Federal Court: trade mark licence restraints can be wider than Trade Marks Act deceptive similarity

Federal Court: trade mark licence restraints can be wider than Trade Marks Act deceptive similarity

Federal Court: trade mark licence restraints can be wider than Trade Marks Act deceptive similarity

Symbion Pharmacy Services Pty Ltd v Idameneo (No. 789) Limited [2011] FCA 389

The Federal Court has held that a contractual restraint prohibiting a licensee from using a mark similar to or capable of being confused with the licensed mark had a wider effect than what constituted infringement under the Trade Marks Act. The Court, however, dismissed the applicant’s claim for trade mark infringement on the basis that it did not call evidence about the likelihood of the respondent’s mark to deceive or cause confusion in the “specialised market” in which that mark was used.

Facts of the case

The trade marks and licence agreement

As part of a corporate restructuring prompted by its sale to Primary Healthcare Limited, the Symbion group of companies (formerly the ‘Mayne group’) sold its pharmacy and pharmaceutical distribution business, Symbion Pharmacy Services Pty Ltd (‘SPS’), to a third party. This sale involved the transfer of the following mark to SPS from its corporate parent, Idameneo (No. 789) Limited (‘Idameneo 789’):

The Symbion Trade Mark

At the time of sale, Idameneo 789 was still winding down its use of the Symbion trade mark. It therefore entered into a licence agreement with SPS, pursuant to which SPS granted Idameneo 789 the right to use the Symbion trade mark, or a green variation of it known as the Symbion device mark, for a two year transitional period.

The Symbion Device Mark

The licence agreement placed a number of restrictions on Idameneo 789, including a term which prohibited the company’s use of any mark “similar to or capable of being confused with” the Symbion trade mark or the Symbion device mark as a “trade mark, business name, domain name or otherwise anywhere in the world” (‘the restraint clause’).

The allegedly infringing conduct

Sometime during the two year term of the licence, Idameneo 789 and other companies within the (now) Primary group of companies began using the following mark in relation to Primary’s provision of radiology services:

The Idameneo 789 Mark

SPS alleged that, by using this mark, Idameneo 789 had:

  1. infringed the Symbion trade mark; and
  2. breached the licence agreement by using a mark which was similar to or capable of being confused with the Symbion trade mark and the Symbion device mark.

The decision

1. The trade mark infringement claim

SPS alleged that the Idameneo 789 mark so nearly resembled the Symbion trade mark that it was likely to deceive or cause confusion. SPS submitted that the use of such a deceptively similar mark in relation to radiology services (services in respect of which the Symbion trade mark was registered), amounted to infringement under the Trade Marks Act.

In response, Idameneo 789 argued that radiology services were not services which were normally supplied to the general public but, rather, were supplied in a “specialised market”. Idameneo 789 relied on a statement by Lord Diplock in a 1972 House of Lords decision that where goods are sold in a specialised market, evidence of the likelihood of deception or confusion from persons dealing in that market is essential to establish that a mark is “deceptively similar”.1 The case proceeded on the basis that the statement applied equally to the supply of services.

Idameneo 789 led evidence (unchallenged by SPS) that radiology services were sold in a specialised market consisting of medical and (sometimes) dental practitioners whose decision it was to refer patients for diagnostic imaging. As such, it argued that the Court would need evidence from persons in this market to assess whether the Idameneo 789 mark was likely to deceive or cause confusion.

SPS did not call any such evidence. Rather, it submitted that there was nothing about the specialised environment in which a doctor or dentist chose to refer a patient for radiology that meant that their likely perception of the Idameneo 789 mark would differ in any respect from that of a normal consumer of those services.

Accepting Idameneo 789’s evidence about the specialised market for diagnostic services, his Honour Jessup J found that the question of whether a mark used in a specialised market was deceptively similar could not be answered by the Court without evidence from those who work in that market. In the absence of such evidence, Jessup J held that SPS’s claim for trade mark infringement must fail.

2. The breach of contractual restraint claim

SPS also alleged that the Idameneo 789 mark was “similar to or capable of being confused with” the Symbion trade mark and the Symbion device mark2 and, as a result, Idameneo 789 had breached the restraint clause.

As with the Symbion trade mark, there was no evidence of any assignment by Idameneo 789 to SPS of the Symbion device mark. However, Jessup J held3 that SPS’s case to enforce the restraint clause did not depend on there being a valid assignment.

Construction of the restraint clause

Idameneo 789 submitted that the Court should construe the restraint clause in light of the Trade Marks Act. Specifically, it argued that the phrase “similar to or capable of being confused with” should be construed so as to go no further than the expression “deceptively similar” in the Trade Marks Act, that is, the prohibition should extend no further than use of a trade mark which so nearly resembles SPS’s marks as to be likely to deceive or to cause confusion.

SPS argued that the restraint clause went beyond the prohibition contained in the Trade Marks Act with respect to the test for deceptive similarity, and should be read as prohibiting use of two types of marks:

  1. those that are “similar to” the Symbion trade mark; and
  2. those that are “capable of being confused with” the Symbion trade mark.

Justice Jessup held that it was clear from the terms of the licence agreement that the parties intended to include a restraint which extended beyond the scope of the prohibition imposed by the Trade Marks Act. His Honour relied on the fact that the obligation was imposed on Idameneo 789 in part to police compliance by the company’s sub-licensees (those other entities within the Primary group) and that the restraint extended to use of the marks not only as trade marks but also as a business name, domain name or otherwise.

His Honour also distinguished the concept of “deceptive similarity” as used in the Trade Marks Act from the restriction in the restraint clause on the basis that the Act is concerned with resemblance which is likely to deceive or cause confusion, whereas the restraint clause is concerned with similarity which is capable of causing confusion.4 Justice Jessup held that the restraint clause set the bar lower than that set by the concept of deceptive similarity under the Trade Marks Act.

However, his Honour rejected SPS’s argument that the restraint clause imposed two separate prohibitions and concluded that the kind of similarity with which the provision is concerned is that which is capable of causing confusion. His Honour concluded that the interpretation contended for by SPS would render the term “similar to” meaningless.

Having decided upon the proper construction of the restraint clause, his Honour approached the issue of whether the Idameneo 789 mark was “similar to or capable of being confused with” the Symbion trade mark from the same perspective used by a court to assess whether a mark is deceptively similar to a trade mark: from that of a person who sees the allegedly infringing mark for the first time and has an imperfect recollection of the registered mark. His Honour accepted Idameneo 789’s argument that when making this assessment, the context in which the marks are used must be taken into account.

Comparing the similarities and differences between the marks, his Honour found that, as a matter of overall impression, the Idameneo 789 mark was similar to the Symbion trade mark to an extent capable of causing confusion.

Permanent injunction

On 24 May 2011,5 Jessup J ordered that Idameneo 789 be permanently restrained from using the Idameneo 789 mark. His Honour refused to order a wider permanent injunction covering the scope of the exclusions in the restraint clause on the basis that:

  • it begged the question which arose for determination in the proceeding (namely, whether the Idameneo 789 mark offended the restraint clause);
  • it would go no further than adding the potential outcome of contempt of court proceedings to SPS’s existing remedies for breach of contract; and
  • nothing in the facts suggested that Idameneo 789 would seek to adopt another mark which was confusingly similar to the Symbion trade mark.

Commentary

Lessons to be learnt

  • In actions for trade mark infringement, if a trade mark is targeted towards a particular class of consumers, such as health professionals, trade mark owners need to present evidence of the likelihood of deception or confusion in participants in that specialised market.
  • When assigning trade mark rights, assignors need to ensure that nothing in an assignment document restricts either their ability to continue using marks not being assigned, or otherwise restricts their activities in the future. An express provision in an assignment document acknowledging the existence and use of the assignor’s other marks, and allowing their use after the assignment is completed, will help clarify these rights.
  • All parties to a licence agreement or an assignment need to appreciate the meaning of the terms expressly included in the document. Words or expressions which do not have an accepted meaning within the context of the Trade Marks Act may ultimately be held to mean something different from what one or other of the parties intended. This applies even more importantly to the party to which any restraint or limitation is directed.

Endnotes

  1. General Electric Co Limited (USA) v General Electric Co Limited [1972] 1 WLR 729, at 737-738.
  2. Which Jessup J dealt with collectively as “the Trade Mark”.
  3. At [31].
  4. At [38].
  5. Symbion Pharmacy Services Pty Ltd v Idameneo (No 789) Limited (No 2) [2011] FCA 531.