Australian Court Rules on "use" of a trade mark in international trade

Can a trade mark owner be said to have used its mark in Australia when products bearing that mark have been imported to and sold in Australia without its knowledge? The recent Australian High Court decision in E & J Gallo Winery v Lion Nathan Australia Pty Limited suggests so.

On 17 January 2005, E & J Gallo Winery (“Gallo”) acquired a registration in Australia for the trade mark BAREFOOT covering wine.

The previous owner of the BAREFOOT registration had never itself sold wine in Australia under the mark during the relevant period (7 May 2004 to 8 May 2007). However, a shipment of 144 bottles of BAREFOOT wine made its way to Australia in July 2002 through a series of distribution transactions. Sales of the wine began in March 2003, with 41 bottles being sold during the relevant period.

Genuine wine bearing the BAREFOOT mark was therefore sold in Australia from March 2003 onwards, without the trader mark owner’s knowledge. The BAREFOOT wine labels are shown below:

During 2006 and 2007, Lion Nathan Australia Pty Limited (“Lion”) developed a concept beer which was later marketed under the mark BAREFOOT RADLER. Sales of BAREFOOT RADLER beer commenced in January 2008. The label of the BAREFOOT RADLER bottles is shown below:

Gallo took objection to Lion’s use of BAREFOOT RADLER and commenced proceedings in the Federal Court for infringement of its BAREFOOT registration. Lion denied that infringement has occurred and, in a counter-claim, sought an order for the removal of the BAREFOOT registration for non-use.

In the Federal Court, the primary judge found that Gallo had not made use of its mark. The judge therefore ordered its removal from the register of trade marks.

On appeal, the Full Court of the Federal Court upheld the primary judge’s decision on non-use. The Full Court held that for there to be trade mark use in Australia, the owner must have had knowledge of that use. Use, for the purpose of maintaining a registration in the face of a non-use removal action, was deemed to be “use of the same character which would warrant registration of the trade mark in the first place. That is conduct, by or on behalf of the owner, associated with a witting or deliberate use of the trade mark in Australia” – paragraph 48 of the Full Court decision.

Gallo appealed the decision of the Full Court to the High Court, in which the Full Court’s decision was overturned.

Of most significance, the High Court held that the use of the BAREFOOT mark in Australia without the trade mark owner’s knowledge constituted trade mark use for the purpose of maintaining a registration. This was a departure from the earlier decisions of the primary judge and the Full Court. At paragraph 51 and 52, the High Court stated:

“The capacity of a trade mark to distinguish a registered owner's goods from those of others, as required by s 17, does not depend on whether the owner knowingly projects the goods into the Australian market. It depends on the goods being in the course of trade in Australia. Each occasion of trade in Australia, whilst goods sold under the trade mark remain in the course of trade, is a use for the purposes of the Trade Marks Act. A registered owner who has registered a trade mark under the provisions of the Trade Marks Act can be taken, in general terms, to have an intention to use that trade mark on goods in Australia. It is a commonplace of contemporary international trade that prior to consumption goods may be in the course of trade across national boundaries.

An overseas manufacturer who has registered a trade mark in Australia and who himself (or through an authorised user) places the trade mark on goods which are then sold to a trader overseas can be said to be a user of the trade mark when those same goods, to which the trade mark is affixed, are in the course of trade, that is, are offered for sale and sold in Australia. This is because the trade mark remains the trade mark of the registered owner (through an authorised user if there is one) whilst the goods are in the course of trade before they are bought for consumption. As affirmed by Gummow J in Wingate Marketing Pty Ltd v Levi Strauss & Co, ‘whilst a trade mark remains on goods, it functions as an indicator of the person who attached or authorised the initial use of the mark’. During the trading period, the trade mark functions as an indicator of the origin of the goods, irrespective of the location of the first sale.”

Accordingly, Gallo’s BAREFOOT registration was allowed to remain on the register. Lion was thus held to have infringed the registration. An injunction was ordered restraining Lion from selling, offering for sale, advertising or promoting beer under the name BAREFOOT RADLER or similar.

In addition, the High Court ruled in favour of Gallo on the following supplementary issues:

Did Gallo’s use of BAREFOOT amount to “use in good faith”?

Was use of BAREFOOT in combination with a footprint device, use of the registered trade mark BAREFOOT (word) alone?

On the question of “good faith”, the High Court held that, despite the small quantities of wine being sold in Australia, the use of Gallo’s BAREFOOT mark was also “use in good faith”. For this reason, Gallo’s registration could not be removed on the ground that there was no use in good faith.

In coming to its decision, the High Court acknowledged a decision of the European Court of Justice in which it was held that use of a trade mark “need not...always be quantitatively significant for it to be deemed genuine” (Ansul BV v Ajax Brandbeveiliging BV [2005] Ch 97).

On the facts of the case, there was no indication that use of Gallo’s BAREFOOT mark was for any purpose other than making profit and establishing goodwill. There was no suggestion that the use was fictitious or colourable. As a result, the use was considered genuine and in good faith, which was sufficient to resist Lion Nathan's application for removal.

Turning to which mark was actually used, Lion argued that use of the word BAREFOOT in combination with a footprint device did not constitute use of the registered word mark BAREFOOT alone.

To support its argument, Lion relied on the decision in Colorado Group Ltd v Strandbags Group Pty Ltd [2007] FCAFC 184. In that case, it was held that use of the word COLORADO in conjunction with a mountain device did not amount to use of the word mark COLORADO alone. Allsop J stated that the mountain device did not “operate as a separate mark, nor as a mere descriptor” and, although the word COLORADO was significant, it could be not be said to have been used alone either – rather, it was used as a part of a composite mark.

However, the High Court in the present case distinguished Colorado. In contrast to the situation in Colorado, the footprint device was seen as a mere descriptor of the word BAREFOOT. The monopoly given by the BAREFOOT registration was deemed “wide enough to include the word together with a device which does not substantially affect the identity of the trade mark in the word alone.” Use of the registered mark BAREFOOT with the footprint device therefore constituted use of the registered trade mark alone.

It should also be noted that the High Court did not overrule the Full Court’s finding that wine and beer are goods of the same description.

The decision of the High Court is favourable to foreign trade mark owners who may not directly use a mark in a certain country, but whose goods may nevertheless find their way into the trade channels of that country.

July 2010