Domain names in hot water

Domain names in hot water

Domain names in hot water

Solahart Industries Pty Ltd v Solar Shop Pty Ltd [2011] FCA 700
Solahart Industries Pty Ltd v Solar Shop Pty Ltd (No. 3) [2011] FCA 884

Justice Perram of the Federal Court has found that use of SOLARHUT in respect of photovoltaic systems infringed registrations for SOLAHART in respect of hot water systems having a solar element.

The Court made interesting observations on the traditional test for assessing whether goods are of the same description but appeared to favour the degree to which the goods are substitutable in determining the issue.

Most surprisingly the Court found that mere use of a domain name to resolve a site hosted from a different domain name was infringement even where there is no use of the trade mark on the site or in the url.

Facts of the Case

Solahart Industries Pty Ltd (“Solahart”) has been in the business of manufacturing, selling and installing solar powered hot water heaters since 1953. During the 1970’s SOLAHART became the leading hot water system in Australia and internationally.

In May 2009, Solar Hut Pty Ltd (“SolarHut”) entered the market as a budget orientated web based vendor of photovoltaic systems. Solar Hut’s entry into the market was, in part, explicable on the basis of the Commonwealth subsidiaries then available for products of that kind.

Between 1 May and 6 October 2009 Solar Hut sold photovoltaic panels through its website solarhut.com.au with reference to the SOLARHUT trade mark.

Following an objection from Solahart, on 6 October 2009 Solar Hut moved to the SUNSAVERS brand and developed an accompanying sunsavers.com.au website. However, Solar Hut did not entirely abandon use of the SOLARHUT name as the solarhut.com.au website remained active for an additional year directing consumers to the new sunsavers.com.au website until 7 October 2010.

Solahart sued Solar Hut for trade mark infringement, passing off and misleading and deceptive conduct.

The decision on infringement

Solahart alleged that three of its trade mark registrations were infringed, namely:

Trade Mark Goods
SOLAHART (293010) Class: 11 Solar operated hot water systems in Class 11
SOLAHART (304100) Class: 11 Domestic water heaters, swimming pool heaters, air heaters and conditioners, solar furnaces and cookers; solar cells and sundry solar devices being parts of installations included in Class 11
SOLAHART (435198) Class: 11 All goods in this class including ventilation systems, air circulating systems and fans and parts and accessories included in Class 11 for ventilation systems, air circulating systems and fans; but excluding cooking apparatus and parts and fittings included in Class 11 for cooking apparatus

Comparison of Goods

The Court noted the obvious different purposes of the products; one is a hot water heater installed by a plumber, the other an electricity generator installed by an electrician. However, the Court also noted a number of similarities including that both sets of products bring about a reduction in a household’s use of electricity; both involve roof mounting of solar collectors and both utilise radiation coming from the sun. A significant factor which appeared to guide the Court’s decision was the degree to which the goods are substitutable. The evidence showed that part of the demand for photovoltaic systems has been drawn away from the solar hot water market–an indicium of substitutability. On this basis, the Court concluded that Solar Hut’s photovoltaic systems were goods of the same description as the hot water systems having a solar element which were the subject of Solahart’s registration nos. 293010 and 304100.

Deceptive Similarity

It was recognised that the prefixes SOLA and SOLAR were clearly references to the sun and phonetically identical however, the suffixes HART and HUT showed obvious visual and conceptual differences. Despite admitting that “HART and HUT are plainly different from a visual perspective” the Court focused on how the marks sounded stating:

The difference between the two is nearly imperceptible. This is not only because the missing ‘R’ has little or no phonetic effect on the preceding ‘A’ but because the words HART and HUT sound almost the same. This is a case where the aural impression makes a decisive difference: the SOLARHUT trade mark is deceptively similar to SOLAHART within the meaning of s 120(2)(a).

Which conduct infringed?

Turning then to the particular infringements alleged, the Court considered the following acts:

  1. Use of SOLARHUT by Solar Hut from 1 May to 6 October 2009;
  2. Use of the domain name solarhut.com.au from 1 May to 6 October 2009; and
  3. Use of the domain name solarhut.com.au from 6 October 2009 to 7 October 2010.

1. Use of SOLARHUT by Solar Hut from 1 May to 6 October 2009

During the first period of alleged infringement Solar Hut used the SOLARHUT trade mark on its website and on radio, print and television advertisements. Much was made of the fact that the radio advertisements, telephone sales and sales by referral exposed consumers to the SOLARHUT trade mark in a purely aural context. The Court concluded that use of SOLARHUT by Solar Hut during 1 May and 6 October 2009 was infringing use.

2. Use of the domain name solarhut.com.au from 1 May to 6 October 2009

The Court ignored the ‘www’ and ‘.com.au’ components of the domain name explaining that “one should put to one side in the analysis the various accoutrements of domain names such as ‘www’ and ‘.com.au’ to which consumers do not pay any substantive attention” and concluded that “the use of SOLARHUT in the domain name www.solarhut.com.au was deceptively similar to SOLAHART”.
During this period Solar Hut’s more traditional marketing initiatives via radio and television invited consumers to visit its website where sales of photovoltaic panels were made with reference to the SOLARHUT trade mark. In this case the domain name “is properly to be viewed as largely analogous to a shop front” and therefore amounts to trade mark use. Use of the domain name solarhut.com.au during the period 1 May to 6 October 2009 was infringing use.

3. Use of the domain name solarhut.com.au from 6 October 2009 to 7 October 2010.

In response to an objection by Solahart, on 6 October 2009 Solar Hut launched the website sunsavers.com.au and appeared to cease use of SOLARHUT as a trade mark. However, during the period 6 October 2009 and 7 October 2010 Solar Hut maintained the domain name solarhut.com.au redirecting its web traffic to the new sunsavers.com.au website. The Court did not accept that the maintenance of the solarhut.com.au domain name was accidental or careless but concluded that this was a deliberate act to funnel traffic to the SUNSAVERS website. The Court was not persuaded that Solar Hut was motivated by a desire to exploit the SOLAHART mark but rather, simply to exploit the residual goodwill in the SOLARHUT brand. The Court noted that the effect of the use of SOLARHUT in this context was to increase traffic to Solar Hut’s www.sunsaver.com.au website which was motivated by a desire to increase sales of photovoltaic systems. This was found to be trade mark use and infringement.

In making this decision the Court considered the authorities of Sports Warehouse Inc v Fry Consulting Pty Ltd [2010] FCA 664 and CSR Ltd v Resource Capital Australia Pty Ltd [2003] FCA 279 in determining whether a domain name could be use as a trade mark and then noted a number of propositions which should be accepted:

First, mere registration of a domain name does not establish the infringement of a trade mark;

Secondly, where a cybersquatter does not seek to attract consumers to the occupied domain name but merely seeks to treat with the owner of the mark it is unlikely that trade mark infringement will be shown for there will be no goods or services being proffered to consumers to which the impugned sign, contained within the domain name, may be seen to be reasonably relating;

Thirdly, where a person uses a domain name to attract consumers to a website which promises connexions with goods and services relating to the registered mark infringement may be established even if the owner of the domain name does not sell the goods or services and instead merely benefits from a flow of traffic over the website;

Fourthly, where a domain name is used to conduct a website from which goods or services are sold the same kinds of questions which arise in ordinary trade mark litigation will arise, for in such cases the analogy between the sign on the front of a shop and the goods sold within will be established;

Fifthly, explicit advertising of the website in that context is obviously relevant for it will show more clearly the connexion between the sign and the service.

Use of the domain name solarhut.com.au during the period 6 October 2009 to 7 October 2010 was infringing use.

Passing Off and Section 52

The Court noted that the principal reason for the finding of deceptive similarity was owing to the way the respective marks sound. The Court did not accept that any person on seeing the former mark could think for a moment that it was related to the latter. On this basis, the Court found that no visual depiction involving the SOLARHUT mark could give rise to passing off. The position was different with respect to the radio advertisement and this was found to amount to a misrepresentation. However, the passing off case failed as Solahart could not establish damage. In the Court’s words:

The difficulty is that the confusion engendered by the radio commercial is so complete that it can only have worked to Solahart’s advantage. Any person who had heard the commercial and mistook the mark SOLARHUT for the mark SOLAHART would also have misunderstood the spoken invitation to visit the website at www.solarhut.com.au as an invitation to visit www.solahart.com.au. Indeed, any action by a listener to act on the deception engendered by the commercial can only have led the listener into the arms of Solahart…its misleading nature must have operated to the detriment of Solar Hut itself and to the benefit of Solahart.

Unable to substantiate a loss, the Court determined that Solahart’s passing off and section 52 claims failed.

Interesting aspects of case

  1. The Court found that use of solarhut.com.au to resolve to a webpage hosted at http://www.sunsavers.com.au amounted to trade mark infringement notwithstanding that SOLARHUT was not reproduced at all on the site or in the url for the site. While this was stated to flow from “an accepted proposition” (the third proposition referred to earlier), no Australian court has previously been prepared to extend trade mark infringement this far. Interestingly the US authority of Nissan Motor Co v Nissan Computer Corp [2004] US CA9 511; 378F.3d 1002 was cited in support without recognising that US law only requires “use in commerce” as opposed to “use as a trade mark in the course of trade” which is required for infringement under Australian law.
  2. On the second day of the trial Solar Hut attempted to amend its defence to include the proviso “defence” under s120(2) of the Act “However, the person is not taken to have infringed the trade mark if the person establishes that using the sign as the person did is not likely to deceive or cause confusion”.
    Perhaps critical to the outcome the Court refused the application on case management grounds. Taking into account the Court’s comments regarding passing off and section 52, had this plea been initially led and Solar Hut argued that its use of SOLARHUT was rarely aural and primarily visual, it is possible that the outcome of the trade mark infringement claim would have been different.
  3. The Court’s findings on the passing off claim are understandable given the finding of fact that Solar Hut had suffered no loss or damage. However, the Court applied the same reasoning to the Trade Practices claim. In the Court’s words “The claim under s52 of the Trade Practices Act fails for the same reasons. The written representations were not misleading or deceptive. The radio commercial was but it could not have resulted in loss to Solahart.” However, loss or damage is not an element required in a Section 52 Trade Practices action.
  4. When determining the question of goods of the same description, the traditional factors including the nature and origin of the goods, the uses made of the goods and the trade channels through which they are bought and sold were considered however, the Court noted that “the phenomenon of internet retailing…tends to blur, almost to extinction, these kinds of considerations”.
    The Court went on to state that a sensible business judgement is called for “and in that context notions of substitutability appear to be apposite”. This demonstrates how hard it is becoming to advise on this issue but also how important it is to have compelling evidence of consumer perceptions and substitutability.
  5. Curiously, no infringement was found of Solahart’s registration no. 435198 which covered all goods in class 11 in addition to a list of specific goods. The Court appeared to consider the all goods claim by reference to the class heading whereas in effect, this registration covered the goods of the earlier registrations which were found to be infringed