Case Update: Trade mark ownership.

By: HEDIE MEKA PhD

Jurisprudence from the Australian Courts has made it clear that fundamental to the rights residing in a registered trade mark is use of the trade mark by the owner of the trade mark, or a third party authorised to use the trade mark by the trade mark owner. The decision by the Federal Court in Calico Global Pty Ltd v Calico LLC [2018] FCA 2096 serves as a yet another cautionary tale regarding the peril in not ensuring that correct ownership is monitored and any changes in ownership are recorded without delay on the Register. The case also is a reminder to ensure that the commercial use of the trade mark is directed services under the registration. As this case shows unequivocally, a registered trade mark will be vulnerable to removal from the Register if these requirements are not met.

This case was an appeal from a decision by the Registrar of Trade Marks to remove 1005184 for the word mark CALICO (the 184 mark) from the Register of Trade Marks in relation to services in class 44. Inter alia, class 44 encompasses medical services. The removal action was brought by Calico LLC, the respondent in the instant appeal. Founded in 2013, Calico LLC is a Google backed research and development biotechnology company focussed on anti-ageing and age-related diseases. Subsequent to filing of the 184 mark, Calico LLC applied for registration of CALICO in class 44 in respect of providing medical information, consultancy and advisory services for the treatment of aging, immunological diseases and degenerative conditions of the body, the promotion of life extension, and restoration of youthful bodily functions.

The class 44 services for the 184 mark for consideration at appeal was the provision of advice and information regarding diet, nutrition, exercise and fitness.

During the relevant non-use period, namely 3 years and 1 month prior to the filing date of the non-use application, the registered owner of the 184 mark was Kevin Owens. During the non-use period, Mr Owens assigned the entire right and title of the 184 trade mark to Calico Pty Ltd. Calico was part owned by Mr Owens and his wife. On the same day as the assignment, Calico granted an exclusive, royalty-free license to Calico Global Pty Ltd (‘Global’) in relation to the 184 mark. At the time, Calico Global was owned by Calico, and three other parties. Kevin Owens was managing director of each of Calico and Global, sole director of Calico, and a director of Global. Global became the registered owner in 2014 of the 184 mark.

The business model adopted by Mr Owens and related entities was a website-based service with an app that provided an online fitness and nutrition program. Users could optionally use “Calico fitness totems” to act as markers to signify that a certain distance had been traversed.

In order to prove that the 184 mark had been used during the relevant period, Calico Global needed to establish that the 184 mark was used in good faith by the registered owner, Mr Owens, or by an authorised user of the mark (Calico) or a licensee of the authorised user (Global).

Rares J, laid out in great detail the legislative scheme of trade mark ownership and use, but the essence of trade mark use under Australian law is as follows (paragraphs 28 and 29):

“In order to amount to use as a trade mark within the meaning of the Act, there must be use of the mark as a badge of origin of, relevantly, services, in the sense that the mark indicates a connection in the course of trade between services and the person who applies the mark to, or in relation to, the provision of the services.
….
In other words, the use of a mark as a trade mark is a use that informs, or signifies, in all the circumstances to third persons to whom a service is offered or provided in the course of trade, that the service originates from the registered, or common law, owner of the trade mark…”

Integral to the issue of authorised use is that an authorised user must be under the registered owner’s control, or the control of an assignee, so that there is a connection between the goods or services the registered owner of the trade mark.

On appeal, Global argued that since Mr Owen was the registered owner of the 184 mark and was a director/managing director of  Calico and Global, he exercised sufficient control over use of the 184 mark by Global, and, as such, use by Global was authorised use of Mr Owens. Furthermore, Calico Global contended that use by Calico as the unregistered assignee exercised sufficient control in the form of the license agreement over the use of the 184 mark so that use by Global amounted to authorised use of Calico.

Neither argument was successful. There was no evidence to support any use by Mr Owens or Calico that could amount to any actual instance of control by either party in relation to Global’s use of the 184 mark. Rares, J held that in light of the assignment of the 184 mark to Calico, Mr Owens was precluded from using the 184 mark as the registered owner since he had assigned his rights in, and gave up control of, the mark to Calico, who in turn granted an exclusive license to Global to use the mark as they wished. According to the court (paragraph 89), this arrangement had the legal effect of distancing Mr Owens from “exercising, as registered owner, any active or practical quality or other control over the services in relation to which the 184 mark was used.” Notwithstanding this, neither Mr Owens or Calico exercised any actual or other control over Global’s use of the 184 mark during the relevant period.

The argument that in light of Mr Owen’s role as director and managing director of Calico, it could be inferred that Calico, through Mr Owen and the license, controlled Global’s use of the mark was not successful. As the Court pointed out, Calico and Global each have a distinct legal personality to that of Mr Owens. Moreover, neither Calico nor Global was wholly owned by, or completely controlled by, Mr Owens. Based on evidence, both corporations were free to exploit the 184 mark as it saw fit, free of interference or by control by Mr Owen.

It is also worth noting that the Court found that the 184 mark had not been used in respect of the class 44 services as claimed. Therefore, even if it could have been shown that that Global’s use was authorised use by Mr Owen, the appeal would have failed on the basis of lack of use in class 44 services.

As a separate ground of appeal, the Court was asked by Global to exercise their discretion under s 101(3) and not remove the 184 mark from the Register. The conduct of Global et al to pressure Calico LLC to enter an agreement weighed heavily against exercising this discretion. Furthermore, the judge characterised Mr Owens and his son as lacking integrity in dealing with Calico LLC and giving evidence at trial. In the Court’s opinion as formulated by the evidence at trial, allowing the 184 mark to remain on the Register would allow Global to engage in behaviour to create confusion in the market place, and to pressure Calico LLC and Google into a commercial arrangement to avoid infringement proceedings. As such, the Court considered that the public interest was not served by allowing Global to be registered as owner of the 184 mark in respect of the services in class 44.

Take Home Message

This decision fortifies the criticality of ensuring the correct owner is recorded on the Register and that the owner of the mark exercise actual control over use of the trade mark by an authorised user of the trade mark. It is not sufficient to rely on indirect control from a director or majority shareholder. Failure to comply with the requirements of ownership and use can lead to the irrevocable loss of the trade mark registration.

Although the Court has broad discretionary powers, this power will only be invoked under certain circumstances and when reasonable to do so. As such, the Court’s discretion should not be viewed as a “get out of jail free card” if there are rudimentary problems with the trade mark, that may be exacerbated by conduct of the owner of the trade mark.