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Federal Court of Australia |
Last Updated: 5 May 1999
TRANSPORT TYRE SALES PTY LTD V MONTANA TYRES RIMS AND TUBES PTY LTD
NG 706 of 1998
JUDGES: BEAUMONT, HEEREY AND EMMETT JJ
DATE: 29 MARCH 1999
PLACE: SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NG 706 OF 1998
|
BETWEEN: | TRANSPORT TYRE SALES PTY LTD
Appellant |
|
AND: | MONTANA TYRES RIMS AND TUBES PTY LTD
Respondent |
|
JUDGE: | BEAUMONT, HEEREY AND EMMETT JJ |
| DATE: | 29 MARCH 1999 |
| WHERE MADE: | SYDNEY |
In the fourth line of the second paragraph on page 34, the word "of" should be inserted after "question".
Associate:
Dated: 29 March 1999
Intellectual Property - trade marks - registration of an assignment of trade marks - whether entry of owner on register was wrongly made and liable to be removed under s 88 Trade Marks Act 1995 - whether trade marks were infringed - whether s 123 defence was made out - meaning of "trade mark" - meaning of "applied to" and "applied in relation to" - whether the action for infringement was commenced "with due diligence".
Trade Practices - misleading and deceptive conduct - whether the conduct of the owner of the trade marks after registering the assignment was misleading or deceptive or fraudulent.
Words and Phrases - "trade mark", "applied to", "applied in relation to".
Trade Marks Act 1938 (UK) - s 4(3)(a)
Trade Marks Act 1995 (Cth) - ss 6, 7, 9, 17, 20, 88, 92, 109, 110, 120, 123, 129
Trade Practices Act 1974 - ss 52, 82
Trade Marks Regulations 1995 - reg. 10(1)(a)
Estex Clothing Manufacturers Pty Ltd v Ellis & Goldstein Ltd (1967) 116 CLR 254 - cons.
Colgate Palmolive Ltd v Markwell Finance Ltd [1989] RPC 497 - cons.
TRANSPORT TYRE SALES PTY LTD V MONTANA TYRES RIMS AND TUBES PTY LTD
NG 706 of 1998
JUDGES: BEAUMONT, HEEREY AND EMMETT JJ
DATE: 29 MARCH 1999
PLACE: SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NG 706 OF 1998
|
BETWEEN: | TRANSPORT TYRE SALES PTY LTD
Appellant |
|
AND: | MONTANA TYRES RIMS AND TUBES PTY LTD
Respondent |
|
JUDGE: | BEAUMONT, HEEREY AND EMMETT JJ |
| DATE OF ORDER: | 29 MARCH 1999 |
| WHERE MADE: | SYDNEY |
THE COURT ORDERS THAT:
1. Appeal allowed in part.
2. Set aside orders 1, 2, 3 and 4 made on 19 June 1998; in lieu thereof, make the following orders:
(a) Order that, with the exception of the claim for damages the subject of the direction in order 5 made on 19 June 1998, the application be otherwise dismissed. Remit the claim for damages to the trial Judge in accordance with these reasons for judgment.
(b) Order, that the cross-claim be remitted to the trial Judge for the purpose of making determinations on the questions of contravention of the Trade Practices Act 1995 raised by the cross-claim, otherwise order that the cross-claim be dismissed.
(c) Make no order for the costs of the trial on 6, 7 and 8 April 1998; costs of (i) the claim for damages mentioned in (a); and (ii) the remitted part of the cross-claim to abide the discretion of the Judge trying that issue.
3. Appeal otherwise dismissed.
Make no order for the costs of the appeal.
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 | NG 706 OF 1998 |
|
BETWEEN: | TRANSPORT TYRE SALES PTY LTD
Appellant |
|
AND: | MONTANA TYRES RIMS AND TUBES PTY LTD
Respondent |
JUDGE:
BEAUMONT, HEEREY AND EMMETT JJ DATE: 29 MARCH 1999 PLACE: SYDNEY
INTRODUCTION
1 This appeal concerned a challenge brought by Montana Tyres Rims and Tubes Pty Ltd ("Montana") to the registration of an assignment by the Ohtsu Tire & Rubber Co. Ltd ("Ohtsu") of Osaka, Japan to Transport Tyre Sales Pty Ltd ("Transport Tyre") of three trade marks. A Judge of the Court ordered, inter alia, that the Register of Trade Marks be rectified by removing the entry made in relation to those trade marks that records the assignment. Transport Tyre has appealed, by leave, against that order and other orders made in connection with the challenge to the assignment.
FACTUAL BACKGROUND
2 Prior to 1997, Ohtsu was the registered owner of three trade marks being the word "OHTSU" (registered on 21 May 1974), the word "FALKEN" (registered on 6 September 1984) and the word and symbols "FALKEN RX" (registered on 28 July 1988) ("the Trade Marks"). Ohtsu was and is a leading tyre manufacturer. It manufactures tyres which are sold all over the world.
3 Transport Tyre was incorporated in 1973. Since that time it has distributed tyres manufactured by Ohtsu. The only tyres sold by Transport Tyre have been Ohtsu products. Between 1973 and 1981, Transport Tyre sold only OHTSU truck tyres. It obtained the tyres through another Australian company, Grant Matich & Co. Pty Ltd ("Matich"). However, in about 1981, Transport Tyre commenced to purchase tyres directly from Ohtsu rather than through Matich.
4 In about 1984, Transport Tyre commenced purchasing recreational vehicle and passenger car tyres manufactured by Ohtsu and bearing the name "FALKEN". At least from 1985 onwards, Mr Spencer Scott Grammer, the managing director of Transport Tyre, understood that Transport Tyre was Ohtsu's exclusive distributor for all products in New South Wales, Queensland and the Northern Territory. Mr Grammer understood that in 1988 that exclusive distributorship was extended to the remainder of Australia. No finding was made as to the correctness of those understandings on the part of Mr Grammer. It may be that neither the fact itself nor Mr Grammer's understanding of the matter is relevant to the questions which arise in the proceeding.
5 In any event, Transport Tyre has expended considerable money and effort in promoting Ohtsu products. Mr Grammer therefore became concerned about what he called "parallel importing". Other organisations began purchasing Ohtsu products outside Australia, mainly in Singapore, and bringing them into Australia where the products were sold to dealers and retailers at prices which sometimes undercut the prices of Transport Tyre.
6 In April 1997, Mr Grammer visited Japan where he held discussions with Ohtsu executives. During the course of the discussions, Mr Grammer raised the possibility of an assignment to Transport Tyre of Ohtsu's Australian trade marks. Reference was made to the possibility of a reassignment of the Trade Marks to Ohtsu. The trial Judge found that "it was agreed" that Transport Tyre would give a written commitment to reassign. However, his Honour does not appear to have found that there was a legally binding agreement entered into at that stage. It seems that there was no discussion in Japan about documentation detail which was apparently to be left to the lawyers.
7 On his return to Australia, Mr Grammer instructed Transport Tyre's solicitors concerning the arrangement. The solicitors prepared drafts of two deeds, being a deed of assignment of trade marks and an option deed. The drafts were sent to Ohtsu in Japan. Representatives of Ohtsu suggested some minor changes and two deeds were prepared for execution.
8 The first deed bears the date 12 May 1997. The second bears the date 26 May 1997. There is no evidence that the deeds were executed otherwise than on the dates they bear, apart from a recital in the deed of option that the parties "have contemporaneously entered into a deed of assignment of trade marks".
9 The parties to both deeds are Ohtsu and Transport Tyre. The deed of assignment recites that Ohtsu is the registered proprietor of the Trade Marks and that:
"The Assignor has agreed to assign all its rights in the Trade Marks (together with the good will of the business concerned in the goods or services in respect of which the Trade Marks are registered) to the Assignee on the terms and conditions set out herein."10 The operative clauses in the deed of assignment are as follows:
"1. The assignor as legal and beneficial owner hereby assigns to the Assignee to hold absolutely and free from any mortgage, lien, charge or other adverse interest all the rights, powers, liberties and immunities conferred on the Assignor by the grant of the Trade Marks including the right to sue for damages and other remedies in respect of any infringement of the Trade Marks which may have occurred prior to the date of this Deed and together with the goodwill of the business concerned in the goods or services in respect of which the Trade Marks are registered.11 The option deed contains the following two recitals:
2. The Assignor shall do all acts, matters and things and execute all documents necessary or desirable for further assuring the right, title and interest of the Assignee in and to the Trade Marks and to facilitate recordal of the Assignee as registered proprietor of the Trade Marks on the Register of Trade Marks.
3. In respect of any action for infringement in relation to any of the Trade Marks, the Assignor shall, at the Assignee's request at any time, render all reasonable assistance at the cost of the Assignee.
4. The Assignor undertakes:-
4.1 not to do any act, matter or thing which would or might:-
(a) invalidate or put in dispute the Assignee's title to the Trade Marks;
(b) invalidate registration of any of the Trade Marks;
(c) support an application to remove any of the Trade Marks as registered trade marks;
4.2 not to assist any person directly or indirectly in the acts described in Clause 4.1."
"A. The parties have contemporaneously entered into a Deed of Assignment of Trade Marks whereby Ohtsu assigned to Transport all its rights in the Australian-registered trade marks particulars of which are set out in the Schedule hereto together with the goodwill of the business concerned in the goods or services in respect of which the Trade Marks are registered (`the Property').12 The relevant operative provisions of the option deed are as follows:
B. Transport has agreed to grant Ohtsu an option to re-acquire the Property in certain circumstances on the terms and conditions set out herein."
"1. Transport irrevocably grants to Ohtsu an option to purchase the Property at a price of $1.00 in accordance with the provisions of this Deed.13 On 15 May 1997, Transport Tyre requested the Registrar of Trade Marks to record the assignment of the three marks. In support of the application, Transport Tyre lodged a copy of the deed of assignment dated 12 May 1997. The Registrar of Trade Marks recorded the assignment on 26 May 1997. From that time, Transport Tyre remained the registered owner of all three trade marks, until an order made by the trial Judge was given effect to and the register was altered to remove the record of the transfer assignment.
2. Ohtsu may exercise its option to acquire the Property by notice in writing to Transport:-
(a) during the period of two (2) years from the date of this Deed-
(i) within the period of 90 days after Ohtsu obtains knowledge of the fact that Transport has committed any act which substantially affects in an adverse manner the world-wide reputation and goodwill of Ohtsu in the `Ohtsu' and `Falken' brands of tyres; or
(ii) upon Transport ceasing for any reason to be the representative of Ohtsu in Australia; or
(b) after the period of two (2) years from the date of this Deed, at any time.
3. In the event that Ohtsu exercises its option in accordance with this Deed:-
(a) Transport shall sell the Property to Ohtsu and Ohtsu shall purchase the Property at a price of $1.00;
(b) settlement shall occur within 60 days of exercise of the option; and
(c) any costs (including stamp duty) of and incidental to such sale shall be payable by Ohtsu.
4. Transport shall not assign the Property to any third party without obtaining the prior written consent to Ohtsu.
5. This Deed shall commence on the date hereof and shall continue for a period of 10 years from the date hereof.
6. In the event of Ohtsu exercising its option in accordance with this Deed, Transport shall do all acts, matters and things and execute all documents necessary or desirable for transferring the right, title and interest of Transport in the Property to Ohtsu and to facilitate recordal of Ohtsu as registered proprietor of the Property on the Australian Register of Trade Marks."
14 Mr Grammer gave evidence which appears to have been accepted by the trial Judge that the way in which business was conducted by Transport Tyre and Ohtsu was unaffected by the two deeds. Transport Tyre continued to run its business, in its own name as an importer and distributor of Ohtsu products, keeping for itself any profits earned and bearing any losses. Ohtsu, in Japan, continued to conduct a manufacturing and world wide distribution business, the profits and losses of which were to its account. Nothing changed hands as between Transport Tyre and Ohtsu as a consequence of the deed of assignment, apart from the Trade Marks themselves.
15 On 17 June 1997, Ebsworth and Ebsworth, solicitors for Transport Tyre, wrote to Montana stating that Transport Tyre was now recorded on the Australian Register of Trade Marks as the owner of the Trade Marks; and that Montana imported and sold OHTSU/FALKEN tyres. The letter went on to require from Montana an undertaking by 27 June 1997 that:
"(a) you will not import or sell tyres, tubes or related products bearing any of our client's trade marks or a deceptively similar trade mark;16 Montana had, since April 1996, conducted a business involving the importation from Singapore of various brands of foreign made tyres, including OHTSU and FALKEN branded tyres. By June 1997, Montana had approximately forty-five account customers to whom it supplied FALKEN tyres. Two of those account customers were wholesalers, the remainder were retailers.
(b) you will not otherwise use any of our client's trade marks in respect of tyres, tubes or associated products."
17 About the same time, an employee of Montana received from one of Montana's retail customers a notice in the following form:
"OHTSU/FALKEN TYRES AND ASSOCIATED PRODUCTS
Transport Tyre Sales Pty Ltd A.C.N. 001 111 511 hereby gives notice that it has become the registered owner in Australia of the following trade marks in relation to tyres, tubes and associated products:-
OHTSU
FALKEN
FALKEN RX
The Company now has the exclusive right to use these trade marks (and/or authorise other persons to use these trade marks) throughout Australia in relation to tyres, tubes and associated products.
Any importation or sale in Australia of tyres, tubes or associated products bearing any of the Company's trade marks (or deceptively similar trade marks) which is not authorised by the Company will infringe the Company's statutory rights under the Trade Marks Act 1995. The Company will not hesitate to take legal action against any party engaged in unauthorised dealings in tyres, tubes or associated products bearing any of its trade marks or deceptively similar trade marks."
18 On 27 June 1997, Sprusons Solicitors, acting for Montana, wrote to Ebsworth and Ebsworth saying:
"We act on behalf of Montana Tyres Rims and Tubes Pty Limited (`Montana') and have been provided with a copy of your letter to our client of 17 June 1997.19 Transport Tyre was not content with that undertaking and on 9 July 1997, Ebsworth and Ebsworth wrote to Sprusons Solicitors requiring a written undertaking by 11 July 1997 that Montana -
We note that your client has been recorded as the registered proprietor of the OHTSU, FALKEN and FALKEN RX trade marks (numbers 278,561, 414,790 and 492, 064) (`Ohtsu Trade Marks'), effective from 15 May 1997, the date upon which the application to record the assignment to your client was filed.
All tyres and associated products bearing the Ohtsu Trade Marks presently in the possession of our client or distributed by our client to its dealers, namely Montana Tyres Queensland and Betta Tyres in Sydney, are tyres manufactured by or on behalf of the Ohtsu Tire & Rubber Co. Ltd of Osaka, Japan, the former registered proprietor of the Ohtsu Trade Marks. These tyres were imported by our client prior to the date upon which your client applied to become the registered proprietor of the Ohtsu Trade Marks.
Accordingly, none of the tyres bearing the Ohtsu Trade Marks in the possession of any of Montana Tyres Rims and Tubes Pty Limited, Montana Tyres Queensland and Betta Tyres in Sydney, are infringing goods, being goods to which the Ohtsu Trade Marks were applied by the then registered proprietor of the trade marks at the time of importation. Our client's right to sell those goods cannot be abrogated by a subsequent assignment of the Ohtsu Trade Marks. Any statements made by or on behalf of your client to the contrary to our client or its dealers will be treated as a groundless threat in breach of Section 129 of the Trade Marks Act and appropriate action taken.
Our client has been importing tyres manufactured by The Ohtsu Tire & Rubber Co. Ltd and bearing the Ohtsu Trade Marks for at least nine years and we are instructed that apart from our respective clients, there have been other importers of those tyres. On this basis our client does not accept that the Ohtsu Trade Marks are capable of distinguishing goods sold by your client from those of others.
Without any admission as to the validity of the registration of the Ohtsu Trade Marks therefore, our client undertakes not to import or sell tyres, tubes or related products bearing any of the Ohtsu Trade Marks and not to use the Ohtsu Trade Marks in respect of tyres, tubes or associated products without the authority of your client, for so long as your client remains the registered proprietor of the Ohtsu Trade Marks.
This undertaking does not preclude our client from selling goods bearing the Ohtsu Trade Marks which were imported by it prior to 15 May 1997."
"will not sell tyres or associated products bearing the specified trade marks which were imported by it prior to 15 May 1997."20 Montana did not proffer the requested undertaking. Over the following weeks Montana received requests for the repurchase of FALKEN stock from many customers and Montana's sales of FALKEN tyres substantially ceased. Further, Montana suffered a large drop in orders of other brands of tyres.
THE ISSUES IN THE PROCEEDING
21 Montana commenced the proceeding on 11 July 1997 when it filed an application and statement of claim. By its amended application, Montana sought:
(1) An order that the registration of the Trade Marks be cancelled pursuant to s 88 of the Trade Marks Act 1995 .
(2) In the alternative, an order that the entry of Transport Tyre as the owner of the Trade Marks be cancelled pursuant to s 88 of the Trade Marks Act 1974 .
(3) In the alternative, an order pursuant to s 80 and/or s 87 of the Trade Practices Act that Transport Tyre take all such steps as may be necessary to rectify the Register of Trade Marks by cancelling the entry of Transport Tyre as the owner of the Trade Marks.
(4) A declaration pursuant to s 129 of the Trade Marks Act 1995 that Transport Tyre has no grounds for making the threats of infringement proceedings.
(5) An order pursuant to s 129 of the Trade Marks Act that Transport Tyre be restrained from continuing to make such threats.
(6) An order pursuant to s 80 of the Trade Practices Act that Transport Tyre be restrained from continuing to make such threats.
(7) Damages pursuant to s 129 of the Trade Marks Act.
(8) Damages pursuant to s 82 of the Trade Practices Act.
22 On 19 September 1997, Transport Tyre filed their defence and cross-claim. In the cross-claim, Transport Tyre asserted that registration of the Trade Marks was valid and subsisting and that Montana had infringed and intended to continue to infringe the Trade Marks. Transport Tyre also sought damages for infringement and an account of profits and a declaration and damages in relation to alleged breaches of s 52 and/or s 53 of the Trade Practices Act. On 21 October 1997, the trial Judge ordered that issues of liability be heard separately and prior to issues of quantum.
THE DECISION AT FIRST INSTANCE
23 The learned primary Judge noted that, in addition to seeking cancellation of the registration of the Trade Marks, Montana sought a declaration and injunction under s 129 of the Trade Marks Act.
24 By s 129 it is relevantly provided that if a person threatens to bring an action against another person ("threatened person") on the ground that the threatened person has infringed a registered trade mark, any person aggrieved by the threat ("plaintiff") may bring an action against the person making the threat ("defendant") to obtain a declaration that the defendant has no grounds for making the threat, an injunction restraining the defendant from continuing to make the threat, or damages sustained because of the defendant's conduct (s 129(1) and s 129(2)). It is a defence to an action under s 129(1) that the acts of the plaintiff constitute an infringement of a registered trade mark (s 129(4)). An action may not be brought or may not proceed if the registered owner or authorised user, with due diligence, begins and pursues an action against the threatened person (s 129(5)).
25 His Honour then noted that, in opening Montana's case, Senior Counsel conceded that there were no circumstances under which Montana would be entitled to an order for cancellation of registration of the marks themselves; that is, even if the recordal of the assignment were to be cancelled.
26 The first issue identified by the primary Judge was whether any of the Trade Marks is, within the meaning of s 17 of the Trade Marks Act, "a sign used... to distinguish goods... dealt with or provided" by Transport Tyre from goods dealt with or provided by any other person. His Honour held that they were not:
"The marks OHTSU and FALKEN are incapable of constituting signs distinguishing the goods distributed by [Transport Tyre] from goods distributed by others. The signs are intended to distinguish, and do distinguish, the tyres as being goods manufactured by [Ohtsu], as distinct from any other tyre manufacturer. Leaving aside any problem arising out of the circumstances of the assignment of the marks and the recordal of the assignment, there is not such a nexus between the marks and [Transport Tyre] as to make those marks registrable as [Transport Tyre] trade marks."
27 His Honour next addressed the question whether the entries recording the assignments were liable to cancellation pursuant to s 88(2)(c) or (e) of the Trade Marks Act.
28 Relevantly, s 88 provides that the Court may, on the application of an aggrieved person, order that the Register be rectified by removing an entry wrongly made (s 88(1)). The application may be made on several grounds.
29 One (contained in s 88(2)(c)) is that because of the circumstances applying at the time when the application for rectification is filed, the use of the mark is likely to deceive or cause confusion for a reason other than one for which (inter alia) the application for the registration of the mark could have been rejected under s 43.
30 By s 43 it is provided that an application for the registration of a mark in respect of particular goods must be rejected if it would be likely to deceive or cause confusion.
31 The primary Judge held that -
"...[this was] this case. The marks OHTSU and FALKEN each have a connotation of connection with [Ohtsu], in the sense that the mark was imposed on the tyres in order to indicate the identity of the manufacturer. The use of either of those marks to indicate an association with a particular distributor would cause confusion, at the least... [so that] these marks are not now liable to cancellation under s 88(2)(c)."
32 His Honour held that the situation under s 88(2)(e) is different, since it "depends on the circumstances under which the entry was made, not the result of its making". The primary Judge accepted Montana's submission that there was a false suggestion to the Registrar:
"...the deed of assignment was calculated to give the Registrar... the appearance of an absolute divestment by Ohtsu of its business and its trade marks...
This, however, was not the case, because, contemporaneously... [Transport Tyre] and Ohtsu entered into another deed dated 26 May 1997... which made it clear that:-
(a) There had been no assignment of goodwill. [Transport Tyre] was merely the representative of Ohtsu in Australia (clause 2(a)(ii));
(b) The power to control the use of the trade marks rested completely with Ohtsu (clause 2(a)(i));
(c) [Transport Tyre] did not have the power to assign the trade marks without Ohtsu's consent (clause 4);
(d) Ohtsu had an `option to repurchase' the trade marks which, after two years was unlimited as to the circumstances in which the `option' could be exercised, and, within two years, could be exercised if [Transport Tyre] did anything which adversely affected Ohtsu's world-wide reputation and goodwill in the `Ohtsu' and `Falken' brands (clauses 1 and 2) or if [Transport Tyre] ceased to be Ohtsu's representative."
33 His Honour held that since there had been a false suggestion, the recordal of the assignment on the Registry ought to be cancelled because the Registrar "is potentially concerned with (the control of the mark) because it bears on the question whether there is such a connection between the mark and the assignee as to fulfil the requirements of s 17".
34 In these circumstances, the trial Judge did not need to consider Transport Tyre's claim of infringement.
35 The next issue addressed by his Honour was Montana's claim under s 129. It was held that this cause of action was established and that the provisions of s 129(5) were not satisfied because the (cross) action for infringement was not commenced "with due diligence".
36 The primary Judge also held that Transport Tyre's conduct in threatening to sue constituted misleading conduct within s 52 of the Trade Practices Act.
37 His Honour then made a declaration that none of the marks is a sign used, or intended to be used, to distinguish goods or services dealt with or provided in the course of trade by Transport Tyre from goods or services so dealt with or provided by any other person. The removal of the assignment from the Register was ordered. Transport Tyre was enjoined from threatening to sue for infringement.
THE SCOPE OF TRANSPORT TYRE'S APPEAL
38 By its notice of appeal from the whole of the judgment at first instance, Transport Tyre seeks (1) an order restoring the entry of the assignment to the Register; (2) an order dismissing all the claims in Montana's application for relief; and (3) relief in respect of the alleged infringement by Montana of Transport Tyre's marks.
39 It will be convenient to deal with the questions that arise in the appeal in turn.
THE ASSIGNMENT
40 In its further amended statement of claim Montana alleged that the assignment by Ohtsu and the application by Transport Tyre for registration as owner of the marks falsely suggested or misrepresented that:
(a) the assignment was with the goodwill of Ohtsu's business;
(b) Transport Tyre had exclusive rights to use the Trade Marks and authorise others to do so; and
(c) Transport Tyre had the right to deal with the Trade Marks as their absolute owner.
41 It was then alleged that the entry on the register of Transport Tyre as owner of the Trade Marks was wrongly made and wrongly remained and was liable to be removed pursuant to the provisions of s 88 of the Trade Marks Act.
42 On this issue his Honour accepted Montana's submissions, which he considered "irresistible". Counsel for Montana had contended that the deed of assignment was "calculated to give to the Registrar of Trade Marks the appearance of an absolute divestment by Ohtsu of its business and its trade marks, which [Transport Tyre] could treat as its own, completely unfettered by Ohtsu". This, it was said, was not the case because of the provisions of the option agreement as a result of which Ohtsu had retained the right and power to control the use of the marks as a badge of origin. The true intention of the parties was that Transport Tyre would never have that power. After referring to the decision of Lockhart J in Prestige Group Australia Pty Ltd v Dart Industries Inc (1990) 26 FCR 197 at 198-199, counsel for Montana went on to contend that the recordal of Transport Tyre as owner of the marks was made as a result of fraud, false suggestion or misrepresentation because -
(a) by selectively submitting the deed of assignment, Transport Tyre represented that this was the only document establishing its title and that its application for recordal was in accordance with the Act; and
(b) it represented that it had absolute control of the marks in question together with Ohtsu's business in which those marks were used.
43 Such misrepresentation, it was said, must have materially contributed to the Registrar's decision to record the assignment. It would "seem doubtful" that the Registrar would have countenanced such an application where the apparent title to the marks resided in one person but the power to control the use and disposition of the marks resided with another.
44 With all respect, in our opinion, the submissions accepted by his Honour are not in accord with the statutory scheme for registration of ownership and recordal of assignment. As has been mentioned, on 15 May 1997 Transport Tyre submitted an application in the prescribed form (Application to Record Assignment or Transmission of a Trade Mark). The application is dated the previous day. It is a simple document and appears to be an "approved form", that is to say a form approved by the Registrar: see s 6. An applicant has to insert the numbers of the mark or marks, the name of the assignor, the name, address, telephone and fax number of the assignee and tick a box indicating whether the assignment or transmission is for all or some of the goods/services for which the trade marks have been registered. The form then states:
"Proof of title to the trade mark is attached (please tick the relevant box)".
45 The form contains three boxes marked respectively:
Deed of Assignment
Merger Document
Other
46 In the present case Transport Tyre's solicitor ticked the Deed of Assignment box.
47 The Act relevantly provides:
"106(1) A registered trade mark, ... may be assigned or transmitted in accordance with this section.
(2) ...
(3) The assignment or transmission may be with or without the goodwill of the business concerned in the relevant goods and/or services.
107 ...
108 ...
109(1) If a registered trade mark is assigned or transmitted:
(a) the person registered as the owner of the trade mark; or
(b) the person to whom the trade mark has been assigned or transmitted;
must apply to the Registrar for a record of the assignment or transmission to be entered in the Register.
(2) The application must:
(a) be in an approved form; and
(b) be filed, together with any prescribed document, in accordance with the regulations.
110(1) If the application complies with this Act, the Registrar must, at, or within, the time provided for in the regulations:
(a) enter the particulars of the assignment or transmission in the Register; and
(b) register the person to whom the trade mark has been assigned or transmitted (`beneficiary') as the owner of the trade mark in relation to the goods and/or services in respect of which the assignment or transmission has effect.
(2) The particulars are taken to have been entered in the Register on the day on which the application was filed, and the registration of the beneficiary as the owner of the trade mark is taken to have had effect from and including that day.
(3) The Registrar must advertise in the Official Journal:
(a) the recording of the assignment or transmission; and
(b) the registration of the beneficiary as the owner of the trade mark." [Emphasis added].
48 For the purposes of s 109(2)(b), the "prescribed document" is a document that establishes the title to a trade mark of the assignee: Trade Marks Regulations reg 10.1(a).
49 Since a registered trade mark is a form of personal property, it may be subject to legal and equitable rights vested in persons other than the registered owner. But nothing in the Act mandates the recording of all or any such interests. On the contrary, Part 11 provides a mechanism for the voluntary recording of claims to interests and rights in respect of trade marks.
50 The fact that Ohtsu held certain rights under the option agreement in respect of the Trade Marks did not make Transport Tyre any the less the owner. As counsel for Transport Tyre argued, a person who grants an option over some form of property must of necessity be the owner. Neither the Registrar, nor anybody searching the register, would reasonably conclude that the bare fact of assignment indicated that no person other than the owner held any rights in respect of the Trade Marks.
51 The Registrar was given notice of the present proceeding, including a copy of the statement of claim, but did not seek to intervene. That fact in itself confirms the conclusion that non-disclosure of the option agreement was not a matter which materially affected the recordal of the assignment. The assignment was the document which established the title of Transport Tyre, and that had been disclosed, as required by s 109(2)(b) and reg 10.1(a). In such a setting the Registrar "must" record the assignment: s 110(1).
52 Neither at trial nor on appeal did Montana contend that the assignment and option agreement constituted a sham. Therefore these documents have to be given effect according to their tenor. The option agreement by no means gave Ohtsu untrammelled control of the Trade Marks. Within the initial two year period it could only exercise the option if Transport Tyre ceased to be its representative or committed any act which substantially affected in an adverse manner the world-wide reputation and goodwill of Ohtsu in the marks. This latter event would by no means be an easy matter to establish. Moreover the option agreement does not impose any positive obligations on Transport Tyre. For example, Ohtsu could not exercise the option simply because Transport Tyre declined to expend what Ohtsu considered to be a necessary expenditure on promotion and marketing.
53 The conclusion to be drawn is that the assignment was valid and effectual. It was in no way inchoate or inherently defeasible. Even if the assignment and the option are read together, as interdependent transactions, the true character of the assignment, as an assignment, remains. In other words, the fact that Ohtsu required a conditional option as a price for the assignment, does not mean that there was no assignment. The option gave certain rights to Ohtsu, but significantly less than the rights attached to full legal or equitable ownership.
54 In making the application for registration of the assignment Transport Tyre did not, in our opinion, engage in fraud, false suggestion or misrepresentation.
INFRINGEMENT
55 In its cross-claim, Transport Tyre sought a declaration that Montana has infringed the Trade Marks and an order restraining Montana from importing into Australia tyres bearing the Trade Marks and from selling, offering for sale or otherwise distributing any such tyre. In addition, Transport Tyre sought damages for infringement and alternatively an account of profits. If Montana succeeded in its claim for cancellation of the entry of Transport Tyre as the owner of the Trade Marks, Transport Tyre could not succeed in any claim for infringement. However, Montana contended that, even if its claim for cancellation of the entry of Transport Tyre as the owner of the Trade Marks failed, there has been no infringement of the Trade Marks. Montana relied on s 123 of the Trade Marks Act as affording a defence to any claim by Transport Tyre that there has been an infringement under s 120 of the Act.
56 It is apparent from the terms of s 120 that infringement occurs only if a person uses a sign as a trade mark in relation to goods or services. Under s 7(4) use of a trade mark in relation to goods means use of the trade mark "upon, or in physical or other relation to, the goods". Under s 7(5) use of a trade mark in relation to services means use of the trade mark "in physical or other relation to the services".
57 The trial Judge held that the recording of Transport Tyre as owner of the Trade Marks should be cancelled. Accordingly, the questions of infringement did not arise for his Honour, who therefore decided to say nothing about them. The questions were apparently argued in full before the trial Judge and involved, as his Honour said, complex questions concerning the application of the Trade Marks Act to "parallel imports". Parallel imports might be described as goods which are marked with a registered trade mark by the registered owner of the trade mark but which are imported into Australia from another jurisdiction contrary to the wishes or expectation of the registered owner.
58 Section 120(1) of the Act relevantly provides as follows:
" 120(1) A person infringes a registered trade mark if the person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered."59 However, s 123 relevantly provides as follows:
" 123(1) In spite of section 120, a person who uses a registered trade mark in relation to goods that are similar to goods in respect of which the trade mark is registered does not infringe the trade mark if the trade mark has been applied to, or in relation to, the goods by, or with the consent of, the registered owner of the trade mark.60 While the proceeding did not involve any allegation of infringement of a trade mark in relation to services, the operation of s 123(2), which deals with services, may have some bearing on the construction of s 123(1).
" (2) In spite of section 120, a person who uses a registered trade mark in relation to services that are similar to services in respect of which the trade mark is registered does not infringe the trade mark if the trade mark has been applied in relation to the services by, or with the consent of, the registered owner of the trade mark."
61 Section 9 of the Trade Marks Act 1955 deals with the expressions "applied to" and "applied in relation to" in the following terms:
"9.(1) For the purposes of this Act:62 In its cross-claim, Transport Tyre alleged that Montana had:
(a) a trade mark is taken to be applied to any goods, material or thing if it is woven in, impressed on, worked into, or affixed or annexed to, the goods, material or thing; and
(b) a trade mark is taken to be applied in relation to goods or services:
(i) if it is applied to any covering, document, label, reel or thing in or with which the goods are, or are intended to be, dealt with or provided in the course of trade; or
(ii) if it is used in a manner likely to lead persons to believe that it refers to, describes or designates the goods or services; and
(c) a trade mark is taken also to be applied in relation to goods or services if it is used:
(i) on a signboard or in an advertisement (including a televised advertisement); or
(ii) in an invoice, wine list, catalogue, business letter, business paper, price list or other commercial document;
and goods are delivered, or services provided (as the case may be) to a person following a request or order made by referring to the trade mark as so used." (Emphasis added).
"(1) imported, sold and promoted tyres and associated tyre products bearing one or more of the Trade Marks.63 Thus, there was no allegation of any infringement other than in respect of tyres and associated tyre products which had been imported into Australia on or before 15 May 1997. The significance of that date is that it is the day on which Transport Tyre made its request to the Registrar of Trade Marks to record the assignment of the Trade Marks from Ohtsu. It is also significant that the cross-claim alleges infringement only by sale and promotion of tyres. It does not particularise any other infringement.
(2) infringed and intended to continue to infringe the Trade Marks by the continued sale and promotion of tyres and associated tyre products bearing the Trade Marks which were imported by Montana or its agents on or before 15 May 1997."
64 A container of tyres was received by Montana in Australia on 5 May 1997. These tyres, and other tyres received by Montana prior to that date, bear one or other of the Trade Marks. The Trade Marks, along with the words "Made in Japan" and a tyre type identification number, are moulded into the side wall of those tyres as part of the manufacturing process. It was common ground that the moulding was placed on the tyres by Ohtsu in the course of manufacture.
65 That moulding, it is common ground, is substantially identical with the Trade Marks. Transport Tyre contended that the sale of such tyres would involve the use of that moulding as a trade mark in relation to the tyres and that such sale involves using a sign as a trade mark in relation to goods within the meaning of s 120.
66 Having regard to the terms of s 9, it is clear that the moulding has been applied to or in relation to the tyres by Ohtsu. At the time when the moulding was placed on the tyres in question, Ohtsu was the registered owner of the Trade Marks. Montana contended, therefore, that it was entitled to the benefit of s 123 because it is a person who used registered trade marks in relation to tyres, being goods that are similar to goods in respect of which those trade marks are registered and the trade marks had been applied to, or in relation to, the tyres by Ohtsu.
67 Transport Tyre, on the other hand, contended that the moulding on the tyres was not a trade mark within the meaning of s 123 because it was not a sign used or intended to be used in Australia. Transport Tyre contended that the term "trade mark" when it is used in s 123 means a sign used or intended to be used in Australia and that there was no evidence that, at the time when the moulding was placed on them, the tyres in question were intended to be projected into the course of trade in Australia. On the contrary, an inference should be drawn, so it was said, that the tyres in question were intended to be projected into trade in Singapore. Thus, since the tyres in question were not intended to be projected into the course of trade in Australia, the moulding on them was not a trade mark within the meaning of s 123. Therefore, even though it might have been applied to or in relation to the tyres by Ohtsu at a time when Ohtsu was the registered owner of the Trade Marks, s 123 has no application.
68 The basis for Transport Tyre's contention is the decision of the High Court in Estex Clothing Manufacturers Pty Ltd v Ellis & Goldstein Ltd (1967) 116 CLR 254. In that case, the respondent was a manufacturer in England of women's dresses, jersey suits and coats which it sold by wholesale and was registered under the provisions of the Trade Marks Act as the proprietor of two trade marks "Eastex". The appellant was a New South Wales company which also manufactured articles of women's clothing. The appellant applied for an order that the trade marks in question be removed on the ground that during the relevant period of three years there was no use in good faith of the trade marks by the respondent.
69 During the relevant three year period, the respondent had manufactured and sold to Australian retail traders for resale in Australia substantial quantities of garments with "Eastex" tags and labels sewn on or otherwise attached to the garments. The sales made by the respondent to the Australian retail traders were made in England and the garments, in each instance, were the subject of an FOB contract and property in them passed upon shipment in London. However, during the three year period such garments were displayed for sale and sold in Australia by those retail traders.
70 The question was whether, in those circumstances, there had been a use in Australia of the trade marks by the respondent during the relevant three year period. The appellant contended that there had been no act of the respondent in Australia which could be said to constitute a use by it in Australia of the marks. The High Court said the following:
"...when an overseas manufacturer projects into the course of trade in this country, by means of sales to Australian retail houses, goods bearing his mark and the goods, bearing his mark, are displayed or offered for sale or sold in this country, the use of the mark is that of the manufacturer." (at 271)71 The High Court considered that in the circumstances of that case, the respondent was the only person who had the right to use the marks and the retailer to whom the garments had been sold for resale did not, in any relevant sense, "use" it.
72 Transport Tyre contended that it follows from that conclusion that the expression "trade mark" when used in the Act must be taken to refer to a mark in relation to goods which are intended to be projected into the course of trade in the Australian market. It was said, therefore, that the term "trade mark" must, whenever used in the Act, be construed as a reference to the rights which were under the Trade Marks Act 1995 and not to rights which are conferred or which might exist in some other jurisdiction. In particular, the term must be so construed when it appears in s 123. Such an approach, however, in our view confuses the rights which arise from the registration of a trade mark under the Act on the one hand and the physical representation or manifestation of the sign which is registered on the other hand.
73 Section 20(1) of the Trade Marks Act relevantly provides as follows:
"If a trade mark is registered, the registered owner of the trade mark has... the exclusive rights:74 In addition, under s 20(2) the registered owner of a trade mark also has the right to obtain relief under the Act if a trade mark has been infringed.
(a) to use the trade mark; and
(b) to authorise other person to use the trade mark;
in relation to the goods and/or services in respect of which the trade mark is registered."
75 A trade mark is defined in s 17 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."76 The term "sign" is defined in s 6 as including the following or any combination of the following:
"...any letter, word, name, signature, numeral, device, brand, heading, label, ticket, aspect of packaging, shape, colour, sound or scent."77 Thus, the term "trade mark" is a physical manifestation. A physical manifestation, or sign, may be registered. When the Act speaks of a "trade mark" it is concerned only with something which is capable of being a sign, albeit a sign which is used or intended to be used to distinguish goods or services from other goods or services in the course of trade.
78 The rights conferred by s 20 must, of course, be taken to have some territorial limitation. It would not be competent for the Parliament of Australia to provide for exclusive rights to use a trade mark in relation to goods throughout the world. However, that limitation has nothing to do with the physical representation or manifestation of the sign which comprises a trade mark.
79 In other words, while the rights conferred by the Trade Marks Act may be territorially limited in the manner indicated above, the term "trade mark" imports no territorial limitation at all. Thus, a sign may be applied, within the meaning of s 9, to goods or in relation to goods or services in any part of the world. It is nevertheless capable of being a trade mark within the meaning of the Act, notwithstanding that it is applied to the goods or in relation to goods or services outside of Australia. It is also capable of being a trade mark within the meaning of the Act, whatever may have been the intention, if any, of the person who applied the mark.
80 When s 123 of the Act refers to a trade mark which "has been applied to, or in relation to" goods, or "has been applied in relation to" services, it is immaterial where the application occurs. It is equally immaterial to enquire as to the intention of the registered owner of the trade mark by whom or with whose consent the trade mark has been so applied.
81 Of course, s 123 only comes into play if there has been an infringement within s 120. There will only be infringement within s 120 where the conduct said to constitute infringement is inconsistent with the rights conferred by s 20. That is to say, the use contemplated by s 120 must be a use within the territory which is subject to the legislative competence of the Australian Parliament.
82 Thus, when s 123 speaks of a person who uses a registered trade mark, the reference is to a use which is an infringement under s 120 because s 123, ex hypothesi, is only relevant where s 120 would otherwise apply. The reference to a "registered trade mark" in s 123 signifies only that the defence afforded by s 123 applies where a sign, which has been registered, is used by the prospective infringer and that sign has been applied to or in relation to the goods by or with the consent of the registered owner of that trade mark.
83 Senior Counsel for Transport Tyre sought to obtain support for the alternative conclusion by reference to a decision of the English Court of Appeal and by reference to extrinsic materials relating to the enactment of the Trade Marks Act. A distinction was drawn between the so called competing theories relevant to the question of "parallel imports". The two theories are described as the doctrine of "exhaustion of rights" and the doctrine of "territoriality". The former is said to involve the exhaustion of a trade mark proprietor's rights to control the disposition of goods bearing its mark once the goods are put on the market. The latter provides that a proprietor's rights in one country should be completely independent of the rights in another country.
84 The dichotomy was recognised in the Report of the Working Party to Review the Trade Marks Legislation of July 1992 ("the Report") which led to the enactment of the Trade Marks Act . Counsel for Transport Tyre contended that, while the Report suggested that a majority of the comments received by the Working Party were in favour of the exhaustion of rights doctrine, the legislation generally and s 123 in particular, does not in fact adopt the recommendation of the Working Party concerning parallel imports. The Report noted that, while the Working Party had not formed a view on what the law should be in this area, some members tended to favour the adoption of the exhaustion of rights doctrine on the basis that is consistent with the objectives of the trade marks law and any misleading or deception caused by the activities of parallel importers could be controlled by the laws prohibiting misleading and deceptive conduct.
85 The Report recommended a provision in the following terms:
"22D A registered trade mark is not infringed by:86 It was said to be significant that s 123, which reflects some of the language of that recommendation, conspicuously ignores other parts of that language.
....................................
(4) The use of the trade mark on goods imported into Australia provided that:
(i) the mark has been applied to the goods by or with the consent of the trade mark proprietor;
(ii) in the case of new goods the condition of the goods has not been changed or impaired; and
(iii) where the goods are also being supplied in Australia under the mark by or with the consent of the registered proprietor, the goods the subject of the importation are not materially different from the first mentioned goods."
87 On the other hand, s 123 was said to bear a closer resemblance to s 4(3)(a) of the Trade Marks Act of the United Kingdom. That section relevantly provides as follows:
"The right to the use of a trade mark given by registration as aforesaid shall not be deemed to be infringed by the use of any such trade mark as aforesaid by any person -88 The effect of s 4(3)(a) was considered by the Court of Appeal in Colgate Palmolive Ltd v Markwell Finance Ltd [1989] RPC 497. In that case, the Court proceeded on the assumption that registered trade marks had been applied to goods in Brazil by the registered proprietor of the trade marks. Nevertheless, the Court held that s 4(3)(a) was not attracted in the circumstances of that case. Lloyd LJ said (at 533) the following:
(a) in relation to goods connected in the course of trade with the proprietor or a registered user of the trade mark if, as to those goods, or a bulk of which they form part, the proprietor or the registered user conforming to permitted use has applied the trade mark and has not subsequently removed or obliterated it, or has at any time expressly or impliedly consented to the use of the trade mark..."
"What then does section 4(3)(a) mean when it refers to the proprietor applying the trade mark? It must mean the United Kingdom trade mark in respect of which he has been granted his exclusive right under section 4(1). It cannot mean or, which is more important for present purposes, even include the Brazilian trade mark. The fact that the marks are identical is... wholly irrelevant. Just as the United Kingdom parliament can not create trade mark protection in Brazil, so any application of the Brazilian trade mark cannot affect the proprietor's exclusive right in respect of the United Kingdom trade mark. If the marks had been different, this would have been so obvious as to amount to a truism.89 With great respect to his Lordship, such an argument confuses the physical sign with the rights conferred by trade mark legislation. There is no reason to conclude that s 4(3)(a), when it says "if... the proprietor... has applied the trade mark" is referring to anything other than the physical manifestation of the trade mark. A registered trade mark is a sign recorded in the Register. The only question is whether that sign has been applied.
But the fact that the marks are identical does create a theoretical difficulty. [Counsel] accepted [and rightly accepted] that if the marks had been different, there would have been nothing to stop the proprietor applying the United Kingdom mark in Brazil, or the Brazilian mark in the United Kingdom. Thus, [the proprietor] could have manufactured, or procured the manufacture of, goods for the United Kingdom marketed in Brazil, applied the United Kingdom mark in Brazil, and then exported them to the United Kingdom. [The registered proprietor] would then have been entitled to the benefit of the United Kingdom registration in respect of such goods, and been subject to the exception created by section 4(3)(a). In other words the place where the mark is applied is immaterial, what matters is which mark has been applied.
How does this work when the mark is the same? How is one to determine which mark has been applied? I can see no alternative but to look to the intention of the proprietor at the time he applies the mark. Then comes the inevitable supplementary question: How is the proprietor's intention to be determined? Is the test subjective or objective?... On the facts of the present case it does not matter. Whether one adopts a subjective or objective approach, it is clear beyond doubt that [the registered proprietor] applied the Brazilian mark."
90 A different conclusion would require a quite impractical enquiry in order to determine whether s 123 had any application. His Lordship's argument would require that enquiry be made as to the intention, whether determined subjectively or objectively, of the proprietor of a registered trade mark, when it physically applies the sign which comprises the trade mark to goods. For example, it would be necessary in a case such as the present one, to enquire whether it was the sign which is registered in Japan as distinct from the sign which is registered in Australia which the proprietor intended to apply. When the signs are identical, in the sense that the signs recorded in each register are identical to each other, such an enquiry would be no more than an exercise in metaphysics.
91 For example, it is easy to imagine a manufacturer who markets his goods world-wide with a trade mark which is registered in identical terms in numerous countries. Such goods might be produced on a continuous production line. Such a manufacturer may not, at the time of the actual application of the trade mark, give any consideration to the country in which each individual item of production would ultimately be marketed. It would follow from the argument of Lloyd LJ that in those circumstances s 123 would have no application to any of the goods. Assuming that there are equivalent provisions to s 123 in other jurisdictions, those equivalent provisions would also have no application to any of the goods. No sale of the goods in any such jurisdiction would have the benefit of s 123.
92 Counsel for Transport Tyre contended that to reject the so-called territorial approach and to adopt the exhaustion of rights approach, would result in anomalous consequences so far as non-user is concerned. It was said that if the proprietor of a trade mark applied the mark to goods in circumstances where the goods were not necessarily intended to be projected into the Australian market, but the goods nevertheless found their way into the Australian market, there would be no infringement because of the operation of s 123.
93 On the other hand, it was said that the effect of the Eastex decision is that there would be no use by the proprietor in Australia if the only use was importation by third parties of the goods into Australia and sale by those third parties in Australia. Under s 92(4), a ground for removal of a trade mark from the Register is that the trade mark has remained registered for a continuous period of three years and at no time during that period has the registered owner used the mark in Australia, or used the mark in good faith in Australia, in relation to the goods to which the application relates. If that is in fact an anomaly in the legislation, it is one which should receive the attention of the Parliament. However, that possible anomaly is not a basis for adopting a construction of s 123 which would render that section quite unworkable. The construction contended for requires treating the word "trade mark" as having meaning which is not open on the words used in the section.
94 Two acts of use or threatened use were alleged against Montana. The first was sale of the tyres. The second was promotion of the tyres. The mere sale of the tyres in question would involve a use of the Trade Marks because of the moulding of the Trade Marks on the tyres. However, that moulding was applied to those tyres by Ohtsu at the time when it was the registered owner of the Trade Marks. That using of the Trade Marks in relation to the tyres in question is therefore excused by s 123.
95 Promotion may raise different questions. In so far as the promotion involved no more than the offering for sale of the tyres in question without any further reference to the Trade Marks, the position would be the same. That is to say, there would be a use in relation to the tyres which would not infringe because of the fact that the Trade Marks had been applied by Ohtsu.
96 However, if promotion entailed, for example, advertisements in which the names "OHTSU" or "FALKEN" appeared, there would be a further "use" of the Trade Marks. That use would be comprised in the advertisements, whether printed or oral or visual. That would be a different use of the Trade Marks from the use entailed by the offering for sale or sale of the tyres in question with the moulding on them. Nevertheless, it is clearly a use of the Trade Marks in relation to the tyres in question. Since, for the reasons indicated above, the Trade Marks have been applied to or in relation to the tyres in question by Ohtsu, it follows that there would not be any infringement by that use of the Trade Marks.
97 It follows that there has been no infringement to date by Montana. The only infringement alleged was sale and promotion of tyres and associated tyre products imported on or before 15 May 1997. No tyres have been imported after that date and sale and promotion of the tyres imported before that date do not constitute infringement by reason of the operation of s 123.
98 The cross-claim also alleged that by importing, selling and promoting the tyres in question, Montana represented to the trade and the public that:
(a) Montana is the owner of the trade marks or the exclusive distributor of tyres and associated tyre products bearing the trade marks.
(b) The tyres and associated trade products bearing the marks have had a particular history and that they were supplied or distributed to Montana by or with the consent of the owner of the trade marks.
(c) The tyres and associated tyre products bearing the trade marks have sponsorship or approval of the owner of the trade marks they do not have.
(d) Montana has a sponsorship approval or affiliation with the owner of the trade marks it does not have.
(e) The tyres and associated tyre products bearing the trade marks and distributed or sold by Montana enjoyed the warranties and guarantees of such tyres and associated products bearing the trade marks distributed by Transport tyre.
99 The cross-claim includes a claim for damages said to have been suffered by Transport Tyre by that conduct which is alleged to have contravened the Trade Practices Act.
100 In the light of his Honour's conclusion concerning the assignment, his Honour did not decide the questions raised by the cross-claim. In so far as a claim is made for damages pursuant to section 82 of the Trade Practices Act 1974, the proceeding should be remitted to the trial judge for the purpose of making determinations on the questions of contravention of the Trade Practices Act raised by the cross claim.
SECTION 129
101 The provisions of s 129 have already been outlined.
102 The chronology of the relevant events for this purpose is as follows:
* On 26 May 1997, the assignment was recorded.
* By letter dated 17 June 1997, Transport Tyre's solicitors wrote to Montana threatening to sue for infringement.
* By letter dated 27 June 1997, Montana by its solicitors gave a limited undertaking not to import or sell the tyres (whilst Transport Tyre remained registered proprietor of the marks).
* By letter dated 9 July 1997, Transport Tyre's solicitor threatened to sue unless by 11 July 1997 Montana undertook not to sell the tyres imported prior to 15 May 1997.
* On 11 July 1997, Montana commenced these proceedings under s 129. Process was served that day.
* The first directions hearing took place on 5 August 1997. A timetable was agreed, including a direction that Transport Tyre file a cross-claim for infringement by 2 September 1997.
* On 19 September 1997, Transport Tyre filed its cross-claim.
103 In holding that Transport Tyre could not invoke s 129(5) because its action for infringement had not been commenced "with due diligence", the primary Judge said:
"[Transport Tyre] left it to Montana to initiate litigation. Perhaps this was because [Transport Tyre] thought it unnecessary to commence a proceeding; perhaps [Transport Tyre] realised the threats were doing their work, Montana's business was collapsing. Whatever the reason, [Transport Tyre] allowed a further ten weeks to pass before, on 19 September 1997, it filed a Cross-claim alleging infringement. This was some three months after [Transport Tyre's] first threats and demands for urgent undertakings." (Emphasis added).
104 With all respect, we cannot agree that Transport Tyre's conduct in suing for infringement should be characterised as so dilatory. On the contrary, when viewed in their proper context, the steps taken by Transport Tyre in prosecuting its claim of infringement should, we think, be seen as action undertaken with a diligence that is fairly described as "due" in those circumstances.
105 An important element in a proper understanding of the context of the events is the identification of a starting point from which any measure of delay on the part of Transport Tyre may be reckoned. As has been noted, the primary Judge took 11 July 1997 as the commencement point in his calculation of the 10 week elapsed period, adding the observation "whatever the reason". But in our view, the process of characterising inaction as a lack of "due diligence" does require an understanding of the reason for the delay. In our opinion, Transport Tyre's reason for not suing before September was a good one, viz. the circumstance that other proceedings had already been commenced by Montana and were not returnable until 5 August 1997. Given that time frame, we think that it was unnecessary for Transport Tyre to institute separate proceedings in July. We think that time should be treated as running for present purposes from 5 August 1997, the date of the first directions hearing. On that date, Transport Tyre sought, and was granted, a direction to file its cross-claim by 2 September 1997. This was, in our view, action taken with due diligence. Although the cross-claim was not, in fact, filed until 19 September 1997, we do not think that this alone undermines the overall assessment of Transport Tyre's conduct as action on its part which falls within the description provided by s 129(5).
106 In our opinion, the claim under s 129 should have been dismissed. To this extent, the appeal should be allowed.
TRANSPORT TYRE'S APPEAL AGAINST THE FINDINGS UNDER S 52 OF THE TRADE PRACTICES ACT
107 In its further amended statement of claim, Montana alleged that Transport Tyre had engaged in conduct in contravention of s 52 of the Trade Practices Act. The substance of the pleading which supported that assertion was as follows:
(1) Transport Tyre has threatened to bring an action against Montana on the ground that Montana has infringed each of the said registered Trade Marks. The threat was particularised as having been constituted by:
(a) letter dated 17 June 1997 from Transport Tyre's solicitors to Montana;
(b) letter dated 9 July 1997 from Transport Tyre's solicitors to the solicitors for Montana;
(c) notices published by Transport Tyre saying, inter alia:
"Any importation or sale in Australia of tyres, tubes or associated products bearing any of the [trade marks] (or deceptively similar trade marks) which is not authorised by [Transport Tyre] will infringe the [Transport Tyres] statutory right under the Trademarks Act 1955. [Transport Tyre] will not hesitate to take legal action against any party engaged in unauthorised dealings in tyres, tubes or associated products bearing any of its trade marks or deceptively similar trade marks."
The relevant terms of the letter of 17 June 1997 were as follows:
"We act for Transport Tyre Sales Pty Ltd.
Our client is now recorded on the Australian Register of Trade Marks as the owner of the following trade marks in respect of tyres and associated products:-
Ohtsu
Falken
Falken RX
Consequently, our client now has the exclusive right to use these trade marks (and/or authorise other persons to use these trade marks) throughout Australia in relation to tyres and other goods or services specified in the registration.
We are instructed that you import and/or sell Ohtsu/Falken tyres and associated products. You are hereby placed on notice that the importation and sale of tyres bearing any of our client's registered trademarks (or a deceptively similar trade mark) infringes our client's trade marks (Fender Australia Pty Ltd v Bevk (1989) 15 IPR 257). Our client has built up its own goodwill by virtue of being the Australian distributor of these tyres for approximately 20 years and has now been permitted to obtain by assignment the position of registered proprietor of these trade marks.
Our client requires that you provide to us by 4.00 p.m., Friday, 27 June 1997 the following undertakings in writing:-
(a) you will not import or sell tyres, tubes or related products bearing any of our client's trade marks or a deceptively similar trade mark;
(b) you will not otherwise use any of our client's trade marks in respect of tyres, tubes or associated products.
Failure to provide this undertaking by the stipulated time will leave our client no alternative but to institute court proceedings to restrain you for breaching our client's trade marks and to obtain an order requiring you to pay our client an amount calculated either as damages suffered by our client or an account of profits earned by you from the infringing marks.
Provided this undertaking is given as required, our client is prepared to purchase your existing stocks of Ohtsu/Falken tyres and associated products at your land cost subject to production of satisfactory evidence of such cost."
The relevant terms of the letter of 9 July 1997 were as follows:
"....
Any future sale of tyres or related products bearing the "OHTSU", "FALKEN" or "FALKEN RX" trade marks constitutes an infringement of our client's rights regardless of when these tyres were imported by your client. As previously advised, our client is prepared to purchase your client's existing stocks of the relevant tyres at your client's landed cost subject to production of satisfactory evidence of such cost.
...."
(2) The acts of Montana in respect of which Transport Tyre has threatened to bring an action do not constitute an infringement of the Trade Marks.
Particulars:
(a) At all relevant times in relation to the said threat, the said registrations were invalid.
(b) The threats were made by Transport Tyre in respect of tyres bearing the said registered Trade Marks and which had been imported prior to 15 May 1997 and supplied by Montana with the licence of Ohtsu.
(2) In the premises Transport Tyre has engaged in conduct in trade or commerce that is misleading or deceptive or is likely to mislead or deceive, in contravention of s 52 of the Trade Practices Act.
108 Because his Honour considered that Montana had available to it a cause of action under s 129 of the Trade Marks Act for groundless threats, it was not necessary for his Honour to determine the question of the application of the Trade Practices Act to the conduct of Transport Tyre about which the complaint was made. Since we have reached a different conclusion concerning the application of s 129(5), it is necessary to consider whether or not Montana had open to it a cause of action under s 82 of the Trade Practices Act based on contravention of s 52.
109 His Honour noted that Montana's amended pleadings included claims based on the Trade Practices Act but observed that they did not change the essential character of the proceeding. His Honour said that counsel for Montana focussed on the Trade Marks Act and observed that, subject to a qualification arising out of s 129(5) of the Trade Marks Act, counsel for Montana accepted that, if Montana is not entitled to succeed under the Trade Marks Act, it is no better off under the Trade Practices Act.
110 The primary case advanced on behalf of Montana was that the assignment of the Trade Marks from Ohtsu to Transport Tyre was ineffective. The contention in relation to the claim under s 82 of the Trade Practices Act, therefore, was that it was misleading for Transport Tyre to contend that it was entitled to the Trade Marks by assignment. In the light of the conclusion which we have reached, that assertion was justified and true. We have reached a conclusion on the effect of the assignment that differs from his Honour's conclusion.
111 A narrower question also arises in relation to the threats made by and on behalf of Transport Tyre. That issue concerns the question of entitlement of Montana and its customers to sell tyres bearing the Trade Marks which had been imported prior to the effective date of the assignment. The assertion made in the threats was that sale of any tyres bearing the Trade Marks would be an infringement. We have now held that that assertion was wrong in so far as it related to tyres on which the Trade Marks had been moulded prior to the effective date of the assignment.
112 For the reasons indicated elsewhere in these reasons, s 123 operates to excuse sale, at any time, of tyres on which the Trade Marks were moulded prior to the date of effective assignment. Accordingly, an unqualified assertion that sale of any tyres bearing the Trade Marks was an infringement, was a false statement and was groundless. Therefore, there was a basis upon which a cause of action for contravention of s 52 of the Trade Practices Act could be maintained.
113 Transport Tyre contended on the appeal, as had been contended before the trial Judge, that the pleading does not support any s 52 claim because no representation was pleaded. The pleading does not allege a representation. The first allegation is simply that Transport Tyre has threatened to bring an action. That assertion could not be denied because it is perfectly true that Transport Tyre had threatened to bring an action. However, while the allegation is not felicitously expressed, it is tolerably clear, from the second allegation set out above, that the pleader was alleging that there was implicit in such a threat a representation that Transport Tyre was legally entitled to bring an action restraining infringement by the sale of tyres which had been imported prior to 15 May 1997. As we have indicated, that was not a true statement because, as we have held, the sale of those tyres would not constitute an infringement. Accordingly, there may have been a cause of action available to Montana and the pleading fairly raises that cause of action.
114 The trial Judge made some observations concerning loss or damage for the purposes of s 82. His Honour concluded that if Montana can establish, as a matter of probability, that it lost sales because customers were influenced by misrepresentations made to them by Transport Tyre, it would show it had suffered loss or damage by conduct of another person that was done in contravention of s 52. However, his Honour made no finding on that question. Loss or damage is, of course, an essential element in establishing liability under s 82 of the Trade Practices Act.
115 It is not entirely clear whether the question of loss or damage was the subject of the hearing before his Honour. While his Honour ordered that issues of liability be heard separately from and prior to issues of quantum, it was still necessary for a finding to be made of loss or damage before the question liability could be determined. No findings have been made. It is not clear whether Montana sold all the tyres which it had imported into Australia prior to the assignment. Nor is there any finding that, because of threats to customers, Montana was unable to sell tyres that it would otherwise have been entitled to sell lawfully.
116 Having regard to the absence of any relevant findings, the appropriate course would be to remit the matter to the trial Judge for the purpose of making findings on the evidence already before him, and without further evidence, as to whether or not Montana suffered any loss or damage by reason of the conduct of Transport Tyre in making the threats as particularised in the further amended statement of claim.
MONTANA'S APPLICATION FOR LEAVE TO CROSS-APPEAL
117 During the hearing of the appeal, Montana sought leave to cross-appeal, out of time, from his Honour's holding that Montana had conceded that order (1) above sought by Montana in its amended application, could not be made in these proceedings in any event. It will be recalled that order (1) sought was an order cancelling the registration of the marks themselves.
118 We refused leave at the hearing, indicating that we would give our reasons when this judgment was published. These are those reasons.
119 His Honour's reasons for judgment were published on 19 June 1998. The appeal was heard in February 1999. No satisfactory explanation for the delay in cross-appealing was given. We note that, in his reasons, his Honour dealt explicitly with the concession.
120 A further complication is the absence of necessary parties - Ohtsu and the Registrar, and the absence of relevant findings by his Honour.
121 The discretion to allow the cross-appeal to be raised at this late stage should be exercised adversely to Montana.
COSTS
122 Since each party has had some measure of success, and of failure, on the appeal, we think that it is appropriate that there be no order for the costs of the trial, or of the appeal.
ORDERS ON THE APPEAL
We propose to make the following orders:
1. Appeal allowed in part.
4. Set aside orders 1, 2, 3 and 4 made on 19 June 1998; in lieu thereof, make the following orders:
(a) Order that, with the exception of the claim for damages the subject of the direction in order 5 made on 19 June 1998, the application be otherwise dismissed. Remit the claim for damages to the trial Judge in accordance with these reasons for judgment.
(b) Order, that the cross-claim be remitted to the trial Judge for the purpose of making determinations on the questions of contravention of the Trade Practices Act raised by the cross-claim, otherwise order that the cross-claim be dismissed.
(d) Make no order for the costs of the trial on 6, 7 and 8 April 1998; costs of (i) the claim for damages mentioned in (a); and (ii) the remitted part of the cross-claim to abide the discretion of the Judge trying that issue.
5. Appeal otherwise dismissed.
6. Make no order for the costs of the appeal.
|
I certify that the preceding one hundred and twenty-two (122) numbered paragraphs are a true copy of the Reasons for Judgment herein
of the Court. |
Associate:
Date: 29 March 1999
|
Counsel for the Appellant: | Mr A J L Bannon SC and Mr R Cobden |
| Solicitor for the Appellant: | Ebsworth & Ebsworth |
| Counsel for the Respondent: | Mr D M Yates SC and Ms A Silink |
| Solicitor for the Respondent: | Sprusons Solicitors |
| Date of Hearing: | 22 and 23 February 1999 |
| Date of Judgment: | 29 March 1999 |
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URL: http://www.austlii.edu.au/au/cases/cth/FCA/1999/329.html