Australia: The As Trustee For dilemma – should trust details be disclosed in Australian trade mark applications?

The discretionary trust is a very popular vehicle for carrying on a business in Australia and holding ownership of intellectual property assets.

A trust is a relationship between several parties. A settlor will entrust (or 'settle') property on a trustee to hold for the benefit of others (the beneficiaries). Both the trustee and the beneficiaries can be (and often are, in the context of a business trust) incorporated entities.

Legal ownership of trust property is held by the trustee. The trustee is at liberty to deal with the trust property, although it can be sued by the beneficiary if any dealing in the property is contrary to the terms of the trust, or if the trustee is in breach of duty.

Trustees as applicants for trade mark registration in Australia

It is common for corporate trustees to be the owner of registered trade marks, particularly where the trustee is the trading entity carrying on the business using the trade mark, or where the trustee is a holding company that licenses another entity to use the mark in question.

A trade mark cannot be filed in the name of the trust itself (e.g. ABC Trust), as the trust is a relationship and does not meet the requirements of having a legal personality.1

The trustee is entitled to file an application provided that it (i) claims to be the owner of the trade mark, and that it either (ii) has a genuine intention to: use the trade mark, authorize another person to use the trade mark, or assign the trade mark to a body corporate that is about to be constituted with a view to that body corporate using the trade mark.2

Whether a person filing a trade mark application has a valid claim to ownership of a trade mark is very important. Generally, the person who first uses a trade mark in Australia for particular goods or services has the best claim to ownership (or proprietorship) at common law. If a trade mark has not been used, the first person to file an application for a trade mark for particular goods or services has the best claim to ownership, provided they have a genuine intention to use the trade mark for those goods or services.

The Trade Marks Act 1995 does not contain any provisions specifically dealing with trustee applicants, nor does it distinguish between legal and beneficial ownership of trade marks. Provided that a trustee meets the requirements of the Trade Marks Act 1995, there is no reason to suggest that a trustee cannot apply for and validly register a trade mark that it holds for the benefit of another. In fact, to apply for a trade mark in a name other than that of the trustee in these circumstances may lead to invalidity of any resulting trade mark registration.

The Trade Marks Act 1995 also does not require all interests in a registered trade mark to be disclosed. Those who claim an interest a trade mark may choose to apply to the Registrar for that interest to be recorded.3 However, recordal of a claimed interest is not proof of existence of a right, nor does failure to record an interest mean that a legal or equitable interest is distinguished.

When filing an application, IP Australia as a matter of policy does not require that the trust relationship be disclosed by the applicant.

As such, at the time of filing, the applicant can either be named as the Trustee only, or the Trustee 'as trustee for' a particular trust.

What are the benefits of disclosing a trust relationship as part of the applicant name?

Many applicants choose to disclose the trust relationship by including it in the applicant name, for instance: ABC Pty Ltd, as trustee for the ABC Family Trust.

There are some benefits of disclosing the trust relationship as part of the applicant name.

First, it constitutes a statement by an applicant on the public record that they are applying in their capacity as trustee. This may be important if there is ever any dispute as to the existence of a trust relationship, or regarding the status of the trade mark as trust property.

Second, State legislation (for example the Trusts Act 1973 (Qld)), may in certain circumstances allow trust property to be transferred to a new trustee without any formal conveyance or assignment. The inclusion of trust details as part of an applicant name may assist allowing recordal of assignments before IP Australia in these cases, where evidence can be shown of the appointment of a new trustee.

Third, there is an argument that not disclosing the existence of a trust relationship as part of an applicant name does not meet the requirements of the Trade Marks Act 1995, as the person applying for registration is not doing so in their own capacity, but in their capacity as trustee. One could mount an argument that any application so filed is vulnerable to opposition or cancellation, on the grounds that the applicant named is not to the true proprietor in the fullest sense of the word (being only the legal owner, not the legal and beneficial owner). Filing an application disclosing the trust relationship as part of the applicant name eliminates this potential vulnerability.

However, the vulnerability is probably more theoretical than practical. Although the Federal Court has recently adopted a more restrictive interpretation of the Trade Marks Act with regards to valid claims to proprietorship and correctly naming the applicant at the time of filing, it would be surprising if a court considered a registration invalid on the basis that a person with a genuine claim to legal ownership did not disclose a trust relationship at the time of filing (particularly given there is no statutory requirement to do so, and other legal or equitable interests in registered trade marks are not required to be disclosed).

Even if the court found that there were grounds for cancellation or refusal of a registration in such circumstances, the court has discretion not to cancel the registration, and to rectify the register so that the trust relationship is disclosed.

What are the disadvantages of disclosing a trust relationship as part of the applicant name?

Unfortunately, disclosing the existence of a trust relationship in an applicant name can have unintended negative consequences.

In Australia, these consequences are generally more in the nature of an inconvenience.

For example, IP Australia may raise a conflicting trade mark objection under section 44 of the Trade Marks Act if the ownership details of similar marks are not identical. This includes situations where marks are in the name of the same legal owner, but one mark discloses the existence of the trust relationship and the other does not (e.g. one mark is owned by ABC Pty Ltd and the other is owned by ABC Pty Ltd as trustee for ABC Family Trust). The legal basis for such objections is questionable, but they can usually be overcome by provision of a letter of consent (somewhat absurdly, having the applicant consent to registration of the mark by themselves), or aligning of ownership details by assignment.

More significant unintended consequences can arise when a trade mark owner seeks to protect their mark internationally.

In order to do this, an applicant will either file applications directly with a foreign Trade Marks Office, or apply for an International Registration under the Madrid Protocol.

Many countries (particularly those with legal systems not based on English common law) do not recognize trust relationships. These countries will often not accept trust details as part of an owner name, or their treatment of trust details can be inconsistent.

In other countries, indicating a difference between legal and beneficial ownership of a trade mark could lead to later threats to validity of the mark.

A trade mark owner will also often claim 'convention priority' from their Australian application, meaning they can claim the date of filing their initial application in Australia as the date of filing in the foreign country. This claim for convention priority can be of crucial importance in securing rights in some countries, particularly first to file jurisdictions where application priority date normally determines who has better claims to the trade mark.

Sometimes it is necessary to omit trust details from an applicant name when filing foreign applications. However, this can cause other problems. An illustrative example is China, which is a large export markets for Australian companies.

China

China is a first to file jurisdiction (meaning the first person to file an application generally has the best claim to rights over the first person to use the trade mark), and trade mark squatting is a major problem for Australian businesses that manufacture or sell their products in China. As such, not being able to secure a trade mark registration in China can lead to major headaches and costs.

China generally accepts applications where the trust relationship is disclosed in the applicant name. However, when a corporate applicant files directly via the Chinese Trade Marks Office, the applicant is also required to provide a current Certificate of Incorporation.

A Certificate of Incorporation issued by ASIC will never contain trust details. The fact that a corporation may act as a trustee is generally of no interest to ASIC. Therefore, when filing in China, the applicant may need to omit trust details to ensure that its application is filed in the same name as appears on its Certificate of Incorporation, or the application may be rejected for not meeting Chinese formality requirements.

However, this will then mean that the application is filed in a different name to that which appears on the certified copy of the Australian application. This discrepancy can lead to a loss of the priority claim.

Other Countries

Every country has its own formalities requirements, and these can change from time to time.

Further, even if a particular country allows a trade mark to be accepted with trustee details disclosed in the applicant name, there is no guarantee that the validity of such an ownership claim will be upheld if the registration is ever challenged in a foreign court.

It is perfectly conceivable that a foreign court could be persuaded to cancel a registered trade mark on the basis of what it considers to be an imprecise or unclear claim to ownership. Evidentiary difficulties might also arise if third parties apply for removal of the mark on the grounds of non-use (for example, if evidence of use such as invoices is tendered that refers only to the legal owner, without mention of the trust).

The risk is higher in jurisdictions where courts may favour local parties over foreign plaintiffs/defendants, and where there is no established doctrine of precedent. In those cases, an ownership 'discrepancy' could be a convenient excuse to find against a foreign brand owner.

Madrid Protocol

International Applications filed under the Madrid Protocol are an increasingly popular and cost- effective method of filing trade mark applications in multiple countries simultaneously.

To file under the Madrid Protocol, the applicant must base the International Application on a 'basic' application or registration filed in a member country (generally, Australian companies rely on their existing Australian application or registration as the basic).

If the 'basic' application/registration relied on discloses the trust relationship as part of the applicant name, so will the International Application.

Generally, International Applications filed under the Madrid Protocol tend to be treated more leniently in regards to formalities requirements than those applications filed directly with the IP Office of a country.

For example, New Zealand does not allow trustee details to be disclosed in the applicant name for applications filed directly via IPONZ. However, the Commissioner will not raise an objection if such an application is filed in New Zealand via the Madrid Protocol.4

While formalities objections based on trust details are usually not raised against applications filed under the Madrid Protocol, there is no guarantee that a member country will not object to such applicant names at some stage, or that issues will not arise when it comes to enforcing the mark, or defending the mark against cancellation or removal.

Is it better to disclose trust details in the applicant name or not disclose?

This will depend on the client's situation. Other commercial and legal considerations (for instance, taxation, asset protection, and contractual issues) may override the trade mark specific issues discussed above.

However, from a trade mark centric position, if the client only wishes to register their trade mark in Australia, there are some advantages and few disadvantages to disclosing the trust relationship in the applicant name.

If the client wishes to also file their trade mark in other countries, and wishes to rely on their Australian mark as the basis for a claim for convention priority, or as the basis for filing an International Application via the Madrid Protocol, it is probably more advantageous to omit trust details from the applicant name in Australia, as it can reduce potential complications in foreign countries.

However, each situation must be considered on its facts. In certain cases, advice from a foreign IP practitioner may be advisable to determine the best course of action, particularly where a trade mark owner intends to engage in significant licensing activities in that foreign country.

Footnotes

1 Trade Marks Act 1995, s27(2)(c).

2 Trade Marks Act 1995, s27(1)

3 Trade Marks Act 1995, Part 11.

4 See s183 Trade Marks Act 2002 (NZ); and https://www.iponz.govt.nz/about-ip/trade-marks/practice-guidelines/current/filing-trade-mark-applications/

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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