Consideration
237 The question to be resolved is whether use by the Zip Companies of their marks was honest concurrent use. That is to be assessed as at the date of the alleged infringing conduct. In its FASOC Firstmac alleges that the first infringing conduct took place at some time in 2013 and that it thereafter took place at various times according to dates of adoption of different marks using the word ZIP.
238 The Zip Companies submitted that their defence of honest concurrent use should be upheld for the following reasons:
(1) since the launch of the ZIP business in 2013, the Zip Companies have acquired very extensive goodwill in the trade mark ZIP, and variants of it such as ZIP MONEY and ZIP PAY. There could be no suggestion that they set out to cause confusion with Firstmac or that they have traded in a manner that has engendered such confusion. Accordingly the purpose of the honest concurrent use defence in s 44(3)(a) of the TM Act, that is the protection of accrued goodwill, is engaged;
(2) they adopted and have used the trade mark ZIP, and variants of it, honestly;
(3) their use of the trade mark ZIP, and variants of it, has been ongoing since 2013 throughout Australia and on a very substantial scale such that the extent of use is plainly sufficient to found the defence;
(4) if the defence is upheld, the likelihood of confusion arising is very low. The parties have operated their respective businesses without incident for about eight years and there is no evidence of any confusion arising from the conduct of the Zip Companies; and
(5) if they were required to rebrand their businesses it would cause very significant inconvenience to the Zip Companies and would see them lose the very substantial and valuable goodwill that they have developed in the trade mark ZIP and variants of it.
239 Firstmac submitted that the Zip Companies are not honest concurrent users for the following reasons:
(1) when the Zip Companies chose the names they did so with a view to using those names as trade marks. Their pursuit of trade marks shows their appreciation and understanding of the importance of registration for protecting brands;
(2) while "zip" is an ordinary English word with an accepted meaning, there is no suggestion that it lacks capacity to distinguish. Firstmac noted that is so for its registration and, importantly, for the Zip Companies;
(3) at the earliest adoption of the marks Messrs Diamond and Gray assert that they did extensive searches but, even on their evidence, they limited themselves to internet searches about what might be in the market and, despite an appreciation of the importance of trade marks, they did not do the one obvious, prudent and sensible search, a trade mark search. There is no good explanation for why they did not do so;
(4) relatedly, the Zip Companies were directly on notice from almost the very beginning of Firstmac's registrations given the 2013 Adverse Reports which Messrs Diamond and Gray read and, having done so, appreciated the simple but significant point that the Applicant's Mark stood in their way;
(5) up until the listing, the Zip Companies' business was very small and they should have changed the name then, with little, if any, relative inconvenience. At that time the Applicant's Mark had been registered for almost nine years and in use for eight. Meanwhile there was limited use by Zipmoney Payments, it had very few Customers and even fewer Merchants and it had not expended significant resources on advertising and promotion of the ZIP or ZIP MONEY brand. The Zip Companies' conduct, including in attempting to get an extension for the 2013 trade mark applications and the filing of the 2015 trade mark applications, demonstrates an insistence on retaining the names they had chosen regardless of the rights of Firstmac, the registered owner. Assessed at the earlier time, when the infringing conduct started, the Zip Companies lack the requisite degree of honesty;
(6) the Zip Companies lack the requisite degree of honesty a fortiori if their conduct is assessed at a later date. By at least 2016 or early 2017 the Zip Companies knew that Firstmac intended to defend its registration and was not going to abandon the field and, rather than dealing with the issue candidly, they chose to "plough on" and continue building up their business in the knowledge that their trade marks were at risk. Firstmac submitted that in choosing to conduct their commercial affairs in this way, the Zip Companies fell far short of acceptable standards of commercial behaviour and are the authors of their own misfortune.
240 I turn to consider whether the Zip Companies would be entitled to registration by reason of s 44(3) of the TM Act. In doing so it is convenient to have regard to the non-exhaustive list of categories identified in McCormick.
241 The first question is the honesty of the concurrent use. That is a necessary but not sufficient condition for a grant of registration under s 44(3) of the TM Act.
242 When Messrs Diamond and Gray adopted the trade marks ZIP and ZIP MONEY neither of them was aware of the Applicant's Mark. As set out above, it was Mr Diamond who came up with the names ZIP and ZIP MONEY in the second half of 2012. At the time, he considered that the word "ZIP" was a good name for the business he was researching and conceptualising because it connoted speed, consistent with his idea of providing finance in real time. He also added the word "money" because other finance businesses used the word "money" in their names and because it clearly indicated what the business is about and placed the product in its category. While he considered other potential branding, he preferred ZIP.
243 In seeking to register ZIP as a domain name, which was the first step Mr Diamond undertook, he undertook internet searches (see [72] and [76] above). Those searches revealed that the domain name www.zip.com was owned by Bank of America, which Mr Diamond understood had no operations in Australia at the time. On the strength of those searches, Mr Diamond registered the domain name www.zipmoney.com.au.
244 True it is that neither Messrs Diamond nor Gray undertook any trade mark searches at the time nor prior to lodging the 2013 trade mark applications. Mr Diamond explained that at the time he believed he had conducted extensive online domain searches, that registering a trade mark would be a straightforward process and did not seek legal advice because at the time they had limited funds and he wished to avoid any unnecessary spend, which he considered legal advice of this nature to be.
245 Firstmac submitted that there is no good explanation as to why the Zip Companies failed to undertake searches of the Register and that common experience shows that internet searches can be intermittent and incomplete, given they are dependent on a range of variables including types of browsers, user history and the like. Firstmac contended that, critically, despite an appreciation of the importance of trade marks, Messrs Diamond and Gray did not undertake the one obvious and prudent search: a trade mark search.
246 There are two vices in Firstmac's submission. First, Mr Gray clearly said that the issue of trade mark registration was not in his area of responsibility. Although he accepted that it was an important matter, there was a lot going on in establishing the business at the time and branding and trade marks was not in his area of responsibility. Indeed he was not even aware that the 2013 trade mark applications had been made. Secondly, Mr Diamond's evidence as to why he only conducted online and domain searches was not challenged and, given the early stage of development of the ZIP business, his explanation for the types of searches he undertook is credible and I accept it.
247 Firstmac submitted that it is well established that: even if the second user did not know of the first user, the second user should have taken steps an honest and reasonable person would take to ascertain their ability to use the mark; and before adopting the mark, the second user must at least have exercised diligence and reasonable care to ensure that it did not conflict with a registered trade mark.
248 As to the first of those propositions, Firstmac relies on Pham Global Pty Ltd v Insight Clinical Imaging Pty Ltd (2017) 251 FCR 379 at [103] where a Full Court of this Court (Greenwood, Jagot and Beach JJ) upheld the primary judge's finding that the appellant's use was not honest concurrent use "given the unchallenged finding that there had been 'a lack of diligence and reasonable care in carrying out adequate searches before the marks were adopted for use'". At first instance, in Insight Radiology Pty Ltd v Insight Clinical Imaging Pty Ltd (2016) 122 IPR 235; [2016] FCA 1406, in considering whether there had been honest concurrent use, at [124] Davies J noted that no explanation was given in the evidence as to how Mrs Pham decided upon "Insight Radiology" and why she chose the word "insight" to brand the relevant business. At [125] her Honour said:
The evidence does not support a finding that either Mr or Mrs Pham knew about the use of similar marks by Insight Clinical Imaging before Insight Radiology commenced using the Radiology marks. Nonetheless, I do not think that it can be said that there has been honest concurrent use of the Radiology marks. In Flexopack SA Tivo Inc v Vivo International Corp Pty Ltd [2012] FCA 252 at [293], Dodds-Streeton J found there had not been honest concurrent use in circumstances where, amongst other things, the applicant had failed to carry out an adequate search, seek professional advice or take reasonable precautions in relation to its adoption of a trade mark. In Flexopack SA Plastics Industry v Flexopack Aust Pty Ltd (2016) 118 IPR 239; [2016] FCA 235, Beach J considered that if a person does not take steps that an honest and reasonable person would take to ascertain the ability to use a trade mark, and has in effect taken a risk, then the person is not acting in good faith in the sense of "honestly" within the terms of the good faith "own name" defence under s 122(1)(a) of the Trade Marks Act. In the present case, I have accepted the expert's evidence that the Google search that Mrs Pham conducted would have come up with Insight Clinical Imaging. Had reasonable diligence been exercised by her at the time, it is reasonable to expect that she would have searched the website and found out that Insight Clinical Imaging was trading in the same field, using similar marks. Whilst there is insufficient evidence from which to conclude that she had looked at the website, the evidence does point to a failure on her part to conduct an proper and adequate search, either because her search was not sufficiently comprehensive to bring up the website in the search result or, if it did, because she failed to visit the website. Furthermore, no searches were done once the IR composite mark had been designed to check whether there were any similar marks used by other traders or before Insight Radiology commenced using the logo. These matters demonstrate a lack of diligence and reasonable care in carrying out adequate searches before the marks were adopted for use by Insight Radiology. It cannot be said that there has been "honest" concurrent use of the Radiology marks within the terms of s 44(3) when the searches, if conducted properly, would have come up with Insight Clinical Imaging's website and its similar marks. If Mr Pham was not aware of Insight Clinical Imaging's marks before he had Insight Radiology adopt and commence to use the Radiology marks, it was because of the inadequacies in the searches that were conducted and lack of care taken.
249 It seems that in that case there was evidence that the relevant person, Mrs Pham, undertook a Google search but that there was also expert evidence that such a search would have come up with the respondent's business, Insight Clinical Imaging. Her Honour also found that, had Mrs Pham exercised reasonable diligence, she would have searched the website and found that Insight Clinical Imaging traded in the same field and used similar marks. In those circumstances Davies J found that Mrs Pham failed to conduct a proper and adequate search.
250 There is no such evidence before me. In this case, Mr Diamond did undertake a search of the internet and has given evidence of what he found at the time. He also undertook subsequent searches. Firstmac has not led evidence and does not contend that Mr Diamond's internet searches were inadequate in that they should have brought up Firstmac's ZIP home loan at the time. Rather Firstmac suggests, without providing any evidence and based on "common experience", that an internet search is, in effect, only as good as the skill of the person undertaking the search and the variables inputted into the search. Firstmac's contention is that there was a failure to do the one obvious search, a trade mark search. But as I have already noted Mr Diamond was not challenged on why he had only conducted online and domain name searches.
251 As to second of the propositions at [247] above, Firstmac relies on Flexopack SA Plastics Industry v Flexopack Australia Pty Ltd (2016) 118 IPR 239; [2016] FCA 235 at [118] where Beach J, in the context of considering the good faith "own name" defence under s 122(1)(a) of the TM Act, said:
If only subjective knowledge was relevant, a person could use the good faith defence despite not having taken any appropriate steps to inform himself of any relevant existing trade marks. This has the potential to undermine the utility of a registered trade mark. The reasonableness or lack thereof of the steps undertaken by the First Respondent in the choice of its company name is to be considered in light of the effect on the trade mark owner. 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.
252 His Honour then went on to consider the second respondent's, Mr Katelis, background, including his background in business, and the evidence about the types of searches he conducted before concluding (at [150]), in effect, that the name in issue was not used in good faith".
253 In issue was the respondents' reliance on s 122(1)(a) of the TM Act and their use of the word "Flexopack" and whether that use was "in good faith". His Honour was not there considering honesty of use for the purposes of s 44(3) of the TM Act. In any event, as is clear from his Honour's reasons, the role of subjective evidence and the adequacy or otherwise of steps taken, including any searches, must be viewed both in the context of the particular defence relied on and the facts of each case.
254 Before leaving Flexopack I note that Beach J also considered s 44(3) of the TM Act and whether there was honest concurrent use. At [170] his Honour found that the respondent, Flexopack Australia Pty Ltd, had not demonstrated honest adoption of the trade mark in question. Relevantly, Beach J found the evidence of Mr Katelis to be unreliable and did not accept that he did not know of the applicant at the time Flexopack Australia adopted its company name and of the potential for confusion. His Honour also noted that Mr Katelis gave evidence that he never conducted a Google search before choosing the company name and that he described a "series of narrow searches" which were found to be "not realistic": see Flexopack at [140]-[142].
255 Returning to the matter at hand, given my acceptance of Mr Diamond's evidence, I am satisfied that the steps taken by him at the time the trade marks ZIP and ZIP MONEY were first adopted were adequate in the circumstances. It follows that at the time of the adoption and initial use of ZIP and ZIP MONEY Messrs Diamond and Gray had no knowledge of the Applicant's Mark and accordingly their use at that time was honest use.
256 It was upon receipt of the 2013 Adverse Reports that Messrs Diamond and Gray became aware of other trade marks which prevented registration of the trade marks ZIP and ZIP MONEY as set out at [80] above and, in particular, became aware of the Applicant's Mark. That was in October 2013 at a time after they had adopted ZIP and ZIP MONEY for their business. Having received the 2013 Adverse Reports they were on notice of the Applicant's Mark. At the time Messrs Diamond and Gray did not seek any legal advice but extensions of time to respond to the 2013 Adverse Reports, made in Mr Diamond's name, were sought and granted, as the 2013 trade mark applications did not lapse until February 2015. Mr Diamond's evidence was that at that time he was distracted with establishing the business and so did not pay the 2013 Adverse Reports and the question of registration of ZIP and ZIP MONEY as trade marks much attention.
257 Given the filing of the application to extend time, I would infer that Mr Diamond read the 2013 Adverse Reports and had it in his mind that steps should be taken in relation to them. After all he acknowledged the prudence of having a trade mark which one wished to use in a business registered. Mr Diamond gave no evidence as to why he let the 2013 trade mark applications lapse and did not attend to them despite having sought an extension of time in which to do so. Firstmac contended that rather than changing the name at this point, the Zip Companies ploughed on despite knowing that the specification of services in Firstmac's registration applied to their products and services.
258 In McCormick Kenny J said at [33] that the mere fact that, at the time when Mr and Mrs McCormick chose the name McCormick's, Mrs McCormick knew of McCormick & Co's prior use of its marks on its products did not preclude a finding that Mrs McCormick acted honestly. See too the observations of Nicholas J in Dunlop at [266] (at [233] above).
259 Similarly, the mere fact that Messrs Diamond and Gray became aware of the Applicant's Mark does not prevent a finding of honest use. By the time they acquired that knowledge they had decided to use ZIP and ZIP MONEY and had invested in a designer who produced the ZIP logos depicted at [80] above. They had undertaken internet searches and lodged the 2013 trade mark applications. As the Zip Companies submitted it is artificial to suggest that, when Messrs Diamond and Gray became aware of the Applicant's Mark, their conduct which had been honest up to that point suddenly became dishonest. As a matter of fact there was no other trader using ZIP or ZIP MONEY in relation to the type of business conducted by the Zip Companies (or their predecessors at the time). As the Zip Companies submitted, against that background, the adoption of the marks ZIP and ZIP MONEY can be classified as commercially honest.
260 Nor am I persuaded that because the Zip Companies have over the years, and since becoming aware of the Applicant's Mark, filed applications to register variants of the trade mark ZIP, and continue to do so, they are acting in a way that is less than honest. There is nothing improper about the Zip Companies seeking to obtain registration of a variant of the trade mark ZIP and seeking to advance their interests in that way.
261 In Tivo the Court noted that a relevant matter going to honesty of use is whether the words which make up the trade mark are common, everyday words, noting that if they are it is more likely that the use will be found to be honest. The word "zip" is an ordinary English word. The Oxford English Dictionary gives it several meanings including: nothing at all, zero; absolutely no, not any; to move briskly or with speed; to cause to move quickly; to close, unfasten or open. Mr Diamond's evidence was that he chose ZIP because it evoked "fast movement successfully, which was consistent with [his] idea of providing finance in real time".
262 That ZIP is an ordinary English word and not invented also weighs in favour of a finding of honesty. It cannot be said that the Zip Companies were seeking to accrue to themselves the goodwill of another trader in an invented word. Mr Diamond chose an everyday word which he believed evoked the essence of the business he was creating.
263 I turn then to consider the other factors that inform the exercise of the discretion under s 44(3) of the TM Act.
264 As to relative inconvenience, at the time of receipt of the 2013 Adverse Reports the Zip Companies' business was nascent but, by the time that the 2013 trade mark applications lapsed in 2015, and prior to its backdoor listing via Rubianna Resources, it had started to grow. As at 30 June 2015 it had 6,212 Customers and a TTV of $4.8 million although its revenue from its credit facility business was modest, standing at approximately $400,000.
265 Firstmac said that at that stage, given the ZIP business was a relatively small business, it would have experienced little, if any, relative inconvenience if it changed its name. In contrast Firstmac says that it had been using the Applicant's Mark for eight years.
266 That submission ignores the matters set out at [264] above. Further the Zip Companies' use of the trade mark ZIP and variants of it has been ongoing since 2013 and has grown significantly over the years. As at 30 June 2019 they had 16,249 Merchants partnering with them, 1.3 million Customers and TTV of $1,127 million. These facts also demonstrate the extent of the use. In addition, Mr Gray's evidence was that if the Zip Companies were required to rebrand it would cause them significant inconvenience, loss of a substantial and valuable goodwill that they have developed in the trade mark ZIP, and variants of it, and would be both costly and time consuming (see [178]-[181] above).
267 In contrast, the ZIP home loan is a small part of Firstmac's business. Firstmac first promoted those home loans from about 2005 to 2014 but ceased offering the product at that time because, as Mr Gration conceded in cross-examination, it was not proving to be sufficiently successful. As at February 2020, there were 127 outstanding original ZIP home loans which had been originated in that initial period. Firstmac reintroduced a ZIP home loan product in 2018, i.e. the 2018 ZIP home loan. Confidential Annexure B to these reasons sets out:
(1) the number and total value of loans originated by Firstmac since the relaunch of the 2018 ZIP home loan product; and
(2) the total number and value of ZIP home loans relative to Firstmac's total loan book as compiled by the Zip Companies from material discovered by Firstmac and about which I did not understand there to be any dispute.
On any view the amounts are modest and, when viewed in the context of Firstmac's total loan book, could be said to be negligible.
268 Further, contrary to Firstmac's submission, Firstmac will not lose the benefit of the Applicant's Mark if the Zip Companies' defence relying on honest concurrent use is upheld. Nor is it apparent that it will lose business to the Zip Companies given the different markets in which the two businesses operate and the fact that, as addressed below, there has been no demonstrated confusion in the market in the period in which the businesses have both operated.
269 Finally in terms of confusion, there is no evidence of any confusion having arisen despite the parties operating their respective businesses concurrently for eight years. Mr Diamond plainly stated that in conducting the Zip Companies' business he had never attempted to associate it with Firstmac or its products but rather had attempted to create an independent brand identity for that business (see [139] above).
270 In addition and as I have already observed, the services offered under the Applicant's Mark and those under the trade mark ZIP, and variants of it, are very different. Firstmac offers a ZIP home loan. A home loan by its very nature is a significant financial commitment, it is entered into with care after the provision of detailed information and it requires approval which usually takes time. In contrast, the Zip Companies offer a speedy or instantaneous facility for smaller amounts and for use in every day spending in a retail setting, either in-store or online. The two businesses operate in different markets. That was reinforced by Mr Gration who gave the following evidence in cross-examination:
Mr Bannon: Now, could I take you to paragraph 54 of your affidavit please?
Mr Gration: Yes.
Mr Bannon: Or perhaps 53 first, I should say. You see:
…became aware of Zipmoney Payments in around late August '16 or 15 September 2016.
Mr Bannon: Do you see that?
Mr Gration: Yes.
Mr Bannon: So before that you hadn't been aware of them, correct?
Mr Gration: Correct.
Mr Bannon: And may we take it you monitored competitor activity during your time before 2016?
Mr Gration: Sorry? I - I missed - - -
Mr Bannon: May we take it as part of your role you monitored competitor activity?
Mr Gration: Yes. Home loan competitor activity.
Mr Bannon: Pardon?
Mr Gration: Home loan competitor activity.
Mr Bannon: Yes. Well, you monitor competitors who you perceive are operating in the same space as the company for which you work?
Mr Gration: Correct.
Mr Bannon: And the result of that monitoring did not throw up any recognition or understanding or reference to ZIP money?
Mr Gration: Correct.
271 Having regard to the matters set out above, I am satisfied that the Zip Companies have established honest concurrent use of the trade mark ZIP, and the variants of it, and taking into account the factors addressed above that they would achieve registration pursuant to s 44(3) of the TM Act. It follows that, to the extent the Zip Companies have been found to have infringed the Applicant's Mark, their defence under subs 122(1)(f) or (fa) of the TM Act is made out such that there has been no such conduct.