An Australian court ruling on authorised use within a trade mark license agreement may affect South African brand owners.
The Federal Court in Australia recently handed down judgment in a protracted dispute between the ‘Wild Geese’ and ‘Wild Turkey’ brands in that territory. The court found that trade mark owners can lose their registrations if they fail to exercise proper control over their licensees – and provided much needed clarity on how Section 8 of the Trade Marks Act 1995 of Australia should be interpreted.
The judgment was handed down in an appeal by Lodestar Anstalt of a decision regarding the non-use of the ‘Wild Geese Wines’ and ‘Wild Geese’ trade marks owned by Campari America LLC. Lodestar sought to sell whiskey under the mark ‘Wild Geese’ and applied for the removal of the trade mark held by Campari on the basis of non-use.
Under Australia’s Trade Marks Act, a trade mark can be removed from the Register if it hasn’t been used for a period of 3 years and 30 days prior to any removal application, and the trade mark owner must show that the mark has been used by the owner or an authorised user (licensee) during the relevant period. Campari had entered into a license agreement with Wild Geese Wines producer, Mr. O’Sullivan.
In clarifying the Act’s definitions of ‘control’ and ‘use’ under the Trade Marks Act, the court had to decide to what extent a licensor must control the use of the trade mark for the licensee to be deemed an ‘authorised user’. In this case, while the agreement between O’Sullivan and Campari contained certain quality control provisions, they did not exercise any of the provisions before the non-use action was instituted.
The court held that ‘control’ means actual control in relation to the use of the trade mark. Besanko J, in delivering judgment stated that, “There must be control as a matter of substance. ‘Actual control’ is a question of fact and degree and will depend on the facts of the case. For example, a licence agreement may contain terms that set out in detail a quality standard to be achieved, and those details may be so extensive that it isn’t necessary for the registered owner to give further direction to the licensee throughout the term.”
“The Australian court’s decision has potential implications for owners of trade marks in South Africa and other African countries, and their licensees, in risk-proofing trade marks against removal for non-use,” says Partner with Adams & Adams, Kelly Thompson. “The South African Trade Marks Act contains similar provisions and refers to use by a licensee as “permitted use”. There is also a provision that allows for the cancellation of a trade mark where it has been used in a manner likely to cause deception or confusion. Uncontrolled licensing could lead to that. The reasoning applied in the Australian ruling may be relied upon in South African courts.”
Howard Rogers, also a Partner with Adams & Adams who specialises in licence agreements, says “Certain other countries in Africa contain specific provisions regarding quality control in their legislation and, where appropriate measures are absent from a licence agreement, it may be considered invalid. The Australian case has highlighted the importance of careful drafting of trade mark licences and ensuring that licence agreements contain explicit quality controls that are enforced meticulously.”
Should you wish to discuss existing or future licence arrangements, contact Kelly Thompson with queries regarding the non-use of trade marks in South Africa and Africa.