There will often be prior third party trade marks that can impact the adoption of a new brand. It is better to know about these up front, and freedom to operate searches provide an important source of information in making decisions on whether to proceed with a new brand – forewarned is forearmed.
However, sometimes it is only after use a new brand commences that a third party's pre-existing trade mark rights comes to light. Depending on when the use commenced, 'honest concurrent use' can affect whether or not the new brand can be protected or can continue to be used. The concept of 'honest concurrent use' is relevant in various contexts, such as:
- to secure registration of a new trade mark through s 44(3) of the Trade Marks Act 1995 (Cth) (the Act) to overcome a prior similar trade mark; and
- more relevantly to this case, when combined with ss 122(1)(f) and (fa), as a defence to trade mark infringement. Those sections provide that if a court is of the opinion that the alleged infringer would obtain registration of the trade mark in their name if they applied for it, then that person does not infringe the registered trade mark that is said to be infringed.
Background to the Firstmac Limited (Firstmac) case
In this case, Firstmac Limited (Firstmac) owns the registered trade mark ZIP in class 36 for 'Financial affairs (loans)', which it applied for on 20 September 2004. Firstmac is part of a corporate group that was, at the time of the hearing, Australia’s largest non-bank lender. In November 2013, Zip Co Limited and ZipMoney Payments Pty Ltd (Zip Parties) launched their buy now pay later credit and payment services under the trade mark ZIP (as well as ZIP PAY and ZIP MONEY), despite receiving adverse examination reports from IP Australia that identified Firstmac's registered ZIP mark as a potential barrier to registration.
Firstmac alleged that the Zip Parties infringed its ZIP trade mark in breach of s 120(1) of the Act. Amongst other things, the Zip Parties relied upon defences of honest concurrent use, and cross-claimed seeking removal of Firstmac's trade mark for non-use. At first instance, the Zip Parties successfully defended the application, and the Court made orders dismissing Firstmac's infringement claim. Firstmac then appealed those orders.
The timing of the Zip Parties' searches
The Full Court found that the respective trade marks were at least deceptively similar to each other (noting that the trial judge had come to a different conclusion where the Zip Parties had used ZIP with additional elements).
The Zip Parties' defence of the infringement for 'honest concurrent use' claim depended on the timing of steps taken in the lead up to the alleged infringement:
- In early, 2013, a representative of the Zip Parties undertook internet searches for the trade mark ZIP and did not locate any relevant use of that trade mark. That evidence was not contradicted.
- In June 2013, without being aware of the Firstmac's ZIP trade mark registration, the Zip Parties decided to adopt the ZIPMONEY brand for their business.
- They took steps to prepare for the launch of the business, including the preparation of artwork for logos, an application for a credit licence, and the applications for the registration of trade marks.
- In August 2013, the Zip Parties applied to register their ZIP trade marks.
- In October 2013, they received adverse reports, which identified Firstmac's prior registration of ZIP. However, the Zip Parties did not get any legal advice on those adverse reports, were apparently distracted by the development of their business and ultimately let the trade mark applications lapse.
- In November 2013, the Zip Parties commenced use of the trade mark ZIP and associated trade marks.
So, at the time the Zip Parties decided to adopt the ZIP brand, they were not aware of Firstmac's pre-existing rights. However, prior to launch, in October 2013, they were aware of that trade mark and had received adverse examination reports from IP Australia identifying Firstmac's registered ZIP mark as a potential barrier to registration of their trade mark applications. The reports expressly raised concerns about the likelihood of confusion between the respective marks. Despite being on notice, the respondents proceeded to adopt and use the ZIP branding, without obtaining legal advice or reconsidering their position.
Whether those searches were sufficient
At first instance, the trial judge considered that there was honest concurrent use because, at the time the Zip Parties decided that they would use the ZIP trade mark in June 2013, they did not know of Firstmac's ZIP trade mark. Given the Zip Parties were acting honestly at the time they decided to use the trade mark, the trial judge inferred that such honesty continued through to their first use in November 2013.
In overturing that decision, the Full Court reaffirmed that the respondents, in this case the Zip Parties, had the onus to prove the defence, and hence to prove honesty. Further, the concept of 'honest concurrent use' requires the presence of objectively assessed honesty, not merely the absence of subjective dishonesty. This allows the courts to assess whether there was sufficient diligence, and reasonable care taken in carrying out searches before trade marks are adopted: see Pham Global Pty Ltd v Insight Clinical Imaging Pty Ltd [2017] FCAFC 83.
In the context of infringement, the court has to consider honest concurrent use in the context of a hypothetical application for registration. There has been some debate as to the time when such an assessment should be undertaken. The Full Court found that 'ordinarily, and in this case, [the hypothetical application is] to be assessed at the first date of the infringing conduct': see Killer Queen, LLC v Taylor [2024] FCAFC 149; Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd [2018] FCAFC 6; and Cantarella Bros Pty Ltd v Lavazza Australia Pty Ltd (No 3) [2023] FCA 1258. For the Zip Parties, the time of first infringement was November 2013, being their date of first use.
The respondents' reliance on prior internet searches, conducted before they received the trade mark examination reports, was not sufficient to prove honest use. That is because, by November 2013, when the Zip Parties launched their ZIP branding, they were aware of Firstmac's registered rights. The Full Court determined that by October 2013, before any use began, the respondents had clear notice of Firstmac's registration from IP Australia's adverse reports. The Court in paragraph 75 said in part:
'…If honest concurrent use cannot be established as at the time of first use, a prior or subsequent state of affairs could not ordinarily assist, and did not do so in the present case. By the first instance of infringing conduct, there was an objective lack of entitlement to use the unregistered marks, with the respondents by then having been given express written notice of that state of affairs… '.
Their failure to act on this notice, and to launch the new brand in the face of it, did not meet the standard of an honest and reasonable trader, disqualifying them from claiming honest concurrent use.
The Full Court also pointed out that failing to engage with the register of trade marks either through searches or applying for trade mark registrations prior to launch of a new brand, would not have been any better. In circumstances such as these, the courts expect an honest trader to do more than what the Zip Parties did.
Although not discussed in this article, the Full Court also overturned the trial judge's findings on non-use and the order of cancellation and rectification were also set aside.
Practical implications for businesses
The Full Court's decision underscores several significant points for businesses adopting new brands:
- You need to assess the defence of honest concurrent use at the time the mark is first used based on the standard of an honest and reasonable trader, not the user's subjective belief or intentions.
- If there is a gap in time between when a party decides to adopt a trade mark and when it is first used, searches undertaken that inform that adoption will not be sufficient to overcome prior rights that come to light, or should have come to light in the intervening period. You should undertake searches as close to the time before first use as possible.
- Where a party is put on notice of an existing relevant registered mark, they need to investigate and address the risk before use begins. Ignoring information on prior relevant trade marks, or failing to seek advice will weigh heavily against any claim of a defence of honest concurrent use.
The decision reinforces that strict criteria must be met to rely on honest concurrent use. If a party is aware of earlier relevant registered rights and fails to take reasonable steps to address those rights before launching a brand, it is likely to be fatal to establishing honest concurrent use. For example, ignoring an adverse report (issued on an application to register the mark) or failing to seek advice will weigh heavily against any claim of honest concurrent use. If you want to minimise the risk of prior trade mark owners undermining the use of a new brand, it is important to update any searches immediately prior to launch. Dealing with any issues at the time they come to light is likely to be more cost effective than adopting a wait and see approach.
