Australian trade mark registration no defence to misleading or deceptive conduct and passing off

Australian trade mark registration no defence to misleading or deceptive conduct and passing off

Australian trade mark registration no defence to misleading or deceptive conduct and passing off

CI JI Family Pty Limited and Luong Huynh Ngo v National Australian Nappies (NAN) Pty Limited and Nhut Thang Ho [2014] FCA 79

The Federal Court has granted injunctive relief and ordered damages in the amount of $25,000 and costs in favour of the CI JI Family Pty Limited and Mr Ngo (the CI JI parties) against National Australian Nappies and its sole director Mr Ho (the NAN parties) following its determination that the NAN parties had engaged in misleading and deceptive conduct and passing off, as a result of their use in New South Wales of a substantially similar business name to the business name “Nappy Land” held in New South Wales by Mr and Mrs Ngo.

The CI JI parties carried on a business in New South Wales under the business name “Nappy Land”, and using the following logo:

In 2013 the NAN parties commenced using the business name “Nappy Land” in New South Wales and the CI JI parties sought to restrain NAN’s use of that name and the domain name www.nappyland.com.au.

The case has an interesting background.

The dissolution of the partnership and the 1999 Agreement

  • In 1997, Mr Ngo and Powerware Consultants Pty Ltd (owned by Mr Ho and his wife) entered into a partnership trading under the business name “Nappy Land”.  In 1999 the partnership dissolved and there was disagreement between the parties as to the terms upon which the parties parted ways;
  • After the dissolution of the partnership, Mr Ngo continued to carry on a business selling commercial quantities of nappies and other products primarily to childcare centres in New South Wales under the name “Nappy Land”.  Without explanation, the business name “Nappy Land” in New South Wales continued to be registered by Mr Ngo and his wife only;
  • Mr Ho continued to carry on business nationally, including in New South Wales, through the company “National Australian Nappies (NAN) Pty Ltd”.  His business also used a composite registered trade mark which included the words “Nappy Land”:

In October 2000, NAN registered the business name “Nappy Land” in Victoria, Queensland and South Australia.

Whatever its activities in New South Wales prior to 2013, from mid-2013 NAN set up a warehouse in New South Wales and actively sought to promote and sell its products in New South Wales under the name “Nappy Land” (using the above registered trade mark) and by reference to the domain name www.nappyland.com.au.

The CI JI parties challenged the more recent activities of the NAN parties in New South Wales claiming that they were causing confusion amongst CI JI’s customers.

Surprisingly, the CI JI parties did not seek to challenge NAN’s registered trade mark, business name or domain name nor did they seek to argue that those names were held on behalf of CI JI.

The CI JI parties argued that under the agreement reached upon the dissolution of the partnership in 1999 it was agreed that Mr Ngo would continue carrying on the business in New South Wales, and Mr Ho would not trade in that State.  The Court rejected this argument.

Trade mark registration no defence to misleading or deceptive conduct and passing off claims

The CI JI parties also argued that through their use of Nappy Land and www.nappyland.com.au, the NAN parties had engaged in misleading and deceptive conduct, under section 18 of the Australian Consumer Law and the tort of passing off.  The NAN parties argued that their registered trade mark was a complete defence to these allegations.  The Court rejected this argument and confirmed that:

The rights conferred upon the registered owner of a trade mark do not extend to a licence to engage in conduct which is misleading or deceptive or to engage in conduct which constitutes a passing off.

Section 230 of the Trade Marks Act 1995 (Cth) also expressly confirms that a trade mark registration is no defence to an action for passing off.

Misleading and deceptive conduct allegations upheld

Despite holding that CI JI’s evidence regarding the misleading or deceptive conduct allegations was vague, the Court concluded that there was “little hesitation” that the phrase “Nappy Land” and the domain name www.nappyland.com.au both had the potential to mislead and had in fact misled the public in New South Wales.  This was because “Nappy Land” and “Nappyland” were sufficiently similar (both in written and oral form) so as to be susceptible of causing confusion and, as such, were likely to mislead or deceive.  The Court also accepted the CI JI parties’ evidence that some of CI JI’s customers had actually been misled by the NAN parties’ activities. 

Given the conclusion that the NAN parties had engaged in misleading or deceptive conduct, his Honour held that it was unnecessary to reach a firm conclusion on whether its conduct also constituted passing off, but indicated that this cause of action would also have been successful.

Injunctive Relief restrains National Australian Nappies

The injunction granted by the Federal Court restrains the NAN parties using the words “Nappy Land” or “NAPPYLAND”, “or any colourable imitation thereof” in doing or promoting any business in New South Wales which involves the sale of nappies, baby wipes, rubber gloves or paper products.  The injunction also requires the NAN parties to make the website www.nappyland.com.au inaccessible to anyone located in New South Wales and to prevent orders for products or services being placed through the website for delivery in New South Wales.

Inadequate evidence of loss or damage affects quantification of compensation

Despite the CI JI parties’ less than satisfactory evidence as to quantum of its loss or damage suffered as a result of the NAN parties’ conduct, the Court held that due to the nature and character of the offending conduct pursued by the NAN parties and the fact that there was some evidence of customers actually being misled, the sum of $25,000 was appropriate as an award of damages.  The Court stated that this amount was at the outer limited of acceptable “guess work” which a Court is able to engage in when quantifying loss and damage in the absence of adequate evidence without straying into “an exercise in imagination” which it cannot do.

Tips for trade mark owners and businesses with similar names

  1. A trade mark registration is no defence to conduct which amounts to misleading or deceptive conduct or passing off.
  2. Owners of registered trade marks need to monitor the conduct of third parties.  Where such conduct arguably amounts to an infringement of the registered trade mark, failure by the registered owner to enforce its rights may ultimately result in the registered owner’s subsequent use of its own trade mark amounting to misleading or deceptive conduct or passing off and, with the registration itself also being vulnerable to cancellation. 
  3. If an applicant requests an early final hearing, particularly where the issues of liability and quantum are to be determined together, it should be prepared with all the necessary evidence, especially evidence to support a claim for loss or damage.  Courts will not embark on a voyage of imagination into what an applicant’s actual loss and damage may have been if the applicant itself does adduce the necessary evidence.
  4. Where an applicant faces difficulties establishing loss and damage, a more appropriate course may (if it is available) be to elect an account of profits – this places a greater burden on the respondent.