Colorado Group Limited v Strandbags Group Pty Limited [2006] FCA 160 (28 February 2006)

FEDERAL COURT OF AUSTRALIA

Colorado Group Limited v Strandbags Group Pty Limited [2006] FCA 160

TRADE MARKS – proprietorship – first use – registration purportedly for article of a similar kind – geographical designation – whether descriptive – whether distinctive

PASSING OFF – time for determining existence of cause of action – concurrent use – each party has reputation in mark – no misrepresentation

TRADE PRACTICES – s 52 – confusion – not sufficient to establish claim – meaning

Trade Marks Act 1995 (Cth) ss 41, 88(2)(e)
Trade Practices Act 1974 (Cth) s 52

Ainsworth v Walmsley (1866) 1 Eq 518 cited
Arkwright v Newbold (1881) 17 Ch D 301 applied
Barnsley Brewery Co Ltd v RBNB [1997] FSR 462 cited
BP plc v Woolworths Ltd (2004) 62 IPR 545 discussed
Cadbury-Schweppes Pty Ltd v Pub Squash Co Ltd [1981] RPC 429 applied
Clark Equipment Co v Registrar of Trade Marks [1964] HCA 55; (1964) 111 CLR 511 cited
Collins Co, The v Oliver Ames & Sons Corporation, 18 F 561 (1882) cited
Colman v Crump, 70 NY 573 (1877) cited
Columbia Mill Company v Alcorn, 150 US 460 (1893) cited
Edwards v Dennis (1885) 30 Ch D 454 cited
Erven Warnink Besloten Vennootschap v J Townend & Sons (Hull) Ltd [1979] AC 731 cited
Estex Clothing Manufacturers Pty Ltd v Ellis and Goldstein Ltd [1966] HCA 81; (1967) 116 CLR 254 discussed
General Electric Co of USA v General Electric Co Ltd [1972] 1 WLR 729 cited
Habib Bank Ltd v Habib Bank AG Zurich [1981] 1 WLR 1265 cited
Hicks’s Trade Mark, In re (1897) 22 VLR 636 cited
Hudson’s Trade-Marks, In re (1886) 32 Ch D 311 cited
Irvine v Talkspot Ltd [2002] FSR 943 cited
J B Palmer’s Trade-Mark, In re (1883) 24 Ch D 504 cited
J C Penney Company Inc v Penneys Ltd [1975] FSR 367 cited
Jackson & Co v Napper (1886) 35 Ch D 160, 178 cited
Krakowski v Eurolynx Properties Ltd [1994] HCA 22; (1995) 183 CLR 563 applied
Leather Cloth Co Ltd v American Leather Couch Co Ltd (1863) 4 De G J & S 137 cited
Lee v Jones (1864) 17 CB (NS) 482 cited
Marengo v Daily Sketch and Daily Graphic Ltd [1992] FSR 1 cited
Peter Isaacson Publications v Nationwide News Pty Ltd (1984) 3 IPR 255 cited
Pioneer Kabushiki Kaisha v Registrar of Trade Marks [1977] HCA 56; (1977) 137 CLR 670 cited
Richards v Butcher [1891] 2 Ch 522 cited
Royal Baking Powder Co, In re [1880] WN 49 cited
Shell Co of Australia Ltd v Rohm & Haas Co [1948] HCA 27; (1949) 78 CLR 601 cited
Shell Co of Australia Limited v Esso Standard Oil (Australia) Limited [1961] HCA 75; (1963) 109 CLR 407 applied
Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 followed
Tattinger v Allbev Limited [1992] FSR 647 cited

McCarthy on Trade Marks and Unfair Competition, vol 2 (2005)
Restatement of the Law of Torts, vol III (1938)

COLORADO GROUP LIMITED and WILLIAMS THE SHOEMEN PTY LIMITED v STRANDBAGS GROUP PTY LIMITED

VID 809 of 2004

FINKELSTEIN J
28 FEBRUARY 2006
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 809 of 2004

BETWEEN:	COLORADO GROUP LIMITED and WILLIAMS THE SHOEMEN PTY LIMITED Applicants
AND:	STRANDBAGS GROUP PTY LIMITED Respondent
AND BETWEEN:	STRANDBAGS GROUP PTY LIMITED Cross-Claimant
AND:	COLORADO GROUP LIMITED and WILLIAMS THE SHOEMEN PTY LIMITED Cross-Respondents

JUDGE:	FINKELSTEIN J
DATE:	28 FEBRUARY 2006
PLACE:	MELBOURNE

1 This is a trade mark infringement action with subsidiary claims for misleading conduct (s 52 of the Trade Practices Act 1974 (Cth)) and passing off. There is a trade mark which lies at the base of each claim. It is the word "Colorado". The mark was registered on 16 February 2001 in respect of, among other articles, "bags, wallets, purses and backpacks, belts," being goods in class 18 and in respect of "services for the bringing together, for the benefit of customers, of a variety of goods in the following classes ... [including] class 18 being bags, belts, wallets, purses and backpacks". The infringement claim is brought under s 125 of the Trade Marks Act 1995 (Cth). Relief is sought under s 126. The principal defence is via a counterclaim seeking an order for the removal of the trade mark.

2 The first applicant, Colorado Group Limited (formerly known as Williams Shoes Limited), is a public company that has been listed on the Australian Stock Exchange since December 1999. Before its listing Colorado Group was a subsidiary of Venator Group, Inc (formerly known as Woolworth Corporation) a large and well-known New York corporation. Initially, Colorado Group did not carry on any trade in its own right. Its principal businesses "Williams the Shoemen" and "Mathers for Shoes" (obviously footwear retailing businesses) were conducted through subsidiaries, the second applicant, Williams the Shoemen Pty Limited, and Mathers Shoes Pty Limited, respectively. In 1991 the group was restructured and the footwear businesses transferred to Colorado Group.

3 At the present time Colorado Group (by which appellation I include Williams the Shoemen) operates in Australia a chain of retail stores. It has 165 Williams the Shoemen stores, 96 Mathers for Shoes stores, 28 JAG stores (which sell men’s and women’s clothing and fashion accessories), 10 Diana Ferrari stores (which sell women’s footwear and leather goods) and 82 Colorado stores. The Colorado stores sell clothing, accessories and footwear. Ms Hudson, the general manager of the Colorado division, said that when they were established, the idea was that Colorado stores would market their products with "strong reference to [an] outdoors, rugged lifestyle". Now, as a result of Ms Hudson’s initiative, Colorado is a "lifestyle" brand, "offering smart, casual, integrated looks that connote or evoke a quintessentially ‘Australian casual’ look and feel."

4 It is necessary to know something about the history of the applicants and how they came to market goods bearing the mark "Colorado". In 1982 there were approximately 140 Williams the Shoemen stores around Australia. In addition to selling shoes another product sold in those stores was a style of backpack with the word "Colorado" embroidered on the front. The word "Colorado" may have appeared in conjunction with a logo comprising a "simple mountain motif". The logo was certainly applied to backpacks from 1988. The backpacks were sold for use predominantly by schoolchildren and hence marketed as a "back to school" product. Although the backpacks were sold throughout Australia, the product was most successful in north Queensland.

5 Beginning in 1987 the Colorado mark was also applied to shoes. Mr Williams, who was with the Colorado Group during the 1980s, said that initially the word was used in conjunction with the "simple mountain motif": both marks appearing on the sock of the shoe. The word also appeared by itself on the outside of the shoe near the heel.

6 In 1988 Mr Williams began working with others on the development of a three peaked mountain logo for use in conjunction with the word "Colorado". The logo took its final form by 1991. Thereafter the mountain logo was displayed on "Colorado" shoes on the inner sole, the bottom of the sole and on the outside of the upper of the shoes.

7 Although new to Australia in 1982, the Colorado mark was not a new mark. Mr Williams described it as a "generic name" used by the parent company (Woolworths Corporation) on goods marketed in the United States. In describing the mark as a "generic name" Mr Williams meant that it was an "in-house" brand name used by Woolworths as a trade mark for its own products. Footlocker and Lynx are examples of other "generic names" used by Woolworths Corporation. Goods bearing the Colorado mark (backpacks and shoes) were acquired for sale through the agency of Woolworths Overseas Corporation, which, I assume, was another Woolworths subsidiary. That company arranged for the manufacture of merchandise bearing "generic names". Representatives of the Australian subsidiary, and presumably also of subsidiaries in other countries, visited WOC’s offices where sample goods were available for inspection. If a subsidiary wished to purchase any of those goods the order for their manufacture would be placed by WOC, which was also responsible for quality control and ensuring that the goods met the local company’s specifications. It is not clear when this arrangement came to an end for the Australian subsidiary, but most likely it lasted until shortly before the listing of Colorado Group.

8 The volume of Colorado backpacks sold through Williams the Shoemen stores was relatively modest. On the other hand, some considerable success was being achieved with the sale of Colorado shoes through both Williams the Shoemen and Mathers stores, especially as the range available increased and the quality improved. While detailed accounting records are no longer available it is estimated that in 1990 around $8 million worth of Colorado branded products was sold by the two stores.

9 The success of Colorado branded shoes led the then retail director, Mr Beagley, to come up with the idea of expanding the Colorado range to include clothing and accessories and establishing a chain of "Colorado" stores to sell those products. As a preliminary step an advertising agency was retained to work on the proposal with Mr Beagley. Together they produced a report in late 1992. The "Key Research Findings" in the report were:

The proposal suggested that the brand’s "new image" be built around the Colorado mountain logo.

10 The report also discussed "Brand Registration". It noted: "Under Australian trademark law, registration of geographical names are [sic] difficult. Currently we are endeavouring to register Colorado as a business name and our distinctive mountain logo as a trademark. Should we be unsuccessful in securing binding registration, we will change to a new name, however, maintaining the identical concept."

11 In July 1992 the Woolworths Corporation resolved to go ahead with the proposal. During the next 12 months Mr Beagley and others within the Colorado Group developed a range of products that were to be sold through the Colorado stores. The products were clothing, footwear, accessories (including backpacks, socks, hats, underwear and shoe care items), leather and non-leather belts, bags and wallets.

12 Three Colorado stores were opened in July 1993. One was located in Doncaster, Victoria, another in Parramatta, New South Wales and the third in Penrith, New South Wales. A fourth store was opened in September 1993, in Darling Harbour, Sydney, New South Wales. Each store was stocked with a full range of Colorado branded products. Some, such as bags, were marked with the Colorado mark alone while others were marked with both the Colorado mark and the mountain logo. Although the word Colorado was sometimes used in isolation, the predominant use of the word was in association with the mountain logo, particularly in relation to footwear, bags, handbags and other accessories. During the next three years (1993 to 1996) six more Colorado stores were opened, three in New South Wales, two in Queensland and one in Victoria.

13 Initially the new venture was not profitable but this was not unexpected. In 1997 or 1998 it was decided to change the "image" of the Colorado brand and expand the number of Colorado outlets. Ms Hudson, at the time the general merchandise manager, was behind the move. Her idea was to redefine the Colorado image to an "Australian lifestyle" brand. Ms Hudson described this style as "a lot cleaner and smarter" than the previous "outdoor" image. Under Ms Hudson’s watch the number of Colorado stores expanded significantly and the range of Colorado branded products grew to encompass items such as watches and eyewear. By this time the mark "Colorado" was used principally alone. The result of the changes in style as well as a significant increase in advertising was that turnover improved dramatically.

14 It is now time to say something about the respondent, Strandbags Group Pty Limited. The company was incorporated in New South Wales in 1983 and currently operates (in some cases through franchisees) a chain of 186 stores around Australia. It is a speciality retailer of bags, travel goods, backpacks, wallets and other small leather goods and accessories. It has an extensive portfolio of registered trade marks, including a mark that incorporates the word "Colorado". Goods branded with the Colorado mark were originally put onto the market by Edgarlodge Pty Ltd, a company owned and controlled by Lee Evans and his wife. Edgarlodge’s business was established in the 1980s. It sold bags, luggage, briefcases and accessories, initially under the business names "The Travel Bug" and "Bagstop".

15 In the early years Edgarlodge obtained its stock from Australian importers and local manufacturers. In the latter part of the 1980s Mr Evans began to investigate the possibility of importing his own products. He also considered what brand name he should use for the imported goods. He chose the word "Colorado". He says this was because he had been looking for something with an American influence and being a John Denver fan was fond of "Colorado Rocky Mountain High" describing it as "one of [my] favourite songs". "Colorado Rocky Mountain High" is not the title of a Denver song, but is a recurring line in a song entitled "Rocky Mountain High". At all events, Mr Evans said that he decided to use the word "Colorado" in early 1990. He also said that he was not aware of anyone else in Australia using that name. Mr Evans conducted a search at the Trade Marks Office and the Australian Securities Commission to see if anyone had registered a mark or business name using the word "Colorado". The searches disclosed that "Colorado" was neither a registered business name nor a registered trade mark. When it was discovered that the word was apparently available for use, Edgarlodge applied for and obtained registration of the business name "Colorado Leathergoods" on 30 May 1990.

16 I am very dubious about Mr Evans’ evidence concerning his choice of the mark. That he was a John Denver fan may be accepted. But I do not believe the rest of his story. I suspect that Mr Evans had come across the name on goods (probably goods sold by one of the applicants) and wanted to use it but needed to check if anyone (perhaps one of the applicants) had rights in respect of it.

17 Moving on, in early 1991 Mr Evans’ secretary, Ms Priest, prepared a design for a logo to be used in conjunction with the word "Colorado". The logo was the head of an American Indian. In due course the word and logo mark was registered as a combination mark in respect of handbags, travelgoods and belts in class 18. The products initially manufactured bearing the new mark (the word "Colorado" with the Indian head logo) were a range of handbags. The mark was embossed on the front of each handbag. Sales of the new line began in 1991 at Edgarlodge’s then eleven Queensland stores. In 1992 changes were effected to the style of the mark "Colorado" and to the Indian head and applied to the then existing range of over twenty-four styles of handbag. The handbags proved to be popular so new products were added to the range, such as suitcases, wallets, key cases and coin purses. As the range expanded to include other products, the combination mark was applied to them as well. Between 1995 and 1998 the combination mark was applied to goods such as backpacks, briefcases and associated products as well as handbags. Depending on the size of the product, the word and logo were either stamped on a leather patch and sewn onto the product or stamped directly onto the product. As the range of goods continued to expand this practice varied. For example, the word "Colorado" was stamped onto a gold metal tag and affixed to handbags, business bags and luggage. The word "Colorado" was also printed on business card inserts that were placed inside wallets.

18 In August 1992 Edgarlodge opened a retail store in Liverpool, New South Wales. The store was designed as a "Colorado theme store" with the word "Colorado" in the shopfront design and on many Colorado products that were sold alongside other products. The Liverpool store closed in April 1994. Mr Evans said that this was due to its poor location. At the same time there was a substantial increase in the volume and range of Colorado branded products sold by Edgarlodge at its other stores. These were products on which the combination mark or the Colorado mark alone was affixed. From 1995 to 1997 Edgarlodge opened fourteen stores that traded under the name "The Colorado Bag Co". By this time, the Colorado side of Edgarlodge’s business had become a sizable operation. In the years 1997 and 1998 sales of Colorado branded products totalled $1.27 million and $2.08 million respectively.

19 Strandbags Group came into the picture in September 1998 when it purchased from Edgarlodge the businesses conducted under the names "The Travel Bug", "The Colorado Bag Co" and "Bagstop". Included among the assets purchased was the goodwill relating to the business carried on by Edgarlodge at its "The Travel Bug", "The Colorado Bag Co" and "Bagstop" outlets. In addition Strandbags Group also purchased from Edgarlodge several business names, including those just mentioned, together with a number of registered trade marks, including the Colorado with Indian head mark.

20 Following the acquisition Strandbags Group decided to "liquidate" the stock it had just purchased, as well as stock that was currently on order by Edgarlodge and for which Strandbags Group had assumed responsibility. Included among the stock to be "liquidated" was all Colorado branded products. The intention was to replace this stock with stock manufactured by Strandbags Group’s own suppliers. There were two reasons. First, Edgarlodge’s computerised inventory system was not compatible with that of Strandbags Group and, second, it wished to produce a better quality product. It regarded itself as catering to "the professional woman seeking a stylish, leather, functional [product]" and who was shopping for the "Australian casual" look.

21 The liquidation of the Colorado stock was completed by about March 1999. Thereafter, apart from handbags, the stock was replaced by Strandbags Group’s own lines of footwear, leathergoods (wallets and the like), backpacks, travel goods and business goods (mainly satchels) all marked "Colorado". A range of Colorado branded handbags was designed and introduced in 2002. The range is now very extensive. Indeed, overall the categories of Colorado products sold by Strandbags Group are substantially larger than those that were supplied by Edgarlodge.

22 Having provided a sketch of some of the more important facts, I can now deal with the claims. As I have said, Colorado Group’s principal claim is for trade mark infringement. By way of answer there is a substantial attack against the validity of the registration of the mark and a cancellation order is sought. It is, I think, convenient to deal with this aspect first. The application for cancellation is made under s 88. Two grounds are relied upon. One relies on grounds upon which the registration of the mark could have been opposed (s 88(2)(a)). Here it is said that Colorado Group was not the proprietor of the mark or, if it was the proprietor, the mark was not distinctive of its goods. The other ground is that registration was obtained by false suggestion or misrepresentation (s 88(2)(e)).

23 I will look at proprietorship first. In In re Hicks’s Trade Mark (1897) 22 VLR 636, Holroyd J said (at 639): "A person cannot be properly registered [under the Trades Marks Act] unless he is the proprietor. Proprietor is the person who at the moment he makes application to be registered is entitled to the exclusive use of the name, whether he then or before publicly adopted it." Broadly speaking, a person may be the proprietor of a mark in one of two ways. First, in respect of a mark which has never been used the proprietor is the person who is (or claims through) the author of the mark (which could include the copyist of a foreign mark) and intends to use it: In re Hudson’s Trade-Marks (1886) 32 Ch D 311, 319-320; Shell Co of Australia Ltd v Rohm & Haas Co [1948] HCA 27; (1949) 78 CLR 601, 627-628. Second, a person may be the proprietor of a mark if he has used it, provided no-one else has used the mark before him. This last proposition requires some elaboration. In the case of an inherently distinctive mark nothing more than first use is necessary to establish proprietorship. The applicant need not show that the mark has gained public recognition. Any general use of the mark as a trade mark will be enough, although in a rare case the use may be so inconsequential that it should be ignored as de minimus. Perhaps care should also be taken when there has been only a slight use of the mark followed by a long period of non-use, where something akin to the doctrine of abandonment might apply. If a mark is not inherently distinctive but indicates that an article emanates from some (usually anonymous) source because, or partly because, the mark has acquired a secondary meaning, strictly speaking first use is not sufficient to establish proprietorship. To make out proprietorship it is also necessary to show that the mark does in fact distinguish the applicant’s goods from the goods of others. Even if this is not an aspect of proprietorship (as I think it is), unless a secondary meaning is established s 41 would bar registration of the mark.

24 When considering proprietorship it is important to remember that there is no proprietorship in a mark per se. Under the common law "property in a trade-mark is ... the right to the exclusive use of some mark, name or symbol in connection with a particular manufacture or vendible commodity": Leather Cloth Co Ltd v American Leather Couch Co Ltd (1863) 4 De G J & S 137, 144. See also Ainsworth v Walmsley (1866) 1 Eq 518, 524 ("This Court has taken upon itself to protect a man in the use of a certain trade-mark as applied to a particular description of article"). The position is no different under the Trade Marks Act. The effect of the current statute, which is substantially similar to earlier legislation, is that a trade mark must be registered in respect of particular goods or services specified in Schedule 1 to the Trade Marks Regulations 1995 (Cth): Trade Marks Act, ss 19, 27 in combination with Trade Mark Regulations, reg 3.1, 4.4, Sch 1.

25 It follows that proprietorship by first use is proprietorship in relation to the goods or classes of goods on which the mark has been used. The proprietor is entitled to have his mark registered in respect of those goods. This entitlement is not confined to identical goods or classes of goods. Registration may also be obtained for goods or classes of goods which is or are "a thing [or things] of the same kind" (Jackson & Co v Napper (1886) 35 Ch D 160, 178) or "like articles of production" (Columbia Mill Company v Alcorn, 150 US 460, 464 (1893)) or "articles of merchandise of the same kind" (Colman v Crump, 70 NY 573, 578 (1877)) or "kindred articles" (The Collins Co v Oliver Ames & Sons Corporation, 18 F 561, 570 (1882)), if there be any difference between these expressions. See also Edwards v Dennis (1885) 30 Ch D 454.

26 With this background in mind the first question to be resolved on proprietorship is whether as at 16 February 2001, Colorado Group was the proprietor of the mark "Colorado" in respect of backpacks, bags, wallets, purses and belts and for services in respect of those articles. In looking at this question I will assume for the time being, though it is a matter in dispute, that the mark was capable of being distinctive of Colorado Group’s goods and services. The answer to the first question requires consideration of three issues, viz (1) Was Colorado Group or its predecessor the first user of the Colorado mark on a backpack, being the article in respect of which first use is claimed? (For this purpose it is conceded that Williams the Shoemen was the predecessor of Colorado Group. It is also conceded that Williams the Shoemen was the first user of the word "Colorado" in combination with the "simple mountain motif"); (2) If the word was applied to backpacks not alone but in combination with the "simple mountain motif" can Colorado Group (or its predecessor) nevertheless claim to be the first user of the Colorado mark?; (3) If Colorado Group (or its predecessor) was the first user of the Colorado mark on backpacks, is a bag, wallet, purse or belt the same kind of article? Unless each pair of questions (1) and (3), or (2) and (3), are answered affirmatively, the registration has gone too far and either Colorado Group is not the proprietor of the Colorado mark or is not the proprietor in respect of bags, wallets, purses and belts. It may be that Edgarlodge first used the word "Colorado" on those goods, albeit in combination with the Indian head logo.

27 Before I answer the question -- Is Colorado Group or its predecessor the proprietor of the Colorado mark by first use? -- it is necessary to get out of the way two preliminary points. The first is this. It was suggested (perhaps only faintly) that when Williams the Shoemen and Colorado Group used the word "Colorado" on shoes and backpacks it was not use as a trade mark. To determine whether this submission is correct I will proceed on the basis that if the word was used in a manner that would be understood by the public to indicate that the goods came from a definite or particular source, or that they emanated from the same, albeit anonymous, source as certain other goods, that is use as a trade mark. It is quite clear that the word "Colorado" appearing on backpacks with or without the "simple mountain motif" was used to distinguish those goods as having a particular origin: that is, it was used as a trade mark. It served no other function on the backpacks. The use of the mark on shoes presents some difficulty. One can readily imagine a designation, especially a word, applied to an article that comes in several styles, being used to distinguish the style and no more. Here, the photographs depicting the boxes in which the shoes were packed shows quite clearly a trade mark use. In any event I think this conclusion is inevitable in the case of the combination mark.

28 The second preliminary point is whether the mark "Colorado" was used as a trade mark by Colorado Group or by Woolworths Corporation, the United States parent. In support of a submission that the use was by Woolworths Corporation alone, Strandbags Group relies on a passage from Estex Clothing Manufacturers Pty Ltd v Ellis and Goldstein Ltd [1966] HCA 81; (1967) 116 CLR 254, 271:

29 In my opinion that case does not support the argument. In the first place Estex established only that when a foreign owner of an Australian trade mark sells imported goods bearing the mark and the goods are then sold in Australia the foreign owner uses the mark in Australia. The case did not consider whether the local retailer also used the mark: Pioneer Kabushiki Kaisha v Registrar of Trade Marks [1977] HCA 56; (1977) 137 CLR 670, 688. In the second place there is little similarity between the facts of this case and those in Estex. Woolworths Corporation was not a foreign manufacturer of goods. It was not the owner of an Australian trade mark. It did not sell goods bearing the Colorado mark for delivery in Australia. What we have here is a local retailer which, through the agency of a related company, arranged for goods to be manufactured overseas bearing a mark nominated by the local retailer and then imported the goods for retail sale. The only involvement of Woolworths Corporation is that it authorised its local subsidiary to use one of its in-house marks. It no doubt permitted other subsidiaries to use those marks in other jurisdictions. However that may be, merely authorising a person to use a mark in Australia is not use in Australia by the person giving the authority. It is clear in my view that only Colorado Group used the mark in Australia.

30 Having got these preliminary points out of the way, I can now return to the first question. As I have said, it is not in dispute that Colorado Group used the word "Colorado" in combination with the "simple mountain motif" on backpacks and shoes before the word "Colorado" was used by Edgarlodge. Speaking generally, however, a person who is the proprietor of a combination mark is not the proprietor for trade mark purposes of the marks comprising each separate component: In re J B Palmer’s Trade-Mark (1883) 24 Ch D 504; In re Royal Baking Powder Co [1880] WN 49; Richards v Butcher [1891] 2 Ch 522. But there may be exceptions to the general rule. In BP plc v Woolworths Ltd (2004) 62 IPR 545 I was required to consider whether it was possible to dissect a mark that was made up of several components and obtain trade mark registration of only one component. I said (at 567-568) that it could be done, provided the component for which registration is sought "creates an impression which is totally separate from the other[s] and is distinctive, that is it performs the trade mark function of identifying the source of the goods and services to customers." While I have heard no evidence on the point, my impression here is that each component (or at least the word) serves that function. On this basis, then, Colorado Group could be regarded as the first user of the "Colorado" mark.

31 There is another basis for this conclusion. As regards backpacks (being the only article in respect of which there is a possibility of establishing first use of the word mark) I agree with Mr Ryan that it is unclear whether the word "Colorado" was accompanied by the logo, at least in the early years. There were only two witnesses called who were with Williams the Shoemen in 1982 and onwards, Mr Williams and Mr Ainsworth. In his affidavit Mr Williams said that the backpacks were packaged in a cellophane bag which bore the printed word "Colorado". He also said the word "Colorado" was embroidered on the front of the backpack without the "simple mountain motif". In oral evidence he said he was "sure that there was [the mark] across the top flap of the backpack. A recollection of the logo I cannot recollect." When pressed he said: "[I] couldn’t rule it [the mountain logo] out." Mr Ainsworth’s recollection went back only to the mid-1980s. He said that at that time the mark on the backpacks comprised the word "Colorado" and the mountain logo. Given this state of the evidence it is not possible to reach any conclusion about the nature of the mark on backpacks between 1982 and, say, 1985. In particular, one cannot say with any confidence that the mark comprised both the word and logo. This conclusion is necessarily adverse to Strandbags Group which carries the onus on the cross-claim.

32 On the last of the three questions -- Are bags, wallets, purses and belts the "same kind" of goods as a backpack? -- the answer in my view is in the negative. First it must be recalled that the style of backpack in respect of which the mark was used (and in respect of which it could be registered) was designed and promoted principally for use by schoolchildren for carrying stationery, books and other school items. There are other styles of backpack, for example fashion backpacks or those used for mountain-climbing and hiking, but they are not the type with which the comparison must be made. Broadly speaking, a "bag" is a receptacle made of some flexible material closed in on all sides except at the top: see Oxford English Dictionary vol 1 (2^nd ed, 1989) 880. There are, however, many different types of bags. They are as varied as plastic bags, bodybags, laundry bags etc. Thus, not every bag can be the "same kind of thing" as a schoolboy’s backpack. In particular, a schoolboy’s backpack is not akin to a ladies handbag. Those are usually intended as a fashion item for the female consumer (albeit for an everyday use). Articles such as wallets, purses and belts are even more dissimilar to the schoolboy’s backpack given their respective, and different, uses. This is not a case where the proprietor of a mark which has been applied to different kinds of articles that fall within a class or category of goods seeks to register that mark in respect of other articles within the class or category. Such a proprietor would be entitled to register his mark not only for each article in the class to which the mark has been applied but also for such other articles in the class which a consumer would reasonably believe are likely to originate from the same source.

33 The next ground of attack against the registration of the trade mark is that it was not distinctive of Colorado Group’s goods. The point arises in the following way. Generally, a word, name or device (or any other designation that may be a "sign" for the purposes of the Trade Marks Act) can only be distinctive of a person’s goods or services if it is "inherently adapted to distinguish" those goods or services or, if it is not inherently distinctive, if it has become distinctive by use, that is if it has acquired a secondary meaning. A designation that is merely descriptive of the character of the goods or of their geographic origin or location cannot be inherently distinctive. At least in the case of a geographic description "there is necessarily great difficulty in proving that by reason of use or other circumstances [the designation] does in fact distinguish his goods": Clark Equipment Co v Registrar of Trade Marks [1964] HCA 55; (1964) 111 CLR 511, 515 per Kitto J in an oft quoted passage.

34 As a matter of principle, the "great difficulty" that confronts an applicant who seeks to register a descriptive mark, especially a mark that describes the location or origin of goods, should be found to exist only in the case of a term that has that effect in relation to the specific goods for which registration is sought. As regards a geographic term, in my opinion the comment on Subdivision (a) of SS720 of the Restatement of the Law of Torts, vol III (1938) correctly states the position. The comment reads:

Reference should also be made to the decision of the Supreme Court of the United States in Hamilton-Brown Shoe Co v Wolf Brothers & Co, 240 US 251 (1916). The case concerned a trade mark consisting of the words "The American Girl" as applied to women’s shoes. The Supreme Court said of this mark (at 256-257): "We do not regard the words ‘The American Girl,’ adopted and employed by complainant in connection with shoes of its manufacture, as being a geographical or descriptive term. It does not signify that the shoes are manufactured in America, or intended to be sold or used in America, nor does it indicate the quality of characteristics of the shoes. Indeed, it does not, in its primary signification, indicate shoes at all. It is a fanciful designation, arbitrarily selected by complainant’s predecessors to designate shoes of their manufacture. We are convinced that it was subject to appropriation for that purpose, and it abundantly appears to have been appropriated and used by complainant and those under whom it claims."

35 In order to decide whether a geographic term is used descriptively one would ordinarily make the following kinds of inquiries: (1) Is the mark the name of the place from which the goods come?; (2) Is the geographic term likely to denote to a reasonable purchaser that the goods come from the place or region named?; (3) Is the place or region noted for the particular goods in question? See generally McCarthy on Trade Marks and Unfair Competition, vol 2 SS14.7. The result of such inquiries would likely show, for instance, that consumers would perceive as designating geographic origin the word "Swiss" when applied to watches, the word "Japan" when applied to motor vehicles, the word "Brazil" when applied to coffee beans and, for those with a local interest, the words "Bank of Melbourne" in relation to banking services. On the other hand, I am certain in my own mind that the word "Colorado" when applied to backpacks or other articles, such as shoes, is not used in a geographical sense. The use of the word "Colorado" in connection with the kinds of goods with which we are concerned is an arbitrary use making it inherently distinctive and thus requiring no proof of secondary meaning.

36 In reaching this conclusion, I have rejected the possibility, with one slight exception, that the word "Colorado" can be descriptive of backpacks or shoes. I have referred to the evidence which is to the effect that the word "Colorado" conjures up notions of trekking, ruggedness, fashion, Rocky Mountains and so on. For the most part those ideas are concerned with the image of the brand and are not descriptive of the goods themselves. The slight exception is that the word may incidentally say something about quality (for example that the goods are "rugged" or durable) but because the word is only indirectly informative it is not likely to be perceived by many in a descriptive sense. Thus the attack based on lack of distinctiveness is not made out.

37 To deal with the allegation that the trade mark registration was obtained by false suggestion or misrepresentation I need to say a little more about the facts. Following the examination of the application for the registration of the trade mark it appeared to the examiner that there were grounds for rejecting it. On 29 June 2001 the Registrar wrote to Colorado Group advising it of those grounds (by providing it with a copy of the examiner’s report) and giving it a reasonable time within which to address those grounds. One issue raised by the examiner was that the trade mark was not distinctive. Relevantly the examiner’s report stated:

On 8 October 2002 Colorado Group provided the Registrar with additional information in support of its application. After considering the additional information the Registrar accepted the application and, there being no opposition to its registration, the mark was registered with effect from the date of lodgement.

38 The information provided to the Registrar, and upon which the Registrar presumably relied to grant registration, included a statement of Mr Williams made a year earlier. When it provided the additional information Colorado Group was well aware of the activities of Strandbags Group. More importantly, it knew about the activities of Strandbags Group as at February 2001, which was the relevant time for the purpose of considering whether the trade mark was distinctive of Colorado Group’s goods. Colorado Group also appreciated that it had to provide some information to the Registrar about the use to which the word "Colorado" had been put by Strandbags Group. Mr Williams’ statement dealt with that matter. He said:

39 This was much less information about Strandbags Group’s activities than was actually known to Colorado Group. Partly for that reason it is said that Mr Williams’ statement was misleading, and did in fact mislead the Registrar. The statement is said to have been misleading in the following respects (and here I quote from Strandbags Group’s submissions): "(a) at least, as to the 2001 status of the Respondent’s uses, and/or (b) very possibly, so as to think that there was some relationship between the trade mark applicant and the Colorado Bag Co." As to (b) it is not being alleged that what was said was untrue (a direct misrepresentation) but, rather, that there was an implied or inferred representation to the effect that all that was known about Colorado Bag Co was being disclosed. Further, this is not a case of omission because an omission (if there be any) must render an actual statement false for it to be a misrepresentation: Arkwright v Newbold (1881) 17 Ch D 301, 309. I propose to proceed on that view.

40 I do not accept that the Registrar would have read Mr Williams’ statement as indicating that there was some relationship between Colorado Group and Colorado Bag Co. The last sentence of the first quoted paragraph only makes sense if there were no relationship between the two. The other alleged misrepresentation, however, cannot be dismissed out of hand. If what was said by Mr Williams would naturally lead the Registrar to suppose that Mr Williams had disclosed all that he knew about the activities of Colorado Bag Co he has made a representation to that effect: Lee v Jones (1864) 17 CB (NS) 482, 510. In deciding what the Registrar would suppose, I am required to assume the Registrar is a reasonable person in that position: Krakowski v Eurolynx Properties Ltd [1994] HCA 22; (1995) 183 CLR 563, 576-577. The view I take is that a reasonable Registrar would likely think that Mr Williams was providing him with information about the situation in 1991 and not as things stood in 2001. The first paragraph is in terms confined to events in 1991 -- "The first Colorado Bag Store opened [in] 1990 or 1991" -- "At the time" this was a cause for some concern but not a major concern because "at that time" the brand was characteristic of Colorado Group’s goods. The reference in the second paragraph to "At the time" and "at that time" likewise points the Registrar to 1990 or 1991. In both paragraphs Mr Williams is making what he no doubt thought was an important point (whether it was or not being irrelevant), namely, that nothing of relevance happened after 1990 or 1991 because the mark had already acquired distinctiveness. I do not accept that Mr Williams’ statement would have been understood by the Registrar as referring to "the 2001 status of [Strandbags Group’s] uses."

41 This conclusion makes it unnecessary to consider whether the Registrar was in fact misled by any implied misrepresentation. It goes without saying that it would have been near to impossible for this allegation to be made out in the absence of the Registrar, who was not called to give evidence.

42 There is in any event a complete answer to the misrepresentation case that does not at all depend upon the meaning to be attributed to Mr Williams’ statement. Even if Mr Williams had set out to deceive the Registrar, the point raised by the examiner was not a good point. This is because I do not agree with the examiner (or therefore the Registrar) that the entitlement to registration depended upon satisfaction of s 45(5). I have already explained that when used on shoes and backpacks the mark "Colorado" was inherently distinctive and that there was no need for evidence of use of the mark having acquired a secondary meaning. Of course the Registrar was required to determine whether the word was used in a geographical sense, but that should have taken him along a different line of inquiry. So, if there was misrepresentation which procured the registration of the mark, as a matter of law it was a misrepresentation about an irrelevant fact.

43 Turning to infringement, I will proceed on the basis that Colorado Group is the proprietor of the mark only in respect of backpacks. This is because in obtaining registration for goods other than backpacks and shoes Colorado Group cast its net too wide and, subject to what the parties may say about the imposition of conditions or the like, its mark should be taken off the register in relation to the goods or classes of goods for which it had not been used and which are not of the same kind as backpacks. On this basis, the question is whether Strandbags Group’s use of the marks "Colorado" and "Colorado Bag Co" in relation to the sale of backpacks is the use of a mark that is substantially identical with or deceptively similar to the Colorado Group trade mark.

44 Applying the principles to be gathered from cases such as Shell Co of Australia Limited v Esso Standard Oil (Australia) Limited [1961] HCA 75; (1963) 109 CLR 407, 415, it is clear beyond any doubt that Strandbags Group’s use of the word "Colorado" infringes the trade mark. A defence under s 122(1)(f) was abandoned. The facts will not support the defence under s 124. This is not because (as was alleged) Edgarlodge is not Strandbags Group’s predecessor in title (I am sure that it is having regard to the terms of the contract of sale), but because Edgarlodge’s use of "Colorado" on backpacks was not a prior use.

45 This brings me to the passing off claim. There is no dispute about the elements of the cause of action. There is a very useful summary of the five elements by Lord Diplock in Erven Warnink Besloten Vennootschap v J Townend & Sons (Hull) Ltd [1979] AC 731, 742. Here the question is whether Colorado Group can make out goodwill and misrepresentation. To prove damage it is no longer necessary to show loss of sales or disparagement of goodwill. It is enough if the exclusivity of the goodwill is eroded: Tattinger v Allbev Limited [1992] FSR 647; Irvine v Talkspot Ltd [2002] FSR 943. Thus if goodwill and misrepresentation are established, damages will be proven. The case was conducted on that basis.

46 Moving to the merits, I will begin by stating two principles. The first is so elementary that it hardly needs stating. The principle is this. Statute and vicarious liability apart, A cannot bring an action against B to recover damages or secure other relief for an injury done by C. The second principle is that the relevant time for determining whether there has been a passing off is the date on which the impugned conduct commenced (Cadbury-Schweppes Pty Ltd v Pub Squash Co Ltd [1981] RPC 429; J C Penney Company Inc v Penneys Ltd [1975] FSR 367) or when the passing off was first threatened (Barnsley Brewery Co Ltd v RBNB [1997] FSR 462), whichever is the earlier. The combined effect of the two principles is that the time at which it is necessary to assess Colorado Group’s claim in passing off is 21 September 1998. That is the day on which Strandbags Group completed the purchase of the Edgarlodge business and commenced its use of the "Colorado" mark. The earlier activities of Edgarlodge cannot be the basis for relief against Strandbags.

47 The situation as at September 1998 was that Colorado Group had a substantial reputation in the Colorado brand throughout Australia. It had approximately 150 Williams the Shoemen and 120 Mathers stores selling Colorado branded products. The evidence does not show how many Colorado stores then existed but I know that by January 1999 (some three months later) there were 30 Colorado stores (up from 19 the previous year), 11 in New South Wales, 8 in Queensland, 3 in South Australia, 4 in Victoria, 1 in Western Australia, 2 in the Australian Capital Territory and 1 in the Northern Territory. I will assume there were a few less as at September 1998. The total turnover of the Colorado division (that is, not including sales at Williams the Shoemen and Mathers stores) was approximately $17.15 million and $31.1 million in 1997 and 1998 respectively. Advertising of Colorado products for the Colorado division was $315,000 in 1997 and $575,000 in 1998. If one has regard (as one should) to the sale of all Colorado products the approximate turnover in 1997 was $82.110 million and in 1998 it was $96.247 million, the total advertising costs in those years being $1.112 million and $1.347 million respectively.

48 Following its acquisition of the Edgarlodge business Strandbags Group also had a large operation selling Colorado branded products. It had acquired 25 stores, including 15 Colorado Bag Co stores that sold Colorado products. The sale of Colorado products brought in $1,271,790 in 1997 and $2,086,218 in 1998. There can be no doubt that Strandbags Group also had a substantial reputation in the Colorado brand, largely centred around Queensland but not confined to that State.

49 It is worth observing, for it will become relevant in a moment, that in view of the substantial trade being done by Strandbags Group, it would have been surprising if this trade was not noticed by Colorado Group. And at least by 1990 or 1991 it had been noticed. In one of those years (it is not clear which) Mr Williams saw a Colorado Bag Co store in south Sydney, possibly the Liverpool store. He said he was "surprised at the name of the store" but no action was taken by him or his employer. Mr Beagley recalled in 1992 seeing a Bagstop shop in Brisbane where handbags marked "Colorado" were being sold. In 1995 at the same shopping centre he saw a Colorado Bag Co store. When asked why Colorado Group took no action about these activities Mr Beagley interestingly said: "We did. We went and looked at a lot of other trade mark registrations to try and, you know, sort of put a ring fence around Colorado and try and get more registrations. But you will note in my proposal [a reference to his earlier report suggesting the establishment of a Colorado chain] that there was concern about the vulnerability of the mark back in the early 90s."

50 In 1995 Colorado Group conducted a business name search of Colorado Bag Co and discovered the proprietor. There was then an exchange of correspondence between Colorado Group and Edgarlodge. The letters are privileged and hence were not produced. I have, however, been given a letter dated 13 August 1998 from Edgarlodge to Colorado Group’s attorneys. It asserts that Colorado Group’s use of the word "Colorado" infringed Edgarlodge’s own trade mark, namely the Colorado with Indian head mark. The letter also alleged that by using the word "Colorado", Colorado Group was infringing s 52 and was passing off its goods as being those of Edgarlodge. In response Colorado Group demanded that Edgarlodge cease selling goods by reference to the mark "Colorado" but said it could use its registered mark (being the Colorado with Indian head mark). By that time, however, Strandbags Group was on the scene and the letter was passed on to its advisers. They issued a denial of infringement and asserted that it was "our client’s customers who have been confused".

51 While I am on the topic of awareness it is also of some relevance to note that Mr Webb, the managing director of Colorado Group, not only knew of Edgarlodge’s use of the "Colorado" mark but also Strandbags Group’s use of the mark. Mr Webb first found out about the use by Edgarlodge in September 1998. He knew at least by 2001 that Strandbags Group had taken over the Edgarlodge business and was making extensive use of the "Colorado" mark. Indeed, in 2001 he met Mr Campbell, Strandbags Group’s managing director, and discussed that use. Nothing was resolved. The two met again in April 2004. At that meeting Mr Webb foreshadowed the institution of this proceeding, indicating that the previous period of "co-existence" could not continue.

52 Now, coming back to September 1998, the position was this. At that time both Colorado Group and Strandbags Group had a reputation in the name Colorado. I rather think that if one were to go back to the 1980s when Williams the Shoemen’s use of the name was confined to backpacks and shoes it and Edgarlodge occupied different fields of trade and it is unlikely, except for those consumers who were careless, that confusion would arise. By the time the companies’ fields of activity began to overlap (that is when Colorado Group was opening its Colorado stores and Edgarlodge was operating its Colorado Bag Co stores) there was the potential for confusion. In the early years the different locations in which the parties operated would suggest that any confusion would not be substantial. Moreover, the fact that Colorado Group’s combination mark (word and mountain logo) was different from Edgarlodge’s combination mark (word with Indian head) would also minimise the possibility of confusion.

53 Whatever be the position in the years leading up to 1998, from the time Strandbags Group purchased the Edgarlodge business both it and Colorado Group had a strong reputation in the Colorado brand. I think this finding must put an end to the passing off claim. In a trade mark case General Electric Co of USA v General Electric Co Ltd [1972] 1 WLR 729, 743, Lord Diplock said: "In cases of honest concurrent user [and Strandbags Group’s use is concurrent], neither of the owners of [a common law trade mark] could restrict the other from using it, but as against a usurper who infringed it either owner of the mark could obtain an injunction". In a passing off case when two traders have a reputation in the same or similar names that are concurrently being used "neither of them can be said to be guilty of any misrepresentation. Each represents nothing but the truth, that a particular name or mark is associated with his goods or business": Habib Bank Ltd v Habib Bank AG Zurich [1981] 1 WLR 1265, 1275 per Oliver LJ. If in such circumstances there might be confusion that is just "one of the misfortunes which occur in life", but it is not actionable as a passing off: Marengo v Daily Sketch and Daily Graphic Ltd [1992] FSR 1, 2.

54 For the sake of completeness I should mention that Colorado Group did not in the action pursue a claim that Strandbags Group should be restricted in the use of its "Colorado" mark to a particular geographic area (for example, Queensland) or to particular kinds of goods (say, handbags). There are many cases where a party using a mark has been restrained from extending its use in a way that will encroach upon the established reputation of a competitor either in a particular geographical area or in a particular line of business. I mention this not to suggest that the pursuit of such a claim could have provided the applicants with some relief, but simply to show that the point has not been overlooked.

55 The claim under s 52 must fail for the same reason as the passing off claim has failed. Although a s 52 claim may succeed where a passing off claim has failed (Peter Isaacson Publications v Nationwide News Pty Ltd (1984) 3 IPR 255), when, as here, there has been no misrepresentation, the s 52 claim cannot succeed: Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177. By the time Strandbags Group took over the Edgarlodge business the point had been reached where the court could not interfere with that company’s trading even if in the past there had been misleading conduct engaged in by Edgarlodge. It is possible that prior to the sale Colorado Group could have taken action to restrain Edgarlodge’s activities. Having failed to take that action, it cannot now complain about what is being done by Strandbags Group.

56 Several aspects of the case remain to be dealt with because as is usual in this kind of litigation there was a split between issues concerning liability and those concerned with remedies. I will hear from the parties on what should now be done.

I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.

Counsel for the Applicants/Cross-Respondents:	A J Ryan

Solicitor for the Applicants/Cross-Respondents:	Deacons

Counsel for the Respondent/Cross-Claimant:	D K Catterns QC A J Maryniak

Solicitor for the Respondent/Cross-Claimant:	Hall & Wilcox

Date of Hearing:	14, 15, 16 June, 22 July 2005

Date of Judgment:	28 February 2006

Federal Court of Australia

Colorado Group Limited v Strandbags Group Pty Limited [2006] FCA 160 (28 February 2006)