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In brief - Trade mark owners should review existing licences

The Full Federal Court of Australia's recent judgement in Lodestar Anstalt v Campari America [2016] FCAFC 92 is an important one for trade mark owners. The Court's decision means that if the only use of a trade mark is unmonitored use by a licensee, that use may not be sufficient to withstand a challenge to registration.

Trade mark owner grants licensee use of the trade mark but does not exert quality control 

The owner of the trade mark had not itself used the trade mark in commerce in Australia. The owner of the trade mark did grant a perpetual, exclusive licence of the mark to an Australian licensee that allowed use of the owner's trade mark in Australia on wine manufactured and distributed by the Australian licensee, and the Australian licensee had used the licensed trade mark on its wine. 
 
The written licence agreement incorporated obligations to observe quality control measures which if not complied with would allow the licensor to terminate the license.
 
The owner did not apply "anything but the appearance of control" to the licensee's use of the trade mark.

Use of a trade mark under the Australian Commonwealth Trade Marks Act

In Australia, a registered trade mark is vulnerable to a third party application for removal on the basis of non-use if the registered trade mark is not used for a continuous period of three years, provided the trade mark has been registered for at least five years.
 
In Australian trade marks legislation (Trade Marks Act 1995), there will be relevant “use” of a trade mark if there has been commercial use by the registered owner or an “authorised user”. 
 
A licensee will be deemed to be an “authorised user” if it can be shown to be exercising its rights under the control of the registered owner, (for example, owner exercises quality control over the branded goods and/or services, or exercises control over the licensee’s trading activities). 

Full Federal Court finds that owner's lack of actual control means licensee is not an authorised user 

At the initial trial, the Court found that, on the basis of the decision in Yau's Entertainment v Asia Television [2002] FCAFC 378, the inclusion of an ability of the owner of the registered trade mark to exercise control was enough to make the licensee an “authorised user”, even if the owner did not take any action to actually control the licensee's use of the trade mark in any way.
 
The initial decision was appealed to the Full Federal Court which resulted in a very different judgement. The Court found that because the owner had not exerted any actual quality or other control of the use of the mark by its licensee, the licensee was not an “authorised user”, and the application to have the registration of the trade mark removed based on non-use by the owner was successful.

Trade mark owners must exert demonstrative and substantive control over licensees' use of the mark 

Registered trade marks remain at risk of removal on the basis of non-use and if the only use of a mark is unmonitored use by a licensee, that use may not be sufficient to withstand a challenge to registration.
 
If owners of trade marks do not use registered marks themselves, but have licensed them to third parties, the owners must exert demonstrative and substantiative control over the licensees' use of the mark. 
 
An example of a trade mark owner who does not use its marks would be an intellectual property holding company that has been set up to own intellectual property and that licenses the intellectual property of other companies who commercialise the intellectual property. 

Trade mark licence terms should be reviewed to ensure that control is ascertained or clear

To reduce the risk of loss of trade mark protection for non-use, post Lodestar Anstalt v Campari America, owners of trade marks may wish to consider (appropriate to their own circumstances): 
  1. reviewing existing written trade mark licence terms to ensure that they have demonstrative and substantiative rights to control the use of the licensed marks 
  2. amending any trade mark licenses to include appropriate control language, if no such rights exist or are inadequate 
  3. actually exerting control over the mark's use in Australia 

This article has been published by Colin Biggers & Paisley for information and education purposes only and is a general summary of the topic(s) presented. This article is not specific legal advice. Please seek your own legal advice for any questions you may have. All information contained in this article is subject to change. Colin Biggers & Paisley cannot be held responsible for any liability whatsoever, or for any loss howsoever arising from any reliance upon the contents of this article.​

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