FEDERAL COURT OF AUSTRALIA

Neumann v Sons of the Desert SL [2008] FCA 1183

HERBERT NEUMANN v SONS OF THE DESERT SL

VID 333 of 2007

RYAN J

11 August 2008

MELBOURNE

THE COURT ORDERS THAT:

1.                  The appeal be allowed.

2.                  The decision of the Registrar of Trade Marks by his delegate of 2 April 2007 be set aside.

3.                  The opposition to registration of trade mark application No 977941 (“the Application”) be allowed.

4.                  The registration of the Application be refused.

5.                  The respondent pay the applicant’s costs of the appeal and of the proceedings before the Registrar of Trade Marks, such costs to be taxed in default of agreement.

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

REASONS FOR JUDGMENT

1                     This is an appeal from a decision of the Registrar of Trade Marks by his delegate, Mr Iain Thomson (“the Delegate”), given on 2 April 2007, whereby the applicant’s opposition to registration of trade mark application No. 977941 (“the Application”) by the respondent was dismissed.

2                     The Court’s jurisdiction to hear this appeal arises under s 191 of the Trade Marks Act 1995 (Cth) (“the Act”).  Although referred to as an “appeal”, this proceeding is by way of an application for the exercise of the Court’s original jurisdiction and is conducted as a rehearing.  There is no presumption of the correctness of the Registrar’s decision but due weight is to be given to his opinion as that of a person expert in the evaluation of the relevant facts and the application to those facts of the principles which can be derived from the Act.

Background

3                     In 1998, the applicant, Joseba Andoni Galdeano Del Sel and Beat Alexander Steffan discussed the incorporation of a company to be called Lucky Charm Distribuciones Tarifa SL (“Lucky Charm”), in which they were to be joint shareholders.  They proposed that Lucky Charm should be a vehicle for marketing casual wear and clothing under the “EL NIÑO” brand and specifically agreed that Lucky Charm itself would not own any trade marks but that the three of them would personally own the trade marks in equal shares and that the ownership of shares in Lucky Charm would always reflect the ownership of the trade marks.  It was also agreed, that when Lucky Charm expanded beyond Europe, they would obtain trade mark registrations in other countries in the names of the joint owners of the original marks.

4                     On 25 September 1998, Lucky Charm was duly incorporated with the applicant, Mr Galdeano and Mr Steffan as the only three shareholders.  Thereafter, several Spanish and European Community trade marks were registered with the three incorporators as joint owners.  Trade marks were also applied for and obtained in the joint names of the Lucky Charm shareholders in the United States, China and Japan.

5                     In 2000, Juan Pozo Segura, a clothing manufacturer, became a director of, and equal shareholder, in Lucky Charm.  He also became a co-owner of all of the trade marks.  It was orally agreed between the applicant, Mr Galdeano, Mr Steffan and Mr Pozo Segura that, as the business expanded into other countries, the four of them would continue to own the trade marks together and that any member who sold his shares in the company would also have to sell his interest in the trade marks to the remaining shareholders in equal shares. 

6                     In early 2001, Mr Steffan resigned as a director of Lucky Charm.  In accordance with the verbal agreement, he sold his shares in Lucky Charm and transferred his interest in the trade marks to the remaining partners in equal shares.  As a result, the applicant, Mr Galdeano and Mr Pozo Segura each became a shareholder in Lucky Charm as to one-third of its issued capital and thenceforth each owned a one-third share in the trade marks.

7                     In August 2002, two separate agreements were executed in relation to Lucky Charm (“the August 2002 agreements”).  An agreement dated 6 August 2002 between the applicant and Mr Galdeano records that the parties will “simultaneously underwrite” with El Secreto Del Mar SL (“ESDM”) “a licence contract for the trade marks”.  For that purpose, it was recited, Mr Galdeano and the applicant “wish to specify certain aspects of the relationship” between them.  The agreement relevantly states that;

‘This agreement is contemplated in relation to other agreements that the signing parties of this contract have underwritten with third parties or could underwrite in the future with reference to the trademarks co-owned by them.’

8                     An agreement dated 7 August 2002 between the applicant and Mr Galdeano on the one hand, and Javier Guerra Fernandez on behalf of ESDM on the other hand, records that the applicant and Mr Galdeano are co-owners of the El Niño trade marks and “assign” to ESDM “the exclusive rights to use the trade marks” identified in the document “for a determined period of time”.

9                     Subsequently, the relationship between the applicant and Mr Galdeano deteriorated.  Mr Galdeano is currently the sole director and shareholder of the respondent, Sons of the Desert SL.  On 11 November 2003, the respondent made an application to the Registrar of Trade Marks to register a composite trade mark, comprising the words “EL NIÑO TARIFA” and an image described as “ALIEN, SEATED ATOP WORDS”, (“the El Niño mark”) in respect of the following classes of goods;

‘Class: 16 Publications and printed matter, adhesives for stationary or household purposes, instructional and teaching material (except apparatus), plastic material for moulding and packaging (not included in other classes), office requisites (except furniture), paper and stationary, cardboard, photographs, printers material, painting brushes, typewriters, artists material.

Class: 25 Clothing, footwear, headgear.’

10                  On 30 March 2004, the Registrar accepted the application and, on 22 April 2004, advertised that decision in the Office Journal.  On 21 July 2004, the applicant filed a notice of opposition to the registration and on 2 April 2007, the Delegate made the decision from which this appeal is brought.

The Delegate’s decision

11                  Before the Delegate, the applicant invoked two grounds of opposition under the Act.  The relevant provisions of the Act are;

Section 42 –    An application for the registration of a trade mark must be rejected if … (b) its use would be contrary to law.

Section 57 –    The registration of a trade mark may be opposed on any of the grounds on which an application for the registration of a trade mark may be rejected under this Act, except the ground that the trade mark cannot be represented graphically.

Section 58 –    The registration of a trade mark may be opposed on the ground that the applicant is not the owner of the trade mark.

12                  The applicant first argued that, under ss 42 and 57, exclusive use of the trade mark by Mr Galdeano would be in breach of an agreement (or agreements) that all trade marks would be jointly owned with the applicant, and thus contrary to law.  Secondly, the applicant contended that, under s 58, the applicant for the trade mark was not the true owner of the mark because, by agreement, the applicant and Mr Galdeano were joint owners.  Both grounds relied on the submission that the applicant and Mr Galdeano were, at all relevant times joint owners of the trade mark pursuant to written and oral agreements that the shareholders in Lucky Charm would be joint owners of the trade mark in whatever country an application might be made for registration.

13                  The Delegate ruled that all evidence on behalf of the opponent as to oral or implied agreements governing joint ownership of the trade marks was irrelevant and inadmissible parol evidence because the August 2002 agreements were intended to be entire contracts that governed the ownership of trade marks by the parties and provided for joint ownership only of trade marks in Spain and the European Community.  He, accordingly, held that there was no agreement, express or implied, in evidence as to the worldwide ownership of the opposed mark and dismissed the applicant’s opposition to the registration.

The applicant’s submissions

14                  On appeal, Counsel for the applicant submitted, first that the Delegate had erred in holding that the opposition based on s 58 should not succeed.  It was contended that, pursuant to the August 2002 agreements, the shareholders of Lucky Charm were to become joint owners of the El Niño mark in all jurisdictions in which it might be registered.  In particular, the applicant relied on cl 5 of the agreement made on 6 August 2002 between the applicant and Mr Galdeano as establishing that equivalent trade marks registered in other jurisdictions would be jointly owned by the shareholders of Lucky Charm.  The effect of that agreement was that ownership of the El Niño mark was shared equally between those shareholders.

15                  Secondly, Mr Franklin SC for the applicant submitted that the Delegate had erred in holding that the opposition to registration based on s 42 of the Act should not succeed.  Rather, it was contended, use of the El Niño mark would be contrary to law because, by virtue of an agreement between the parties, the shareholders of Lucky Charm were also joint owners in all jurisdictions of trade marks containing the El Niño mark.  Accordingly, the filing of an application to register, and the use of, the El Niño mark in Australia by the respondent alone was in breach of the agreement between the applicant and Mr Galdeano.  The applicant further submitted that the Delegate had also erred in relying on reg 21.15 of the Trade Mark Regulations 1995 when he accepted written evidence from the respondent in non-declaratory form.  Finally, it was said that the Delegate had erred in finding that use of the El Niño mark by the respondent alone would not be in breach of Article 5 of the Spanish Act and the fiduciary duty which Mr Galdeano owed to the applicant.

16                  The fundamental issue in this appeal is therefore whether there is an agreement (or agreements) governing the ownership of the El Niño mark and providing that the applicant and Mr Galdeano are joint owners of that mark.  The applicant submitted, and I accept, that if he succeeds in persuading the Court that, by virtue of such an agreement, he and Mr Galdeano are joint owners of the trade mark, the applicant must succeed on both grounds.

17                  There was no appearance on behalf of the respondent on the hearing of this appeal.

Consideration

18                  The applicant did not rely upon the evidence which had been before the Delegate but recognised that the Court might wish to have regard to it.  In Malibu Boats West Inc v Catanese (2000) 51 IPR 134, the headnote recites that Finkelstein J held;

‘(ii)      There are two possible approaches as to on what evidence the court determines an appeal from the registrar:

(a)        the evidence comprises all that was before the registrar, together with any additional evidence that the parties seek to adduce.  By permitting a party to adduce “further evidence”, the implication is that the material before the registrar must necessarily be before the court hearing the appeal (at [7]); and

(b)        the material that was before the registrar should be brought before the court.  If the parties agree, that evidence can be used on the appeal.  If the parties are not in agreement about the use of the evidence … the evidence or so much of it as a party wishes to adduce must be tendered again.  In addition, further evidence can be led.  The appeal must then be decided on the evidence before the court even if it presents a case that is different from that which was before the registrar (at [8]).’

19                  The appellant in the Malibu Boats case did not seek to rely upon all of the evidence that had been before the registrar.  Finkelstein J observed, at [10] that;

‘Such a course might present difficulty in a case where there is no opponent, and the registrar does not appear, because the court may be asked to make findings that it would not make if all the material that had been before the registrar were before the court.  It is in just such a case that the court will be assisted by the intervention of the registrar.’

20                  Counsel for the applicant referred to par 3.65 of Shanahan’s Australian Law of Trade Marks and Passing Off (3^rd ed.), where it is noted that;

‘The owner of the trade mark would generally be found to be the trader whose goods or services are distinguished by the use of the trade mark.  That trader would be the owner at common law, for it would be he or she who would exclude others through proceedings for passing off.  But the inquiry will usually be complicated by other factors … The issue may well have been concluded by agreement, either express or to be inferred from the conduct and relationship of the parties.  On occasion, indeed it will be found that the trade mark is jointly owned.’

21                  According to the applicant, the present is such a case.  In parallel proceedings in New Zealand, the applicant had been unsuccessful in his opposition before the Assistant Commissioner of Trade Marks but ultimately succeeded on appeal.  The New Zealand High Court had to consider whether or not the application for registration of the trade mark had been made in bad faith, which turned upon whether the applicant and Mr Galdeano were co-owners of the trade mark.  Andrews J concluded as follows;

‘I accept the appellant’s [Mr Neumann’s] evidence that … Galdeano and he are co-owners of the El Niño trade marks incorporating the seated boy device not only in Spain and the European Union, but also in any territory in the world.  In so finding, I have not found it necessary to refer to the August 2002 agreements.  Accordingly, I find that … Galdeano and [Mr Neumann, the present applicant] are co-owners of the trade mark for which the respondent [Sons of the Desert SL, the present respondent] applied for registration in New Zealand.’

22                  Before me, it was submitted on behalf of the applicant that, having regard to the evidence filed in these proceedings, the conclusion by Andrews J that the applicant and Mr Galdeano are co-owners of the mark in any territory in the world is correct and that, as with ownership of the mark in New Zealand, Mr Galdeano and the applicant are co-owners of the El Niño mark for which the respondent applied for registration in Australia.

23                  I have considered the evidence before the Delegate and the evidence filed in these proceedings.  In my opinion, the August 2002 agreements are related agreements.  When they are examined together, it becomes apparent that they are referable only to the licensing of the El Niño trade marks that were already jointly owned by the applicant and Mr Galdeano.  They did not create any rights of co-ownership in the El Niño mark.  However, I accept the applicant’s submission that they are evidence of a pre-existing agreement that the El Niño trade marks would be co-owned by the shareholders in Lucky Charm, who were, at the time of the August 2002 agreements, the applicant and Mr Galdeano.

24                  Accordingly, it is necessary to examine other earlier agreements and the evidence of the applicant, Mr Steffan and Mr Pozo Segura in relation to them, in order to determine whether there is an agreement (or agreements) in existence that created co-ownership in the El Niño trade marks in Spain and the European Community, and, upon registration, in other territories. 

25                  In my opinion, the application of the August 2002 agreements is clearly not limited to Spain and the European Community.  Clause 2 of the agreement made on 7 August 2002 recites that;

‘TERRITORIAL SCOPE: The territorial cope [sic] in relation to that granted by this assignment of exclusive use reaches both the Spanish territory as well as any other country currently integrated in the European Union … with the possibility to extend it later to other countries of the world if the parties so agree.’

26                  Furthermore, the agreement made on 6 August 2002, in relation to the joint sharing of expenses incurred in obtaining and maintaining trade marks, refers to expenses to be incurred in -

‘… the renewal or extension of the corresponding trade marks and registrations which are co-owned by Mr Neumann and Mr Galdeano, and which are subject of the assignment of use to Mr Guerra (the principal of ESDM).’

27                  It was clearly contemplated by the parties to the August 2002 agreements that the trade marks which were the subject of the licence would be trade marks registered in Spain and the European Community and in other countries to which their registration might be extended.  Accordingly, the Delegate erred in holding that the August 2002 agreements, did not, in terms, mention co-ownership of trade marks in territories other than Spain and the European Community.

28                  It follows that, the respondent, which is solely controlled by Mr Galdeano, is not the owner of the El Niño trade mark in Australia.  Rather, by virtue of the agreements to which I have referred, the El Niño marks are jointly owned by Mr Galdeano and the applicant in all countries outside Spain and the European Community.

29                  Even if, as suggested by the Delegate, the August 2002 agreements can be construed as referring only to Spanish and European Community trade marks, that does not exclude the existence of an agreement in relation to ownership of the marks in territories outside Spain and the European Community.  The 7 August agreement grants a licence to ESDM in respect of the Spanish and European Community trade marks, with a possibility to “extend” to other countries.  On the evidence of the applicant, Mr Steffan and Mr Pozo Segura, there appears to have been a further oral agreement in relation to ownership of the El Niño mark in other countries.  That is supported by evidence that registration of the trade marks was applied for and obtained in the United States, China and Japan in the joint names of the then proprietors of Lucky Charm, all before the August 2002 agreements.  It follows that the applicant’s opposition to the registration of the mark in Australia, in so far as it invokes s 58 of the Act, should succeed.

30                  In light of the conclusion which I have just reached that the El Niño mark is, by virtue of the agreements in evidence, jointly owned by the applicant and Mr Galdeano, makes it strictly unnecessary to consider the ground invoking s 42 of the Act.  However, out of deference to the careful submissions advanced by Mr Franklin, I shall do so briefly.

31                  The phrase “contrary to law” in s 42 of the Act is not limited to breaches of statutory provisions.  As observed by Shanahan at 6.125, “it appears any law at all is contemplated, statutory or otherwise.”  Counsel for the applicant submitted that, if it is clear from the evidence that use of the trade mark by the proprietor would be in breach of contract, then the use would be “contrary to law”.  I agree that the purported exclusive use by the respondent, at the direction of Mr Galdeano, of the El Niño trade mark would be in breach of the agreements and, accordingly, “contrary to law”.

32                  In his notice of appeal, the applicant also advanced two further substantive grounds in reliance on s 42 of the Act, namely that;

(a)                the use of the El Niño mark would be in breach of Article 5 of the Spanish Unfair Competition Act (the Spanish Act) and the fiduciary duty which Mr Galdeano owed to the applicant; and

(b)               the use of the El Niño mark would infringe copyright and therefore be contrary to law.

The second of these two grounds was not pursued.

33                  In support of the first ground, the applicant relied on the evidence of Jose Garrido, a Spanish attorney, to establish that;

·          ‘The relevant agreements between the parties were made in Spain, between Spanish residents and Spanish companies, related to events occurring in Spain and are under the jurisdiction of Spanish law to regulate.

·          Spanish law implies in all contracts (written and oral) an obligation of good faith;

·          Article 5 of the Spanish Act “shall apply to acts of unfair competition, if they produce or may produce substantial effects on the Spanish market”;

·          Mr Galdeano’s failure to inform the applicant of the trade mark application is conduct which does not comply with the minimum requirements of good faith in Spanish law;

·          The filing of the trade mark application in Australia without including the applicant (the co-owner with Mr Galdeano) is conduct which causes tangible damage to the Applicant in Spain, under Spanish law;

·          Because of the potential damage described, Mr Galdeano’s conduct threatens to produce substantial effect on the Spanish market and would contravene the Act; and

·          Because the applicant does not hold majority ownership in the Spanish trade marks, if Mr Galdeano through the Respondent decided to manufacture goods bearing the trade mark in another country and import them into Spain, the applicant would be prevented from taking action.’

34                  Mr Garrido concluded that registration of the mark in Australia by the respondent to the exclusion of the applicant would be contrary to Spanish law, which governs the relationship between the parties.  I accept this evidence and therefore consider that the opposition based on s 42 of the Act must also succeed.

35                  The final matter arises from the applicant’s submission that, in arriving at his conclusions, the Delegate relied upon statements that were not in the form of declarations (namely, the statements of Paul David Tortoise and Manuel-Angel Fernandez Muniz, copies of which were attached to the statutory declaration of a trade mark attorney, Brian Morton Hendy).  The Delegate relied upon regulation 21.15(8), which provides that;

‘The Registrar is not bound by the rules of evidence but may inform himself or herself on any matter that is before him or her in any way that the Registrar reasonably believes to be appropriate.’

36                  I agree with the applicant’s contention that the Delegate erred in relying upon that regulation to admit statements that were not in the form of declarations.  Indeed, reg 21.17(1) expressly requires that;

‘Evidence that is given in writing in any proceedings before the Registrar must be in the form of a declaration.’

37                  Accordingly, had it been necessary, I would have set aside the decision of the Delegate for this alternative or additional reason.

Conclusion

38                  For the reasons outline above, the appeal must be allowed.  I shall direct that the decision of the Delegate be set aside and in lieu thereof the opposition to the registration of the trade mark be upheld and the registration of the mark be refused.  The respondent should pay the applicant’s costs of this appeal and of the opposition proceedings before the Registrar of Trade Marks.

Associate:

Dated:         11^th August 2008