FEDERAL COURT OF AUSTRALIA

Fry Consulting Pty Ltd v Sports Warehouse Inc (No 2) [2012] FCA 81

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    The notice of contention be dismissed.

3.    The respondent pay the applicant’s costs of the appeal and the notice of contention.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

Introduction

1    The principal issue for determination in this appeal is whether the trade mark of the applicant, Fry Consulting Pty Ltd (“Fry Consulting”), should be refused registration because (as alleged by the respondent, Sports Warehouse Inc (“Sports Warehouse”)) it lacks the capacity to distinguish under s 41 of the Trade Marks Act 1995 (“the Act”), is deceptively similar to another mark pursuant to s 60 of the Act and, or alternatively, because Fry Consulting’s application to register the trade mark was made in bad faith pursuant to s 62A of the Act.

2    Both Fry Consulting and Sports Warehouse are corporations which sell tennis goods. Sports Warehouse is the more long standing enterprise, which was incorporated in California in 1994. It is principally based in, and sells (almost exclusively online) to, a United States market, although it also makes international sales, including to Australia. Fry Consulting is an Australian based company which commenced business much more recently. It conducts sales in Australia both online and through retail stores.

Procedural history

3    Both Fry Consulting and Sports Warehouse have applied to register a trade mark in relation to retail services and each has opposed the other’s application. The present appeal arises in the context of the relatively complex procedural history of the parties’ disputes.

4    Fry Consulting, by its notice of appeal dated 22 December 2009, appealed from the decision of the delegate of the Registrar of Trade Marks, who upheld Sports Warehouse’s opposition and refused registration to Fry Consulting’s Australian trade mark application number 1153714 lodged on 22 December 2006 for the mark below (“the Fry trade mark”) in class 35 in respect of “Retailing of goods (by any means)” (“the designated services”):

5    The Fry trade mark was advertised by the Registrar on 18 April 2007 and accepted for registration with an endorsement that ss 41(5) and 44(4) of the Act had been applied. Sports Warehouse opposed the registration of the Fry trade mark pursuant to s 52 of the Act, relying on ss 44 and 58A of the Act.

6    On 2 December 2009, the delegate, in Fry Consulting Pty Ltd v Sports Warehouse Inc (2009) 85 IPR 403, upheld Sports Warehouse’s opposition to the registration of the Fry trade mark under ss 44 and 58A of the Act on grounds that:

(a)    the Fry trade mark was deceptively similar to the Sports Warehouse mark TENNIS WAREHOUSE, for which an application to register was then pending with a priority date of 23 February 2005, within the meaning of section 44(2) of the Act;

(b)    the Fry trade mark had not been used continuously by Fry Consulting for a period beginning before 23 February 2005 until the priority date of the trade mark application (namely 22 December 2006 – “the priority date”), within the meaning of section 44(4) of the Act. The delegate also found that Fry Consulting’s use of the Fry trade mark with the by-line “Your online tennis shop!” (as depicted below) was not use of the Fry trade mark, when applying s 7(1) of the Act; and

(c)    if (contrary to the above finding) Fry Consulting had continuously used the Fry trade mark, Sports Warehouse had used the TENNIS WAREHOUSE mark continuously in Australia from a date before the first use of the Fry trade mark, whether the first use was 10 September 2004, as Fry Consulting contended, or November 2006, which appeared to be established on the evidence.

7    On 22 December 2009, Fry Consulting filed its notice of appeal from the delegate’s decision pursuant to s 56 of the Act, at which time Sports Warehouse’s application to register its mark was still pending.

8    As the delegate stated, Sports Warehouse applied on 23 February 2005 to register the mark “TENNIS WAREHOUSE” in respect of “online retail services featuring tennis clothing, tennis footwear, tennis gear, tennis equipment, tennis accessories, and tennis sports bags”.

9    Fry Consulting opposed Sports Warehouse’s application before the delegate of the Registrar of Trade Marks, who allowed the opposition on 17 March 2008. In 2010 (after Fry Consulting’s notice of appeal was filed in this proceeding), Kenny J, in Sports Warehouse v Fry (2010) 186 FCR 519 (“Sports Warehouse v Fry”), dismissed Sports Warehouse’s appeal. As a consequence of Kenny J’s decision, the application to register the Sports Warehouse mark is no longer pending and Sports Warehouse could no longer press its grounds of opposition to registration of the Fry trade mark pursuant to s 44 and 58A of the Act, based on its alleged deceptive similarity to the Sports Warehouse trade mark.

Amended notice of contention

10    Although Fry Consulting’s appeal was rendered moot by the decision in Sports Warehouse v Fry, by an amended notice of contention in this proceeding filed on 17 March 2011, Sports Warehouse now relies on the following grounds of opposition to registration of the Fry trade mark under ss 41, 60 and 62A of the Act:

1.    The Delegate ought to have found that whilst the trade mark the subject of Trade Mark Application No. 1153714 (the TENNIS WAREHOUSE AUSTRALIA & Device Application) was to some extent inherently adapted to distinguish the designated services from the services of other persons, having taken into account the combined effect of the extent to which that trade mark was inherently adapted to distinguish the designated services, the use, or intended use, of the trade mark by the Appellant and any other circumstances, the trade mark did not and would not so distinguish the Appellant’s services from the services of other persons, such that the TENNIS WAREHOUSE AUSTRALIA & Device Application should have been refused by reason of sub-sections 41(2) and 41(5)(c) of the Trade Marks Act 1995 (Cth).

2.    The Delegate ought to have found that the Respondent’s TENNIS WAREHOUSE trade mark had, before 22 December 2006, acquired a reputation in Australia and because of that reputation, the use of the trade mark, the subject of Trade Mark Application No. 1153714 (the TENNIS WAREHOUSE AUSTRALIA & Device Application), would be likely to deceive or cause confusion, such that it the TENNIS WAREHOUSE AUSTRALIA & Device Application should have been refused by reason of section 60 of the Trade Marks Act 1995 (Cth).

3.    The Delegate ought to have found that the TENNIS WAREHOUSE AUSTRALIA & Device Application was made in bad faith, such that it should have been refused by reason of section 62A of the Trade Marks Act 1995 (Cth).

Evidence

11    The evidence in the appeal was as follows:

(a)    Fry Consulting relied on:

(i)    Statutory Declaration of Wesley Fry, director of Fry Consulting, dated 21 March 2007;

(ii)    Statutory Declaration of Wesley Fry dated 20 March 2008;

(iii)    Statutory Declaration of Jonathan Feder, solicitor for Fry Consulting, dated 24 July 2009:

(iv)    Affidavit of Wesley Fry sworn on 11 February 2011;

(v)    Affidavit of Jonathan Feder affirmed on 11 February 2011;

(vi)    Affidavit of David Hughes, director of Plum Publishing Pty Ltd, sworn on 15 February 2011;

(vii)    Affidavit of Jonathan Feder affirmed on 5 April 2011

(vi)    Affidavit of Wesley Fry sworn on 7 April 2011;

(ix)    Affidavit of Jonathan Feder affirmed on 3 June 2011; and

(x)    Affidavit Wesley Fry sworn on 8 June 2011.

(b)    Sports Warehouse relied on:

(i)    Paragraphs 7 to 9 of the Affidavit of Mark Sczbecki, Chief Operating Officer of Sports Warehouse, sworn on 16 October 2008 in Federal Court proceeding No. VID 197 of 2008, and contained in the Statutory Declaration of Mark Sczbecki dated 16 December 2008;

(ii)    Affidavit of JÜrgen Bebber, solicitor for Sports Warehouse, sworn on 2 May 2011;

(ii)    Affidavit of Mark Sczbecki sworn on 3 May 2011; and

(iv)    Affidavit of Matt Bramble, Circulation Manager at The Tennis Media Company, sworn on 4 May 2011.

12    A number of the above statutory declarations and affidavits were filed in earlier proceedings and were evidence before Kenny J in Sports Warehouse v Fry. It was common ground that issue estoppel applies in relation to a number of findings of Kenny J in Sports Warehouse v Fry, on the basis of the principles set out by Dixon J in Blair v Curran (1939) 62 CLR 404 at 531-3, as follows:

A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared. The distinction between res judicata and issue estoppel is that in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order.

Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded. In matters of fact the issue estoppel is confined to those ultimate facts which form the ingredients in the cause of action, that is, the title to the right established. Where the conclusion is against the existence of a right or claim which in point of law depends upon a number of ingredients or ultimate facts the absence of any one of which would be enough to defeat the claim, the estoppel covers only the actual ground upon which the existence of the right was negatived. But in neither case is the estoppel confined to the final legal conclusion expressed in the judgment, decree or order. In the phraseology of Coleridge J in R. v. Inhabitants of the Township of Hartington Middle Quarter… the judicial determination concludes, not merely as to the point actually decided but as to a matter which it was necessary to decide and which was actually decided as the groundwork of the decision itself, though not then directly the point at issue. Matters cardinal to the latter claim or contention cannot be raised if to raise them is necessarily to assert that the former decision was erroneous.

In the phraseology of Lord Shaw, “a fact fundamental to the decision arrived at” in the former proceedings and “the legal quality of the fact” must be taken as finally and conclusively established (Hoystead v. Commissioner of Taxation). But matters of law or fact which are subsidiary or collateral are not covered by the estoppel. Findings, however deliberate and formal, which concern only evidentiary facts and not ultimate facts forming the very title to rights give rise to no preclusion. Decisions upon matters of law which amount to no more than steps in a process of reasoning tending to establish or support the proposition upon which the rights depend do not estop the parties if the same matters of law arise in subsequent litigation.

The difficulty in the actual application of these conceptions is to distinguish the matters fundamental or cardinal to the prior decision or judgment, decree or order or necessarily involved in it as its legal justification or foundation from matters which even though actually raised and decided as being in the circumstances of the case the determining considerations, yet are not in point of law the essential foundation or groundwork of the judgment, decree or order.

(emphasis added and citations omitted)

13    It was also common ground that a presumption of registrability applied in relation to opposition based on s 41(3) of the Act and that Fry Consulting bore the onus in relation to opposition based on s 41(5). Further, while Sports Warehouse bore the burden of establishing opposition based on s 60 and s 62A, in the absence of a decision to the contrary by the Full Court, the usual civil standard applied (see Sports Warehouse v Fry at [26] to [40]).

Background

14    The principal facts, evidence and findings relevant to the notice of contention in this proceeding are as follows.

15    Since 1994, Sports Warehouse has operated an online retailing business selling tennis goods from its website at the domain name www.tennis-warehouse.com and, from September 1997, at the domain name www.tenniswarehouse.com. Sports Warehouse conducts its retailing online (save, possibly, for a very small percentage of sales) and, according to its written submissions, has no physical retail store or telephone or mail ordering service. It also operates similar online retail businesses for sports other than tennis.

16    From 1995 to 22 December 2006, Sports Warehouse sold over US$190M worth of tennis goods internationally and US$1.14M solely in Australia, through the Sports Warehouse website. In that time, it has made 8,350 deliveries of goods to Australian customers. Sports Warehouse has used the name “Tennis Warehouse” in the following manners over time:

(a)    use of the domain names www.tennis-warehouse.com and www.tenniswarehouse.com in connection with its online retailing website.

(b)    use of the words “Tennis Warehouse” on its website banners:

(i)    from 1994 to 1999 as follows:

(ii)    in 2000 as follows:

(iii)    from 2001 to 2002 as follows:

(c)    use of the words “Tennis Warehouse” in association with a logo comprising the letters TW in a horizontally stretched oval (the TW logo) on its website banners.

(i)    from 2003 to 2005 as follows:

(ii)    from 2006 as follows:

(d)    use of the various promotional emails and advertisements in magazines and online as viewed by Australians from at least 1999 in the various forms set out above.

17    Kenny J found in Sports Warehouse v Fry at [49]-[51] that Sports Warehouse’s sales to Australian customers were modest compared to Sports Warehouse’s world-wide sales (less than 1%), and between 1994 and August 2009 (the time of trial before her Honour) sales to customers in the United States formed 80-85% of the company’s total sales.

18    Before me, Mr Fry confirmed the accuracy of his testimony before Kenny J, to the effect that, prior to September 2004, while managing a self-storage business owned by his parents, he decided to run his own online retail store, operating from a warehouse. Having already decided to deal in tennis products, Mr Fry performed a Google search which revealed Sports Warehouse’s website. He conceded he thought of the name “Tennis Warehouse” after visiting the Tennis Warehouse website during the course of his Google searches, which he probably had not selected previously. He subsequently, in early September 2004, registered the business name “Tennis Warehouse” and the domain name “tenniswarehouse.com.au”. Mr Fry also incorporated Fry Consulting in early September 2004 for the purpose of running the online retail tennis gear store.

19    Mr Fry acknowledged that nothing on the Tennis Warehouse website indicated that its online sales were restricted to the United States of America and indeed, he knew that the website made sales to Australia, as a friend had purchased some racquets. Mr Fry agreed that he used some photographs from the Tennis Warehouse website in preparing the Fry Consulting website.

20    Mr Fry testified that his wife conducted a trade mark search and informed him that Tennis Warehouse was not an “international” trade mark.

21    Mr Fry conceded that he knew that there was potential that some people would confuse the websites (at least at the point of the domain name) and acknowledged that he chose the name partly for that reason, but denied that he hoped to use Sports Warehouse’s reputation in order to boost early sales. He also denied that he believed the name TENNIS WAREHOUSE would cause customers aware of Sports Warehouse’s website to think that the Fry Consulting website was an arm or affiliate of Sports Warehouse.

22    On 21 December 2004, Mr Hightower, the President of Sports Warehouse, sent an email to Mr Fry asserting that Sports Warehouse had a “worldwide trademark on the name Tennis Warehouse”. Mr Hightower requested that Mr Fry cease to use its “trademarked name” by operating a business with the name Tennis Warehouse and a website with the URL http://www.tenniswarehouse.com.au/. By an email on 22 December 2004, Mr Fry confirmed that he was running the business at the website, and stated that:

When setting up my company I did thorough research on the name including checking to see if the name had a world wide trademark. My information showed that it was not an international trademark. If I have been misinformed, please provide me with the International Trademark Number so that I can find it, or provide me with some evidence that you have a world wide trademark. If you do, I will gladly trade under a different name.

I own the business name “Tennis Warehouse” in Australia and when applying for this the Australian Business Register does a search to make sure it is not conflicting or breaching any trade marks. This name passed all checks and I was able to obtain it.

As part of our business, we operate our warehousing from a Self Storage Warehouse, we do not have a shop. The name Tennis Warehouse was chosen for this reason.

We are still a young business and have not spent much on marketing, so the prospect of a changing our name is not unreasonable. If it must be done, I would rather do it sooner than later, however, I would like to see evidence of your world trade mark before I make this change.

Please note that I am only interested in selling to Australia. It is my intention to change the heading at the top of the page from “Tennis Warehouse” to “Tennis Warehouse Australia” and you will notice this change happen soon anyway.

23    By an email dated 23 December 2004, Mr Hightower stated that:

…We will gather the requested documentation and provide to you after the New Year. I think you’ll agree that Tennis Warehouse is essentially an international “brand”, that we have developed over the past 12 years. As such, we must vigorously enforce our trademark, or risk misuse by third parties. In the meantime, I would request (and suggest) you pursue a different business name, so as not to confuse consumers of any connection between your business and ours. …

24    Kenny J found in relation to the above email exchange at [66]:

This correspondence reveals error on both sides. There was no worldwide trade mark, as Mr Hightower claimed. Neither party suggested that the documentation mentioned in Mr Hightower’s last email was ever supplied to Mr Fry. In cross-examination, Mr Fry accepted that he erroneously said that the Victoria business register had an Australia-wide application, although he claimed that he was unaware that registration on the business register did not involve a search on the trademark register. Ultimately, nothing turns in this case on these errors.

25    In late December 2004, Fry Consulting changed the name on its website to Tennis Warehouse Australia, although the domain and business names were unchanged. Kenny J found at [67] that:

… the email correspondence from Mr Hightower led Mr Fry to change the name on Fry Consulting’s website from “Tennis Warehouse” to “Tennis Warehouse Australia”.

26    Her Honour did not accept Mr Fry’s evidence that the email exchange with Mr Hightower merely accelerated a change he had always intended to make.

27    It was not disputed that despite Mr Hightower’s assurance that Sports Warehouse would, “after the New Year”, provide Mr Fry with the requested documentation evidencing its “worldwide trade mark”, Sports Warehouse did not communicate with Mr Fry again until November 2006.

28    As Kenny J found in Sports Warehouse v Fry at [72], Fry Consulting’s sales revenue was very modest in 2004, but increased over time. It generated sales of $972,743.93 in 2006 and $1.2M in 2007. In addition to online sales, the business commenced selling out of a physical warehouse in Fitzroy in 2005.

29    Mr Fry conceded that following the exchange with Mr Hightower in December 2004, Fry Consulting, in July 2005, applied to register the words “TENNIS WAREHOUSE AUSTRALIA” without a logo, but subsequently abandoned the application.

30    In August 2005, Sports Warehouse applied to register TENNIS WAREHOUSE.

31    Mr Fry instructed Mr Hughes to design a new trade mark. As Mr Hughes, who was not cross-examined, deposed:

In or about November/December 2005, the Applicant commissioned Plum Publishing to create a logo for its business incorporating the words “TENNIS WAREHOUSE AUSTRALIA”.

In December 2005, I created the tennis ball logo (Logo) depicted in Australian Trade Mark Application No. 1153714. I have checked my computer records which show a file named “Tennis Warehouse Logo Use” dated December 2005 which means that I finalised the Logo in December 2005.

32    Mr Fry, when cross-examined in the present proceeding, stated that he selected the Fry trade mark by approving a trade mark designed on his instructions by Mr Hughes. He recalled that he instructed Mr Hughes to design a logo similar to the logo Mr Hughes had designed for his own business, Plum Publishing, consisting of a stylised round fruit, which Mr Fry admired. Mr Fry could not recollect any other instructions, but recalled that Mr Hughes devised the words “Your online tennis shop!” and also included the domain name.

33    On 27 November 2006, Fry Consulting’s solicitors wrote to the solicitors for Sports Warehouse seeking undertakings that, inter alia, “Sports Warehouse... cease and forever refrain from using the mark “TENNIS WAREHOUSE” in Australia in the course of trade…” and withdraw its application to register the TENNIS WAREHOUSE Trade Mark.

34    Sports Warehouse’s solicitors, by a letter in reply dated 27 November 2006, refused to provide the undertakings and asserted that Fry Consulting’s use of the trade mark “TENNIS WAREHOUSE AUSTRALIA” was an attempt to pass off its services as those of Sports Warehouse, which, with use of the domain name “tenniswarehouse.com.au”, was misleading and deceptive.

35    At that time, 21 December 2006, Fry Consulting was using the banner on its website stating “TENNIS WAREHOUSE AUSTRALIA” with a green tennis ball logo and the words “Your online tennis shop!”.

36    After receipt of Sports Warehouse’s letter, Mr Fry instructed his solicitors to apply to register the TENNIS WAREHOUSE AUSTRALIA logo trade mark.

rELEVANT LEGISLATION

37    Section 7 of the Act provides:

7    Use of trade mark

(1)    If the Registrar or a prescribed court, having regard to the circumstances of a particular case, thinks fit, the Registrar or the court may decide that a person has used a trade mark if it is established that the person has used the trade mark with additions or alterations that do not substantially affect the identity of the trade mark.

(2)    To avoid any doubt, it is stated that, if a trade mark consists of the following, or any combination of the following, namely, any letter, word, name or numeral, any aural representation of the trade mark is, for the purposes of this Act, a use of the trade mark.

(3)    An authorised use of a trade mark by a person (see section 8) is taken, for the purposes of this Act, to be a use of the trade mark by the owner of the trade mark.

(4)    In this Act:

use of a trade mark in relation to goods means use of the trade mark upon, or in physical or other relation to, the goods (including second-hand goods).

(5)    In this Act:

use of a trade mark in relation to services means use of the trade mark in physical or other relation to the services.

38    Section 17 of the Act provides:

17    What is a trade mark?

A trade mark is a sign used, or intended to be used, to distinguish goods or services dealt with or provided in the course of trade by a person from goods or services so dealt with or provided by any other person.

39    Section 41 of the Act provides:

41    Trade mark not distinguishing applicant’s goods or services

(1)    For the purposes of this section, the use of a trade mark by a predecessor in title of an applicant for the registration of the trade mark is taken to be a use of the trade mark by the applicant.

(2)    An application for the registration of a trade mark must be rejected if the trade mark is not capable of distinguishing the applicant’s goods or services in respect of which the trade mark is sought to be registered (designated goods or services) from the goods or services of other persons.

(3)    In deciding the question whether or not a trade mark is capable of distinguishing the designated goods or services from the goods or services of other persons, the Registrar must first take into account the extent to which the trade mark is inherently adapted to distinguish the designated goods or services from the goods or services of other persons.

(4)    Then, if the Registrar is still unable to decide the question, the following provisions apply.

(5)    If the Registrar finds that the trade mark is to some extent inherently adapted to distinguish the designated goods or services from the goods or services of other persons but is unable to decide, on that basis alone, that the trade mark is capable of so distinguishing the designated goods or services:

(a)    the Registrar is to consider whether, because of the combined effect of the following:

(i)    the extent to which the trade mark is inherently adapted to distinguish the designated goods or services;

(ii)    the use, or intended use, of the trade mark by the applicant;

(iii)    any other circumstances;

the trade mark does or will distinguish the designated goods or services as being those of the applicant; and

(b)    if the Registrar is then satisfied that the trade mark does or will so distinguish the designated goods or services—the trade mark is taken to be capable of distinguishing the applicant’s goods or services from the goods or services of other persons; and

(c)    if the Registrar is not satisfied that the trade mark does or will so distinguish the designated goods or services—the trade mark is taken not to be capable of distinguishing the applicant’s goods or services from the goods or services of other persons.

(6)    If the Registrar finds that the trade mark is not to any extent inherently adapted to distinguish the designated goods or services from the goods or services of other persons, the following provisions apply:

(a)    if the applicant establishes that, because of the extent to which the applicant has used the trade mark before the filing date in respect of the application, it does distinguish the designated goods or services as being those of the applicant—the trade mark is taken to be capable of distinguishing the designated goods or services from the goods or services of other persons;

(b)    in any other case—the trade mark is taken not to be capable of distinguishing the designated goods or services from the goods or services of other persons.

40    Section 60 provides:

60    Trade mark similar to trade mark that has acquired a reputation in Australia

The registration of a trade mark in respect of particular goods or services may be opposed on the ground that:

(a)    another trade mark had, before the priority date for the registration of the first-mentioned trade mark in respect of those goods or services, acquired a reputation in Australia; and

(b)    because of the reputation of that other trade mark, the use of the first-mentioned trade mark would be likely to deceive or cause confusion.

41    Section 62A provides:

62A    Application made in bad faith

The registration of a trade mark may be opposed on the ground that the application was made in bad faith.

discussion

Contention 1

The Delegate ought to have found that whilst the trade mark the subject of Trade Mark Application No. 1153714 (the TENNIS WAREHOUSE AUSTRALIA & Device Application) was to some extent inherently adapted to distinguish the designated services from the services of other persons, having taken into account the combined effect of the extent to which that trade mark was inherently adapted to distinguish the designated services, the use, or intended use, of the trade mark by the Appellant and any other circumstances, the trade mark did not and would not so distinguish the Appellant’s services from the services of other persons, such that the TENNIS WAREHOUSE AUSTRALIA & Device Application should have been refused by reason of sub sections 41(2) and 41(5)(c) of the Trade Marks Act 1995 (Cth).

42    Section 41(3) requires the Registrar to take into account the extent to which the trade mark was inherently adapted to distinguish. As stated by Sundberg J in Chocolaterie Guylian NV v Registrar of Trade Marks (2009) 180 FCR 60 (“Guylian”) at [21], there is a presumption of registrability of a trade mark, where, in the context of s 41(3), the mark is presumed sufficiently adapted unless the Registrar is not so satisfied on the balance of probabilities.

43    As Kenny J stated in Sports Warehouse v Fry at [83]:

The Note 1 to s 41(6) of the Act indicates that the degree of descriptiveness attaching to the mark may be relevant in considering whether a mark is or is not inherently adapted to distinguish the designated services: see also Ocean Spray Cranberries Inc v Registrar of Trade Marks (2000) 47 IPR 579; [2000] FCA 177 at [30] per Wilcox J. There is a high (though not absolute) degree of descriptiveness in the words “TENNIS WAREHOUSE” that argues against the mark being inherent adapted to distinguish.

44    Further, it is necessary to assess the likelihood that other traders actuated only by proper motives would wish to use the mark or one closely resembling it at the lodgement date on or in connection with their goods or services.

Parties’ submissions

45    Fry Consulting submitted that the Fry trade mark met the requirements of s 41(3) of the Act and there was thus no need to rely on s 41(5). It drew support from Kenny J’s finding that Sports Warehouse’s “TENNIS WAREHOUSE” trade mark, although highly descriptive, possessed some inherent capacity to distinguish. Fry Consulting submitted that its combination trade mark, consisting of a combination of the words “TENNIS WAREHOUSE” (already found to possess some degree of distinctiveness), together with the word “AUSTRALIA” and an accompanying “tennis ball” logo (which must be considered as a combination rather than as individual elements), necessarily had a much higher capacity to distinguish than the TENNIS WAREHOUSE trade mark. Fry Consulting emphasised that in assessing the capacity to distinguish, it was necessary to consider the combination, rather than the constituents.

46    Fry Consulting acknowledged that the use of the word “warehouse” in combination with particular products had, as the searches exhibited to Mr Feder’s affidavit demonstrated, became quite common, probably as indicators of a mode of retailing cheaper products, rather than the established primary signification of a warehouse as a storage depot.

47    Mr Feder, using the Wayback Machine (which provides a digital record of how Internet sites appeared at particular points in time), searched whether any retailers using the word “WAREHOUSE” existed as at 22 December 2006 and found 16 examples, including Chemist Warehouse, Digital Camera Warehouse, Bathroom Warehouse, Cricket Warehouse, Golf Club Warehouse, Scuba Warehouse, Lounge Suite Warehouse and Cleaners Warehouse. He deposed that the names suggested to him that all the above stocked and sold a large range of the relevant products at warehouse prices.

48    The descriptiveness and increasingly common incidence of the word “WAREHOUSE” nevertheless, in Fry Consulting’s submission, merely emphasised the need to consider, in this context, the combination as a whole, including the device.

49    Fry Consulting submitted that when the tennis ball logo was considered in isolation, it was quite “eye catching” and different, as the examples of use of the tennis and other sports ball devices, whether in an online context or as trade marks exhibited to Mr Bebber’s affidavit, showed (see [84] to [94] of these reasons).

50    Fry Consulting submitted that the exhibited tennis ball devices revealed many differences of detail and concept both inter se and when compared with the Fry Consulting logo. Similarly, while the IP Australia searches of registered trade marks exhibited by Mr Bebber showed many uses of the word “tennis” or a ball device, or a combination of both, each example constituted a distinctive representation.

51    Fry Consulting submitted that the searches also evidenced the Registrar’s acceptance of such marks as sufficiently inherently distinctive under s 41(3), as there was no endorsement to indicate reliance on s 41(5) of the Act.

52    Sports Warehouse, while not disputing that the Fry trade mark was to some extent inherently adapted to distinguish Fry Consulting’s services, submitted that it was at a very low level, insufficient to satisfy the requirements of s 41(3) of the Act. Sports Warehouse contended that Kenny J’s finding that its TENNIS WAREHOUSE trade mark was largely descriptive of its services applied even more forcefully to the Fry trade mark, because the TENNIS WAREHOUSE mark was not wholly descriptive, as it omitted reference to the online nature of the services to which its application related. In contrast, the Fry trade mark could be seen as fully descriptive of the services it provided within Australia, which were not limited to online services. Sports Warehouse, in particular reliance on Sundberg J’s observations in Guylian, submitted that an honest trader might want to use the trade mark or a very similar mark, as the evidence of Messrs Feder and Bebber established that both before and after the priority date, other traders had the intention and inclination to use a tennis or similar sports ball device with the word “tennis” or similar in relation to their goods or services. Sports Warehouse emphasised that the evidence established the likelihood that other traders would legitimately wish to use, if not an identical mark, at least one which so nearly resembled the Fry trade mark as to infringe.

53    It contended that Fry Consulting’s reliance on the many different ways of representing a tennis ball was misplaced in this context, as any of the depictions in question, if placed next to the words “Tennis Warehouse Australia”, would probably be deceptively similar to the Fry trade mark.

54    Sports Warehouse further submitted that in contrast to Diamond T Motor Car Company [1921] 2 Ch 583 (“Diamond T”), where the combination of the elements was itself unusual, there was nothing unusual in combining the elements of, or elements similar to, those in the Fry trade mark, given that the words were highly descriptive and the evidence indicated an inclination to use tennis balls in combination with such words.

55    Sports Warehouse also challenged Fry Consulting’s reliance on the registration of similar trade marks under s 41(3) without reliance on s 41(5) as unsound, given that the validity of such registrations was untested.

Discussion of contention 1

56    The Fry trade mark is not a geographical word or a descriptive word (or words) in isolation, which is not to any extent inherently adapted to distinguish. Its adaptability to distinguish is to be determined according to the principles in Clark Equipment Co v Registrar of Trade Marks (1964) 111 CLR 511, where Kitto J set out the following authoritative analysis (at 513-14):

Th[e] ultimate question must not be misunderstood. It is not whether the mark will be adapted to distinguish the registered owner’s goods if it be registered and other persons consequently find themselves precluded from using it. The question is whether the mark, considered quite apart from the effects of registration, is such that by its use the applicant is likely to attain his object of thereby distinguishing his goods from the goods of others. In Registrar of Trade Marks v W & G Du Cros Ltd, Lord Parker of Waddington, having remarked upon the difficulty of finding the right criterion by which to determine whether a proposed mark is or is not “adapted to distinguish” the applicant’s goods, defined the crucial question ... and added two sentences which have often been quoted but to which it is well to return for an understanding of the problem ... His Lordship said: “The applicant’s chance of success in this respect [i.e. in distinguishing his goods by means of the mark, apart from the effects of registration] must, I think, largely depend upon whether other traders are likely, in the ordinary course of their businesses and without improper motive, to desire to use the same mark, or some mark nearly resembling it, upon or in connexion with their own goods...” The interests of strangers and of the public are thus bound up with the whole question ... but to say this is not to treat the question as depending upon some vague notion of public policy: it is to insist that the question whether a mark is adapted to distinguish be tested by reference to the likelihood that other persons, trading in goods of the relevant kind and being actuated only by proper motives – in the exercise, that is to say, of the common right of the public to make honest use of words forming part of the common heritage, for the sake of the signification which they ordinarily possess – will think of the word and want to use it in connexion with similar goods in any manner which would infringe a registered trade mark granted in respect of it.

57    Clearly, if a mark consists solely of words which are highly, even if not fully or merely, descriptive of particular goods or services, there is a considerable likelihood that other traders in such or related goods would think of and legitimately wish to use the very words constituting the mark or similar words.

58    In Sports Warehouse v Fry at [93] to [95], Kenny J found that TENNIS WAREHOUSE had a sensible meaning and was highly descriptive of the Sports Warehouse services, although not fully descriptive, as the services were “online retail services”. She also found that the description was somewhat indirect, but not as indirect or allusive as in the Tub Happy case (Mark Foy’s Ltd v Davies Coop & Co Ltd (1956) 95 CLR 190).

59    In the present case, the words “TENNIS WAREHOUSE AUSTRALIA” may be said to be highly descriptive on the same basis. The description is, however, as Kenny J found, somewhat indirect, as a warehouse is not necessarily a source of retail sales, and although usage in that sense may be increasingly common, the primary and traditional meaning is a storage repository. Further, the words do not refer to any particular mode of retail services, whether online or otherwise, while the mark is sought to be registered in relation to any means of retailing. In my opinion, the words are not fully or specifically descriptive of the services in relation to which registration is sought or those in fact provided by Fry Consulting. In contrast to the TENNIS WAREHOUSE mark, they do not omit a limitation which in fact applied (as the retailing was exclusively online) but, on the other hand, the description is not only indirect but does not convey the online means of retailing for which, inter alia, registration is sought and Fry Consulting in fact provides.

60    More significantly, in contrast to the TENNIS WAREHOUSE mark considered by Kenny J, the Fry trade mark at issue in this case is a combination mark which includes the stylised depiction of a tennis ball.

61    It is established that a combination mark may be capable of distinguishing by the overall impression it creates, even if the individual elements in isolation lack any such capacity, because, for example, they are commonplace in a trade, or, by parity of reasoning, merely or highly descriptive. When assessing whether a combination trade mark such as the Fry trade mark is adapted to distinguish, it is necessary to consider the combination as a total composition, rather than the individual constituent elements in isolation. In Diamond T, P.O Lawrence J held that a combination trade mark consisting of the capital letter “T”, across which the word “Diamond” was impressed in block print, all enclosed within a double diamond shaped border, was, as a whole, adapted to distinguish the applicant’s motor vehicles from those of other manufacturers.

62    The Registrar of Trade Marks had refused the application to register the mark, apparently accepting the opponent’s argument that the diamond-shaped border was common to the trade, the word “diamond” carried it no further, “T” was an initial and not registrable, and a combination consisting of a double oval containing a word had been held to be not distinctive.

63    P.O. Lawrence J stated (at 588):

Now it has often been said that it is wrong, in judging whether a combination mark is distinctive or not, to dissect the mark and it to show that each of its component parts is not distinctive in itself and then, as the result of this process, to conclude that the mark as a whole is not distinctive.

64    His Lordship observed that whether the trade mark as a whole was not distinctive largely depended on whether other traders were likely, in the ordinary course of business, and without any improper motive, to desire to use the mark, or one resembling it, upon or in connection with their goods (at 589).

65    His Lordship did not consider that the combination trade mark would convey that it was being used in a descriptive or laudatory sense, or to apply to motor cars generally. Nor did he accept that the trade mark was not in fact adapted to distinguish simply because six marks registered in the relevant class contained a diamond shaped border, which was common to the trade. He observed that the trade mark combined, for the first time, a number of common features, and there was no other diamond “T” mark at present in the trade (at 591).

66    Sports Warehouse relied on Guylian in support of its contention that registration of the Fry trade mark would confer an unjustifiable monopoly impeding other traders from bona fide use of marks which contained descriptive or commonplace elements. In Guylian, Sundberg J held that the applicant’s seahorse shaped mark, (although potentially registrable as a shape mark under s 17 of the Act) was not capable of distinguishing the applicant’s chocolate confectionary goods within the meaning of s 41(5) of the Act.

67    The Registrar had found that the seahorse shape was clearly recognisable as a modification of the shape of a real seahorse, and other traders were already using a seahorse shape, or shapes very similar to it.

68    Sundberg J did not consider that the seahorse shape was sufficiently inherently adapted to distinguish the applicant’s goods pursuant to s 41(3) of the Act. His Honour stated, in that context, that a trade mark that is inherently adapted to distinguish goods is one that can “do the job of distinguishing without first educating the public that it is a trade mark” (citing British Sugar PLC v James Robertson & Sons Ltd [1996] RPC 281 at 306).

69    His Honour also relied on Kenman Kandy Australia Pty Ltd v Registrar of Trade Marks (2002) 122 FCR 494 (“Kenman Kandy”), where the majority (Stone and French JJ) held that the applicant’s bug shaped confectionary was registrable as a three dimensional shape mark.

70    In Kenman Kandy, Stone J stated at [163]:

Although the bug shape is suggestive of insect life it is not the shape of any specific insect or bug. Indeed, were it not for the description given by the appellants, it might as easily be seen as some extra-terrestrial object or space equipment such as a modified lunar landing module. Registration of the bug shape as a trade mark would not give the appellant a monopoly over all bug or insect shapes — only this particular shape and any substantially identical or deceptively similar shape.

71    French J, who agreed with Stone J, stated at [50]:

Theoretically it may be the case that the number of possible symmetrical arrangements of projections and recesses is not infinite. Assuming that to be so, it is speculative, absent evidence, to draw conclusions about that number and whether the particular arrangement has any significant impact upon the access of other traders to the use of insect like shapes as trade marks. In that connection it is necessary to bear in mind that this trade mark is still at the registration stage. It enjoys the benefit of the presumption of registrability mandated by s 33. To the extent that critical criteria upon which registration might be rejected are in doubt, the application should be accepted.

72    In Guylian, the Registrar argued that the seahorse shape was not concocted or invented, but was a clear representation of a seahorse with a relatively minor level of stylisation or abstraction, which possessed an ordinary signification that another trader in chocolate might want to use. He relied, in that context, on Stone J’s observation in Kenman Kandy that the absence of ordinary associations and significations made a sign inherently adapted to distinguish one trader’s goods from another’s. Further, the Registrar submitted that chocolate confectionary was manufactured in a wide variety of novelty shapes, including animals, and other manufacturers had sold chocolate in the shape of sea shells and other marine life and currently sold chocolate in the same seahorse shape as the applicant’s chocolates, or very similar to it.

73    Sundberg J accepted that although there were other ways to depict a seahorse than that chosen by the applicant, Guylian, “it [was] quite possible that as at the priority date other traders might want to depict a seahorse [and other marine shapes] in a way that is similar enough to cause potential confusion in the minds of consumers” (at [77]).

74    His Honour did not think it unlikely that others might wish to depict a seahorse in future merely because no other seahorse shapes were being sold in Australia at the time.

75    Recognising that an evaluative judgment was necessary in every case, Sundberg J considered that in Guylian “[t]he degree of likelihood… turns very much on the extent to which this particular seahorse shape is distinctive or unique” (at [78]). He found at [78] that:

while the shape has some distinctive features… it is not so unique or imaginative that other traders, using a seahorse shape for its ordinary signification, will be able to avoid potentially infringing the mark if it were registered.

76    His Honour concluded that the mark, although to some degree inherently adapted to distinguish, was not sufficiently so to decide the matter because, inter alia:

(a)    the mark gave the immediate impression of an ordinary sea horse;

(b)    evidence of other seahorse shapes on the market tended to confirm rather than deny the likelihood that other traders wishing to depict a seahorse may have some difficulty in avoiding infringement proceedings. The seahorse shapes sold by other traders did not differ so significantly as to obviate confusion, and, given the exclusivity of rights granted upon registration, it would be difficult for other traders to ascertain where to draw the line (at [79]);

(c)    the shape in suit was not “entirely concocted” and thus not lacking an “association that would lead to confusion”, if other traders wished to draw upon it (at [80]); and

(d)    more recent evidence of similar sea shell and seahorse chocolate products further supported the conclusion that, as at the priority date, other traders might have wished in the future to adopt the same shape or one closely resembling it, as (while as at 2008 such use was likely to be largely attributable to the applicant’s long promotion of those shapes) the tendency for competition in the manufacturing of sea shell/marine chocolate creatures was already evident (at [81]).

77    Having found that the mark was not sufficiently inherently adapted to distinguish for the purposes of s 41(5), Sundberg J considered whether the mark had, as at the priority date, acquired a capacity to distinguish the relevant goods, by use of the mark as a trade mark.

78    His Honour found that although the applicant’s survey evidence showed that a proportion of consumers associated the seahorse shape with the applicant, it was not because the applicant had educated the public to recognise the shape as a badge of origin (at [95]). Rather, his Honour’s impression was that the shape was only one of several features on the packaging and did not function as a trade mark, but rather, illustrated individual chocolates and the contents of the box generally. Further, in other marketing materials, the shape was used in combination with other shapes (at [96]). A Guylian trade mark printed on the packaging also diluted the trade mark significance that might otherwise have been attributed to the seahorse shape.

79    The survey and expert evidence ultimately indicated that, while many consumers identified the applicant with the seahorse shape, the association was probably referable to the sale of the confectionary shapes over a long period with various trade marks, and not because the shape itself had been a trade mark. Consumers did not “actually understand the shape as an indicator of the origin of the goods” (at [100]). Further, about 50% of consumers did not identify the shape with any particular manufacturer, and 25% of those who did identified it with a manufacturer other than the applicant (at [100]).

80    In my opinion, in the present case, the impression created by the Fry trade mark as a whole is distinctive, although it contained some very descriptive elements.

81    As Diamond T establishes, a combination mark should not be dissected into its individual elements in the context of assessing the distinctiveness of the totality, so even a collection of entirely commonplace elements could achieve distinction to the requisite degree. While Sports Warehouse submitted that, in Diamond T, the idea of combining the commonplace elements was novel, the reasoning did not depend on the novelty of combining the elements selected, but on the distinctive impression created. If that result be accomplished, it is irrelevant that the elements themselves are not distinctive and that it is not novel to combine elements of that kind.

82    In this case, the tennis ball device, which is represented with a relatively high level of abstraction and stylisation, is, as Fry Consulting submitted, eye catching. It is not a clear or obvious depiction of a tennis ball, and although it quite cleverly employs the characteristic thin line wrapping, it is far from a literal image. In my view, if unaccompanied by the words, it would not give the immediate impression of a tennis ball and may not be identified as such.

83    The tennis ball logo thus does not appear to possess the ordinary association and significance to the degree which would deprive it of inherent capacity to distinguish. While it is not necessary for any particular element of a combination mark to possess distinctiveness in itself, and the tennis ball logo is not, in contrast to Guylian, advanced as a sign mark, its qualities, combined with other elements, create, as a totality, a distinctive impression, notwithstanding the descriptive nature of some constituents.

84    Sports Warehouse contended, however, that as the Fry trade mark was very descriptive and it was obvious to combine elements of the relevant kind, the monopoly conferred by registration was unjustified. It relied, in that context, on searches conducted by JÜrgen Bebber, of the solicitors for the respondent, to establish that many traders legitimately wishing to use a similar mark would be prevented from doing so if the Fry trade mark were registered. Mr Bebber deposed to a search he conducted of the IP Australia database for all pending and registered trade marks in class 35 indexed with the words “tennis” and “ball”, and exhibited the results of that search. Mr Bebber also exhibited print-outs and screen shots of various websites he located using a Google search for “tennis retailers and tennis shop online”.

85    Mr Feder, by his affidavit affirmed on 3 June 2011, deposed to his own search of the same subject matter on the Australian Trade Marks Online Search System on 26 May 2011, updating Mr Bebber’s results. A trade mark application with a picture of a cricketer was withdrawn on 28 February 2011, and a trade mark for “EGGAZ SPORTS” with a picture of an egg figure with a cricket bat, tennis racquet and soccer ball was filed on 27 April 2011.

86    The searches exhibited by Messrs Bebber and Feder related to trade marks and screen shots; approximately half of the marks pre-date the priority date, while half post-date it. While evidence of use by other traders prior to the lodgement date is of primary importance in assessing the likelihood that, as at the priority date, they may legitimately wish to use the mark or a mark similar to it in relation to it, as Kenny J in Sports Warehouse v Fry (at [101]) held, in reliance on Sundberg J in Guylian (at [54]), evidence of use of a constituent word of the mark by businesses after the date of lodgement was not irrelevant to whether the mark was inherently adapted to distinguish the designated services from those other traders, although such evidence could be accorded only limited weight and could “be in no sense decisive of the principal issue” (at [102]).

87    Sports Warehouse contended that the marks and screen shots exhibited by Mr Bebber in this case revealed not only an inclination by traders to use a tennis ball as part of their mark, but also a number of the uses so nearly resembling the Fry trade mark that, if it were registered, they (albeit properly motivated) might infringe. Sports Warehouse also submitted that the marks and screen shots demonstrated the very low inherent adaptability to distinguish the Fry trade mark.

88    That submission was not, in my view, persuasive. Many of the exhibited marks and screen shots contained an image or depiction of a tennis ball to the left-hand side of the trader’s name, whether by itself or accompanied by another shape or tennis racquet. They included a Tennis Australia mark and the screen shots of the websites for Reynolds Racquets, POP Tennis, The Tennis Shop, Tennis Pro Shop, Strung Out, Tennis & Gear Online Store, and Racquet Works.

89    A number of other marks and screen shots used a depiction of a tennis ball and/or racquet as part of the trader’s name. The mark for tennismart.com.au used a tennis ball in place of the “i” in “tennis”; a mark for the word “Cleanskin” used a subtle depiction of a tennis ball to form the letter “C”; and the Curnow Tennis website used the head of a tennis racquet with a ball in front of it to form the letter “C”, with the remaining letters “urnow” written so as to comprise part of the neck and handle of the tennis racquet.

90    Several marks and screen shots used an image of a person throwing a tennis ball in the air with a racquet outstretched as if about to serve. They included the ATP Tour Inc mark, the Australian Open Tennis mark, and the “Lets go tennis” mark.

91    Other miscellaneous uses of tennis balls or racquets included, inter alia, the Tennis Ranch website (on which a map of Australia was superimposed over the head of a tennis racquet), the Tennis Australia Travel mark (which depicted a tennis ball in the appearance of a globe), and the Tennis Coaches Australia Limited mark (which depicted three tennis balls of different colours).

92    Each of the above marks appeared to me both distinctive in itself and significantly different from the Fry trade mark.

93    The evidence demonstrated that there are many ways in which to depict a tennis or sports ball which differ materially from the logo in the Fry trade mark, many variations of words and their arrangement in phrases capable of performing an analogous function, and many potential ways of arranging such words and logos in combination. In my view, the multiplicity of combinations of words and a ball or other device embodying some reference to “tennis” and/or “Australia” indicated a considerable scope for variation and individuality, both within the constituent elements themselves and the different modes of their combination.

94    The exhibited trade marks and other examples of screen shots were not, in my view, persuasive evidence of the likelihood that other traders would, as at the priority date, legitimately desire to use the Fry trade mark or one so closely resembling it as to infringe.

95    The evidence of registration of trade marks containing depictions of sports balls without endorsement under s 41(5) fortified, but was unnecessary to, the conclusion that the Fry trade mark is sufficiently inherently adapted to distinguish the services to satisfy the requirements of s 41(3).

96    It follows that I am satisfied, on the balance of probabilities, that the Fry trade mark is inherently capable of distinguishing Fry Consulting’s services pursuant to s 41(3) of the Act.

Section 41(5)

97    As I have found that the Fry trade mark is inherently capable of distinguishing Fry Consulting’s services under s 41(3), it is unnecessary to consider whether, pursuant to s 41(5), by the combined effect of some inherent adaptability to distinguish and use or intended use, it is capable of distinguishing. In deference to the submissions of the parties, I briefly consider that question.

98    In contrast to the question under s 41(3), Fry Consulting bears an onus of establishing the matters required under s 41(5).

99    The use in this context must be of the trade mark the subject of the application to distinguish the applicant’s goods.

100    In Sports Warehouse v Fry, Kenny J stated at [111]:

Section 41(5) permits the registration of a trade mark that is not inherently sufficiently adapted to distinguish, but that has as at the lodgement date in fact acquired a capability to distinguish the relevant services: see Chocolaterie Guylian at [84] and Austereo at [51]. In other words, s 41(5) recognises that marks which are insufficiently inherently adapted to distinguish may nevertheless by their use or other circumstances have become distinctive in the minds of consumers so that they will be able to “do the job of distinguishing” the applicant’s goods: Chocolaterie Guylian at [84]. Thus, under s 41(5), an applicant relying on use prior to the lodgement date will need to show that the mark has in fact been used as a trade mark prior to the lodgement date so as to have acquired the requisite capability to distinguish the applicant’s goods: Chocolaterie Guylian at [84].

101    Fry Consulting relied, in this context, on Mr Fry’s evidence of the use of the trade mark. Mr Fry deposed to use of the trade mark prior to the lodgement date of 22 December 2006 constituted by advertisements in widely circulating newspapers such as The Age, magazines directed at tennis enthusiasts, posters, business documents comprising sample invoices and business cards, website uses, t-shirts worn by sponsored players at tournaments and the sales made by Fry Consulting.

102    Fry Consulting also relied on a number of post-lodgement uses of the Fry trade mark.

103    As Sports Warehouse submitted, evidence of use as a trade mark after the lodgement is, in this context, relevant only to whether it possessed the capability to distinguish at the priority date.

104    Mr Fry acknowledged that only in March 2009 did Fry Consulting start to use the trade mark without the words/tagline “Your online tennis shop!”. Mr Fry stated that Fry Consulting dropped the tagline in March 2009 in order to accord with a new style guide. He agreed that, prior to that date, in so far as there was consistent use of the logo and the words “TENNIS WAREHOUSE AUSTRALIA”, it was predominantly together with the tagline “Your online tennis shop!” printed in the same colour as the ball.

105    Sports Warehouse disputed, on various bases, the validity and reliability of many of the alleged uses of the Fry trade mark. Its overriding contention, however, was that the tagline, when present, was an integral element of the trade mark, and, as the delegate found, its addition substantially affected the identity of the Fry trade mark, so that the use prior to 2009 was not use of the Fry trade mark, which lacks the tagline. Conversely, if the tagline were viewed as an independent trade mark, consistently with Kenny J’s holding in Sports Warehouse v Fry on the use of “TENNIS WAREHOUSE” with the TW device, the use of the tagline in conjunction with the Fry trade mark significantly diluted use of the latter as a trade mark.

106    Fry Consulting submitted that the inclusion of the tagline was distinguishable from the use of the “TW” device with the TENNIS WAREHOUSE mark, as the former device apparently had independent trade mark significance, while the tagline in this case was mere puffery or comparable to the inclusion of an address or contact details, and a peripheral or merely subsidiary booster with no independent trade mark significance.

107    Fry Consulting submitted that, as such, the Fry trade mark without the tagline was, in accordance with the principles articulated in Shell Company of Australia Ltd v Esso Standard Oil (Australia) Ltd (1963) 109 CLR 407, substantially identical to the Fry trade mark together with the tagline, and the latter would infringe the former.

108    In my opinion, however, the tagline constituted a prominent and consistently located feature in the overall combination of elements used prior to March 2009.

109    Its identifying function appears more significant than mere contact details. Unlike the addition of a device depicting a “Barefoot” in E&J Gallo Winery v Lion Nathan Australia Pty Ltd (2010) 241 CLR 144 (“E&J Gallo”), the tagline did not merely restate or echo in varied form another element with which it had a common identity. Rather, it added material information concerning the online tennis shop.

110    In Colorado Group Ltd v Strandbags Group Pty Ltd (2007) 164 FCR 506, the Full Federal Court concluded that where the word “Colorado”, although with an important or even dominant effect, was always used with a device, the device was part of the trade mark use and had a capacity to distinguish. The device was neither a separate mark nor a mere descriptor but operated as part of a combination with the word “Colorado” in part reinforcing it. Allsop J (with whom Kenny and Gyles JJ agreed in separate judgments) concluded at [110] that “though the word “Colorado” is important in the impression, it cannot be said to have been used alone, rather than as part of a composite mark (with the device) to show origin.”

111    In E&J Gallo, the word “Barefoot” was originally used alone as a mark but subsequently used with the image of a bare foot. The High Court plurality (French CJ, Gummow, Crennan and Bell JJ) held (at [69]) that the use of the mark with the bare foot device constituted use of the registered trade mark, because the device was an illustration of the word “Barefoot”. Their Honours stated that the monopoly given by the registration of the word BAREFOOT alone was “wide enough to include the word together with a device which does not substantially affect the identity of the trade mark in the word alone”.

112    In this case, where significant elements in the combination mark are also highly descriptive, the descriptive nature of the tagline does not deprive it of importance. The addition of the tagline therefore, in my view, as the delegate found, would substantially affect the identity of the trade mark in this case, which achieves distinctiveness by its overall combination of individual elements, some of which clearly lack much distinctiveness in themselves. While, as Fry Consulting submitted, Diamond T did not address the relevance of additional features to a distinctive combination of non-distinctive elements, consistently with its reasoning, the addition or subtraction of a prominent element to or from a mark which is capable of distinguishing only as a combination is likely to affect the identity of the mark.

113    Whether the tagline is an element of a combination trade mark denoting origin or an independent trade mark, on either analysis its consistent use with the Fry trade mark prior to March 2009 substantially diluted the trade mark significance of the latter.

114    Given that the use prior to March 2009 (and hence prior to the priority date) was almost exclusively accompanied by the tagline, Fry Consulting could not have, on the basis of such use, discharged its onus under s 41(5), had that been necessary. Nor, in my opinion, would Sports Warehouse’s failure to issue proceedings against Fry Consulting for passing off or contravention of the Trade Practices Act 1974 (Cth), or Mr Fry’s belief that no other trader was currently using a tennis ball device in conjunction with TENNIS WAREHOUSE or TENNIS WAREHOUSE AUSTRALIA, constitute “other circumstances” within the meaning of s 41(5)(a)(iii) which would, by a combined effect, establish that the Fry trade mark did or would distinguish the designated services as being those of Fry Consulting.

115    If, contrary to the above, use with the tagline was use of the Fry trade mark, the evidence did not establish extensive use.

116    In his statutory declarations of 21 March 2007 and 20 March 2008, and his affidavit of 11 February 2011, Mr Fry deposed to pre-lodgement use of the Fry trade mark (up to 22 December 2006) as follows: in newspaper, magazine and calendar advertisements, including in the Tennis Victoria Pennant Competition 2006 Pennant Guide, Australian Tennis, The Age and the NSW tennis calendar; on a poster which Fry Consulting commenced distributing in February 2007; on invoices and business cards; on the Fry Consulting website banner; on t-shirts worn by sponsored players at the Shepparton Lawn Tennis Tournament; in advertising spend; and in the signs displaying the Fry trade mark on Fry Consulting’s physical premises in Fitzroy.

117    While Sports Warehouse argued that the invoices were post-sale and therefore not evidence of use “in the course of trade”, as required by s 17 of the Act, I accept that, as Mr Fry testified, in contrast to Kenny J’s finding in Sports Warehouse v Fry (at [170]), in the present case, the transactions occurred in Australia, and for warehouse purchases, invoices bearing the Fry trade mark were sometimes provided to customers before payment was made, which would constitute use in the course of trade.

118    Fry Consulting conceded, however, that the t-shirts did not display the full Fry trade mark and that its advertising expenditure was “not extensive”. Further, as Sports Warehouse contended, Fry Consulting did not lead evidence of the number of posters distributed or the circulation numbers of the NSW tennis calendar.

119    Ultimately, I was not persuaded that, had it been necessary to rely on s 41(5)(a)(ii) of the Act, the use of the Fry trade mark (with the tagline) would have sufficed

Contention 2

The Delegate ought to have found that the Respondent’s TENNIS WAREHOUSE trade mark had, before 22 December 2006, acquired a reputation in Australia and because of that reputation, the use of the trade mark, the subject of Trade Mark Application No. 1153714 would be likely to deceive or cause confusion, such that the TENNIS WAREHOUSE AUSTRALIA & Device Application should have been refused by reason of section 60 of the Trade Marks Act 1995 (Cth).

Likelihood of deception and confusion under s 60 of the Act

120    Sports Warehouse bore the onus of establishing this ground of contention. Fry Consulting submitted that to establish this ground, it was necessary to show that:

(a)    there was "another trade mark"

(b)    which had acquired a reputation in Australia

(c)    amongst a significant section of the public

(d)    such that use of the opposed mark… would be likely to deceive or cause confusion.

121    While Sports Warehouse formally disputed that a reputation amongst “a significant section of the public” is required, as it conceded, the Full Court’s decision in Renaud Cointreau v Cordon Bleu International (2001) 193 ALR 657 to that effect is binding on this court. Although the Sports Warehouse mark is not registered, registration is not necessary, as s 60 requires only a mark that has acquired a reputation in Australia amongst a significant section of the public, such that use of the Fry trade mark would be likely to deceive or cause confusion. In Sports Warehouse v Fry, Kenny J found that Sports Warehouse’s use of the words TENNIS WAREHOUSE was frequently in combination with the device “TW” on the webpage, invoices and merchandising. Her Honour found that such usage (whether it was of a composite mark or of two separate marks in combination) deprived the words “TENNIS WAREHOUSE” of their significance as a trade mark on the webpage. The trade mark significance attaching to the words used by themselves on the webpage and in emails, article promotions and business invoices prior to August 2005 was therefore substantially diluted.

122    Kenny J also found that certain other uses of the TENNIS WAREHOUSE trade mark were not uses in the course of the trade for the purpose of showing trade mark use, as required by s 17 of the Act. In particular, her Honour found that:

1    There was no great or clear evidence of internet sales to Australia or expenditure on advertising to Australian customers before August 2005, and evidence of website visits both before and after that date, being difficult to put in perspective, was of limited value in the context of s 41(5).

2    The use of “Tennis Warehouse” as a domain name was trade mark usage where it led customers to the website, but was not sufficient, overall, to establish the capacity to acquire distinctiveness under s 41(5).

3    The evidence of trade and consumer witnesses of the usage of the “TENNIS WAREHOUSE” mark in Australia prior to August 2005 was relatively slight, and not to be accorded much weight.

4    While there was possibly some use of the words “TENNIS WAREHOUSE” on their own from 2003 onwards, there was no clear evidence of use without the “TW” logo on the website. Further, alleged third party Internet uses did not greatly support the proposition that the words were being used as a trade mark in their own right. The use on invoices and packaging was not a use in the course of trade under s 17 of the Act.

5    The Sports Warehouse trade mark had relatively low distinctiveness and the evidence of use in Australia from 2003 was unclear, so evidence of the volume of traffic between Australian customers or Internet users and the Tennis Warehouse website could not meet the deficiencies in Sports Warehouse’s case for the purpose of showing capacity to distinguish arising from use of the trade mark.

123    Given Kenny J’s findings, Sports Warehouse cannot establish that it had, as at 18 August 2005, acquired a reputation in the TENNIS WAREHOUSE mark in Australia amongst a significant section of the public, as required by s 60 of the Act.

124    Kenny J’s findings nevertheless left open the possibility that evidence of Sports Warehouse’s usage of its mark between 18 August 2005 and 22 December 2006 (a period of approximately 16 months) could establish its reputation in the relevant sense.

125    In my opinion, however, the evidence (most relevantly that of Messrs Bramble and Sczbecki) did not establish use of the TENNIS WAREHOUSE mark on its own between the relevant dates.

126    In his affidavit sworn on 4 May 2011, Matt Bramble deposed to the number of issues of Tennis magazine containing TENNIS WAREHOUSE advertisements, which were sent to customers with an Australian address from 2002 to 2006. It was not, however, evident whether the advertisements used the TENNIS WAREHOUSE mark on its own or in combination with the “TW” device in a circle. In cross-examination, Mr Bramble confirmed that in preparing the affidavit, he relied on a “Kantar Media Report” database, which listed the magazine issues in which a particular advertiser had paid for advertisements. He had not “physically laid eyeballs” on the advertisements, and therefore could not say what the advertisements looked like. He knew only that the advertisements were placed and paid for by Tennis Warehouse.

127    Mark Sczbecki, by his affidavit sworn on 16 October 2008, set out the approximate annual number of “page impressions” for the tennis warehouse website (www.tennis-warehouse.com) between 2004 and 30 September 2008. Mr Sczbecki did not refer to the use of the TENNIS WAREHOUSE mark.

128    Mr Sczbecki, by his affidavit sworn on 3 May 2011, referred to the Tennis Warehouse website (www.tennis-warehouse.com or www.tenniswarehouse.com) and its banner, which consists of the words “TENNIS WAREHOUSE” beside the letters “TW” in an oval. Mr Sczbecki exhibited screen shots of sample homepages of the tennis warehouse website as they appeared between 1998 and 2009. The only exhibited screen shot dating from the period between August 2005 and December 2006 showed the banner with the letters “TW” in an oval, rather than TENNIS WAREHOUSE by itself. Mr Sczbecki also exhibited advertisements which appeared in Tennis magazine. During the period from August 2005 to December 2006, each of the advertisements used the letters “TW” in an oval above or beside the words TENNIS WAREHOUSE. Mr Sczbecki’s oral evidence did not further explain the use of the TENNIS WAREHOUSE mark during the relevant period.

129    The evidence of later usage did not demonstrate a material increase of the mark TENNIS WAREHOUSE on its own and I was not satisfied that it acquired a reputation amongst a significant section of the Australian public in the intervening period. In my opinion, on the evidence, the usage remained essentially unchanged and Mr Szcbecki’s evidence as to sales, advertising and Internet usage reaching Australia after 18 August 2005 did not establish that, as at 22 December 2006, Sports Warehouse had acquired the relevant level of reputation in the TENNIS WAREHOUSE trade mark required for s 60.

130    At trial, Sports Warehouse sought to amend its amended notice of contention to rely, for the purposes of its argument under s 60, on its reputation in the unregistered composite mark of “TENNIS WAREHOUSE”, as opposed to the TENNIS WAREHOUSE trade mark. Kenny J made no finding about the trade mark significance attached to the composite mark, which Sports Warehouse started to use in 2003. For the reasons stated in Fry Consulting Pty Ltd v Sports Warehouse Inc (No 1) [2011] FCA 1417, I refused Sports Warehouse’s application to amend.

131    Since 1995, Sports Warehouse had used the name “Tennis Warehouse” in Australia and did not change its domain name for its online store. Sports Warehouse, for the first time in closing submissions, (while conceding that reputation in the context of s 60 was that of the mark rather than reputation on some other basis), contended that as a significant number of Australian residents visited the Tennis Warehouse website at the domain names “www.tennis-warehouse.com” or “www.tenniswarehouse.com”, by inference they came to know Sports Warehouse by that word, which did not include a TW device. While acknowledging that, once at the website, the customer would encounter the TW device with the TENNIS WAREHOUSE trade mark, counsel for Sports Warehouse submitted that the court could infer, in such circumstances, a “capacity for confusion” at which s 60 was essentially directed.

132    While it has been held that a domain name can in some circumstances constitute use of a trade mark (see Sports Warehouse v Fry at [146]-[156]), there was no evidence before the court to establish that, as at December 2006, the TENNIS WAREHOUSE mark had acquired a reputation through use of the domain names amongst any consumers or any significant section of the public.

133    In all the circumstances, Sports Warehouse did not establish that the Fry trade mark is likely to deceive or cause confusion under s 60.

Contention 3

The Delegate ought to have found that the TENNIS WAREHOUSE AUSTRALIA & Device Application was made in bad faith, such that it should have been refused by reason of section 62A of the Trade Marks Act 1995 (Cth).

134    Sports Warehouse contended that Fry Consulting’s application to register the Fry trade mark was made in bad faith in circumstances where, as the evidence established, and Kenny J found at [62]:

By September 2004, Mr Fry, a director of Fry Consulting, was well aware of Sports Warehouse’s online retail store and the fact that Sports Warehouse sold goods to Australia through that website. His visits to that online retail store led him to cause Fry Consulting, in September 2004, to register the business name “Tennis Warehouse”; to register the domain name www.tenniswarehouse.com.au; and to set up an online tennis retail store at that domain name in competition with Sports Warehouse. Mr Fry adopted the name knowing that it would cause confusion between Fry Consulting’s and Sports Warehouse’s online stores. Indeed, the potential for such confusion was why he chose the name. Furthermore, in developing the Fry Consulting website, Mr Fry took images from the Sports Warehouse website.

135    In an email exchange between Mr Hightower of Sports Warehouse and Mr Fry in late December 2004, Sports Warehouse complained about Fry Consulting’s use of the name “Tennis Warehouse”. Kenny J found (at [67]) that:

the email correspondence from Mr Hightower led Mr Fry to change the name on Fry Consulting’s website from “Tennis Warehouse” to “Tennis Warehouse Australia”. Apart from the email correspondence, there was no reason put forward by Mr Fry that would explain the change so soon after the registration and initial use of the original name, “Tennis Warehouse”. The change that occurred was precisely that foreshadowed in Mr Fry’s response to Mr Hightower. Furthermore, despite the change in the name at its website, Fry Consulting did not apply to change its name on the Victorian business register. Nor did it apply to register the name “Tennis Warehouse Australia”. As already noted, there was no change in its domain name.”

136    Her Honour specifically rejected Mr Fry’s assertion that he changed the name to “Tennis Warehouse Australia” to “explain to customers that we were focussed on Australia only”, and was critical of Mr Fry’s credibility, generally (at [67]).

137    Kenny J also found at [63]:

In late December 2004, however, Fry Consulting changed the name on its website from “Tennis Warehouse” to “Tennis Warehouse Australia”, although its domain name remained the same. The occasion for the change in name so soon after the registration and first use by Fry Consulting of “Tennis Warehouse” was the email correspondence in December 2004 between Mr Fry and Mr Hightower, President of Sports Warehouse.

138    Kenny J concluded that for the purpose of considering whether other traders might legitimately wish to use the TENNIS WAREHOUSE trade mark, she would not have regard to Fry Consulting’s use of its composite mark. Her Honour stated at [104] and [105]:

For present purposes, I have not had regard to the respondent’s use of its composite mark. The conduct of Fry Consulting and of its sole director, Mr Fry, was not that of a trader “actuated only by proper motives” in the sense intended by Kitto J in Clark Equipment: see [76] above. The evidence to which I have already referred showed that Mr Fry, as sole director of Fry Consulting, originally chose the name “TENNIS WAREHOUSE” after visiting the tennis warehouse website to assess the rival business of Tennis Warehouse. Further, when Mr Fry chose the name for his own new business he was aware that, through the tennis warehouse website, the proprietor of the tennis warehouse business (Sports Warehouse) not only had the capacity to sell tennis goods from that website to customers in Australia, but had in fact done so. The effect of Mr Fry’s evidence was that he adopted the name after forming the opinion that it would benefit his business to do so because potential customers would be confused by the identicalness of the names into believing that there was some association between his business and that of Sports Warehouse. Mr Fry admitted to taking images from the tennis warehouse website. When Mr Fry caused Fry Consulting to change the name on its website from “Tennis Warehouse” to “Tennis Warehouse Australia” in late December 2004, he did so because of the email correspondence from Mr Hightower, President of Sports Warehouse, but it is not suggested that his essential motive in adapting the “Tennis Warehouse” name to his own business as “Tennis Warehouse Australia” had altered.

I accept that, strictly speaking, on the appeal, the respondent’s conduct is not under examination. I also accept that the overarching inquiry is essentially hypothetical: at [76] above. Because of the matters to which I have just referred, however, Fry Consulting’s use of the marks “Tennis Warehouse” or “Tennis Warehouse Australia” cannot be relied on by it as an instance in which another trader actuated only by proper motives (in the relevant sense) has wanted to use the trade mark in suit or one closely resembling it.

139    Sports Warehouse submitted that an application could be in bad faith if, as in this case, the applicant knew or intended that the use of the mark would cause confusion, or was aware that an overseas company which owned the mark was already operating or intending to operate in Australia.

140    Sports Warehouse submitted:

As is clear from the above, it does not matter that the trade mark applicant in fact intends to use the marks in question nor whether the applicant has subsequently attempted to change the mark so as to distinguish it from the originating name. That is precisely the case here. Mr Fry chose the “Tennis Warehouse” name (which Fry Consulting still uses as a domain name and which is still registered as a business name) for the express purpose of causing confusion between Fry Consulting’s and Sports Warehouse’s websites. He was entirely aware of the significant use of that name by Sports Warehouse internationally and became aware of the website from word of mouth – thus highlighting the importance of the name. He would have known that, in the context of internet use, the key words in any internet search by a person who was aware of Sports Warehouse’s website would be the terms “Tennis” and “Warehouse” and he sought to benefit from that. His purported attempt to change the name in order to distance Fry Consulting from Sports Warehouse website by adding the word “Australia” and a tennis ball device was clearly unlikely to be effective in the internet context (or, indeed, the physical world) and was unlikely to have been done for that purpose. In any event, the core element of the name “Tennis Warehouse” remained in the Opposed mark. Finally, Mr Fry raised the possibility in correspondence with Mr Hightower of a business relationship, saying:

On a positive note, once we have sorted this issue out, perhaps we can enjoy a business relationship? Would you be interested in supplying me with tennis equipment? I’m not sure if you offer wholesale prices, but if so, I would be very interested in buying from you. We could use the synergies in our names to our advantage (or even if I end up changing the name). I would promote my web site in Australia, buying my products from you, which could effectively increase your sales to Australia.

141    Fry Consulting submitted that Kenny J’s findings and related observations in Sports Warehouse v Fry were not determinative of the allegations under s 62A of the Act in this proceeding, as they were directed only at whether Sports Warehouse’s mark “TENNIS WAREHOUSE” had inherent distinctiveness under s 41(3) of the Act. Fry Consulting submitted that although her Honour found at [105] that Fry Consulting’s use of the mark “TENNIS WAREHOUSE” or “TENNIS WAREHOUSE AUSTRALIA” did not constitute an example of another trader actuated by only proper motives to use the trade mark in suit or one closely resembling it, that was not relevant to whether Fry Consulting applied to register the Fry trade mark in bad faith, as at 22 December 2006. As I construe her Honour’s observations, however, they were not limited to TENNIS WAREHOUSE or TENNIS WAREHOUSE AUSTRALIA but extended to the Fry trade mark which her Honour described as “the composite mark”.

142    Fry Consulting also contended that any bad faith on Fry Consulting’s part in adopting the words “TENNIS WAREHOUSE” in September 2004 had dissipated by December 2006.

Application made in bad faith

143    Section 62A was introduced into the Act in 2006. It applies to the present application, which was accepted after its date of commencement on 23 October 2006.

144    The Explanatory Memorandum stated:

Section 62A

1.    The Act allows removal of a trade mark on the basis that there was no intention in good faith to use, authorise use of, or assign the trade mark. However, current opposition grounds do not cover instances in which a person has deliberately set out to gain registration of a trade mark, or adopted a trade mark in bad faith. There have been several instances in which trade mark applicants have deliberately set out to gain registration of their trade marks, or have adopted trade marks, in bad faith. Some examples of these include:

    a person who monitors new property developments; registers the name of the new property development as a trade mark for a number of services; and then threatens the property developer with trade mark infringement unless they licence or buy the trade mark;

    a pattern of registering trade marks that are deliberate misspellings of other registered trade marks; and

    business people who identify a trade mark overseas which has no market penetration in Australia, and then register that trade mark with no intention to use it in the Australian market and for the express purpose of selling the mark to the overseas owner.

When such situations occur, there is very little third parties can do to prevent registration of this type of trade mark, because existing grounds for rejection and opposition do not allow the Registrar to take these facts into account.

145    It is clear that bad faith for the purposes of s 62A must be at the time of the application in this case (22 December 2006) and must relate to the making of the subject of that application, which in this case is the composite word and device mark, rather than the mark TENNIS WAREHOUSE or TENNIS WAREHOUSE AUSTRALIA. Further, the onus of proving bad faith rests on the opponent. While the seriousness of an allegation of bad faith that “impugns the character of an individual or collective character of a business…” requires correspondingly cogent evidence (statement of the Hearing Officer in Maslyukov v Diageo Distilling Ltd [2010] EWHC 443 (“Maslyukov”), quoted with approval by Arnold J at [36] and [37]), the standard of proof is the balance of probabilities, rather than that of beyond reasonable doubt.

146    Several United Kingdom decisions on s 3(6) of the Trade Marks Act 1994 (UK) provide useful guidance on bad faith in the context of s 62A of the Act and have been applied in decisions of the Australian Trade Marks office. Section 3(6) of the Trade Marks Act 1994 (UK) is worded similarly to s 62A of the Act. It states that a trade mark shall not be registered if or to the extent that the application is made in bad faith.

147    In Harrison’s Trade Mark Application [2005] FSR 10 (the leading United Kingdom decision) (“Harrison”), Sir William Aldous (with whom Arden and Pill L.JJ agreed) dismissed an appeal from a refusal to register the trade mark “CHINAWHITE” on the ground that the application was made in bad faith under s 3(6) of the UK legislation. The Hearing Officer (whose decision was upheld in the first instance) found that the appellant had refrained from questioning a prospective business partner about his proprietorship of the word, although knowing that he had developed a house cocktail called “CHINAWHITE” while employed at the opponent’s nightclub of the same name. The Hearing Officer concluded that, in all the circumstances, the appellant’s conduct “fell short of the standards of acceptable commercial behaviour observed by reasonable and experienced men in the particular area”. Sir William Aldous rejected the appellant’s contentions that bad faith required dishonesty (at [20]) and that an applicant’s subjective state of mind was the sole consideration (at [24]). His Lordship stated that “bad faith” in this context was a “combined test” that involved both subjective and objective elements. His Lordship referred to the leading speech of Lord Hutton in Twinsectra Ltd v Yardley [2002] UKHL 12 at [27] and [36], a case involving dishonesty on the part of a solicitor, and stated at [24]-[26]:

24.    Clearly the court, when considering bad faith, cannot apply a purely subjective test, called by Lord Hutton “the Robin Hood test”. The dishonest person or one with low standards cannot be permitted to obtain trade mark registrations in circumstances where a person abiding by a reasonable standard would not. The registration of a trade mark is designed to enable bona fide proprietors to protect their proprietary rights without having to prove unfair trading. Registration is not provided to help those with low moral standards.

25.    Lord Hutton went on to conclude that the true test for dishonesty was the combined test. He said:

36. ... Therefore I consider ... that your Lordships should state that dishonesty requires knowledge by the defendant that what he was doing would be regarded as dishonest by honest people, although he should not escape a finding of dishonesty because he sets his own standards of honesty and does not regard as dishonest what he knows would offend the normally accepted standards of honest conduct.

26.    For my part, l would accept the reasoning of Lord Hutton as applying to considerations of bad faith. The words “bad faith” suggest a mental state. Clearly when considering the question of whether an application to register is made in bad faith all the circumstances will be relevant. However the court must decide whether the knowledge of the applicant was such that his decision to apply for registration would be regarded as in bad faith by persons adopting proper standards.

148    That “combined” test has been applied in English decisions such as Maslyukov, in particular at [36]-[37], and in Australian Trade Marks office decisions.

149    In Maslyukov, Arnold J upheld the refusal of a Hearing Officer to register, as trade marks in respect of alcoholic beverages, the names of a number of Scottish distilleries that were no longer functioning. Arnold J accepted as accurate the Hearing Officer’s summary of the law at [117] of his decision as follows:

Bad faith includes dishonesty and ‘some dealings which fall short of the standards of acceptable commercial behaviour observed by reasonable and experienced men in the particular field being examined’. Certain behaviour might have become prevalent but this does not mean that it can be deemed to be acceptable. It is necessary to apply what is referred to as the ‘combined test’. This requires me to decide what Mr Maslyukov knew at the time of making the application and then, in the light of that knowledge, whether his behaviour fell short of acceptable commercial behaviour. Bad faith impugns the character of an individual or collective character of a business, as such it is a serious allegation. The more serious the allegation the more cogent must be the evidence to support it. However, the matter still has to be decided upon the balance of probabilities. The issue has to be considered as at the date of application for registration. An act of bad faith cannot be cured by an action after the date of application.

150    Arnold J found that Mr Maslyukov knew that the trade marks were the signs of non-functioning distilleries with which he had no relationship and gave no persuasive reason for his choice, which could only be to use the names as a springboard for his proposed business in the hope that the products would be identified with the distilleries and take on board their reputation. Arnold J stated at [123]:

In my view Mr Maslyukov is using the trade mark applications to appropriate the reputation of the distilleries; something very useful to a new business which has no history in the trade, especially when tradition and heritage are key parts of the trade. Taking into account the knowledge of Mr Maslyukov, the reputations of the distilleries, the traditions of the trade, the absence of any link of Mr Maslyukov with the distilleries I have no doubt that reasonable and experienced men in the Scotch whisky trade would consider that filing the applications falls short of the standards of acceptable commercial behaviour…

151    In William Leith New Century Marquees (SRISO/018/00, UK Registry), the applicant applied to register a trade mark in respect of marquees, tents and related goods, although aware that NEW CENTURY was the opponent’s trade mark in the United States of America and that the opponent had started to trade in the United Kingdom under the trade mark. He was himself a customer and the delegate found that he should have been aware that the opponent could be expected to expand that trade, if it had not already done so. He had previously proposed a licence arrangement with the opponent although its terms were not clear. The delegate of the Registrar concluded:

Mr Leith subsequently adopted the sign NEW CENTURY MARQUEES as his own trade mark, and he used it in the UK. When he was challenged about this he sought to register the mark in combination with his own name. In my view, the mark he has applied to register is confusingly similar with the mark NEW CENTURY.

…

It is difficult to see how a person who applies to register a mark in his own name which he has previously recognised as the property of a potential overseas principal can be said to be acting in accordance with acceptable standards of commercial behaviour. I do not believe that combining the mark with the applicant’s own name is any answer to that criticism.

152    In Wilkshire v Bombala Council (2009) 82 IPR 325, the applicant, following prolonged competition and conflict between the parties, undertook in terms of settlement not to threaten the opponent or its licensee with any action over the opponent’s mark, but subsequently applied to register a series of marks nearly identical to that of the opponent. Hearing Officer McDonagh concluded that its conduct amounted to bad faith within the meaning of s 62A, as “the circumstances were such that a ‘reasonable person’ standing in the applicant’s shoes would have been aware that he/she ought not to apply for trade mark registration”.

153    In Hard Coffee Pty Ltd v Hard Coffee Main Beach Pty Ltd [2009] ATMO 26, Hearing Officer Nancarrow held that applications to register the trade marks HARD COFFEE MAIN BEACH and HARD COFFEE were made in bad faith within the meaning of s 62A, where a company controlled by the applicant’s controller had previously obtained a licence from the opponent’s predecessor in title to use the HARD COFFEE MAIN BEACH trade mark, acknowledging in that context that it had not purchased any right, title or interest in the names and that the vendor retained title to all related intellectual property rights. The Hearing Officer considered that in the circumstances, the director clearly understood that the trade mark in question remained the property of the opponent in respect of coffee shops.

154    While Sir William Aldous in Harrison expressly rejected the view that dishonesty was necessary to establish bad faith under the English legislation, Hearing Officer Nancarrow observed that while the Act provided no guidance as to the meaning of bad faith, “it would appear that there would need to be an element of intentional dishonesty or a deliberate attempt to mislead the Registrar in some way in the claim made by means of the application” (at [11]). Consistently with the English decisions, however, the Hearing Officer noted that subjective naivety would not exclude bad faith if a reasonable man in the applicant’s shoes should have been aware that he ought not to apply for trade mark registration (at [11]).

155    The Hearing Officer stated:

The onus of demonstrating ‘bad faith’ falls squarely on the party making such an allegation with the need for evidence able to fulfil the degree of proof required to satisfy the civil standard of ‘balance of probabilities’. That said, the allegation of ‘bad faith’ is a very serious one and a finding of bad faith should not be taken lightly. I note comments from a variety of jurisdictions in support of both propositions.

156    In Pritchard Pacific Pty Ltd Baltimore Aircoil (Australia) Pty Ltd v Brendan McCarrison and Breezewater Pty Ltd [2011] ATMO 46, the delegate upheld opposition to the registration of a trade mark for, inter alia, cooling towers and like apparatus and related services, on grounds including bad faith under s 62A of the Act. The delegate found that the applicant’s controller had a prior business connection with and knowledge of the opponent, such that a person standing in his shoes should have known that he should not apply for the registration of a trade mark deceptively similar to that used by his former business partner (at [42]).

157    The delegate found that the controller, following cessation of the common entity’s trading activities, used the opponent’s logo on the company’s letterhead, and made misleading assertions which it did not clarify.

158    The applicant had also repeatedly acknowledged that the opponent or its predecessors in title were authorised to use the relevant trade mark and thus acknowledged its belief that it did not have such rights. The delegate therefore concluded that the applicant “should have known that applying for the registration of a deceptively similar trade mark would not be in good faith without the authorisation” of those entities, and a reasonable person in the applicant’s shoes would have been aware that he should not have applied (at [53]). The application was therefore, on the balance of probabilities, not made in good faith.

159    Australian judicial discussion of s 62A has so far been sparse and mostly limited to applications made in the knowledge that the mark was the property of another.

160    In Wang v Anying Group Pty Ltd [2009] FCA 1500 at [62], Finn J refused relief to a party who applied for and procured the registration of a trade mark in breach of duty to another party whom he well knew to be the owner of the mark.

161    In Wilkshire v Registrar of Trade Marks (2009) 83 IPR 71 at [19], Finn J merely noted, without substantive discussion of s 62A, that the delegate refused to register the mark pursuant to s 62A of the Act where the applicant had applied for registration, despite previously recognising it to be “the property of another with which he had had a course of dealing”. (See also Wilkshire v Registrar of Trade Marks (No 2) [2009] FCA 1505 at [7] per Finn J).

162    In Wang v Anying Group Pty Ltd [2011] FCA 1196 at [95] and [98], Foster J found that a party claimed to be the owner of the trade mark knowing the claim to be false. While his Honour ordered rectification of the Register by cancelling the mark pursuant to s 62A and 89(2)(a) of the Act, he did not discuss s 62A further.

163    The examples of bad faith applications in the Explanatory Memorandum are predominantly, but not exclusively, manifestations of blocking or holding to ransom the party which is, at least in conscience, entitled to a mark, but the illustrations in the Explanatory Memorandum are merely inclusive and do not limit the breadth of the concept of bad faith.

164    Bad faith, in the context of s 62A, does not, in my opinion, require, although it includes, dishonesty or fraud. It is a wider notion, potentially applicable to diverse species of conduct.

165    The formulation in United Kingdom authority of bad faith as falling short of the standards of acceptable commercial behaviour observed by reasonable and experienced persons in a particular area is, in my view, an apt touchstone. An overly literal application may, however, tend to negate the relevance attributed to the applicant’s mental state in the combined test preferred in Harrison.

166    Further, in my view, mere negligence, incompetence or a lack of prudence to reasonable and experienced standards would not, in themselves, suffice, as the concept of bad faith imports conduct which, irrespective of the form it takes, is of an unscrupulous, underhand or unconscientious character.

167    The proposition advanced by Sports Warehouse, that mere awareness that an overseas company owning the mark is already operating or intending to operate in Australia would amount to bad faith, is unduly absolute. The question is whether, in all the particular circumstances, the applicant’s knowledge was such that his decision to apply for registration at the relevant date would be regarded as in bad faith by persons adopting proper standards. No decided case is precisely on all fours with the present case. Aspects of Fry Consulting’s conduct have, however, been recognised in various decided cases as important elements in a finding of bad faith. Mr Fry, as Kenny J found, and his further testimony in the present appeal confirmed, immediately prior to September 2004, chose the name TENNIS WAREHOUSE after visiting the Sports Warehouse website. He adopted that name although aware that Sports Warehouse sold goods online to Australia, and, while aware that there could be some confusion as to the domain names, chose the name partly for that reason. Mr Fry nevertheless denied that he thought that confusion would persist once consumers arrived at the websites. He also denied that he thought that consumers would believe that his business was affiliated with Sports Warehouse or would identify his products with those of Sports Warehouse.

168    Although Mr Fry raised the possibility of a licence agreement in his email to Mr Hightower, he did not learn of the “TENNIS WAREHOUSE” mark through a licence agreement or a prior relationship which imposed obligations of a fiduciary or quasi-fiduciary character. Nor did he acknowledge, in his correspondence with Mr Hightower, Sports Warehouse’s exclusive entitlement to or property in “TENNIS WAREHOUSE”.

169    Nevertheless, in September 2004, Mr Fry adopted a name used by an overseas entity knowing that it operated overseas and had made sales to Australia, intending to exploit it to his commercial advantage for his enterprise, and aware that consumers could potentially be confused at least in relation to the domain names. Mr Fry also took some photographs from the Sports Warehouse website.

170    While Mr Fry claimed that he conducted some searches before adopting the words (and it was subsequently held that Sports Warehouse could not register the “TENNIS WAREHOUSE” mark in Australia), Mr Fry’s conduct was exploitative and designed to acquire a springboard or advantage for his fledgling business. While it is unnecessary to decide the question, given his knowledge as at September 2004, an attempt to register the words “TENNIS WAREHOUSE” at that time may well have been regarded as in bad faith according to proper or ordinary commercial standards.

171    Subsequent modifications to a mark or name appropriated in such circumstances would not necessarily negate improper motivation. Kenny J thus held that the use of the Fry trade mark, although it included the subsequently added tennis ball device, did not evidence use “actuated only by proper motives”.

172    The issue for determination by Kenny J nevertheless related to use “actuated only by proper motives” rather than bad faith in applying for registration. Although closely related to the present question, the issue before Kenny J was distinct, and, as her Honour recognised, to some extent hypothetical.

173    In my opinion, the circumstances which significantly distinguish this case from those in which bad faith was found lie in the correspondence between Messrs Hightower and Fry in late December 2004 and its aftermath. In the correspondence, Mr Fry expressed a willingness to cease using the “TENNIS WAREHOUSE” mark and stated a preference to do so sooner rather than later if Sports Warehouse established its entitlements. In essence, he challenged Sports Warehouse’s claims but undertook to desist forthwith if proof were provided. The following day Mr Hightower indicated that Sports Warehouse would provide documentation “in the New Year”. That email was followed by Sports Warehouse’s lengthy silence and inactivity.

174    In circumstances where:

(a)    Mr Fry unequivocally indicated his willingness to cease using TENNIS WAREHOUSE if Sports Warehouse provided evidence of its entitlement, and sought a prompt response, so that if necessary he could change the name prior to significant business development and expenditure on advertising;

(b)    Mr Fry did not acknowledge Sports Warehouse’s ownership or rights in Australia and Kenny J did not find that Mr Fry did not believe his assertions about the implications of a business name search, although they were misconceived;

(c)    Sports Warehouse, despite undertaking to do so, did not provide any documentation or evidence of its entitlement or rights to the “TENNIS WAREHOUSE” mark, the subsequent application to register which in Australia was unsuccessful. It failed to make any further contact or objection until Fry Consulting again initiated contact two years later; and

(d)    During that period, in the absence of any further objection or contact from Sports Warehouse, Mr Fry proceeded to develop his business using the words “TENNIS WAREHOUSE”, to which he added the word “AUSTRALIA”, and subsequently commissioned Mr Hughes to design a tennis ball logo, resulting in a composite mark,

I am not persuaded that Sports Warehouse has discharged the onus of establishing that Fry Consulting, as at December 2006, applied for the composite trade mark in bad faith, in the sense that Mr Fry’s knowledge as at that date was such, in all the circumstances, that persons adopting proper standards would regard the decision to register as in bad faith, or that reasonable and experienced persons in the field would view such conduct as falling short of acceptable commercial behaviour.

cONCLUSION

175    In my opinion, the allegations made by the notice of contention are not established.

Associate:

Dated:    13 February 2012