FEDERAL COURT OF AUSTRALIA

Solahart Industries Pty Ltd v Solar Shop Pty Ltd (No 1) [2010] FCA 1083

THE COURT ORDERS THAT:

1.                  The applicants’ notice of motion filed on 24 September 2010 be dismissed with costs.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1                     The trial of this trade mark case is due to start before me next Tuesday, 12 October 2010. The applicants wish to amend their pleading to raise a fresh ground which is a course resisted by the respondents. The respondents say that if the amendment were to be permitted they would be required to call additional witnesses and to pursue the production of further documentation from the applicants; that this cannot sensibly be done in the time remaining before the commencement of the trial; and that, in those circumstances, the amendments should not be permitted. For their part the applicants deny that the effect of the amendments will be to introduce anything new into the case and they say, in substance, that the respondents’ protestations are opportunistic rather than sincere.

2                     To understand the submissions which are made and, indeed, the proposed amendments themselves, it is necessary to say something of the matters which will be tried next week. The two applicants are members of the Rheem group of companies whose interests encompass hot water generally and solar hot water more particularly. The first applicant owns the trade mark SOLARHART in respect of three different types of goods which may be loosely, if not entirely accurately, described as solar hot water systems. The applicants contend that they have long been in the business of manufacturing and selling these systems by reference to the trade mark SOLARHART and that they have acquired a substantial reputation in that business by that name. The applicants’ basic point is that the respondents, who are in the business of selling and installing solar panels, are impermissibly exploiting that reputation by suggesting a connexion between their solar systems and those of the applicants when no such connexion exists. There is a separate part of the case concerning the applicants’ use of the word “Solarsavers” and the respondents’ use of the word “Sunsavers” which is not immediately material and which may be put to one side for the moment.

3                     On the SOLARHART part of the case, the substantial question to be resolved is whether the respondents have, in fact, suggested the existence of such a connexion. Epicentral to that question is the respondents’ use of the words “Solar Hut”which, if spoken aloud, sounds similar to “Solarhart”. The applicants say that the respondents have used the words “Solar Hut” to promote their solar panel systems using the World Wide Web through the uniform resource locator, or URL, www.solarhut.com.au, through a related email address sales@solarhut.com.au, by a telephone sales line operating under the name Solar Hut, and by means of various television and radio broadcasts.

4                     The legal form this debate takes is fourfold. First, the applicants allege that their three SOLARHART trade marks have been infringed because the respondents have used “a sign” (here the words “Solar Hut”) that is substantially identical with, or deceptively similar to, a registered trade mark (here the word SOLARHART) in relation to goods or services in respect of which the SOLARHART marks are registered: s 120(1) Trade Marks Act 1995 (Cth). The effect of the underlined words casts a burden on the applicants to show that the goods sold by the respondents are the same as those in respect of which the three marks are registered. The actual goods in respect of which the SOLARHART marks are registered need not be set out in detail; it suffices only to say that they relate to water heating systems. There may be an issue – the respondents say there is – as to whether the respondents’ solar panels can be said to be goods of that description.

5                     Secondly, and no doubt in anticipation of that very point, the applicants also allege that their SOLARHART trade marks have been infringed because the respondents have used the words “Solar Hut” in relation to “goods of the same description” as the goods in respect of which the mark are registered (s 120(2)(a) Trade Marks Act 1995) or “services that are closely related” to such goods (s 120(2)(b) Trade Marks Act 1995). This is a lower standard than s 120(1) and, no doubt, the applicants will contend they are entitled to succeed under subsection (2) even if they fail under subsection (1).

6                     Thirdly, the applicants argue that the manner in which the respondents have gone about using the words “Solar Hut” – on the website, via radio and so – conveys to members of the public a connexion between the two businesses which does not exist. The claim here is the tort of passing-off. In part, this allegation involves the same basic question of what one gets from the use of the words “Solar Hut” but, unlike the trade mark claims, the question is not whether the “sign” used by the respondents (“Solar Hut”) is “substantially identical with, or deceptively similar to” the SOLARHART marks (cf. s 120(1) and (2)) but whether the existence of a connexion between the two businesses has been hinted at. As the respondents point out, this will require a broader inquiry than the mere examination of the trade marks themselves and the words “Solar Hut” – it will require a consideration of the nature and extent of the applicants’ reputation.

7                     Finally, the passing-off claim is reformulated as a claim under s 52 of the Trade Practices Act 1974 (Cth)that the respondents’ conduct misled and deceived the public about the relationship between their business and the applicants’. For present purposes, these two claims may be treated as being the same although it should not be thought thereby that they are, in all ways, identical.

8                     I turn then to the proposed amendments which concern a further, and different, claim under the Trade Marks Act 1995. To grasp its gravamen it is necessary to relate it to the applicants’ extant claims under that Act. As has been noted, the applicants’ claim under s 120(1) requires them to prove that the respondents have used the words “Solar Hut” on goods (broadly: solar panels) which are the same as those for which the SOLARHART mark is registered (broadly: solar water heaters) and that the claim under s 120(2) was broader requiring only proof that the respondents’ goods were “of the same description” or that the respondents’ services were “closely related” to the goods in respect of which the SOLARHART marks were registered.

9                     The applicants now wish to make a claim for infringement under s 120(3). That section, which has not much been litigated, offers to an applicant, at a price, an even broader possibility. Under its provisions an applicant may succeed against a respondent who uses a deceptively similar sign in respect of quite unrelated goods or services but only after showing that the trade mark in question “is well known in Australia” (s 120(3)(a)); that by reason of that notoriety the use of the infringing sign would be likely to be taken as signifying a connexion between those goods and the owner of the mark (s 120(3)(c)); and that the interests of that owner are likely to be “adversely affected” thereby (s 120(3)(d)).

10                  Consequently, if they are to pursue the claim under s 120(3) the present applicants must now allege that the SOLARHART marks are “well known”; that consequently the use of the allegedly confusing sign “Solar Hut” on unrelated goods (such as solar panels) is apt to suggest the existence of a connexion with the respondents; and the first applicant’s interests (as owner of the SOLARHART marks) would be likely to be adversely affected. Ms Goddard SC, who appeared for the applicants, suggested that s 120(3) was to be seen, in effect, as a statutory form of passing-off action. I would not doubt that both actions depend upon reputation, however, there are points of difference too, one of which, most obviously, is the requirement that the mark be “well known” which, at least at first blush, appears to be a much higher standard than under passing-off. It may also be that it is somewhat more focused on the mark itself than passing-off’s more nebulous notion of get-up which is not necessarily limited to the use of a mark. So too, it is not self-evident that the need to show that an interest has been adversely affected is necessarily on all-fours with a passing-off claim.

11                  Mr Webb SC, who appeared with Mr Burgess for the respondents, submitted that the question of whether the SOLARHART marks were “well known” was a new issue and that the respondents wished to seek to prove, or at least consider proving, that the SOLARHART marks were not well known. In particular, they wished to call expert marketing evidence and possibly also lay witnesses to show that the SOLARHART marks were not “well known”.  Ms Goddard submitted, however, that this was a false issue because the fame of the SOLARHART marks had already been an issue in the proceedings for sometime and heretofore the respondents had not sought to produce evidence of the kind which they now said was necessary. She particularly pointed to those parts of the case which were concerned with the applicants’ goodwill and reputation in the marks and which, she noted, directly raised the allegation that the first applicant had a “substantial goodwill and reputation in the mark SOLARHART” in relation to various kinds of solar heating systems.

12                  The question which immediately arises is whether that is the same thing as proving that the SOLARHART marks are “well known” under s 120(3). If they are then Ms Goddard’s submission is correct; if they are not then it is difficult to avoid the conclusion that the respondents should not be shut out of seeking to prove that the marks are not well known.

13                  During the course of argument I was somewhat disposed to Ms Goddard’s arguments about this, however, the passage of the long weekend and a close reading of s 120(3) have caused me to come to the view that it is Mr Webb’s argument which should be accepted. The words used in s 120(3)(c) are “well known” and this expression must mean, so it seems to me, widely or generally known. I would not go so far as to say that “well known” means “famous” for fame carries with it not only connotations of widespread reputation (as “well known” does) but also of excellence or achievement: the tax office is well known but Madonna is famous.

14                  It is true, as Ms Goddard submits, that a central part of the applicants’ case up until this point has been to show that the first applicant has a substantial goodwill and reputation in the SOLARHART marks but there need be no necessary correspondence between those concepts and the concept of being well known. It is quite possible that a trader could acquire a substantial, perhaps a formidable, reputation and goodwill in a particular mark without that mark being “well known” in the sense that it is used in s 120(3). There will, for example, be cases where a trader occupies a dominant position in a market with which the general population has no familiarity at all such as that which might obtain in the case of a manufacturer of lenses, engine cylinders or microscopes. In such cases it is easy to imagine a substantial reputation inhering in a trade mark without that mark being “well known”. One may accept that it is likely that any mark which is “well known” in the sense used in s 120(3) will have attached to it a substantial reputation and goodwill but the converse need not be true.

15                  In this case, assuming that the applicants succeed in showing that they have a substantial reputation and goodwill in the SOLARHART trade marks, the question of whether those marks are also well known is likely to be delicately poised. Contrary to the submissions made on the applicants’ behalf it is difficult to see why the respondents should not have the opportunity of seeking to prove that the marks lack the quality of being well known and to do so, if they be so advised, with expert marketing witnesses and, possibly, lay witnesses too. I would not wish necessarily to be seen as endorsing the admissibility or final weight to be accorded any such evidence. It suffices for present purposes only to say that the pursuit of such a forensic endeavour is not frivolous. In saying that I accept, of course, that the applicants will not be seeking to prove that the marks are well known through any material upon which they have not already signalled an intention to rely. However, it follows from what I have said that that is not really an answer to the point put against them which is whether there is a fresh issue and whether the respondents should be given a chance to try their hand at that issue. Just because the applicants propose to play the same cards on this new round does not mean that the respondents are bound to do the same thing.

16                  The remarks made above about the proper construction of s 120(3) are, of course, conclusions reached in the context of an interlocutory debate. It is possible that the applicants might demonstrate at trial that as a matter of statutory interpretation the expression “well known” is commensurate with the status of having a substantial reputation. However, as Mr Webb correctly submitted, for the purposes of an amendment application one need only be satisfied that there is a risk that s 120(3) operates in the manner I have suggested. It seems to me that the risk it does operate in that manner is indeed substantial and the risk of trial prejudice to the respondents correspondingly non-trivial. It follows – and this is the endpoint of the argument – that if the amendment were allowed I would have to accede to the respondents’ application to put on further evidence. I accept that if that were to occur the trial could not practically proceed next Tuesday and would need to go over for some period, in all likelihood, some months.

17                  The respondents submit that if the trial is vacated in that fashion then they will suffer the continuing prejudice of having the legality of their current business practices subsisting under a veil of uncertainty. Fleeting reference was earlier made in these reasons to a second set of allegations which were based on the respondents’ use of the word “Sunsavers” and the applicants’ use of word “Solarsavers”. Without descending into the detail, the first debate about the SOLARHART marks is mostly of historical importance (and hence mostly relevant only to damages) since the respondents, after the commencement of these proceedings largely – if not entirely – ceased using the words “Solar Hut”. However, they continue to use “Sunsavers” with the consequence, so Mr Webb submitted, that these proceedings pose an on-going risk to the respondents. I accept this submission – if the trial is vacated and adjourned for a few months and thereafter it is determined that during that period the use of “Sunsavers” by the respondents sounded in damages then the respondents’ liability will have been augmented by the adjourned period.

18                  That is an important consideration and one which very much requires one to understand how it is that the applicants come to be adding their claims under s 120(3) so close to midnight. In that regard, the evidence rose no higher than that the applicants had recently discovered that some reference could still be found on the respondents’ website to “Solar Hut”. Although I do not think it is of any great significance it should be noted that this had the appearance of being largely unintended and certainly not obvious. To see the references it was necessary to penetrate quite deeply into the website. Even assuming that were not so, however, it is difficult to see what rational connexion that discovery by the applicants had with a desire on their part to make a claim under s 120(3). Ms Goddard did not seek to justify the decision to bring the amendment application on that basis submitting instead only that it formed part of the context in which the application was made. Granted that be so, however, the applicants did not actually explain why the claim was being brought now. Ms Goddard very properly accepted that it could not be said that the applicants were unaware at an earlier time of the possibility of a claim under s 120(3) and sought to put, as I understood it, that the question of whether the goods and services of the respondents were the same, similar or entirely different to those in respect of which the marks were registered had gradually taken on an increased significance, now necessitating the amendment.

19                  I have no difficulty in accepting that from the applicants’ perspective the claim under s 120(3) may turn out to be quite important. Without expressing any concluded view on the matter and without closely analysing just what the goods are in respect of which the marks are registered, it is not difficult to see the respondents will be seeking to run a case that they sell photovoltaic solar panels and that the marks are registered with respect to something quite different, namely, a range of solar hot water systems and associated devices. The soundness of that argument lies at the heart of the claims under s 120(1) and (2). A desire to pursue a claim in which the question of whether the respondents’ goods and services have any connexion with the goods in respect of which the first applicant’s marks are registered is entirely understandable from a tactical perspective. However, that tactical consideration has been present since the inception of these proceedings. In order to put the respondents through the prejudice of vacating this trial so that it would have a chance to meet the claim under s 120(3) I would need to understand why the applicants have left this matter so late. For example, if the matter had been overlooked this might be of significance as no doubt it would be if it could be shown that the respondents had in someway contributed to the applicants’ decision not to bring the claim at an earlier time.

20                  Unfortunately, and despite Ms Goddard’s useful submissions, I do not think I know why the claim has been brought so late. In those circumstances, it is impossible to gauge where the justice of the matter lies, for one cannot say whether the circumstances of the applicants (including those which explain why they find themselves in the situation of seeking to amend so late) justify visiting upon the respondents the difficulties identified above. Since the application to amend is brought by the applicants it is they who bear the onus of showing that the interests of justice favour the granting of leave to amend.  Where it is shown that real prejudice to an opposing party will result from the granting of an amendment the party seeking the amendment is exposed to the practical necessity of demonstrating that the infliction of that prejudice is justified by the circumstances giving rise to the necessity of amendment. It is for that reason that the present applicants must “bring the circumstances giving rise to the amendment to the court’s attention, so that they may be weighed against the effects of any delay” (Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at [103] per Gummow, Hayne, Crennan, Kiefel and Bell JJ).

21                  No clear picture has been placed before me explaining why the application has been brought so late and, actual prejudice to the respondents being established by the on-going persistence of these proceedings, it must follow that the application to amend must be refused. The motion should be dismissed with costs. The exhibits may be returned.

Associate:

Dated:         5 October 2010