsorship and advertising in  North America, extensive brand promotion over social media and the internet generally, and its recognition in North American media as a leading franchise. There is evidence that a large number of New Zealanders travel to the United States on an annual basis (a total of 299,447 in 2019). In these circumstances, I consider a reasonable inference can be drawn that a proportion of those travellers will have become aware of the Planet Fitness brand.

[46]              I accept there are limitations on the YouTube evidence, but do not consider it to be irrelevant. The analytics report produced establishes that there were 17,743 views from New Zealand (with an average duration of 32 seconds) on the respondent’s Planet Fitness YouTube channel between 2011 and July 2019 (the report gives no information about whether these were repeat views). Although, as the Commissioner noted,45 most of the views occurred early in that period and dropped significantly after 2015, I consider this is evidence of a “not insignificant” number of New Zealanders watching videos on the respondent’s Planet Fitness YouTube channel.

[47]              Mr Vartanian provided evidence of Planet Fitness being frequently referred to in the North American editions of Men’s Health and Women’s Health magazines. There are aspects of the evidence that are unsatisfactory, but it is uncontested that these magazines are available to purchase in New Zealand. In relation to Men’s Health, it appears both the North American and Australian versions are available for purchase in New Zealand over the internet, but it is not clear from the evidence which version is available  at  New  Zealand  retail  outlets.   The  example   articles  provided  by   Mr Vartanian only relate to the North  American  edition.  The  evidence  from  a Roy Morgan readership survey is that Women’s Health had a New Zealand readership of 26,000 in 2018. There is also some evidence from third party  websites that  Men’s Health is likely to have the same or greater circulation. Given the deficiencies in the evidence, I think the most that can be said is that there are likely to be some

45 At [66].

New Zealanders who have had some exposure to the respondent’s mark through these magazines.

[48]              There is evidence from six New Zealand gym goers and one gym working professional that they are aware of Planet Fitness as a large North American gym brand through either viewing online fitness content (including videos), or through travel to the United States. I agree with the Commissioner that these witnesses cannot be considered the typical purchaser of gym services in New Zealand, but I also consider that this evidence cannot be dismissed as irrelevant. I tend to agree with the Commissioner that “the most that can be said is that they are individuals living in New Zealand who are aware of the PLANET FITNESS brand for gyms”.46 However, the evidence cannot be assessed in isolation. It provides examples of New Zealanders who have obtained awareness of the brand through online content  or  travel  to North America. I consider this evidence, in combination with the evidence of the website and YouTube Channel visits, the availability of online and magazine content, and the potential for exposure through travel to North America, meets the Sexwax threshold of “sufficient” evidence of reputation or awareness to engage s 17(1)(a).

[49]              I accept that the evidence could have been better,47 but the Court must consider the evidence actually adduced and cannot speculate about whether other evidence may have been available. A granular and empirical approach to the evidence is inconsistent with the approach articulated in Sexwax.

Risk of deception or confusion

[50]              Applying Sexwax, I consider that the evidence in this case, having regard to the practical business probabilities, all the surrounding circumstances and the degree of similarity of the marks, means the appellant has not established that there is no reasonable likelihood that the mark would cause deception or confusion.

46 At [80].

47     For example, Mr Arthur submits that a survey should have been conducted (Mr Elliott submits it is most uncommon to conduct a survey in these circumstances), expert evidence should have been called to explain the website and YouTube data, and the inference should be drawn that the evidence from the individuals has been “cherry-picked”.

[51]              The appellant did not seriously challenge the likelihood of deception or confusion for gym services should I find that there was sufficient awareness of the mark to engage s 17(1)(a). This was a responsible position to take given the identical nature of the mark and services. As the Commissioner noted, no detailed analysis is required to find that the appellant has failed to establish on the balance of probabilities that there would be no risk of deception or confusion for those aware of the respondent’s mark.48

[52]              However, the appellant says there would be no risk of deception or confusion in respect of clothing, footwear and headgear. It submits such items are not similar to gym services, they are not limited to gym items, and as the market for such items is the entire purchasing public of New Zealand, there cannot be a risk that a substantial number of people in that market will be deceived when only a small proportion of them are aware of the brand.

[53]This is the type of analysis the Court in Sexwax firmly rejected:49

[58] ... In seeking to register the mark in a number of classes, applicants  may wrongly require the opponent to establish a reputation in every one of those classes – to demonstrate a reputation in the requisite “market”. Further, the opponent could then be required to show a risk of deception amongst a substantial number of persons in that market. In both cases the threshold is likely to be high. This would allow the applicant, by choosing the nature and number of items within the class, to dictate the market definition, necessarily excluding or swamping the opponent’s goods and leading to registration of a mark that may confuse a substantial number of those familiar with the opponent’s goods. This is an incorrect application of s 17(1)(a) and would frustrate the public protection impetus behind it.

…

[60] Axiomatically the risk of confusion may be higher where the goods of the applicant and the opponent are the same or similar. But s 17(1)(a) is not confined to such cases. It is concerned with public confusion resulting from use of the applicant’s mark, regardless of whether the goods are the same, similar, or entirely different.

…

[65] The correct focus is on the awareness of the opponent’s mark in  relation to prospective purchasers of the goods to which its mark attaches and individuals and entities involved in that trade; not the entirety of the

48 Decision under appeal, above n 1, at [86].

49     Sexwax, above n 2.

purchasing public of New Zealand. The question of likelihood of deception or confusion must then be assessed against that reputation, considering the fair, notional use of the goods bearing each of the marks. We now turn to that question of reputation in this case.

[54]              Therefore, the question is the likelihood of deception or confusion among those aware of the mark regardless of whether the goods or services are the same, similar or entirely different. The question is whether people who are aware of the respondent’s mark would have cause to wonder, when seeing the appellant’s use of the mark on clothing, footwear or headgear, “whether there was a trade connection between the two”.50 Given this threshold and the identical nature of the mark, the appellant cannot establish there is no reasonable likelihood that the use of the mark for clothing, footwear, and headgear would cause deception or confusion.

Conclusion

[55]              Accordingly, I agree with the Commissioner’s decision upholding the respondent’s opposition to the registration of the trade mark PLANET FITNESS on the grounds of s 17(1)(a). The appeal is dismissed.

The cross-appeal

Overview of the parties’ positions

[56]              The respondent51 contends that the application of the trade mark was made in bad faith because the purpose of the application was to hinder the entry of a competitor to the New Zealand market rather than to use the mark. The respondent submits the Commissioner erred in failing to uphold its opposition based on bad faith.

[57]              The appellant submits that there is no evidence that it had anything other than honest intentions when it applied for registration, noting the respondent did not seek to cross-examine Mr Patchell-Evans. Mr Patchell-Evans did not know of any intention of the respondent’s Planet Fitness brand entering New Zealand or Australia. There was no prospective economic relationship, and there has been no

50 At [52].

51     I continue to refer to PFIP International, LLC as the respondent (notwithstanding that it is properly the appellant in terms of the cross appeal) for ease of reference.

communication between the parties since 2007. The fact the appellant knew about the respondent’s use of PLANET FITNESS in the United States does not mean that this application was in bad faith.

The issues

[58]The following issues are raised by the cross-appeal:

(a)Who bears the onus of proving allegations of bad faith?

(b)What is the test for establishing bad faith?

(c)Was bad faith established in the circumstances?

The onus or burden of proof

[59]The parties disagree about who bears the onus of proving bad faith.

[60]              I accept the respondent’s submission that although the language of s 17(2) is not clear about where the onus lies, the primary legal onus (as with other grounds of registrability) is on the applicant to establish its application does not offend against the requirements for registrability.52 However, this starting position does not preclude a shift in the onus in respect of allegations of bad faith.

[61]              The appellant submits that the New Zealand authorities require bad faith to be “distinctly proved”. Mr Arthur relies on Bickford’s Australia Pty Ltd v Hansen Beverage Company,53 where the Assistant Commissioner held the opponent has the onus of establishing that the applicant’s trade mark application is made in bad faith. This Commissioner relied on the English decision of Royal Enfield Trade Marks,54 where an allegation of bad faith was described as a serious allegation and it was said:55

It should not be made unless it can be fully and properly pleaded and should not be upheld unless it is distinctly proved and this will rarely be possible by a process of inference.

52     Pioneer, above n 15, at 61.

53     Bickford’s Australia Pty Ltd v Hansen Beverage Company [2008] NZIPOTM 13 at [30].

54     Royal Enfield Trade Marks [2002] RPC 24 508 at 516.

55 At [31].

[62]              Associate Professor Batty has recently published an article entitled Bad Faith: A Section Whose Time has Come?,56 in which he notes Royal Enfield was clarified in a subsequent case:57

Later in BRUTT Trade Marks the Appointed Person clarified that it could be necessary and proper to rely on inference. An inference was described as being a logical deduction from known facts, distinguished from mere conjecture or a guess. Yet, it was also said it was “not enough to prove facts which are also consistent with good faith”. A presumption of good faith applied. Thus, unless the presumption of good faith was displaced by cogent evidence, an allegation of bad faith would fail.

(footnotes omitted)

[63]             In Zoggs International Ltd v Sexwax Inc Simon France J observed that bad faith is a “serious allegation, requiring clear evidence and careful analysis. Ultimately, the standard of proof is the balance of probabilities but I consider there remains value in the words of Mr Thorley QC, the Appointed Person, in Royal Enfield Trade Marks

…”.58 The Judge then quoted the passage from that case set out above at [61].

[64]              More recently, the Court of Appeal of England and Wales in Lidl Great Britain Ltd v Tesco Stores Ltd confirmed a party is presumed to have acted in good faith unless the contrary is proved, but where the objective circumstances give rise to a prima facie case of bad faith, the evidential burden shifts to the applicant to “explain its intentions at the time of making the application”.59 In Lidl the objective circumstances (including admissions) and inferences from those circumstances were held to give rise to a prima facie case of bad faith.

[65]              There is a tension in the authorities between the principle that the primary legal onus lies with the applicant to establish its application does not offend against the requirements for registration, and statements that an allegation of bad faith must be distinctly proved (including the statement by Simon France J in Zoggs that the standard of proof is the balance of probabilities). I have no difficulty accepting that an allegation of bad faith is serious, requires clear evidence and careful analysis, and

56 Rob Batty “Bad Faith: A Section Whose Time has Come?” (2024) 2 NZLR 261.

57     At 269.

58     Zoggs International Ltd v Sexwax Inc [2013] NZHC 1494 at [36]. As already noted, this decision was appealed, but not on these grounds: Sexwax, above n 2.

59     Lidl Great Britain Ltd v Tesco Stores Ltd [2024] EWCA Civ 262 at [173].

the presumption of good faith must be displaced by cogent evidence. But these propositions could be consistent with placing an evidential burden on the party alleging bad faith rather than a strict burden of proof. In the end, I consider there is likely to be little distinction between the two. An evidential burden that requires clear and cogent evidence is likely to be practically indistinguishable to proof on the balance of probabilities.

[66]              I also accept that objective circumstances may allow bad faith to be established by inference. It seems to me that there is considerable merit in the position reached in Lidl, namely where the objective circumstances give rise to a prima facie case of bad faith, the presumption of good faith is displaced and the evidential burden shifts to the applicant.

The test for bad faith

[67]              As Associate Professor Batty’s article, Bad Faith: A Section Whose Time has Come?, was published after the hearing of this case, I gave the parties an opportunity to address it in further submissions.60 I consider the aspects of Associate Professor Batty’s analysis that are most relevant for the purposes of this appeal can be summarised as follows:

(a)Other features of the Act have stunted the operation of bad faith under s 17(2). In particular, the “law of proprietorship” under s 32 absorbs many situations associated with bad faith, leaving s 17(2) with little work to do. A consequence of this is that the law on bad faith has become  something  of   a   weakened   concept,61   which   “risks   New Zealand’s law in the area remaining complex, rigid and static”.62

(b)It is possible to obtain registration without making use of a trade mark, but this can lead to abusive practices, including:63

… traders filing for a trade mark they know is used or is about to be used by another, traders “brand hijacking” by filing for

60     Batty, above n 56.

61     Batty uses the phrase “wilted transplant”.

62     At 263.

63     At 262.

a trade mark used overseas but not in the relevant jurisdiction, traders filing and “stockpiling” trade marks they do not intend to use, traders filing applications to register trade marks with wide specifications of goods or services that do not equate to their use or intended use, and traders refiling (“evergreening”) their trade marks to circumvent sanctions for non-use.

(c)The legislative background of the United Kingdom’s Trade Marks Act 1994 (on which the current New Zealand Act was modelled),64 suggests that the bad faith provision was aimed at remedying such abusive practices.65 Associate Professor Batty considers that the background materials to the current New Zealand Act paint a similar picture:66

Indeed, the IPONZ Practice Guidelines state that “‘bad faith’ is likely to cover issues of ownership and intention to use the mark”. The Guidelines cite Kerly’s Law of Trade Marks and Trade Names (Kerly’s). The 16th edition of Kerly’s identifies the following broad categories of cases involving bad faith: ownership of the mark, no bona fide intention to use the mark and width of the specification.

(footnotes omitted).

(d)The development of United Kingdom case law on the test for bad faith includes the High Court decision of Gromax Plasticulture Ltd v Don & Low Nonwovens Ltd, where it was said that “Plainly [bad faith] includes dishonesty and, as I would hold, includes also some dealings which fall short of the standards of acceptable commercial behaviour observed by reasonable and experienced [persons] in the particular area being examined”.67

(e)The Court of Appeal of England and Wales in Harrison’s Trade Mark Application said “… the court must decide whether the [subjective] knowledge of the applicant was such that his decision to apply for registration would be regarded as in bad faith by persons adopting proper standards [objective standard]”. This was later clarified as

64     It was directly modelled on Singapore’s Trade Mark Act 1998, which was in turn based on the United Kingdom’s Trade Marks Act 1994: see Batty, above n 56, at 269.

65     At 265.

66     At 274.

67     Gromax Plasticulture Ltd v Don & Low Nonwovens Ltd [1999] RPC 367 (Ch) at 379.

meaning “that the registrant’s own subjective perception of proper standards is not relevant to the determination of bad faith. That is, it was not necessary to establish that the registrant was aware that what the registrant was doing was wrong.”68

(f)Following enactment of the Act in 2002, the New Zealand courts turned to English cases for guidance on the meaning of bad faith. In Valley Girl Co Ltd v Hanama Collection Pty Ltd, Miller J referred with approval to Lindsay J’s description of the standard of bad faith in Gromax,69 as did the first Intellectual Property Office (IPONZ) cases under the 2002 Act. On appeal from one of these cases, Andrews J considered the combined test in Harrison’s Trade Mark Application was an appropriate test for determining bad faith under the 2002 Act.70 However, despite some early IPONZ decisions suggesting that a lack of intention to use might amount to bad faith, he notes this view “seems to have been supplanted by the view that a finding of bad faith requires” a lack of “an intention to use the trade mark at all … and something else which shows the circumstances … fell short of reasonable standards of commercial behaviour. This could be, for example, where there is evidence that an applicant’s sole or primary purpose is to prevent or deter another trader from using the trade mark.”71

(g)The Court of Justice of the European Union (CJEU) cases focus on the applicant’s intention on registration, which may involve an element of bad faith where “the sole objective is to prevent competition rather than to use the sign.”72 And that in “such a circumstance, the trade mark is not fulfilling its essential function” of “guaranteeing to consumers the

68 Batty, above n 56, at 268 citing Ajit Weekly Trade Mark [2006] RPC 25 (Appointed Person) at [37]–[41] and NM Dawson “Bad Faith in European trade mark law” (2011) 3 IPQ 229 at 245.

69 Valley Girl Co Ltd v Hanama Collection Pty Ltd (2005) 66 IPR 214 (HC) at [53] (However, as Batty notes the case was decided under the 1953 Act).

70 Neumann v Sons of the Desert, SL HC Auckland CIV-2007-485-212, 5 November 2007 at [33]; Batty also refers to Simon France J drawing on Royal Enfield Trade Marks when observing that bad faith is a “serious allegation, requiring clear evidence and careful analysis” in Zoggs International Ltd v Sexwax Inc, above n 58.

71 Batty, above n 56, at 276.

72 At 278.

origin of goods or services”.73 In Sky Plc v Skykick UK Ltd,74 the CJEU said:

… if the applicant for registration of that mark had the intention either of undermining, in a manner inconsistent with honest practices, the interests of third parties, or of obtaining, without even targeting a specific third party, an exclusive right for purposes other than those falling within the functions of a trade mark.

(h)The CJEU identified that such a finding could only be made if there was “objective, relevant and consistent indicia tending to show” such an intention.75 It has been observed that this “raises quite a high bar to establish bad faith, that may only be met when there is an ongoing pattern of behaviour.” However, the CJEU’s linkage of bad faith with the essential function of a trade mark and the purposes of the trade mark system provide the foundations for a more purposive approach to the meaning of bad faith.76

(i)Associate Professor Batty summarises the United Kingdom case of Lidl Great Britain Ltd v Tesco Stores Ltd as follows:77

Lidl had applied to register a wordless logo in 1995. Lidl never used the logo in the form in which it was registered. Lidl then re-registered this wordless logo mark for partially duplicative goods and services in 2002, 2005 and 2007 (and applied again in 2021). In a bad faith counterclaim to an infringement action, Tesco was able to raise an inference that Lidl had applied to register the wordless logo in order “to use it as a weapon to secure a wider legal monopoly than it was entitled to, with no genuine intention to use it”. The High Court found that Lidl was unable to rebut this inference and held that the 1995 registration was applied for in bad faith. The High Court also found that Lidl was unable to rebut the inference that the re-registered marks were applied for to pursue the same policy. Further, the High Court held that in filing the 2002, 2005 and 2007 applications Lidl was attempting to evergreen — that is, to avoid sanctions for non- use. These later registrations were, therefore, also held to have been filed in bad faith. The Court of Appeal recently

73     At 278.

74     Case C-371/18 Sky Plc v Skykick UK Ltd ECLI:EU:C:2020:45.

75     At 280.

76     At 280.

77     At 281–282; Lidl Great Britain Ltd v Tesco Stores Ltd [2023] EWHC 873 (Ch), [2023] ETMR 30; and Lidl Great Britain Ltd v Tesco Stores Ltd, above n 59.

dismissed an appeal in relation to these holdings. Arnold LJ reiterated his view that abuse of the trade mark system may constitute bad faith.

(footnotes omitted).

(j)Against that background, he concludes:

Such jurisprudence may help persuade New Zealand adjudicators to adopt a more explicitly teleological or purposive conception of bad faith. Adopting such a purposive conception of bad faith could support a finding of bad faith when it can be established that an applicant filed a trade mark with an intent to hamper, or take advantage of, the interests of a third party using a sign to distinguish its goods or services, or to use the registered trade mark regime for purposes other than for protecting a sign used (or genuinely intended to be used) in the course of trade to distinguish the goods and services covered by its application. The advantage of such an approach is that it may avoid bad faith from being interpreted narrowly and by dint of ontological categorisation. That is, whether the situation at issue maps onto the facts of a previous decision where an allegation of bad faith succeeded. Instead, s 17(2) could take on a broader, more flexible scope of operation.

The most important benefit of this approach is that it would articulate the concept of bad faith in accordance with an understanding of why we protect trade marks and have a registration system in the first place.  Under the 2002 Act  (as in Europe), the privileges of registration are given to trade marks that communicate origin in the marketplace. As explained above, the justifications for trade mark protection rest on safeguarding the fidelity of trade marks as origin communicating devices and protecting traders’ interests in developing goodwill associated with their trade marks (that signal trade origin). The registration system facilitates such protection and obviates the need for a trader to rely on passing off. The registration system ought not be used to target and impede the interests of third parties or to pursue aims unrelated to protecting marks used or intended to be used to communicate origin in the marketplace.

(Emphasis added and footnotes omitted)

[68]              In Lidl, Arnold J (with whom the other judges agreed)78 discussed and expanded upon a summary of the law of bad faith from the Court’s previous decision in Sky Ltd v SkyKick UK Ltd.79 Arnold J noted that:

(a)bad faith is not limited to dishonesty;80

(b)it has a two-fold purpose of preventing bad faith in respect of specific third parties and preventing abuse of the trade mark system;81

(c)the second purpose provides one of the few ways of combating such abuses and “therefore it is important that it is not too restrictively interpreted”;82 and

(d)a lack of intention to use the trade mark will be insufficient to establish bad faith unless it meets the test set out by the CJEU in SkyKick, namely an “intention either of undermining, in a manner inconsistent with honest practices, the interests of third parties, or of obtaining, without even targeting a specific third party, an exclusive right for purposes other than those falling within the functions of a trade mark.”83

[69]              There is no New Zealand authority that prevents me taking a purposive approach to bad faith and, as Associate Professor Batty’s analysis demonstrates, recent European and United Kingdom authority supports it. It is consistent with the purpose in s 3(e) of the Act of ensuring “that New Zealand’s trade mark regime takes account of international developments.” Moreover, I consider the approach is consistent with the New Zealand High Court’s previous reliance on United Kingdom authority in formulating its approach to bad faith.  Since  at  least  Gromax  (adopted  by  the New Zealand High Court),84 confirmed recently in Lidl,85 bad faith has not been

78     Lidl Great Britain Ltd v Tesco Stores Ltd [2022] EWCA Civ 1433 (appeal against strike out) at [15]–[24].

79     Sky Ltd v SkyKick UK Ltd [2021] EWCA Civ 1121 (an appeal to the Supreme Court was heard in June 2023 but judgment has not yet been issued).

80 At [19].

81 At [21].

82 At [21].

83 At [22].

84     Valley Girl, above n 69; and Neumann, above n 70.

85     Lidl Great Britain Ltd v Tesco Stores Ltd, above n 78.

limited to dishonesty and includes conduct that falls below acceptable standards of commercial behaviour.

[70]              I do not accept Mr Arthur’s submission that the European and United Kingdom case law should be treated with caution because their law does not have a stand-alone requirement that the applicant intends to use the trade mark, and therefore bad faith has more work to do than in New Zealand.86 I do not consider this to be a reason why, as a matter of principle, New Zealand should not continue to look to the United Kingdom for guidance on the law of bad faith.

[71]              The appellant submits that the effect of the decisions of Lidl and SkyKick is that for an applicant to be acting in bad faith its sole motive, established by clear pleading and evidence or admission, must be to use the registration as a weapon, not to use or intend to use the trade mark to indicate origin. The appellant notes that in Lidl the Court said the judge was correct to give no weight to Lidl’s statement of intention to use (in the form of bare assertions in the application) because that statement, taken at face value, was untrue (presumably based on admissions leading to the inference that Lidl did not, in fact, intend to use the mark).87 As the trade mark had been unused for about 25 years, Lidl’s admissions enabled the inference that the trade mark registrations were to be used as a legal weapon and were not intended to be used or to indicate origin, which amounted to bad faith.

[72]              The appellant’s submissions place too much weight on how the claim of bad faith was pleaded in Lidl. The pleading expressly alleged that the application was “made solely for the purposes of deployment as a weapon in legal proceedings, not in accordance with its function of being used … to indicate origin.”⁸⁸ The reason for the pleading seems to be the Court’s statement in SkyKick that:

52. It will be seen that the Court in  Lindt stopped short of defining bad  faith. Rather it preferred to give guidance on the factors which might contribute to such a finding in particular factual scenarios close to those in issue in the main proceedings in that case. One theme which emerges, however, is that the facts must justify a conclusion that the applicant’s intentions were solely ones (“sole objective” at [44] and

86     See Batty, above n 56, at 265.

87 At [177].

88     At [26] (pleading at [47.4]).

“sole aim” at [47])) which were inconsistent with the essential functions of a trade mark or designed to promote unfair competition. If the facts show that the applicant is justified in applying for the mark, for example because he seeks to prevent third parties taking advantage of his sign, or if he has a reputation which deserves broader protection, this is capable of defeating an allegation of bad faith. A second theme, which is developed in the later case law, is that a touchstone of bad faith might be that, in consequence of the applicant’s intentions, “the mark did not fulfil its essential function of ensuring that the consumer or end user can identify the origin of the product or service from those of a different origin, without any confusion.”

[73]              It seems to me that the Court was making the obvious point that if there is a legitimate reason for registering the mark consistent with the purpose of the trade mark system, this will be sufficient to defeat a claim of bad faith. It does not lead to the conclusion that bad faith cannot be established absent a sole motive to use registration as a weapon rather than to use the trade mark to indicate origin.

[74]              Against that background, I agree with Associate Professor Batty that an approach should be taken that accords with why we protect trade marks and have a registration system in the first place. And that the registration system should not be used to target and impede the interests of third parties or to pursue aims unrelated to protecting marks intended to be used to communicate origin in the marketplace.

[75]              Therefore, the test I intend to apply is whether there is clear and cogent evidence that the appellant filed its application with the intention of impeding, or taking advantage of, the interests of the respondent using its mark, or to use the registration regime for purposes other than protecting a genuine intention to use the mark. In other words, whether the appellant’s intention was to abuse the trade mark system. In the context of this case, that essentially comes down to whether there is a clear and cogent inference that the appellant’s intention was to impede the respondent’s use of its mark in New Zealand rather than a genuine intention to use the mark.

Is bad faith established in this case?

[76]              I should note at the outset that the case for bad faith appears to have been considerably more fully developed on appeal than it was before the Commissioner.

The Commissioner dealt with the issue in four paragraphs.89 She considered that the case for bad faith rested on a meeting between Mr Patchell-Evans and respondent in 2007 and concluded:

100. the fact that [Mr Patchell-Evans] may have considered becoming

involved in the business in 2007 does not suggest bad faith in applying for the mark in New Zealand in 2019. As Mr Arthur submitted, Planet Fitness did not leave the USA until 2015 and then only expanded to geographically proximate countries, with expansion into Australia in late 2019 (after the relevant date).

[77]              The respondent relies on a series of objective and undisputed circumstances that it submits lead to an inference of bad faith. These include:

(a)Mr Patchell-Evans is the owner of multiple gym chains in Canada and New Zealand, including CityFitness.

(b)He has been in the industry since 1979 (45 years). He is an experienced, well-informed and sophisticated commercial party.

(c)Mr Patchell-Evans knew about the respondent and the brand it had developed in the ‘PLANET FITNESS’ mark.

(d)Mr Patchell-Evans met with the respondent in 2007 either with the intention of becoming a franchisee (the respondent’s understanding, which he does not dispute), or for the purpose of making an offer to purchase part of their business (Mr Patchell-Evans’ position). Either way, he was endeavouring to enter into some sort of co-existence arrangement and at the very least he acknowledged the respondent’s ownership of the brand. The meeting ended with him proposing an arrangement where the parties would agree not to compete with each other in their respective countries, which the respondent did not agree to.

(e)Mr Patchell-Evans’ previous opposition to the respondent’s attempts to register its own slogans. In 2011, he opposed registration in Canada of

89     Decision under appeal, above n 1, at [98]–[101].

the trade mark ‘PLANET FITNESS THE JUDGEMENT FREE

ZONE’, the respondent’s widely used positioning slogan.

(f)Following the 2007 meeting, Mr Patchell-Evans went on, by 2014, to develop his own low-cost gym chain in Canada (in addition to his existing chain). This chain imitated many of the key elements of the respondent’s business model. Initially, Mr Patchell-Evans called it “McFit”, which was the same name as a long-running German fitness chain (with over 1.4 million members in Germany, Australia, Italy, Poland and Spain). It was only after McDonald’s Corporation opposed registration of the McFit trade mark that he abandoned the McFit name and adopted the trade mark “Fit4Less”.

(g)Mr Patchell-Evans’ New Zealand chain, CityFitness, styles itself as “Low Cost Fitness With High Performance Equipment”, replicating Planet Fitness’s successful low-cost/high-value business model. This has included introducing a ban on grunting and dropping weights (among other things) in 2014 in line with the respondent’s policy of sounding a “lunk alarm” in response to grunting or dropping weights.90

(h)During 2016–2018, there was significant media attention given to the respondent’s expansion in the United States (approximately 1,000 additional stores over five years). The respondent expanded to Puerto Rico (2013), Canada (2014), Dominican Republic (2015), Panama (2017) and Mexico (2018). When it launched in Panama, the respondent press releases said that “we continue to expand our brand internationally”, and when launching in Mexico, repeated the same message, namely “we continue to extend our footprint and expand our brand internationally”.

(i)In November 2019, the respondent officially opened 35 gyms in Australia following settlement of a dispute with Australian entities that

90     Notably, the 2014 New Zealand media reports of the introduction of the ban at CityFitness directly compares it with Planet Fitness’s introduction of the “lunk alarm” in the United States.

used the PLANET FITNESS mark. Although this was four months after the New Zealand trade mark application, the dispute had been the subject of litigation for several years. There is an Australian Trade Mark decision upholding the Australian entities’ opposition to the respondent’s trade mark applications.91 The Australian entities had been operating gyms under the name Planet Fitness for about 20 years. Following settlement, the respondent acquired those gyms and opened others. These were matters of public record searchable/accessible online to anyone with an interest in the matter.

[78]              The respondent submits that it is not a coincidence that Mr Patchell-Evans applied to register the mark in July 2019 following the publicity of the respondent’s expansion in 2016-2018 and the ongoing dispute about intended expansion in Australia. It submits that while this information may not have been known to the average person, the clear inference can be drawn that it would have been known to an industry insider such as Mr Patchell-Evans. In support of this, the respondent points to the evidence of Mr Vartanian that he and the respondent’s senior management team keep a careful and meticulous eye on their competitors and what is happening in the industry. And that any serious gym operator regardless of their location around the world would be aware of the internationally recognised success and awards that Planet Fitness was achieving in the years leading up to the appellant’s application.

[79]              The respondent submits that the combination of these circumstances lead to the inference that in applying to register the trade mark in New Zealand, while owning a gym chain operating a similar business model, Mr Patchell-Evans can only have been attempting to prevent the possible expansion of a competitor. The respondent says there is no evidence of a genuine intention to use the mark, not even a statement to that effect in Mr Patchell-Evans’ evidence. No alternative explanation, let alone a convincing one, has been provided for why the appellant applied to register the mark.

[80]              In response, the appellant relies on both the presumption of good faith (discussed above), and the presumption of intended use.   But as Miller J noted in

91     Planet Fitness Pty Ltd v PFIP LLC [2018] ATMO 11.

Effem Foods Ltd v Cadbury Ltd, like the presumption of good faith, the presumption of intended use is rebuttable.92 There can be no suggestion that circumstantial or inferential evidence is less capable of rebutting the presumption than the direct evidence provided in that case. There is nothing second rate about circumstantial evidence.93 And, as noted above, it has been held that the presumption of good faith can be rebutted by inference.

[81]              I consider that the combination of objective circumstances/indicia establish a prima facie case of bad faith. That evidence includes that Mr Patchell-Evans is a highly  experienced  owner  of  international  gym  franchises  in  Canada   and   New Zealand. He attended a meeting in 2007 that, at the very least, both parties thought may result in a mutually beneficial commercial transaction during which he obtained information about the respondent’s  business.  The  meeting  ended  with Mr Patchell-Evans seeking an agreement that the parties not compete against each other. This was followed in 2011 by his opposition in Canada to registration of the respondent’s established trade mark slogan. He has then modelled his Canadian and New Zealand gym brands on the respondent’s low-cost/high value model, including adopting a similar “no grunt” policy at CityFitness. His low-cost gym brand in Canada attempted to use a name (also a name used by a German gym brand) that saw him in a trade mark dispute with McDonald’s.

[82]              All of this culminated in the appellant applying for the PLANET FITNESS trade mark in New Zealand in 2019 following publicity of the respondent’s international expansion between 2016-2018,94 and only four months prior to settlement of the respondent’s Australian dispute that resulted in it opening 35 gyms in Australia. It can be inferred these matters would have been known to Mr Patchell- Evans given: his experience in the industry; the respondent’s evidence about its senior management team keeping a meticulous eye on competitors and expectations of what

92 Effem Foods Ltd v Cadbury Ltd HC Wellington CIV-2005-485-1487, 21 March 2007.

93   In the criminal context, juries are frequently directed that “there is nothing inherently second-    rate or dubious about circumstantial evidence”, see, for example, Matara v R [2015] NZCA 261 at [10]; and Wong v R [2024] NZCA 240 at [22].

94 I have not overlooked the appellant’s submission that this expansion was mainly in North America or adjacent countries, but the evidence must be looked at in its full context rather than in isolation. That context includes the evidence of potential expansion in Australia that was the subject of litigation over a similar period, as well as prior rapid and highly successful expansion within the United States.

any serious gym operator would be aware of; and the evidence that Mr Patchell-Evans has kept a meticulous eye on the respondent through his history of dealings with, and modelling his businesses on, the respondent.

[83]              As already noted, I accept that bad faith is a serious finding that requires clear and cogent evidence. In my view, these objective circumstances, in combination, lead to the clear and cogent inference that the purpose of the appellant’s application was attempting to prevent the possible expansion of a competitor into New Zealand rather than an intention to use the mark. There was therefore a prima facie case of bad faith that required a response.

[84]              In response to the pleadings and evidence filed by the respondent in respect of these issues, Mr Patchell-Evans simply filed a six-paragraph statutory declaration that addresses only the circumstances of the meeting in 2007. The substantive portions of his statement can be set out in full:

2The facts contained in this declaration come from my own knowledge.

3In his statutory declaration, submitted in support of PFIP’s opposition, Christopher Rondeau says at paragraph [8] that he and other founders of the Planet Fitness Inc., Marc Grondahl and Michael Grondahl met with me in late 2007 in Dover, New Hampshire.

4Mr Rondeau says he and the Grondahls met with me on the understanding that I was interested in possibly becoming a franchisee and running Planet Fitness franchise locations in Canada.

5While I don't dispute that this may have been their understanding of the meeting, my intention at the time was to consider making an offer to purchase part of their business. I was not intending to enter into a franchise agreement.

6Naturally, I asked a number of questions to find out what I could about the business I was considering buying into. However, I ultimately decided not to pursue the matter further.

[85]              This statement does not deny that the 2007 meeting ended with Mr Patchell- Evans’ request for an agreement that the parties not compete with one another in their respective countries, nor does it provide any denial of knowledge of the matters set out in the respondent’s evidence, including the Australian dispute. Nor does it contain any explanation for why Mr Patchell-Evans would want to provide gym services in New Zealand using the same name as one of the most well-known gym brands in

North America in circumstances where he already runs an established gym chain in New Zealand modelled on that brand. It does not even contain a bare statement of an intention to use the mark made under oath. Instead, the appellant relies on the bare and unsworn statements of intention to use its mark contained in its pleadings.

[86]              Mr Arthur made submissions to the effect that there may be a desire to use the Planet Fitness brand to open another chain aimed at capturing a different section of the market rather than competing against CityFitness. That may be so but there is simply no evidence to that effect. And it is highly implausible that Mr Patchell-Evans would choose to do this by adopting the name of one of North America’s largest gym brands on which he has modelled CityFitness.

[87]              Mr Arthur submits that the respondent has failed to clearly plead the allegation that the appellant’s intention was solely to block a competitor. It is convenient to set out the respondent’s pleading on bad faith in full:

3.Reference is made to the history of the Opponent in paragraph 1 above, which includes, but is not limited to:

3.1A director of the Applicant, David Patchell-Evans, has been closely involved in the fitness and gym industry for a number of years;

3.2The said David Patchell-Evans founded a Canadian gym chain known as GoodLife Fitness Clubs well before the priority date of the Opposed Mark;

3.3Since well before the priority date of the Opposed Mark, Mr Patchell- Evans has operated, and continues to operate, a gym chain in New Zealand under the trade mark CityFitness;

3.4The Opponent and/or its related entities or associates have a history with Mr Patchell-Evans, including in relation to opposition(s) in Canada to trade mark(s) which contained the element PLANET FITNESS prior to the priority date of the Opposed Mark; and

3.5Mr Patchell-Evans has, prior to the priority date of the Opposed Mark, personally met with the CEO and founders of the Opponent and/or its related entities to discuss potential business arrangements.

Therefore, the Applicant applied to register the Opposed Mark in the knowledge of the Opponent’s prior use of its PLANET FITNESS trade mark in relation to the same or similar goods and services as those covered by this application, the Opponent’s ongoing use of its PLANET FITNESS trade mark in multiple jurisdictions and the Opponent’s continued expansion of its use into additional jurisdictions. Further, the Opponent has not evinced any intention to use the Opposed Mark in New Zealand which is reinforced by the

fact that Mr Patchell-Evans already operates a gym in New Zealand under a different trade mark.

Consequently, the application has been filed in bad faith and registration of the trade mark would contravene section 17(2) of the Act.

[88]              This pleading clearly alleged bad faith based on a lack of intention to use the mark and a series of other factors relating to the history of competition between     Mr Patchell-Evans’ business interests and the respondent. While it does not expressly contain the allegation that “the application was made in bad faith because the intention was to impede a competitor rather than use the mark” that is the clear inference from the document. I consider the pleading complied with the obligation to fairly inform the appellant of the case it had to meet.

[89]              Mr Arthur also submits that it was incumbent on the applicant to seek to cross- examine Mr Patchell-Evans if it was going to assert an allegation that there was no intention to use the mark, or reprehensible conduct. However, the purpose of cross- examination is to resolve conflicts in the evidence. A party is required to cross- examine a witness on contradictory evidence to give them an opportunity to respond.95 But a party is not required to cross-examine in the absence of a conflict in the evidence, or provide a party with an opportunity to improve their evidence, or an opportunity to respond to allegations of which they are already aware and have had an opportunity to respond.96

[90]              As already noted, the respondent’s pleadings alleged bad faith based on a lack of intention to use, combined with other matters that supported the inference that the intention of the application was to impede the respondent’s use of the mark. The respondent also filed extensive evidence addressing the pleaded facts. In response, Mr Patchell-Evans chose to only address the 2007 meeting. It was not incumbent on the respondent to give him a further opportunity to respond through cross- examination.

95     Evidence Act 2006, s 92(2).

96     Elisabeth McDonald and Scott Optican (eds) Mahoney on Evidence: Act and Analysis (4th ed, Thomson Reuters, Wellington, 2018) at [92.01(1)–(2)].

[91]              I therefore accept the respondent’s submission that the appellant has provided no alternative explanation, let alone a convincing one, for why it applied to register the mark. Caution is required in drawing inferences from silence, but even in a criminal context, the failure of a defendant to give evidence where the prosecution case calls for an explanation can lead to an adverse inference.97 The burden and standard of proof are of course quite different in this context, and I do not need to go as far as drawing an adverse inference. It suffices for me to find there was clear and cogent evidence of objective circumstances that established a prima facie case of bad faith, which shifted the evidential burden to the applicant to “explain its intentions at the time of making the application.”98 For the reasons set out above, it failed to do so.

Conclusion

[92]              I therefore allow the cross-appeal. In accordance with s 17(2) of the Act, the Commissioner must not register the trade mark because the application was made in bad faith.

Costs

[93]              My preliminary view is that the respondent is entitled to costs on a 2B basis on the appeal and cross-appeal with certification for second counsel. If costs cannot be agreed, the parties should file memoranda within 10 working days (limited to five pages), and reply memoranda (limited to two pages) five working days thereafter. Costs will be determined on the papers.

La Hood J

Solicitors:

MoranLaw, Wellington for Appellant

Henry Hughes Law Limited, Auckland for Respondent/Cross-Appellant

97     Trompert v Police [1985] 1 NZLR 357 (CA); and R v Gunthorp [2003] 2 NZLR 433 (CA) at [142]–145.

98     Lidl, above n 59, at [173].