In an interesting and long-anticipated decision, the Federal Court has ordered the partial cancellation of registrations for the trade marks DUNLOP and (DUNLOP/FLYING D Marks) on the basis that, through its failure to properly control the use of the marks, the trade mark owner allowed its foreign supplier (and owner of the DUNLOP/FLYING D Marks in other jurisdictions) to develop an independent reputation in those marks in the Australian marketplace to such an extent that the marks came to signify the foreign supplier and not the trade mark owner.

Background

As the case involved a complex fact scenario covering over 120 years of use of the DUNLOP mark in Australia, it is not possible to go into the facts in any great detail in this article. 

A short summary of the relevant facts is set out below:

  • Dunlop Aircraft Tyres Limited and its predecessors (DATL) manufactured aircraft tyres under the name DUNLOP in the United Kingdom since at least 1910 and under the logo  in the UK since the mid-1950s.  It is the owner of those marks in the United Kingdom.
  • Goodyear Australia and its predecessors in title (Goodyear AU) were the registered proprietor of the marks DUNLOP (registered since 1910) and  (since 1965) in Australia (Dunlop Registrations) in relation to, amongst other goods and services, aircraft tyres.  The Goodyear Tire & Rubber Company (Goodyear US) wholly acquired Goodyear AU in 2006, and the Dunlop Registrations were assigned to it.  Goodyear US then licensed the use of the Dunlop Registrations back to Goodyear AU.
  • Prior to 1987, Goodyear AU manufactured aircraft tyres under the DUNLOP/FLYING D Marks in Australia.  However, it was unable to manufacture all types of aircraft tyres so, from around 1925 to 2015, it imported and sold in Australia aircraft tyres manufactured by DATL bearing the DUNLOP/FLYING D Marks.  At no stage did Goodyear AU exercise any quality or other control over the tyres made by DATL.  Further, from 1987 to 2015, the only aircraft tyres sold in Australia by Goodyear AU bearing the DUNLOP/FLYING D Marks were sourced from DATL.
  • In 2009, DATL sought to register the DUNLOP/FLYING D Marks in Australia in its own name in relation to aircraft tyres, but these registrations were successfully opposed by Goodyear AU and Goodyear US (the Goodyear Parties) on ownership and lack of honesty of use grounds (Opposition Decision).

 In 2015, DATL ceased its arrangements with Goodyear AU and commenced selling aircraft tyres under the DUNLOP/FLYING D Marks in Australia through a different distributor. 

  • The Goodyear Parties commenced proceedings against DATL in the Federal Court (Nicholas J) on the grounds of trade mark infringement and misleading and deceptive conduct.  In response, DATL sought revocation of the Dunlop Registrations in relation to aircraft tyres and related goods and services on the grounds of non-use and cancellation of the Dunlop Registrations on the grounds that their continued registration/use by the Goodyear Parties would cause consumer confusion.  DATL also appealed the Opposition Decision.

Revocation for Non-Use

The Court held that the Dunlop Registrations should not be revoked in relation to 'aircraft tyres', as Goodyear AU's sale of DUNLOP/FLYING D branded aircraft tyres sourced from DATL was trade mark use for the purposes of the Act, even though neither Goodyear AU nor Goodyear US exercised any control over how DATL used the marks on those tyres. 

In coming to this conclusion, the Court made the following observations:

  1. In assessing whether a trade mark has been used under the control of a the trade mark owner, it is necessary to consider both:
    1. Whether the use was authorised; and
    2. Whether the use by the authorised party was trade mark use. 
  2. In terms of authorised use, while there needs to be 'actual control', this can include appropriate financial and managerial control.  As Goodyear AU was a wholly owned subsidiary of Goodyear US, and Goodyear US knew of and approved the use by Goodyear AU of the Dunlop Registered Marks in connection with tyres manufactured by DATL to DATL's standards, this was sufficient for 'authorised use' to be established, even though DATL was not subject to quality control by Goodyear US.
  3. In terms of 'trade mark use', as the DUNLOP/FLYING D Marks were used to signify that the aircraft tyres were made 'by or under the aegis of the registered owner of those marks or its authorised licensee', this was sufficient to establish that Goodyear US (through Goodyear AU) had used the marks the subject of the Dunlop Registrations, even though there was no relevant trade mark connexion between the aircraft tyres themselves and Goodyear US.

Cancellation Action

The Court held that the Dunlop Registrations should be cancelled in relation to aircraft tyre related goods and services on the basis that the continued maintenance of the Dunlop Registrations would cause consumer confusion, as the relevant market associated the DUNLOP/FLYING D Marks with DATL and not the Goodyear Parties.

In coming to this conclusion, the Court held that:

  1. the presumption of conclusive registration no longer applied to the Dunlop Registrations because the DUNLOP/FLYING D marks did not distinguish the Goodyear Parties' activities from those of DATL in relation to aircraft tyre related goods and services;
  2. the continued maintenance of the Dunlop Registrations for aircraft tyre related goods and services was likely to cause consumer confusion as the aircraft tyres market already associated the use of the DUNLOP/FLYING D Marks on aircraft tyre related goods and services with DATL (not the Goodyear Parties) and, more importantly, if the Goodyear Parties commenced using the DUNLOP/FLYING D Marks on their own aircraft tyres and related goods and services, consumers would assume that those goods and services are associated with DATL;
  3. the discretion to retain the Dunlop Registrations on the Register for aircraft tyre related goods and services should not be exercised as the Goodyear Parties were at 'fault' for the confusion as they failed to exercise any control over DATL's use of the DUNLOP/FLYING D marks in Australia and because, if the Dunlop Registrations were maintained, consumers would assume that Goodyear US controlled the entity who manufactured the DUNLOP/FLYING D branded aircraft tyres when this was not the case.

Importantly, the Court ruled that, while an order for cancellation could only operate prospectively (i.e. from the date of the Court order), the Goodyear Parties could not continue their 'primary' infringement action against DATL because, once the Dunlop Registrations were cancelled, Goodyear US was no longer the 'owner' of the Dunlop Registrations for the purposes of section 20(2) of the Trade Marks Act, and therefore no longer had standing to continue the action.

Appeal of the Opposition Decision

While the Court disagreed with the Delegate's finding that DATL's use of the DUNLOP/FLYING D Marks was not honest, the Court upheld the Delegate's decision to refuse DATL's applications on ownership grounds, on the basis that ownership overrides acceptance on the basis of honest concurrent use.

In coming to this conclusion, the Court observed that:

  1. DATL's use of the DUNLOP/FLYING D Marks was honest, as it had not used those marks contrary to any agreement between the parties or to 'misappropriate' or diminish Goodyear US's goodwill or rights in the Dunlop Registrations, and the marks had come to signify that the aircraft tyres were made by DATL — section 44(3)(a) (honest concurrent use) would therefore have applied; however
  2. Goodyear US was the owner of the DUNLOP/FLYING D Marks in relation to 'aircraft tyres' at the time of DATL's applications, as mere non-use of a mark was not sufficient, without more, to constitute abandonment of ownership, particularly in circumstances where steps had been taken to maintain the registrations and the maintenance of the Dunlop Registrations would have likely been maintained to serve as a deterrent to DATL obtaining registration in its own right — section 58 (refusal on ownership grounds) therefore applied over and above acceptance on the grounds of honest concurrent use.

Infringement/Misleading and Deceptive Conduct

The Goodyear Parties were unsuccessful in their claims for trade mark infringement and misleading and deceptive conduct.

The Court considered that, while aircraft tyre related goods and services were similar to other tyre related goods and services, there would be no consumer confusion, as consumers already associated the DUNLOP/FLYING D Marks with DATL in relation to aircraft tyre related goods and services. 

The Court also held that consumers would not be misled or deceived were DATL to offer aircraft tyre related goods and services under the DUNLOP/FLYING D marks independently of the Goodyear Parties, as this idea was based on the 'unreasonable assumption' that consumers in the specialised and sophisticated aircraft tyre industry would not appreciate that a supplier could legally appoint a different distributor in Australia.

Key Points

While the case relies on a somewhat unique factual scenario, it provides a number of key messages for trade mark owners and their advisors:

  1. The importance of licensing and brand protection — The case highlights that even the most distinctive registered trade mark may become vulnerable to cancellation if the trade mark owner allows it to be used in such a way as it comes to signify the goods/services of third parties.  Trade mark owners should therefore take appropriate brand protection steps, such as appropriate licensing arrangements with suppliers (including clear recognition of the trade mark owner on the supplied goods) and enforcement, in order to protect their trade mark rights.

    This aspect of brand protection is likely to become increasingly important with the advent of global ecommerce sites and fast and reliable international shipping, as local trade mark owners may find that their rights are being usurped by foreign trade mark owners taking advantage of those means to establish a reputation in their own right in Australia.
  2. Control is more than just 'quality control' — While a trade mark owner must engage in 'actual control' of the use of its mark, this can be satisfied by means other than quality control — in particular, where a trade mark owner exercises financial and managerial control over a trade mark user, it will be sufficient if the trade mark owner 'knew of and approved' the intended use of the trade mark by that user (even if that use is not otherwise subject to quality control by the trade mark owner).
  3. Cancellation as a sword and a shield— This case confirms that counterclaiming for cancellation of a trade mark is an effective strategy when facing an infringement action — if the counterclaim is successful, then, based on the decision in this case, the trade mark owner may be prevented from obtaining relief in respect of the alleged infringing conduct as it will no longer have standing to maintain its infringement action.

The decision has been appealed to the Full Federal Court.

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.