FEDERAL COURT OF AUSTRALIA

TRADE PRACTICES – misleading or deceptive conduct – use by appellants of “Nike” as name of their products – relevance of consumers’ “erroneous assumption” that there was a connection between the appellants’ products and the respondents – character of question as one of fact – circumstances in which injunctions will be awarded.

TRADE MARKS – application for expungement of registered trade mark – whether mark wrongly remained in the Register due to use likely to deceive or cause confusion – “secondary operation” of s 28 of Trade Marks Act 1955 – whether s 28 operates in respect of post-registration conduct – whether registered proprietor of trade mark must be guilty of “blameworthy conduct” for mark to be expunged – what constitutes “blameworthy conduct” – whether conduct must cause likelihood of deception or confusion – relevance of conduct calculated to take advantage of likelihood of deception or confusion – whether applicants for expungement were “persons aggrieved” – whether applicants for expungement estopped from pursuing relief claimed.

Trade Marks Act 1955 (Cth), ss 22, 24, 28, 34, 61.

Trade Marks Act 1995 (Cth), ss 88(2)(c), 89,  250.

Trade Practices Act 1974 (Cth), ss 52, 75B, 80.

Nike International Ltd v United Pharmaceutical Industries (Aust) Pty Ltd (1996) 35 IPR 385, affirmed.

10th Cantanae Pty Ltd v Shoshana Pty Ltd (1987) 79 ALR 299, cited.

Commodore Business Machines Pty Ltd v Trade Practices Commission (1990) 92 ALR 563, cited.

Hogan v Pacific Dunlop Ltd (1988) 12 IPR 225, cited.

ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248, cited.

Kraft Foods Inc v Gaines Pet Food Corporation (1996) 65 FCR 104, distinguished.

Lego Australia Pty Ltd v Paul’s (Merchants) Pty Ltd (1982) 42 ALR 345, distinguished.

McWilliam’s Wines Pty Ltd v McDonald’s Systems of Australia Pty Ltd (1980) 49 FLR 455, distinguished.

Mikasa (NSW) Pty Ltd v Festival Stores (1972) 127 CLR 617, cited.

New South Wales Dairy Corporation v Murray Goulburn Co-operative Co Ltd (1990) 171 CLR 363, considered and applied.

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, distinguished.

Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177, cited.

The Ritz Hotel v Charles of the Ritz Limited (1988) 15 NSWLR 158, cited.

Trade Practices Commission v Glo Juice Pty Ltd (1987) 73 ALR 407, cited.

World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181, cited.

McIlhenny Company  v Blue Yonder Holdings Pty Ltd (1997) 149 ALR 496, cited.

R & C Products Pty Ltd v Abundant Earth Pty Ltd (1984) 55 ALR 38, cited.

Twentieth Century Fox Film Corporation v The South Australian Brewery Co. Ltd (1996) 66 FCR 451, cited.

Pacific Dunlop Ltd v Hogan (1989) 23 FCR 553, cited.

Berlei Hestia Industries Ltd v The Bali Company Inc (1973) 129 CLR 353, cited.

Murray Goulburn Co–operative Co. Ltd v New South Wales Dairy Corporation (1990) 24 FCR 370, cited.

Riv-Oland Marble Co. (Vic) Pty Ltd v Settef SpA (1988) 19 FCR 569, followed.

General Electric Co. v General Electric Co. Ltd [1972] 1 WLR 729, followed.

Southern Cross Refrigerating Company v Toowoomba Foundry Pty Ltd (1954) 91 CLR 592, cited.

Reckitt & Colman (Australia) Ltd v Boden (1945) 70 CLR 84, cited.

Canon Kabushiki Kaisha v Brook (1996) 69 FCR 401, cited.

Angelides v James Stedman Hendersons Sweets Ltd (1927) 40 CLR 43, cited.

Radio Corporation Pty Ltd v Disney (1937) 57 CLR 448, cited.

HTX International Pty Ltd v Semco Pty Ltd (1983) 49 ALR 636, cited.

Re Bali Brassiere Co Inc’s Registered Trade Mark and Berlei Ltd’s Application (1968) 118 CLR 128, cited.

New South Wales Dairy Corporation v Murray Goulburn Co-operative Co Ltd (1989) 86 ALR 549, cited.

Mrs Pommeroy Ld v Scalé (1906) 24 RPC 177, cited.

Holt & Coy. (Leeds) Ld’s Application for a Trade Mark (the “English Rose”) [1957] RPC 289, cited.

CAMPOMAR SOCIEDAD, LIMITADA & ANOR V NIKE INTERNATIONAL LIMITED & ANOR

NG 741 OF 1996

CAMPOMAR SOCIEDAD, LIMITADA V NIKE INTERNATIONAL LIMITED & ANOR

NG 839 OF 1996

 

 

JUDGES:       BURCHETT, SACKVILLE AND LEHANE JJ

DATE:            7 JULY 1998

PLACE:          SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA	NG 741  of   1996
NEW SOUTH WALES DISTRICT REGISTRY

 

on appeal from a single judge of the

federal court of australia

 

 

BETWEEN:	CAMPOMAR SOCIEDAD, LIMITADA First Appellant   NIKE COSMETICS SA Second AppELlant
AND:	NIKE INTERNATIONAL LIMITED First Respondent   NIKE AUSTRALIA PTY LTD Second Respondent
JUDGES:		BURCHETT, SACKVILLE AND LEHANE JJ
DATE OF ORDER:		7 JULY 1998
WHERE MADE:		SYDNEY

 

 

 

THE COURT ORDERS THAT:

 

1.         The appeal be dismissed with costs.

Note:  Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA	NG 839  of   1996
NEW SOUTH WALES DISTRICT REGISTRY

 

 

on appeal from a single judge of the

federal court of australia

 

BETWEEN:	CAMPOMAR SOCIEDAD, LIMITADA APPELLANT
AND:	NIKE INTERNATIONAL LIMITED First Respondent   NIKE AUSTRALIA PTY LTD Second Respondent
JUDGES:		BURCHETT, SACKVILLE AND LEHANE JJ
DATE OF ORDER:		7 JULY 1998
WHERE MADE:		SYDNEY

 

 

THE COURT ORDERS THAT:

1.         The appeal be dismissed with costs.

Note:  Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 741 of 1996 NG 839 of 1996

 

ON APpEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

 

BETWEEN:	CAMPOMAR SOCIEDAD, LIMITADA First Appellant   NIKE COSMETICS SA Second Appellant
AND:	NIKE INTERNATIONAL LIMITED First Respondent   NIKE AUSTRALIA PTY LTD Second Respondent

 

 

BETWEEN:   AND:	CAMPOMAR SOCIEDAD, LIMITADA Appellant   NIKE INTERNATIONAL LIMITED First Respondent
	NIKE AUSTRALIA PTY LTD Second Respondent

 

JUDGES:	BURCHETT, SACKVILLE AND LEHANE JJ
DATE:	7 JULY 1998
PLACE:	SYDNEY

REASONS FOR JUDGMENT

BURCHETT J

The great number of people who have travelled to Athens will have seen, high on a promontory of rock above the entrance to the Acropolis, the temple of the goddess Athena Nike, symbol and personification of victory.  On both sides in these appeals, the word “Nike” has been adopted as a trade mark - on the appellants’ side for cosmetics and toiletries, and on the respondents’ for sporting footwear and clothing.  It is the problem of the consequences of the double use of the name, in respect of goods in such widely different categories, that I shall discuss in these reasons.

At the outset, I should make it clear that the appeals fall to be decided upon the provisions of the Trade Marks Act 1955 (“the Act”), not those of the Trade Marks Act 1995 (“the new Act”).  That is because the proceedings were commenced prior to 1 January 1996: see s 250 of the new Act.

The appellant Campomar Sociedad, Limitada (“Campomar”) is a Spanish company, dealing in cosmetic and perfume products, which is the owner of a number of trade marks featuring the word “NIKE”, registered in Spain and in other countries, including the United States, in respect of perfumes and essences.  Its mark “NIKE” was registered in class 3 of the International Classification (as to which see Shanahan, Australian Law of Trade Marks and Passing Off, 2^nd ed (1990), at 50) by a predecessor in title known as Perfumes Nike in Spain on 10 June 1940, and in the United States with the priority date 18 August 1964.  Campomar obtained registration of “NIKE” in Australia in class 3 in respect of perfumery products of all kinds, without opposition, with the priority date 29 August 1986.  Before it did so, there had been an exchange of correspondence between Campomar and Nike Inc., representing the United States based group of companies which includes the respondents.  That correspondence concluded with a caution to Campomar against suggesting its products had the sponsorship or approval of Nike Inc., but accompanied by the clear statement: “we do not believe perfume and cosmetic products are part of this company’s image”.

On 2 August 1992, Campomar lodged an application for registration of its Australian mark in respect of further products in class 3, particularly soap.  Registration followed in due course.

Although, as the learned trial judge pointed out (see the decision at first instance reported as Nike International Ltd v United Pharmaceutical Industries (Aust) Pty Ltd (1996) 35 IPR 385 at 393), the marks owned by Campomar long predated those of the respondent Nike International Limited (Nike International), until about or just before 1986 Campomar’s trading was confined to Spain and North Africa.  None of its perfumes or other products was sold in Australia until 1993, and the marketing of them here lasted only for a brief period before ceasing as a result of these proceedings.

It does not follow that Campomar’s registered mark in Australia is simply to be regarded as a “new” mark, unworthy of protection if Nike International’s older (in purely Australian terms) registration in a different class comes into some collision with it.  The policy of the law in Australia has been stated by the Courts in terms which show they are conscious of the claims of persons who have an entitlement to marks overseas.  First invention of a mark, and first use of it overseas, were not seen as irrelevancies in Riv-Oland Marble Co (Vic) Pty Ltd v Settef SpA (1988) 19 FCR 569 at 601, where a number of cases were cited for the proposition that “courts are suspicious of attempts by one trader to appropriate the mark of another trader notwithstanding that the latter is a foreign trader and the mark has been used by him predominantly in a foreign country”.  At the very close of the twentieth century, as international commerce is rapidly blurring the boundaries between countries, this point of principle is even more important than when it was first perceived.  It ought therefore to be fully reflected in the decisions of the courts.  In particular, in my opinion, it is time to recognize that the phrase “other special circumstances” in s 34 (to which I shall refer), or any similar expression in a comparable provision (cf s 44(3)(b) of the new Act), is apt to include, in an appropriate case, circumstances involving the use of a mark overseas.

In any case, the earlier of Campomar’s two registrations, that dating from 29 August 1986, has the protection of s 61 of the Act, and is vulnerable, in these proceedings, only if it offends s 28.  That is because the proceedings were not commenced until 1994.

The respondent Nike International, for its part, was, by 29 August 1986, the registered owner of the trade mark “NIKE” (as from 8 January 1975) for goods in class 25 being “Athletic shoes for sports, athletic shoes for training, and athletic shoes for general use; and athletic uniforms”; as the owner of the mark “NIKE” (as from 19 April 1979) for all goods in class 18, and also for all goods in class 28; and as the owner of the mark “NIKE” (as from 21 January 1981) for all goods in class 25.  Nike International then had, as well, registrations for a device mark which was subsequently registered in combination with the word “NIKE”, so as to form a thick, curved underlining of it.  But neither of the respondents has ever been registered as the owner of a mark in class 3.  In relation to sporting footwear and clothing, the respondents have made “NIKE”, as their mark, a very well known name.

A remarkable feature of this case is the wide difference between the categories of goods to which the appellants’ mark “NIKE” relates and the categories of goods to which the respondents’ mark “NIKE” relates.  The various registrations reflect this difference.  Class 3, which is set out in Schedule 4 to the Trade Marks Regulations 1958, comprises:

“Bleaching preparations and other substances for laundry use; cleaning, polishing, scouring and abrasive preparations; soaps; perfumery, essential oils, cosmetics, hair lotions; dentifrices”.

That is the class to which both of Campomar’s registrations relate.  Classes 18, 25 and 28, to each of which registrations by the respondent Nike International relate, are as follows:

“18.  Leather and imitations of leather, and goods made of these materials and not included in other classes; animal skins, hides; trunks and travelling bags; umbrellas, parasols and walking sticks; whips, harness and saddlery

...

25.  Clothing, footwear, headgear

...

28.  Games and playthings; gymnastic and sporting articles not included in other classes; decorations for Christmas trees”.

Classes 3, 18, 25 and 28 are also to be found, expressed in the same terms, in Schedule 1 to the Trade Marks Regulations 1995.

When Campomar began to promote its fragrances in Australia in 1993, it did so in a way that emphasized sporting associations in respect of its products, selling a “sport fragrance” which was displayed in pharmacies together with other sports fragrances, particularly one produced or licensed by Adidas. Although the reputation of Nike International related to sporting footwear and clothing, not fragrances, some confusion ensued.  The respondents brought the present proceedings promptly, in which they sought relief under ss 52 and 75B of the Trade Practices Act 1974 and in passing off, as well as under the Act.  Pending the resolution of the dispute, sale of the appellants’ products ceased, and at the hearing the appellants’ counsel made it clear that the only resumption of sales to Australia contemplated by the appellants was of Nike fragrances the packaging of which would not include the word “sports”.  The respondents, however, called evidence of a practice known as “brand extension”, by which a strong and well recognized brand, related to a particular category of product, may find application (through licensing or otherwise) in the sale of other products.  For example, the manufacturer of Porsche motor vehicles was said to have licensed the use of the Porsche name on sunglasses, and, as has been indicated, the brand name Adidas, well known for sporting footwear and clothing, has also been applied to fragrances.  Fragrances, according to this evidence, and it was accepted by the trial judge, are particularly dependent for their attraction upon the imagery associated with them, which may be picked up from a well known name, though that name might originally have gained its appeal in a quite different context.  The emphasis on the sporting associations of the appellants’ fragrances during the brief period when they were actually marketed in Australia was plainly apt to lead people to infer some relationship with the sporting products of Nike International.  But, in addition, the evidence showed that, even apart from the marketing of the fragrances in a way calculated to draw attention to sporting associations, the mere use of a name so well known as “NIKE” was apt to cause persons to infer that the owner of the sportswear trade mark was or might be engaging in brand extension.  The trial judge so found.  He also said (at 394-395) that persons “would immediately associate the product with Nike International in some way.  They would be likely to think that the product had Nike’s approval or was sponsored by it ... .  Some would be likely to consider that it was a product manufactured or distributed by Nike International itself.”

However, his Honour did not immediately uphold the claim under s 52 of the Trade Practices Act on that account.  He found it necessary to consider the question “whether customers believing that Campomar products were in some way connected with Nike were misled into thinking as they did by Campomar or whether the erroneous assumption they made was made because they misled themselves ... .”  If Campomar’s trade mark was valid, it could not be correct to conclude, simply from its use on the fragrances in respect of which it was registered, that Campomar was representing its products as having an association with a different manufacturer whose mark was registered in respect of a different category of goods.  Any confusion that might result would not be because of a misrepresentation by Campomar, but because of the policy of the Act in respect of the registration of trade marks.  See McWilliam’s Wines Pty Ltd v McDonald’s System of Australia Pty Ltd (1980) 33 ALR 394 at 404-405, 411-412, 413-416; reasoning which was examined and approved in Parkdale Custom Built Furniture Proprietary Limited v Puxu Proprietary Limited (1982) 149 CLR 191 by Mason J at 203-204 and by Brennan J at 225 - see also the remarks of Gibbs CJ at 198-199.  For present purposes, the important thing to note is that the trial judge adverted to this point (at 395), and that he proceeded to make findings and orders in reliance on s 52 of the Trade Practices Act, and on the principles relating to passing off, which were not limited to the use of the mark in association with the word “sports”, but forbad the use of the mark simpliciter, only after first finding that the trade mark registrations should be expunged from the register.  That finding, as his Honour put it (at 408), removed the entitlement of the appellants “to rely upon the existence of registered trade marks as a defence”.

So the primary question in the appeals is whether the trial judge was entitled to hold that the appellants’ mark was liable to be expunged as a mark “wrongly ... remaining in the Register” within s 22(1)(b) because it had become “[a] mark ... the use of which would be likely to deceive or cause confusion” within s 28(a).  He so held on the ground that the reputation of the sporting products of Nike International had grown so great it cast its shadow, by virtue of the practice of brand extension as a feature of commerce, over a category of goods in which the appellants had a lawfully registered mark, long maintained overseas, a category far removed from sporting footwear or clothing and any interest in which Nike International had expressly disclaimed.  It is important to recognize that the conclusion must be grounded in Nike International’s reputation, not in the appellants’ abortive attempt at passing off by emphasizing a sporting image for their products.  That attempt, briefly pursued and soon abandoned, impugned their conduct; it did not make the use of the mark in itself likely to deceive or cause confusion.  The authorities do not suggest that any act of passing off associated with the sale of goods bearing a trade mark will lead to a forfeiture of the mark under s 28(a).  Of course, a prolonged indulgence in such conduct might have had the effect of making the mark one the use of which would have been likely to deceive or cause confusion:  cf The Kettle Chip Company Pty Limited v Apand Pty Limited (1993) 46 FCR 152 at 174-175.  That is not this case.  Here, the problem is whether the impact of Nike International’s name has become so powerful that normal use of the appellants’ mark will have the effect proscribed by s 28(a).  Subject to an issue of conduct to be discussed, it was because the trial judge thought this was the position that he held the mark should be expunged.

Before examining the authorities on s 28(a), I think it is not irrelevant to remark how surprising this result is.  For the conclusion must follow that the registered trade mark of any ordinary trader will always be at risk if another trader, though dealing in a quite different area geographically or commercially, who has an identical or similar registered trade mark, happens to achieve commercial greatness.  There are warnings in the authorities against a view of s 28 which would encourage an assiduous infringer at the expense of a registered owner:  Re Bali Brassiere Co Inc’s Registered Trade Mark and Berlei Ltd’s Application (1968) 118 CLR 128 at 133; Riv-Oland Marble at 574; HTX International Pty Ltd v Semco Pty Ltd (1983) 49 ALR 636 at 644.  Nike International is not an assiduous infringer, but the logic of the warnings, as each of those cases makes clear, is that the registered owner’s statutory rights deserve recognition and protection, not merely that an infringer’s position is undeserving.  What Windeyer J actually said in the first of them, at the page cited, in the form of a rhetorical question, was:

“Is a mark which was valid when registered to be removed because later events, perhaps the assiduous efforts of an infringer, have created a likelihood of confusion?”  (Emphasis added.)

An important part of the background against which s 28 must be understood was highlighted by Bowen CJ in Riv-Oland Marble at 573, when he said of s 34 (the provision authorizing “the registration of trade marks which are substantially identical or deceptively similar” in cases “of honest concurrent use or of other special circumstances”):

“No doubt this provision had its origin in the situation that traders in different parts of the country might be circulating goods within their particular region under marks which were similar and doing so quite honestly.  In such circumstances expansion of the respective markets might tend to bring the likelihood of deception or confusion.  Notwithstanding this the policy of the legislation was to enable honest concurrent users to register their marks.”

(It will be observed that Bowen CJ is here speaking of a type of confusion, arising out of the expansion of geographical markets, precisely similar to the confusion alleged in the present case by reason of another kind of expansion, brand extension.  There is nothing to suggest that the collision of marks through the invasive effect of brand extension should be seen as any different from the collision of marks due to an overlap of geographical boundaries.  Indeed, the contrary is strongly suggested by a pregnant question posed in the judgment of Fox J in HTX International (at 644):  “Is a rival trader, by using a registered trade mark, able to render that mark invalid?”)  In the same judgment of Bowen CJ (at 574), his Honour referred also to s 82 (the provision permitting the assignment of a registered trade mark without the goodwill of the business concerned), commenting:

“As has been indicated, some degree of deception and confusion seems to be inherent in the system when you have provisions such as s 34 and s 82 in the Act.”

Thus it cannot be assumed, in approaching the construction of s 28, that the Act is always intolerant of any likelihood of deception or confusion, without regard to the circumstances from which that likelihood may have arisen.  Plainly, there is a public interest in the avoidance of deception or confusion, but the Act has been drawn on the basis that there are circumstances which should prevail over this interest.  Even when a mark on the register is in some respect deceptive, it remains a purpose of the Act, as Dawson and Toohey JJ made clear in New South Wales Dairy Corporation v Murray Goulburn Co-operative Company Limited (1990) 171 CLR 363 at 408, to secure “the protection of the proprietary interest in a registered trade mark”.  Cf per Mason CJ at 382-384, per Brennan J at 389.

In the last mentioned case, the High Court entered upon a comprehensive examination of the operation of s 28, which provides:

“A mark –

(a)       the use of which would be likely to deceive or cause confusion;

(b)       the use of which would be contrary to law;

(c)        which comprises or contains scandalous matter; or

(d)       which would otherwise be not entitled to protection in a court of justice;

shall not be registered as a trade mark.”

It should not be overlooked that the court was considering the impact of this section upon two deceptively similar trade marks registered in respect of the same class of goods.  While this is a factual distinction between New South Wales Dairy Corporation and the present appeals, I think it also has implications of principle.  For the division of the register into classes facilitates the co-existence of similar marks in different classes, while it emphasizes the difficulty of such a co-existence within the same class.  That said, the principles laid down by the majority of the High Court must govern our decision.

The foundation of the decision of the majority of the High Court was their conclusion that, although the primary effect of s 28, expressed in its final words, is to prevent the registration of a mark in the circumstances it states, it has what Mason CJ described (at 372) as “a secondary operation in relation to the continuance in the register of a trade mark after its initial registration”.  His Honour had previously put forward this construction of the section in Berlei Hestia Industries Ltd v The Bali Company Inc (1973) 129 CLR 353 at 360, in a judgment with which Stephen J agreed.  It was a construction that was in accordance with the interpretation the House of Lords had given to a similar, although not identical, provision in United Kingdom legislation:  General Electric Co. (of U.S.A.) v General Electric Co. Ltd. [1972] 1 WLR 729.

This, however, was the beginning, not the end, of the problems of New South Wales Dairy Corporation.  Again by majority, the High Court held that, at least in a case where a registered mark was not said to have been deceptive when first registered (see per Mason CJ at 373), s 28(a) was subject to an implication excluding the section’s automatic operation to render the mark liable to expunction upon its being shown that the use of the mark had become likely to deceive or cause confusion.  Mason CJ held (at 384) that there was “an implication that s.28(a) looks to supervening likelihood of deception or confusion only if that likelihood is the result of blameworthy conduct on the part of the registered proprietor.”  Acknowledging that the forcing of this implication upon the language of s 28 involved some difficulty, his Honour explained:

“It may be sufficient to say that in the context of the entire statutory scheme a trade mark is only liable to be expunged under s.28(a) if the use of it becomes likely to deceive or cause confusion and that likelihood is due to the fault or blameworthy conduct of the registered proprietor.  However, for the purpose of this appeal, I am content to accept that the fault or blameworthy conduct must be such as to disentitle the mark to protection in a court of justice.”

Brennan J took a similar  view when he said (at 390-391):

“In my opinion, the Act does not contemplate that a registered proprietor should continue to enjoy the rights which s.58 [ie the section conferring rights upon registration of a trade mark] confers if he has produced the circumstances which make the further use of the mark likely to deceive or cause confusion:  s.58 cannot be understood as conferring rights which might be exercised by the holder to frustrate an object of the Act.  But, where the registered proprietor has not produced those circumstances and where no provision other than s.28(a) warrants expunction of the registered trade mark, there is no reason apparent on the face of the Act why the registered proprietor should not continue to enjoy the rights which registration of the trade mark confers.  The Act does not make the avoidance of deception or confusion absolute … .”

His Honour went on to refer to the statement of Lord Diplock in General Electric (at 751):

“If the likelihood of causing confusion did not exist at the time when the mark was first registered, but was the result of events occurring between that date and the date of application to expunge it, the mark may not be expunged from the register as an entry wrongly remaining on the register, unless the likelihood of causing deception resulted from some blameworthy act of the registered proprietor of the mark or of a predecessor in title of his as registered proprietor.”

Brennan J, in agreeing with this statement, said:

“I would take to be ‘blameworthy’ any conduct (whether by act or omission) on the part of a registered proprietor or his predecessor in title which he knew or ought to have known would result in the likelihood that the use of the mark would deceive or cause confusion and which has in fact caused or contributed to that result.”

He added that he accepted Lord Diplock’s view that, even in such a case, “the court has a discretion whether or not to expunge [the mark] and as to any conditions or limitations to be imposed in the event of its being permitted to remain on the register”. 

It has been suggested that a majority of the High Court (Deane, Dawson, Toohey and Gaudron JJ) may have taken a slightly different view of the nature of blameworthy conduct.  Certainly, they reached a different conclusion on the facts of the case as to whether it had occurred.  However, I do not perceive any significant difference of principle, apart from the suggestion made (at 384) by Mason CJ, in a passage which I have cited, that “blameworthy conduct” might possibly extend beyond what would “disentitle the mark to protection in a court of justice”.  The majority of the Court does not appear to have treated the principle as reaching to conduct that would not disentitle an applicant to relief in a court of equity, and their view of its scope was, I think, part of the ratio decidendi of the decision.  Dawson and Toohey JJ (at 409), having referred to the speech of Lord Diplock in General Electric, said this:

“The use of the term ‘blameworthy act’ is, we think, no more than a shorthand method of referring to all those circumstances which might disentitle an applicant to relief in a court of equity.  It was not intended to posit an all-embracing test. … It would, in our view, be quite wrong to use the term to erect an independent standard against which a registered proprietor’s conduct must be judged.  Not only would it be an impermissible extension of the language of the section, but it would shift the focus from the true question and introduce notions of a subjective kind.

It would clearly be a most significant circumstance, in defending a trade mark against expunction from the register, that the registered proprietor would have been refused relief in proceedings brought by him for infringement because he did not come with clean hands, being himself responsible in some way for the deception or confusion.  That may be blameworthy conduct but it is not the only conduct which would disentitle an applicant to relief.  And, in some circumstances, it may not disentitle an applicant to relief.  For example, it may be more important that equity grant a remedy in the public interest than that it does not aid a wrongdoer:  see Money v Money [No. 2] [1966] 1 NSWR 348, at pp 351-352.  But this is merely to emphasize that in equity the remedy was discretionary, notwithstanding that it was exercised along defined lines.”

Their Honours reiterated (at 410):

“The likelihood of deception or confusion had to be such that the mark would not be entitled to protection in a court of justice.”

The views of Dawson and Toohey JJ received (at 414) the express agreement, subject to a reservation as to which she was in the minority, of Gaudron J.  Deane J, who took a different view of the construction of s 28, nevertheless expressed (at 399) his agreement with the views of Dawson and Toohey JJ on the issue of blameworthy conduct.

Since expunction, in a case such as the present, pursuant to s 28(a) requires the demonstration of circumstances which might disentitle the registered proprietor to relief in a court of equity, it is necessary to consider what those circumstances would be.  What is involved was indicated by Isaacs J in Meyers v Casey (1913) 17 CLR 90 at 124 when he referred to “cases where the right relied on, and which the Court of equity is asked to protect or assist, is itself to some extent brought into existence or induced by some illegal or unconscionable conduct of the plaintiff, so that protection for what he claims involves protection for his own wrong.”  Isaacs J said:

“No Court of equity will aid a man to derive advantage from his own wrong, and this is really the meaning of the maxim [that he who comes to equity must come with clean hands].”

In the same judgment, Isaacs J made it clear (at 123) that want of clean hands did not mean “a general depravity; it must have an immediate and necessary relation to the equity sued for”.  In Angelides v James Stedman Hendersons Sweets Limited (1927) 40 CLR 43, in which a registered trade mark was involved but in the context that the cause of action under consideration in the High Court was for passing off, Rich and Starke JJ, who were in the majority, said (at 85) that the question of disentitling conduct was “one of degree”.  Isaacs ACJ, in his dissenting judgment, said (at 67-68) that there was “a radical distinction between allowing registration of a trade mark for future trade and giving a remedy for injury to past trade while [a] misrepresentation was proceeding”.  In New South Wales Dairy Corporation v Murray-Goulburn Co-operative Co Ltd (1989) 86 ALR 549, the first instance decision, Gummow J said (at 595):

“Conduct will attract the epithet ‘disentitling’ if it has an immediate and necessary relation to the equity sued for:  Meyers v Casey [supra]”.  (I have corrected some obvious printing errors.)

In Meagher, Gummow and Lehane, Equity Doctrines and Remedies, 3^rd ed (1992) at para 326, Meyers v Casey is cited, with other authorities, for the proposition:

“For the defence of unclean hands to operate at all, the impropriety complained of ‘must have an immediate and necessary relation to the equity sued for’.  If the relationship to the cause of action relied on by the plaintiff is indirect, it is irrelevant. …

A plaintiff who has once been guilty of unclean hands need not be permanently debarred from equitable relief.  He may, as it is picturesquely put, ‘wash his hands’; by, for example, showing that his misconduct ceased well before the suit… .”  (Footnotes omitted.)

 

The directness of the relationship between the impropriety or blameworthiness attributed to the registered proprietor and the trade mark is also indicated by the terms in which the relevant principle is stated by Bowen CJ in Riv-Oland Marble  at 574 – his Honour thought “the proprietor of a trade mark would only be disentitled to registration under the Act under s 28(a) if the likelihood of deception or confusion resulted from some blameworthy conduct on his part” (emphasis added).  In Riv-Oland Marble at 597, Lockhart J (with whose judgment Bowen CJ expressed general agreement) referred to the judgment of Fox J in HTX International as supporting the proposition that “the operation of s 28(a) after the initial registration of a trade mark is confined to situations where the likelihood of deception or confusion is brought about bysome blameworthy act of the registered proprietor of the mark” (emphasis added).  Lockhart J expressly accepted that proposition at 598.

 

In my opinion, these authorities make it clear that the statutory right of the registered proprietor of a trade mark, which Brennan J in New South Wales Dairy Corporation described (at 389) as “a species of property”, is not lost either simply by wrongful conduct, or by a combination of wrongful conduct and a likelihood of deception or confusion arising out of the use of the mark at some time after registration.  Blameworthy conduct is only of significance for a case where the use of the mark has become likely to deceive or confuse and that likelihood is a result of relevant blameworthy conduct.  The exposition of the meaning of “blameworthy” in this context contained in the joint judgment of Dawson and Toohey JJ, in the passage I have cited, confines it to conduct which “might disentitle an applicant to relief in a court of equity”, and that kind of conduct must have an immediate and necessary relation to the equity in question, which, in this case, relates to the protection of the trade mark itself.  These considerations of fundamental principle combine to ensure the registered proprietor’s right is not so fragile it will be irretrievably lost by some form of misconduct that does not in itself render the continuance of the trade mark obnoxious to the Act or to the principles of equity.  The right of property conferred by registration is not dum casta.

 

In the present matter, the continuing liability to confusion or deception, on the evidence, arises only out of the impact of the practice of brand extension.  The quite transitory attempt of the appellants to place sports fragrances on the market in circumstances calculated to attract a measure of Nike International’s reputation could not have had any bearing on the question whether  the sale, without any reference to sports, of perfumes simply bearing the “NIKE” mark would be likely to deceive or confuse.  It was only ever suggested that such sales would have that effect on the basis of the extent of the reach of the Nike International name.  Unless the hands of the appellants were indelibly stained, it seems to me that to allow the likelihood of deception or confusion linked to brand extension to bring about the expunction of their trade mark, would set at nought the principle stated by Bowen CJ in Riv-Oland Marble and by the High Court in New South Wales Dairy Corporation.  This principle requires some problems of that kind to be accepted, and it was stated in the context of similar marks falling within the one category of goods; here the goods are in far distant categories, so that the principle applies a fortiori.

To recapitulate and elaborate somewhat, two questions must be kept distinct:  whether the use of the mark has become likely to deceive or confuse, which is not the same thing as whether its proprietor has been guilty of passing off; and, if and only if the use of the mark has become likely to deceive or confuse, whether that likelihood was brought about by blameworthy conduct disentitling the registered proprietor to relief in a court of equity.  In answering the first question, as Cornish, Intellectual Property 2^nd ed (1989) para 17-036 makes clear, “[a]ny prospect of deception may be brought into account, provided that it relates to the mark itself and not to some other aspect of the [proprietor’s] trading methods.”  To the same effect, Gummow J in his first instance decision in New South Wales Dairy Corporation (at 575-576), after referring to the onus borne by “the applicant for expungement”, said that “the issue of contravention of s 28 both on opposition to grant and on expungement applications is answered not by reference to the manner in which the proprietor or applicant for registration has used the mark in the past, but by reference to the use to which he properly can put the mark within the ambit of the registration”.  Certainly, a proprietor might, by a sustained manner of dealing, give to his mark a misleading or confusing meaning or connotation, but I do not think the evidence, or the trial judge’s findings, would support a conclusion that Campomar’s brief activities so affected its mark.  The liability to deceive or confuse in question here arises out of the tendency towards brand extension of Nike International’s success.

But if the second question is reached in this case, it requires the court to consider whether any likelihood of deception or confusion was caused by relevant blameworthy conduct on the part of Campomar.  Apart from the question of causation, this involves an examination of the nature of disentitling conduct.  In the first instance judgment from which I have already cited, Gummow J said (at 583):

“[T]he remedial protection given statutory rights ordinarily will depend upon the terms of the statute in question, unless a claim can be made out in the auxiliary jurisdiction of courts of equity to a remedy beyond that provided by the statute … .  Where what is sought is a statutory remedy (eg an injunction under s 65 of the Trade Marks Act to restrain infringement) a question will arise whether an equitable defence such as unclean hands is ever available … unless the statute expressly or by necessary implication makes it so … .  Further, even in courts of equity, administering purely equitable remedies, the maxim does not always operate and unclean hands of a plaintiff will not necessarily be a good answer by a defendant.”

Although, when the case reached the High Court, the majority held in favour of the implication of a requirement of blameworthy conduct in cases of the kind I am considering, attention was again called to the nature of the statutory proprietary right in question.  It will require conduct that has both the stated causal effect and the stated disentitling effect to seal the loss of the right.  Misconduct in breach of some “independent standard” will not do.  The misconduct in question in the present case was irrelevant to the course of trade proposed by the appellants and principally in issue at the hearing, which would create no problems except those related to brand extension.  In Mrs Pomeroy Ld. v Scalé (1906) 24 RPC 177 at 192, Parker J did not regard “a comparatively short interval” of misrepresentation by the plaintiff, though directly related to the plaintiff’s name improperly used by the defendant, as disentitling the plaintiff on the ground of unclean hands from its right to an injunction.  The fact is that in this case the impropriety complained of is not directly and immediately related to the equity relied on, arising out of the statutory right itself, since the gravamen of the case for deception or confusion is the reach of Nike International’s reputation through brand extension.  The case precisely illustrates what Isaacs ACJ, in Angelides (at 67-68), called the “radical distinction between allowing registration of a trade mark for future trade and giving a remedy for injury to past trade while the misrepresentation was proceeding”. 

An argument was raised at the hearing as to whether Campomar’s trade mark offended s 28(a), not merely by reason of supervening events, but as at its priority date, 29 August 1986.  However, I do not understand the trial judge to have made any such finding, and the evidence concerning the effect of brand extension, upon which he did make a finding in the respondents’ favour, concentrated on the rapidly growing reputation of Nike International in the period up to trial.  From this point of view, the narrowness of the original registration by Nike International as from 8 January 1975 is significant.  It was not until 21 January 1981 that Nike International became entitled to its mark for all goods in class 25, although it did  have registration in the presently irrelevant classes 18 and 28 from 19 April 1979.  It is also significant that, although Campomar’s correspondence with Nike Inc had drawn attention to its mark, and to the fact that it might use that mark more extensively in relation to cosmetic and perfume products and toiletries, there was no opposition to Campomar’s applications in 1986 and again in 1992.  In Holt & Coy. (Leeds) Ld’s Application for a Trade Mark (the “English Rose”) [1957] RPC 289 at 293-294, Lloyd-Jacob J, a judge of great experience in this area, held that where the registered proprietor of a mark for silk stockings had consented to an application to register a similar mark for brassieres, corsets, girdles and belts, the consent registration “justifies the conclusion that although silk stockings and the enumerated foundation garments are goods of a like description in the general sense, all being articles of women’s wear, the conditions of trade justify the inference that the discrimination exercised in their purchase is such as to avoid deception and confusion as to their trade origin, notwithstanding the substantial identity of their brand marking.”  If that be correct, the availability of a corresponding inference in respect of the likelihood of deception and confusion as at the date of each of Campomar’s registrations in Australia is plain.  In my opinion, it would not be right to make a finding that Campomar’s trade marks, particularly the earlier mark, offended s 28(a) at the date of their registration.  Of course, this conclusion is stronger, on the evidence I have been discussing, in relation to the 1986 registration; but, given the validity of that, I do not think the slight extension of it involved in the later registration could be regarded as in itself involving any likelihood of deception or confusion. 

 

It is clear that the remedy of expunction is a remedy to be granted or withheld in the court’s discretion:  General Electric Co at 751; New South Wales Dairy Corporation at 391.  The trial judge did not advert to this discretion because the weight he gave to the brand extension argument caused him to devote no separate consideration to the rights conferred by registration on Campomar in respect of the marketing of fragrances and cosmetic products generally, without any overt link to sports.  At least in the case of the 1992 registration, assuming the 1986 registration was valid when granted, I think that, even if the 1992 registration offends s 28(a), the court’s discretion should be exercised in favour of the appellant.  In reaching that conclusion, I take into account s 34 and the matters of principle in relation to it which I have already discussed.

My rejection of the respondents’ attack on Campomar’s registrations as having offended s 28(a) at their dates relieves me of the task of determining whether expunction on that ground would require a finding of blameworthy conduct.  However, I think I should make some comments bearing on a related question.  It was argued that certain dicta in Canon Kabushiki Kaisha v Brook (1996) 69 FCR 401 were wrong in requiring blameworthy conduct to be shown before opposition proceedings could succeed in reliance on s 28(a).  In my opinion, this argument is correct, although it does not impugn the actual decision.  The majority of the High Court found the roots of the implication which is explained in New South Wales Dairy Corporation, as the judgments show, in the proprietary right of the registered proprietor of a mark; there is no basis for the same implication to be made in favour of a mere applicant for a mark.  Before Canon Kabushiki Kaisha v Brook, the requirement of blameworthy conduct was always stated in relation to expunction applications, and I think it is properly confined to them.  Although it is true that the point appears more explicitly in the judgments of Mason CJ and Brennan J in New South Wales Dairy Corporation than in the joint judgment of Dawson and Toohey JJ, it is to be found also in that judgment.  Their Honours referred (at 408) to “the protection of the proprietary interest in a registered trademark” as “an important purpose” of the Act, and they did so in the course of justifying their construction of s 28(a).  Earlier, they had mentioned (at 406-407) the danger that an unqualified construction of the section would give an infringing user “a ground for claiming rectification against the registered user”.

The more difficult question is whether the implication only arises where supervening events make the use of the mark deceptive or confusing, or whether the implication can be relied on when a registration that has been granted is attacked on the ground that, at its date, the use of the mark was deceptive or confusing.  This last question I prefer to leave to a case squarely raising it for decision.

For the foregoing reasons, I would allow the appeals from the orders of expunction, and I would allow the appeal from the orders made against the appellants under the Trade Practices Act and from the orders made against the appellants based on passing off, to the extent required to remould those orders so that they would relate only to the marketing of products in the manner that was pursued prior to the cessation of marketing which occurred following the institution of the proceedings.  On the basis that Campomar’s registered trade mark should not be expunged, the trial judge’s reasoning would not support wider relief under the Trade Practices Act or for passing off.  I would order that the respondents pay two-thirds of the appellants’ costs of the appeals, but I would not disturb the costs order made at first instance in the proceeding not limited to expunction; in the other proceeding, I would set aside the order for costs made against the appellant and substitute an order that the respondents pay the appellant’s costs.

I certify that this and the preceding seventeen (17) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Burchett

Associate:

Dated:              7 July 1998

SACKVILLE J:

THE PROCEEDINGS

The Nike group of companies markets the NIKE brand of athletic footwear, sports clothing and sporting accessories in a large number of countries.  This appeal arises out of proceedings instituted by two members of the Nike group, Nike International Limited (“Nike International”) and Nike Australia Pty Ltd (“Nike Australia”).  I shall refer to these two companies together as “the Nike companies” or, simply, “Nike”.

The Nike companies succeeded in obtaining relief under the Trade Practices Act 1974 (Cth) (the “TP Act”), in passing off and under the Trade Marks Act 1955 (Cth) against two Spanish companies, Campomar Sociedad Limitada (“Campomar”) and Nike Cosmetics SA (“Nike SA”).  Nike SA was previously known as Nike Sports Cosmetics SA, but the word “Sports” was removed from the name after the dispute with the Nike companies arose.  I refer to these two companies together as “the appellants”.

Campomar obtained registration in Australia, effective from 29 August 1986, of the trade mark “NIKE”.  In the first instance, the mark was registered in Class 3, in respect of perfumery products of all kinds and essential oils.  The mark was later registered (again in Class 3) in respect of bleaching powders, abrasives and soaps.  Cosmetic and perfume products distributed by Campomar under the name NIKE were marketed in Australia from September 1993.  The marketing of Campomar’s products in Australia gave rise to the litigation.

The learned primary Judge found that the Nike companies had established causes of action against the appellants under s 52 of the TP Act, and in passing off.  His Honour restrained each of the appellants:

“(a)     [i]n trade or commerce, without the licence of the applicants, advertising, promoting, selling, offering to sell, supplying or offering to supply any perfume, aftershave, eau de toilette, cosmetic, shampoo, soap, deodorant or other health or beauty care product under or by reference to the name NIKE or any other name or mark substantially identical with or deceptively similar thereto;

(b)       aiding, abetting, counselling, procuring or being in any way, directly or indirectly, knowingly concerned in or party to the conduct referred to in sub-paragraph (a) hereof.”

The primary Judge also made orders, pursuant to ss 22 and 28 of the Trade Marks Act 1955 (Cth), rectifying the Register of Trade Marks, by expunging Campomar’s trade marks.  The present appeal is against all the orders made by the primary Judge.

THE FACTS

The appellants challenge certain findings of the primary Judge and contend that his Honour did not make other findings that were necessary to support the orders he made.  However, many facts were not in dispute.  The following account of the non-contentious facts is largely taken from the judgment of the primary Judge.

Nike International and other companies in the Nike group have a number of registered trade marks in Australia and elsewhere, covering the word “NIKE”.  The word itself refers to the Greek goddess of victory.  The marks have been registered for many years and have been used, and continue to be used, in connection with products such as athletic footwear, sporting apparel and other sporting goods, manufactured or distributed by or on behalf of Nike International.  The company has built up a significant reputation in Australia as a manufacturer and distributor of athletic footwear.  There is no issue in the proceedings concerning the validity of any of the Nike International trade marks. 

Campomar was incorporated in 1964 in Spain.  Since that time it has specialised in the manufacture, distribution and wholesaling of cosmetic and perfume products.  On 10 June 1940 Campomar’s predecessor in title obtained registration of the word “NIKE” in international Class 3, in respect of perfumes and essences of all types. International class 3 comprises bleaching preparations and other substances for laundry use; cleaning, polishing, scouring and abrasive preparations; soaps; perfumery, essential oils, cosmetics, hair lotion; and dentifrices.  Between 1955 and 1967 Campomar’s predecessor in title obtained registration of a number of other trade marks containing the word “NIKE”, for example, “NIKE TULIPAN”, “LAVENDA PURE NIKE” and “GEL MOUSSANT NIKE”.

The Nike International trade marks are not registered in class 3, but in class 25, which consist of clothing, footwear and headgear.  In some cases, they are registered in class 28, which includes gymnastic and sporting articles not included in other classes.

Between 1967 and 1984 Campomar maintained a trade relationship with a firm known as “Perfumes Nike”, owned by a Senor Mateos.  Many years before 1967, Senor Mateos had adopted “Perfumes Nike” as a business name and NIKE as a trade mark.  Perfumes Nike specialised in manufacturing perfume products.  From 1980, Campomar began to distribute products bearing the NIKE trade mark.  These were manufactured by Perfumes Nike in Spain and in North Africa.  In 1984 Campomar bought the business and assets of Perfumes Nike, including all of its intellectual property rights.  Campomar received an assignment of Perfumes Nike’s trade mark registrations, one of which was a United States trade mark for “NIKE” in international class 3, with a priority date of 18 August 1964.  None of the trade marks, however, was registered in Australia.

Between 1985 and 1994 Campomar applied for registration of the NIKE trade mark in a large number of countries, including Australia.  Campomar applied for two trade marks in Australia.  Its first application was lodged on 29 August 1986, and was accepted on 15 June 1989, taking effect from the date of the application.  This mark (“Campomar’s first mark”) was registered in relation to perfumed products of all kinds and essential oils.  The second application was for the registration of NIKE in class 3, but in respect of bleaching preparations and other substances for laundry use, cleaning, polishing, scouring and abrasive preparations; and soaps.  This application was lodged on 2 August 1992 and accepted on 6 January 1994.  This mark (“Campomar’s second mark”) took effect from the date of the application, 2 August 1992.

In about 1980, Mr Ruiz, the managing director of Campomar, became aware of the existence of Nike Inc and its related companies and their business of selling footwear and clothing.  Mr Ruiz later formed the view that there might be room for co-operation between Campomar and Nike Inc, in Spain and other countries.  In August 1985, he sent a telex to Mr Knight of Nike Inc.  He explained that Campomar had recently acquired another Spanish company which possessed trade marks for use with perfumery and fragrance products.  The letter continued as follows:

“Our short term plan is to create a ‘NIKE’ sports fragrance line, which is modern, with a strong personality and inspired by a ‘NIKE’ scent.

I would like to know if your company would be interested in some kind of collaboration or participation in this project.

We are aware of the nature and awareness level of products bearing the NIKE trade mark and sincerely believe that this fragrance line could achieve a high level of international acceptance.

1.         The sports fragrance market is still young.

2.         The sporting movement, jogging, etc has not yet been taken advantage of by fragrance manufacturers.

3.         There are no true sporting fragrances and the market potential is enormous.

4.         ...”.

 

Nike Inc responded through a Mr Lucas.  The response was as follows:

“As our company is the creator of the internationally renown [sic] NIKE name and we are responsible for defining and promoting the Nike image throughout the world, we [are of course] interested in any new products associated with the Nike name.”

The response requested further information about the nature and extent of Campomar’s trade mark rights to the NIKE name in various countries.

On 24 September 1985, Mr Ruiz provided the information requested by Nike Inc.  Mr Ruiz continued as follows:

“Fragrance companies have only made mild forays into this new market, not however through sport but through ‘ready-to-wear’ fashion.  Personally I am convinced that within 5 years this company will be able to integrate itself into the sporting revolution with a fragrance and other sport cosmetics, we could achieve a success so great such as occurred with sporting shoes or sandals.

Our aim is to place within this market segment a NIKE fragrance line using a sporty fragrance which we are currently researching, using designs which are clearly sportive.”

The initial launch was to comprise a number of products, including eau de toilette and bath gel.  Mr Ruiz indicated that Campomar was “healthy financially”, but for a project of such magnitude required the support of a strong company.  In a further telex of 25 September 1985, Mr Ruiz provided Mr Lucas with additional information.

After some prompting, Mr Lucas replied on behalf of Nike Inc on 9 June 1986, declining to participate in the proposed venture:

“We have decided we do not wish to participate in your project, as we do not believe perfume and cosmetic products are part of this company’s image.

While we understand you have registered the name ‘NIKE’ in the class covering ‘perfume and essences’, we must caution you not to suggest or imply that any ‘NIKE’ products you produce are sponsored or approved by Nike Inc.”

Mr Ruiz gave evidence that he understood Mr Lucas’ telex to mean that Nike Inc did not intend to extend its brand into perfume and cosmetic products. 

On 6 October 1989, Mr Ruiz caused Nike SA to be incorporated.  Nike SA became the manufacturer and vendor of perfume products bearing the NIKE trade mark.  Campomar granted Nike SA an exclusive licence to use its trade marks in any country in which it was or might become registered.  Nike SA then contacted possible distributors in many countries, in Europe and elsewhere.  His Honour found that sales of the Nike perfume products had yielded about $A4 million between 1991 and the date of trial.

Prior to the incorporation of Nike SA, Campomar had instructed trade mark attorneys in Australia to apply for registration of the NIKE trade mark.  This led to the filing of the application for registration of Campomar’s first mark on 29 August 1986.  There was no objection to the registration.  It was advertised as accepted on 15 June 1989 and proceeded to registration without any opposition.

In 1992 Mr Ruiz received advice that if Campomar wished to market its full range of products (particularly shampoos) it would have to extend its international class 3 trade mark registration to include bleaching powders, abrasives and soaps.  Accordingly, Campomar applied for registration of the mark in a number of countries, including Australia.  This led to the registration of Campomar’s second mark.

Before Campomar entered the Australian market, it produced a men’s fragrance under the name “Vigoroso Doncel”.  The packaging used for this product had a drawing of a polo player on a horse on one side and a drawing of a tennis player on the other.  The word “Nike” was depicted on the box in script.  The trial Judge described the letters as being “joined as they would be if they were written in neat handwriting”.

At a date not identified precisely by his Honour, Mr Ruiz decided to change the labels used for Nike perfumes.  The changes included depicting the word “NIKE” in block letters in bold print.  Thus, in the case of “NIKE Sport Fragrance”, one of the principal products marketed in Australia, the word “NIKE” appeared in much bolder and larger print than did the other words.

Nike International depicted the word “NIKE” differently in its packaging and advertising.  As his Honour described it, the

“letters used for the word ‘NIKE’ are block letters but the print is slanted.  The word usually appears over a mark which is a figure shape somewhat like an inverted crescent except that one projection from its lowest point is longer than the other...the mark is usually written in colour, often red on a black background.  It is clear that the slant of the print used for the word ‘NIKE’ and its appearance above the crescent...is designed to communicate the idea of speed and perhaps power”.

I have appended a copy of the Nike International mark, as used in connection with athletic footwear and sports clothing.  I have also appended a copy of the packaging used to market Vigoroso Doncel.

In July 1993, the managing director of an Australian company, United Pharmaceutical Industries (Aust) Pty Ltd (“United”), wrote to the international manager of Nike SA.  The letter stated that United, having seen the Nike products at a trade fair, was keen to begin selling them and placed an order.  The order was confirmed on 20 September 1993.  United’s marketing of the Campomar products led to their appearance in Australian pharmacies and, ultimately, to the litigation.  United and its managing director were joined as parties to the proceedings, but did not contest them.  Campomar suspended exports to Australia pending the outcome of the proceedings determined by the primary Judge.

THE TRADE MARKS ACT

Since the appellants challenge the orders made by the primary Judge rectifying the register, to expunge Campomar’s trade marks, it is convenient to set out the relevant legislation.  It was common ground that the Trade Marks Act 1955 (Cth) (the “TM Act”)applied to the present proceedings, notwithstanding that it was repealed by the Trade Marks Act 1995 (Cth) (the “1995 Act”).  The transitional provisions of the 1995 Act have the effect that proceedings under s 22 of the TM Act, commenced prior to 1 January 1996, are to be decided under the TM Act: 1995 Act, s 250.

Section 22(1) of the TM Act provides as follows:

“22(1)Subject to this Act, a prescribed court may, on the application of a persons aggrieved or of the Registrar, order the rectification of the Register:

(a)       ...

(b)       by the expunging or amendment of an entry wrongly made in or remaining in the Register;

(c)        ...; or

(d)       by the correction of an error or defect in the Register.”

Section 24(1) of the TM Act is as follows:

“24(1)A trade mark is registerable in Part A of the register if it contains or consists of:

            (a)        ...

            (b)        ...

            (c)        an invented word;

            (d)        a word not having direct reference to the character or quality of the goods or services in respect of which registration is sought and not being, according to its ordinary meaning, a geographical name or a surname; or

            (e)        any other distinctive mark.”

As the primary Judge observed, the word “Nike” falls within these provisions, either as an invented word or as a word not having direct reference to the quality or character of the goods in respect of which registration is sought.

Section 28 of the Act is headed “Scandalous and improper marks”.  It provides as follows:

“28.     A mark:

            (a)        the use of which would be likely to deceive or cause confusion;

            (b)        the use of which would be contrary to law;

            (c)        which comprises or contains scandalous matter; or

            (d)        which would otherwise be not entitled to protection in a court of justice;

            shall not be registered as a trade mark.”

Section 61(1) of the TM Act is as follows:

“(1)     In legal proceedings relating to a trademark registered in Part A of the Register (including applications under section 22), the original registration of the trade mark under this Act shall, after the expiration of 7 years from the date of the original registration, be taken to be valid in all respects, unless it is shown -

            (a)        ...;

            (b)        that the trade mark offends against the provisions of section 28; or

            (c)        ....”

THE PLEADED CASE

Two sets of proceedings were before the primary Judge.  In the first (NG 241 of 1994), Nike International and Nike Australia sued United, its managing director, Campomar and Nike SA.  They claimed damages, injunctive relief and an order expunging Campomar’s first mark.  As I have noted, United and its managing director did not contest the proceedings.  In the second action (NG 333 of 1994), Nike International and Nike Australia sought an order against Campomar, expunging Campomar’s second mark.

Because of the approach taken by the primary Judge, it is necessary to consider the pleadings in the first proceedings.  The Nike companies alleged that Nike Australia had acquired a substantial reputation in Australia in the name “NIKE”, when used in connection with the advertising, promotion or sale of athletic footwear and clothing (pars 12, 13).  The practice of brand extension (that is, the practice where manufacturers of well-known brands of goods, in this case, footwear and clothing, licence the manufacture and sale of other consumer goods, including toiletries and perfumes, under and by reference to the trade name) was well known to the general public (pars 14, 15).  By reason of these matters, the “use in Australia of the name NIKE in toiletries, aftershave, perfume and eau de toilette signifie[d] or [was] likely to signify to a significant number of persons that” the articles were manufactured by or on behalf of Nike Australia or were manufactured and sold with the licence or consent of Nike Australia (par 16).

In late 1993, United commenced to promote and sell in Australia quantities of shampoo, aftershave and eau de toilette bearing the name “NIKE” (par 17).  Nike SA supplied the offending articles to United, with the licence and approval of Campomar, in circumstances where the Campomar companies knew or ought to have known that the articles would deceive or cause confusion (par 17A).  In the course of promoting the offending articles, United and the appellants “represented by the use of the mark NIKE” that the articles were manufactured by or on behalf of Nike Australia or with its consent (par 18).  These representations were false, misleading and deceptive (par 19).

It was then alleged that, by reason of the matters pleaded in pars 12 to 19, United and the appellants engaged in misleading and deceptive conduct, thereby contravening s 52 of the TP Act (par 20).  It was also alleged that the appellants aided and abetted and were knowingly concerned in United’s contravention of s 52 of the TP Act (par 22).  It was said that the appellants and United and its managing director had threatened to continue to engage in the conduct referred to in pars 20 and 22.  It was further alleged that, by reason of the matters already pleaded, the Campomar companies had engaged in passing off (pars 24, 25).

The Nike companies pleaded that each of them was an “aggrieved person” within the meaning of s 22 of the Trade Marks Act 1955 (Cth) in relation to the entry in the Register of Campomar’s first mark (par 30).  They alleged that the mark

“(b)     was on 29 August 1986 and at all material times thereafter a mark the use of which would be likely to deceive or cause confusion;

...

(d)       is a mark which if not likely to deceive or cause confusion on 29 August 1986 had become likely to do so by reason of blameworthy conduct on the part of the [Campomar companies]. (Par 34)”

The statement of claim in its original form did not plead that the appellants themselves had contravened s 52 of the TP Act or engaged in passing off, although it did plead that they knowingly participated in United’s contravention of s 52 of the TP Act.  The statement of claim was amended on the first morning of the hearing to plead that the appellants themselves had contravened s 52 (pars 17A, 20) and engaged in passing off (par 25).

THE PRIMARY JUDGE’S REASONS

The primary Judge first considered the case put forward by the Nike companies in relation to the pleaded causes of action under the TP Act.  In addressing this aspect of the case in his judgment delivered on 8 August 1996, his Honour proceeded under a misapprehension, as he made clear in supplementary reasons delivered on 20 August 1996.  This misapprehension arose because his Honour overlooked the amendments made on the first day of the hearing.  Accordingly, he proceeded on the erroneous assumption that the case pleaded against the Campomar companies under the TP Act was limited to that of aiding and abetting or knowingly participating in United’s contravention of the TP Act.

 

His Honour commenced by finding that by 1986, the time at which Campomar was expanding its international marketing activities, Nike International was “established as a well-known supplier of athletic footwear and sports clothing”.  Campomar’s products were not marketed in Australia until 1993 and, even then, did not become widely known because the marketing ceased not long after it commenced.

The evidence established that Campomar’s cosmetic products had been marketed in Australia under the name “NIKE Sport Fragrance”.  The products had been displayed in pharmacies beside or underneath other sport fragrances, including one marketed under the name “ADIDAS” with the licence of that well known manufacturer of sporting footwear and clothing.  The primary Judge characterised the Nike companies’ case as

“essentially...that the placing of the NIKE sport fragrance in the same area of pharmacies as other sports fragrances, particularly the Adidas sports fragrance, was likely to mislead or deceive members of the public into thinking that the NIKE sports fragrance was in some way promoted or distributed by Nike International itself or with its consent and approval.”

His Honour then referred to evidence that representatives of pharmacies which had run out of NIKE sport fragrance stock had telephoned Nike International asking how they could obtain further supplies.  This

“indicated that the pharmacies themselves thought that the NIKE sports fragrance product had some connection with Nike International.”

The primary Judge also accepted expert evidence given by Mr Blanket, a lecturer in advertising and promotions, in relation to brand extension, characterising his evidence as “helpful” although of less direct relevance than the evidence of investigators and pharmacists.

On the basis of the evidence of the pharmacists and of investigators engaged by the Nike companies his Honour found that

“many persons seeing the Nike cosmetic products, particularly products entitled ‘NIKE Sports Fragrance’, on pharmacy shelves, whether in the vicinity of similar products or not, would immediately associate the product with Nike International in some way.  They would be likely to think that the product had Nike’s approval or was sponsored by it.”

This, however, did not conclude the matter.  First, there was a question of whether customers believing that Campomar products were connected with Nike were misled by Campomar’s actions or whether they misled themselves into making an erroneous assumption.  His Honour dealt with this issue after giving reasons for holding that Nike International had made out its case for expungement of the two trade marks from the register.  He found that the likelihood was that people would be actually misled or deceived by United’s actions as the marketer of the goods.  The trade evidence established this.  His Honour continued as follows:

“Apart from this, however, I would myself infer from the whole of the evidence that this was likely to have been the situation. The Nike name used in connection with products marketed by Nike International was so well known in relation to sporting goods that it was almost certain that numbers of persons looking to buy toiletries or fragrances would be led to believe that such products marketed under the Nike name were marketed either by Nike International itself or with its authority.”

This was not a case where those who were misled deceived themselves.  They made an assumption because they were intended by Campomar to make it.  Campomar must have appreciated that a sports fragrance such as was marketed would be placed alongside other sports fragrances in pharmacies, and other outlets and that this would give the product an advantage not otherwise available.

The second question was whether Campomar, through Mr Ruiz, knowingly participated in a contravention of s 52 of the TP Act.  On this issue his Honour found that Campomar’s marketing activities were intended to enable it to take advantage of the Nike International reputation.  In reaching this conclusion, he drew support from findings made on the trade mark issues.

The primary Judge identified three issues arising for determination on the application for rectification of the register:

“(a)     whether Nike is a ‘person aggrieved’ within the meaning of s 22 of the [TM Act];

 

  (b)     if so, whether the registration obtained by Campomar was wrongly made in or is wrongly remaining in the Register;

  (c)      in relation to (b), ha[d] Campomar been guilty, either at the time of registration or subsequently, of ‘blameworthy conduct’ in the sense in which that expression is understood in the applicable authorities?”

His Honour held that Nike International was a person aggrieved, since there was a reasonable possibility of Nike International being appreciably disadvantaged by the register remaining unrectified: The Ritz Hotel Limited v Charles of the Ritz Limited (1988) 15 NSWLR 158 (S Ct NSW/McLelland J), at 193-194.  The removal of the marks from the register would make it less likely that Campomar would engage in conduct likely to deceive or cause confusion and thus less likely to engage in conduct disadvantageous to the Nike companies.

The primary Judge approached the second and third questions on the basis that a lawfully registered trade mark was liable to expungement under s 28(1) of the TM Act, by reason of the supervening likelihood of deception or confusion, only if the likelihood were the result of some “blameworthy conduct” on the part of the registered proprietor.  He interpreted “blameworthy conduct” to mean circumstances that would disentitle an applicant from relief in equity.  It followed that for Nike International to succeed in its claim for rectification of the register, it had to establish the likelihood of confusion and that the confusion was the product of blameworthy conduct.  He considered that, although different views had been expressed by members of the High Court in New South Wales Dairy Corporation v Murray Goulburn Co-Operative Co Ltd (1990) 171 CLR 363 (the “Moove Case”), this approach reflected the course of authority.

The evidence established the following:

·      The marketing of Campomar products led to confusion among customers and staff of the pharmacies where the products were displayed.  For the reasons explained by the expert in his evidence, persons seeing the Campomar products displayed, who knew of the reputation of Nike International, were likely to have been confused.

·      Mr Ruiz engaged in conduct, such as changing the printing of the word “NIKE” and describing the product as “sports fragrance”, in order to take advantage of the goodwill and reputation of Nike International.  He was well aware of the benefit likely to flow from using the name “NIKE” in association with a sports fragrance and other toiletries.

·      Campomar had engaged in a course of conduct which led to its products, described as “NIKE SPORT FRAGRANCE”, being marketed in circumstances where it was likely that they would be confused by customers and others by reason of the reputation which Nike International had in athletic footwear and other sporting products.

These findings, on any view, amounted to blameworthy conduct, as that expression had been used by members of the High Court in the “Moove” Case.  Thus Nike International had made out its claim for expungement of the two trade marks.

In the primary Judge’s supplementary reasons for judgment, his Honour stated that he had overlooked the amendments to the statement of claim made on the first day of the hearing. He said that, if he had remembered that the amendments pleaded a contravention of s 52 of the TP Act directly against the Campomar companies, he would have had no hesitation in finding that the contravention had been established.  He continued:

“I think a reading of the reasons which I have published would reflect the fact that I was of this view when I wrote the judgment and I think my treatment of the cause of action which I did find established, based on s 75B of the [TP Act], serves to show that I was somewhat puzzled as to why the more direct causes of action were not relied upon.  Now that I see that they were, my judgment needs correcting to the extent of my saying that on the material which I had, and for the reasons for judgment already published, I find the two causes of action established, so that the third and fourth respondents were, in my view, guilty of a breach of s 52 of the [TP Act] and also of passing off.”

SUBMISSIONS

The appellants challenged the judgment of the primary Judge on a number of grounds.  First, Mr Catterns, who appeared with Ms Baird for the appellants, submitted that there was a “structural flaw” in the reasons.  The uncontradicted evidence of Mr Ruiz was that the Campomar companies intended to market in Australia, if permitted by the Court to do so, only perfumes and other products which bore the word “NIKE”, but not the words “Sports Fragrance”.  Moreover, the evidence showed that, with some exceptions, the products exported to Australia by Campomar were packaged and marketed as “Nike Sports Fragrance”.  Thus, his Honour’s findings, to the effect that customers and pharmacists were likely to have been deceived, rested on the sale within Australia of products marketed as “Nike Sports Fragrance”.  No finding had been made to the effect that products simply bearing the word “Nike” would mislead or be likely to mislead consumers or others.

The absence of such a finding had three consequences:

(i)         the orders made by his Honour were unsustainably broad, since they extended to the sale or supply of products under the name “NIKE”, regardless of whether the products were described as sport fragrances or otherwise connected with sporting activities;

(ii)        there was no basis for the holding that use of the trade mark “NIKE”, simpliciter, was “likely to deceive or cause confusion” within s 28(a) of the TM Act and thus no basis for the expungement orders; and

(iii)       the foundations for the holding that the Nike companies were “persons aggrieved”, for the purposes of s 22 of the TM Act, was lacking.

Secondly, the appellants submitted that the primary Judge erred in finding that consumers and pharmacists had been misled by Campomar’s conduct, in marketing perfume and cosmetic products in Australia, into believing that those products were associated in some way with the Nike companies.  The evidence supported the proposition that consumers and pharmacists had erroneously assumed that the products marketed as “Nike Sports Fragrance” were distributed with the licence and approval of the Nike companies.  This was not an assumption for which the appellants were responsible.

Thirdly, the appellants challenged the finding that the use of Campomar’s marks would be likely to deceive or cause confusion within s 28(a) of the TM Act and that, accordingly, the marks were liable to be expunged under s 22.  It was not the whole get-up of the products sold or supplied by the appellants that was to be tested.  The question was whether use of the mark - that is, the word “NIKE” - was likely to deceive or cause confusion.  Nike had failed to show that the use of the mark, simpliciter, was likely to deceive or cause confusion.  Further, as previously submitted, the primary Judge had made no such finding.

Fourthly, the appellants submitted that, even if the use of their marks was likely to deceive or cause confusion, within s 28(a) of the TM Act, it was necessary for Nike to show that this was in consequence of blameworthy conduct on the part of the appellants.  In the present case,      s 28(a) applied (if it did) only by reason of Nike International’s continued expansion of its reputation after 1986.  Any propensity of the mark to deceive was not a consequence of blameworthy conduct by the appellants.

Fifthly, the appellants submitted that Nike International was not a “person aggrieved” within the meaning of s 22 of the TM Act.

Finally, the appellants relied on an argument put to the primary Judge, but not addressed in his reasons.  It was said that Nike International, in its letter of 9 June 1986 and at a subsequent meeting had represented that it was not interested in perfumes and that Campomar relied on that representation in applying for registration of Campomar’s first mark.  Mr Catterns invited the Court to make the necessary findings to make out the appellant’s claim that Nike International was estopped from pursuing the relief claimed by it in the present proceedings.

THE TRADE PRACTICES ISSUES

The Assumption Underlying the Appellants’ Submissions

The attack by the appellants on the breadth of orders made by the primary Judge rests on an assumption which Mr Nicholas (who appeared for the Nike companies) did not directly challenge.  The assumption is that, in the absence of a finding by the primary Judge that use of the name “NIKE” on the appellants’ perfume and cosmetic products of itself would mislead or be likely to mislead consumers and others, there was no basis for orders in the form made by the primary Judge.  In particular, since Mr Ruiz had disclaimed any intention by the appellants to market products designated and promoted as “Nike Sport Fragrance”, there was no justification for restraining the appellants from distributing perfume or related products “under or by reference to the name NIKE or any other name or mark substantially identical with or deceptively similar thereto”.

The Court’s power to grant injunctions in respect of contraventions of s 52 of the TP Act is granted by s 80 of that Act.  Section 80(1) empowers the Court, where it is satisfied that a person has engaged or is proposing to engage in conduct that constitutes or would constitute a contravention (inter alia) of s 52, to grant an injunction “in such terms as the Court determines to be appropriate”.  Section 80(1) is not, in terms, limited to restraining the conduct found to have occurred or found to be in the contemplation of the respondent.  Moreover, s 80(4) specifically provides that the Court’s power to grant injunctions may be exercised

“(a)     whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in conduct of that kind;

 (b)      whether or not the person has previously engaged in conduct of that kind; and

 (c)       whether or not there is an imminent danger of substantial damage to any person if the first-mentioned person engages in conduct of that kind.”

See also TP Act, s 80(5), relating to mandatory injunctions.

The cases have not produced a comprehensive formula determining the relationship between findings of misleading and deceptive conduct and the form of any order made pursuant to s 80 of the TP Act.  It is well established that, as Lockhart J said in ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 (FCA/FC), at 259:

“injunctions should be granted in clear and unambiguous terms which leave no room for the persons to whom they are directed to wonder whether or not their future conduct falls within the scope or boundaries of the injunction”.

The Full Court (Gummow, Foster and Hill JJ) in Commodore Business Machines Pty Ltd v Trade Practices Commission (1990) 92 ALR 563, at 574-575, discouraged the practice of awarding injunctions expressed in terms of the statutory prohibition, on the ground that this merely reproduces that which the Act forbids, but with the risk of sanctions for contempt in the event of contravention.  Their Honours considered that, despite the observations of Barwick CJ in Mikasa (NSW) Pty Ltd v Festival Stores (1972) 127 CLR 617, at 631-632, injunctions of this kind

“conflict with the general precept, applicable to the exercise of power under s 80 of the [TP Act] as much to the framing of injunctions in aid of legal and equitable rights, that a final injunction should bear upon the case alleged and proved against the defendant, and should indicate that conduct which is enjoined or commanded to be performed, so that the defendant knows what is expected of him as a matter of fact”.

But, as their Honours also pointed out (at 575):

“[i]n some cases, there is a risk that an injunction drawn too precisely may encourage evasion of the spirit but not the letter, whilst a wider form of injunction will not place the defendant in any real position of doubt as to what is expected of him.”

Some judicial pronouncements suggest a more flexible link between the case proved and the form of injunctive relief.  In ICI v TPC, Lockhart J (with whom Gummow and French JJ relevantly agreed) characterised (at 255) s 80 of the TP Act as “essentially a public interest provision”.  The section departed from the traditional basis for the grant of injunctions because an applicant need not establish a proprietary right or interest to gain standing and because subsections (4) and (5) empower the Court to grant injunctive relief, notwithstanding that the defendant has not previously engaged in the prohibited conduct or does not intend to engage in it again.  Lockhart J summarised the effect of subsections (4) and (5) as follows (at 256):

“In my opinion subss (4) and (5) are designed to ensure that once the condition precedent to the exercise of injunctive relief has been satisfied (ie contraventions or proposed contraventions of Pt IV or V of the Act), the court should be given the widest possible injunctive powers, devoid of traditional constraints, though the power must be exercised judicially and sensibly.

Notwithstanding the provisions of subss (4) and (5), which permit an injunction to be granted whether or not there appears to be a likelihood of future contravention, the likelihood of future contravention by the defendant is regarded in the judgments of the court as a relevant factor.”

Other cases have emphasised the need for the orders to reflect the findings made in a particular case.  In World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181 (FCA/FC), Brennan J commented on certain orders which restrained World Series Cricket from making references “in a misleading or deceptive manner” to cricket matches as “Tests” or “Test Series”.  His Honour said that the orders

“should reflect the prima facie case which Mr Parish [the Chairman of the Australian Cricket Board] has shown, and that is not merely a case that the terms specified...will be used in reference to [World Series Cricket] matches or teams, but is a case that their use in reference to those matches or teams will contravene s 52 in some way.  If their use will contravene s 52 only in certain circumstances, the injunction should reflect the circumstances in which the reference is prohibited”.  (Emphasis added.)

His Honour took the view (not shared by the other members of the Court) that Mr Parish had established that the term “Test” connoted features unique to “official” Test matches.  These features were not shared by other cricket matches, regardless of the quality of the players or the countries from which they were drawn.  It followed that the use of the term “Test”, in relation to matches not having the unique features associated with Test matches, had been shown to be misleading and deceptive as to those features.  This was so even if the kinds of matches organised by World Series Cricket, and the teams competing in those matches were distinctly identified.  Accordingly, his Honour considered it appropriate that an order be made restraining World Series Cricket, without qualification, from using the term “Test” in relation to its matches.  Brennan J’s approval would seem to support the assumption underlying the appellants’ argument.  See also Trade Practices Commission v Glo Juice Pty Ltd (1987) 73 ALR 407 (FCA/Burchett J), at 412 ff.

The Nature of the Findings Made by the Primary Judge

Because the validity of the assumption I have identified was not tested in the argument, I do not think it desirable to consider the issue further, unless it is necessary to do so.  In my opinion it is not necessary to resolve the question because the primary Judge intended to find and did find that the use of the name “NIKE” in connection with the sale and promotion of the appellants’ products was likely to deceive consumers and others, such as pharmacists, stocking those products.

In considering his Honour’s reasons, several factors should be borne in mind.  First, the case pleaded by Nike in the amended statement of claim was not confined to an allegation that the sale and distribution of the appellants’ perfumes and toiletries were likely to mislead because the products were marketed as “Nike Sport Fragrance”.  On the contrary, par 16 of the amended statement of claim alleged that “the use in Australia of the name NIKE on toiletries [and perfumes] signifies or is likely to signify” that the articles were manufactured by or on behalf of Nike or were manufactured or sold with its licence and consent.  It was further alleged that the appellants represented by the use of the mark “NIKE”, in connection with the articles distributed and promoted by United, that the articles were manufactured or sold on behalf of Nike or with its licence and consent (par 18).  These representations were said to have been false, misleading and deceptive (pars 19, 20).  It was also said that the appellants had threatened to continue to engage in the misleading and deceptive conduct (par 22).  Nike’s case under the TP Act as pleaded, therefore rested on the use in Australia by the appellants of the name NIKE, independently of the sale and distribution of products labelled as “Nike Sport Fragrance”.

Secondly, although the appellants’ submissions drew a sharp distinction between their pre-litigation activities and their proposed post-litigation conduct, the distinction is much less clear-cut than those submissions might suggest.  Mr Ruiz’s evidence showed that his expressed intention to limit Campomar’s activities to products not labelled or marketed as sport fragrances was formulated shortly before the hearing commenced, presumably in consequence of the litigation itself.  Mr Catterns’ written and oral submissions frankly acknowledged that the “old product range” included products which did not have the words “Sport Fragrance” on them.  In other words, some of Campomar’s products marketed in Australia through the agency of United, bore the name “NIKE” but were not labelled or presented as “Sport Fragrance”.  It is therefore not the case that any findings as to the pre-litigation activities of the appellants and United must have related exclusively to products sold and marketed as “Nike Sport Fragrance”.

Thirdly, the primary Judge clearly recognised in argument the contention he was required to address.  During an interchange with Nike’s counsel, his Honour said this (JB, vol 1, p 60A):

“I suppose Mr Catterns will say to me, just forget about the sport fragrance because we do not intend to use that and tell us about ordinary fragrances that do not have sport on them.  That is going to be the question I will have to decide and that is a question of whether or not it is likely to mislead or deceive and I have got to make up my mind about it objectively.”

 

In the course of final addresses, Mr Catterns made it quite clear that the appellants wished to resist an order restraining the sale or distribution of products included in Exhibit 1 - that is, products containing no explicit reference to “Sport Fragrance” or to sports generally.  His Honour noted, in response to this submission (Ts 168) that

“when you have not marketed it at all, I do not know the circumstances upon which you are going to market, then all I have got is the packaging.”

 

This comment indicates that his Honour was aware of the argument upon which the appellants were relying.

Fourthly, there was evidence before the primary Judge which, if accepted, supported the conclusion that the use of the name NIKE by the appellants with or without a marketing strategy or get-up which used the words “SPORT FRAGRANCE”, was likely to mislead consumers and others.  The following passage in the evidence of Mr Nowak, a pharmacist, illustrates the point (JB, vol 1, p 45-45A):

“I just want to explore what led you to that assumption or perhaps  you could tell us what led you to that assumption?---Well, I mean, its fairly simple.  The product name is NIKE and consequently I would have thought the product that’s called NIKE is associated with NIKE sportswear.

Do you in thinking that have an assumption that the sportswear company has the exclusive right to use the word NIKE in various fields of commerce?---Yes.

And that includes obviously sportswear in  your assumption does it?---Sportswear, anything that NIKE want to put their name to that they feel that they can market.  I believe that they’ve got a right to use that name and so therefore that’s what led me to believe that that fragrance was owned by NIKE.

Do you think that that right flows from the sportswear company’s ownership of trademarks?---Well, yes, in short, yes.

And do you assume that they have got a range of trademarks in respect of different types of goods that they want to sell?  Yes, that’s an assumption that I’m making just purely on the name NIKE.  There’s no way that I can sit back and research every product that I’m sold, so I sort of figure that if it says NIKE its NIKE.” (Emphasis added.)

 

The cross examination of Mr Nowak was designed to further the appellants’ “erroneous assumption” argument, but his evidence clearly indicates that he made his assumption “purely” on the basis of the name “NIKE”.  Similar evidence was given by Ms Dinnall, a product manager for a rival perfume distributor who was conducting market research.  In addition, the expert evidence of Mr Blanket, which his Honour accepted, was directed to establishing the proposition that the brand name “NIKE”, when used in relation to personal care products, would be seen as a “natural extension” from sporting footwear and clothing.

Having regard to this background, I think that a fair reading of the primary Judge’s reasons supports the view that he did intend to find that the appellants’ use of the name NIKE for its products, without more, was conduct likely to mislead and deceive.  In a passage I have already quoted, the primary Judge found that many persons “seeing the NIKE cosmetic products, particularly products entitled ‘Nike Sport Fragrance’ would immediately associate the product with Nike International in some way”.  This language is inconsistent with his Honour intending to make a finding exclusively in relation to products packaged and marketed as “Nike Sport Fragrance”.  It is, however, consistent with the evidence of Mr Blanket, which his Honour said was to the effect that

“the imagery associated with the NIKE name when used in connection with a range of personal care products would be likely to give rise to a highly desirable set of ‘emotional responses’ flowing from extensive consumer awareness and ‘attractive product imaging’ associated with the NIKE name.”

Similarly, in another passage from the judgment, the primary Judge inferred from the evidence that the

“Nike name...was so well known in relation to sporting goods that it was almost certain that numbers of persons looking to buy toiletries or fragrances would be led to believe that such products marketed under the Nike name were marketed either by Nike International or with its authority.”

I think that this passage indicates that his Honour intended to find that the use of the Nike name by the appellants was likely to mislead consumers and retailers.

It is true that the primary Judge, at certain points in his judgment, identified questions and made findings by reference to the sale and promotion of products under the label “NIKE SPORT FRAGRANCE”.  For example, in holding that Campomar had engaged in “blameworthy conduct” for the purposes of the application of s 28 of the TM Act, his Honour found that Campomar

“engaged in a course of conduct which led to its products, described as ‘NIKE SPORT FRAGRANCE’, being marketed in circumstances where it was likely that they would be confused by customers and others by reason of the reputation which Nike International had in athletic footwear and other sporting products.”

I think, with respect, that it is fair to say that his Honour’s intentions might have emerged more clearly had he made an explicit finding that the use of the NIKE name was likely to deceive customers and retailers, independently of the marketing and distribution of products labelled as “NIKE SPORT FRAGRANCE”.  However, as Mr Catterns acknowledged, the question is essentially one of impression based on a reading of the judgment as a whole, having regard to the manner in which the case was conducted.  In my view, the primary Judge intended to and did make a finding that the use of the NIKE name by the appellants, whether or not in connection with the sale of products labelled as “NIKE SPORT FRAGRANCE”, was likely to mislead customers and retailers.

Mr Catterns contended that the primary Judge’s misapprehension concerning Nike’s pleaded case (acknowledged in his supplementary judgment) supported the view that his Honour had intended to make findings limited to products distributed and marketed as “NIKE Sport Fragrance”.  Mr Catterns submitted that, since his Honour mistakenly understood Nike’s case to be based on the appellants’ knowing participation in United’s contravention of s 52 of the TP Act, he must have made findings limited to the products distributed by United.  Even if this were so, however, the products distributed by United were not confined to those labelled as “NIKE SPORT FRAGRANCE”.  As I have said, Mr Catterns acknowledged that some of the “old products” did not have the words “SPORT FRAGRANCE” on their packaging.  In any event, his Honour’s assumption that Nike’s case against the appellants rested on s 75B of the TP Act did not detract from the need for him to direct attention to the form of appropriate relief having regard to the appellants’ stated plans for the future.  In my view, his Honour appreciated that he had to take into account the appellants’ intentions with respect to the marketing of their products.

Was the Finding of Fact Correct?

In my opinion, the evidence relied on by the primary Judge supported his finding that the appellants’ use of the name “NIKE” in connection with the sale and promotion of their products was likely to deceive consumers and retails. Mr Catterns criticised what he said was Mr Blanket’s “impressionistic list of brand extension anecdotes”.  However, his Honour did not adopt that characterisation of Mr Blanket’s evidence and it was open to him to accept (as he did) Mr Blanket’s opinion that brand extension operated in the fragrance market.  Moreover, there was evidence from consumers and others that directly related to the impression conveyed by the use of the NIKE name on perfume and personal care products.  Indeed, his Honour considered the evidence of investigators and pharmacists to be “more directly on point”, although he found Mr Blanket’s analysis “helpful” because it summarised the effect of the direct evidence.  Once the evidence of Mr Blanket and the other witnesses is accepted, there is no basis for challenging the finding made by the primary Judge.

ERRONEOUS ASSUMPTION

The appellants submitted that any confusion in the words of consumers as to whether the appellants’ products were affiliated with Nike arose from their own erroneous assumption that such an affiliation existed.  Mr Catterns relied on well-known cases which, to use the language of Gummow J in Hogan v Pacific Dunlop Ltd (1988) 12 IPR 225, at 253, stand for the proposition that an applicant will fail if the cause of error claimed to give rise to a contravention of s 52 was an erroneous belief on the part of consumers a “for which the defendant was not responsible”:Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; McWilliams Wines Pty Ltd v McDonald’s Systems of Australia Pty Ltd (1980) 49 FLR 455; and Lego Australia Pty Ltd v Pauls (Merchants) Pty Ltd (1982) 42 ALR 347 (FCA/FC).

As Deane and Fitzgerald JJ remarked in Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 (FCA/FC), at 200, there was for a time a tendency to regard the McWilliams Case as establishing a proposition of law, to the effect that intervention of an erroneous assumption between conduct and any misconception destroys the necessary chain of causation, with the consequence that the conduct cannot be regarded as likely to mislead or deceive.  Their Honours considered this tendency to be mistaken.  They continued (at 200):

“In truth, of course, no conduct can mislead or deceive unless the representee labours under some erroneous assumption.  Such an assumption can range from the obvious, such as a single assumption that an express representation is worthy of credence, through the predictable, such as the common assumption in a passing-off case that goods marketed under a trade name which corresponds to the well-known trade name of goods of the same type have their origins in the manufacturer of the well-known goods, to the fanciful, such as an assumption that the mere fact that a person sells goods means that he is the manufacturer of them.  The nature of the erroneous assumption which must be made before conduct can mislead or deceive will be a relevant, and sometimes decisive, factor in determining the factual question whether conduct should properly be categorized as misleading or deceptive or as likely to mislead or deceive.  Beyond that, generalizations are themselves liable to be misleading or deceptive.”

In Lego Australia Pty Ltd v Paul’s (Merchants) Pty Ltd (1982) 42 ALR 344, at 350, Deane and Fitzgerald JJ said that, in their joint judgment in Taco Bell, they had been

“at pains to stress that the question whether particular conduct of which complaint is made is misleading or deceptive or is likely to mislead or deceive is, in the ordinary case, a question of fact to be answered in the context of the evidence as to the alleged conduct and as to relevant surrounding facts and circumstances and that, irrespective of whether conduct produces or is likely to produce confusion or misconception, it cannot, for the purposes of s 52, be categorized as misleading or deceptive unless it contains or conveys in all the circumstances of the case, a misrepresentation.”

See also 10th Cantanae Pty Ltd v Shoshana Pty Ltd (1987) 79 ALR 299 (FCA/FC), at 324-325, per Gummow J.

In this case, his Honour made several findings bearing on the “erroneous assumption” submission.  First, he found that Mr Ruiz, on behalf of Campomar, had engaged in certain conduct “in order to take advantage of the goodwill and reputation of Nike International”.  That conduct included registering the NIKE trademark in Australia and elsewhere in respect of perfumes, changing the way the word NIKE was presented (changing the script form to block letters in bold print) and describing the product as “SPORT FRAGRANCE”.  Secondly, Campomar, through Mr Ruiz, was

“well aware of the benefit which would be likely to flow to it in using the name Nike in association with a sports fragrance and other toiletries simply because of the likelihood of potential customers being led to believe that the two Nike products were in some way connected in the sense of coming either from the same source or, in the case of the toiletries and perfumes, from a source authorised by Nike International.”

Thirdly, Campomar had engaged in a course of conduct which led to its products being marketed in circumstances where it was likely that they would be confused by customers and others, by reason of Nike International’s reputation in athletic footwear and other sporting products.

These findings must be read with the findings to which I have previously referred.  When this is done, the primary  Judge’s conclusion that the persons who were misled or deceived did not mislead or deceive themselves by making an assumption they were not entitled to make, is inevitable.  As he remarked, the persons who were misled made the very assumption that Campomar intended they should make.

The present case is clearly distinguishable from cases such as Parkdale v Puxu, McWilliam’s Wines v McDonalds and Lego v Paul’s (Merchants).  The findings of fact by the primary Judge were to the effect that Campomar had engaged in conduct, including the use of the name NIKE on perfume and personal care products, in order to take advantage of Nike International’s goodwill and reputation.  As Gummow J remarked in Hogan v Pacific Dunlop, at 253, whatever the true operation of the so-called erroneous assumption doctrine, it can have no application in circumstances such as these.  In any event, the question is ultimately one of fact.

 

TRADE MAKE ISSUES

Person Aggrieved

Mr Catterns submitted that the primary Judge had applied an incorrect test in deciding that Nike International was a “person aggrieved”, within the meaning of s 22 of the TM Act.  According to Mr Catterns, his Honour held that an alleged contravention of s 52 of the TP Act  by the registered proprietor of the mark (Campomar) was sufficient to establish that Nike International was disadvantaged so as to make it a person aggrieved.

Mr Catterns said that the correct test was that laid down by McLelland J in Ritz Hotel, at 193, namely that

“there is a reasonable possibility of [the applicant] being...appreciably disadvantaged in a legal or practical sense by the Register remaining unrectified, or by the trade mark remaining unremoved in respect of any goods....”

 

 

Nike International was not disadvantaged by the retention of Campomar’s marks on the register, because Nike International

·      had never traded on the products the subject of the Campomar marks; and

·      it had expressly eschewed any desire to do so, for example in the letter to Mr Ruiz of 9 June 1986, stating that Nike “did not believe perfume and cosmetic products are part of this company’s image”.

The primary Judge approached this question by extracting the relevant passage from the judgment of McLelland J in Ritz Hotel and noting that the passage had been approved by a Full Court of this Court in Kraft Foods Inc v Gaines Pet Food Corporation (1996) 65 FCR 104, at 113, per Sackville J, with whom Sheppard and Tamberlin JJ agreed.  In that case approval was also given to McLelland J’s observation that the expression “persons aggrieved” has no special or technical meaning and is to be liberally construed.

The primary Judge, in the present case, after referring to the authorities, said this:

 

“Here, I think it is clear that there is a reasonable possibility of Nike International being appreciably disadvantaged.  If the fact be that it is open to the court to expunge an entry wrongly remaining in the register even though it may not have been an entry of that kind when it was first made, then Nike has at least a reasonable prospect of succeeding in its endeavour to have the marks expunged.  Its case is that the respondents have used the mark NIKE of which Campomar is the proprietor, to engage in conduct which would be likely to deceive or cause confusion; cf par 28(a) of the Trade Marks Act.  The removal of the mark from the register would make it less likely that such conduct, which is disadvantageous to Nike International, would continue.  A possible consequence of leaving the mark on the register is that Nike International will continue to be disadvantaged.  That is enough, in my opinion, to make it a person aggrieved.”

In my opinion, the primary Judge applied the correct test and did not err in finding that the test was satisfied.  The reasons need to be understood in the context of his earlier findings that many persons seeing the appellants’ cosmetic products would immediately associate the product with Nike International, by reason of its established reputation in the sporting goods field, and would be likely to think that the product had Nike’s approval or was sponsored by it.  The primary Judge considered that Nike International would or might suffer appreciable disadvantage if Campomar’s marks were not removed from the register, since removal would make it less likely that consumers would continue to be deceived or misled in the manner contemplated by s 28(a) of the TM Act.  This finding was supported by the evidence.

The present case is different from those in which applicants have been held not to be “persons aggrieved”: see Gaines, at 208-209.  In Gaines itself, for example, the applicants’ claim that it was a “person aggrieved” rested solely on the fact that it had filed an application for a trade mark.  Not only was there no satisfactory evidence of prior or intended use of the mark by the applicant, but there was nothing to suggest that the applicant had an established reputation in respect of any goods that would have led to consumers and others being misled or deceived.  That evidence was adduced in this case and was accepted by the primary Judge.  The likelihood of confusion in the market place from the continued use of the appellants’ marks, having regard to Nike International’s established reputation, was sufficient to constitute Nike International a “person aggrieved” within s 22 of the TM Act.

 

Other Trade Mark Issues

I have had the advantage of reading in draft the judgment of Lehane J.  I agree with his Honour’s reasoning on the question of whether the use by the applicants of their marks would be likely to deceive or cause confusion (TM Act, s 28(a)).  I also agree with his Honour that the primary Judge’s finding that the appellants had engaged in blameworthy conduct should be upheld.

 

ESTOPPEL

The appellants submitted that, if all else failed, the Nike companies were estopped from pursuing remedies in respect of the appellants’ use of their trade marks in connection with perfume and personal care products.  It was said that the appellants had relied on the representation made by Nike International in its June 1986 letter, to the effect that it was not interested in entering the market for perfumes.  The appellants had demonstrated their reliance by applying for registration of their trade marks.  They had also relied on a statement made to Mr Ruiz at a 1990 meeting by Mr Faylor, an attorney representing the Nike companies, that Campomar “would have little to fear” so long as it did not intend to mislead the public.

In my view, the foundation for the estoppel argument is lacking.  The letter of June 1986 cautioned Campomar not to suggest or imply that its “NIKE” products were sponsored or approved by Nike Inc.  Mr Faylor’s statement was qualified by the requirement that Campomar not attempt to mislead the public.  The foundation of Nike’s case is that the distribution of the appellants’ products misled or deceived, or was likely to mislead or deceive, consumers and others.  It is hardly unconscionable to institute proceedings of the kind implicitly foreshadowed in both the 1986 letter and the 1990 conversation.

CONCLUSION

Each appeal should be dismissed, with costs.

I certify that this and the preceding twenty-nine (29) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Sackville.

Associate:

Dated:              7 July, 1998

LEHANE J:

Sackville J has stated the facts and issues and described the course of the proceedings before the primary judge in terms which I gratefully adopt.   As a result, I can go directly to the matters canvassed on the appeal.   In dealing with them I shall refer indiscriminately to “the appellants” and “the respondents”: Sackville J’s reasons describe the different roles and interests of the first and second appellants and of the first and second respondents.  

 

 

Trade Practices Act

(a)    Nature of findings and their basis

 

Two circumstances combined to complicate both the trial and the appeal.  One was the amendment of the statement of claim in matter no. G241 of 1994, made by leave at the commencement of the hearing before the trial judge.   The other was the tender by senior counsel for the appellants of what became known as Exhibit 1 (the appellants’ “new line” which eschewed, on its labelling and packaging and, apparently, in brochures referring to it, any overt reference to “sport”) and senior counsel’s announcement, in the course of his opening address, that the appellants did not threaten to sell or distribute, in Australia, any products other than those comprising the new line.

In those circumstances the respondents’ pleaded case, amended to allege infringements of s 52 of the Trade Practices Act 1974 (Cth) directly by the appellants and passing-off by them, relied upon what had been done, by way of distribution of the appellants’ products in Australia for a brief period in 1993, not the rather different conduct in which they now threatened to engage; and, of course, the affidavit evidence read on behalf of the respondents dealt with (or, in the case of the expert evidence of Mr Blanket, was given in the light of) what the appellants had done, not what they now proposed to do.

Exchanges between the trial judge and counsel, to which we were referred, make it clear that the case proceeded on the basis that the appellants sought a “clean bill of health” in relation both to what had previously been done and to what was now proposed and that alternatively, if his Honour should find in favour of the respondents as to the appellants’ past conduct, any injunctive relief should be limited so as not to restrain the sale or distribution of the new line.   It is apparent also, from the following exchange, that his Honour saw an immediate difficulty with what he was asked to do:

HIS HONOUR:           One of the things that worries me about it a bit, I suppose I ought to help you both by at least indicating to your clients what I think the situation is but you are really asking me to decide the product that has not been marketed in the air.  In other words, I will not know the circumstances in which it will [be] marketed and it is possible it could be marketed in some circumstances where there would be misleading and deceptive conduct and marketed in others where there would not be.  

I mean, if it was marketed with a package that also said, no connection with Nike shoes, [or] whatever the right thing was, I know that is frowned upon these days, it is not regarded as a good formula but if you made some statement on it to the effect that it had absolutely no connection with his product, well then, that might be one thing.   If you do not have that, it might be another.  

MR CATTERNS:         Your Honour, I submit that ---

HIS HONOUR:           But when you have not marketed it at all, I do not know the circumstances upon which you are going to market, then all I have got is the packaging to go on.  

MR CATTERNS:         Your Honour has only two other things - our brochures too; they are in evidence.  Our brochures are in evidence, exhibited to Mr Ruiz’s last affidavit and secondly, it is a logical inference that it will be sold through the same sort of outlets as the previous products, e.g. the pharmacy at Noosa.  

It should be observed in passing that the “last affidavit” referred to was one sworn on 1 December 1995 (the trial commenced on Monday 4 December 1995). 

I mention these matters not by way of criticism but simply to set out, as clearly as I can, what seems to me an important aspect of the context in which the trial proceeded.   The judge had before him examples of the appellants’ products which had been distributed briefly in Australia during 1993.   Several of them were described as “sport fragrances”.  Others were not, though they were stated on their packaging to be the products of a company then known as “Nike Sport Cosmetics SA”.   He had before him other evidence which clearly indicated that the appellants’ intention was to stress the “sports” nature, or association, of their products.  He had evidence of the way in which those products had been distributed in Australia (and senior counsel for the appellants had suggested to his Honour that he might infer that the new line would be distributed substantially in the same way).   The packaging and labelling of the new line, and a brochure about it, were in evidence.  There was evidence, which his Honour accepted, that at least by some time before the commencement of the proceedings the respondents had acquired an extremely strong reputation in Australia, as well as elsewhere, for their Nike brand, used principally in relation to sporting footwear.   There was on the other hand no evidence of any reputation acquired by the appellants in Australia for their Nike branded products, apart from any reputation which may have resulted from the brief period of distribution in 1993.   Finally, there was evidence given by Mr Blanket about the practice of brand extension and the implications of that practice for a brand such as that of the respondents.  

Despite the exchange, which I have quoted, between his Honour and counsel, there is force in the submission of counsel for the appellants that the trial judge, in considering the case under the Trade Practices Act, was diverted from considering, separately, whether distribution in Australia of the new line of products would contravene s 52 by his belief, at the time when he wrote his principal judgment, that the appellants were claimed to be liable under the Trade Practices Act only as persons involved (s 75B) in a contravention alleged against their former distributor: that had the result, it was submitted (supported by references to several passages in the judgment), that his Honour had considered, in relation to the Trade Practices Act, only the conduct in which the distributor had engaged, that is the distribution of the superseded products, many of them “sport fragrances” and the “sporting” associations of which, generally, had been emphasised in order to promote the products.   There is force also, I think, in the submission that when, in his supplementary judgment, his Honour found the appellants directly liable for a contravention of s 52 he did not consider any conduct (or threatened conduct) other than that dealt with in the principal judgment. 

The following passage in the principal judgment, particularly, might be seen as supporting the appellants’ submissions as to his Honour’s understanding of the case sought to be made against them under the Trade Practices Act:

In order to understand the way in which Nike’s case is put in relation to the causes of action upon which it relies under the Trade Practices Act, it is necessary to refer to evidence called in Nike’s case.  I can do this comprehensively.   There is no issue about its accuracy.  Exhibited to affidavits filed on behalf of Nike were examples of the Nike cosmetic products which were marketed under the name “NIKE Sport Fragrance”.  Some of the evidence establishes that this product was found displayed in pharmacies beside or underneath other sports fragrances including a sports fragrance marketed under the name “Adidas”.   Evidence establishes that the well-known sporting organisation Adidas does either itself, or through other companies which it authorises, market a sports fragrance bearing its name.  Essentially the Nike International case is that the placing of the NIKE sport fragrance in the same area of pharmacies as other sports fragrances, particularly the Adidas sports fragrance, was likely to mislead or deceive members of the public into thinking that the NIKE sports fragrance was in some way promoted or distributed by Nike International itself or with its consent and approval.

There was evidence of Nike International being telephoned by pharmacies who were out of NIKE sport fragrance stock asking how they could obtain further supplies.   This indicated that the pharmacies themselves thought that the NIKE sports fragrance product had some connection with Nike International.

There are a number of other passages in the principal judgment which reinforce that impression.   Some occur in that part of the judgment in which his Honour deals with questions arising from the claim for expungement of the registered marks.   But it is perhaps desirable to quote the following passage from his Honour’s concluding observations about the claim under the Trade Practices Act, the first paragraph of which deals with the question of “erroneous assumption” (and the second of which, it may be noted, includes what appears to be a finding of direct contravention of s 52):

I do not think that this is a case in which the evidence establishes that those who were misled or deceived, misled or deceived themselves by making an assumption they were not entitled to make.   Those making the assumption did so because they were intended by Campomar to make it.   I think that it must have been well appreciated by Campomar that a sports fragrance such as was marketed would be placed alongside other sports fragrances in pharmacies and other outlets and that this, because of the use of the name Nike, would give the product an advantage that it would not otherwise have had.

The evidence establishes that Campomar through Mr Ruiz did knowingly contravene s.52.  I agree that it may not have appreciated that it was committing a breach of the law.   But it knew precisely what was occurring.  In particular, the evidence establishes that its marketing activities were intended to enable it to take advantage of the Nike International reputation.  On the findings I have made, that is what was in fact occurring when [the appellants’ former distributor] decided not to defend the proceedings brought against it.      

It is not necessary to quote at length from the supplementary judgment: it is a fair summary, I think, simply to say that his Honour expressed the view that his reasons for finding the appellants liable on an accessory basis led equally to the conclusion that they were liable directly under s 52 and in passing-off.

  

It should be added that neither in the principal judgment nor in the supplementary judgment does his Honour explicitly refer to the new line or to what had passed between his Honour and counsel in the early stages of the trial.  

But that is by no means the end of the matter.  His Honour accepted the evidence of Mr Blanket; he said that he found Mr Blanket’s analysis helpful:

.....because it tends to summarise the effect of the direct evidence which has been led and also to crystallise my own reactions to that evidence.  

The critical paragraph of Mr Blanket’s affidavit reads:

The brand name NIKE is an extremely well known brand name which has been heavily advertised and promoted by “sporty”, “sexy”, “energetic” and “youthful” imagery.   It is well adapted for use in relation to personal care products such as fragrances, shampoos, deodorants and after shaves.   The use of the NIKE name on such products would be a natural extension from sporting footwear and clothing from both the manufacturers’ and the consumers’ standpoint.   The imagery associated with the NIKE name when used in connection with a range of personal care products would be likely to give rise to a highly desirable set of emotional responses flowing from extensive consumer awareness and attractive product imagery associated with the NIKE name.  

A number of matters should be noted about that evidence and in association with it.   It is clear that Mr Blanket was directing his attention to “Nike” simply as a name, not necessarily associated with other elements of packaging or get up designed to reinforce sporting associations.   The evidence followed a discussion by Mr Blanket of the concept of “brand extension”: that is, the practice by which a name or image well established in the public mind in relation to a particular type of product is adapted for use in relation to products of other kinds; I shall return to that practice, and to other aspects of Mr Blanket’s evidence, later in these reasons, noting for the present only that Mr Blanket offered a number of examples of the application of the practice (Mr Catterns described them as “impressionistic” as in a sense they are; most of them, however, are also well known and it was not suggested that Mr Blanket’s evidence, though in some respects expressed in rather general terms, was inaccurate).  The trial judge accepted a considerable volume of evidence concerning the respondents’ reputation in Australia.   His Honour said:

I have not found it necessary to refer to the detail of this evidence but I should make it clear that I accept it.   There is no issue about it and there is no point in dwelling on it.   In taking that course, however, I do not wish to be thought to be underestimating the significance of NIKE International and its products as a force in the market in Australia for athletic footwear and sporting gear.  Obviously NIKE International is very well known in this connection throughout the country.  

That may be taken as a finding as to the extent of the respondents’ reputation in Australia both at the date of commencement of proceedings and also during the period in 1993 when the appellants’ products were distributed. 

The direct evidence of people who had actually been misled, accepted by the trial judge, was, in a number of cases, based upon the use of the name “Nike”, combined in some cases with the typeface in which the name was printed on the appellants’ products; some witnesses made somewhat expansive assumptions about the respondents’ rights, as the manufacturers of the well-known sporting footwear, to exclusive use of the name “Nike” across a wide range of products (in one case, questions asked by his Honour drew a response that the witness assumed that the right would extend to pet food or a toilet cleaner).   Certainly it could not be said of the evidence that it supported a finding no wider than that people had been misled only by the use of the phrase “sport fragrance” in conjunction with the name or the naming of the manufacturer as “Nike Sport Cosmetics SA”. 

Following his discussion of Mr Blanket’s evidence the trial Judge said this:

I think there can be no question but that many persons seeing the NIKE cosmetic products, particularly products entitled “NIKE Sports Fragrance”, on pharmacy shelves, whether in the vicinity of similar products or not, would immediately associate the product with Nike International in some way.   They would be likely to think that the product had Nike’s approval or was sponsored by it (cf. para. 53(c) of the Trade Practices Act).  Some would be likely to consider that it was a product manufactured or distributed by Nike International itself.

Finally, his Honour made the following findings in relation to the case under the Trade Practices Act as he then understood it to be pleaded:

I am satisfied that the evidence establishes the likelihood of persons being actually misled or deceived.   In other words, there is primarily a case under s.52 against United which marketed the goods.   This indeed is the effect of the evidence from the trade.   I have accepted that evidence.  Apart from this, however, I would myself infer from the whole of the evidence that this was likely to have been the situation.   The Nike name used in connection with products marketed by Nike International was so well known in relation to sporting goods that it was almost certain that numbers of persons looking to buy toiletries or fragrances would be led to believe that such products marketed under the Nike name were marketed either by Nike International itself or with its authority.  

Immediately before his Honour delivered, ex tempore, his supplementary judgment, counsel reminded him, in clear terms, of the distinction between the products which had been distributed in 1993 and the new line.   And, of course, the orders which his Honour made, and of which the appellants complain, were made after lengthy discussion with counsel following the delivery of the principal judgment and, among other things, operated to restrain the appellants, without the licence of the respondents, from:

..... advertising, promoting, selling, offering to sell, supplying or offering to supply any perfume, aftershave, eau de toilette, cosmetic, shampoo, soap, deodorant or other health or beauty care product under or by reference to the name NIKE or any other name or mark substantially identical with or deceptively similar thereto; .....

It is to be recalled that the only significant distinction between the packaging and labelling of the products distributed in 1993 and the new line is that, whereas some of the former included the words “sport fragrance” and all included “sport” as part of the manufacturer’s name, none of the latter included either of those features.   But it is plain that his Honour regarded neither feature as essential to his conclusion.   It was the use of the name (particularly, perhaps, the name written in large block capitals) which resulted in people being, or being likely to be, misled or deceived.   What I have already said demonstrates, I think, that that conclusion has a clear foundation in the evidence; and it supports the orders which his Honour made.

(b) Were the findings supported by the evidence?

It is implicit in that conclusion that I do not accept submissions by senior counsel for the appellants that the evidence did not support the findings made and that, in any event, if consumers were misled or deceived, that was not because of any conduct on the part of the appellants but resulted from an erroneous assumption on the part of the consumers.   The former of those submissions was founded on the proposition that it was necessary for the respondents, in order to succeed, to establish a particular chain of reasoning and that they had failed to do so: the chain of reasoning required to be established was (it was said), the respondents’ reputation being a reputation as a manufacturer and distributor of athletic footwear, first that the public was aware of the practice of brand extension and secondly that they would apply that general awareness to the present facts.  The contention was that the evidence was not capable of establishing either of those two propositions.  As to the first proposition, it was said that it depended entirely on Mr Blanket’s evidence and that evidence was merely an “impressionistic list of brand extension anecdotes”, there being no evidence of the sales of any of the products to which the “anecdotes” related.   As for the second proposition, Mr Blanket had agreed that a “brand” includes many components other than the name of a product, including, in the case of the respondents’ brand, a device described in argument as a “swoosh”, the colour red, slanted type face and slogans (particularly “just do it”) much emphasised in the respondents’ advertising.  

The difficulty with those contentions, however, is that there was evidence of persons actually misled, including evidence that the particular aspect of the appellants’ products which brought that about was the use of the name “Nike”.   There was then expert evidence by Mr Blanket (whose qualifications to give that evidence were not challenged) which explained on a rational basis why consumers would be misled and why, particularly, the use of the name, as the appellants used it, might bring about that result.   The question is one of fact and decisions on other facts (particularly the significantly different facts of McIlhenny Company  v Blue Yonder Holdings Pty Ltd (1997) 149 ALR 496, referred to in argument) do not greatly help in its resolution.   In short, in my view, the submission that the findings were not sufficiently supported by the evidence should be rejected.

(c) “Erroneous assumption”

To speak of a principle about “erroneous assumption” may itself mislead, because it diverts attention both from the real question to be answered, which is one of characterising conduct (in a case such as the present) of a manufacturer or distributor not that of a consumer, and, again, from the character of the question as one of fact.   The appellants relied strongly on McWilliam’s Wines Pty Ltd v McDonald’s System of Australia Pty Ltd (1980) 49 FLR 455 and the approval of that decision by Mason and Brennan JJ in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 203, 204 and at 225.   The appellants relied also on particular matters established by the evidence: for example, that the respondents have expressly decided not to extend their brand into the field occupied by the appellants, that the appellants’ use of the mark in other countries substantially pre-dates use by the respondents and that the appellants have in Australia, but the respondents have not, a long standing registered trade mark in the relevant class.   The appellants referred us to observations of the members of the Court in Lego Australia Pty Ltd v Paul’s (Merchants) Pty Ltd (1982) 42 ALR 344, particularly in the joint judgment of Deane and Fitzgerald JJ at 352:

The fact that companies may and sometimes do expand the range of products which they produce cannot of itself warrant a conclusion that a particular company has done so.

And, in relation to the facts of that case:

Any members of the public who were confused or under a misconception … were so confused or under such a misconception as a result of an unwarranted assumption which they themselves made.  

In Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 200, Deane and Fitzgerald JJ referred to what they regarded as a mistaken tendency to see comments by the members of the Court in McWilliam’s “as involving some general proposition of law to the effect that intervention of an erroneous assumption between conduct and any misconception destroys a necessary chain of causation with the consequence that the conduct itself cannot properly be described as misleading or deceptive or as being likely to mislead or deceive”.

Their Honours continued:

In truth, of course, no conduct can mislead or deceive unless the representee labours under some erroneous assumption. Such an assumption can range from the obvious, such as a simple assumption that an express representation is worthy of credence, through the predictable, such as the common assumption in a passing-off case that goods marketed under a trade name which corresponds to the well-known trade name of goods of the same type have their origins in the manufacturer of the well-known goods, to the fanciful, such as an assumption that the mere fact that a person sells goods means that he is the manufacturer of them.  The nature of the erroneous assumption which must be made before conduct can mislead or deceive will be a relevant, and sometimes decisive, factor in determining the factual question whether conduct should properly be categorized as misleading or deceptive or as likely to mislead or deceive.   Beyond that, generalizations are themselves liable to be misleading or deceptive.  Thus, one might generalize that the need for a simple assumption that an express representation is literally true could never be a factor militating against a finding that conduct which has misled or deceived is of its nature misleading or deceptive.   Such a generalization would, however, ignore the part that irony can legitimately play in human communications.   On the other hand, conduct which could only mislead or deceive if the representee were to make a fanciful assumption and which ordinarily would be innocent, may be misleading or deceptive if it appears that the person engaging in the conduct knew that the person to whom the relevant conduct was directed was convinced of the validity of that assumption.

Taco Bell emphasises, once again (at 202), that the question is one of fact.  Numerous reported cases show how that question of fact has been approached and some of the matters which have been thought relevant in deciding it.   Thus:

A later manufacturer who does no more than exercise his freedom to manufacture and sell goods made in accordance with a design in the public domain does not mislead or deceive; and if a consumer has an erroneous preconceived belief that the first manufacturer has a monopoly, a false assumption by the consumer as to the source of the later manufacturer’s goods is self-induced.

(Parkdale at 225, per Brennan J).   Whether goods are in the same, similar or, on the other hand, significantly disparate categories, is relevant (R & C Products Pty Ltd v Abundant Earth Pty Ltd (1984) 55 ALR 38; Lego Australia; McIlhenny); so is the class of those to whom the conduct is directed, for example whether that class is consumers generally or, on the other hand, a limited and sophisticated class with some knowledge of marketing practice (Taco Bell; Parkdale; R & C Products; McIlhenny).

But the reported cases do not yield a complete list of relevant matters: plainly, for example, the extent and strength of the reputation in a name or brand (or its “power”) is an important matter; so is the “fit” between one category of products and another, for the purpose of brand extension: here, for instance, there was evidence of Mr Blanket which his Honour accepted, that a strong brand applied to athletic footwear is readily extendable to products such as “toiletries”; on the other hand, there is no such obvious “fit” between a powerful and well established brand applied to a spicy sauce and the service of designing promotional stands for use at trade fairs and exhibitions (McIlhenny).

The circumstance that the respondents have - to date - chosen not to extend their brand into the field which the appellants seek to occupy seems to me of very little relevance: it does not help in characterising the appellants’ conduct (or threatened conduct) or its likely effect on those to whom it is directed.   Nor can it matter, for present purposes, that in other parts of the world the appellants have a reputation, in the name “Nike” as applied to toiletries, which arose substantially earlier than the reputation which the respondents have now acquired or that, in the absence of any significant reputation in Australia, the appellants have registered trade marks in classes covering the categories of goods which they propose to distribute.   Neither, in my view, does it matter that particular members of the public made somewhat extravagant assumptions as to the extent of the respondents’ rights in relation to the name “Nike”, accepting that they would extend to products such as toilet cleaners and pet food.   No question arises in relation to products of those sorts, nor were the witnesses’ responses a reaction to an encounter with such products.   What matters is that there was evidence that by using “Nike” as the name of their products the appellants misled people into believing that their products had a connection with the respondents and that there was evidence, also, entitling his Honour to conclude that it was by no means irrational or surprising that consumers should reach that conclusion.   It is relevant also that there was evidence, which his Honour accepted, that, in relation to the products distributed in 1993, the appellants intended and wished that consumers would see an association between their products and those of the respondents (see, as a recent example, Twentieth Century Fox Film Corporation v The South Australian Brewery Co. Ltd (1996) 66 FCR 451 at 466; and see Pacific Dunlop Ltd v Hogan (1989) 23 FCR 553 at 586).  

(d) Conclusions on Trade Practices Act and passing-off

All those considerations combine, in my view, to require the conclusions that the trial judge was right to dismiss the arguments based on erroneous assumption and that his findings of contravention of s 52 of the Trade Practices Act should not be disturbed.   

It was not suggested that, if we should reach that conclusion, we should nevertheless conclude that his Honour erred in finding both passing-off as to what happened in 1993 and a threat of it as to what is now proposed.   I see no reason to doubt that the findings as to s 52 lead equally, in the circumstances of this case, to the conclusion that his Honour’s findings on passing-off should be upheld.  

Trade Mark Issues

(a) The legislative provisions and the issues

The respondents’ claim, which succeeded before the trial judge, was for expungement, under s 22 of the Trade Marks Act 1955 (the “1955 Act”, which, in the circumstances described in Sackville J’s judgment, applies to these proceedings as a result of transitional provisions in the Trade Marks Act 1995 (the “1995 Act”)).   Sub-section (1) of s 22 of the 1955 Act provides as follows:

22(1) Subject to this Act, a prescribed court may, on the application of a person aggrieved or of the Registrar, order the rectification of the Register: ..

                        (b) by the expunging or amendment of an entry wrongly made in or remaining in the Register; .....

 

The respondents claim to be persons aggrieved by the circumstance that the appellants’ marks remain, wrongly as they say, in the Register (the appellants dispute that the respondents are to be regarded as “persons aggrieved”).   The respondents say that the reason why the marks wrongly remain in the Register is that they offend against s 28.  The earlier of the appellants’ marks was registered more than seven years before the commencement of the proceedings before the trial judge, so that s 61(1) applies. 

 

That sub-section provides:

 

61(1) In legal proceedings relating to a trade mark registered in Part A of the Register ..... , the original registration of the trade mark under this Act shall, after the expiration of 7 years from the date of the original registration, be taken to be valid in all respects, unless it is shown: ...

(b) that the Trade Mark offends against the provisions of section 28; ...

Section 28 provides:

28  A mark:

(a)  the use of which would be likely to deceive or cause confusion;

(b)  the use of which would be contrary to law;

(c)  which comprises or contains scandalous matter; or

(d)  which would otherwise be not entitled to protection in a court of justice,

shall not be registered as a trade mark. 

 

These proceedings give rise to a factual question, to be tested at the date when the proceedings before the trial judge were commenced (and possibly also at the dates when the appellants’ marks were registered), that is the question whether the appellants’ marks were marks the use of which would be likely to deceive or cause confusion.   If so, there is a question, relevant at least to the claim for expungement of the earlier mark, whether likelihood to deceive or cause confusion is available as a ground for expungement where the circumstances giving rise to the likelihood have arisen since the date of original registration.   There is then a further question, whether mere likelihood to deceive or cause confusion is a sufficient foundation for expungement, at least in circumstances where the likelihood arises from circumstances following registration or whether, on the other hand, further matters (particularly, what is described as “blameworthy conduct”) must be established; and if so, whether the trial judge correctly held that the respondents had established those matters. 

 

(b)  Use likely to deceive or cause confusion?    “Secondary” operation of s 28

The initial question is whether the trial judge was right in concluding that, in the circumstances disclosed by the evidence, the appellants’ marks were marks the use of which would be likely to deceive or cause confusion (s 28(a)).   In this Court it must be accepted, in my view, despite a formal submission to the contrary by counsel for the appellants, that s 28(a) has a “secondary operation” in the sense that, in providing that a mark the use of which would be likely to deceive or cause confusion shall not be registered as a trade mark, it uses “registered” as encompassing not only the original registration of the mark but a registered mark’s condition of being registered.  That s 28(b) has a secondary operation in that sense is supported by observations of Barwick CJ in Berlei Hestia Industries Ltd v The Bali Company Inc (1973) 129 CLR 353 at 356 and by Mason J in the same case at 361; the Full Court of this Court held that it had such a continuing operation in Murray Goulburn Co–Operative Co. Ltd v New South Wales Dairy Corporation (1990) 24 FCR 370 at 378, 379 (it had already so held, perhaps obiter, in Riv-Oland Marble Co. (Vic) Pty Ltd v Settef SpA (1988) 19 FCR 569 at 594 per Lockhart J, with whose judgment Bowen CJ expressed general agreement); and although the High Court, on appeal in Murray Goulburn, did not have to decide the question, because the correctness of the proposition was assumed, the view taken by the Full Court was held by Mason CJ and Brennan, Toohey and Dawson JJ to be correct (though it was held by Deane J to be incorrect and doubted by Gaudron and McHugh JJ: (1990) 171 CLR 363).  In those circumstances we should, in my view, follow the view taken by the Full Court, and approved by a majority of the Justices of the High Court, in Murray Goulburn.  It is established that that is the correct view of the corresponding English provisions: General Electric Co. v General Electric Co. Ltd [1972] 1 WLR 729 at 749–751.  It may be noted, in passing, that the 1995 Act deals with the matter explicitly: see ss 88(2)(c) and 89.  

 

Thus, a mark which, because of events that have occurred since its registration, has become one the use of which would be likely to deceive or cause confusion may be expunged under s 22(1) as an entry wrongly remaining in the Register.  Expungment may be ordered in those circumstances after the expiration of seven years from the original registration of the mark because, as s 28 has been construed, the mark may be regarded as one which offends against the provisions of that section (s 61(1)(b)).

Expungement on this ground is, of course, permissible only if the use of the mark would be likely to deceive or cause confusion, and in this case the mark is simply the word “NIKE”.  The “use” which is relevant has been described as embracing “any normal and fair future use of the mark in the course of trade” (General Electric at 737); in Southern Cross Refrigerating Company v Toowoomba Foundry Pty Ltd (1954) 91 CLR 592, in the context of opposition proceedings where the applicant bore the onus, Kitto J said at 595:

And the onus is not discharged by proof only that a particular method of user will not give rise to confusion.   The test is, what can the applicant do if he obtains registration?

In the course of its reasons for dismissing an appeal from the decision of Kitto J, the High Court said (91 CLR at 608), citing the judgment of Dixon J in Reckitt & Colman (Australia) Ltd v Boden (1945) 70 CLR 84 at 94, 95 and looking at the matter from the point of view of the opponent’s use rather than the applicant’s:

Further, it is not enough for the applicant “to negative the likelihood of confusion in relation to the actual trade carried on by the opponent at the time of registration and to the manner in which the latter then uses his mark.  The applicant must also take into account all legitimate uses which the opponent may reasonably make of his mark within the ambit of his registration”.

In this case, no particular difficulty arises in relation to the relevant “use”.   The way in which the appellants propose to use their mark is by labelling their goods prominently as “NIKE” toiletries of various kinds.   Except that there is now no use of the phrase “sport fragrance” and the manufacturer’s name does not include the word “sport”, there is no significant difference between that manner of use and the use which occurred, briefly, in 1993.   The proposed use and, I think, the use in 1993, fall clearly enough within the relevant kinds of use described in the authorities to which I have referred.  That being so, if the trial judge’s conclusions as to the case under s 52 and in passing-off are to be upheld (as in my view they should be), it follows that the use of the mark is (and was at the time when the respondents lodged their applications for expungement) likely to deceive or cause confusion.   

(c) “Blameworthy Conduct”

It must be accepted in this Court that, if a mark is one the use of which is likely to deceive or cause confusion only by reason of events which have occurred since registration, the mark will be expunged on that ground only if, additionally, the mark is one which is disentitled to protection in a court of justice; and that at least the usual case where that will be so is one where the registered proprietor has been guilty of “blameworthy conduct”.   In the course of summarising his views as to the legal status of a trade mark the use of which is likely to cause confusion, Lord Diplock, said, in General Electric at 751:

If the likelihood of causing confusion did not exist at the time when the mark was first registered, but was the result of events occurring between that date and the date of application to expunge it, the mark may not be expunged from the register as an entry wrongly remaining on the register, unless the likelihood of causing deception resulted from some blameworthy act of the registered proprietor of the mark or of a predecessor in title of his as registered proprietor.  

That view of the law was adopted by a majority of the Full Court in Riv-Oland (though that was the case where the circumstances giving rise to a likelihood of confusion existed at the time of registration).   It was reaffirmed by the Full Court in Murray Goulburn, though with the qualification that “blameworthy conduct” does not necessarily exhaust the categories of case where a mark, which has become likely to deceive or cause confusion, is disentitled to protection in a court of justice (at 382; it may be observed in passing that the examples, given by the court, of cases where a mark might not be entitled to protection otherwise than because of blameworthy conduct, all appear to arise in circumstances necessarily existing at the time of registration; it is not necessary, however, to pursue that matter).  On appeal to the High Court in Murray Goulburn, four of the Justices, Mason CJ and Brennan, Dawson and Toohey JJ, accepted that a mark will be expunged, on the ground of likelihood of deception or confusion by reason of circumstances arising since registration, only where the proprietor has been guilty of “blameworthy conduct”: there were differences between Mason CJ and Brennan J, on the one hand, and Dawson and Toohey JJ, on the other, as to what might amount to blameworthy conduct, leading Mason CJ and Brennan J to dissent from the majority decision that the appeal should be dismissed; but, on the assumption that s 28(a) had a secondary operation, Deane and Gaudron JJ agreed with the judgment of Dawson and Toohey JJ as to the necessity for, and what was meant by, “blameworthy conduct”. 

Where it has been held that “blameworthy conduct” is required to justify expungement, that result has not been arrived at through a consideration of factors which might be taken into account, where a mark in the first place was validly registered, in exercising (as a matter of discretion) the power to expunge it under s 22.   It has been arrived at by a process of construing s 28(a) in the context of the statute as a whole    The approach taken by the Full Court in Riv-Oland and Murray Goulburn was the relatively straightforward one of declining to read s 28 disjunctively but rather by reading para (d) (“a mark .... which would otherwise be not entitled to protection in a court of justice”) as qualifying the preceding paragraphs, particularly para (a).   That was also, in substance, the approach taken by Dawson and Toohey JJ in the High Court.   It is, with respect, an approach which gives rise to a particular difficulty, because it is not easy to see how s 28(a) means one thing in one context and something different in another: why, if in one context the fact that a mark is one the use of which is likely to deceive or cause confusion means that it offends against s 28 only if in addition the mark is one which is not entitled to protection in a court of justice, that is not equally so in other contexts.

The question may arise where expungement is sought because of a potential for confusion which already existed at the time of registration, or in opposition proceedings preceding registration (a context in which, in Canon Kabushiki Kaisha v Brook (1996) 69 FCR 401, Tamberlin J expressed the view that an opponent relying on s 28(a) must demonstrate blameworthy conduct).   However, as Gummow J pointed out in Murray Goulburn (86 ALR at 582, 583), to hold that the qualified construction of s 28(a) extends to a case where expungement is sought on the ground of likelihood of deception or confusion existing at the time of registration would be inconsistent with a long line of binding authority, particularly, in Australia, Berlei Hestia.   Nor does Lord Diplock suggest, in General Electric, that the requirement of blameworthy conduct extends to a case where expungement is sought on the basis of a likelihood of deception or confusion existing at the time of registration: indeed, at 751, his Lordship states the contrary.   It was, perhaps, difficulties of this sort which led to the following observation by Mason CJ in Murray Goulburn at 384:

But I should say that it may not be necessary to read s.28(a) as though it were governed by s.28(d).  So to read s.28(a) is a difficult exercise as a matter of construction.   It may be sufficient to say that in the context of the entire statutory scheme a trade mark is only liable to be expunged under s.28(a) if the use of it becomes likely to deceive or cause confusion and that likelihood is due to the fault or blameworthy conduct of the registered proprietor.   However, for the purposes of this appeal, I am content to accept that the fault or blameworthy conduct must be such as to disentitle the mark to protection in a court of justice.

It will be necessary to reach a conclusion about those matters only if the trial judge’s finding that the appellants were guilty of blameworthy conduct of a relevant kind is not upheld: in those circumstances it would be necessary to consider contentions by the respondents that the likelihood of deception or confusion existed both on 29 August 1986, when the registration of the appellants’ first mark took effect, and on 2 August 1992, the effective date of registration of their second mark and that expungement was justified, and should be ordered, simply upon the basis that, at the date of registration of each of the marks, its use was likely to deceive or cause confusion.   Accordingly it is convenient to consider, first, the question whether, following the effective date of registration of their first mark, the appellants have been guilty, as his Honour found, of blameworthy conduct.   Before doing so, however, I should note that I have read, and respectfully agree with, what Burchett J has written about the dicta in Canon.

A peculiarity of this case is that the respondents have not used the name “Nike” in relation to goods within the classes in which the appellants’ marks are registered.   That circumstance differentiates this case from General Electric, Riv-Oland, Murray Goulburn and other cases cited by counsel, particularly HTX International Pty Ltd v Semco Pty Ltd (1983) 49 ALR 636.   Another obvious and striking feature of those cases is that in none of them was blameworthy conduct held to be established.   It is perhaps not surprising, therefore, that those authorities do not offer a great deal by way of guidance as to what constitutes blameworthy conduct, or circumstances disentitling a registered proprietor to protection of a mark in a court of justice, in a case such as the present.  And in Murray Goulburn, Dawson and Toohey JJ held, at 409, that “blameworthy conduct” should not be erected as:

... an independent standard against which a registered proprietor’s conduct must be judged.   Not only would it be an impermissible extension of the language of the section, but it would shift the focus from the true question and introduce notions of a subjective kind.  

The true question in their Honours’ view, was whether, having regard to well established equitable discretionary considerations, the circumstances (including the proprietor’s conduct) were such as to lead to the refusal of relief.  

Senior counsel for the appellants laid considerable stress on a recurring theme in a number of the judgments: that the conduct of a registered proprietor is, for present purposes, to be regarded as blameworthy, or as disentitling a mark to protection, only if it causes or contributes to the likelihood that the use of the mark will deceive or cause confusion.  The principle, as stated by Lord Diplock in General Electric at 751, would not permit expungement:

...... unless the likelihood of causing deception resulted from some blameworthy act of the registered proprietor of the mark or of a predecessor in title of his as registered proprietor.  

In Riv-Oland, Lockhart J accepted that formulation, at 598:

In my view the test propounded by Lord Diplock with respect to s 11 of the United Kingdom Act, namely that the operation of the section is confined to situations where the likelihood of deception or confusion is brought about by some blameworthy act of the registered proprietor of the mark, is equally applicable to s 28 of the Act, notwithstanding the differences in the structure and syntax of the two sections.

Senior counsel referred us to a number of similar observations in the judgments of the members of the High Court in Murray Goulburn.   I have already referred to Mason CJ’s formulation of the principle at 384:

.... a trade mark is only liable to be expunged under s.28(a) if the use of it becomes likely to deceive or cause confusion and that likelihood is due to the fault or blameworthy conduct of the registered proprietor.  

His Honour applies that formulation in reaching his conclusion, at 388, on the facts as found.  Similar expressions of opinion are to be found in the judgment of Brennan J, particularly at 391, where his Honour adds a further element:

I would take to be “blameworthy” any conduct (whether by act or omission) on the part of a registered proprietor or his predecessor in title which he knew or ought to have known would result in the likelihood that the use of the mark would deceive or cause confusion and which has in fact caused or contributed to that result.  

His Honour, significantly, proceeds to refer to the discretionary character of relief under s 22:

It is unnecessary now to consider the scope of this discretion and the circumstances which may evoke its exercise, except to say that it may be relevant not only to consider the public interest but also to compare the respective contributions made by the conduct of the parties to expunction proceedings under s.22 in creating a likelihood that use of a registered trade mark would deceive or cause confusion.

Consistently with their view that “blameworthy conduct” is not to be regarded as an “independent standard against which a registered proprietor’s conduct must be judged”, but rather as “no more than a shorthand method of referring to all those circumstances which might disentitle an applicant to relief in a court of equity”, Dawson and Toohey JJ put the matter, at 409, more broadly:

It would clearly be a most significant circumstance, in defending a trade mark against expunction from the register, that the registered proprietor would have been refused relief in proceedings brought by him for infringement because he did not come with clean hands, being himself responsible in some way for the deception or confusion.   That may be blameworthy conduct but it is not the only conduct which would disentitle an applicant to relief.   And, in some circumstances, it may not disentitle an applicant to relief.  For example, it may be more important that equity grant a remedy in the public interest than that it does not aid a wrongdoer: ..... .   But this is merely to emphasise that in equity the remedy was discretionary, notwithstanding that it was exercised along defined lines.  

Deane J’s observations at 399 are consistent with that view:

In the light of the findings of the trial judge, including the specific finding to the effect that there was no belief (or intent) on the part of the respondent that its conduct would encourage deception or confusion or involve or lead to the appropriation to itself of any of the MOOVE goodwill, I would have agreed with Dawson and Toohey JJ that that question should be answered in the negative.  

Gaudron J, as I have mentioned, expressed (at 414) agreement with Dawson and Toohey JJ on the “blameworthy conduct” issue.  

What I have characterised as the broader approach is, I think, consistent with the judgments of all members of the High Court, both majority and minority, in the somewhat different context of Angelides v James Stedman Hendersons Sweets Ltd (1927) 40 CLR 43; see particularly the judgment of Rich and Starke JJ at 83.  

In this case, on the basis of the findings made by the trial judge, it may readily be seen that the use of the appellants’ marks has become likely to deceive or cause confusion principally because, no doubt through vigorous and successful promotion, the respondents have acquired a reputation in the name “Nike” which extends beyond the boundaries of the categories of goods in respect of which they use the name or their own registered marks.   The efforts of the respondents may properly be described as assiduous, but involve no wrongdoing on their part (compare the frequently cited passage in the judgment of Windeyer J at first instance in Berlei Hestia (1968) 118 CLR 128 at 133).   The outcome is, however, that attempts by the appellants, in circumstances where they have acquired for themselves no substantial reputation in Australia, to use their long-standing registered mark in relation to goods to which they have for many years applied it in other parts of the world, have been held to amount to passing-off and conduct infringing s 52 of the Trade Practices Act.   It does not necessarily follow from that outcome, or from the terms of the relief which has been granted to the respondents, that there is no manner in which the appellants could use their registered marks in relation to goods in the class in which they are registered without passing-off or infringing s 52.   The question, however, is whether there is anything in the conduct of the appellants, or in the circumstances more generally, which should be held sufficient to deprive them of their rights as registered proprietors of their marks.  

The trial judge has found that the conduct of the appellants, leading to the distribution which occurred in 1993, involved a deliberate stressing of sporting connotations likely to produce favourable reactions in the minds of consumers because of associations arising from their knowledge of the respondents’ products and reputation.   It may be that the appellants believed that they were entitled to take that course.   But the appellants’ conduct, as found by his Honour, was deliberate in the sense that it was designed to take advantage of an “image” generated by the respondents’ distribution and promotion of their sports footwear.   The distribution of the appellants’ products in Australia during 1993, following that course, was conduct infringing s 52 and passing-off.   As I have held, the evidence supported those findings and conclusions.   What the appellants now seek to do is to distribute products labelled and packaged in a way which does not explicitly refer to sport, and supported by brochures and publicity material which contain no explicit reference to sport, but which continues to emphasise the name “Nike”: it is printed on the labels and boxes in large capital letters, displayed boldly and with a prominence considerably exceeding that given to anything else written on them.   The evidence before the trial judge supported a finding that that way of presenting the appellants’ products was calculated to cause confusion, and in fact did so, by suggesting (no less than the labels and packages using the word “sport”) an association with the respondents and their products.   I have held that the trial judge is to be taken to have concluded that the distribution in Australia of products presented in that way would equally amount to conduct infringing s 52 and to passing-off and that those findings equally should be upheld.   It is not unfair, I think, to characterise what the appellants have done as, first, to distribute their products in a way calculated deliberately to take advantage of favourable reactions arising from widespread knowledge of the respondents’ products and, when confronted with apparent legal difficulties arising from that way of proceeding, as withdrawing to an extent that (it might have been thought) might solve the legal difficulty but without substantially impairing the attainment of the advantage sought.

Certainly the attempt, by the appellants, to enter the Australian market was short-lived and the extent of the actual confusion arising from it correspondingly slight.   Equally, as I have said, there may well be ways in which the appellants could use their marks which would avoid the likelihood of confusion or deception.   But it follows from the findings of the trial judge that a wide range of ways in which the marks might with any prominence be used, in relation to the range of products which the appellants manufacture and sell, could be likely to deceive or cause confusion.   And that is so in relation to the only uses of the marks which the appellants have made or propose to make.   Indeed it might be thought that, in the absence of any reputation of their own, in Australia, in the name “Nike”, the name has no particular value to the appellants in the Australian market except to the extent that it enables them to benefit from associations arising from the respondents’ reputation: and that is what they sought to do.

Thus, if the appellants’ conduct has not given rise to the likelihood that the use of their mark is likely to deceive or cause confusion, it may properly be characterised as conduct calculated to take advantage of that likelihood in circumstances where the respondents at relevant times had, in Australia, a very substantial reputation in the word “Nike” and the respondents, for all that appears, had none.   In my view that conduct is, in the circumstances as I have described them, properly regarded as a circumstance disentitling the marks to relief in a court of equity.   That view is, I think, consistent with the approach taken by Dawson and Toohey JJ, and approved by Deane and Gaudron JJ, in Murray Goulburn; it is consistent also with the discussion of a predecessor of s 28(d) by Dixon J in Radio Corporation Pty Ltd v Disney (1937) 57 CLR 448 at 457-459 (an appeal from a decision of the Registrar in opposition proceedings). 

Brief reference was made, in argument, to s 89 of the 1995 Act.   That provision clearly confers on the court a discretionary power, among other things, to rectify the Register by cancelling the registration of a mark in circumstances where the mark is liable to deceive or confuse, whether because of circumstances existing at the time of registration or because of circumstances arising later.   In granting an application for rectification under the section the court is to take into account prescribed matters and “any other matter that the court considers relevant”; but such an order is not to be made if the registered owner of the trade mark satisfies the court that the ground relied on by the applicant has not arisen through any act or fault of the registered owner.   There are obvious similarities, and equally obvious differences, between that provision and those of the 1955 Act.   In my view the new provision casts no particular light on the questions of construction which arise here.

Because of the conclusions I have reached, it is unnecessary for me to consider matters raised in notices of contention filed by the respondents, particularly contentions to the effect that, regardless of “blameworthy conduct”, each of the appellants’ marks should be expunged because each was already, at the date on which its registration took effect, a mark the use of which would be likely to deceive or cause confusion.  

 

Other Matters

I agree with Sackville J’s reasons for concluding that the respondents are “persons aggrieved” for the purposes of s 22 of the 1955 Act; I agree also with his Honour’s reasons for rejecting the appellants’ contentions based on principles of estoppel.

Conclusion

There was no suggestion that, if we were to reach the result, on the substance of the case, which I favour, the trial judge’s orders should be varied in any way.   In those circumstances, for the reasons which I have given, in my view each appeal should be dismissed with costs.

 

I certify that this and the preceding twenty-four (24) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Lehane.

Associate:

Dated:              7 July 1998

Counsel for the Appellants:	Mr D.K. Catterns QC Ms J.R. Baird
Solicitor for the Appellants:	Mallesons Stephen Jaques
Counsel for the Respondents:	Mr J.V. Nicholas Mr M. Richmond
Solicitor for the Respondents:	Sprusons
Date of Hearing:	25, 26 September 1997
Date of Judgment:	7 July 1998