Do You Own Your Trade Mark?

A trade mark may be one of the most valuable assets of a business. It may be a name, a word or words, or a logo, or a combination of these.

Use by Other Entities

It is common in business groups for assets, including trade marks, to be held by a group entity that is not the trading entity using the trade mark(s) of the group for goods or services. If a trade mark is held or applied for by a person or entity that will not use the mark, considerable care must be taken to ensure that the mark is not susceptible to removal, or worse, that it is not validly registered in the first place.

The Need for Control

In a previous article (Wild Geese: The Bird has Flown) we commented on the decision of the Federal Court in the “Wild Geese Wines” case.^[1] The main lesson from that case was that if a trade mark is licensed to another user, the owner must exercise real control over the licensee in the use of the mark. It is not sufficient if a licence agreement exists and provides rights of control, these rights must actually be exercised to comply with Section 8 of the Trade Marks Act.^[2]

The Court in the Wild Geese case adopted the words of Aiken J^[3] and said that “A trade mark must indicate a connection in the course of trade with the registered owner”.^[4]

The result in the Wild Geese case was that the mark was removed for non-use as no control was in fact exercised although rights to control existed in an agreement.

Control in a Corporate Group

Besanko J in the Wild Geese case indicated that control of a subsidiary by a parent company, where the parent company holds the registered trade mark, may be sufficient saying:

“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”^[5]

However, if the entity holding the registered trade mark in a group is not a holding company of the entity that is actually using the trade mark, this control may not be inferred, even if there is common ownership or management.^[6]

If the relationship of a holding company and subsidiary does not exist (or, prudently, even if it does) to ensure that a registered trade mark is not vulnerable to removal for non-use, a licence agreement should ideally be in place with obligations for quality and rights of control, and the rights should regularly be exercised by the entity that holds the trade mark.

Invalid Registration: Who is the Wwner?

A recent case of Pham Global Pty Ltd v Insight Clinical Imaging Pty Ltd^[7] (“Insight case”) has illustrated an even more fundamental problem that may arise. A trade mark that is registered or applied for may not be capable of registration if the registered holder or applicant is not the user of the mark.

There were many issues in the Insight case, but relevantly the Federal Court at first instance (Davies J)^[8] and on appeal (Greenwood Jagot and Beach JJ) found that a trade mark (the words INSIGHT RADIOLOGY with a logo) which had been applied for by a Mr Pham could not be registered as Mr Pham was not the owner of the mark.

Davies J found (and the Full Court accepted) that the true owner of the mark was a company which had at times various names including Insight Radiology Pty Ltd (“Insight”).  Mr Pham was the sole director of Insight and he and his wife were shareholders. The Judge found that the mark was designed for use by the company for its business purposes and that Mr Pham acted for and on behalf of the company, not in his own right, in having the logo of the mark designed.^[9]

It was argued by Mr Pham that he intended to use the trade mark by licensing it to Insight, relying on Section 27(1)(b)(ii) of the Trade Marks Act. Section 27, relevantly, reads:

1. A person may apply for the registration of a trade mark in respect of goods and/or services if:

1. the person claims to be the owner of the trade mark; and
2. one of the following applies:

1. the person is using or intends to use the trade mark in relation to the goods and/or services;
2. the person has authorised or intends to authorise another person to use the trade mark in relation to the goods and/or services;

The Judge did not accept the evidence of Mr Pham saying:

“The evidence considered as a whole strongly suggests to the contrary that it was never intended by Mr Pham that he would use the mark himself, whether by licensing the companies or otherwise but rather that his intention was always for Insight Radiology to use the mark in connection with its business, which, the evidence shows, has been the case.

Accordingly, I do not accept Mr Pham’s evidence that it was his intention to licence Insight Radiology and AMA Healthcare to use the IR composite mark, which I do not consider to be truthful of his actual intention at the time in the light of evidence as a whole.  Consistent with the origin of the IR composite mark and its actual use I find that Mr Pham, as the controller of Insight Radiology, intended at the date of filing of the application that Insight Radiology would use the IR composite mark, not that he would use the IR composite mark either in the immediate future or at all.”^[10]

Accordingly the primary judge and the Full Court found that Mr Pham was not the owner of the trade mark and could not apply for registration.

The Full Court, citing earlier authority, used the tag line that the Trade Marks Act provides for:

registration of ownership not ownership by registration.^[11]

Can Assignment Cure an Ownership Defect?

Mr Pham attempted to cure any problems with ownership of the trade mark by assigning the trade mark to Insight during the course of the application, and after opposition had been made to registration. The primary judge Davies J accepted that this did cure the defect, as Insight was then the owner of the mark and held that opposition to registration failed.^[12]

The Full Court, however, did not agree. It held that Mr Pham did not own the mark so he could not assign it.^[13] The Court held that even if Mr Pham could assign the mark, the assignment after the application was immaterial. The defect in ownership existed at the time of application and subsequent assignment could not cure that defect.^[14]

Trade Marks at Risk

It can be seen from cases, particularly the Wild Geese and Insight cases, that a registered trade mark may be at risk under the Trade Marks Act of removal for non-use (Section 92), for cancellation (Section 88) or opposition to an application for registration (Section 58) on the basis of non-ownership if the trade mark is not used by the registered holder or applicant for the mark.

Licence Agreements

To preclude the possibility of removal for non-use, a Licence Agreement in appropriate terms with conditions for control should be put in place between the trade mark owner or applicant and the user, and control should be exercised.

The existence of a licence may also assist an argument against an assertion that the registered holder or applicant is not the owner of the trade mark (as was found in the Insight case) but this will not be conclusive if the licence is introduced after the application or registration of the mark.

New Applications

If a trade mark is registered in circumstances such as those of the Insight case, particularly in the name of an individual (although this could also be a company) and there are concerns that a licence agreement will not cure any defect in ownership, and a potential invalidity of registration, the only safe course appears to be a new application for registration of the trade mark. Before this action is taken, however, advice should be obtained and searches made to consider the possible consequences.

When an application is to made for a new trade mark, careful consideration should be given to the identity of the applicant if the applicant will not be the user of the trade mark. It may be prudent to put a Licence Agreement in place at the time of application to clearly establish the intention of the applicant to use the mark by licensing it.

If there is any doubt about existing marks, it would be prudent to obtain advice.