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Focus: Bad faith in coffee wars

4 June 2009

In brief: IP Australia recently issued its first decision considering the new 'bad faith' ground of opposition which was introduced into the Trade Marks Act 1995 as section 62A in 2006. Partner David Yates and Senior Associate Nicky Shanks look at the guidance that this decision gives on the interpretation and application of this new ground in Australia. 

How does it affect you?

  • This is a new ground of trade mark opposition in Australia and the first case to consider it provides some guidance on its application
  • The ground of opposition provides a basis on which to object to a trade mark application in circumstances where an applicant has sought to obtain statutory rights to a brand by way of dishonest or sharp practice
  • In doing so, the ground of opposition maintains a focus of trade mark law on the property of the trade mark owner, separately from the effect of the use of trade marks on consumers

Background

Hard Coffee Pty Limited (the opponent) opposed applications filed in 2007 by Hard Coffee Main Beach Pty Limited (the applicant) to register the trade marks HARDCOFFEE and HARDCOFFEE MAIN BEACH covering coffee shop services, catering-related services, coffees and other beverages typically offered by coffee shops.1

The opponent's evidence showed that the director and secretary of the applicant (Mr Raymond) had been the director of a company which purchased a coffee shop from the opponent in 2004. The coffee shop was one of a series of HARD COFFEE coffee shops owned and operated by the opponent in Queensland. The terms of the business sale clearly specified that the 'Hard Coffee' and 'Hard Coffee Main Beach' business names and all intellectual property relating to the names were not included in the sale and that the vendor (the opponent) retained all title to these names.

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Requirements of section 62A

Section 62A provides that the registration of a trade mark may be opposed on the ground that the trade mark application was 'made in bad faith'. In assessing what will constitute 'bad faith', the Hearing Officer suggested three scenarios: there will need to be either:

  • an element of intentional dishonesty (presumably in the dealings between the parties);
  • a deliberate attempt, in filing the application, to mislead the Registrar in some way; or
  • where an applicant claims ignorance or naivety in relation to the circumstances in which the application was made, the issue will be whether a 'reasonable man', standing in the shoes of the applicant, should be aware that he ought not to have applied for the trade mark registration.

The Hearing Officer also indicated that 'bad faith' will not always involve the appropriation by an applicant of an opponent's mark and/or reputation, but where the allegation is made on this basis, the respective marks will need to be substantially identical or deceptively similar.

While these three scenarios are helpful guidance, the relevant tribunal considering the s62A ground of opposition will, it is submitted, be guided by the wording of s62A and not by whether conduct falls within the scenarios suggested. To assert that an application has been 'made in bad faith' it seems to us that an opponent might assert that, although the applicant has otherwise satisfied the requirements for a valid trade mark application set out in s27 (requiring a claim by the applicant to be the owner of the mark and an intention by the applicant to either use the mark, authorise another person to use it, or to assign it to a body corporate that is about to be incorporated with a view to its use by that entity), the circumstances in which the applicant did so (potentially including the applicant's conduct) are such that the applicant should not, in good conscience, be entitled to register the trade mark. Such 'circumstances' are not limited by the terms of s62A.

It is important, in our view, to be mindful of the distinction between the evidence which an opponent points to in support of an allegation of intentional dishonesty, and an opponent's claim (perhaps in the alternative) that even if the applicant was not intentionally dishonest, the applicant ought to have known that the application should not have been made and thus the making was in bad faith. In attempting to prove, on the balance of probabilities, intentional dishonesty on the part of the applicant, the opponent might prove a range of facts and ask the relevant tribunal to infer from these knowledge and thus dishonesty on the part of the applicant (in the absence of admissions from the applicant to this effect). However, this is not the same as saying the applicant 'should have known better' having regard to the circumstances. It will be interesting to see how the latter scenario, which reflects the third scenario posited by the Hearing Officer in this case, will be considered in subsequent decisions.

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Decision

The Hearing Officer concluded that the applicant had applied to register the trade marks in 'bad faith'. The Hearing Officer noted that the applications were filed 'in the face of rights that Mr Raymond had previously acknowledged' and that, having signed the business sale agreement, Mr Raymond had a responsibility not to file the applications.

The applicant did not respond to the opponent's evidence and its failure to explain its adoption of the marks appeared to lend support to the Hearing Officer's view, formed on the basis of the opponent's evidence, that the applications were made in bad faith. The fact that the opponent had established rights in the HARD COFFEE mark and that the applicant had filed applications in respect of goods and services with an obvious link to the opponent's business also appeared to be relevant factors in this decision.

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Conclusions

It does not strike us as surprising that the conduct of the applicant was held to constitute 'bad faith' in this case. The Hearing Officer concluded on the balance of probabilities that the applicant, through its director, had acted dishonestly with knowledge of the opponent's rights. Nonetheless, the decision gives helpful guidance on the way in which this new ground of opposition may serve the interests of rights holders, particularly those who feel wronged by the conduct of another party in respect of their brand but who might not have the type of evidence of reputation that would support a finding of likelihood of deception or confusion under s60.

Footnotes
  1. Hard Coffee Pty Limited v Hard Coffee Main Beach Pty Limited. [2009] ATMO 26 (1 April 2009).

Published 4 June 2009

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