The Full Federal Court of Australia provides a welcome reality check to the meaning of an “authorised user” of a trade mark
12 Aug '19

Last year UNIQUE reported on a Federal Court decision having significant ramifications for trade mark owners who structure their IP arrangements by housing their IP assets in a separate entity from their trading entity. Benefits of these structuring arrangements include asset protection (e.g. insulating valuable IP assets from potential disgruntled creditors) and tax (e.g. sharing revenue in the form of inter-group IP licensing fees). 

As our regular readers know only too well, a registered trade mark can be removed from the Register if it is not used within a prescribed period. The use must be by the owner or an ‘authorised user’. The meaning of ‘authorised user’ has proven fertile ground for trade mark lawyers in recent years. 

In the case of Trident Seafoods the Court, at first instance, held that a company’s use of a registered trade mark owned in the name of its wholly-owned subsidiary, was not authorised use within the meaning of section 8 of the Trade Marks Act

However, in a decision that should be lauded for its commercial sensibility, the Full Federal Court has ruled that the parent company (Manassen) was in fact an authorised user of the TRIDENT trade marks owned by the subsidiary (Trident Foods). 

How the Court arrived at its conclusion of authorised use

In reaching this conclusion the Full Federal Court observed:

  1. The Full Federal Court’s earlier decision in the Lodestar case which made clear that ‘actual’ control was required to establish authorised use.
  2. Determining actual control is a question of fact and degree.
  3. Control can arise where there is “obedience” to the trade mark owner.
  4. It is not necessary to assess which company has control over the other but rather whether the owner had control over the use by the parent entity.
  5. The Full Federal Court held there was “relevant control”. To this end, it was noted both companies were acting with “unity of purpose” with each having directors in common.
  6. In the circumstances, the subsidiary controlled the parent’s use of the trade marks because it owned the marks and its directors, who were also the parent’s directors, must have had one common purpose: to maximise sales and to grow the brand.
  7. It was “commercially unrealistic” not to infer that the directors wished to ensure the maintenance and enhancement of the value of the brand.
  8. The Court also noted that the two companies had shared processes which explained why there was no ‘actual control’ being exercised over the parent. It was clear that the parent was using the trade marks with the knowledge, consent and authority of the owner, Trident Foods.

A couple of take aways

  1. A wholly owned subsidiary can be used to hold a corporate group’s IP assets. 
  2. Authorised use, and the determination of control, is a question of fact and degree.
  3. In this case, the commonality of directors and the companies’ shared processes helped prove authorised use.
  4. A well drafted and managed trade mark licence agreement remains the best strategy to prove authorised use and to help defend an action for the removal of a trade mark on grounds of non-use. 
Trident Seafoods Corporation v Trident Foods Pty Ltd [2019] FCAFC 100 (Reeves, Jagot and Rangiah JJ)

 

This update is provided by way of general information only and is not legal advice. Always obtain your own independent legal advice tailored to your business’ particular circumstances before making decisions relating to the legal issues referred to above. In this regard, we’re here to help. You can contact us on (03) 9596 8495 or at hello@bchn.com.au.