Injunction granted in favour of Winnebago set aside on appeal due to 25 year delay

Knott Investments Pty Ltd v Winnebago Industries, Inc [2013] FCAFC 59

On 7 June 2013, the Full Court of the Federal Court of Australia unanimously upheld an appeal by Knott Investments against orders restraining it from using the “Winnebago” name and associated logos, in connection with the manufacture, promotion or sale of recreational vehicles (RV’s) in Australia.  The Full Court held that the injunction granted by a single judge of the Federal Court was “unreasonable” and “unjust”¹ in the light of Winnebago’s 25 year delay in taking action against Knott Investments.

The Winnebago name in the US and Australia

Since 1959, Winnebago (an American company) has manufactured and sold RV’s such as motor homes and trailers in the United States and elsewhere (but not in Australia).  In 1978 Knott Investments (or a principal of Knott, Mr Binns and his wife), without Winnebago’s permission, began manufacturing and selling RV’s in Australia using the Winnebago name and logo in a form substantially identical to Winnebago’s mark.

Winnebago became aware of Knott’s actions in 1985 however, did nothing until 1991, when it entered into settlement discussions with Knott.  A Settlement Agreement was eventually executed between Winnebago and Knott in 1992.  Both parties had differing views as to the effect of the Settlement Agreement.  Knott said the Agreement permitted it to use the Winnebago name “without any problem”.² Mr Binns also (mistakenly) believed that the Settlement Agreement allowed Knott to apply to register a trade mark for “Winnebago”, which it did in 1997 (and which was subsequently registered).  On the other hand, Winnebago asserted, and the Full Court agreed, that the effect of the Settlement Agreement was as a “standstill agreement” reserving Winnebago’s rights, holding its position and putting Knott on notice of Winnebago’s claims³ (and did not give permission for Knott to register a trade mark).  The Settlement Agreement did not contain a Release.

In 2010, 25 years after Winnebago first became aware of Knott’s conduct, Winnebago demanded Knott stop using its name and logo and commenced proceedings in the Federal Court alleging misleading and deceptive conduct and passing off.  At first instance, the Court found in favour of Winnebago and, among other things, restrained Knott from using the Winnebago name and marks in Australia and cancelled its Australian trade mark for “Winnebago”.

Appeal to the Full Court of the Federal Court

Knott appealed to the Full Federal Court.  Most of the appeal judgment focussed on whether or not the trial judge had erred in making orders permanently restraining Knott from using the “Winnebago” name and marks.  The Full Court agreed with the trial judge on most of the substantive issues,⁴ but allowed the appeal on the basis that the relief granted to Winnebago by the trial judge should be varied.

Winnebago’s entitlement to relief

In Justice Jagot’s opinion, the error made by the trial judge (which required appellate intervention) was that an “unreasonable or plainly unjust” outcome had resulted from granting an injunction in Winnebago’s favour.⁵

In determining that restraining Knott from using the Winnebago marks was unfair, the Full Court considered the following:

• Winnebago had known that Knott was using the Winnebago name and logo since at least 1985 but had done nothing until 1991.  Since 1992, when the Settlement Agreement was signed, it had effectively sat on its hands until 2010 when it demanded Knott stop using the Winnebago marks and logo.
• In taking no action for (effectively) 25 years, Winnebago had taken a risk that when it eventually decided to take action against Knott, Knott might be able to successfully argue that because of Winnebago’s lengthy inaction, it would be unfair to prevent Knott from using the Winnebago name and logo.⁶
• Despite the fact that Winnebago had not made any representations (expressly or impliedly) that it would not enter the Australian market or take action against Knott, Knott was under the impression that this was the case.
• Knott had therefore taken a risk that Winnebago would sue Knott in the future (and Knott would be required to rebrand its products).  Taking this risk was not motivated by any particularly malicious intent, but rather stemmed from an initial intention of Mr Binns to trade off the reputation of Winnebago.⁷
• Justice Jagot considered that restraining Knott from using the Winnebago marks would enable Winnebago to trade off the reputation and goodwill that Knott had developed over 30 years.⁸ It would be unfair for Winnebago to take advantage of the work Knott had put into building up its business in Australia.⁹ In addition, Justice Cowdroy stated that if an injunction were granted to Winnebago, Knott and Mr Binns would suffer severe detriment.¹⁰

In the light of the above, the Full Court considered that granting an injunction restraining the appellants from using the Winnebago marks was unreasonable due to the substantial delay by Winnebago in bringing an action against Knott.¹¹ Accordingly, the Full Court ordered that many of the original Orders be set aside, including the injunction and the requirement that Knott deliver up any Winnebago branded stationery and marketing materials held by it.

However, the Full Court did hold that, in the interests of consumer protection, it was necessary for Knott to provide a disclaimer that Knott products were not manufactured by or under the licence of Winnebago, and were not associated with Winnebago.¹² According to the Court, it was not sufficient merely to refer to the disclaimer in documents but that the disclaimer needed to be included in notices on vehicles, in the future.¹³

Lessons for trade mark owners

As seen in the Winnebago case, courts may refuse or restrict remedies granted to a rights holder due to delay.  Trade mark owners should be vigilant in protecting their trade mark rights.  If they do not, those rights can be lost or significantly restricted.

Endnotes

1. Knott Investments Pty Ltd v Winnebago Industries, Inc [2013] FCAFC 59 [132]. See also Allsop J’s comments at [68] and Cowdroy J at [106].
2. Knott Investments Pty Ltd v Winnebago Industries, Inc [2013] FCAFC 59 [134].
3. Ibid [2].
4. In relation to the substantive issues on appeal, the Full Court largely agreed with the trial judge’s conclusion that Knott did not have a defence to Winnebago’s claims of misleading and deceptive conduct and passing off (namely, that Knott could not prove estoppel or laches, acquiescence and delay).
5. Knott Investments Pty Ltd v Winnebago Industries, Inc [2013] FCAFC 59 [132]. See also Allsop J’s comments at [68] and Cowdroy J at [106].
6. Ibid [137].
7. The Full Court did not agree with the trial judge’s conclusion that Mr Binns’ intention, when entering the Australian market and commencing use of the Winnebago marks, had been not only to trade off the reputation of Winnebago but also to prevent Winnebago from ever entering the Australia market or worse, to extort money from Winnebago (Ibid [133]).
8. The 25 years of Knott’s use and the extra 5 years that Mr and Mrs Binns had used the mark prior to Knott.
9. This was despite Winnebago’s argument that it might be disadvantaged by Knott’s reputation considering hat some customers had complained to Knott as to their as to confusion over whether Knott’s products were Winnebago’s product. The court held that, with over $560 million in sales, Knott was bound to have some unhappy customers and that it had worked hard to build up its business in Australia (see Knott Investments Pty Ltd v Winnebago Industries, Inc [2013] FCAFC 59 [128]).
10. Ibid [103].
11. Ibid [106] (per Cowdroy J).
12. This was one of the original orders of the Federal Court.
13. Knott Investments Pty Ltd v Winnebago Industries, Inc [2013] FCAFC 59 [66].