7.5.2 Consideration
463 BBNT submits that this defence is inoperable for three reasons. First, the words "BED & BATH" operate to provide branding significance, as opposed to any characteristic within the meaning of s 122(1)(b)(i). Second, good faith must be positively proven and the intention of GRBA forecloses such a finding. Third, BBNT points to GRBA's failure to cease using the allegedly infringing brand after being put on notice 11 days after the opening of the Westfield Doncaster store on 25 May 2023.
464 Dealing with the first point, GRBA contends that, consistent with the intention of both Mr Lew and Ms McGann, GRBA has used the words "BED & BATH" to indicate that GRBA is now retailing "bedroom" and "bathroom" products from a House branded store. "BED & BATH" in the House B&B mark is not used to designate commercial origin, but to explain to consumers something about the kind, quality, intended purpose or other characteristic of the relevant goods or services being offered by GRBA.
465 As I have said above, the words "bed" and "bath" are not used solely descriptively in either the BBNT marks or the House B&B mark and those words are not purely descriptive even when used by soft homeware retailers as category descriptions. Namely, neither BBNT nor House B&B sell beds or baths, and nor would one find a bed or a bath in the parts of other retail stores labelled as such. Further, the House B&B mark is a composite one, of which the words "bed" and "bath" are only part of the mark. I therefore do not consider that the House B&B mark is used by GRBA to indicate the purpose of, or characteristics of, the goods sold in House B&B stores.
466 In any event, I am not satisfied that, at the time of adopting the House B&B mark, GRBA acted with an honest belief that no confusion would arise: see Digital Post at [73] (per North, Middleton and Barker JJ).
467 GRBA relied upon the evidence of Mr Lew and Ms McGann to establish that GRBA held the requisite honest belief. Consistent with the authorities, I do not need to be satisfied that GRBA engaged in fraud or dishonesty to find the defence under s 122(1)(b) inoperable. Rather, GRBA has the onus to establish that an appropriate person within their organisation actually held an honest belief. In my view, GRBA has failed to discharge that onus.
468 I think a distinction can be drawn between the belief of Ms McGann - who came up with the House B&B mark - and Mr Lew - who made the ultimate decision to adopt the mark. As I discussed at [189]-[218], I found Ms McGann to be an unimpressive witness and I give her evidence very little weight. Ms McGann clearly had BBNT on her mind when selecting the House B&B mark and, as evidenced by the running scared email, had an intention to divert trade away from BBNT. In any event, she is a very experienced marketer who would have been acutely aware that BBNT was one of the leading players in the soft homewares market. I observed at [200] that "BED & BATH" were not mentioned as category descriptions or navigational aids in any contemporaneous document in early May 2021 at the time of Ms McGann selecting the House B&B name. As such, I do not accept that Ms McGann held an honest belief that the "BED & BATH" part of the House B&B mark was purely a category description and nor do I think that she genuinely turned her mind to, and concluded that, no confusion would arise by adopting that mark by reference to the BBNT marks.
469 Mr Lew's evidence is more in the realm of wilful blindness. Mr Lew did not come up with the House B&B mark and there is no direct evidence that he had BBNT on his mind at the time of adopting the mark. However, Mr Lew is an incredibly experienced retailer and the evidence showed that he is highly conscious of branding and was very aware of competitors in the soft homewares market, including BBNT who he described as a "very prominent and successful brand" and "very well established in the market". In these circumstances, I simply cannot accept that he "never thought about BBNT" at the time of adopting the House B&B name, both when Ms McGann first suggested the name and after the running scared email. His refusal to even acknowledge in cross-examination that there was any similarity between the store names BBNT and House B&B, particularly his statement that it never occurred to him that House B&B has the same two words in its store name as BBNT, speaks to an astonishing level of blindness to the possibility of confusion.
470 Allsop J's comments in Anheuser-Busch at [216] are apposite here:
It is hard to see how [Mr Lew] and his company could be sure, or could hold the view, that no confusion would arise. They have not persuaded me that anyone did hold that view. In these circumstances, I think it can be said that, though the [GRBA] and Mr [Lew] were not consciously dishonest, [GRBA] did not use, and does not intend to use, [the House B&B mark] in good faith for the purposes of s 122 of the TM Act.
471 GRBA's wilful blindness is further evidenced by the fact that GRBA did not adduce any legal advice prior to adopting the House B&B mark. That omission must be viewed in context. Namely, several GRBA witnesses, including Mr Lew, gave evidence that GRBA would in the normal course seek legal advice before adopting a new brand, especially when, as in this particular case, GRBA intended to open up 50 new stores at great expense.
472 GRBA contends that there cannot be a requirement that a party take positive steps to ascertain its ability to use a mark in order for its conduct to be in good faith. If there is such a requirement, GRBA draws analogies to the interlocutory decision in A Nelson & Co Ltd v Martin & Pleasance Pty Ltd (2021) 157 IPR 376 where Flick J observed at [39] that unchallenged evidence that a party had filed and relied upon the results of a Headstart application with IP Australia "would go a long way to making out a defence of 'good faith' for the purposes of s 122(1)(b)".
473 There are two issues with relying upon Flick J's comments in Nelson. First, Nelson concerned an interlocutory injunction and is not an authoritative statement on what enquiries may discharge the good faith defence in s 122(1)(b) once infringement has been established. In my view, a Headstart application alone is unlikely to establish good faith. I consider that obtaining legal advice and conducting a search of the trade marks register are far better indications of a party acting in good faith: see Flexopack at [112] and [150] (per Beach J). In any event, the Headstart application itself was not undertaken as good faith due diligence, as the same day that the application was filed Mr Lew instructed Mr Caruana to change the signage on the Doncaster store to House B&B.
474 The second point is that Flick J was not dealing with a situation where the infringer's conduct constituted wilful blindness.
475 Ultimately, even if I accept that Mr Lew and Ms McGann genuinely held the subjective belief that there was no similarity between the House B&B mark and the BBNT marks, and therefore no confusion would arise from the adoption of the House B&B mark, that is not sufficient to establish good faith for the purposes of s 122(1)(b). As Beach J observed at [118] in Flexopack:
If good faith were to be construed as merely being satisfied on the basis of a stated subjective belief that one did not know of the other, it could lead to a situation where one could justify trade mark use with one's ignorance. The failure to make proper inquiries should not place a respondent in a better position than if such inquiries had been made.
476 As such, GRBA's conduct in adopting the mark, discussed above at [234]-[241], does not constitute what I consider in the circumstances of this case to be proper enquiries or reasonable diligence to ascertain that its chosen name did not conflict with a registered trade mark: see Flexopack at [110] (per Beach J). Therefore, GRBA did not act in good faith in adopting the House B&B mark and, if I am wrong on infringement, GRBA cannot rely upon the defence in s 122(1)(b).
477 Finally, GRBA's actions after receiving BBNT's letter of demand on 25 May 2021, and thereby being formally put on notice of BBNT rights, are inconsistent with a party acting in good faith.
478 GRBA contends that BBNT is wrong to allege that the conduct of GRBA cannot cease to be use in good faith upon being put on notice of BBNT's allegations. GRBA relies on the Full Court's finding in Digital Post at [52], [56], [90] and [93] (per North, Middleton and Barker JJ) that the respondent was acting in good faith pursuant to s 122(1)(a) of the Act even though it was aware of potential confusion and the applicant's reputation in the registered mark. However, as their Honours stated in Digital Post at [94] "[t]his is not a situation like Anheuser-Busch where there was wilful blindness to the potential for confusion". This comment suggests that their Honours considered that good faith could not be established where wilful blindness is established.
479 That recognition makes it easy to reconcile the approach in Digital Post with Beach J's far stricter approach in Flexopack. Although not described as such, Beach J in Flexopack was clearly dealing with a situation of wilful blindness as evinced by his Honour's comment at [150] that any ignorance of the applicant's trade mark was "only due to [the respondent's] own indifference and his failure to make the inquiries that an honest and reasonable person would have made in his position". This characterisation of Flexopack also disposes of GRBA's reliance on Halal Certification Authority Pty Ltd v Flujo Sanguineo Holdings Pty Ltd (2021) 163 IPR 433 at [52], [67], [123], [132], [135] and [141]-[142] (per Bromwich J). In Halal Certification, Bromwich J described the infringer's conduct as "honest" and "no more than an oversight" (at [67] and [141]) which clearly takes their conduct outside the realm of wilful blindness. These findings were not challenged on appeal in Halal Certification Authority Pty Ltd v Flujo Sanguineo Holdings Pty Ltd [2023] FCAFC 175 at [112]-[117] (per Nicholas, Burley and Cheeseman JJ).
480 I do not consider that a party who is wilfully blind to the prospect of infringing can be said to be acting in good faith when the likelihood of deception is expressly raised with them by the owner of the registered mark. In the circumstances of this case, once the potential conflict was brought to GRBA's attention, it was impermissible for it to just keep ignoring and failing to investigate BBNT's concerns or seek "proper" or substantive legal advice.
481 Accordingly, if I am incorrect on the question of trademark infringement, GRBA cannot rely upon s 122(1)(b)(i) as a defence to any infringement.