Australia: Acquisition of a business: Hedging your IP bets

Last Updated: 17 November 2018
Article by Dorota Bryks

In Sportsbet Pty Ltd v Crownbet Pty Ltd [2018] FCA 1045, Australia's biggest non-retail bookmaker, Sportsbet Pty Ltd (Sportsbet), has been successful in obtaining an interlocutory injunction preventing rival, CrownBet Pty Ltd (CrownBet), from using the name 'SPORTINGBET'.

CrownBet acquired the name 'SPORTINGBET' as part of its acquisition of William Hill Australia Holdings Pty Ltd (William Hill), who had operated extensively under that name between 2002-2015. Despite this, the interlocutory injunction restrains CrownBet from using the name 'SPORTINGBET' until the final determination of the case, on the basis of considerations including the confusion the concurrence of 'SPORTINGBET' alongside Sportsbet's 'SPORTSBET' would cause to the betting marketplace, and the ramifications of this on Sportsbet's business.

The interlocutory order and Sportsbet's strong likelihood of success in the final determination, based on Justice Moshinsky's comments, indicates the importance of fully evaluating the value and usability of any intellectual property in commercial acquisitions and factoring this into both the purchase price and post-acquisition rebranding.

Background

  1. 2002 to 2015: William Hill operates under 'SPORTINGBET', before rebranding to 'WILLIAM HILL' in early 2015.
  2. December 2017: Crown Resorts Ltd sells its interest in CrownBet. Pursuant to this deal, CrownBet must cease using the name 'CROWNBET' on or before 26 August 2018.
  3. March 2018: CrownBet acquires William Hill. Pursuant to this deal, CrownBet must cease using the name 'WILLIAM HILL' on or before 22 October 2018. Also pursuant to the deal, CrownBet acquires the name 'SPORTINGBET'.
  4. Early June 2018: CrownBet's plan to rebrand to 'SPORTINGBET' from the end of August 2018 is made public.
  5. Late June 2018: Sportsbet commences legal proceedings against CrownBet seeking both an interlocutory (mid-proceedings) and final injunction to restrain Crownbet from using 'SPORTINGBET'. This is based on the claim that CrownBet's use of 'SPORTINGBET' for the provision of betting services would constitute misleading or deceptive conduct in breach of the Australian Consumer Law in the Competition and Consumer Act 2010 (Cth), and also infringe Sportsbet's trade marks.

The Decision for the Injunction

Alongside granting an interlocutory injunction restraining CrownBet from using 'SPORTINGBET', Justice Moshinsky in the Federal Court of Australia also indicated that Sportsbet have a "strong" prima facie case that if CrownBet were to start using 'SPORTINGBET', many bettors would be likely to assume a trade association between Sportsbet and CrownBet, and place bets with CrownBet/ SPORTINGBET in the mistaken belief that they were placing the bet with Sportsbet. This suggests Sportsbet is likely to be successful also in obtaining a final injunction against CrownBet.

CrownBet's Take

Wait, weren't 'SPORTINGBET' and 'SPORTSBET' being used concurrently between 2002 and 2015?

CrownBet argued that the 'SPORTINGBET' brand is still widely recognised in the marketplace given its extensive use between 2002 and 2015. Furthermore, during this period, William Hill's 'SPORTINGBET' and Sportsbet's 'SPORTSBET' were used concurrently, with no complaint by Sportsbet.

The Court rejected this argument as 'SPORTINGBET' has been out of use for 2-3 years, while the brand recognition of 'SPORTSBET' has grown significantly since 2015 as a result of substantial increases in marketing expenditure to promote the brand.

What about the fact that CrownBet can't use the names 'WILLIAM HILL' or 'CROWNBET' as per its contractual obligations?

The granting of an interlocutory injunction would require CrownBet to halt its plans to rebrand to 'SPORTINGBET' and immediately adopt a new name and migrate customers accordingly. CrownBet put forward the argument that given the time constraints, it would only be able to use one of its previous names, such as 'WILLIAM HILL' or 'CROWNBET', but that this would be impossible given the sale arrangements it has entered into with Crown Resorts Ltd and William Hill. The practical effect would be that even if CrownBet was ultimately successful and able to use the name 'SPORTINGBET', it would be unable to do so given the high costs of rebranding a second time following the first rebranding pursuant to the interlocutory injunction.

While accepting this as a reality, Justice Moshinsky nonetheless granted the interlocutory injunction and stated that the practical inconveniences CrownBet would face was in part CrownBet's own making, and that it should have recognised that a dispute based on the similarity of 'SPORTINGBET' and 'SPORTSBET' was likely to have commenced in light of its rebranding.

What does this mean for your company?

This case highlights the importance of undertaking thorough intellectual property due diligence in the process of acquiring a business.

It is particularly important that the practical usability of any trade marks that will be transferred as part of a sale is evaluated, to ensure that the value and associated goodwill, or lack thereof, is properly accounted for in determining the purchase price.

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.

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