Use of a trade mark within a corporate group

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  • Barry Meskin - Principal, Patent & Trade Mark Attorney
  • Principal, Patent & Trade Mark Attorney

After a registered trade mark is successfully obtained, the trade mark should be properly used to prevent the registration from being removed under Australia’s non-use provisions.

The registered owner of a trade mark is not required to use the trade mark themselves and may allow use of the trade mark by another person or entity.  To be considered proper use of the trade mark, the use must be authorised use and should fall within the definition of an authorised user and authorised use as defined in section 8 of the Trade Marks Act 1995.

It is common for large businesses to have multiple legal entities, typically, by way of proprietary companies and for registered IP assets such as trade marks to be held in companies that are different from the entities that actually use the trade marks.  These situations can have implications for whether use of a trade mark is authorised in the Trade Marks Act 1995.

The decision handed down by the Federal Court of Australia in Trident Seafoods Corporation v Trident Foods Pty Ltd [2019] FCAFC 100 provides trade mark owners with clarification on what is considered authorised use within the definition of the Trade Marks Act 1995 (Cth) in instances where the entity that owns the trade mark is not the same entity that uses the trade mark and where one of the company’s is a subsidiary of the other one.

Background

This case involves two Australian trade marks for TRIDENT owned by Trident Foods Pty Ltd (Trident Foods). The trade marks were registered in relation to goods in class 29 including fish and fish products.

Trident Foods is a wholly owned subsidiary of Manassen Foods Australia Pty Ltd (Manassen), who has used the TRIDENT trade marks in Australia for an extended period of time.

A third party, Trident Seafoods Corporation (Trident Seafoods), applied to remove the Trident Foods trade marks in Australia.  This resulted in a decision from the delegate, a Federal Court appeal and, subsequently, the present Full Court appeal.

While the case deals with a number aspects of trade mark law, one of the main clarifications provided by the Full Court is around use of a trade mark by parent and subsidiary companies in circumstances where there is no formal written licence agreement between the parent and subsidiary company that controls the use of the trade mark.

There was no formal license agreement between Manassen and Trident Foods until 3 November 2017, and the companies had argued that prior to this date, there was an unwritten license agreement between the Manassen and Trident Foods since 2000.

The delegate and Federal Court judge were not swayed by this argument and found that the trade marks were not used within the relevant period.  While the trade marks were ultimately not removed using discretionary powers, it was nonetheless found that the use by Manassen was not authorised use of the trade marks by Trident Foods due to the lack of a written licence agreement.

The Decision

On appeal, however, the Full Court disagreed and determined that use of the TRIDENT trade mark by Manassen was authorised by Trident Foods and as such, the use did qualify as authorised use under the Trade Marks Act 1995.

The court found that the issue is not whether one company controlled the other, but rather whether Trident Foods, even though a wholly owned subsidiary of Manassen, had control over Manassen’s use of the trade marks.

Significant factors considered by the court included that:

  • both companies had the same directors;
  • due to the fact that at all relevant times the companies had the same directors, they were considered to operate with a unity of purpose;
  • the directors of Trident Foods had obligations to ensure the maintenance of the value in the trade marks and, accordingly, “Trident Foods necessarily controlled Manassen’s use of the trade marks by reason of the simple fact that it owned the trade marks and its directors were also Manassen’s directors”;
  • the aim of the directors and both companies was therefore to maximise sales and enhance the value of the brand;
  • it is commercially unrealistic not to infer that the owners of the trade marks controlled the trade marks due to the desire of the common directors to ensure the maintenance and enhancement of the value of the brand; and
  • it is inconceivable that Manassen was using the marks without the knowledge, consent and authority of Trident Foods.

For these reasons, the court considered that the trade marks were actively used and that the active consent and authority of this use must constitute an unwritten licence for use of the trade marks.

Accordingly, Manassen was an authorised user, and its use was considered authorised use as defined under s8.  Accordingly, the trade marks had been used, and the conditions to remove the marks under s92(4)(b) of the Act were not satisfied.

Implications

In instances where companies have the same ownership and same directors, the use of a trade mark owned by one company by another company is likely to be considered authorised use if both companies and their directors are acting with unity of purpose.  This may make it easier for large companies with complex structures to establish that trade marks used by other companies within the group are authorised and under sufficient control as required by s8 of the Act.  Even in these situations, it is advisable that written licence agreements are in place to prevent having to prove unity of purpose.  In addition, it may not be possible to show unity of purpose if companies only have some directors in common and if some dealings are done on arm’s length commercial terms.

Registering a trade mark is a complex procedure that requires sound knowledge of trade marks law and regulations. As such, applicants are recommended to seek professional advice on trade mark applications. At Baxter IP, our trade mark attorneys are delighted to assist you in assessing your proposed trade marks and advising you on the best trade mark filing strategy.