Consideration
38 A trade mark is used to distinguish one trader's goods or services from those of another. It is a "badge of origin" in the sense that it indicates a connection in the course of trade between goods or services and the person who applies the mark to the goods or as a means of promoting its services: cf E&J Gallo Winery Pty Ltd v Lion Nathan Australia (2010) 241 CLR 144 at 163 [43] per French CJ, Gummow, Crennan and Bell JJ; Coca-Cola Co v All-Fect Distributors Ltd (1999) 96 FCR 107 at 115 [19] per Black CJ, Sundberg and Finkelstein JJ.
39 Hence, its use in relation to goods or services will create a reputation for the user of the trade mark that associates it with the particular goods or services in the minds of the public or, in the case of a specialised market, those who are actual or potential consumers in that market for the goods or services. In other words, the use of a trade mark in relation to goods or services distinguishes those goods or services as those of the person who owns the trade mark.
40 In construing the licence agreement and in particular, the ambit and operation of cl 5.5(b), the Court must consider the circumstances with reference to which the words in that clause were used. It must then discern, from those circumstances, the objective that the parties have in mind and, as Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ said in Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45 at 52-53 [10]:
"In particular, an appreciation of the commercial purpose of a contract (Reardon Smith Line v Hansen-Tangen [1976] 1 WLR 989 at 995-996; [1976] 3 All ER 570 at 574): "presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating." Such statements exemplify the point made by Brennan J in his judgment in Codelfa ((1982) 149 CLR 337 at 401):
"The meaning of a written contract may be illuminated by evidence of facts to which the writing refers, for the symbols of language convey meaning according to the circumstances in which they are used.""
41 The primary judge approached the construction of cl 5.5(b) and said that he was bound to assume that "the clause is somewhat more favourable to [Symbion] than the Act". However, that is not an assumption stated in the licence agreement. Rather, in our opinion, the licence agreement reflected a commercial elucidation of the contractual rights and restrictions each party would have in respect of the Symbion registration and the Symbion device mark. Any basis for an assumption that the construction of cl 5.5(b) must provide a comparatively better outcome in terms of protection for Symbion than it is entitled to under the Act must be found in the words of the licence agreement itself.
42 In deciding the contractual issues, his Honour overlooked Idameneo's written and oral submissions that evidence from persons in specialised markets was necessary to support a contention that the use of a mark in one market was likely to deceive or confuse persons in a different specialised market. This argument was based on what Lord Diplock had said in General Electric [1972] 1 WLR at 737H-738C, as approved by Gummow J, with whom Black CJ and Lockhart J agreed, in Interlego AG v Croner Trading Pty Ltd (1992) 39 FCR 348 at 388, namely:
"My Lords, where goods are of a kind which are not normally sold to the general public for consumption or domestic use but are sold in a specialised market consisting of persons engaged in a particular trade, evidence of persons accustomed to dealing in that market as to the likelihood of deception or confusion is essential. A judge, though he must use his common sense in assessing the credibility and probative value of that evidence, is not entitled to supplement any deficiency in evidence of this kind by giving effect to his own subjective view as to whether or not he himself would be likely to be deceived or confused. In the instant case this would apply to the large industrial electrical machinery sold under the rondel mark. But where goods are sold to the general public for consumption or domestic use, the question whether such buyers would be likely to be deceived or confused by the use of the trade mark is a "jury question." By that I mean: that if the issue had now, as formerly, to be tried by a jury, who as members of the general public would themselves be potential buyers of the goods, they would be required not only to consider any evidence of other members of the public which had been adduced but also to use their own common sense and to consider whether they would themselves be likely to be deceived or confused.
The question does not cease to be a "jury question" when the issue is tried by a judge alone or on appeal by a plurality of judges. The judge's approach to the question should be the same as that of a jury. He, too, would be a potential buyer of the goods. He should, of course, be alert to the danger of allowing his own idiosyncratic knowledge or temperament to influence his decision, but the whole of his training in the practice of the law should have accustomed him to this, and this should provide the safety which in the case of a jury is provided by their number. That in issues of this kind judges are entitled to give effect to their own opinions as to the likelihood of deception or confusion and, in doing so, are not confined to the evidence of witnesses called at the trial is well established by decisions of this House itself." (emphasis added)
43 As his Lordship explained, the reason why the law requires evidence of the effect of the use of a trade mark in a specialised market on those who trade or participate in such a market is because this is not a mere "jury" question. This evidence is essential in such situations because the use of a common law trade mark gives its owner rights to benefit from the reputation and goodwill associated with the mark. Similarly, in the case of a trade mark registered under the Act used only in a specialised market, this evidence is essential to establish the likelihood, among those in the relevant market, that the mark complained of so nearly resembles the registered mark that it is likely to deceive or cause confusion. Ordinarily, the owner of a registered trade mark used in a specialised market will already enjoy the benefit of a reputation and goodwill from that use.
44 A representation associated with a trade mark established by its use in a specialised market generates both a reputation and goodwill for the owner among those in the market who know, or know of, the mark. That reputation and goodwill is valuable to the owner because of its capacity to create an association with, or to represent a badge of origin of, its goods or services in the minds of those in the specialised market who know, or know of, the trade mark. If the reputation or goodwill associated with a trade mark exists only in a specialised market, then evidence of those in that market who know it, or of it, is relevant and necessary to establish what, if any, injury the owner of the mark may suffer by another person using a mark that is alleged to infringe the owner's right.
45 The owner of a trade mark that has an established reputation or goodwill in that mark in a specialised market can bring proceedings to protect its proprietary interest in that reputation or goodwill. As explained above, the relevance of the mark's reputation and goodwill in cases of specialised markets is that evidence of market participants is essential to establish the likelihood of deception or confusion: General Electric [1972] 1 WLR at 737H-738C; Interlego 39 FCR at 388.
46 Thus, where the trade mark is registered, the owner can, for example, take infringement proceedings under s 120 of the Act and, or where it is a common law mark, commence passing off proceedings: s 230(1) of the Act; cf Leather Cloth Co Ltd v American Leather Cloth Co Ltd (1865) 11 HLC 523 at 538 per Lord Kingsdown; Cadbury-Schweppes Pty Ltd v Pub Squash Co Pty Ltd [1980] 2 NSWLR 851 at 857C-D; [1981] 1 WLR 193 at 199E-G per Lord Scarman. The principle was encapsulated by Lord Herschell in Reddaway v Banham [1896] AC 199 at 209:
"The principle which is applicable to this class of cases was, in my judgment, well laid down by Lord Kingsdown in Leather Cloth Co. v. American Leather Cloth Co ((1865) 11 HLC 523 at 538 [11 ER 1435 at 1442]). It had been previously enunciated in much the same way by Lord Langdale in the case of Croft v. Day ((1843) 7 Beav 84 [49 ER 994]). Lord Kingsdown's words were as follows: "The fundamental rule is, that one man has no right to put off his goods for sale as the goods of a rival trader, and he cannot, therefore (in the language of Lord Langdale, in the case of Perry v. Truefitt ((1842) 6 Beav 66 [49 ER 749]), be allowed to use names, marks, letters, or other indicia, by which he may induce purchasers to believe that the goods which he is selling are the manufacture of another person." It is, in my opinion, this fundamental rule which governs all cases, whatever be the particular mode adopted by any man for putting off his goods as those of a rival trader, whether it is done by the use of a mark which has become his trade mark, or in any other way." (emphasis added)
47 A range of considerations informs the way in which the law deals with the exploitation and protection of rights in both registered and unregistered trade marks. This ranges from the public policy balances that are currently reflected in the Act and provisions of the Competition and Consumer Act 2010 (Cth) such as s 46, dealing with misuse of market power, and s 48, dealing with resale price maintenance: see Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 65-75 [42]-[67] per Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ.
48 Here, cl 5 of the licence agreement commenced by Idameneo stating (in cl 5.1) that it recognised the value of the goodwill and reputation in the "Trade Marks" (as defined in the licence agreement) and acknowledged that these enured solely to, and were for the benefit of, Symbion and its subsidiaries. And in cl 5.3, Idameneo accepted that it must not do, or cause to be done, anything that may adversely affect or jeopardise that goodwill or the value of those trade marks. This provided part of the contractual matrix in which cl 5.5(b) must be construed.
49 Relevantly, on the uncontested evidence, Symbion's property consisting of the Symbion registration and Symbion device mark, and the reputation and goodwill associated with them, was located in the specialised markets in which those trade marks had been used, including the markets in which Idameneo traded. Moreover, the parties were giving effect to a demerger of their former corporate and business group that reflected the distinct special markets in which the newly separated Symbion and Idameneo entities operated. And, cl 5.5(b) did not impose a restraint merely in Australia nor was it limited to the use of trade marks. The concluding words of cl 5.5 prohibited use "anywhere in the world". Thus, the repetition of the words of the Act is likely not to have been apt to apply to use of trade marks in every other country.