The recent Federal Court decision surrounding Trident Foods Pty Ltd sends a warning to trade mark owners to exercise actual control over licensees or risk a messy non-use battle. The decision involved two appeals, one against a refusal to remove one of Trident Foods’ (TF) mark TRIDENT from the Register for non-use. The Registrar’s Delegate had found there was no use of the mark, but exercised the discretion under s.101 of the Trade Marks Act (1995) (Cth) to retain the registration.
To defeat a non-use removal application, a trade mark owner must establish use of the mark, or that it authorised its use, during the non-use period. Section 8 of the Act provides that an authorised user must use the mark in relation to the goods under the control of the owner. It provides examples where control will be satisfied including where the owner exercises:
- quality control over the goods in relation to which mark is used, or
- financial control over the party using the mark.
Financial control is generally exercised where a trade mark owner is the parent company and its subsidiary the licensee.
In Trident, TF could not establish use of the mark during the non-use period but argued that it had authorised its use, within the meaning of s.8, by its parent company, Manassen Foods Australia Pty Ltd (Manassen). Manassen had sold Trident branded goods in Australia since 2000. TF argued the requisite control was exercised citing: the companies’ common directors; their common ultimate holding company; Manassen’s compliance with the ultimate holding company’s quality control manual; an argument that it was common for separate entities such as wholly owned subsidiaries to own IP; and the fact that there was an unwritten licence agreement in place which was formalised in 2017.
Referring to Lodestar Anstalt v Campari America LLC [2016] FCAFC 92, Gleeson J held that “authorised use involves use under the ‘actual’ control of the trade mark owner. There must be control “as a matter of substance” although connection with the registered owner indicated by the trade mark may be slight.”
Neither the corporate relationship of the companies, their common offices, nor the fact the companies had common directors resulted in the requisite exercise of control, the Court found. Further, while there had been assertions of actual control, there was no evidence to support this. The Court did not accept that a trade mark notice demonstrated the requisite control or that there was an unwritten licence agreement in place. TF therefore failed to establish that Manassen was an authorised user, and the Court found there had been no use of the mark. Fortunately, for TF the Court exercised the discretion to retain its TRIDENT registration.
It is not unusual for a holding company or a wholly owned subsidiary to own trade marks and then licence the use of the mark to another entity. Often taxation and asset protection considerations dictate these types of arrangements. However, following this decision trade mark owners should revisit their licensing arrangements to ensure a licensee’s use is an ‘authorised use’ and to avoid non-use issues in future.
