January 2020

Unity of Purpose - a new common-sense approach for trade marks in corporate groups

The decision in the recent Trident Seafoods case in the Full Federal Court has introduced a more relaxed and arguably more appropriate test for ‘authorised use’ of a trade mark within a corporate group.

Let’s dive in:

Facts

Trident Foods Pty Ltd (Trident Foods) owns trade marks in Australia for the word ‘TRIDENT’, registered in class 29 for meat, fish and other seafood products (Trident Foods Marks).

Since about 2000, all sales under the Trident Foods Marks had been by Manassen Foods Australia Pty Ltd (Manassen).  Trident Foods is a wholly owned subsidiary of Manassen.

Trident Seafoods Corporation (Trident Seafoods) applied to register its Trident Seafoods logo as a trade mark in Class 29 for seafood and edible oils products, but was blocked by the pre-existing Trident Foods Marks.

This drove Trident Seafoods to apply to have the Trident Foods Marks removed for non-use.

A trade mark can be removed for non-use if it is not used by the owner, or an authorised user, of the trade mark for a continuous period of three years.

Main issue – authorised use of a trade mark

As Trident Foods had not itself used the Trident Foods Marks during the relevant non-use period, the main issue to be resolved was whether or not Manassen was an ‘authorised user’ of the Trident Foods Marks. In other words, was Manassen’s use of the Trident Foods Marks under the control of Trident Foods?

If Manassen was proven to be an authorised user, the use by Manassen during the non-use period would be taken to be use of the Trident Foods Marks by Trident Foods itself, defeating the revocation for non-use application brought by Trident Seafoods.

The actual control test

In dealing with the issue of ‘authorised use’, the primary judge applied the actual control test established in prior cases, including the decision in Lodestar Anstalt v Campari America LLC (2016) 244 FCR 557 (Lodestar) which was the leading authority on ‘authorised use’ prior to this case.

The actual control test requires a trade mark owner to not only show that there are mechanisms of control in place which permit the trade mark owner to exercise control over the user of the trade mark (eg a formal licence agreement with audit and inspection rights) but to also show actual exercise of those mechanisms (eg by showing the user actually provided product samples or other examples of trade mark use to the trade mark owner for review and approval at regular intervals).

The primary judge held that Trident Foods did not provide any evidence of ‘actual’ control over Manassen’s use of the Trident Foods Marks, which meant that the Trident Foods Marks were susceptible to removal from the register for non-use.

A new test – unity of purpose

The Full Court reversed the primary judge’s decision on the issue of ‘authorised use’ and in doing so introduced a new and more relaxed unity of purpose test for ‘authorised use’ of a trade mark within a corporate group. 

The key consideration under the unity of purpose test is still whether the trade mark owner has exercised control over the user’s use of the trade mark, but it differs from the actual control test because it allows the court to infer there has been sufficient control if the evidence shows that the trade mark owner and the user are part of the same corporate group and have operated with a 'unity of purpose'.

In coming to its decision, the Full Court placed particular significance on the fact that Trident Foods and Manassen shared common directors who were involved in the day-to-day operations of both companies and held that, because of this ‘unity of purpose’, it would be commercially unrealistic in the circumstances not to infer that the Trident Foods controlled the Manassen’s use of the marks.

Implications for the future

The application of the actual control test was always somewhat contrived in the context of companies in a related corporate group as the cases that established it (including Lodestar) were cases where there was no relationship between the owner and user of the marks beyond a licence. The introduction of the unity of purpose test by the Full Court in the Trident case indicates a more relaxed and arguably more appropriate test for ‘authorised use’ of a trade mark within a corporate group.

However, there is some uncertainty as to what is the level of connection needed between companies within a corporate group to establish a ‘unity of purpose’? It is unclear whether it is enough that the companies are related entities or whether, the companies must have the same directors or whether the directors must be involved in the day-to-day operations of both companies.

Key takeaway

While the unity of purpose test provides a welcome relaxation of the actual control test, there is still too much uncertainty for it to be relied upon broadly.

For related entities with different directors, and even those with the same directors who aren’t involved in the day-to-day operations, it is probably prudent to continue with the usual practice expected under the actual control test and ensure that appropriate licence agreements, with stringent control requirements, are in place.

 

Authors: Michael Cossetto and Puria Davoodi