Trade mark use control requirements in a corporate group eased by recent Full Federal Court decision

The Full Federal Court’s recent decision in Trident Seafoods Corporation v Trident Foods Pty Ltd [2019] FCAFC 100 provides useful guidance about control of trade mark use in a corporate group to ensure maintenance of registered trade mark validity. 

This issue commonly arises following changes to IP arrangements in a corporate group, either for tax reasons or as a result of an acquisition (as occurred in this case, where following an acquisition, the trade marks were owned by a wholly owned subsidiary and the parent company was the using entity).

Background

The case concerned a non-use challenge by a US headquartered seafood distributor (Trident Seafoods Corporation) brought against Australian trade marks owned by another company, Trident Foods Pty Limited. Trident Foods had for many years sold a range of food products in Australia under the TRIDENT brand and, likewise for many years, owned Australian trade mark registrations for the TRIDENT brand in relation to goods in class 29 for meat and fish products including sardines and mackerel. 

The removal application was prompted by Trident Seafoods’ application in 2013 to register its Trident Seafoods logo in class 29 for various seafood and related products, as registration of this logo was blocked by the prior TRIDENT marks owned by Trident Foods. In response to the non-use application, Trident Foods began using the TRIDENT mark on tuna, smoked oysters and smoked mussels products.

Trade mark authorised use recap

Under Australian trade mark law, 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’ (section 8(1), Trade Marks Act 1995 (Cth) or TMA). This concept of control includes the owner of the trade mark exercising quality control over the relevant goods or services, or the owner exercising financial control over the other person’s trading activities (section 8(3) and 8(4), TMA). The meaning of the expression ‘under the control of’ is not limited to financial or quality control (section 8(5), TMA). 

Maintenance of the validity of a trade mark depends, therefore, on there being use, and that the use indicates a connection in the course of trade with the registered owner. If the mark is used by someone other than the owner and that use is not controlled, there will be a risk of revocation for non-use or deceptiveness.

Trade mark use under the control of an owner in a corporate group with common directors/address

Here, the parent company was the using entity of the TRIDENT marks owned by its wholly owned Australian subsidiary Trident Foods. The companies had common directors and a common registered address and common principal place of business. Was there sufficient control exercised by the trade mark owner/subsidiary of the parent company’s use to avoid removal?

In reversing the first instance decision on this issue, the Full Court held that the key consideration was not whether one company controlled the other. Rather, the issue was whether the trade mark owner had control over the using entity’s use of the marks, even if the trade mark owner was a subsidiary. 

On the facts, the Full Court found that Trident Foods had used the marks in Australia during the relevant period and the parent’s use of the marks was authorised use under section 8(1) TMA.

It was significant that at all relevant times both the subsidiary, Trident Foods, and the parent company had the same directors, and it was to be inferred from the evidence that the two companies operated with a ‘unity of purpose’. 

The directors of Trident Foods had obligations to ensure the maintenance of the value of the trade marks, and to that end Trident Foods necessarily controlled the parent company’s use of the marks. This is because the directors, who were common to the companies, had one common purpose, being to maximise sales and to enhance value of the brand. It was commercially unrealistic in the circumstances not to infer that the owner of the marks controlled the use of the marks. 

The fact that the director of Trident Foods found it unnecessary to give directions in relation to use of the marks supported the unity of purpose which itself is indicative of control.

Protection of the valuable goodwill in the books of Trident Foods (A$10 million) required active engagement by the directors of Trident Foods, and it was inconceivable that the parent was using the marks without the knowledge, consent and authority of Trident Foods. The inference of control was also supported by the identification of Trident Foods as trade mark owner on products supplied by the parent. The group’s vendor quality management system was, however, of marginal relevance as it referred to neither company specifically and was is in general terms.

Key takeaways

The Full Court emphasised that the circumstances in this case were at the other end of the spectrum to other cases where there was no relationship at all between the owner of the trade marks and the using entity, beyond a licence.

The decision confirms that, in a corporate group, the key issue for maintenance of control is in fact the existence of supervision rather than corporate control. The Court will look at the commercial realities, and may infer that the owner of the marks has controlled use of the marks if the evidence shows that the trade mark owner and parent using entity have operated with the requisite ‘unity of purpose’.

In reaching this result, the decision of the Full Court appears to represent an easing of the standard required in a corporate group to establish the existence of control sufficient to ensure validity of a trade mark, over that discussed in the recent cases (see for example, Calico Global Pty Ltd v Calico LLC [2018] FCA 2096 applying Lodestar Anstalt v Campari America LLC (2016) 244 FCR 557, the decision of a Full Court five member bench which emphasised the need to exercise actual control to constitute ‘authorised use’ of a trade mark, albeit not in a corporate group context).

Also, on a day-to-day basis, there needs to be a practical and workable system of ‘actual control’ (short and practical guidelines as to brand use, notices, supervisions and inspections etc.) and a ‘paper trail’ of records to prove it.