Katrina Chambers

Back in control – Recognition of the commercial realities for IP holdings within corporate group structures

Katrina Chambers

10 September 2019

Trade marks

The Federal Court decision in Trident Seafoods Corporation v Trident Foods Pty Limited [2019] FCAFC 100 provides welcome leeway with respect to intellectual property structuring arrangements.

The problem

Within corporate groups, it is not uncommon for trade marks and other intellectual property to be registered in a company separate to the company or companies that actually use the trade marks.  There may or may not be a written licence in place between the companies (although there certainly should be!).

As a result of decisions such as Lodestar Anstalt v Campari America LLC [2016] FCAFC 92 it was feared that these types of arrangements could potentially expose the registered trade marks to removal on the basis of non-use if the companies using the trade marks were not using them under the actual control of the trade mark owner, for example where the IP holding company was a subsidiary.  In the Lodestar case, the existence of a written licence alone was not considered enough to establish actual control.

Registered trade marks are vulnerable to removal on the basis of non-use if they are not used by the owner or an authorised user for a period of three years or more.

Section 8 of the Trade Marks Act 1995 (Cth) (the Act) provides:

(1) A person is an authorised user of a trade mark if the person uses the trade mark in relation to goods or services under the control of the owner of the trade mark.

(2) The use of a trade mark by an authorised user of the trade mark is an authorised use of the trade mark to the extent only that the user uses the trade mark under the control of the owner of the trade mark.

(3) If the owner of a trade mark exercises quality control over goods or services:

(a) dealt with or provided in the course of trade by another person; and

(b) in relation to which the trade mark is used;

the other person is taken, for the purposes of subsection (1), to use the trade mark in relation to the other goods or services under the control of the owner.

(4) If:

(a) a person deals with or provides, in the course of trade, goods or services in relation to which a trade mark is used; and 

(b) the owner of the trade mark exercises financial control over the other person’s relevant trading activities;

the other person is taken, for the purposes of subsection (1), to use the trade mark in relation to the goods or services under the control of the owner.

(5) Subsections (3) and (4) do not limit the meaning of the expression under the control of in subsections (1) and (2).

The facts

Trident Seafoods Corporation (Trident Seafoods) brought an action for removal of Trident Foods Pty Limited’s (Trident Foods) registered trade marks for the word “TRIDENT” on the basis of non-use.  Trident Seafoods wished to commence selling in Australia using the trade mark “TRIDENT SEAFOODS”.

Trident Foods is a wholly owned subsidiary of Manassen Foods Australia Pty Ltd (Manassen).  The two companies shared common directors.

Manassen had acquired Trident Foods in about 2000, and since that time, “TRIDENT” branded products had been sold by Manassen, not Trident Foods.  The trade marks remained registered in the name of Trident Foods.  Trident Foods did not itself use the trade marks from about 2000.

Trident Foods could not demonstrate that it had used the marks during the relevant period.  The question was therefore whether Manassen’s use during the relevant period counted on the basis that Manassen was an “authorised user” of Trident Foods.

The decision at first instance

In Trident Seafoods Corporation v Trident Foods Pty Ltd [2018] FCA 1490, Trident Foods relied on the Trade Marks Office decision in HS TM, LLC v Schein Orthopadie-Service KG [2016] ATMO 63 where the Hearing Officer found that “there is nothing unusual in a large company … incorporating a wholly owned subsidiary in order to hold its worldwide trade mark (or, for that matter, patent or other IP right) portfolio …. It is a very common practice because, inter alia, it efficiently streamlines processes for the prosecution and renewal of properties in the portfolio and it avoids the need to record name changes, mergers or assignments around the world should the parent company restructure or change names”.  Trident Foods also submitted that it exercised quality control over Manassun’s use of its trade marks by reason of common directorships.  There was no written licence agreement in place during the relevant period.

The judge at first instance, Justice Gleeson, found that there was no evidence the “TRIDENT” trade mark had been used by Manassen under the control of Trident Foods.  In considering the corporate relationship between Trident Foods and Manassen it was significant to Justice Gleeson that Trident Foods was a subsidiary of Manassen, rather than Trident Foods being the parent company.  The fact that the companies had common directors was also not enough for Justice Gleeson.

Justice Gleeson nonetheless exercised her discretion under section 101(3) of the Act and refused to remove Trident Foods’ trade marks from the register, even though in her view the grounds for removal on the basis of non-use had been established.

Trident Seafoods appealed from this decision.

The appeal

The appeal was dismissed.

The Full Court upheld the primary judge’s decision so far as she had exercised her discretion under section 101(3).

The Full Court also revisited the question of whether Manassen was an authorised user of Trident Foods.  The Court found that Manassen was an authorised user.  Even though as a wholly owned subsidiary Trident Foods did not control Manassen, it did control Manassen’s use of the trade marks.   It was significant to the Court that at all relevant times the two companies had the same directors, and that the two companies operated with a unity of purpose.  According to the Court, unity of purpose is indicative of the existence of actual control.  It was also relevant that the labels/packaging of the products sold by Manassen stated that the “TRIDENT” trade mark was owned by Trident Foods.

Key points

  • Registered trade marks are vulnerable to removal on the basis of non-use if they are not used by the registered owner or an authorised user.
  • Actual control is required to demonstrate authorised use.
  • The Full Court of the Federal Court of Australia has recognised the existence of actual control of trade mark use within corporate groups where there is a commonality of directors and “unity of purpose”.
  • Written trade mark licences aren’t essential to the establishment of actual control but appropriately drafted documents can greatly assist. Written licence agreements are also recommended to clearly set out the scope of the relevant company’s rights, obligations and liabilities.