A recent decision of the Full Court of the Federal Court of Australia is the latest round in a long‑running fight in Australia and elsewhere between the owners respectively of the well-known WILD TURKEY bourbon whiskey brand (“the Wild Turkey Interests”) and WILD GEESE RARE IRISH WHISKEY (“the Irish Whiskey Interests”).
The Australian Trade Marks Act has “use it or lose it” provisions in relation to trade marks. Registered trade marks can be removed if the owner does not actively use the trade mark in Australia for a period of three years. If your trade mark has not been used by you, or by an authorised user on your behalf, it is possible for another party to apply to have your trade mark removed.
The Full Court in its judgment found that a mere right to control the use of a trade mark is insufficient to defend an application to have the trade mark removed for non-use. The decision may have serious implications for entities with trade mark licencing agreements.
On 21 June 2000, the Irish Whiskey Interests applied for, and obtained, registration of the word mark WILD GEESE in classes 32 and 33.
At around the same time, Mr Patrick O’Sullivan QC, a South Australian Queen’s Counsel and a winemaker, set up Wild Geese Wines Pty Ltd (WGW). WGW began operating a vineyard in the Adelaide Hills that sold merlot and later pinot noir under the label “WILD GEESE WINES”. The first vintage of Merlot was 2001.
WGW applied about 7 months after the Irish Whiskey Interests to register WILD GEESE WINES in a composite mark, but withdrew the application when the Trade Marks Office cited the Irish Whiskey Interests’ WILD GEESE mark.
Subsequently, in 2005, WGW sought to register the words WILD GEESE and WILD GEESE WINES as trade marks. It was apparent that the Wild Geese Whiskey had never been sold in Australia and therefore the trade mark WILD GEESE had not been used by the Irish Whiskey Interests. WGW accordingly made an application to have the trade mark removed for non-use.
The Wild Turkey Interests had also previously lodged an application to have the WILD GEESE mark removed for non-use.
Mr O’Sullivan contacted the Wild Turkey Interests and their initial response was to assert that WGW was infringing the WILD TURKEY mark. However, an agreement was eventually reached whereby WGW assigned all of its interests in its WILD GEESE trade marks, and its rights to apply for removal of the Irish Whiskey Interests’ mark, to the Wild Turkey Interests.
WGW was granted a perpetual and exclusive licence to use the trade mark to manufacture and distribute its wine in Australia for a one-off fee of $1.00. The agreement included quality control conditions that required the wine to be of a sufficient standard to obtain export approval and gave the Wild Turkey Interests the right to request samples of the wine.
The Irish Whiskey Interests’ trade mark for WILD GEESE was removed for non‑use after an earlier decision of the Full Federal Court.
In 2007, the Irish Whiskey Interests began selling their whiskey in Australia and wished to use the mark WILD GEESE. In September 2010, they brought an application to remove the Wild Turkey Interests’ trade mark for WILD GEESE arguing that it had not been used by the Wild Turkey Interests.
The Wild Turkey Interests did not use the mark, however, they argued that WGW used the trade mark to sell its wine as an authorised user under the licence agreement.
Section 8(1) of the Trade Marks Act provides that a person is an “authorised user” of a trade mark if the person uses the trade mark in relation to goods or services “under the control” of the owner. If there is authorised use, this is taken to be use by the trade mark owner. If the owner of a mark does not use the mark and relies on use by an authorised user, the owner must establish that use by the party that is asserted to be an authorised user is use that is under the control of the owner. Control is taken to be exercised if the owner:
although these provisions do not limit the meaning of “under the control of an owner” (section 8(5)).
Obviously, the Wild Turkey Interests did not exercise financial control over WGW. The main question considered by the Court was whether the Wild Turkey Interests exercised quality control. There was no doubt that the licencing agreement gave them a right to exercise quality control by testing the wine and requiring it to be of a sufficient standard. However, these control mechanisms were never actually enforced. There was no evidence of the Wild Turkey Interests monitoring WGW’s use of the trade mark.
The Wild Turkey Interests did request a wine sample in April 2011. While the request demonstrated control over the quality of the product, it was made after the non-use application had been lodged and, therefore, outside of the relevant period.
In his judgment, Katzman J recognised that control is not limited to financial control or quality control, by reason of section 8(5), but said:
“The language used in the two sub sections strongly suggests that – regardless of the form that the control might take – it is the exercise of control that matters, not merely the right to do so.”
The Full Court decided the mere fact that WGW was licenced to use the trade mark was insufficient to establish that control had been exercised. The mere existence of a control clause is not enough.
The Wild Turkey Interests applied for special leave to appeal the decision in the High Court, but the High Court has since dismissed the application stating there was no reason to doubt the correctness of the decision.
The most frequent situations in which trade marks are used by a party other than the owner is in a company group, where trade marks or other intellectual property is often held in a separate holding entity. We do not consider that the decision will impact licencing arrangements between a parent company and its subsidiary as the necessary degree of control will exist. This was recognised in the judgment of Besanko J who said:
“The meaning of ‘under the control of’ in s 8 is informed by the principles stated by Aickin J in Pioneer, that is to say, that the trade mark must indicate a connection in the course of trade with the registered owner. The connection may be slight, such as selection or quality control or control of the user in the sense in which a parent company controls a subsidiary.”
It is easy to see that a parent company will control a subsidiary. However, this may not necessarily be so if the owner of a trade mark and the user of the mark are companies in the same group, but not a holding company and a subsidiary. In many cases trade marks and other intellectual property may be held in a special purpose holding entity in a group, not the parent company. There may also be issues for franchise systems. Normally, there will be stringent quality control provisions in franchise licensing arrangements, but if control is exercised by an entity such as an area franchisor, not the owner of the franchised trade marks, there could be a risk of non-use.
In Healthworld Ltd v Shin-Sun Australia Pty Ltd a trade mark owner was unable to prove that a related company was an authorised user. The two companies had different shareholders who were members of the same family. The companies shared a general manager who was the majority shareholder of one company. There were common directors of the companies, but only for a short period prior to an application for the removal of the mark for non-use. There was no written agreement, and no evidence of any quality control or financial control.
The Wild Geese decision seems to spell the end for “set and forget” licencing arrangements. Trade mark owners can no longer rely on the mere right to control a trade mark through the provisions of licensing agreements, although having an agreement with suitable provisions is a good start. The owner must establish that actual control is being exercised. To ensure that trade mark owners avoid losing valuable trade mark rights, we recommend that owners:
The review of licensing arrangements, and the monitoring and enforcement of control provisions, should be undertaken both for licensing arrangements with third parties and with related or inter‑group entities. DW Fox Tucker can assist with the review and preparation, where necessary, of suitable documentation for licensing and control of trade marks.
 Lodestar Anstalt v Campari Inc  FCAFC92
 Trade Marks Act 1995 (Commonwealth)
 Trade Marks Act, Section 92
 Austin Nichols & Co Inc v Lodestar Anstalt (No 1) (2012) 202FCR490
 Lodestar Anstalt v Campari America LLC  FCAFC92 at para 169.
 Campari America LLC v Lodestar Anstalt  HCASL 312 (16 November 2016)
 Pioneer Kabushiki Kaisha v Registrar of Trade Marks (1977) 137 CLR 670, 683.
 Lodestar Anstalt v Campari America LLC  FCAFC 92 at para 95.
 Healthworld Ltd v Shin-Sun Australia Pty Ltd  FCA 100; Full Court  FCAFC 14.
 Healthworld Ltd v Shin-Sun Australia Pty Ltd  FCA 100 paras 60-64.
This communication provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Should you wish to discuss any matter raised in this report, or what it means for you, your business or your clients' businesses, please feel free to contact us.