iStock_000050094102_FullThe recent Federal Court of Australia decision in Skyy Spririts LLC v Lodestar Anstalt [2015] FCA 509 serves as a reminder that Australian registered trade marks are vulnerable to removal on the basis of non-use if licensing and structuring arrangements are not adequate.

Under the Australian Trade Marks Act 1995 (Cth) a trade mark may, upon application, be removed from the register if the registered owner has not used the trade mark in Australia for a continuous period of 3 years.

As part of a long running dispute between Wild Turkey Bourbon and Wild Geese Rare Irish Whisky about  their rights in Australia with respect to the trade marks “WILD TURKEY” and “WILD GEESE”, a non-use application was filed with IP Australia seeking removal of Wild Turkey Bourbon’s “WILD GEESE” trade mark registration.

Wild Turkey Bourbon had not in fact used the trade mark “WILD GEESE” in Australia.  It had however, as a result of another historical dispute, granted a perpetual licence of that trade mark, to an Australian wine making company, for a nominal fee of $1.00. 

The licensee had used the trade mark in Australia during the relevant period.

Section 7 of the Trade Marks Act provides that “authorised use” constitutes “use” of a trade mark by the registered owner of a trade mark.  The question was therefore whether the Australian wine company was an “authorised user” of Wild Turkey Bourbon.

Section 8 of the Trade Marks Act provides:

  • A person is an authorised user of a trade mark if the person uses the trade mark in relation to goods or services under the control of the owner of the trade mark.
  • The use of a trade mark by an authorised user of the trade mark is an authorised use of the trade mark to the extent only that the user uses the trade mark under the control of the owner of the trade mark.
  • If the owner of a trade mark exercises quality control over goods or services ….. the other person is taken, for the purposes of subsection (1), to use the trade mark in relation to the goods or services under the control of the owner.
  • If … the owner of the trade mark exercises financial control over the other person’s relevant trading activities, the other person is taken, for the purposes of subsection (1), to use the trade mark in relation to the goods or services under the control of the owner.
  • Subsections (3) and (4) do not limit the meaning of the expression under the control of in subsections (1) and (2).

The evidence showed that in practice, Wild Turkey Bourbon did not exercise any actual control over the way that the Australian wine company used the trade mark “WILD GEESE”, or any actual quality control with respect to the wine in relation to which the licensee used the mark.   There was also no financial control in the circumstances.

The Court considered a number of previous Australian decisions including CA Henschke & Co v Rosemount Estates Pty Ltd (2000) 52 IPR 42, where the court doubted that “control” for the purpose of section 8 could be established solely on the basis of the existence of a licence that could be terminated by the licensor.

Something more than this is required, and fortunately for Wild Turkey Bourbon, it had a written licence agreement with the Australian wine company that included clauses that contractually imposed obligations to observe quality control measures.  Notwithstanding that Wild Turkey Bourbon exercised no actual control in practice, the possibility of control given by the licence terms and conditions was considered to be enough to qualify the licensee as an authorised user.  Accordingly the Wild Turkey Bourbon’s “WILD GEESE” registration was not removed.

This case demonstrates the importance of having written trade mark licences in place between IP holding entities and operations entities, and the inclusion of appropriate “control” provisions in those licences.

The question as to whether there is “authorised use” arises where an IP holding company is the registered owner of a trade mark portfolio, and a separate operations entity is the only entity that is actually using the mark on goods or services in the course of trade.

In this context, note also that characterisation as an “authorised user” can, subject to any agreement with the registered owner, provide the licensee with certain powers under the Trade Marks Act.  These include the right to bring an action for trade mark infringement and the right to give Australian Customs a notice objecting to the importation of goods that infringe a trade mark.  The ability to bring infringement proceedings can be extremely important, notwithstanding that the licensor may also be willing to take such action, if you consider that a licensor cannot recover its licensee’s damages.

IP structuring arrangements can also be relevant when considering whether the parallel importation of “grey goods” into Australia infringes a registered trade mark.  Section 123 of the Trade Marks Act provides a defence to infringement if the relevant trade mark “has been applied to, or in relation to the goods, by, or with the consent of, the registered owner of the trade mark”.

If a single IP holding company is the registered owner of a portfolio of international trade marks, section 123 may protect an importer who acquires goods from a manufacturer or supplier who has a licence from the IP holding company for a territory outside Australia.  If that result is not intended, appropriate conditions and limitations need to be specified in the relevant distribution agreements and manufacturing licences.   Alternatively consideration can be given to a different IP holding structure.