Food Channel Network Pty Ltd v Television Food Network G.P.

REASONS FOR JUDGMENT 1 The question to be determined in these proceedings is the proper basis upon which the discretion arising under s 43 of the Federal Court of Australia Act 1976 as to the costs of the principal proceeding (including reserved costs) (Food Channel Network Pty Ltd v Television Food Network G.P. [2010] FCA 703) ought to be exercised having regard to the character of those proceedings, the issues raised in the litigation and the disposition of the controversy reflected by the orders made and reasons for judgment given. 2 In the principal proceeding, Food Channel Network Pty Ltd ("FCN") commenced proceedings under s 104 of the Trade Marks Act 1995 (Cth) by way of an appeal from a decision of the Delegate of the Registrar of Trade Marks that FCN's trade mark registration 733265 "be removed from the Register in respect of all services for which it is registered". FCN's trade mark was entered on the Register on 21 January 1998 and registered with effect from 28 April 1997. The trade mark consists of the words "The Food Channel" and a graphic image comprising food items shown in motion around a TV antenna. The trade mark was at the date of the Delegate's decision registered in respect of two classes of services, namely: Class: 38 Television broadcasting services including free‑to‑air and cable television broadcasting Class: 41 Production of television programs and television entertainment 3 Trade mark 733265 is depicted at [21] of the reasons for judgment in the principal proceeding. Those reasons should be read in conjunction with these reasons. 4 The application for removal of the trade mark from the Register in respect of both services categories was lodged with the Registrar on 14 August 2006 by Television Food Network G.P. ("TVFN") under s 92(4)(b) of the Trade Marks Act (as it then stood) on the ground that at no time during a continuous period of registration of the trade mark between 14 July 2003 and 14 July 2006 had FCN used the trade mark in Australia or used the trade mark in good faith in Australia in relation to either category of services for which it was registered. The essential contention before the Trade Marks Office was that FCN had not used the mark in the relevant period at all. 5 FCN as registered proprietor opposed TVFN's application before the Registrar. By force of s 100(1)(c) of the Trade Marks Act, it fell to FCN to discharge, before the Registrar, the onus of rebutting TVFN's allegation of non‑use of the mark in each of the services categories during the three year period. That rebuttal onus falls upon the registered proprietor of the trade mark under the Trade Marks Act,as opponent to the removal application, as the owner is in the best position to demonstrate an example of its bona fide use of the mark in the relevant period. 6 FCN as applicant‑appellant before the Federal Court in the exercise of original jurisdiction must also rebut in the de novo proceedings under s 104 of the Trade Marks Act, the allegation of fact of non‑use of the trade mark in the three year period for the purposes of s 92(4)(b) relied upon by TVFN as the ground of removal. 7 In the principal proceeding FCN sought to rebut the contention of non‑use in the relevant period by relying upon the evidence of the sole director and shareholder of FCN, Mr Paul Lawrence, as to the history and use of the trade mark. Mr Lawrence gave extensive evidence about the history and origin of the mark, FCN's use of the mark, the steps taken to either contract in particular food programming or engage in other production activities relating to food programming content for supply under programming supply contracts with a television broadcaster. Mr Lawrence's evidence was supported by affidavits given by a range of witnesses who spoke to their knowledge of the trade mark as depicted at [21] of the reasons for judgment in the principal proceeding, the broadcasting of particular programming exhibiting the trade mark and the development of an animated version of the logo. Evidence was given in relation to the uploading of a version of the trade mark to FCN's website both in animated and static form. Evidence was called by FCN from Mr Styles who gave evidence of broadcasts by ABC Asia Pacific of programming content and Mr Styles' knowledge of Mr Lawrence, FCN and the trade mark endorsed upon some of the programming supplied by FCN to the broadcaster. It is not necessary in these reasons to review the scope of all of the evidence called in support of FCN's case by way of corroboration of Mr Lawrence's evidence of contended use. The evidence included the evidence of Mr Bates, Mr Styles, Mr Riley and Mr Day. 8 FCN contended that the effect of all of this evidence including evidence in relation to the satellite footprint for transmissions by ABC Asia Pacific of program material containing the trade mark and the capacity of Australian citizens to receive those transmissions, demonstrated that FCN had used the mark in the relevant period in relation to both the services of producing television programs and television entertainment for television broadcast and in relation to broadcasting services. 9 TVFN contended that FCN had failed to rebut the contention of non‑use. TVFN asserted that notwithstanding the evidence adduced in rebuttal of its contention of non‑use, FCN had failed to establish use of the mark in the relevant period in relation to either category of services. Secondly, TVFN contended that even if FCN had used the mark in the way contended, it had failed to use the mark in relation to services for which the mark was registered. As to the production of content, TVFN contended that FCN did not engage in production activities but simply engaged in the supply of goods, namely, programs, which were produced by NBN Production. As to broadcasting services, TVFN contended that FCN supplied programs under program supply agreements to a broadcaster and the broadcaster engaged in the activity of transmitting the programs by satellite broadcast to persons having the relevant equipment (dish) capable of receiving a signal (or cable re‑broadcast of the satellite signal to subscribers to a cable broadcast service). 10 TVFN also contended that Mr Lawrence was unreliable as a witness as he had demonstrated, it was said, a capacity to produce affidavit evidence which sought to support contentions that needed to be demonstrated in respect of particular earlier trade marks and when it became necessary to adduce evidence in support of other trade marks, the evidence was adapted to support that case notwithstanding contended inconsistencies in the evidence. The contended disposition of Mr Lawrence to so behave was the subject of considerable evidence relating to trade mark controversies between Mr Lawrence and TVFN adduced by Mr Tannahill. 11 Having regard to the way in which the case was presented, the body of evidence was examined by first having regard to the question of whether the evidence demonstrated use of the mark by FCN at any moment in time during the relevant period and secondly by assessing whether any use so demonstrated constituted use of the trade mark in relation to the services for which the mark was registered. 12 In the result, FCN was successful in the proceeding by rebutting the contention of non‑use in relation to trade mark 733265 to the extent of use in relation to the production of television programs and television entertainment. FCN was unsuccessful in rebutting the contention of non‑use in relation to the Class 38 services of television broadcasting services including free‑to‑air and cable television broadcasting. 13 The conclusions in relation to the Class 38 services turned upon a consideration of evidence of contended use in relation to the transmission of programs and a construction of the language of the services registration in the context of the evidence of the things FCN did or undertook. Although FCN was successful in respect of one class of services and unsuccessful in respect of another, that outcome does not reflect an appropriate division of the time, effort and analysis of evidence in the case. Approximately 70% of the case was dedicated to the question of whether any use of the trade mark had occurred in the relevant period (as compared with TVFN's contention of use by Mr Lawrence's company of trade mark 738571 registered in Classes 38 and 41 and depicted at [46] of the reasons for judgment in the principal proceeding) and the forensic review of the evidence of Mr Lawrence and all of the witnesses called in corroboration of his evidence. Considerable time was also dedicated to dealing with the historical sequence of trade mark controversies between FCN and TVFN and the issue of whether or not FCN's website at any point in the period reflected an uploading of an animated or static version of the trade mark. The question of whether the ABC Asia Pacific Satellite transmissions embraced a footprint (by reference to a sequence of transmission contours each requiring a receiving dish of particular dimensions having regard to the particular contours) which included some or all of Australia was closely examined in the course of the trial. Ultimately, the majority of the factual issues which consumed the case were resolved in favour of Mr Lawrence but for issues going to whether FCN held a broadcasting licence; whether FCN itself engaged in broadcasting activity; the appropriate construction to be attributed to the language of the Class 38 registration; and whether TVFN had standing to apply for removal of FCN's trade mark as an "aggrieved person". 14 In terms of the standing issue, FCN contended that TVFN did not qualify as an aggrieved person for the purposes of the Act on the footing that TVFN was not properly characterised as a trade rival in a common field of activity with an established or recognised reputation in Australia and that, consistent with authority, standing, it was said, was not conferred upon TVFN simply on the footing that the Register (as contended by TVFN) wrongly recorded a continuing registration in favour of FCN in circumstances of non‑use satisfying s 92(4)(b) of the Trade Marks Act. TVFN's applications for registration were the subject of citations by the Registrar of FCN's trade mark as an obstacle to registration. Ultimately, TVFN's contention that the Register incorrectly records a continuing registration of a trade mark (by reason of the owner's non‑use as contemplated by s 92(4)(b)) thus compromising the purity of the Register confers standing on TVFN to agitate that issue: Health World Ltd v Shin‑Sun Australia Pty Ltd (2010) 265 ALR 265; [2010] HCA 13. 15 In terms of the burden of the case, having regard to all of these considerations, Mr Lawrence was therefore successful in the proceeding on approximately 70% of the matters in controversy on all of the evidence. That being so, FCN is entitled to an order for costs of 70% of the costs of and incidental to the principal proceeding. The order as to costs before the Registrar ought not to be disturbed as the circumstances which gave rise to those orders were a function of the procedural arrangements made before the Registrar and the determination of the issues on the merits in the context of the evidence before the Registrar at that time having regard to orders made leading up to the hearing. FCN objects to the unfairness of the orders made before the Registrar on the footing that the Registrar's Delegate refused an application for an extension of time and excluded Mr Lawrence's declaration on the apparent basis that FCN had failed to comply with an order requiring service of the declaration by a certain date. However, the Registrar made orders about those matters against the background of many extensions of time for the filing and serving of declarations. The orders made by the Registrar's Delegate were a function of those procedural arrangements and the material the Registrar's Delegate regarded as properly before the decision‑maker in all the circumstances. In the principal proceeding the Registrar's orders were varied pursuant to s 197 of the Trade Marks Act such that trade mark registration 733265 be removed from the Register of Trade Marks under the Trade Marks Act in respect only of the Class 38 services and that the trade mark remain registered in respect of the Class 41 services. The Delegate's decision was not otherwise varied. 16 A further matter concerns the question of whether FCN is entitled to a more favourable order for costs than that proposed above, on the footing that FCN made an offer of settlement under the Federal Court Rules which was rejected by TVFN, thus enlivening a discretion under Order 23, rule 11(4). That rule provides that if an offer is made by an applicant and not accepted by the respondent and the applicant obtains judgment on the claim to which the offer relates not less favourable than the terms of the offer, then, unless the Court otherwise orders, the applicant is entitled to an order against the respondent for costs incurred in respect of the claim taxed on a party and party basis up to and including the day the offer was made and, after that day, taxed on an indemnity basis. 17 On 12 February 2009, the applicant by its solicitors made an offer to the respondent by its solicitors on this footing: Clearly the applicant can show use of the trade mark as demonstrated by the statutory declaration of Mr Paul Lawrence corroborated by the affidavits of Mr Matthew Day and Mr Ian Bates (a former barrister) and many other witnesses we can call at the trial. In short it is highly likely that the applicant in this appeal will be successful. In the circumstances and considering the cost to both parties to pursue this appeal and the valuable time of the court, we [FCN] are prepared to settle the matter on the basis that your client [the respondent] agrees to an order to allow the appeal and to do all things necessary to enable the rescinding of the order of the Delegate of the Registrar of Trade Marks so as to reinstate our client's trade mark 733265 with the parties to bear their own costs. We make this offer of compromise in accordance with Order 23 of the Federal Court Rules as attached in the Notice of Offer of Compromise. [emphasis added] 18 The Notice of Offer of Compromise contained two terms, namely: 1. The appeal be allowed and the order of the Delegate of the Registrar of Trade Marks be rescinded and the applicant's Trade Mark 733265 ("the Trade Mark") be reinstated. 2. [T]here be no order as to costs and each party bear their own costs of the appeal. 19 Plainly enough, FCN did not obtain judgment in the proceeding on its claim to which the offer related not less favourable than the terms of the offer. Although the applicant was substantially successful in terms of the resolution of the matters which occupied the burden of the case, FCN was nevertheless only partially successful. Order 23, rule 11(4) has no relevant application. The question as to which party ought to bear the costs of the proceeding in whole or in part is to be determined in the exercise of the discretion conferred by s 43 of the Federal Court of Australia Act 1976. 20 FCN has relied upon substantial written submissions. Those submissions are directed to a number of matters which are said to properly inform the exercise of the discretion. The relevant matters, of course, are those matters already identified. The discretion is to be exercised having regard to the nature of the controversy before the Court engaging the parties; the issues by reference to which evidence was called; the forensic burden of the case; the extent to which the parties were successful or otherwise on those issues and any other matters which might be demonstrated to be contextually relevant. 21 FCN attaches significant weight to the disequilibrium in the bargaining position and resources available to TVFN as compared with the stretched and limited resources of FCN. FCN contends that TVFN is maintaining a systemic campaign of attrition against FCN and those matters ought to be taken into account in making orders that TVFN pay indemnity costs of the principal proceeding. The exercise of the discretion, however, is more properly informed by the matters earlier mentioned. 22 FCN addresses extensive submissions to notions of industry confusion about the relationship between trade mark registrations and the provision of television broadcasting services. The thrust of the submissions raises two matters. First, the submissions are, in effect, in the nature of a de facto appeal from the finding in the principal proceeding. Secondly, the submissions seem to be directed to demonstrating that notwithstanding that FCN was unsuccessful in relation to the Class 38 services, it was nevertheless reasonable to apply for and obtain and maintain a trade mark registration for those services having regard to the field of use adopted by FCN for its mark. It is said that if the field of use does not demonstrate use of the mark in relation to Class 38 services, that finding takes FCN by surprise. 23 These matters are not relevant to the exercise of the discretion on costs. The applicant has either discharged the onus cast upon it by the Trade Marks Act of demonstrating use of the mark in relation to the services in respect of which it was registered, or not. The exercise of the discretion as to costs is determined by reference to the matters earlier mentioned rather than by questions of whether FCN held a genuine belief that its use of the mark, as reflected in the evidence it called, constituted use in relation to the Class 38 services. 24 TVFN in its submissions contends that the exercise of the discretion should be informed by the consideration that the primary statutory forum for resolving disputes relating to non‑use and thus resolving challenges to the purity of the Register is proceedings before the Registrar of Trade Marks or his or her Delegate. It follows, it is said, that the discretion as to costs in Federal Court proceedings should be exercised in such a way as to act as a disincentive to parties in treating proceedings before the Registrar as simply a step on the way to Federal Court proceedings. TVFN contends that the discretion should be exercised so as to encourage parties to fully and properly prepare material before the Registrar so as to enable issues of non‑use to be resolved fully and primarily before the Registrar. 25 However, the Trade Marks Act provides a right of appeal to the Federal Court. The issues are to be determined on all of the material the parties seek to put before the Court and the hearing is conducted de novo. The costs should be determined having regard to settled principle in the orthodoxy of the conduct of the litigation. 26 In the ordinary course, courts are reluctant to embrace the proposition that, as a general rule, it is appropriate to undertake an inquiry as to who was successful in relation to particular issues in a case to determine whether there should be an apportionment of costs against a successful party. Moreover, a court should not be too ready to disallow costs simply because a party has failed upon an issue unless it be a quite separate and distinct issue from the issues on which it succeeded or unless there is some element of unreasonableness or inappropriate conduct in relation to that issue: Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No. 2) [2000] FCA 602 at [54] per Goldberg J; Black & Decker Inc. v GMCA Pty Ltd (No. 3) [2008] FCA 932 at [7] per Heerey J; BHP Coal Pty Ltd & Ors v O & K Orenstein & Koppel AG & Ors (No. 2) [2009] QSC 64 per McMurdo J at [8]. See also Ramsden v Federal Commissioner of Taxation [2004] FCA 681 at [11] per Spender J; Waterman v Gerling Australia Insurance Co Pty Ltd (No 2) [2005] NSWSC 1111 at [10] per Brereton J; AGL Energy Ltd v Queensland Competition Authority (No 2) [2009] QSC 116 at [11]-[13] per McMurdo J; Alborn v Stephens [2010] QCA 58 at [8] per Muir JA (Holmes JA and Daubney J agreeing). 27 In the principal proceeding the issues relating to whether FCN held a broadcasting licence; whether FCN engaged in broadcasting activity; the appropriate construction to be attributed to the language of the Class 38 registration; and whether TVFN had standing to apply for removal of FCN's trade mark as an aggrieved person were separate and distinct issues. As indicated earlier, the burden of the case in terms of the field of controversial issues dealt with in the principal proceeding did not evenly divide between the two classes of services. In exercising the discretion as to costs it is appropriate to reduce the proportion of the recoverable costs to reflect aspects of the separateness of the issues just mentioned. 28 Having regard to all of these considerations, the appropriate order is that the respondent pay 70% of the applicant's costs of and incidental to the proceeding.