Branding : Am I Honest If I Am Not Dishonest?

The need for Australian businesses to maintain records of trade mark searches and evidence that consumers would experience no confusion before adopting a brand have never been more important.

Following the High Court’s decision in Firstmac,¹ Courts are increasingly expecting businesses to show they did their homework before adopting a brand, including taking reasonable steps to check for existing trade mark rights, to avail themselves of the statutory honest concurrent use defence² to trade mark infringement. The question in Firstmac focused largely on what are such reasonable steps.

The High Court confirmed that whilst two businesses can sometimes end up using similar trade marks independently and in good faith, the later business must still be able to demonstrate it used its brand honestly and without intending to mislead customers. The issue in Firstmac was how to demonstrate the honesty requirements at the relevant time. The Court found that the time at which the defences of honest concurrent use are to be assessed is the time of each alleged potential infringement.

As background to the Firstmac decision, the Zip companies (nearly a decade after Firstmac had registered its ZIP mark) led evidence that they had conducted frequent internet searches for the name ZIP in the course of planning and developing the business but none of those searches returned results for Firstmac’s ZIP home loan products. The Zip companies then filed a trade mark application for the ZIP MONEY and ZIP logos. After receiving an adverse examination report on those marks, they continued to use the marks and faced significant difficulties in establishing that their conduct was honest for the purpose of the defence. Although awareness of a competing registered mark does not automatically disqualify business from showing honest concurrent use, a business which decides to proceed regardless must be able to affirmatively explain why their conduct remained honest.

The High Court found that the standard for an honest state of mind appears to require that a person seeking to establish honest concurrent use “had a genuine belief that use and adoption of its mark would not be likely to cause confusion, or in some way trade off the goodwill of the earlier registered trade mark”. However importantly, proof of such a belief will not always be sufficient to establish an honest state of mind and mere knowledge of the competing mark will not preclude a finding of honesty.

In assessing honesty for themselves, Firstmac’s case, was not whether the Zip Companies were dishonest but was instead whether the Zip Companies had discharged their onus of positively proving their honesty. The Court held that the Zip Companies had not proved their honesty in circumstances in which they were aware of the likelihood of a material impediment to the legitimate use of the Zip Companies’ marks and they had chosen not to engage with the adverse examination reports.

The High Court in deciding the honesty element, noted that the Zip Companies did not lead evidence sufficient for a finding that, despite knowing of a material impediment to the legitimate use of the Zip Companies’ marks, consumers would experience no confusion between the Zip Companies’ marks and the Firstmac Mark. Nor did the Zip Companies lead evidence sufficient for a finding that although they had not turned their mind to these matters, they had not been reckless in this failure to do so. These gaps in the evidentiary record and findings precluded a conclusion that the Zip Companies had proved their honesty.

Following Firstmac, revisions to the Trade Marks Examiners Manual have adopted this reasoning into trade mark examination. The following matters are now listed as the relevant considerations in the examination of honest concurrent use:

• Was the applicant aware of the conflicting trade mark?
• What enquiries did the applicant make before commencing use?
• If no enquiries were made, what is the reason for this (and would someone in the applicant’s position have been reasonably expected to do more)?
• If the applicant was aware of the conflicting mark, why did they choose to proceed? For instance, did they genuinely believe that their use of the mark was unlikely to cause confusion?

Footnotes

1. Zip Co Limited v Firstmac Limited ²⁰⁰⁶ HCA 16.

2. Trade Marks Act 1995 (Cth), s 44(3).

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.