No Flex Zone – Federal Court sends Australian company packing over trade mark dispute
For readers who are fond of a good deli selection, discussions of the chemical composition of plastics, or interesting trade mark issues (or all three) – this one’s for you.
The Applicant, Flexopack S.A. Plastics Industry, is a Greek company which sells and distributes thermoplastic food packaging films around the world under the trade mark “Flexopack”.
The Applicant has various products available, some of which are shown below:
The Applicant’s business is highly successful – it has engaged distributors to promote and supply its products in Australia since around 1995, and it incorporated an Australian subsidiary (which operates as a trading and conversion company) in 2014.
The Applicant obtained an Australian registration for the following logo in 2008:
The First Respondent, Flexopack Australia Pty Ltd, is a small business which was incorporated in 2010. The Respondent is a much small company than the Applicant in terms of size and revenue, and operates only in Australia. It supplies similar packaging films as the Applicant, to similar customers as the Applicant, under the trade mark “Flexopack Australia”. The Second Respondent, Mr Katelis, is the sole director and shareholder of the First Respondent.
The Applicant alleged that the First Respondent infringed its “Flexopack” trade mark and had engaged in passing off. The First Respondent cross-claimed that the Applicant’s trade mark registration should be removed from the register, and filed a non-use application with the Registrar of Trade Marks against that registration.
Before we go any further, we thought it was worth noting that this case opens with one of our all-time-favourite one-liners:
“How to preserve cheese and other foodstuff has challenged indigenous Mediterraneans for millennia”.
And now, onto other challenging topics – trade mark law.
Breach of trade mark
It was found that the Respondents had infringed the Applicant’s trade mark rights by using “Flexopack” and “Flexopack Australia” as trade marks on their business cards, invoices and quotations, packaging, email sign-offs and in advertising (amongst other things).
Beach J also held that the Respondents had infringed the Applicant’s trade mark by using “Flexopack” in their domain name <www.flexopack.com.au>:
“It is the use of the domain name on a website containing advertising material that promotes goods or services that can constitute use as a trade mark under s120.”
The mere registration of a domain name is not use as a trade mark. However, it appears that where a customer would see a domain name as being a virtual reality storefront for goods, and not a mere descriptor, this will be use of a domain name as a trade mark. While the First Respondent’s company name was Flexopack Australia Pty Ltd, that name in turn functioned as a trade mark.
Interestingly, the Respondents admitted that the names “Flexopack” and “Flexopack Australia” were deceptively similar to the Applicant’s registered trade mark. However, they disputed that the goods and services they had used those names for were within the scope of the Applicant’s trade mark registration (and therefore disputed that infringement pursuant to section 120(1) or (2) of the Trade Marks Act 2005 (Cth) had occurred). The Respondents’ argument was effectively that the chemical composition of their packaging did not fall within the scope of the registration in class 16 for “thermoplastic polymers (for packaging)”. Ultimately this was rejected, on the basis that class 16 includes “packing materials” and that the evidence led by the Respondents was not sufficient to convince the Court that the goods the Respondents sold were not thermoplastic polymers.
The “own name” defence
As a defence to infringement, the Respondents sought to rely on the “own name” defence under section 122(1)(a) of the Trade Marks Act. This defence provides that a person does not infringe a registered trade mark if the person uses, in good faith, that person’s name or the name of that person’s place of business.
The “own name” defence is subject to a number of qualifications, however Beach J found that the Respondents failed to establish the requisite “good faith” element. Drawing on both English and Australian precedent, his Honour considered that the Respondents’ actions should be assessed objectively. In his view, in order to rely on the defence the Respondents must have undertaken reasonable diligence to determine whether the names they wished to use conflicted with a registered mark – mere ignorance of the Applicant’s registered trade mark would not be sufficient to enliven the defence, and a lack of fraud or conscious dishonesty would not establish good faith. Beach J also affirmed the English position that once a party has been put on notice that they are infringing a registered mark, the “own name” defence will no longer be available (though it may excuse prior use).
Ultimately, Beach J was not satisfied that the Respondents had undertaken reasonable due diligence, or that they had acted in good faith in using “Flexopack” and “Flexopack Australia” as trade marks. His Honour was particularly critical of Mr Katelis who, despite operating in the same industry and under almost the same name as the Applicant, gave evidence that he did not know that the Applicant’s company existed prior to the dispute. Beach J also refused to accept that, although Mr Katelis was an experienced businessman and had prior experience with intellectual property protection, he was not aware that he should have conducted a trade mark search prior to using the “Flexopack” and “Flexopack Australia” names as trade marks.
Removal, passing off and the question of joint liability
The Respondents’ application to remove the Applicant’s trade mark registration was quickly dismissed – it was held that “Flexopack” is an invented word which is not descriptive of any goods, and is therefore inherently adapted to distinguish. Beach J refused to be drawn into what he called an “atomistic” and “artificial” approach to disassembling the Applicant’s registered mark in order to examine whether the words “flexo” and “pack” might be separately understood by customers as having other meanings (especially given the lack of evidence to support this exercise).
It was also held that the Respondents had engaged in passing off, and that their conduct was misleading and deceptive in breach of the Australian Consumer Law.
Finally, Mr Katelis was found jointly liable with the First Respondent for the trade mark infringement and the tort of passing off as he was the sole director, shareholder, secretary and directing mind of the First Respondent throughout the relevant period.
This decision canvasses a number of issues, but we think the below are the key concepts:
- It is important to undertake proper due diligence before using a word or a name as a trade mark. The courts will assess your due diligence objectively, so it is better to be more thorough than less and to keep proper records of the checks you have made.
- The courts will be reluctant to undertake an “atomistic” or artificial approach to determining whether words are descriptive or capable of distinguishing unless this exercise is supported by probative evidence.
- Parties seeking to rely on the “own name” defence must be able to prove (among other things) that the use was in good faith. Absence of fraud or conscious dishonesty is not enough.
- It is possible to infringe a trade mark electronically via electronic signatures and domain names. The test for domain names being used as a trade mark appears to be whether a customer would see a domain name as being a virtual reality storefront for goods (which we think is likely to capture a good number of domain names).
- The “own name” defence will generally not be available once a party has been put on notice of the existence of a registered trade mark.
- The “corporate veil” may not be a protection from personal liability for trade mark infringement where individuals are the sole “directing minds” of companies who infringe trade marks and are knowingly involved in that infringement.