ownership of the Registered mark
10 When a director of a company acquires a commercial opportunity as a result of his engagement as director, the benefits of taking that opportunity belong, in equity, to the company, whether or not the company would or could have taken up the opportunity (see Warman International Ltd v Dwyer (1995) 182 CLR 544 at 558). A director must account to a company of which he is a director for any benefit or gain that has been obtained or received, in circumstances where a conflict or significant possibility of conflict exists between the director's fiduciary duty to the company and the director's personal interest in the present or possible receipt of such a benefit or gain (see Chan v Zacharia (1984) 154 CLR 178 at 199).
11 A director will act in breach of his fiduciary duty to a company if the director takes up an opportunity for profit where there is a sufficient temporal and causal connection between the duty and the opportunity. Whether there is a sufficient connection in any particular case may depend upon a number of factors, such as the circumstances in which the opportunity arises, the nature of the opportunity, and the nature and extent of the company's operations and anticipated future operations. It is necessary to determine the scope of the fiduciary duty owed by the director to the company in the circumstances of the particular case, and to identify the conduct or failure to act that is said to amount to a failure to discharge that duty. Having done so, the question is whether there is a sufficient temporal and causal connection between the fiduciary duty and the opportunity for profit that has been or is sought to be taken by the director (see SEA Food International Pty Ltd v Lam (1998) 16 ACLC 552 at 557).
12 Mediaquest asserts that Mr Brailsford acquired the Registered Mark on trust for Coating Removal Technology Limited (CRT), and that Mediaquest acquired CRT's beneficial ownership of the Registered Mark by transmission and assignment on the bankruptcy of CRT. The substantive question, therefore, is whether, although the Registered Mark was registered in the name of Mr Brailsford, the beneficial owner of the Registered Mark was CRT.
13 Mr Brailsford applied to register the Peel Away Mark in Australia in August 1997. Following Mr Brailsford's death, his motivation in doing so and the circumstances surrounding his decision to do so can only be the subject of inference and speculation. However, on 16 July 1999, Mr Brailsford swore an affidavit in a proceeding in a Massachusetts court between Fiberlock Technologies Inc (Fiberlock), as plaintiff, and CRT, Pilgrim Trading Limited (Pilgrim) and Mr Brailsford, as defendants (the Fiberlock Proceeding). Further, on 16 October 2001, Mr Brailsford swore an affidavit in connection with a bankruptcy application made in relation to the Fiberlock Proceeding. Some information as to the circumstances surrounding the Peel Away Mark and its ownership can be gleaned from those affidavits, as well as from other business records. The materials, however, are somewhat sparse.
14 Peel Away is the trade name of a group of patented paint stripping products combining a paint stripping paste and a laminated paper blanket. The products encompass a principle for which a patent was granted to Mr Brailsford in 1984. Under the patented method, the painted surface is covered with the paste and the blanket is placed over it. That combination causes a chemical reaction that loosens the paint from the surface. The loosened paint and paste adhere to the blanket. After the requisite waiting time, the paint is easily peeled away with the blanket. Mr Brailsford owned the intellectual property rights to that system.
15 The Peel Away Mark was first used in the United States, at the latest, in August 1981. In the early 1980s, Mr Brailsford assigned what he described as "the licence rights" to Pilgrim, a company incorporated in the United Kingdom. Mr Brailsford was the president of Pilgrim. On 5 February 1985, United States trade mark registered number 1318744 was granted to Pilgrim. On 15 February 1992, a second trade mark application was filed in respect of the Peel Away Mark, which was subsequently granted to Pilgrim, with registered number 1735957. I shall refer to those two trade marks as the US Marks.
16 On 18 December 1986, Pilgrim granted to Dumond Chemicals Inc of New York (Dumond), an exclusive licence to use and exploit, in the United States, Puerto Rico and Canada, certain trade mark rights, together with patent rights and knowhow relating to the Peel Away paint stripping system (the Dumond Licence). The trade mark rights were described as "Peel-Away I and logo", "Peel-Away II and logo" and "Patina and logo". The initial term of the licence was to expire on 31 December 1991, with automatic renewal for additional one year terms. The Dumond Licence appears to grant rights only in respect of the first of the US Marks, since the application for the second of the US Marks was not made until 1992. However, I do not understand anything to turn on that fact.
17 On 30 November 1992, Pilgrim assigned its entire interest in and the goodwill associated with the US Marks to Mr Brailsford. At that time, the second of the US Marks had not yet been granted to Pilgrim, although the application had been made. The assignment of 30 November 1992 would appear to have included the benefit and associated burden of the Dumond Licence, which was then still on foot.
18 CRT was incorporated on 7 July 1993. Mr Brailsford was its president and was a director. As at 16 October 2001, Mr Brailsford was still the president and a director of CRT. There is every reason to draw the inference that that situation persisted during 1997, when Mr Brailsford applied to register the Peel Away Mark in Australia.
19 On 30 August 1993, Mr Brailsford assigned his entire interest in and the goodwill associated with the US Marks to CRT. That assignment would also appear to have included the benefit and associated burden of the Dumond Licence, which was then still on foot. On the same day, CRT appointed Messrs Grimes and Battersby of Stamford, Connecticut, United States of America, as its representatives upon whom notices or process in proceedings affecting registration of the US Marks might be served. That appointment was signed by Mr Brailsford as president of CRT.
20 In his affidavit of 16 October 2001, Mr Brailsford said that CRT was engaged in the ownership of patents and trade marks for what was described as "an innovative paint product known as Peel Away". He said that the patents and trade marks were then licensed to Dumond, and that the revenues generated from that licensing arrangement were the sole source of income of CRT. On the basis of the presumption of continuity, it should be concluded that that position prevailed throughout the 1990s.
21 However, by the mid 1990s, there was apparently some uneasiness in the relationship between Pilgrim and Dumond, and, during 1997, Mr Brailsford began to negotiate with Fiberlock for a licence for the distribution of Peel Away products. In late 1997, Pilgrim notified Dumond of breaches of the Dumond Licence and that it intended to terminate the Dumond Licence at 31 December 1997. On 16 December 1997, Mr Brailsford, as president of CRT, wrote to Dumond, reminding Dumond of its obligations on termination of the Dumond Licence. Mr Brailsford suggested a form of letter to be sent to customers indicating that the Dumond Licence was terminated from midnight on 31 December 1997.
22 On 31 December 1997, Mr Brailsford executed a licence on behalf of CRT in favour of Fiberlock. That licence recited that CRT owned all rights and "removal knowhow" and other rights for removing paint and other coatings from surfaces marketed worldwide under the registered trade name Peel Away. The licence was for the United States for a term of five years, with an option to extend for a further term of five years. However, in the light of what was said by Mr Brailsford in his affidavit of 16 October 2001, to the effect that revenue from the Dumond Licence was CRT's only source of income, it appears that the licensing to Fiberlock did not proceed, possibly as a result of some compromise of the Fiberlock Proceeding.
23 On 28 May 1998, CRT applied to the United Kingdom Patents Office in relation to a patent for a paint stripping system. Mr Brailsford was described as the inventor, and CRT was said to have derived the right to apply for the patent by virtue of an agreement with Mr Brailsford.
24 On 20 November 1998, a declaration of use in relation to the US Marks was lodged with the United States Patent and Trademark Office. The declaration was signed by Ms Suzan Macy, who was described as the vice-president of CRT. The declaration asserted that the US Marks had been in continuous use in interstate commerce within the United States for five consecutive years from the date of registration to that time, and were still in use in interstate commerce within the United States in connection with all of the goods and services in all of the classes recited in the registration. That says nothing about use or ownership in other parts of the world.
25 On 14 November 2002, Mr Brailsford signed a declaration to the United States Patent and Trademark Office requesting renewal of the registration of the US Marks in favour of CRT. The declaration asserted that CRT was using US Marks in commerce on, or in connection with, the goods listed in the existing registration. That, again, says nothing about use in other parts of the world.
26 In July 2003, CRT entered into a further licence agreement with Dumond (the Second Dumond Licence), which recited that CRT was the owner and had the right to use, or permit the use of:
the trade mark Peel Away in all international classifications covering paint removal products;
US patents numbers 4579627 and 5188675, including any continuations to those patents; and
the technical knowledge and expertise possessed by CRT to use the paint removal products.
27 The Second Dumond Licence was to be exclusive in the United States, Canada and Mexico. It provided that, if net sales in a calendar year in other geographic regions listed met or exceeded the amount specified, that geographic region would be exclusive for the remainder of the term of the Second Dumond Licence or any renewal term. The geographic regions listed were:
Central/South America;
Europe (excluding the United Kingdom and the Netherlands);
Eastern Europe, including Russia, Bulgaria and Estonia;
the Middle East;
the Far East (including Japan, China, Korea, Taiwan, Singapore and the Philippines); and
Africa.
28 The Second Dumond Licence appears to be the first time, apart from the United Kingdom patent application, to which I have already referred, when any suggestion was made that the rights of CRT in relation to the Peel Away intellectual property extended beyond the United States. In the Second Dumond Licence, however, the United Kingdom is expressly excluded, and there is no mention of Australia. By that time, of course, the Registered Mark had been granted to Mr Brailsford.
29 Mediaquest contends that the circumstances outlined give rise to an inference that, when Mr Brailsford decided to register the Peel Away Mark in Australia in his own name, he did so in circumstances where that registration may have represented a valuable opportunity for a company of which he was the president, managing director or chief executive officer. Mediaquest points to the fact that there is no evidence of any informed consent on the part of CRT that would prevent those principles from applying to Mr Brailsford's acquisition of the Registered Mark. Mediaquest contends that there is no basis for concluding that Mr Brailsford may have acquired the opportunity to register the Peel Away Mark in Australia in any private capacity. It asserts, therefore, that either Mr Brailsford obtained the Registered Mark on behalf of CRT, or he should be treated in equity as having been obliged to do so. Either way, Mediaquest says, CRT, and any assign of CRT, would be entitled to a declaration of ownership of the Registered Mark. The difficulty for those contentions of Mediaquest is the paucity of evidence concerning Mr Brailsford's activities and his relationship with Pilgrim and CRT.
30 Under s 19 of the Act, a trade mark may be registered in respect of goods, services or both goods and services. Under s 20, if a trade mark is registered, the registered owner has the exclusive right to use the trade mark and to authorise other persons to use the trade mark in respect of those goods or services. A registered trade mark is personal property, and the registered owner may deal with the trade mark as its absolute owner.
31 The Registered Mark constitutes a different item of property from the US Marks. The registration of the Registered Mark created a monopoly in Australia in favour of the registered holder. The item of property constituted by the Registered Mark is a distinct item of property from anything shown to have been dealt with by CRT. There is no reason why a particular mark might not be owned by different entities in different jurisdictions. That is to say, there is no inconsistency between CRT being the owner of the US Marks in the United States or elsewhere and Mr Brailsford being the owner of the Registered Mark in Australia. The question, however, is whether the opportunity to acquire the property that was brought into existence by the registration of the Registered Mark represented an opportunity that came to Mr Brailsford by reason of his being a director of CRT.
32 There is nothing in the materials to suggest that CRT at any time dealt with or purported to deal with rights in relation to the Peel Away Mark in Australia. The evidence demonstrates clearly enough that CRT was the owner of the Peel Away mark in the United States. While CRT is a company incorporated under the laws of Jersey in the Channel Islands, it does not appear to have engaged in any activity outside the United States or the United Kingdom. Specifically, there is no evidence that it engaged in any activity related to Australia.
33 Both Pilgrim and CRT appear to have been creatures of Mr Brailsford. There is no evidence as to Mr Brailsford's motivation or reasons for incorporating Pilgrim and assigning his rights to that company. Nor is there evidence as to Mr Brailsford's motivation or reasons for reacquiring the rights from Pilgrim and then assigning them to CRT.
34 The contention advanced on behalf of Mediaquest is that Mr Brailsford acquired the opportunity to register the Peel Away Mark in Australia by reason of his being a director of CRT. However, that can only be an inference. The circumstance that Mr Brailsford had dealings with the Peel Away mark before CRT was incorporated gives rise to a contrary inference. That is to say, it does not necessarily follow that the opportunity of registering the Peel Away mark in Australia was one that came to Mr Brailsford by reason of his being a director of CRT. Rather, an inference is at least available, and may perhaps be more easily drawn, that CRT acquired whatever opportunity it had to exploit the Peel Away Mark, and associated technology and knowhow, because Mr Brailsford chose to make it available to CRT.
35 Under s 27 of the Act, a person may apply for the registration of a trade mark if the person claims to be the owner of the trade mark and, relevantly, one of the following applies:
the person intends to use the trade mark;
the person intends to authorise another person to use the trade mark; or
the person intends to assign the trade mark to a body corporate with a view to the use by the body corporate of the trade mark.
There is no evidence to suggest that CRT ever used or intended to use the Peel Away Mark in Australia.
36 In the absence of evidence as to the circumstances surrounding the incorporation of CRT and the assignment of the US Marks by Mr Brailsford to CRT, there is no basis for concluding that the opportunity of using the Peel Away Mark in Australia was one that came to Mr Brailsford by reason of his being a director or chief executive officer of CRT. I am not persuaded that it is more likely than not that Mr Brailsford acquired the Registered Mark by reason of his position as a director and chief executive officer of CRT.
37 Even if Mr Brailsford held the Registered Mark on trust for CRT, it would still be necessary for Mediaquest to establish that it has acquired CRT's rights by way of assignment or transmissions. It claims to have done so by reason of bankruptcy proceedings in the United States.
38 On 5 May 2008, a trustee in bankruptcy was appointed to CRT, with power to realise its assets. The trustee entered into a deed of assignment and a bill of sale with Mediaquest, whereby the trustee assigned all of CRT's rights in relation to the Peel Away Mark and related rights, together with those claims that CRT may have against Mr Brailsford. Those words are clear enough to embrace any right that CRT may have had against Mr Brailsford in respect of the registration of the Registered Mark. If Mr Brailsford held the Registered Mark on trust for CRT, it would be appropriate to treat him, and his estate, as holding that property on trust for Mediaquest.
39 However, in the light of the conclusion that I have reached, there was no entitlement on the part of CRT to the Registered Mark that vested in CRT's trustee in bankruptcy. Accordingly, there was no assignment or transmission to Mediaquest of any rights in relation to the Registered Mark. It follows that Mediaquest's claim for a declaration that it is the beneficial owner of the Registered Mark should be dismissed.