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Federal Court of Australia |
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG963 of 1995
)
GENERAL DIVISION )
BETWEEN: MELHERO PTY LIMITED
First applicant
MITCHELL PRODUCTS PTY LIMITED
Second applicant
AND CLUB X PTY LIMITED
First respondent
WALTER DELL PTY LIMITED
Second respondent
ASHWOOD WAY PTY LIMITED
Third respondent
SHAFT THEATRES PTY LIMITED
Fourth respondent
SILKEN HALL PTY LIMITED
Fifth respondent
TEXAS PARK PTY LIMITED
Sixth respondent
AND BETWEEN: WALTER DELL PTY LIMITED
First cross-claimant
ASHWOOD WAY PTY LIMITED
Second cross-claimant
AND MELHERO PTY LIMITED
First cross-respondent
MITCHELL PRODUCTS PTY LIMITED
Second cross-respondent
CORAM: BEAUMONT J.
DATE: 20 JANUARY 1997
CORRIGENDA
Page 93, paragraph 3, line 1, has been amended by deleting the words "misleading or deceptive" and inserting the words "likely to deceive".
TRADE MARKS AND TRADE NAMES - Trade Marks Act 1955 and Trade Marks Act 1995 - infringement, passing off - whether conduct in contravention of s.52 Trade Practices Act 1974 - rectification of the Register.
Nike International Limited v. United Pharmaceutical Industries (Aust.) Pty Limited (1996) 35 IPR 385.
Ritz Hotel Limited v. Charles of the Ritz Limited (1988) 12 IPR 417
Westinghouse Electric Corporation v. Thermopart Pty Limited (1967) 1A
IPR 647
Caterpillar Loading Hire (Holding) Pty Limited v. Caterpillar Tractor Co. [1983] FCA 145; (1983 48 ALR 511
Re Trade Mark "Thunderbird" [1974] HCA 51; (1974) 48 ALJR 456
Southern Cross Refrigeration Co. v. Toowoomba Foundry Pty Limited (1954) 91 CLR 592
Carnival Cruise Lines Inc. [1994] FCA 936; (1994) 120 ALR 495
Top Heavy Pty Limited v. Killin (1996) 34 IPR 282
Canon v. Brook (1996 36 IPR 88
MELHERO PTY LIMITED & ANOR v. CLUB X PTY LIMITED & ORS
No. NG963 of 1995
BEAUMONT J.
SYDNEY
20 JANUARY 1997
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG963 of 1995
)
GENERAL DIVISION )
BETWEEN: MELHERO PTY LIMITED
First applicant
MITCHELL PRODUCTS PTY LIMITED
Second applicant
AND CLUB X PTY LIMITED
First respondent
WALTER DELL PTY LIMITED
Second respondent
ASHWOOD WAY PTY LIMITED
Third respondent
SHAFT THEATRES PTY LIMITED
Fourth respondent
SILKEN HALL PTY LIMITED
Fifth respondent
TEXAS PARK PTY LIMITED
Sixth respondent
AND BETWEEN: WALTER DELL PTY LIMITED
First cross-claimant
ASHWOOD WAY PTY LIMITED
Second cross-claimant
AND MELHERO PTY LIMITED
First cross-respondent
MITCHELL PRODUCTS PTY LIMITED
Second cross-respondent
CORAM: BEAUMONT J.
DATE: 20 JANUARY 1997
MINUTES OF ORDER
THE COURT ORDERS:
1. Direct the applicants to bring in short minutes of orders in accordance with these reasons for judgment.
2. Costs reserved.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG963 of 1995
)
GENERAL DIVISION )
BETWEEN: MELHERO PTY LIMITED
First applicant
MITCHELL PRODUCTS PTY LIMITED
Second applicant
AND CLUB X PTY LIMITED
First respondent
WALTER DELL PTY LIMITED
Second respondent
ASHWOOD WAY PTY LIMITED
Third respondent
SHAFT THEATRES PTY LIMITED
Fourth respondent
SILKEN HALL PTY LIMITED
Fifth respondent
TEXAS PARK PTY LIMITED
Sixth respondent
AND BETWEEN: WALTER DELL PTY LIMITED
First cross-claimant
ASHWOOD WAY PTY LIMITED
Second cross-claimant
AND MELHERO PTY LIMITED
First cross-respondent
MITCHELL PRODUCTS PTY LIMITED
Second cross-respondent
CORAM: BEAUMONT J.
DATE: 20 JANUARY 1997
INDEX TO REASONS FOR JUDGMENT
INTRODUCTION 1
THE CASE PLEADED BY THE APPLICANTS 3
THE CASE OPENED FOR THE APPLICANTS 5
THE APPLICANTS' AFFIDAVIT EVIDENCE 6
(a) The affidavit of Mr Mark Franks sworn on 21 December 1995 6
(b) The affidavit of Mr Mark Franks sworn on 5 April 1996 7
(c) The affidavits of Mr Mark Franks sworn on 11 and 12 April 1996 9
(d) The affidavit of Mr John Buckland sworn on 20 December 1995 12
(e) The affidavit of Mr John Buckland sworn on 9 January 1996 19
(f) The affidavit of Mr John Buckland sworn on 25 March 1996 25
(g) The affidavit of Mr John Buckland sworn on 11 April 1996 27
(h) The affidavit of Ms Sarah Caroline Webb sworn on 20 December 1995 27
(i) The affidavit of Ms Anna Katherine Warne affirmed on 11 March 1996 30
(j) The affidavit of Ms Anna Katherine Warne affirmed on 25 March 1996 31
(k) The affidavit of Mr David Phillip Nichols affirmed on 23 February 1996 31
(l) The affidavit of Mr Samuel Montague Webster affirmed on 22 March 1996 32
THE ORAL EVIDENCE OF THE APPLICANTS' WITNESSES 33
Mr John Buckland 33
Mr Mark Franks 41
THE CASE PLEADED BY THE RESPONDENTS IN THEIR DEFENCE 49
THE CASE PLEADED BY THE SECOND AND THIRD RESPONDENTS
IN THEIR CROSS-CLAIM 52
THE EVIDENCE IN THE RESPONDENTS' AND CROSS-CLAIMANTS' CASE 53
(a) The affidavit of Mr Malcolm Royal sworn on 3 January 1996 54
(b) The affidavit and oral evidence of Mr Edward Fraser Oxlee 55
(c) The affidavit and oral evidence of Mr Eric Hill 56
CONCLUSIONS ON THE TRADE MARKS ISSUES 79
(a) Introduction 79
(b) Is the Trade Marks Act 1955 or the 1995 Act applicable to the applicants'
claim for rectification of the Register? 80
(c) The applicants' claim for rectification of the Register 80
CONCLUSIONS ON TRADE PRACTICES ISSUES 96
CONCLUSIONS ON PASSING OFF 98
CONCLUSIONS ON THE CROSS-CLAIM 98
APPENDIX 100
THE POSITION UNDER THE 1955 ACT 100
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG963 of 1995
)
GENERAL DIVISION )
BETWEEN: MELHERO PTY LIMITED
First applicant
MITCHELL PRODUCTS PTY LIMITED
Second applicant
AND CLUB X PTY LIMITED
First respondent
WALTER DELL PTY LIMITED
Second respondent
ASHWOOD WAY PTY LIMITED
Third respondent
SHAFT THEATRES PTY LIMITED
Fourth respondent
SILKEN HALL PTY LIMITED
Fifth respondent
TEXAS PARK PTY LIMITED
Sixth respondent
AND BETWEEN: WALTER DELL PTY LIMITED
First cross-claimant
ASHWOOD WAY PTY LIMITED
Second cross-claimant
AND MELHERO PTY LIMITED
First cross-respondent
MITCHELL PRODUCTS PTY LIMITED
Second cross-respondent
CORAM: BEAUMONT J.
DATE: 20 JANUARY 1997
REASONS FOR JUDGMENT
INTRODUCTION
By their application made under Part V of the Trade Practices Act 1974 and in the accrued jurisdiction of the Court, filed on 20 December 1995, Melhero Pty Limited, (the first applicant) and Mitchell Products Pty Limited (the second applicant) claimed relief against Club X Pty Limited (the first respondent), Walter Dell Pty Limited (the second respondent), Ashwood Way Pty Limited (the third respondent) and Shaft Theatres Pty Limited (the fourth respondent). Silken Hall Pty Limited and Texas Park Pty Limited (the fifth and sixth respondents) were subsequently added as parties on 27 February and 21 March 1996 respectively.
The applicants are companies controlled by Mr Mark Franks, a citizen and resident of the United States who for some time has been engaged in this country, and internationally, in the business of supplying and distributing "adult" videos and products. The respondents are companies controlled by Mr Eric Robert Hill, Mr Kenneth Hill and other members of their families. Mr Eric Hill has for some time been involved in the "adult" sex services and products industry.
In their application, the applicants claimed that the use by the respondents in trade or commerce of the words "Adam & Eve", or any similar words, was likely to mislead and constituted passing off. The applicants sought injunctive and other relief in that connection.
By their amended application, filed on 27 February 1996, the applicants claimed, in addition to the relief originally sought, an order for the cancellation of the registration of the trade mark "Adam & Eve" ( No.A635943) ("the Trade Mark") for services in Class 42 (being "services that cannot be placed in other classes" in Schedule 1 of the Regulations) namely the "wholesaling and retailing of adult products namely aphrodisiacs, sound and image films and video tapes, body stimuli apparatus, equipment and devices including vibro massage and vibro stimuli apparatus and devices and vibrators for personal use, hygienic rubber articles including condoms; restaurant services and provision of food and drink; brothels, massage parlours; social and relaxation centres and meeting places" in respect of which Walter Dell and Ashwood Way became the proprietors as from 26 July 1994; alternatively, an order was sought that a condition be inserted in the Register limiting the registration of the Trade Mark to the metropolitan region of Melbourne; or, alternatively to the State of Victoria; or, alternatively, that it not extend to the Australian Capital Territory or New South Wales.
THE CASE PLEADED BY THE APPLICANTS
The material allegations pleaded by the applicants in the further amended statement of claim are as follows:
1. The applicants (or further or alternatively, the applicants and their predecessors in business) have, since at least 1991, conducted a business in the "adult" industry known as "Adam & Eve". In the course of these activities, the applicants (and their predecessors) have used marks containing the words "Adam & Eve" in connection with the supply and promotion of their goods and services. Under, and by reference to, the mark "Adam & Eve", the applicants have extensively conducted, and advertised and promoted themselves and their goods and services to the public.
2. Walter Dell and Ashwood Way, who applied for registration of the Trade Mark on 26 July 1994, have licensed Club X, Shaft Theatres, Silken Hall and Texas Park to use the Trade Mark in connection with adult businesses operated by them; and the respondents have commenced using the Trade Mark in connection with the promotion or supply of goods and services in the adult industry in New South Wales.
3. (In truth) as at 26 July 1994, Walter Dell and Ashwood Way were not, within the meaning of s.58 of the Trade Marks Act 1955 , the owners of the Trade Mark; or alternatively, they were not the owners: (a) anywhere in Australia other than in Melbourne; or (b) alternatively, other than in Victoria; or, (c) alternatively, they were not the owners in the Australian Capital Territory or in New South Wales.
4. As at 26 July 1994, and since, the words "Adam & Eve" signified, to the trade and the public in Australia, when used in connection with services in respect of which the Trade Mark is registered, that those services were the applicants' services, or are services supplied in association with, or with the licence and approval of, the applicants; and the applicants have acquired a large and valuable reputation in Australia, or alternatively, the foregoing parts of Australia, in the name of "Adam & Eve" in relation to their goods and services.
5. Thus (it is claimed by the applicants) for the purposes of s.41 of the Trade Marks Act 1995 , the Trade Mark is not capable of distinguishing the respondents' services; its use is, for the purposes of s.42, contrary to law; and its use is likely to deceive or cause confusion. The Trade Mark, within the meaning of s.88, wrongly remains in the Register and ought to be expunged; alternatively, the Register ought to be rectified by inserting, by way of territorial limitation, one of the conditions previously mentioned.
6. In the circumstances, the respondents have, in trade or commerce, engaged in misleading or deceptive conduct, contrary to s.52, have passed off their goods and services as those of the applicants, and represented that their goods and services have a sponsorship, approval or affiliation they do not have, contrary to s.53(c) of the Trade Practices Act 1955 .
THE CASE OPENED FOR THE APPLICANTS
Senior Counsel for the applicants opened their case on the basis that their business "is centred" in Canberra; that they carry on business out of two shops, one in the suburb of Fyshwick (from January 1993), the other in the suburb of Mitchell (from June 1995); that in connection with the operation of those businesses, and in connection with the goods sold in those shops, they have significantly used the name "Adam & Eve"; and that there is a "spill-over" of reputation out of the Australian Capital Territory and into New South Wales, principally Sydney, through radio and television advertising and by virtue of persons resident elsewhere "coming [to] and going from" Canberra.
In order to understand the issues that arise for determination, it will be necessary to summarise the evidence, given by affidavit and orally, tendered by the parties.
THE APPLICANTS' AFFIDAVIT EVIDENCE
(a) The affidavit of Mr Mark Franks sworn on 21 December 1995
In this affidavit, Mr Franks said that he is involved in the business of producing, supplying and distributing adult videos and adult products in the United States, Canada, Europe and Australia; that in 1991 he decided to set up an outlet for his business in Australia; that in May 1992 he caused Melhero, and in September 1991 Mitchell Products, to be incorporated; and that Melhero's business is the operation of a retail store selling adult products, and that of Mitchell Products was (but no longer is) the operation of a mail order business.
Mr Franks said that Melhero opened an adult retail store called "Adam & Eve" in Gladstone Street, Fyshwick in January 1993; that a second store, known as "Adam & Eve 2" was opened at Grimwade Street, Mitchell in June 1995; and that Mitchell Products, which is the proprietor of the registered business name "Adam & Eve of Australia" in the Australian Capital Territory, New South Wales and South Australia, has granted Melhero a licence to use the name. (It appears later that Mitchell Products originally registered the business name "Adam & Eve of Australia" in New South Wales on 15 April 1992).
Mr Franks said that the respondents operate adult retail stores in Melbourne, Canberra, Sydney and Western Australia under the name "Club X"; and that he first became aware that the respondents were using the name "Adam & Eve" at a "Club X" store at 78 Darlinghurst Street, Kings Cross in late November 1995.
Mr Franks said that until December 1995, he was not aware that Walter Dell and Ashwood Way had applied in July 1994 for registration of the Trade Mark.
Mr Franks said that he had visited all of the "Club X" stores in Melbourne, Canberra and Sydney, and that, in his opinion, they "have a presentation which is inconsistent with the image that [Melhero] has sought to present to its customers"; that the "Club X" stores are "small, often dark and inexpensively furnished". Mr Franks said that the "Club X" store in George Street, Sydney has "peep machines", where "x-rated" videos are shown "in full view of the customers". In his opinion, the "Club X" stores, by "focus[sing] mainly on hard core magazines and sex toys", do not stock the range of products that are sold by the applicants' stores; and the staff in the "Club X" stores are mainly men.
(b) The affidavit of Mr Mark Franks sworn on 5 April 1996
In this affidavit, Mr Franks said that Mitchell Products was "set up" to distribute videos via mail order, and also to wholesale videos to retail outlets. It commenced trading in February 1992 under the name "Champions Videos of Australia", supplying nationally adult x-rated videos by mail order "to the gay market".
As has been noted, the business name "Adam & Eve of Australia" was registered in New South Wales on behalf of Mitchell Products in April 1992.
The Franks Family Trust, of which Mr Franks and his wife Barbara are trustees and beneficiaries, is beneficially entitled to all of Mitchell Products' issued shares, except for a share held by Mr Franks on trust for the Franks Family Irrevocable Trust.
Mr Franks said that Melhero was incorporated in May 1992 to operate an adult retail store in Fyshwick, Australian Capital Territory, which opened in January 1993 under the name "Adam & Eve". The majority of Melhero's shares are held on trust for the Franks Family Irrevocable Trust.
Mr Franks said that in June 1993, Kitloft Pty Limited, another company ultimately controlled by him, was incorporated to operate an "adult" retail store at 159 Oxford Street, Sydney. Between September 1993 and August 1995, Kitloft carried on business there under the name "Campus 159". Between August 1995 and January 1996, the store was closed for refurbishment. Since January 1996, with the licence of Mitchell Products, Kitloft has carried on business at that site under the name "Adam & Eve".
Mr Franks said that in late 1992 or 1993, he gave instructions to Jeffrey Morton, then Mitchell Products' manager, for an application to be made by Mitchell Products for the registration of the trade mark "Adam & Eve", but it appears that the instructions were not effectively communicated, and no such application was made.
(c) The affidavits of Mr Mark Franks sworn on 11 and 12 April 1996
By his affidavit sworn on 11 April, Mr Franks said that in 1992 Mitchell Products (then known as Truefeat Pty Limited) placed advertisements in a large number of the "Yellow Pages" telephone directories published in the several telephone areas of Australia (Ex. "N"). The entries tendered for the areas in 1993 for Sydney, Hobart, Perth, Adelaide, Northern Territory, Brisbane, Melbourne, Launceston, Bairnsdale, Burnie, Newcastle, Wollongong and Central Coast, list under the title "Adult Products &/or Services" the service "Adam & Eve Videos of Australia - phone for free brochure" (or similar words) and give the address "42 Hoskins Mitchell ACT" and the number "free call... 008 806 900". (Ex. "Q").
Mr Franks said that all of Melhero's sales income since 1993 has been derived from products sold by retail at the Fyshwick "Adam & Eve" store. A separate company, Budtint Pty Limited, operates the Arcade of adult video viewing booths located at the Fyshwick store.
Mr Franks said that prior to the opening of the Fyshwick store by Melhero in January 1993, Mitchell Products (then Truefeat Pty Limited) had since 1992 operated an adult video mail order business at Mitchell with two divisions: "Champions" - supplying gay adult videos; and "Adam & Eve" - supplying the heterosexual adult market. At the Mitchell premises, there was also a small retail store for the "over the counter" sales of the two ranges of adult videos and some other products. The second "Adam & Eve" store was opened in June 1995 in the same group of buildings at Mitchell, selling by retail products similar to those sold by Melhero at Fyshwick.
Melhero's accounts for the year ended 30 June 1994 record Fyshwick sales of "Adam & Eve" products of $787,420; and for that period, Budtint's Arcade takings were $210,650. The sales recorded by Mitchell Products in that period were $2,272,013 in respect of videos traded by mail order in its "Adam & Eve" and "Champion" divisions.
By his affidavit sworn on 12 April Mr Franks said that until July 1994, Jeffrey Morton was a director and shareholder of Melhero and of Mitchell Products. A dispute arose about his shareholding and proceedings were instituted in this Court which were ultimately determined in favour of Mr Franks. In the course of the dispute, Mr Franks applied to the Court for the appointment of an interim receiver of Mitchell Products' assets. John Vouris of the firm Court & Co. was so appointed on 1 November 1994.
Mr Franks said that in the course of this litigation in 1994, Mitchell Products continued its mail order business and associated shop. The operations of Melhero's "Adam & Eve" store at Fyshwick were not affected by the litigation.
On the conclusion of the litigation, Mitchell Products' directors appointed Mr Vouris as its voluntary administrator under the Corporations Law. Subsequently, a Deed of Arrangement was proposed, ratified by a majority of Mitchell Products' creditors and approved by the Court.
Annexed to Mr Frank's affidavit is a copy of an agreement dated 21 December 1994 for the sale to him of assets of Mitchell Products there specified. Mr Vouris, as Mitchell Products' administrator, was a party to this agreement which provided for payment of a price of $275,000. The assets sold comprised the shop fittings, equipment, vehicle and stock at the Mitchell premises. Provision was made with respect to the exercise of an option in the lease of the premises, or for the grant of a new lease. The vendor was to transfer to the purchaser any claim it may have had over the mailing lists.
Mr Franks said that he negotiated a sale to Fort Bacon Pty Limited (known as "Axis") of certain of the assets of Mitchell Products then sold to him, being assets "relating to the publication of video tapes and the "Adam & Eve" mail order business which had previously been conducted by [Mitchell Products]". The balance of the assets acquired by him were sold back to Mitchell Products under an agreement dated 8 February 1995 for a price of $195,000.
Mr Franks said that Mitchell Products' retail store operations continued throughout the period from July 1994 "up to and after 8 February 1995".
(d) The affidavit of Mr John Buckland sworn on 20 December 1995
Mr Buckland said that he has managed Melhero's "Adam & Eve" stores in Canberra since January 1993, in the case of the Fyshwick store, and since June 1995 in the case of the Mitchell store. At the time of the opening of the Mitchell store, Mr Buckland sent a media release to the "Canberra Times" and the "Eros Foundation", a lobby group established in Canberra to support the adult industry, stating that "Adam & Eve, Australia's most exciting adult store... are celebrating two years of innovative erotic retailing in Canberra with a new store in Mitchell and a ladies only coffee morning... In the past regular women's nights have been held at the Fyshwick store". It was also claimed in the release that "women demand [a] new adult shop in Canberra".
Mr Buckland said that the two stores are retail outlets which sell adult products such as adult toys, "naughty" gifts, collectable items, videos, magazines, greeting cards, board games, massage oils and instruction manuals, and a wide range of lingerie for men and women. The stores, which seek to target couples and single women rather than men, are furnished with quality finishes including timber benchtops, carpet and glass displays. The staff are required to dress in smart casual clothing. In Mr Buckland's opinion, the presentation of the stores is quite different from other adult stores, and more akin to the presentation in a department store.
Mr Buckland said that since January 1995, the stores send catalogues to customers on their mailing list monthly.
Mr Buckland mentioned several references to the Canberra stores in magazine and newspaper articles (Ex. "A") in recent years as follows:
(1) In an article by Peter Fray entitled "Sultans of Sleaze" published in the national magazine "The Bulletin" dated 15 February 1994, it was reported that:
"Unclassified and illegal material is available in most cities, especially Sydney. But in the nation's capital - the only place where it is legal to both duplicate and sell X-rated porn - the industry is keen to stay within the law. `We do not,' says Gerry Hercus, the undisputed king of video porn and owner of Rob and Tony's workplace, `try and promote sex as such, except that we are promoting a product, much like Myers. The real issue is not sex, it's violence.'"
"With Melbourne's Hill brothers, Ken and Eric, who run the Club X retail chain, [Darwin-based] Hercus and Jeff Morton from Champions Video control more than 80% of the legal market [in the `porn industry']". It was also reported that turnover then of videos, magazines and sex aids was said to be $40 to $60 million a year. It was further reported that: "John Buckland, the retail manager for Champions, claims that 70% of people using his main Canberra store, Adam And Eve, are couples".
The report went on:
"Next to the plumbing supplies stores and the paint and furniture shops, Adam and Eve is in marked contrast to the sleaze and subterfuge of sex shops in other cities. It has a bright and breezy window display, while inside its layout is akin to that of an up-market city boutique. It sells vibrators, leather gear and an endless supply of videos and magazines. Porn's modern face can be found in the dim recesses of Adam and Eve's 32-channel video booth arcade. There's nothing new about providing facilities for individuals - nearly always men - to masturbate while watching X-rated videos, or cutting glory holes in the walls of some booths for homosexual men to have anal or oral sex. But Champions, a local branch of a massive US chain headed by 43-year-old Californian Mark Franks, has extended the concept to offer wheelchair access, quads (featuring two televisions, one split into quarters to show four different videos at once) and the "buddy booth". At first glance, these booths appear like any other - with a TV monitor and slots for coins - but there is something irregular about the frosted glass partition separating it from next door. By pressing a button in the booth, the glass defrosts to reveal the person in the next booth. If she or he doesn't want to have a mutual pornographic experience, then a button on his or her side frosts the wall again. Buckland stresses the de-frosting only happens if both booth customers are willing.
Simple: Adam and Eve and other Canberra outlets sell legally classified X-rated videos for between $30 and $60, but in under-the-counter shops unclassified and violent videos can often be picked up for as little as $20. In a bookshop in central Sydney, buying an unclassified video is a simple transaction. The shop's collection of videos can be found in a small room full of video covers, known as slicks. As an employee explains, the piles are split into sex preferences... straight sex, anal, S & M, girls with girls... and so on. Judging by their dress, the men flicking through the slicks on the day The Bulletin visits are from all walks of life. Few people speak; even fewer look up from the slicks or at anyone entering the room. When a customer picks a slick - in The Bulletin's case, an unclassified Japanese sex torture movie which promises women howling `like wounded animals for more pain' - the employee gets the actual tape from a nearby storeroom. For $20, with the offer of $5 back on exchange, Bushido 7 is tucked into a brown paper bag.
The activities of such shops - and the brisk mail-order trade in pirated videos by backyard operators in Sydney (who often use ACT mail boxes to appear legal) - are the bane of the industry's life. Just before Christmas, NSW police raided the shop, seized 4000 videos and charged the owner with selling unclassified material. A month later the shop was offering the same products; ...."
(2) The "Canberra Times" in June 1994 carried an advertisement by the "Adam & Eve Adult Emporium", Fyshwick, showing the first "Adam And Eve's" `Ladies Only' event held on 27 June 1994, together with an article about a further "Adam & Eve" `Ladies Only' event to be held on 15 August 1994. The "events" included "workshops" dealing with "safe sex information", "sensual massage", "latest in erotic lingerie", "videos designed for ladies", "massage", "aroma therapy", "exercises", "tips on safe sex" and "marital aids". Booking was "essential", a light supper was to be served on 15 August and there was to be no cover charge.
(3) In August 1994, the "Canberra Times" carried similar advertising for the "Adam & Eve Adult Emporium", Fyshwick, together with an article describing an "Adam And Eve Lingerie Parade". According to the article, the parade was "a very well choreographed and professional show. Far from being sleazy this was complete entertainment".
(4) In March 1995, an article by Andrea Jones in the "Sydney Morning Herald" entitled "Erotica for Two" reported that: "Porn merchants have seen the future - and it's not men in trench coats. More and more women are turning on to erotica with their partners".
The article stated that:
"Amid the factories and offices in the Canberra suburb of Mitchell is what looks for all the world like a department store, but the merchandise is a little unorthodox.
In the front are displays of chocolates, except they're in naughty shapes. Then there is a department of slinky lingerie. Further in are shelves of videos, the covers showing couples locked in embrace. Out back are movie booths where shoppers can plug into 32 erotic channels.
Adam & Eve is a new-style sex shop designed especially for women and couples. And it's not alone. In Canberra, Melbourne, Adelaide and soon Perth, the adult chain, Club X, has targeted women with Club Femme stores which are softer and less confrontational than traditional sex shops.
`Couples are the future,' says Club X operations manager David Newall. `The number of couples is very visible to us as an increasing part of the market.'
The sexual revolution of the 90s is couples' burgeoning taste for porn. While pornography once conjured images of men in trench coats and sand shoes, it is becoming part and parcel of foreplay in respectable bedrooms across Australia.
Adam & Eve's retail manager John Buckley [sic] said that on Valentine's Day they had a rush on videos by Candida Royalle, a former porn star who now makes erotic moves aimed at women."
The article went on to refer to a study of more than 100 women aged from 18 to 70 by the University of New England indicating that 72% had watched at least one x-rated video, "almost exclusively watched the video with a man" and "purely for entertainment".
(5) The "Canberra Times" dated 5 June 1995, in an article by Liz Armitage entitled "Adult shops shed an old image", repeating the theme of the "Sydney Morning Herald" article, reported that 50 women had attended "Adam And Eve in Mitchell for a ladies-only coffee morning"; and that: "These mornings are a regular event at the Adam And Eve shops in Fyshwick and Mitchell...".
(6) "New Woman", a national magazine, in its issue in August 1995 also picked up this theme in an article entitled "Foreplay" by Angela Matheson who reported that she "shop[ped] for erotica in Canberra, find[ing] the shelves laden with devious delights and discover[ing] that women want more" at "Canberra's Adam And Eve sex shop" which was reported to have a "Tupperware-party atmosphere... [and] continu[ing] to notch up record porn sales...".
The article went on to report: "Despite Adam And Eve's best intentions, the bulk of merchandise looks like it belongs in a junk shop. Despite arguments to the contrary, good quality erotica is almost impossible to find".
(7) In the September 1995 issue of the national magazine "Cosmopolitan", Paula Kennedy picked up the theme previously mentioned in an article entitled "Pornography - who says we don't like to watch", with the sub-title: "Who says pornographic videos are the domain of boys' nights and the raincoat brigade. There's a new style of erotica hitting the screen and more and more women are watching."
According to the article:
""Nowhere is [the sexual] empowerment [of women] more evident than in the growing ranks of adult shops lining the streets of Fyshwick, an erotaholics paradise on Canberra's outskirts. There, adult shop Adam and Eve is set up in the mould of a classy boutique. In a bid to attract a female clientele, it has an up-market window display featuring six mannequins wearing the latest lingerie... Tonight it's ladies night at Adam And Eve's and the 150 women cruising the aisles are, to put it plainly, on heat. Their arms are overflowing with vibrators, flavoured condoms and leather lingerie - and that's before they've even reached the sensual video section...".
The article quotes the President of the Eros Foundation:
"In the past, [the] women [who are customers of Adam & Eve] let their partners bring home the erotic videos, because they didn't like the sleazy atmosphere of illegal adult shops... But given the opportunity to select erotica in a safe, appealing environment, they've discovered there's plenty to see".
At the end of the article, under the heading "Shopping for Erotica", the following is stated:
"Shopping For Erotica
Erotic material that is sold through legal outlets in the ACT and Northern Territory is classified by the chief censor's office to make sure it contains no coercion, underage sex or violence. Because there is such a big demand, the ACT and NT are catering to an estimated 250,000 who buy in person. Approximately 500,000 clients also mail- order by catalogue from other states, where the range of erotica in back street adult shops is very limited. If you would like more information about buying erotic videos call: Video Ray, distributor of Candida Royale's Femme Films ( (02) 908 4422 and Adam And Eve ( (06) 239 1121."
Mr Buckland said that the "Adam & Eve" stores in Canberra employ a total staff of 22 and have an average weekly turnover of $16,000; on average, $4,000 per month is spent on advertising expenses.
(e) The affidavit of Mr John Buckland sworn on 9 January 1996
Mr Buckland said that in respect of the period 22 to 31 December 1995, a record was kept of the "State origin" of each customer of the Fyshwick store as follows:
22 December 1995
ACT 44
NSW 24
VIC 16
SA 5
WA 2
TAS 1
23 December 1995
ACT 41
NSW 15
QLD 1
VIC 2
SA 1
26 December 1995
ACT 36
NSW 14
QLD 1
VIC 1
WA 1
TAS 1
27 December 1995
ACT 28
NSW 19
QLD 1
VIC 7
28 December 1995
ACT 12
NSW 22
QLD 4
VIC 4
TAS 2
29 December 1995
ACT 20
NSW 13
QLD 1
VIC 1
SA 1
30 December 1995
ACT 28
NSW 23
QLD 2
VIC 1
NT 1
WA 2
31 December 1995
ACT 16
NSW 7
QLD 1
VIC 1
Mr Buckland said that there are 1582 customers on the stores' mailing list, of which 740 are from New South Wales. (These figures were later corrected, although not substantially, by Mr Buckland in a later affidavit, to be mentioned below).
Mr Buckland identified photographs (Ex. "B") of each of the Canberra stores. Both display signage with the name "Adam & Eve" prominently on the outside of the premises, along with a drawing of an apple and, in the case of the Fyshwick premises, a drawing of a serpent. The nature of each of the premises, internally, as indicated in the photographs, appears to be as described in the publications previously mentioned. The photographs of the Fyshwick premises are as follows:
The photographs of the Mitchell premises are as follows:
Mr Buckland referred to a mail order video catalogue (Ex. "C" - issue 36) published in the middle of 1995 by "Axis", described as "Australian X-rated Industry Sales and Service" with a Darwin postal address, containing an advertisement inserted by Mr Franks, of the "Adam & Eve" Fyshwick store, advertising under that name the range of videos and lingerie at "Australia's most exciting adult stores" and "Australia's only 32 multi-channel video arcade..." as follows:
The x-rated videos in the first part of the catalogue are said to be "U.S. releases" under the name "Video Ekstase".
According to a statement made in the catalogue by Gerard Hercus, as the manager of "Axis", Axis is "Australia's largest `adult' mail order distributor" with a "new purpose built facility in the ACT".
A mail order form for "Axis" then appears in the catalogue.
After this, appear advertisements for "U.S. releases" being x-rated videos issued under the name "Adam & Eve" as follows:
It will be noted that the name "Adam & Eve" is written here differently and in different colours, from the name in the Fyshwick advertisement; and that each of the advertisements features a drawing of an apple, although they are drawn differently.
(f) The affidavit of Mr John Buckland sworn on 25 March 1996
Mr Buckland referred to advertisements by "Adam & Eve", Fyshwick in the "Canberra Times" since February 1993, together with advertisements in other newspapers in the region. He also referred to advertising of "buddy booths" in that store in several Sydney publications, the "Sydney Star Observer", described as "the gay and lesbian communities' newspaper", with a circulation in 1993 of approximately 20,000 (in issues between January and September 1993), "Capital Q" (in issues between May 1993 and February 1994) and "Campaign" (in issues between March 1993 and February 1994). He referred also to advertising by that store in "Outrage", a Melbourne publication, in January 1993, and in "Pride", a Queensland publication, between February 1993 and January 1994.
Mr Buckland then referred to advertising by "Adam & Eve", Fyshwick on two Canberra radio stations between July 1993 and April 1994; and on radio stations at Goulburn and Cooma between August and November 1993, with a view, he said, to "target[ing] Sydney people travelling to and from the snow fields...". He referred also to advertising by this store on Wollongong television in August and September 1993, featuring a "Father's Day" promotion (Ex. "L").
Mr Buckland said that between August 1994 and January 1996, Melhero spent a total of $157,487 on advertising; and that Mitchell Products spent $54,214 on advertising between April 1995 and January 1996. He further said that between July 1994 and June 1995, Melhero spent $37,586 on "Canberra Times" advertising; and $42,177 between July 1995 and January 1996.
There were later tendered in evidence (Ex. "R") circulation figures of the several publications in which the applicants' businesses were advertised or otherwise referred to in the relevant periods in question (between 1993 and 1995). The circulations were said to be approximately as follows:
"Canberra Times": 42,000 (Monday - Friday) 68,000 (Saturday).
"Sydney Morning Herald": 240,000
"New Women": 111,000 (in the period July to December 1995)
"Cosmopolitan": 265,000 (in the period October 1994 to September 1995)
"The Bulletin": 103,000
"Capital Q": 4,000
The circulation of the "Sydney Star Observer" has already been mentioned.
Mr Buckland identified price units for the "Adam & Eve" stores range of products, which include magazines, condoms, lubricants, sprays, massage oil, vibrators, massage books and body lotions at prices as high as $300 and as low as 50cents.
(g) The affidavit of Mr John Buckland sworn on 11 April 1996
Mr Buckland referred again to the mailing lists in the period October 1994 to January 1996 for the "Adam & Eve" Canberra stores, as mentioned in his affidavit sworn on 9 January 1996. He said that names are entered on the mailing lists by two methods, namely by customers writing their names on forms held at the counter in the stores, or by a member of staff entering the name on the list as a result of a telephone enquiry from a potential customer. Mr Buckland said that, in analysing these lists, he excluded those forwarded on behalf of the applicants' "Mustang Ranch" store in Canberra (to be mentioned below) and the "Campus 159" store in Sydney (also to be described below). He said that his analysis showed the following places of residence: ACT - 259; NSW - 693; VIC - 178; QLD - 159; SA - 62; TAS - 27; WA - 73; NT - 3; overseas - 6; total - 1,460. He said that the discrepancy between the figure of 1,460 and that of 1,582 mentioned in his affidavit sworn on 9 January 1996 was the result of an oversight in that the figure of 1,582 incudes some customers of "Mustang Ranch" or "Campus 159" stores.
(h) The affidavit of Ms Sarah Caroline Webb sworn on 20 December 1995
Ms Webb, a paralegal employed by the applicants' solicitors, said that she took photographs of the premises of "Club X" at 78 Darlinghurst Road, King's Cross (see Ex. "G") in November 1995. She said that she then observed a neon sign "Adam & Eve" in the entrance hall to the premises. The photographs also show a neon sign outside the premises indicating "Club X" and "videos", "books" and "toys". The photographs are as follows:
(i) The affidavit of Ms Anna Katherine Warne affirmed on 11 March 1996
Ms Warne said that on 4 March 1996, she visited an adult bookshop at the premises 799 George Street, Sydney where an "Adam & Eve" sign was visible outside the shop together with a "Love Art Shop" sign, advertising "adult shop - magazines videos books and marital products" (see Ex. "H").
Photograph of the premises is as follows:
It seems that the placing of the "Adam & Eve" sign there had only recently occurred. The applicants' solicitors raised the matter in correspondence with the respondents' solicitors, who asserted that the respondents had the right to use the name.
(j) The affidavit of Ms Anna Katherine Warne affirmed on 25 March 1996
Ms Warne referred to correspondence from the Sydney publisher of "Capital Q Weekly", a magazine in which, it appears, the applicants advertised their "Adam & Eve" Canberra stores in late 1993 and early 1994. The correspondence stated that, at this time, the magazine had a distribution of about 14,000 copies, the bulk of which were distributed in Sydney's inner city, eastern suburbs and inner west; and that copies "were also available in all [S]tates at various venues and bookshops".
(k) The affidavit of Mr David Phillip Nichols affirmed on 23 February 1996
Mr Nichols, the manager of the "Adam & Eve" adult retail store located at 159 Oxford Street, Sydney since its opening on 31 January 1996, said that he had previously worked at the premises as the manager of the business known as "Campus 159" between October 1993 and August 1995. He said that the "Adam & Eve" Sydney store sells "adult" products including adult toys, "naughty" gifts, collectible items, magazines, greeting cards, board games, massage oils and instruction manuals, together with a range of lingerie. Also, there are daily shows on the premises "featuring exotic dancers". He referred to advertisements of the business in February 1996 in the "Wentworth Courier", circulating in Sydney's eastern suburbs, and in the "Sydney Star Observer", advertising that " `Adam & Eve' is now in Sydney".
Mr Nichols estimated that between six and eight customers have appeared to be confused about the supposed relationship between the Oxford Street store and the "Club X" Adam & Eve store at Kings Cross. He gave details of conversations with two such customers. He had also received telephone calls from two customers asking about the association between the Oxford Street store and the Canberra "Adam & Eve" stores.
(l) The affidavit of Mr Samuel Montague Webster affirmed on 22 March 1996
Mr Webster is a marketing consultant, in the adult entertainment industry, to Austereo Limited, the owner of major commercial radio stations in Sydney, Melbourne, the Gold Coast, Darwin, Perth and Canberra. Mr Webster said that in August 1993 he was engaged by Melhero to implement an advertising strategy to target traffic passing through Canberra from Sydney to the snow fields around Jindabyne, NSW. The strategy he developed was to use a combination of radio stations that persons travelling from Sydney down to Jindabyne would listen to. Accordingly, advertising space promoting the "Adam & Eve" store in Fyshwick was booked with radio stations in Goulburn, Canberra and Cooma, especially in holiday periods, in 1993-4. Between September 1993 and December 1993, 187 "spots" on Canberra radio FM 104.7 were purchased at a cost of $11,220; 187 "spots" on Canberra radio 2CA at a cost of $3,927; 240 "spots" on radio station 2GN Goulburn at a cost of $7,200; and 260 "spots" on radio station 2XL Cooma at a cost of $7,800. In the period January to April 1994 a total of 187 "spots" on station 2CA Canberra at a cost of $3,927.
THE ORAL EVIDENCE OF THE APPLICANTS' WITNESSES
Reference should next be made to the oral evidence given by the applicants' witnesses in further examination in chief, in cross- examination and in re-examination.
Mr John Buckland
Mr Buckland said that a tourist bus on the way to the Snowy Mountains will usually stop at the Fyshwick store on a weekend, particularly in the winter (T.p.27).
Mr Buckland said that it is the practice to send the applicants' catalogue to customers on their mailing list (T.p.33). A catalogue was tendered (Ex. "M").
The front page of the catalogue is entitled:
"SIN-Sations - Australia's most SINtilating Adult Catalogue".
Then appears the statement:
"Introducing OUR LATEST RELEASES IN Videos Leather Lingerie Novelties Condoms Adult Toys Reds Leather Massage Oils - shop in complete comfort at Australia's most exciting ADULT STORES."
There is also on this page a drawing of an apple, partly eaten, with the statement:
"Be Tempted".
On the second page there is this message:
"Dear Valued Shopper,
Welcome to the first of SIN-Sations Home Shopper Catalogues. The Adam & Eve chain of Stores are the New Generation in Adult Stores. We offer the greatest range of Adult products in a relaxed, comfortable environment - ideal for first-time and regular Adult shoppers alike. The Adam & Eve stores are designed so that single males, females and couples fee relaxed browsing through...
Orgasmic shopping,
SIN-Sations"
Several pages of advertisements of the products mentioned on the front page follow.
There is also an advertisement for: "Live. The SIN-Sations. Australia's newest all female review for hotels clubs & private functions. Ten beautiful ladies in a fully choreographed extravaganza of fashion light & sound". Bookings are to be made through a given telephone number.
On the last page of the catalogue there is the statement:
"Visit one of our three modern showrooms".
There follow references to:
(1) "FYSHWICK A.C.T. 125 Gladstone St [telephone and fax numbers are stated]."
Below this are photographs of those premises, external and internal, the former showing, although not prominently, the name "Adam & Eve".
Below this the following is stated:
"X-Rated VIDEO Sales & Rentals Enormous range of Adult Books VIBRATORS, TOYS & GIFTS Lingerie, Leather, Kits for Couples, Swingers, Partners, LINGERIE PARADES LADIES ONLY EVENINGS".
(2) "MITCHELL A.C.T. 32 Grimwade St [telephone and fax numbers are stated]."
Below this are photographs of the premises, external and internal, the former showing, again not prominently, the name "Adam & Eve".
Below this the following is stated:
"Introducing Australia's only 32 MULTICHANNEL ADULT VIDEO ARCADE Raunchy Pasta PREVIEWS RENTALS VIDEO & MAGAZINE EXCHANGES EROTIC ART GALLERY, LIVE SHOWS COMING..."
(3) "SYDNEY N.S.W. 159 Oxford St Darlinghurst [telephone and fax numbers are stated]".
Below this are photographs, internal and external, of the premises, showing in the latter case again not prominently, the name "Campus 159".
Below this appears the following:
"XXX LIVE EROTIC ALL-MALE SHOWS XXX Multi Channel Adult Video Arcade, Huge range of Toys for Girls & Boys, Leather, Lubes & Lotions, Magazines, Condoms, Cards, T-Shirts & More! Hundreds of XXX Videos...Latest releases 7 Styles of AROMA"
Also on the last page of the catalogue appears an advertisement for "Mustang Ranch" , another Melhero business, as follows:
"Stage 1: Opening late June...OVER 5,000 XXX TAPES!
Stage 2: Opening September: Beautiful Erotic Dancers Appearing LIVE!! AUSTRALIA'S LARGEST LIVE ENTERTAINMENT & RETAIL COMPLEX SEVEN UNIQUE VENUES ALL UNDER THE ONE ROOF Molonglo Mall, FYSHWICK A.C.T...."
In cross-examination, Mr Buckland said that the Mitchell store runs between Hoskin and Grimwade Streets (T.p.34). At the Grimwade Street end is the "SIN-Sations" nightclub (T.p.35). At that end, there are signs for both "Adam & Eve" and "SIN-Sations" (T.p.36); Ex. "B").
He agreed that in the catalogue, Ex. "M", the "lead" name is "SIN- Sations". That name was first used in September 1995 (T.p.35).
With reference to another "Axis" catalogue (Ex. "1" - issue 37 apparently published after the middle of 1995), it was Mr Buckland's understanding that the applicants purchase videos from the Fort Bacon company, trading as "Axis", a company at arms' length with the applicants, controlled by Mr Hercus (T.p.39).
In the "Axis" catalogue issue 37 (Ex. "1"), there is an introductory statement on p.3 by Mr Hercus explaining the business operations of "Axis" in terms similar to his statement on p.12 in Ex. "C" (issue 36). Below the statement on p.3 of Ex. "1": "Thank you for shopping with Axis!", there are advertisements for five stores, including "Adam & Eve Shop 1" at Fyshwick, and "Adam & Eve Shop 2" at Mitchell.
Mr Buckland said that Mitchell Products used the name "Champions" to sell pornographic gay videos, adult toys and "straight" videos for male and female audiences, until early 1995 (T.p.43). He agreed that in 1993-4, "Champions" was the main name used by the applicants in Canberra (T.p.45).
With reference to the "Bulletin" article previously mentioned, Mr Buckland said that the Fyshwick premises may be described as a "David Jones-type store", notwithstanding the proximate location of the "arcade" and the provision of facilities for individuals, nearly all men, including the "buddy booths" (T.pp.48-9), which he describes as "two booths side by side that has interactive glass...[and] an electric current goes through the glass when you put your tokens in to watch a video and you can actually see through that wall to the next cubicle - no interaction but you can see the person next door" (T.p.50).
Mr Buckland agreed that in a later "Axis" catalogue, issue 43 (Ex. "2"), there is a section advertising U.S. "Adam & Eve" videos, but the catalogue contains no reference to any of the applicants' stores (T.p.56). The only telephone number mentioned in the catalogue is the "Axis" number in Darwin.
Mr Buckland said that in January 1996, Mr Franks instructed him to erect an "Adam And Eve" sign at the Oxford Street, Darlinghurst premises (T.pp.58-9). The instruction came through a fax from Joel Kaminsky, on behalf of Bay Management Pty Limited. Mr Kaminsky, with the agreement of Mr Franks, handled the day-to-day management of the applicants' stores "in unison with" Mr Buckland (T.p.116).
Mr Buckland agreed that he became aware of the establishment of the "Club X Adam And Eve" store in King's Cross, Sydney in September 1995, but he had "no idea" whether the decision to use the name "Adam And Eve" in relation to the Oxford Street premises was prompted by the opening of the Club X premises (T.pp.59-60).
Mr Buckland agreed that it is possible to see through the "Adam & Eve" perspex sign outside the Oxford Street store to a "Campus 159" sign underneath it (T.p.61; Ex. "4"). Other photographs of the ground floor of the Oxford Street premises in evidence (Ex. "5") show first, another "Adam & Eve" sign, with a drawing of the serpent and the partially eaten apple previously described; and secondly, a smaller "Campus 159" sign.
These photographs are as follows:
Mr Buckland said that when he commenced employment with the applicants in 1993, Mitchell Products was distributing two kinds of catalogues - one an "Adam & Eve", the other a "Champions", catalogue (T.p.64). Two of the "Champions" catalogues published by Axis in 1996 (Issues 14 and 15) (Ex. "6", Ex. "7") carry advertisements for "Campus 159" at 159 Oxford Street as "a unique adult store", described as "home of Sydney's only live male erotic shows" (T.p.65).
Mr Buckland said that he provided the information for the media release, prepared by the Eros Foundation, for the opening of Melhero's "Mustang Ranch" (T.p.67) at separate premises (T.p.70). The release (Ex. "8") quotes Mr Buckland as saying that the "multi-faceted complex... cater[ing] for women's, men's and couples theme nights" is "a little like a cross between Okalahoma and a Devo rock music clip... No expense has been spared in recreating the very wild west...". ... "Canberra is becoming the Copenhagen of the southern hemisphere and will reap the economic rewards of this move in the very near future."
Mr Mark Franks
In cross-examination, Mr Franks said that he "owns" both Melhero and Mitchell Products and the licence agreement between these companies for the use by Melhero of the name "Adam And Eve" was an oral, "casual" agreement. No licence fee was involved (T.p.81).
Mr Franks agreed that when, in 1992, he instructed Mr Morton to apply for the trade mark, it was for the words "Adam & Eve of Australia" with graphics described as "apple with bite missing" (T.p.82) and for the goods in Class 9 of: "Video Cassettes" (Ex. "9").
Class 9 in Part 1 ("Classes of Goods") was (and remains) in these terms:
"Scientific, nautical, surveying, electric, photographic, cinematographic, optical, weighing, measuring, signalling, checking (supervision), life-saving and teaching apparatus and instruments; apparatus for recording, transmission or reproduction of sound or images; magnetic data carriers, recording discs; automatic vending machines and mechanisms for coin operated apparatus; cash registers, calculating machines, data processing equipment and computers; fire extinguishing apparatus."
Although Mr Franks said that he did not see the documentation relating to the rejection of the trade mark application (T.p.83), material in evidence produced by the Trade Marks Office (Ex. "10") indicates that the application was lodged on 11 June 1992, that a notice of non-acceptance was given on 8 October 1993 and that the application lapsed on 10 March 1994.
Mr Franks agreed that Mitchell Products' business name registration is for "Adam & Eve of Australia" (T.p.83; Ex. "11"). He accepted that Melhero has not applied for business name registration for "Adam & Eve" (T.p.84).
(It is convenient to note here that there is in evidence, tendered by the respondents (Ex. "11"), a list of business name registrations of the name "Adam & Eve" or "Adam and Eve" in most States and Territories. The registered proprietors include persons other than the applicants and the respondents. The nature of the businesses include the sale of clothing (including lingerie), gardening, hairdressing, introduction agency, sale of wedding stationary, sale of gift baskets and cards, beautician, wedding car services, escort agency, sale of massage oil, sale of household goods, cafe and restaurant, and modelling.)
Mr Franks agreed, in evidence given on 11 April 1996 (i.e. before his affidavit sworn on 12 April 1996 previously mentioned), that Mr Vouris was appointed as administrator (receiver) of Mitchell Products (then Truefeat) in July 1994 on the application of Mr Franks as a creditor of the company (T.p.85); that in November 1994, Mr Vouris advertised the whole of the business for sale (T.p.88; Ex. "13"); and that in December 1994 his solicitors, acting for the Franks Family Trust, Benelan Pty Limited and the Planet Group Incorporated offered to buy Mitchell Products' assets for the sum of $275,000. The offer was to include any claim that Truefeat may have had in respect of the mailing lists; Benelan was prepared to release Truefeat (Mitchell Products) and the receiver and administrator from any claims it may have had "for licence fees for the use of the mailing list"; and the offer was conditional upon the administrator securing the exercise of the options under the lease of the Mitchell premises (T.p.89; Ex. "14").
Mr Franks' view was that the applicants' mail order business was "very limited"; their business was essentially a "retail operation (that is to say) stores that customers walk into... store fronts... the... mailing list... is very insignificant" (T.p.115). Mitchell Products' mail order business ceased when it went into administration (T.p.117). Melhero never had a mail order business (T.p.117).
Mr Franks was cross-examined (T.p.117) about the Heads of Agreement, dated 24 November 1994, made between him, his Family Trust, Dominion Publishing Limited, Benelan Pty Limited (both controlled by Mr Franks) and Fort Bacon Pty Limited (controlled , as has been noted, by Mr Hercus) (Ex. "16") arising out of negotiations for the sale to Fort Bacon of all the shares held by Mr Franks, his Family Trust and Dominion in Benelan. It was there provided, inter alia, that there should be included in the sale "as part of the assets of Benelan the mailing list presently owned by [Dominion] [operated by Truefeat Pty Limited to date]..." (cl. 4).
By cl. 10 it was provided:
"10. The parties agree that [Dominion] shall licence the use of the name Adam & Eve to Fort Bacon for the proposed Adam & Eve mail order business of Fort Bacon in Australia. In return Fort Bacon shall place an advertisement in an order catalogue or brochures in regard to the Adam & Eve mail order business advertising the stores owned by Franks or [Dominion] or affiliates operating under the name "Adam & Eve in Australia". In this regard [Dominion] or its affiliates will prepare an advertisement... and submit it to Fort Bacon."
A similar licence was granted for the name "Champions" (cl.12).
There was later tendered in evidence (Ex. "O") a "sale and purchase agreement for securities in Benelan Pty Limited", dated 23 December 1994 (the "Sale Agreement") entered into pursuant to the Heads of Agreement dated 24 November 1994 previously mentioned. The Sale Agreement was made between Mr Franks, his Family Trust and Dominion as vendors, and Swanray Pty Limited and Rainsong Pty Limited, (companies controlled by Mr Hercus), as purchasers, Fort Bacon as guarantor and Benelan.
For present purposes it is sufficient to refer to the copyright and business names aspects of the Sale Agreement, which, as has been seen, was foreshadowed by the Heads of Agreement.
By cl. 7.1 of the Sale Agreement, dealing with completion, it was provided (cl. 7.1(g)), inter alia, that Benelan and Dominion should enter into an "Adam And Eve Copyright Supply Agreement" in the form annexed and a "Champions Video Copyright Supply Agreement".
The form of the annexed "Adam and Eve Copyright Supply Agreement" (the "Supply Agreement") was expressed to be made between Dominion, a company controlled by Mr Franks, carrying on business in the British Virgin Islands, and Benelan. The Supply Agreement recited that Dominion carries on the business of buying, selling and licensing copyright in "the Programmes" (defined as the video programmes to be supplied by Dominion); that Dominion holds all the right, title and interest in the "Business Names" (defined as the names "Adam & Eve" and "Adam & Eve Video"); that Benelan carries on the business in Australia and New Zealand (the "Territory") of selling "Videogrammes" (defined as video cassettes suitable for home consumption on which the Programmes are recorded by Benelan); and that Dominion has agreed to supply an exclusive licence to Benelan in respect of the copyright in the Programmes and in respect of the Business Names.
By cl. 2.1 of the Supply Agreement, Dominion licensed to Benelan exclusively the copyright in the Programmes for the sole purposes of (a) making multiple copies; (b) selling the Videogrammes in the Territory (i) to retailers, and (ii) to consumers by, inter alia, mail order; and (c) screening the Programmes in adult shops or video arcades.
The price to be paid by Benelan for these rights and the term of the arrangement were "to be agreed... in good faith" (cl. 3.1; cl. 4.1).
By cl. 7 of the Supply Agreement, Dominion granted to Benelan "at no cost an exclusive licence to use the Business Names" for purposes (a), (b) and (c) above (as in cl. 2.1).
By cl. 8 of the Supply Agreement, in consideration of the licence granted in cl. 7, Benelan "shall at no cost to [Dominion] allocate to Dominion advertising space [as specified] in every brochure, mail order catalogue or... publication....".
Although Mr Franks has asserted that Dominion has the entitlement to license the use of the name "Adam & Eve" for mail order business in Australia, he accepted that there is no other reference in any of the evidence to Dominion's entitlement to do this. (T.p.118).
Mr Franks was cross-examined about a mail order promotion form
distributed by "Champions Video of Australia: in 1993 (Ex. "17")
which, he said, was "not... a typical example" (T.p.119). On the front
of this form is an advertisement for "XXX videos... lotions
and
lubes... leather... toys... magazines & gifts...". There is a
prominent reference to "Adam & Eve" as "Australias
Canberra's [sic] Most Exciting Adult Store...
featuring the world's best video arcade!!!... Buddy Booths... Quad
Booths... Preview Booths...
32 Channels..." The Fyshwick address is
given. There is a photograph of a male person, with the statement "Pic
from Panda Display
Ad".
The reverse side of the form refers to "Champions Video of Australia PO Box 86, Mitchell ACT 2911... for phone orders call 008 808 600..." The several items listed for sale appear to be of the kind sold in the "Champions" line of business.
Mr Franks described the form being Ex. "17" as a "coupon" and said that it would have been accompanied by brochures advertising x-rated videos, being publications of the kind tendered as Ex. "17A". These publications are headed "Adam & Eve of Australia" as follows:
The publications contain statements that they are "printed in U.S.A.... copyright 1992". There is on them an order form addressed to "Adam & Eve Video of Australia, P.O. Box 237, Dickson A.C.T. 2602... 008 808 900." There is also the following statement:
"Don't accept pirated videos.
All Adam & Eve videos are duplicated off original U.S.A. masters & shipped in original U.S.A. video boxes."
Mr Franks said that he purchased an existing store at 159 Oxford Street, Darlinghurst known as "Numbers" (T.p.120).
Mr Franks agreed that "Campus 159" appeals to the male gay market (T.p.121). He did not agree that, prior to the activity of the respondents in Kings Cross, he had no intention to change the name of the Oxford Street store to "Adam & Eve" (T.p.121).
Mr Franks said that the advertisements of "Campus 159" in the "Axis" "Champions" catalogues, Ex. "6" and "7", were placed there under his Family Trust's licence, as the owner of the name "Champions", to the "Axis" Group (T.p.122).
Mr Franks was cross-examined (T.p.123) about the particulars in a certificate of registration under the Business Names Act, 1962 (NSW) of the name "Adam & Eve of Australia", indicating Truefeat as the proprietor, but indicating the principal place of Truefeat's business as 70 Abercrombie Street, Chippendale (Ex. "18"). Mr Franks said that this address was Mr Morton's residential address. There was no retail outlet there (T.p.123). The original application on behalf of Truefeat for the registration in NSW of the business name was first proposed to indicate that the principal place of business was 42 Hoskins Street, Mitchell, ACT. This was then crossed out and 70 Abercrombie Street, Chippendale substituted (Ex. "19").
THE CASE PLEADED BY THE RESPONDENTS IN THEIR DEFENCE
By their further amended defence filed on 17 April 1996, the respondents deny the essential claims made by the applicants in their pleading. Specifically, the respondents say, relevantly, that:
(1) Continuously since February 1984 Walter Dell and Ashwood Way, by themselves or their predecessors, have carried on, in Victoria and elsewhere throughout Australia, the business of promoting, offering for sale and selling adult products and services under the name and mark "Adam & Eve".
(2) Continuously since December 1984 Walter Dell and Ashwood Way, through their licensees, have carried on, in Victoria and elsewhere throughout Australia, the business of promoting, offering for sale and selling adult products and services under the name and mark "Club X".
Particulars of the "Club X" business then given state that the business was carried on as from specified dates between December 1984 and July 1994, at thirteen locations in Melbourne CBD or its suburbs; as from dates between June 1988 to November 1993, at four locations in the ACT; as from August 1989, at three locations at King's Cross (including 78 Darlinghurst Road) and three Sydney CBD locations (including premises at 711 George Street); as from dates between January 1989 and November 1993, at three locations in Perth; and as from August 1990 at a location in the Adelaide CBD. Further particulars of the "Club X" business then given include promoting, offering for sale and selling adult products by mail order throughout Australia.
(3) The name or mark "Club X", whether alone or in conjunction with other words, is distinctive of, and signifies exclusively, the "Club X" business carried on by Walter Dell and Ashwood Way.
(4) In September 1995, Walter Dell and Ashwood Way commenced, through their licensee, to carry on the business of promoting, offering for sale and selling adult products under the name and mark "Adam & Eve", in conjunction with the name and mark "Club X", from the premises 78 Darlinghurst Road, King's Cross, Sydney.
(5) If, contrary to the respondents' contention, it be held that the use of the name or mark "Adam & Eve" by Walter Dell or Ashwood Way, or their licensees, had been liable to deceive or confuse, then such deception or confusion has not arisen through any act or fault on the part of Walter Dell or Ashwood Way.
(6) (a) In July 1994, Mr Vouris was appointed receiver and manager of Mitchell Products. At that date, or by no later than 1 November 1994, the controllers of Mitchell Products believed that its financial position was such that it could not continue to trade. On 24 October 1994, Mr Vouris retired as such receiver and manager. On 1 November 1994, Mr Vouris was appointed administrator of Mitchell Products.
(b) Shortly after his appointment, Mr Vouris advertised the business of Mitchell Products for sale.
(c) On 19 November 1994, the creditors of Mitchell Products resolved to execute a Deed of Arrangement, executed on 21 December 1994, on the basis, evidenced in cl. 5.1 of the Deed, that the property of the company that was available to pay creditors is the sum of $245,000 being the proceeds of sale of the assets of the company.
(d) If (as the applicants claim, contrary to the respondents' contention) Mitchell Products was entitled to use, and license the use of, the name "Adam & Eve" and enjoyed a goodwill and reputation in it, such name, mark and entitlement was one of the assets sold by Mitchell Products in accordance with the Deed of Arrangement.
(e) Alternatively, if, as the applicants claim, there was in fact no such sale and assignment, the applicants are estopped from denying an assignment.
(f) Alternatively, the conduct of the applicants in participating in the execution of the Deed of Arrangement, including cl. 5.1, against the background of the resolution to execute such Deed and in an assignment of less than all of Mitchell Products' assets, contrary to the terms of the Deed, and in the continued use by the applicants of the name "Adam & Eve", was and is liable to mislead the public and/or Mitchell Products' creditors. In the premises: (i) the applicants have no exclusive reputation as alleged; (ii) there has not been any likelihood of deception and confusion as claimed by the applicants; (iii) any relief which would assist or promote the continued use by the applicants of the name "Adam & Eve" would be contrary to the public interest; and (iv) in its discretion, the Court ought to refuse the relief sought by the applicants.
THE CASE PLEADED BY THE SECOND AND THIRD RESPONDENTS IN THEIR CROSS-CLAIM
By their cross-claim, first filed on 19 March 1996, Walter Dell and Ashwood Way relevantly say:
(1) The cross-claimants are, and have been, the registered proprietors of the Trade Mark.
(2) The cross-respondents, Melhero and Mitchell Products, have infringed the trade mark by using the name or mark "Adam & Eve" being "a sign that is substantially identical with or deceptively similar to the... trade mark in Australia in relation to services in respect of which the... trade mark is registered".
Particulars given are:
(a) In December 1995, Melhero and Mitchell Products erected a sign bearing the words "Adam & Eve" outside the premises 159 Oxford Street, Sydney.
(b) Since January 1993, Melhero has carried on the business of providing adult entertainment services, and has offered for sale, and sold, adult products from the premises 125 Gladstone Street, Fyshwick, ACT under the name and mark "Adam & Eve".
(c) Since June 1995, Mitchell Products has carried on the business of providing adult entertainment services, and has offered for sale, and sold, adult products from the premises at 32 Grimwade Street, Mitchell, ACT under the name or mark "Adam & Eve".
The cross-claimants seek orders enjoining Melhero and Mitchell Products from using the name or mark "Adam & Eve" or any name or mark substantially identical or deceptively similar.
THE EVIDENCE IN THE RESPONDENTS' AND CROSS-CLAIMANTS' CASE
Again, it will be necessary to summarise the evidence, given by affidavit or orally, tendered on behalf of the respondents.
(a) The affidavit of Mr Malcolm Royal sworn on 3 January 1996
Mr Royal is a patent attorney. The parts of his affidavit now relied on prove (1) registration of the Trade Mark (Ex. "20"); (2) registration of the business name "Adam & Eve Adult Book Shop" in Victoria (Ex. "22"); and (3) the contract under which Walter Dell and Ashwood Way purchased that business (Ex. "21").
The certificate of registration of the trade mark "Adam & Eve" under the 1955 Trade Marks Act dated 12 October 1995 (Ex. "20") certifies that Ashwood Way and Walter Dell are its proprietors and that it is registered in Part A of the Register and that, as has been noted, it is in respect of:
"Wholesale and retailing of adult products namely aphrodisiacs, sound and image films and video tapes, body stimuli apparatus, equipment and devices including vibro massage and vibro stimuli apparatus and devices and vibrators for personal use, hygienic rubber articles including condoms; restaurant services and provision of food and drink; brothels, massage parlours; social and relaxation centres and meeting places all being services in [Class 42]."
(Class 42 in Part 2 ("Classes of Services) was (and remains) as follows:
"Providing of food and drink; temporary accommodation; medical, hygienic and beauty care; veterinary and agricultural services; legal services; scientific and industrial research; computer programming; services that cannot be place in other classes."
It was further certified that the registration, for a period of seven years from 26 July 1994, "gives no right to the exclusive use of the word ADAM".
An extract from the Victorian Business Name Registry database (Ex. "22") dated 30 November 1995 records that on 28 February 1984 the business name "Adam & Eve Adult Book Shop" was registered (No. 0602189B) in the name of Edward Fraser Oxlee in respect of the business then carried on at 183D Barkly Street, St. Kilda; that the business subsequently ceased at that location; that on 1 March 1987, Mr Oxlee carried on business under that name at 100B Barkly Street, St. Kilda until 12 February 1992; that Mr Oxlee carried on business under that name at 323 Sydney Road, Brunswick from 1 July 1987 until 15 July 1994; and that from that date, Ashwood Way and Walter Dell carried on the business under that name at Sydney Road.
Under the contract for sale of the business (Ex. "21") made between Seventeenth Mayelda Pty Limited, Mr Oxlee and Stella Ida Oxlee as vendors and Ashwood Way and Walter Dell as purchasers, there was a sale of "the business including the assets [being certain specified plant and equipment] and the goodwill in the business...". Particulars of the sale included statements that the business name was "Adam & Eve Adult Bookshop... Registration No. 0602189B"; that the type of business was "Adult Books and Accessories"; that the address of the business premises was 323 Sydney Road, Brunswick; that the price was $50,000; that the settlement date was 15 July 1994; and that no stock was included in the sale.
The contract provided that the existing lease of the premises be assigned to Avondale Tower Pty Limited, a company associated with the purchasers. It was stated that the lease was for a term of five years from 1 February 1994 (with "[o]ne option of five years") at a monthly rent of $1,600.
(b) The affidavit and oral evidence of Mr Edward Fraser Oxlee
By his affidavit sworn on 4 January 1996, Mr Oxlee said that in February 1984, he purchased an adult bookshop business carried on at 183D Barkly Street, St. Kilda; and that he traded there under the name "Adam & Eve Adult Bookshop" for about five years, when he closed the business.
Mr Oxlee said that in March 1987 he purchased an adult bookshop business carried on at 100B and 100C Barkly Street, St. Kilda. He conducted that business under the name "Adam & Eve Adult Bookshop" until February 1992, when he sold the business (but not the business name) to a company associated with Mr Eric Hill (as has been noted, one of the controllers of the respondents). Annexed to the affidavit and tendered in Mr Oxlee's oral evidence (Ex. "23") were photographs of the shop front of those business premises, displaying the name "Adam & Eve" prominently and advertising "Adult Books" together with "Lingerie, Marital Aids, Novelties".
Mr Oxlee said that in July 1987 he purchased an adult bookshop business carried on at 323 Sydney Road, Brunswick, which he then conducted under the name "Adam & Eve Adult Bookshop".
Mr Oxlee said that "from the late 1980s Seventeenth Mayelda Pty Limited [a company controlled by him and his wife Stella Ida Oxlee] conducted the [above] businesses..." until this company sold the business and the business name to Ashwood Way and Walter Dell. In the conduct of the business, Seventeenth Mayelda Pty Limited and Mr Oxlee sold by retail adult products such as magazines, videos, condoms, vibrators and other body stimuli.
Mr Oxlee said that "[i]t was customary for [him], [his] staff and customers to refer to each of the businesses as simply `Adam & Eve'".
Annexed to Mr Oxlee's affidavit and later tendered in the course of his oral evidence (Ex. "24"), were photographs of the shop front of the Sydney Road premises, prominently displaying the description "Adam & Eve Adult Book Shop".
Mr Oxlee placed advertisements for his stores in ACM (Melbourne Adult Contact Magazines - Ex. "25") between 1987 and 1994 (T.p.135). Ex. "25" consists of a series of these contact magazines aimed at "swinging couples, threesomes, girls seek boys, boys seek girls" (see the June 1994 issue, priced at $5.50). Mr Oxlee's stores at Brunswick and St. Kilda were advertised in these magazines, amongst other Melbourne adult bookshops, as " `Adam & Eve' Adult Bookshops" and were there claimed to be: "The first in the land".
(It is convenient to note here that according to the evidence of Peter Francis Torney, in his affidavit affirmed on 4 April 1986, Mr Torney has published the ACM magazine since 1983, originally monthly; since 1990, it has been published fortnightly. Circulation (1,700 copies) is by delivery to about 46 retail adult sex product and service businesses in Melbourne and country Victoria, being the majority of those businesses in Victoria, and about 70 subscriptions "Australia wide").
By his affidavit sworn on 9 April 1996, Mr Oxlee said that the signage at 183D Barkly Street was the same as that at 100B and 100C Barkly Street.
Mr Oxlee said that when he was conducting his businesses in Barkly Street, there were in the area a number of adult bookshops, night clubs, establishments which provided semi-nude shows, and a large variety of restaurants and pubs, the majority of which operated until well after midnight. His shops were open from 10.00 a.m. to 2.00 a.m. and on Saturday nights, to 3.00 a.m. On Friday and Saturday nights, there was always a large number of people walking and looking into the shops, including his. There were also prostitutes in the area and on Friday and Saturday nights, large numbers of cars cruised up and down Barkly Street slowly, with the occupants of the cars looking out the car windows at the street life. The "Adam & Eve" bookshop signage was always lit at night. The King's Cross area in Sydney is, in his opinion, the "nearest equivalent" to this area in Melbourne. At that time, most pubs, restaurants and entertainment venues in other parts of Melbourne closed by midnight. The St. Kilda area provided late entertainment and trade.
Mr Oxlee said that his Sydney Road, Brunswick store traded until about 11.00 p.m. Sydney Road becomes the Hume Highway and is the main thoroughfare into Melbourne. The traffic flow is very heavy. The signage at this store was always lit at night.
Mr Oxlee said that he regularly had conversations in his shops with customers, or prospective customers, who would say that they were from other (then nominated) parts of Australia and who would ask - "Where's the action around here?" or "Where are the girls?" or similar questions.
Mr Oxlee said the annual sales of each of his stores was about $15,000. Most sales were for between $15 - $30 per customer.
In cross-examination, Mr Oxlee said that St. Kilda "did have [a `red light'] reputation of being a cosmopolitan [area] similar to King's Cross...". (T.p.136).
He estimated that books and magazines constituted about 65% of his total sales. (T.p.136).
Mr Oxlee said that he became aware of the "Adam & Eve" retail business in Canberra in about 1993 when he received, by mistake, an invoice addressed to that business (T.p.139).
Mr Oxlee said that he did not have a mail order business; that all his business was retail and "over the counter, [there was] nothing under the counter". (T.p.139).
In his belief, it was common in Melbourne for adult bookshops to sell other products, such as sex aids, as a secondary activity (T.pp.140- 1).
In re-examination, Mr Oxlee said that he could recall seeing only one advertisement for the "Adam & Eve" Canberra business and that was in about 1993 "after [he] found out they did exist up in Canberra... I understood [them] to be a video supplier... [He] did see an ad. somewhere which indicated Champion videos and Adam & Eve videos". Being a firm based in Canberra, he "assumed it was x-rated videos". (T.p.142).
(c) The affidavit and oral evidence of Mr Eric Hill
By his affidavit affirmed on 5 January 1996, Mr Hill said that he is a director of each of the first four of the respondent companies and that he has been continuously involved in the adult sex products and services industry for at least 16 years. He said that on 21 September 1995, Silken Hall erected a sign "Adam & Eve" at the 78 Darlinghurst Road, King's Cross premises "in connection with that part of its business which is directed... towards female customers". Silken Hall used the "Club X" sign "in connection with the other part of its business which is directed to male customers".
By his affidavit affirmed on 15 March 1996, Mr Hill said that on 2 November 1994 Texas Park Pty Limited purchased the adult sex product business then conducted on the first floor of the premises 779 George Street, Sydney under the name "Love Art"; and that on 24 January 1996, the sign "Adam & Eve" was erected at the premises. Mr Hill says that the ground floor of the premises is vacant and that on the "Adam & Eve" sign at the premises there is an advertisement of the proposed opening on the ground floor level of an adult sex product business to be conducted there by Texas Park when the premises are upgraded. Mr Hill says that this business will be "directed towards female customers".
By his affidavit affirmed on 2 April 1996, Mr Hill said that since 14 February 1996 he has been the manager, but not a director, of the respondent companies, Club X Pty Limited, Shaft Theatres Pty Limited and Texas Park Pty Limited; that he is a director of Walter Dell Pty Limited, Ashwood Way Pty Limited and Silken Hall Pty Limited; that Walter Dell Pty Limited is his family company; and that Ashwood Way Pty Limited is the family company of his brother, Kenneth James Hill.
Mr Hill said that in 1983 Walter Dell and Ashwood Way licensed Shaft Theatres to use the mark "Club X" in connection with its adult cinema operated at 37 Swanston Street, Melbourne. He said that in 1984 he and his brother agreed to establish a chain of shops selling inter alia adult products and services under the mark "Club X". This mark was registered in Part A of the Register as a trade mark on 21 October 1992, effective for a term of seven years from 25 November 1991 in the name of Club X Pty Limited. Walter Dell and Ashwood Way are now the registered proprietors under an assignment from Club X Pty Limited dated 2 June 1993. The registered mark comprises the stylised words "Club X" plus device and is registered in respect of the retailing of adult products being services included in Class 42.
The certification of registration of the trade mark (part of Ex. "33") states that registration shall give no right to the exclusive use of the word CLUB and the letter X.
The "Club X" mark is as follows:
An example in a mail-order catalogue is as follows:
Mr Hill said that between December 1984 and July 1994 Walter Dell and Ashwood Way licensed the business operators of 27 retail outlets in Victoria, the ACT, New South Wales, Western Australia and South Australia to use the "Club X" mark in connection with the supply of adult sex products and services. The grant of the licences included the businesses conducted at 100B and 100C Barkly Street, St. Kilda (from February 1993), 323 Sydney Road, Brunswick (from July 1994), 78 Darlinghurst Road, King's Cross (from August 1989) and 711 George Street, Sydney (from August 1989).
Mr Hill said that the "Club X" mark has been advertised and promoted by telephone directory listings; shop front signage; television; newspapers; brochures; magazines; radio; computer bulletin boards and mail order. (Examples of the advertising of "Club X" became part of Ex. "33").
Mr Hill said that, effective for a period of seven years from 15 March 1993, Parkhurst Pines Pty Limited, a company associated with him, became the registered proprietor of the "Club Femme Erotica" trade mark, which was assigned to Walter Dell and Ashwood Way by deed of assignment dated 2 June 1993. The mark (No. A597928) comprises the stylised words "Club Femme Erotica" plus device.
This mark is registered in Part A in respect of the retailing of adult products, but excluding the retailing of contraceptives, prophylactics, condoms and/or lubricants, being services included in Class 42. The certificate of registration (part of Ex. "33") states that registration gives no right to the exclusive use of the FEMALE SYMBOL and to the separate exclusive use of the words "FEMME" and "EROTICA".
The "Club Femme Erotica" mark is as follows:
Mr Hill said that, between February 1993 and January 1994, Walter Dell and Ashwood Way licensed the business operations of retail outlets in Victoria, Western Australia, the ACT and South Australia to use the "Club Femme Erotica" mark; and that the mark has been advertised in the ways previously mentioned. (Examples of this advertising, referred to in Mr Hill's affidavit, became part of Ex. "33').
Mr Hill said that Walter Dell and Ashwood Way are now the proprietors of the mark "Club X" plus device in respect of Class 9 goods, Class 16 goods, Class 41
goods and services and Class 42 services; and of the mark "Club Femme Erotica" plus device in respect of Class 9 goods, Class 10 goods, Class 16 goods and Class 42 services.
Mr Hill said that since 3 March 1993, Ram Products Marketing Pty Limited, a company associated with Walter Dell and Ashwood Way, has been the registered proprietor of the business name "Club Femme" in the ACT.
Mr Hill said that, from 1988 to 1990, he and his brother and Kurt Johnson controlled a company Section Forge Pty Limited, which conducted a business called Worldwide Video House from the first floor of the premises 100B and 100C Barkly Street, St. Kilda. In this time, Mr Hill visited the ground floor premises then occupied by Mr Oxlee. Mr Hill observed that offered for sale there, were the following adult products, in particular: sex aids and stimuli; sexually explicit books, magazines and manuals; adult games; lingerie; leather clothing; body lotions, lubricants and oils; sex novelties; penile, clitoral and anal vibrators and stimulators; sexual videos; condoms; and sexually provocative clothing.
Mr Hill said that the vehicular traffic passing the Barkly Street shops at the time was heavy.
Mr Hill said that the businesses conducted under the "Club X" name "were patronised principally by males". Shortly after moving to Barkly Street, he and his brother discussed "how to promote [their] businesses to the potential female clientele". Mr Kenneth Hill suggested that the name "Adam & Eve" would "appeal to both sexes" and made enquiries whether they could lease the Barkly Street shops. In December 1992, Mr Oxlee initiated negotiations with the Hills for the sale of his business, but he indicated that they could not have the "Adam & Eve" name because Mr Oxlee was still using it at Brunswick.
The negotiations were concluded by the entry by Parkhurst Pines into a contract dated 12 February 1993 to purchase the Barkly Street bookshop business from Seventeenth Mayelda for a price of $70,000, of which $69,500 was attributed to goodwill and $500 to plant and equipment (part of Ex. "33"). Solicitors' correspondence prior to the sale (part of Ex. "33") confirmed that the business name was not included in the sale.
By letter to the Director of Urban Planning, City of St. Kilda dated 24 February 1993, Parkhurst's planners applied for permission to erect new signage at the premises using the names "Club X" and "Club Femme Erotica".
Mr Hill referred to photographs showing the "Adam & Eve" signage at the Barkly Street shops between 1988 and February 1993 (part of Ex. "33") as follows:
Mr Hill then referred to photographs (part of Ex. "33") showing the "Club X" and "Club Femme Erotica" signage at these premises since April 1993 as follows:
Mr Hill said that "Club Femme" shops were opened in Canberra in July 1993, in Perth in November 1993 and in Adelaide in January 1994. In this period, he and his brother considered a marketing strategy to attract adult female clientele. They considered that the use of the "Club Femme" name was appropriate where there was an entrance separate from the "Club X" premises; but where there was only one entrance available, another name was needed to attract female clientele.
Mr Hill said that in May 1994, Mr Oxlee inquired whether Mr Hill was interested in buying Mr Oxlee's "remaining interests". Mr Hill asked whether the name "Adam & Eve" was included. Mr Oxlee said that this was "negotiable".
Mr Hill then recounted the negotiations which, as mentioned, were ultimately concluded in July 1994, for the sale of the Sydney Road business, including the name "Adam & Eve".
Mr Hill referred to photographs (part of Ex. "33"), already described, showing the "Adam & Eve Adult Book Shop" signage at the Sydney Road premises which remained in place until August 1994 as follows:
Mr Hill then referred to photographs of the signage at the Sydney Road premises since August 1994 (part of Ex. "33") with the mark "Club X" prominently displayed and below or beside it the words "Adam & Eve Adult Centre", less prominently shown, as follows:
Mr Hill said that "[s]uch combined signage is the product of [our] marketing strategy to retain existing Adam & Eve customers posing that mark as an attraction to female clientele and the Club X registered mark to male clientele at the single entrance Sydney Road shop".
Mr Hill said that in July 1994 he instructed his office manager, David Newnham, to instruct Mr Royal, as the respondents' patent attorney, to apply to register the "Adam & Eve" Trade Mark. Mr Hill referred to the correspondence in this connection (part of Ex. "33") as follows:
(1) By letter to Mr Newnham dated 26 July 1994, Mr Royal confirmed the making of the application in the names of Ashwood Way and Walter Dell and said:
"...we have assumed that the applicant has an intention to use the mark throughout Australia. If this is not the case, it will be necessary to amend the statement to indicate the particular States [or] areas within which the mark is intended to be used. In that case, however, the Registrar would then restrict the effect of the registration to those States or areas..."
(It appears that no such indication was given.)
(2) By letter to Mr Newnham dated 27 July 1994, Mr Royal provided details of the new trade mark application. He added:
"Truefeat Pty Limited's application A578846 has been advertised lapsed."
(Mr Hill was cross-examined about his knowledge of the contents of Mr Royal's letter dated 27 July 1994. His response (T.pp.190-1) was that he "hadn't actually read [it]").
(3) In the official report on the application to register the trade mark dated 12 April 1995, the examiner (Ms Janet Long) reported, inter alia, that the mark did not meet the requirements of s.33 of the Trade Marks Act because it was "substantially identical or deceptively similar to "another registered trade mark (No. 545477) and was "for the same or closely related goods or services".
(The other mark (No. 545477) comprising the words "Adam & Eve", of which Adam and Eve Corporation, a Japanese corporation, was the registered proprietor, was registered in Part A of the Register for a period of seven years from 12 November 1990 in respect of "articles of clothing; bath robes, clothing belts, brassieres, top coats, girdles, gloves, hats, caps, jackets, jerseys, jumpers, neckties, pyjamas, scarfs, shirts, skirts, suits, swimsuits, trousers, underwear, vests, shoes and boots, and all other Class 25 goods excluding hosiery, socks and stockings".)
In her report, the examiner went on to say:
"Please agree to the following endorsement as a condition of registration:
Registration gives no right to the exclusive use of the word ADAM.
I have requested this endorsement because the word ADAM is a surname which occurs 1,269 times in our Search For Australian Surnames which is based on the Australian electoral roll."
(4) By letter to Mr Newnham dated 24 April 1995, Mr Royal advised that they should argue against the objection citing trade mark No. 545477. Mr Royal said that this was a registration "in relation to articles of clothing which we can distinguish from the wholesaling and retailing of adult products of your interest".
(It appears that their argument was successful since, as has been noted, their application was ultimately accepted under s.44(1) of the Trade Marks Act 1955 . The registered mark was sealed on 12 October 1995, effective from 26 July 1994.)
In his affidavit, Mr Hill went on to say (para. 49.3 of his affidavit) that on 21 September 1995 Silken Hall:
"in association with the `Club X' registered mark which it uses in connection with that part of its retail adult sex products and services business at the Darlinghurst Road shop directed towards male customers erected a sign advertising the registered mark directed towards adult female customers".
Mr Hill said that Walter Dell and Ashwood Way "have continuously used" the "Adam & Eve" registered mark in Australia since completion of their purchase of the "Adam & Eve" business by:
(i) the continuous display of the mark at the Sydney Road shop since 15 July 1994.
(ii) the continuous display of the mark by their licensee, Silken Hall, at the Darlinghurst Road shop since 21 September 1995.
(iii) the continuous display of the mark by their licensee, Texas Park, at the 779 George Street, Sydney shop since 24 January 1996.
Mr Hill said that, since July 1994, there has appeared in the Melbourne White Pages telephone directory the entry "Adam & Eve 323 Sydney Road Brunswick"; and that in the Melbourne Yellow Pages there has appeared the entry "Adam & Eve Adult Books 323 Sydney Road Brunswick".
Mr Hill said that in the 1995 Melbourne telephone directory there is an entry "Adam & Eve Videos of Australia 42 Hoskins Street Mitchell ACT" with a freecall number; and that in the Yellow Pages there is an entry "Adam & Eve Videos 125 Gladstone Street Fyshwick" with the same freecall number (part of Ex. "33").
Mr Hill referred to a report by the Victorian Roads Corporation (part of Ex. "33") indicating that between 1989 and 1995 traffic movements on Sydney Road, Brunswick, near where the respondents' shop is located, ranged between about 12,000 to 20,000 movements over a 24 hour period.
By his affidavit affirmed on 12 April 1996, Mr Hill said that the company which has operated the 323 Sydney Road, Brunswick store since July 1994 is Rosewood Grange Pty Limited, a company controlled by Mr Hill, Mr Hill's son, Craig Hill, and Mr Hill's younger brother, Glen Hill. Mr Hill said that, in July 1994, in his capacity as a director of Walter Dell and Ashwood Way, he said the following to them:
"Ashwood Way and Walter Dell have bought the business at 323 Sydney Road, Brunswick. Ken and I want Rosewood Grange to run the business. The name which the business has been using is `Adam & Eve' and we want to keep that name. We also want the `Club X' name to be used. The business will be run as part of the group."
Mr Hill said that his son and his younger brother agreed to his proposal.
Mr Hill said that prior to September 1995, he attended a meeting of the directors of Silken Hall at which Mr Ken Hill and George Sobota, also directors, were present. It was decided that Silken Hall would change the name of the King's Cross shop by using the "Adam & Eve" name "in conjunction with" the "Club X" name.
Mr Hill said that he, Mr Ken Hill and Mr Sobota attended a meeting of the directors of Texas Park at a date prior to January 1996. It was then decided that Texas Park conduct a business at the 779 George Street, Sydney premises using the name "Adam & Eve".
In cross-examination, Mr Hill was asked about his knowledge of the litigation between Mr Franks and Mr Morton in 1994 over the control of Mitchell Products (Truefeat). It was put to Mr Hill that by April 1994 he had subsidised Mr Morton to the extent of $7,000 in Mr Morton's dispute with Mr Franks. Mr Hill's response (T.p.178) was:
"I can't say what the amount of money would have been."
It was put to Mr Hill that he continued to subsidise Mr Morton in his litigation with Mr Franks. Mr Hill's response (T.p.178) was:
"I would suggest we weren't subsidising Mr Morton. Mr Morton wished to meet with us and discuss matters and he actually approached us."
It was then put to Mr Hill that Mr Morton offered a proposition to him that if Mr Morton succeeded in his claim of ownership of Mitchell Products, the respondents would be given the name "Adam & Eve" used by the applicants. Mr Hill's response (T.p.179) was:
"I am not aware of that arrangement."
Mr Hill said (T.p.179) that he was aware that in 1994 discussions took place between Mr Morton and Mr Newnham in which Mr Morton indicated that he was "broke" and "required an air fare and accommodation".
Later, Mr Hill said (T.p.190) that although he "would have seen and spoken to Mr Morton", he was not "involved in the negotiations or [otherwise] directly involved".
Mr Hill agreed that the respondents have not used the name "Adam & Eve" in connection with any of their ACT stores (T.p.181).
Mr Hill said that the respondents do not have a catalogue for the videos they sell. They do not now have a mailing list, although they used to be in the mail order business, using the name "Club X Mail Order" or "Price Busters Mail Order". (T.p.185).
Mr Hill was asked about his instructions in July 1994 to Mr Newnham to apply for the registered trade mark, and whether he knew at that time that there was a business in Fyshwick, ACT which had been operating for 18 months selling products within the Class which the respondents claimed for their mark. Mr Hill's response (T.p.186) was:
"I knew a business in the ACT, yes, with that sign in front."
It was then put to Mr Hill that he did not limit his trade mark application to places outside the ACT. Mr Hill's response (T.p.181) was:
"I did not see any need to."
Mr Hill was then asked whether he thought that use by him in the ACT of the name "Adam and Eve" in connection with his business there would be likely to confuse people into thinking that there was some connection with the existing business of the applicants. Mr Hill's response (T.p.186) was:
"I didn't think there would be any confusion."
It was put to Mr Hill that he knew in July 1994 that there was a business which had been established for about 18 months at Fyshwick operating under the name "Adam and Eve". Mr Hill's response (T.p.189) was:
"I knew there [were] premises with Adam and Eve on the front. I don't know anything about the structure of that business."
When asked whether the respondents planned to open an "Adam and Eve" business in the ACT, Mr Hill's response (T.p.189) was:
"That would be [sc. decided] in consultation with other directors and shareholders on our overall marketing plan. I believe that we ultimately would [move in]... [but] I am only surmising and I don't make sole decisions in our company."
When it was put to him that, given the use by the applicants of the name "Adam & Eve" at the Fyshwick store, if the respondents moved into the ACT and used that name, it would be "highly confusing", Mr Hill's response (T.pp.189-190) was:
"I don't believe so. The opponents [the applicants] appear to operate under many very different names and they seem to change them quite regularly."
Mr Hill accepted, however, that the applicants have not changed the name "Adam & Eve" at Fyshwick since January 1993 (T.p.190).
Mr Hill agreed that there is a "concentration" of the "adult" or "x- rated" industry in the ACT (T.p.191); and that there is "a great concentration of mail order people there [operating under the Commonwealth licensing system]" (T.pp.191-2).
Mr Hill said that all of the respondents' shops where the "Club X" name is used (including the Sydney Road store), have signage with a similar graphic layout and a particular device used as a ("Club X") logo (T.p.193). This logo appears prominently inside and outside the respondents' shops and as a "retail sticker" on all the material that is marketed (T.p.194).
CONCLUSIONS ON THE TRADE MARKS ISSUES
(a) Introduction
A question arises at the outset as to the order in which the issues on the applicants' claims and on the cross-claimants' cross-claims should be dealt with. Counsel noted that a similar question arose in Nike International Limited v. United Pharmaceutical Industries (Aust.) Pty Limited (1996) 35 IPR 385. Sheppard J. decided (at 395-6) that it was expedient to consider the trade mark issues first. In the present case, counsel put their submissions on the trade mark questions before dealing with the Trade Practices and passing off issues. I propose to follow that sequence as it appears to be the convenient course here also.
(b) Is the Trade Marks Act 1955 or the 1995 Act applicable to the applicants' claim for rectification of the Register?
I have dealt with this preliminary question in separate reasons (No. 2) published with these reasons, in which I concluded that the 1995 Act applies. I will proceed on that basis, but in the event that this matter goes further, I will also express an opinion, in an appendix to these reasons, as to what the position would have been in the event that I had held that the 1955 Act had applied.
(c) The applicants' claim for rectification of the Register
It will be recalled in this connection that the applicants' primary claim is for cancellation of the registered trade mark; or that, alternatively, there be imposed appropriate conditions limiting the effect of the registration in terms of its territorial operation. The applicants rely upon ss.88(1) and (2)(a), 41(2), 42 and 43 of the 1995 Act.
I should note that in my opinion, the applicants have locus standii as "aggrieved persons" in terms of s.88, to bring the application for rectification. To use the test postulated by McLelland J. in Ritz Hotel Limited v. Charles of the Ritz Limited (1988) 12 IPR 417 (at 454), the applicants have a real interest in having the Register rectified. There is a reasonable possibility of the applicants being appreciably disadvantaged in a legal or practical sense by the Register remaining unrectified: cf Nike per Sheppard J. (at 399).
By s.88(1) it is provided:
"88(1) Subject to subsection (2) and section 89, a prescribed court may, on the application of an aggrieved person, order that the Register be rectified by:
(a) cancelling the registration of a trade mark; or
(b) removing or amending an entry wrongly made or remaining on the Register; or
(c) entering any condition or limitation affecting the registration of a trade mark that ought to be entered".
By s.88(2)(a) it is provided that an application may be made on any of the grounds of opposition to registration under Division 2 of Part 5. Those grounds will be considered below.
Section 88 should be read with s.89. By s.89 it is relevantly provided:
"89(1) The court may decide not to grant an application for rectification made:
(a) ...
(b) on the ground that the trade mark is liable to deceive or confuse (a ground... [of opposition] see paragraph 88(2)(a)); or
(c) ...
if the registered owner of the trade mark satisfies the court that the ground relied on by the applicant has not arisen through any act or fault of the registered owner.
(2) In making a decision under subsection (1), the court:
(a) ...
(b) may take into account any... matter that the court considers relevant."
Part 5 of the 1995 Act deals with "Opposition to Registration". Division 2 of Part 5 (ss.57-62) deals with "Grounds for Opposition to Registration". It is provided by s.57, relevantly, that the registration of a trade mark may be opposed on any of the grounds on which an application for the registration of a trade mark may be rejected under Division 2 of Part 4, except the ground that the trade mark cannot be represented graphically.
Sections 41, 42 and 43 are in Division 2 of Part 4.
By s.41(1) it is provided that, for the purposes of s.41, the use of a trade mark by a predecessor in title of an applicant for the registration of a trade mark is taken to be a use of the trade mark by the applicant.
An "applicant" is defined by s.6 to mean the person in whose name the application is for the time being proceeding; thus for present purposes, Walter Dell and Ashwood Way are the applicants.
"Predecessor in title", in relation to a person who claims to be the owner of a trade mark, means, relevantly:
"(a) ...
(b) ... the person who assigned the trade mark... to the first- mentioned person."
At common law, an unregistered trade mark may be assigned with the business in which it is used, and in the absence of an agreement to the contrary, will pass by implication on a transfer of the goodwill of that business (see Shanahan, Australian Law of Trade Marks and Passing Off 2nd Ed. at 302).
It will be recalled that under the contract for the purchase in July 1994 by Ashwood Way and Walter Dell of the Sydney Road business (Ex. "21"), there was a sale of "the business including... the goodwill..."; that the particulars of sale referred to the registered business name "Adam & Eve Adult Bookshop", and that the business was described as "Adult Books & Accessories". It is clear, then, that the bookshop business, its goodwill and its business name were assigned to the purchasers under the contract. Any trade mark in that connection (if the entitlement to one existed, a question to be addressed later) would also have been assigned under the contract, there being no agreement to the contrary.
It should be noted here that there is, of course, a clear distinction between a business name on the one hand, and a trade mark on the other. A business name refers to the name under which the business is carried on; and when a name is also used to indicate the trade origin of goods or services, it can function also as a "trade mark" within the meaning of the Trade Marks Legislation (see Shanahan, op. cit. at 416-7). I will return to this aspect later.
By s.41(2) of the 1995 Act it is provided that 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 (the "designated goods or services") from the goods or services of other persons. (This provision should be read in the light of ss.17 and 19, defining a "trade mark", to be mentioned below).
The phrase "the goods (or "services") of a person" is defined by s.6 to mean goods or services dealt with or provided in the course of trade by the person.
By s.41(3) it is provided that 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.
By s.41(4), if the Registrar is still unable to decide the question, the following provisions apply:
(1) 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;
(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 (s.41(5)).
(2) If the Registrar finds that the trade mark is not 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 (s.41(b)).
It should be noted here that the concept of "use" of a trade mark is dealt with by s.7 of the 1995 Act as follows: 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 alternations that do not substantially affect the identity of the trade mark (s.7(1)). 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 the Act, a use of the trade mark (s.7(2)). An "authorised" use of a trade mark by a person (as defined by s.8 in essence use "under the control" of the owner) is taken, for the purposes of the Act, to be a use by the owner (s.7(3)). In the Act: (a) "use" in relation to goods means use "upon, or in physical or other relation to", the goods (including second-hand goods) (s.7(4)); (b) "use" in relation to services, means use "in physical or other relation to "the services (s.7(5)).
By s.17, referred to above, a "trade mark" is defined as 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.
By s.19(1) a trade mark may be registered in accordance with the Act in respect of: (a) goods; or (b) services; or (c) both goods and services.
Another ground for opposition in Division 2 of Part 5 which might have been a relevant consideration in this matter is s.60. Section 60 provides that registration of a mark can be opposed if it is substantially identical with or deceptively similar to a trade mark that, before the priority date for the registration of the first- mentioned trade mark in respect of those goods or services, had acquired a reputation in Australia and because of the reputation of the other trade mark, the use of the first-mentioned mark would be likely to deceive or cause confusion. However, as it was not relied upon by the applicants, I express no opinion about it.
I turn now to the application of these statutory provisions to the facts and circumstances of the present case. It will have been noted from the summary of the evidence made earlier, that there was ultimately little, if any, room for contest about the primary facts. It also appeared that there could be no substantial point of departure between the parties in terms of the inferences to be drawn from the primary facts.
It is convenient to consider the position first from the point of view of the activities carried on by Mr Oxlee and his family company, since the application for registration was made at the time of the disposition by Mr Oxlee of his business to the applicants (for registration), that is, in July 1994.
As has been seen, the evidence discloses and, in the absence of any serious challenge, I find, that since 1984 Mr Oxlee carried on the business of an adult bookshop under the trade name "Adam & Eve Adult Bookshop" at Barkly Street until February 1992 and at Sydney Road from July 1987 until July 1994; that the principal business carried on under that name was the retail sale of adult books and "accessories". The "accessories" were adult products of the kind described by Mr Hill in his description of Mr Oxlee's Barkly Street premises, that is, in the main, x-rated videos, lingerie, body stimuli apparatus and hygienic rubber articles.
Whether the retail sale by Mr Oxlee of these books and "accessories" could, by some stretching of language, be described in other, exceptional circumstances, as a dealing with, or a provision of "services" at all (as distinct from a dealing with, or provision of "goods") need not be finally resolved now. But it is clear from the evidence that the other services in respect of which the Trade Mark was registered (restaurants, brothels, social centres etc.) were not provided by Mr Oxlee in the course of the conduct of its businesses. In short, the unchallenged evidence discloses and I find that at both Barkly Street and Sydney Road, Mr Oxlee carried on the business of the retail sale of adult books and accessories under the trade name "Adam & Eve Adult Bookshop".
Two conclusions follow from this finding. First, no question arises, relevantly, of the use of a trade mark in respect of "services" as distinct from "goods". Secondly, although as has been noted, it is possible that a trade or business name (whether or not registered) may be used as a trade mark (see, e.g. Westinghouse Electric Corporation v. Thermopart Pty Limited (1967) 1A IPR 647 at 659), this is not a relevant consideration here since such use (if any) was, in my view, in respect of goods, and not in respect of services (cf. Caterpillar Loading Hire (Holding) Pty Limited v. Caterpillar Tractor Co. [1983] FCA 145; (1983) 48 ALR 511 per Lockhart J. at 524).
The distinction between the provision of goods and the provision of services is well indicated by the signage later adopted by the respondents at the Sydney Road premises, previously mentioned, referring to "Club X. Adam and Eve Adult Centre". If this is the true character of the business, that is, a social centre or "club", its operations may properly be viewed as the provision of services. There may be grey areas and questions of degree arising here but, in my opinion, Mr Oxlee's business is fairly characterised as a dealing in or provision of goods, rather than of services.
This is not to say that I do not accept that Mr Oxlee's business name had no goodwill attached to it. The evidence discloses, and I find, that his business name had, from 1984, established a local goodwill, first in the St. Kilda area and later in the region of Brunswick. However, I am not satisfied that Mr Oxlee's business was well known beyond those parameters. Mention has been made of limited advertising by Mr Oxlee, especially in the Adult Contact Magazines, that presumably would have been noticed by residents of other parts of Victoria. But the scale of Mr Oxlee's operations was not substantial. The size of his businesses was, no doubt, reflected in the relatively modest prices paid for them by the respondents. Mr Oxlee was not, of course, the manufacturer of the goods he retailed. Nor could it have been suggested that those goods were identified in some way with his "Adam & Eve" business name as the source or origin of the goods. In other words, in my view, it could not have been said that Mr Oxlee "used" the mark "Adam & Eve" in relation to goods dealt with or provided by him. Rather, he used the words "Adam & Eve" as the business name of his adult bookshop.
It should be added that a further difficulty which would have confronted Mr Oxlee in establishing that he was the owner of a mark that distinguished his services (or goods) is the special nature of the name he chose to employ. Adam and Eve, as the first man and the first woman and their biblical story are as well known to the public as any story in our history. Their names have been used in countless contexts, some of which have been picked up in the many business name registrations already described.
It should further be mentioned that another problem for Mr Oxlee in justifying his registration of the trade mark would have been the reputation arising from the activities of Melhero, and perhaps of Dominion Publishing and "AXIS" as well, in the name "Adam & Eve" in connection with its business activities at Fyshwick. By July 1994, the applicants had established substantial businesses under that name in selling, locally and by mail order, x-rated videos and accessories and also through an associated company, Budtint, in providing services in Arcade at Fyshwick. It is true that most of Melhero's business was local to Canberra but the evidence disclosed, and I find, that a significant proportion of its custom came from outside Canberra, either as tourists or pursuant to a dealing under a mail-order transaction by an interstate resident. Even if it be accepted that Mr Oxlee for trade mark (as distinct from passing off) purposes, did not need to establish a general market reputation in Australia (see Re Trade Mark "Thunderbird" [1974] HCA 51; (1974) 48 ALJR 456 at 459), he had to show distinctiveness within the meaning of s.41.
Despite the evidence that Mr Oxlee's business had undoubtedly used the mark for a number of years prior to the commencement by the applicants of the use of the mark, at the time of registration of the mark by the respondents, the applicants had also been trading under the name "Adam and Eve" and had already gained a substantial reputation in the name in respect of the same goods and services in relation to which the mark was registered. Notwithstanding the geographically localised nature of the two businesses, the evidence, including the fact that much trade was done by mail-order, indicates that it is likely that there would be confusion between the two businesses.
It follows, in my opinion, that Mr Oxlee, and thus the applicants for registration, could not have satisfied the "distinctiveness" criteria of s.41. In my view, as at July 1994, the name "Adam & Eve" was not capable of distinguishing their services (or goods) from the goods or services of other persons. It further follows from the language of s.41(2) that any application for registration must be rejected. The Register should, accordingly, be rectified by cancelling the registration.
Although not necessary to do so, I will also mention the possible operation of s.43 of the 1995 Act in the present circumstances.
By s.43 it is provided that an application for the registration of a trade mark in respect of particular goods or services must be rejected if, because of some connotation that the trade mark or a sign contained in the trade mark has, the use of the trade mark in relation to those goods or services would be likely to deceive or cause confusion.
Whether a mark is misleading or deceptive is essentially a question of fact. It is directed at ordinary members of the public and in particular the normal buyers of the goods or services in question. The test is well-known; a mere possibility of confusion is not enough. There must be a real, tangible danger of its occurring. It is sufficient if the result of the user of the mark will be that a number of persons will be caused to "wonder" whether the two products may have come from the same source. Southern Cross Refrigerating Co. v Toowoomba Foundry Pty Limited (1954) 91 CLR 592 at 595 per Kitto J.
In my opinion, on the assumption (contrary to my earlier holding) that Mr Oxlee could establish that the mark was distinctive of its services (or goods), the use of the mark would, by July 1994, have been likely to deceive or cause confusion in some limited circumstances. It is true that both Melhero and Mr Oxlee were trading under the same name and selling by retail the same or very similar products, the area of Mr Oxlee's operation and reputation was, as has been found, territorially limited to St. Kilda and Brunswick, and most of Melhero's business was sourced in Canberra. Nonetheless, there must have been a real possibility that at least some of the potential customers of each of their businesses would "wonder about" the source or original of the services (or goods) on offer, so that s.43 could apply (cf. Carnival Cruise Lines Inc. [1994] FCA 936; (1994) 120 ALR 495).
As has been noted, by s.89(1)(b), the court may decide not to grant an application for rectification made on the ground that the trade mark is liable to confuse or deceive, if the registered owner of the trade mark satisfies the court that this ground has not arisen through any act or fault of the registered owner.
In my opinion, if, as I think, there would have been a likelihood of confusion as at July 1994, it did not arise through the conduct of Mr Oxlee. He had been using the name, in good faith, since 1984, whereas Melhero did not commence its operations until January 1993. It is true that Mr Hill was aware or Melhero's business name, and of Truefeat's lapsed application, when he applied for registration. But, for present purposes, it is Mr Oxlee's position that is relevant as the immediate predecessor in title in the senses previously discussed. Thus, in my view, the Court's jurisdiction under s.89(1)(b) is available to be exercised in an appropriate case. But, it is another question whether the discretion conferred by s.89 ought to be exercised, so that the application for rectification would be refused.
I have difficulty in accepting that the discretion should be exercised in favour of Mr Hill and his companies. Whilst Mr Oxlee is free of any blame, he did not seek to claim registration of a trade mark. But Mr Hill did so, knowing of Melhero's similar activities and identical business name, and knowing also that one of Melhero's associates had applied for, if not ultimately pursued, an application to register that mark. Moreover, Mr Hill agreed in his evidence, as has been noted, that he was aware that in about April 1994 negotiations had been carried on with Mr Morton, who was then obviously dissatisfied with Mr. Franks. In all of those circumstances, for Mr Hill to proceed with the application for registration of the Trade Mark must have been, to his knowledge, a risky step. It is not a case, then, where, in my view, a discretion in his favour ought to be exercised.
Nor, in my view, is there any "public interest" reason, as was urged on behalf of the respondents, in favour of declining to order the removal of the trade mark.
(As has previously been mentioned, I have included in the Appendix to these reasons, an opinion on what would have been the position if the 1955 Act had applied.)
CONCLUSIONS ON TRADE PRACTICES ISSUES
On behalf of the applicants it is contended that the respondents, in choosing to use the signage "Adam & Eve" at the Darlinghurst Road premises in September 1995, have engaged in conduct which is likely to mislead or deceive. The applicants argue that, as at September 1995, their reputation and goodwill in the name "Adam & Eve" in connection with the mail order and retail sale of adult videos and "adult services" was such that the use of the name "Adam & Eve" by the respondents at their King's Cross premises was likely to lead to a "conclusion" by a "significant" number of people that there was some association between the business conducted a those premises and the applicants' established business. (It should be noted that it is now well established by the authorities that the trade mark test of "wondering" about the question is not the test here.)
It may be accepted that if the facts here justified the "conclusion" by members of the public contended for by the applicants, a prima facie contravention of s.52 of the Trade Practices Act would be established. But I am unable to agree that the evidence warrants a finding that a "significant" number of persons would be likely to conclude in September 1995 that there was some association between the business conducted at Darlinghurst Road and the applicants' businesses.
In this area, it is now also well established by the authorities that the test under s.52 is, in essence, a factual inquiry. As has been noted earlier, although both sides here have used the same name in carrying on similar businesses, there are important differences between them: First, Mr Oxlee's business, as developed by the respondents in conjunction with the "Club X" and "Femme" names, may be seen as less "upmarket", and much smaller, than the applicants' businesses. Secondly, the applicants' businesses have always, in its mail-order aspects, emphasised the special x-rated standing of Canberra and Darwin as exclusive locations (in the Territories) for the conduct of that special kind of operation. Thirdly, the applicants have also made extensive use of the names "Champions" and "SIN- Sations" in conjunction with the name "Adam & Eve"; and, significantly, in Sydney they have continued to use the name "Campus 159" in conjunction with "Adam & Eve". Fourthly, the "Axis" catalogues distributed by the applicants advertise "Adam & Eve" videos produced in the United States, distinguishing them from videos from other x-rated videos, for instance, European ones. Next, and perhaps most important, the name "Adam & Eve" appears, on the evidence, to have very little significance in Sydney. When the territorial aspects of the parties' respective reputations are considered, in essence, Mr Oxlee's businesses and the respondents' business should, as I have said, be seen as centred in St. Kilda and Brunswick, whereas the applicants' businesses should be viewed as Canberra-based; and until September 1995, shortly before the institution of these proceedings, there was no use of the name "Adam & Eve" in Sydney in this field of business. Finally, it is also material to bear in mind, in the present connection that, as has been previously mentioned, the names of "Adam" and "Eve" are extremely well known in many other contexts. Indeed, it is difficult to think of names that would be more familiar to the public.
In my view, no contravention of s.52 has been established in the respect alleged by the applicants. In the absence of any real threat by the respondents to use the name "Adam & Eve" in the Australian Capital Territory, there is no basis for the Court to intervene in that regard.
CONCLUSIONS ON PASSING OFF
For similar reasons, the claim of passing off must, in my view, also fail.
For our purposes, the relevant principles are as stated by Shanahan op. cit. (at 373) as follows:
"Where it is alleged that the misrepresentations being effected by the use of some trade mark, trade name or get-up, the plaintiff's own indicium must be known in the relevant market. Its `reputation' must extend to the geographical area in which the defendant is making the representation and to the class of purchaser to which the representation is addressed."
Although the position may well have been different if the respondents had sought to establish in the Australian Capital Territory a business under the name "Adam & Eve", there is, as has been said, no real threat by the respondents to do this. As has been noted, the parties' respective businesses operate in different geographic areas and are otherwise different in the respects previously mentioned.
In the circumstances, there is no need to deal with the discretionary defences raised by the respondents.
CONCLUSION ON THE CROSS-CLAIM
Given the conclusion that the Trade Mark ought to be cancelled, the cross-claim must fail. It may be noted that if the Trade Mark had remained on the Register, a question would have arisen as to the significance, in this context, of the use, by both sides, of the other names mentioned ("club X", "Femme", "Champions", "SIN-Sations" and "Campus 159"), in conjunction with the trade name "Adam & Eve" (cf. Carnival Cruise, above, per Gummow J. at 513).
ORDERS
1. Direct the applicants to bring in short minutes of orders in accordance with these reasons for judgment.
2. Costs reserved.
THE POSITION UNDER THE 1955 ACT
In my reasons I have held that any mark, as distinct from a trade name, used by Mr Oxlee in respect of services (or goods) dealt with or provided by him was not distinctive within the meaning of s.41 of the 1995 Act. I have also held that the 1995 Act rather than the 1955 Act applies to the rectification claim. I will now consider the position, in terms of the alleged "distinctiveness" of Mr Oxlee's mark, as if under the 1955 Act, in the event that I be wrong in applying the 1995 Act.
In Top Heavy Pty Limited v. Killin (1996) 34 IPR 282, Lehane J. compared the provisions of the two Acts in this area and concluded that there were no differences of a substantial kind. With respect, I agree with that analysis. It follows that I would not have been satisfied, for the purposes of the 1955 Act, that Mr Oxlee, or the second and third respondents, were entitled to register the mark as a distinctive mark.
In the Nike Case, above, Sheppard J. dealt with an expungement application on the basis that the 1955 rather than the 1995 Act applied. I respectfully agree with his Honour's analysis of the authorities in this area especially on the "blameworthy conduct" question (at 396-405). My attention has been drawn to the somewhat different approach taken by Tamberlin J. in Canon v. Brook (1996) 36 IPR 88 (at 101), but I note that they were opposition, not expungement, proceedings and may be distinguished accordingly.
As I have held in my reasons, there was a likelihood of confusion, in terms of persons "wondering" about their source, arising between the use of the same name by both Melhero and Mr Oxlee in selling the same or similar products. There was also, in my view, for the reasons already given, conduct on the part of Mr Hill in proceeding to apply for the registration of the mark which could fairly be described as "blameworthy". It would have followed, in my view, that expungement proceedings under the 1955 Act should also have succeeded.
I certify that this and the preceding one hundred and six (106) pages are a true copy of the Reasons for Judgment herein of the Court.
Associate
Dated: 20 January 1997
Counsel and Solicitors Mr. J. Ireland Q.C.
for applicants: Instructed by Hunt & Hunt
Counsel and Solicitors Mr A. Bannon
for respondents: Instructed by Rockliffs
Dates of hearing: 10, 11, 12 April 1996, 22 August 1996
Date Judgment delivered: 20 January 1997
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