Australia: Lodestar Anstalt v Campari America LLC [2016] FCAFC 92

Last Updated: 11 February 2017
Article by Michael Deacon and Chris Bevitt

The Parties

Campari America LLC (Campari America) was the registered trade mark owner. Lodestar Anstalt (Lodestar) applied to remove the trade marks from the register on the basis of non-use. The judgment of the Full Federal Court (Allsop CJ, Greenwood, Besanko, Nicholas and Katzmann JJ) relates to an appeal by Lodestar from the first instance Federal Court decision of Perram J, who allowed Campari America's appeal against the original decision by the Registrar of Trade Marks to remove the trade marks from the register.

The Trade Marks

The Australian trade marks in issue were WILD GEESE WINES (No. 1066646) and WILD GEESE (No. 1066650), both registered in class 33 for "wine" (the Wild Geese Marks).

Background and Issues

The background to this case is somewhat convoluted, so only key aspects are summarised here.

Wild Geese Wines Pty Ltd (WGW) transferred to Campari America's predecessor ownership of the Wild Geese Marks. In exchange, Campari America's predecessor granted WGW a perpetual licence to use the Wild Geese Marks for wine exclusively in Australia. For simplicity, we refer to Campari America's predecessor and Campari America as "Campari".

The licence included standard trade mark licence terms. It also included the following specific requirements relating to quality control:

  • the wine to which WGW applied the Wild Geese Marks must meet the quality standards required for the Australian Wine and Brandy Corporation (AWBC) to approve the wine for export; and
  • WGW must provide samples of the wine on request from Campari to AWBC, Campari or the Australian Wine Research Institute to confirm compliance with the required quality standards.

Campari was also entitled to terminate the licence if WGW breached the licence in a material way.

Under section 92 of the Trade Marks Act 1995, a trade mark registration may be removed if the trade mark owner has not used the trade mark in Australia in relation to the goods for which it is registered for a continuous period of 3 years. An application cannot be brought until the trade mark has been registered for 5 years (section 93(2)). Section 7 of the Act provides that an "authorised use" of a trade mark by a person is taken to be use of the trade mark by the trade mark owner.

Importantly, section 8 of the Act confirms that a person is an "authorised user" if it uses the mark in relation to the relevant goods or services "under the control of the owner of the trade mark" and use of the mark is an "authorised use" only to the extent that the user uses the mark under the control of the trade mark owner. Trade mark owners have traditionally relied on trade mark licences similar to the one in this case to establish the element of control required by the Act.

As part of a long-running worldwide battle for control of the Wild Geese name, Lodestar, which manufactured whisky under the brand "Wild Geese", applied to remove the Wild Geese Marks from the register under section 92 on the basis that the marks had not been used by Campari.

Campari had not used the Wild Geese Marks in Australia during the relevant 3 year period. It was also apparent that Campari never requested samples of the wine produced by WGW and did not take any steps to monitor the manufacture or sale of wines by WGW in Australia, even though it was entitled to do so by the terms of the licence.

During the relevant 3 year period, WGW sold in Australia wines with labels featuring WILD GEESE WINES, such as the following:

Campari argued that use of the Wild Geese Marks by WGW on the wines in accordance with the licence was "authorised use" and therefore constituted use by Campari for the purpose of refuting Lodestar's non-use application.

Previous Decision

At first instance, Perram J held that WGW had made "authorised use" of the Wild Geese Marks, despite evidence suggesting that Campari had exercised no actual control over the use of the marks by WGW. In reaching his decision, Justice Perram indicated that he was bound to follow the Full Court decision of Yau's Entertainment Pty Ltd v Asia Television Ltd [2002] FACFC 78, which he felt required only the possibility of contractual control by the trade mark owner over use of the mark by the user to establish "authorised use", even though he disagreed with that principle.

The Decision

The Full Federal Court disagreed with Justice Perram's interpretation of Yau and overturned the decision, holding that the Trade Marks Act 1995 required more than just a theoretical possibility of contractual control over use of a trade mark to establish "authorised use".

In considering the meaning of "under the control" of the trade mark owner for the purposes of section 8, the Court referred to the judgment of Aickin J in Pioneer Kabushiki Kaisha v Registrar of Trade Marks [1977] HCA 56 in support of the proposition that the trade mark owner must exercise a sufficient degree of control over the quality of the goods manufactured under licence in order for the trade mark to serve its purpose of indicating a connection in the course of trade between those goods and the trade mark owner as contemplated by Pioneer. The degree of control required for that purpose will depend on the circumstances of the case.

In this case, the Court found that neither Campari nor the licence terms had any impact or control over WGW's manufacturing processes or the quality of the wine it produced, noting that: (a) the AWBC standard was so low (with virtually all wines approved at first instance) that its use in the licence as a benchmark for quality control was merely illusory; (b) Campari never requested samples of the wine, nor were any samples supplied to Campari for quality control purposes, during the relevant 3 year period; and (c) Campari never monitored WGW's operations or use of the Wild Geese Marks.

The Court held that Campari had not made use of the Wild Geese Marks during the relevant 3 year period and could not rely on use of the marks by WGW for the purposes of section 92 because Campari had exercised no actual control over WGW or its use of the Wild Geese Marks.

The Significance

The decision confirms that a trade mark owner must exercise actual control over use of the trade mark by its "authorised user" to establish use of the mark for the purposes of section 92. A mere possibility of control will be insufficient, even if that possibility is provided by contractual terms agreed between the trade mark owner and authorised user. Note that this decision applies primarily to third party licensees. Under section 8(4) of the Trade Marks Act 1995, if the owner of a trade mark exercises financial control over the user's relevant trading activities, the user is taken to do so under the control of the owner.

Trade mark owners should ensure not only that their trade mark licences (and other commercial agreements involving use of their marks) permit them to exercise control over the use of their trade marks, but should also take actual steps to exercise that control to avoid the risk of their trade mark registrations becoming vulnerable to removal for non-use.

Read full Lodestar Anstalt v Campari judgment

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Shelston IP ranked one of Australia's leading Intellectual Property firms in 2015.

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