Tasman Insulation New Zealand Limited (Tasman Insulation) is the registered trade mark owner. Knauf Insulation Limited (Knauf) is the alleged infringer of the trade mark. In response to the infringement claim, Knauf sought to revoke registration of the trade mark on the basis that it had become generic and was not being used by Tasman Insulation as a trade mark. This New Zealand Court of Appeal judgment (Randerson, French and Cooper JJ) relates to appeals by both parties from various aspects of the earlier High Court judgment of Brown J in this case.
Note that unlike in Australia, New Zealand's High Court is not the court of final recourse. The New Zealand Supreme Court performs that function.
The Trade Mark
The New Zealand trade mark in issue was BATTS (No. 105507), registered in class 17 for "insulating materials".
Background and Issues
Tasman Insulation has been the owner of the New Zealand trade mark registration for BATTS in respect of insulating materials since 1973. Knauf was importing into New Zealand insulation products under the primary brand "Earthwool", but was also using "batts" on its product packaging, labels, instructions and in the HTML code for an image on its website relating to the products.
Tasman Insulation claimed that Knauf's use of "batts" for its insulation products and in the HTML code infringed Tasman Insulation's BATTS trade mark. In response, Knauf applied to revoke Tasman Insulation's BATTS trade mark registration on the basis that "batts" had become generic in New Zealand and Tasman Insulation was not using "batts" as a trade mark. Knauf also sought to defend the trade mark infringement claim by asserting that it had not used "batts" as a trade mark but had used the name honestly and merely to describe the nature or quality of its products.
Both parties also made claims under the Fair Trading Act 1986 (NZ), including in relation to misleading and deceptive conduct, but those claims are not discussed here.
Revocation – generecism and non-use
Section 66(1)(c) of the Trade Marks Act 2002 (NZ) provides that a trade mark may be revoked for becoming generic only if it has become a common name in general public use for the relevant goods or services as a result of the trade mark owner's acts or inactivity. Justice Brown confirmed that the applicant carries a heavy burden of proof in order to establish not only that the mark has become a common name but has done so as a result of its owner's acts or inactivity.
For the purposes of section 66(1)(c), "acts" include positive acts to protect the trade mark or encourage its use by others as a trade mark while "inactivity" includes a failure to take measures to protect the mark. Importantly, Brown J noted that inactivity must be considered by reference to unauthorised trade mark use by others. For example, a failure to act in response to descriptive use of a mark by a third party that would not infringe the trade mark would not amount to inactivity because the trade mark owner would not be legally entitled to take action against such use.
The evidence showed that third parties had been using "batts" descriptively. However, the evidence also showed that Tasman Insulation had taken a number of positive steps in connection with protecting BATTS, managing its use as a trade mark by others and/or indicating that it was being used as a trade mark, including: (i) using ® with BATTS; (ii) using BATTS® as an adjective in advertising materials to indicate the origin of its insulating materials (being use as a trade mark); (iii) issuing branding style guides to control use of the mark, including by requiring the mark to be used as an adjective only and encouraging its use with an already generic name such as "product" or "insulation"; (iv) notifying customers in writing of its trade mark rights in connection with BATTS; and (v) taking action for infringement in some cases.
Considering that Tasman Insulation was not obliged to take action against descriptive use of "batts" by others and that Tasman Insulation had been taking positive steps to protect its BATTS trade mark registration, Brown J held that Knauf had failed to prove that "batts" had become a common name as a result of Tasman Insulation's acts or inactivity. In any case, Brown J was not convinced that "batts" had become generic based on the evidence before him.
Justice Brown also held that the evidence showed Tasman Insulation had used "batts" as a trade mark.
As a result, Knauf failed in its bid to revoke Tasman Insulation's BATTS trade mark registration.
Justice Brown held that the use of "batts" by Knauf on its product packaging, labels and instructions was not use as a trade mark and therefore did not infringe Tasman Insulation's BATTS trade mark. Noting that Knauf had been using "batts" in lower case without any other distinctive features and taking into account all the circumstances surrounding its use, including the additional "Earthwool" branding, the nature of the market and customers of insulation products, Brown J considered that the relevant public would view Knauf's use of "batts" as describing its products rather than as a trade mark indicating the source or origin of the products.
However, Brown J held that Knauf's use of "batts" in the HTML code was use as a trade mark which infringed Tasman Insulation's BATTS trade mark. In that instance, "batts" would be visible to relevant internet users in a manner which did not simply describe the products but rather acted to identify the source of the products on the website. Knauf's defence that it was merely using "batts" honestly to describe its products failed, with Brown J deciding that "batts" had been used with the intention of diverting consumers to Knauf's website.
The Court of Appeal upheld all aspects of the High Court's decision except for the finding that Knauf's use of "batts" in the HTML code infringed Tasman Insulation's BATTS trade mark. Instead, the Court of Appeal took the view that use of "batts" in the HTML code did not amount to use as a trade mark and therefore could not be infringing use, primarily on the basis that HTML code would appear random to consumers and would not convey the meaning necessary for "batts" to operate as a trade mark or be recognised in that manner by consumers.
As a result, both the revocation actions by Knauf and the infringement actions by Tasman Insulation were ultimately dismissed.
This case reinforces well-understood principles that a trade mark owner with a trade mark which is at risk of becoming generic must actively manage its own use of the trade mark and use by distributors and customers, and also actively defend the trade mark against infringement. Somewhat ironically, such infringement action by Tasman Insulation in this case was to no avail due to the Court's finding that Knauf's use was not use as a trade mark.
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