KINGS’ CHOICE – Trade Mark Rectification

Application by Kapsons Food Company Limited to remove Trade Marks Nos. 262468/469/470 KINGS’ CHOICE in the name of Chia Khim Lee Food Industries Pte Ltd. Decision of Assistant Commissioner Ailsa Duffy QC, 9 December 2003.

In this well reasoned decision concerning an application to remove or part cancel registered trade marks, Assistant Commissioner Duffy considered a number of important issues: the admissibility of hearsay evidence in proceedings before the Commissioner; what is necessary to establish proprietorship of a trade mark; the intention to use filing requirement under the 1953 Act; the burden of proof in a rectification proceeding; and the matters to be taken into consideration in determining whether or not goods are the same or similar.

The provisions of the Trade Marks Act 1953 applied as the rectification proceedings were filed before the Trade Marks Act 2002 came into force (in August 2003). Nonetheless, the decision is relevant when considering certain issues under the 2002 Act, as we discuss in this article. The 2002 Act offers weaker protection to the owner of an unregistered mark which has priority over a registration for the same or similar mark by another party. Thus owners of unregistered yet registrable trade marks in New Zealand would be best advised to register them.

Background

Chia Khim Lee Food Industries Pte Ltd (“CKL”) had registered the trade mark KINGS’ CHOICE for broad categories of goods in classes 29, 30 and 32. The applications were filed on 21 May 1996 and the registrations took effect from this date.

Kapsons Food Company Limited (“Kapsons”) became aware of the CKL registrations when it applied to register the mark KING’S CHOICE for “foodstuffs” in class 29 and for “rice and foodstuffs” in class 30 on 3 January 2001. On 3 January 2002 it lodged the applications for rectification. Kapsons applied to remove CKL’s marks from the register or – alternatively – sought rectification of the entries on the register by restricting the statements of goods. Kapsons alleged that the CKL marks should never have been registered. Kapsons filed evidence to show that it had used the mark KING’S CHOICE in New Zealand since 1990 in relation to foodstuffs, particularly rice products.

An application for cancellation or part-cancellation of CKL’s marks on non-use grounds would not have succeeded. The 1953 Act provided for removal of a trade mark which had been actually registered for a period of 5 years – during which time there had been no bona fide use of the mark in respect of all or some of the registered goods. Because the CKL marks were actually registered on 9 February 1998, a non-use removal action could not have been filed until early 2003.

Kapsons’ evidence demonstrated that it launched its rice products in New Zealand in 1990, and that by 1996 sales had reached almost one million New Zealand dollars. In addition Kapsons had sold a number of cartons of canned corn and canned fruit salad under the KING’S CHOICE trade mark. Five per cent of Kapsons’ gross sales had been spent on advertising and promotion; this was a condition of supply of its KING’S CHOICE products to supermarkets. Kapsons’ evidence that it had used the trade mark KING’S CHOICE for rice products prior to May 1996 was confirmed by evidence from two retailers.

CKL filed evidence of two shipments of products bearing the KINGS’ CHOICE mark to New Zealand – a shipment of soya bean oil in 1998 and a second shipment of soya bean oil in January 2003 (after the applications for rectification were filed.)

Hearsay evidence

Kapsons commissioned an investigation into use of CKL’s mark KINGS’ CHOICE. An employee of the firm of investigators, Mr Winslow, spoke with a number of buyers (unidentified) for supermarket chains. The proprietor of Mr Winslow’s firm – Mr Barkle – then made a declaration describing these enquiries. Mr Barkle’s declaration was held to be inadmissible. The Hearing Officer said:

“The declaration is double hearsay of conversations with unnamed persons. Mr Barkle, the maker of the declaration has clearly no personal knowledge of the facts in his declaration. No evidence had been put before me as to why Kapsons could not have obtained direct evidence from the buyers of the three organisations and from the persons at (…).” (at page 4)

The use of hearsay evidence in hearings before the Commissioner of Trade Marks was considered in two recent High Court decisions – Royal New Zealand Yacht Squadron v Daks Simpson Group plc (AP 76/01 unreported decision of Young J, High Court, Wellington, 21 September 2001) and Rainbow Technologies Inc v Logical Networks Limited (CP 136/02, unreported decision of Hammond J, High Court, Wellington, 30 June 2003). In refusing to admit the Barkle declaration, the Assistant Commissioner said:

“I do not think it appropriate to rely on evidence that is double hearsay from unnamed sources which goes to the very essence of one of the disputed issues.” (at page 6)

The Hearing Officer commented that the buyers spoken to by Mr Winslow should have each made a declaration to the effect that he/she had read Mr Barkle’s declaration and, to the best of the buyer’s knowledge, the contents were true and correct.

Proprietorship

Section 26(1) of the Trade Marks Act 1953 reads:

“Any person claiming to be the proprietor of a trade mark used or proposed to be used by him who is desirous of registering it shall apply in writing to the Commissioner in the prescribed manner for registration either in Part A or in Part B of the register.”

CKL’s applications were filed on 21 May 1996, which was the relevant date for this enquiry.

The Hearing Officer referred to the following passage from Kerly’s Law of Trade Marks and Trade Names (12 ed, page 7) when considering the legal principles regarding acquisition of common law proprietorship of a trade mark.

“… it was necessary for the plaintiff in a trade mark action to plead that the mark in question had acquired a reputation and become known as his by use in connection with his goods. But the court did not require him to prove that the use had extended over any long or defined period. It was, therefore, practically open to a trader to obtain protection against infringers of a newly devised mark which had hardly been used at all. (emphasis added)”

Reference was also made to the Australian cases Settef Spa v Riv-Oland Marble Company (Vic) Pty Limited (1987) 10 IPR 402 and Malibu Boats West Inc v Catanese 51 RPC 134. The Hearing Officer concluded:

“It seems from the statement in Kerly and the above cases that a small amount of use is enough to establish a common law proprietorship in a mark. In addition use does not require actual trade. I therefore propose to take into account advertising up to May 1996.” (at page 10)

Accordingly it was held that Kapsons was the proprietor of the KING’S CHOICE mark, in respect of rice products and canned baby corn and fruit salad, prior to the date of CKL’s applications to register KINGS’ CHOICE.

Section 26 of the Trade Marks Act 1953 required the applicant to be either using or intending to use the trade mark it sought to register. The Hearing Officer accepted that lack of a bona fide intention to use the trade mark at the date of application will disqualify the mark from registration. She referred to Effem Foods Limited v Tip Top Investments Limited (CL21/00 unreported decision of Williams J, High Court, Auckland, 1 June 2001) and to Newnham v Table for Six ((1997) 44 IPR 269 at 278).

To support its submission under this head, Kapsons had pointed to the “minimal use” which CKL had made of its mark since its registration. The Hearing Officer held that Kapsons carried the burden of proving lack of bona fide intention to use, and that she was not satisfied on the balance of probabilities that Kapsons could prove that CKL never had a bona fide intention to use KINGS’ CHOICE in relation to all goods for which it was registered. The Hearing Officer observed:

“History shows that CKL has made little use of its mark. Such use can support an inference that there was never an intention to use it in the first place. But it can equally support an inference that CKL had an initial bona fide intention to use the mark which was thwarted later by the inability to secure a distributor that was to CKL’s liking.” (at page 15)

Use of CKL’s mark was/would be misleading and deceptive

Kapsons submitted that the registration of CKL’s KINGS’ CHOICE marks was and remained contrary to Section 16 of the Trade Marks Act 1953:

“It shall not be lawful to register as a trade mark or part of a trade mark any scandalous matter or any matter the use of which would be likely to deceive or cause confusion or would be contrary to law or morality or would otherwise be disentitled to protection in a Court of justice.”

Accordingly, Kapsons argued, CKL’s mark should never have been accepted for registration.

The Hearing Officer held that under the first limb in respect of Section 16, Kapsons was required to prove, on the balance of probabilities, that CKL’s use of its mark would be likely to deceive or cause confusion at the application date – 21 May 1996. The relevant test is that set out in the case Hannaford & Burton v Polaroid Group [1976] 2 NZLR 14. When applied to the present case, the issue was:

“… having to regard to Kapsons’ actual use of the mark KING’S CHOICE in May 1996 am I satisfied that CKL’s mark KINGS’ CHOICE, if used in a normal and fair manner in connection with the goods for which registration was sought, would be reasonably likely to deceive or cause confusion among a substantial number of persons.

It is for Kapsons to establish that it had a “sufficiently substantial reputation in the New Zealand market” in May 1996. Without this Kapsons cannot establish a likelihood of goods covered by CKL’s trade mark being identified with Kapsons’ goods. For Kapsons to establish it had a substantial reputation in the New Zealand market in May 1996, it must prove the market had a greater familiarity with its products and its mark than was the case when it came to proving proprietorship under Section 26.” (at pages 16-17)

It was held that Kapsons had a sufficiently substantial reputation in KING’S CHOICE for rice products at the time CKL applied to register its mark. Thus registration of CKL’s mark in relation to rice products was contrary to Section 16. The Hearing Officer held that registration of CKL’s mark in relation to canned corn and fruits salad was not contrary to section 16; there was insufficient evidence to show a sufficient reputation in relation to those goods, at the relevant date.

The Hearing Officer next considered whether the other goods, apart from rice, for which CKL had registered its mark were “the same as rice”, having previously stated that the question of whether use by CKL on those other goods would be likely to lead to deception or confusion would depend upon “whether those goods can be categorised as being the same as the goods for which Kapsons uses its mark and therefore likely to lead to confusion or deception.” (page 19)

Kapsons, which carried the burden of establishing the likelihood of deception or confusion, failed to file evidence that purchasers had been confused or deceived by CKL’s registered mark. The Hearing Officer said that she appreciated: “the practical difficulty Kapsons faced when preparing its case. However, it could have overcome this difficulty by adducing other evidence.” Other possible evidence the Hearing Officer listed were opinion polls and market surveys; evidence from retailers regarding customer behaviour; evidence from retailers regarding whether they would stock the respective goods side by side; and evidence from marketing experts, including evidence from marketing experts about the brand sensitivity of purchasers of staple products.

The following cases were referred to in determining in what circumstances two sets of goods can be considered “the same”:

i) In Jellinek’s Application (1946) 63 RPC 59, Romer J identified the following factors:

    • The trade channels through which the goods were sold;
    • The nature of the goods and the uses thereof;
    • The production and manufacturing process; and
    • The fact goods are used in association with each other is not a reason to regard them as the same.

ii) In San Remo Macaroni Company Pty Limited v San Remo Gourmet Coffee Pty Limited (2000) 50 IPR 321, the court compared pasta products and coffee. It held:

    • They were not used as substitutes or alternatives for each other.
    • The native characteristics and purpose of pasta products and coffee were quite different.
    • One food was eaten, the other drunk.
    • Coffee and pasta products satisfied different needs.

iii) In Coca Cola v All-Fect (1998) 43 IPR 47, the Federal Court of Australia found that cola bottle-shaped confectionery was not the same as the Coca Cola beverage. The court held:

    • The presence of overlapping ingredients (sugar, colour, flavour, acids) did not make the goods of the same description.
    • The fact both goods were sold through the same or similar trade channels was of limited assistance as these channels sold a wide range of unrelated goods.
    • The use to which each of the goods was put was different as eating confectionery and drinking a beverage was different.
    • After taking the above factors into account, the Hearing Officer concluded that the other goods for which CKL had registered its mark in classes 29, 30 and 32 were not the same as “rice”.

Well-known Mark

Kapsons also relied on Section 17(2) of the 1953 Act, claiming its mark was – in May 1996 – well-known:

“… no trade mark shall be registered in respect of any goods if the trade mark (or an essential element) is identical or similar to or a translation of a trade mark which is well-known in New Zealand (whether through advertising or otherwise)—

(a) As respects those goods or any similar goods; or

(b) As respects any other goods if use of the first-mentioned trade mark would be taken as indicating a connection in the course of trade between those other goods and the proprietor of the well-known trade mark, and would be likely to prejudice the interests of such proprietor,—

where use of the first-mentioned trade mark would be likely to deceive or cause confusion.”

In the South African case, McDonalds v Joburgers (1996) 36 IPR 11, the Court held that to be “well known” it was sufficient for the mark’s reputation to extend to a substantial number of persons, which is the test used in passing off cases. The Hearing Officer concluded:

“I find the reasoning of the South African court most helpful. As stated in the judgment “if a substantial number is not sufficient what is? To require 100% would be excessive, but how much less would suffice.”

I therefore propose to treat “well known” as requiring a mark be known to a substantial number of persons interested in purchasing the goods to which the mark relates. I have already found that Kapsons use of its mark for rice products has created a substantial reputation in relation to use of its mark. I think this satisfies the “well-known” requirement in s.17(2).” (at page 28)

Accordingly, registration of CKL’s mark in relation to “rice” contravened section 17(2). Because no evidence had been presented by Kapsons to show that people would consider there to be a connection between KING’S CHOICE rice and goods other than rice – which were encompassed by CKL’s registrations and branded KINGS’ CHOICE, Kapsons did not succeed under this head.

Decision

Having held that CKL’s registration of KINGS’ CHOICE for rice was contrary to section 16, the Hearing Officer exercised her discretion to direct that the register be rectified by removing from CKL’s Class 30 registration the reference to rice.

Having found, pursuant to section 26, that CKL was not the proprietor of the trade mark KINGS’ CHOICE at the relevant date in relation to rice, canned fruit salad and canned baby corn, and as CKL has not traded in those goods since it applied for registration, it was directed that the register be rectified to exclude canned baby corn and canned fruit salad from the goods of CKL’s Class 29 registration.

Trade Marks Act 2002

Bad faith / proprietorship / use statements

The 2002 Act contains no provision which is equivalent to Section 26. No claim to proprietorship or use statement need be made on filing the application. Section 17(1)(b)(iii) provides that a trade mark should not be registered if:

“The application for the registration of the trade mark is made in bad faith.”

The term “bad faith” has not yet been judicially considered in New Zealand. In Gromax Plasticulture Ltd v Don & Low Nonwovens Ltd [1999] RPC 367 at 379, Lindsay J said in relation to section 3(6) of the United Kingdom Trade Mark Act 1994 (which corresponds to section 17(1)(b)(iii):

“I shall not attempt to define bad faith in this context. Plainly it 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 men in the particular area being examined.”

In Demon Ale Trade Mark [2002] RPC 345, Geoffrey Hobbs QC said (at page 356):

“These observations recognise that the expression ‘bad faith’ has moral overtones which appear to make it possible for an application for registration to be rendered invalid under section 3(6) by behaviour which otherwise involves no breach of any duty, obligation, prohibition or requirement that is legally binding upon the applicant.”

These pronouncements would be persuasive in any New Zealand proceeding.

Regulation 44(j) of the Trade Marks Regulations 2003 provides that a use statement must be made prior to registration:

“An applicant must supply the following information before the application can be accepted, and may supply it after filing the application:

(j) a statement by the applicant that the trade mark is being used or is proposed to be used”

However, at present no application can be filed electronically at the Intellectual Property Office of New Zealand unless a use/non-use statement is made. Further, in the case of multi-class applications, there is no facility to make separate use statements for each class – or to state that the mark is used in respect of certain goods/services, but proposed to be used in respect of others.

Under the 2002 Act, prior use of a mark which is not well-known in New Zealand is not in itself a ground for preventing a subsequent applicant from registering the same or similar mark for the same or similar goods or services.

Grounds for refusal of applications

Section 17(1)(a) and (b) (ii) of the Trade Marks Act 2002 corresponds to section 16 of the 1953 Act.

“Absolute grounds for not registering trade mark: general

(1) The Commissioner must not do any of the following things:

(a) register as a trade mark or part of a trade mark any matter the use of which would be likely to deceive or cause confusion:

(b) register a trade mark or part of a trade mark if—

(i) its use is contrary to New Zealand law or would otherwise be disentitled to protection in any court:

(ii) the Commissioner considers that its use or registration would be likely to offend a significant section of the community, including Maori:

(iii) the application for the registration of the trade mark is made in bad faith.”

Section 25 of the 2002 Act supersedes section 17 of the 1953 Act, and provides for refusal of applications to register trade marks which conflict with registered trade marks or with well-known, unregistered marks:

“(1) The Commissioner must not register a trade mark (trade mark A) in respect of any goods or services if—

(a) it is identical to a trade mark (trade mark B) that belongs to a different owner and that is registered, or has priority under section 34, in respect of the same goods or services; or

(b) it is similar to a trade mark (trade mark C) that belongs to a different owner and that is registered, or has priority under section 34, in respect of the same goods or services or goods or services that are similar to those goods or services, and its use is likely to deceive or confuse; or

(c) it is, or an essential element of it is, identical or similar to, or a translation of, a trade mark that is well known in New Zealand (trade mark D), whether through advertising or otherwise, in respect of those goods or services or similar goods or services or any other goods or services if the use of trade mark A would be taken as indicating a connection in the course of trade between those other goods or services and the owner of trade mark D, and would be likely to prejudice the interests of the owner.”

Prior Common Law Marks

Thus if a prior common law mark is not well-known, under the 2002 Act it may not operate as a bar to the subsequent registration by another party of the same or similar mark for the same or similar goods. If the prior common law mark does not have a “sufficient” reputation, it would not be possible to demonstrate a likelihood of deception or confusion should the later, registered mark be used.

The owner of the prior common law mark may continue to use its mark in relation to the goods or services for which it “continuously” used the trade mark where the use commenced before the date of the subsequent registration by another party. Section 96 provides an exception to infringement if the unregistered mark was used continuously, and prior to, the registration or use of the registered mark:

“No infringement for certain continuous use of unregistered trade mark

(1) A registered trade mark (trade mark A) is not infringed by the use of an unregistered trade mark (trade mark B) if—

(a) trade mark B is identical with or similar to trade mark A and is used in relation to any goods or services that are identical with or similar to any goods or services in respect of which trade mark A is registered; and

(b) trade mark B has been continuously used by the owner or the owner's predecessor in title and used in relation to those goods or services in the course of trade before, whichever is the earlier of,—

(i) the date of application in New Zealand for the registration of trade mark A; or

(ii) the date that the owner first used trade mark A.

(2) Nothing in this Act entitles the owner of a registered trade mark to—

(a) interfere with or restrain the use by any person of a trade mark identical or similar to it in relation to goods or services in relation to which that person or the owner's predecessor in title had continuously used that trade mark from a date prior to the commencement of the Trade Marks Amendment Act 1994 if, before that date, the use of that trade mark by that person did not infringe the right to the use of the first-mentioned trade mark given by the registration; or

(b) object (if use is proved) to that person being put on the register for that identical or similar trade mark in respect of those goods or services or similar goods or services.”

This situation should encourage trade mark owners who use or intend to use their trade marks in New Zealand to promptly apply to register those marks, if such marks are registrable.

Barbara Sullivan


 

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