Federal Court of Australia Finds No Bad Faith in Trademark Application Despite Deliberate Adoption of Similar Mark
The Federal Court of Australia dismissed an opposition to the registration of a trademark, holding that the application had not been made in bad faith despite a lower court’s finding of improper motive in the use of the mark. The court allowed the applicant to proceed with its appeal.
Mutual Trademark Oppositions
Applicant Fry Consulting Pty Ltd. and respondent Sports Warehouse Inc. are competitors selling tennis goods. Sports, which was incorporated in California in 1994, is based in the United States and primarily sells there, almost entirely online. Sports also makes some international sales, including to Australia. Fry is a more recently established Australian-based company, which sells in Australia both online and through retail stores. In December 2006, Fry filed application no. 115371 to register a trademark, which Sports opposed. The composite mark, for “retailing of goods (by any means),” consisted of the phrase TENNIS WAREHOUSE AUSTRALIA to the right of a drawing of a tennis ball. In December 2009, the Register of Trade Marks upheld the opposition. Registration was refused under Section 44 of the Trade Marks Act 1995 (the “Act”), among others, on the ground that the mark was deceptively similar to the Sports mark TENNIS WAREHOUSE, which Sports had applied to register with a priority date of February 23, 2005. Fry successfully opposed Sports’s application, after which Sports amended its complaint to oppose Fry’s registration under Sections 41, 60, and 62A of the Act (which apply to unregistered marks). Sports claimed that Fry’s TENNIS WAREHOUSE AUSTRALIA & Device mark was not inherently distinctive under Sections 41(2) and (5)(c) of the Act, was likely to cause deception or confusion with the Sports mark under Section 60, and had been applied for in bad faith, under Section 62A.
Deliberate Choice of Similar Designations
In 1994, Sports began operating an online retail business selling tennis products from its website under the domain name www.tennis-warehouse.com, and later www.tenniswarehouse.com. From 1995 to 2006, Sports sold over US$190 million of tennis goods internationally, of which US$1.14 million was in Australia. The Sports website displayed banners showing the stylized mark TENNIS WAREHOUSE, sometimes adjacent to the letters “TW” inside an oval. Fry’s director Wesley Fry testified that when he began his business, he was aware of the Sports website, and knew that Sports sold goods in Australia. Fry adopted the name “Tennis Warehouse” after visiting Sports’s Tennis Warehouse website, and he registered the business name “Tennis Warehouse” and the domain name www.tenniswarehouse.com.au. He conceded that consumers might confuse the two websites and that he chose the name partly for this reason. After receiving a warning letter from Sports in December 2004, Fry expressed willingness to change the name if Sports provided evidence of its “international” trademark. Fry then added the word “Australia” to “Tennis Warehouse” in his mark. Sports agreed to send Fry the requested evidence, but never did so. In December 2005, Fry added the tennis ball design to his mark.
In upholding Fry’s opposition to Sports’s application to register TENNIS WAREHOUSE, the lower court had considered whether the mark was inherently distinctive or descriptive, based on whether “other traders actuated only by proper motives would wish to use the mark or one closely resembling it.” Fry at ¶ 44. The court concluded that Fry’s use of TENNIS WAREHOUSE or TENNIS WAREHOUSE AUSTRALIA was not actuated by proper motives, due to Fry’s adoption of the mark admittedly knowing that it might cause confusion, along with his use of an almost identical domain name. Fry also had taken images from the Sports website to use on his own website. The lower court observed that Fry had not changed his domain name or his business name when he added “Australia” to his mark, the timing of which the court found suspect.
“Combined” Test for Bad Faith
On appeal, the instant court held that Fry’s mark was inherently distinctive and was not likely to deceive or cause confusion with Sports’s mark. Turning to the issue of bad faith, the court explained that Section 62A allows the refusal to register a mark if there was no good-faith intention to use it. Noting the paucity of Australian cases on point, the court looked to UK case law for guidance. Those cases applied the “combined” test, which assessed both objective factors and subjective intent:
Clearly the court, when considering bad faith, cannot apply a purely subjective test [ . . . ]. The dishonest person or one with low standards cannot be permitted to obtain trade mark registrations in circumstances where a person abiding by a reasonable standard would not. The registration of a trade mark is designed to enable bona fide proprietors to protect their proprietary rights without having to prove unfair trading. Registration is not provided to help those with low moral standards.
Fry at ¶ 147 (quoting Harrison’s Trade Mark Application  EWCA Civ 1028;  FSR 10 (internal quotation omitted)). The court stated that bad faith did not require dishonesty, but did require more than negligence, incompetence, or imprudence. “The formulation in United Kingdom authority of bad faith as falling short of the standards of acceptable commercial behaviour observed by reasonable and experienced persons in a particular area is, in my view, an apt touchstone.” Id. at ¶ 165.
Bad Faith Not Found
As the court explained, the lower court had not ruled on whether Fry’s application had been made in bad faith, but on whether Fry’s use of its mark showed improper motivation. The instant court found that Fry’s conduct in this regard did not amount to bad faith, based on Fry’s willingness to stop using the TENNIS WAREHOUSE mark if Sports showed its entitlement to the mark. The court placed great significance on the fact that Sports agreed to do so, yet never did. In addition, Sports’s application to register that mark was unsuccessful. Moreover, after their correspondence Sports remained silent until Fry contacted Sports two years later, and during that period Fry had developed his business under the mark, to which he added AUSTRALIA and the drawing of a tennis ball. The court also observed that Fry had not acknowledged Sports’s ownership of the mark, believing—albeit mistakenly—that his registration of the “Tennis Warehouse” business name gave him trademark rights in the name.
Accordingly, the court was not persuaded that Fry had applied to register the composite mark in bad faith, “in the sense that Mr Fry’s knowledge as of that date was such, in all the circumstances, that persons adopting proper standards would regard the decision to register as in bad faith, or that reasonable and experienced persons in the field would view such conduct as falling short of acceptable commercial behaviour.” Fry at ¶ 174.
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