WET SEAL – Trade Mark Rectification

Rectification of trade mark – wrongful claim to ownership and use of trade mark deceptive - McPhail Sports Limited v J&M Fashions Limited

Introduction

Henry Hughes acted for the successful applicant in recent proceedings before the Assistant Commissioner concerning an application for a declaration of invalidity.

The decision considers and summarises the law relating to section 17(1)(a) of the Trade Marks Act 2002 (“the Act”), which states that the Commissioner of Trade Marks must not 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.

This decision also considers the law relating to wrongful claims to proprietorship by an applicant for registration of a trade mark (section 32(1)). This decision confirms that the person who applies to register a trade mark under the Act must be the owner of that trade mark in New Zealand, and that the first person to use a word mark in New Zealand for the goods in question usually has a superior claim to ownership over an applicant for registration who has made no use of the trade mark. (The Act has now been amended to specifically address this point.)

Background

McPhail Sports Limited (“McPhail”) was the proprietor of Trade Mark Registration No. 670712 WET SEAL in class 25 in respect of “clothing, including sleepwear, footwear and headgear”. This registration had an effective date of 16 December 2002. The application for registration claimed that McPhail proposed to use the trade mark.

On 12 November 2003, J & M Fashions Pty Limited (“J&M”) applied to register WET SEAL in class 25 in respect of “clothing, footwear, headgear”. On 13 November 2003, J&M filed an application for a declaration of invalidity in respect of Trade Mark No. 670712 WET SEAL. This application alleged that J&M has used, and continues to use, the trade mark WET SEAL in New Zealand in relation to clothing since at least 1993/1994, and that Trade Mark No. 670712 should not have been registered because:

(i) J&M is the true owner of the trade mark WET SEAL when used in relation to clothing in New Zealand, and McPhail accordingly made a wrongful claim to proprietorship in its application for registration (section 32(1) of the Act); and

(ii) Trade Mark No. 670712 was not validly registered because use of WET SEAL by McPhail would be likely to deceive or cause confusion (section 17(1)(a)), use of WET SEAL by McPhail is contrary to New Zealand law or would otherwise be disentitled to protection in any court (section 17(1)(b)(i)) and the application for the registration of WET SEAL by McPhail was made in bad faith (section 17(1)(b)(iii)). (The bad faith ground was not pursued at the hearing.)

The Assistant Commissioner’s Decision

Aggrieved Person

An application for a declaration of invalidity is made under section 73 of the Act. Section 73(1) requires that such an application be made by an “aggrieved person”.

The Assistant Commissioner found that J&M is an “aggrieved person”, because of its claim that it is the true owner of the WET SEAL trade mark in New Zealand in relation to clothing, and because its application to register its WET SEAL trade mark was blocked by McPhail’s conflicting registration.

Wrongful Claim to Ownership

In summary, J&M’s submissions in relation to the ownership claims were as follows:

(i) The person who applies to register a trade mark must be the owner of the trade mark. This is apparent from the definition of “owner” in section 5 of the Act which provides (in part): “… in relation to an unregistered trade mark, means the person who owns all of the rights in the mark”.

The amendment to section 32(1) of the Act sought in the Statutes Amendment Bill (No. 5) 2005 will insert into section 32(1) an express requirement that the person applying for registration of a trade mark must be the person claiming to be the owner. This amendment will not effect a substantive change to the law when it comes into force and it will not be retrospective in its operation.

(ii) The applicant for registration must possess a proprietary right which, if questioned, can be substantiated. The first person to use the trade mark in New Zealand for the goods in question usually has a superior claim to ownership over an applicant for registration who has made no use of the mark.

There are three requirements for a legitimate claim to proprietorship:

• there is no prior use or prior assertion of proprietorship;

• the applicant for registration is using or has a sufficiently definite intention to use the mark; and

• there is no fraud or breach of duty involved.

(Newnham v Table for Six (1996) Ltd (1998) 44 IPR 269 per Cartwright J. at page 278 – considering section 26(1) of the Trade Marks Act 1953 which was replaced by section 32(1) of the Act.)

(iii) To establish ownership it is sufficient that the trade mark is used publicly in New Zealand, as a trade mark. Even slight use will suffice – the use need not be sufficient to establish a local reputation: Moorgate Tobacco Co Ltd v Phillip Morris Ltd and another (1984) 3 IPR 556.

(iv) Prior to the relevant date J&M had used WET SEAL as a trade mark for clothing in New Zealand. It had used the trade mark continually and consistently for at least six years. There is no evidence that McPhail had used the trade mark before the relevant date. At the relevant date, McPhail was not the owner of the trade mark WET SEAL when used in relation to clothing.

The Assistant Commissioner (having regard to the evidence adduced by J&M) accepted J&M’s submissions on ownership and found that J&M is the true owner of the trade mark WET SEAL when used in relation to clothing in New Zealand, based on J&M’s use prior to the relevant date.

Use likely to deceive or cause confusion

Section 17(1)(a) of the Act provides that:

“The Commissioner must not … 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”.

The Assistant Commissioner summarised the law relating to section 17(1)(a) as follows:

(i) In determining whether a trade mark is likely to deceive or cause confusion the leading authority is Pioneer Hi-Bred Corn Company v Hy-Line Chicks Pty Ltd [1078] 2 NZLR 50. Another leading authority is Smith Hayden & Company’s Application (1945) RPC 97, 101. Both cases were cited with approval by Doogue J. in Anheuser-Busch Inc v Budweiser Budvar National Corporation [2001] 3 NZLR 472 at pages 676-678 and approved by the Court of Appeal [2003] 1 NZLR 472 at pages 478-479.

(ii) The relevant date for determining the parties’ rights in these proceedings is 16 December 2002 – the application date for, and effective registration date of, Trade Mark No. 670712.

(iii) In order to succeed on this ground, J&M must establish that it had used the WET SEAL trade mark in New Zealand in relation to the relevant goods before 16 December 2002 and, in so doing, that it had built up a sufficiently substantial reputation to lead to the possibility of confusion or deception in the marketplace.

(iv) The test in the Smith Hayden case (as applied in Anheuser-Busch) distinguishes between notional and actual uses of the trade marks as follows:

• one must take into consideration notional fair use by the applicant for registration (McPhail) in relation to all and any goods (any type of clothing) encompassed by the application;

• the comparison is with the actual use of J&M’s WET SEAL trade mark; and

• the style of use of J&M’s WET SEAL trade marks may be relevant. However “get-ups”, other aspects of the packaging, process, styles and designs of clothing are irrelevant.

(v) The ten “clearly settled” propositions set out in the Pioneer Hi-Bred case also apply.

(vi) Section 17(1)(a) requires that J&M establish an awareness of its (or some other party’s) trade mark or name in the relevant New Zealand market. It need not demonstrate prior use of its (or the other party’s) mark or name in New Zealand. The manner in which, or the source from which, knowledge has been acquired is immaterial.

The Assistant Commissioner summarised J&M’s submissions on this ground as follows:

(i) J&M has established an awareness of and reputation in its WET SEAL trade mark in New Zealand at the relevant date as a result of sales of its WET SEAL women’s and girls clothing in New Zealand since 1996.

(ii) J&M’s clothing was sold through outlets in Auckland, New Zealand’s largest population centre, and in Waihi, Coromandel, Tauranga, Mount Maunganui and Napier. These are all popular summer holiday destinations for young people therefore the populations of these places increase considerably over the summer months.

(iii) The sales figures and quantities of J&M’s WET SEAL clothing sold before the relevant date are significant. The unit prices of the goods are very low, and this increases the likelihood of confusion.

(iv) There is an overlap between J&M’s goods (clothing for women and girls) and McPhail’s specified goods (clothing, including sleepwear, footwear and headgear). J&M has demonstrated prior use of its WET SEAL trade mark in relation to clothing for women and girls. Some of that clothing, such as t-shirts, could be word by men or boys.

(v) The use of WET SEAL by McPhail in relation to clothing other than clothing for women and girls could still deceive and cause confusion. The type of clothing sold by J&M in New Zealand is sold side-by-side with all kinds of clothing (including clothing for men and boys) in beach wear, sports wear and street wear stores. A fair description of J&M’s goods and McPhail’s goods is “clothing”. There is no distinction for these purposes between clothing for women and girls and clothing for men and boys.

The Assistant Commissioner (having regard to the evidence adduced by J&M) accepted J&M’s submissions on deception and confusion and found that the use of the trade mark WET SEAL by McPhail at the relevant date would have been likely to deceive and cause confusion amongst a significant number of persons as contemplated by section 17(1)(a) of the Act. As a consequence, Trade Mark No. 670712 should not have been registered.

The Assistant Commissioner decided that, since he found in favour of J&M in respect of its claim under section 17(1)(a), there was no need to consider J&M’s claims under sections 17(1)(b)(i) and 17(1)(b)(iii).

Other Issues

The Assistant Commissioner also considered McPhail’s assertions that:

(i) its WET SEAL trade mark has acquired a distinctive character in relation to its goods since registration and hence must not be declared invalid pursuant to section 73(2) of the Act; and

(ii) if J&M is found to have used the WET SEAL trade mark in New Zealand since before the priority date then McPhail has honestly and concurrently used the trade mark and is entitled to maintain its registration by virtue of section 26(b) of the Act.

The Assistant Commissioner rejected both these arguments.

Conclusion

The Assistant Commissioner found for J&M and declared that Trade Mark No. 670712 WET SEAL is invalid and directed that this registration be removed from the register.

McPhail has not appealed.

Section 32(1) of the Act was amended by the Trade Marks Amendment Act 2005, which came into force on 14 December 2004. The provision now reads:

32 Application: how made

(1) A person claiming to be the owner of a trade mark or series of trade marks may, on payment of the prescribed fee (if any), apply in the prescribed manner (if any) for the registration of the trade mark or series of trade marks used or proposed to be used in respect of the following:

(a) particular goods or services within 1 or more classes:

(b) particular goods and services within 1 or more classes.

Barbara Sullivan - March 2006


 

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