Moorgate Tobacco Co Ltd v Philip Morris Ltd

Moorgate Tobacco Co Ltd v Philip Morris Ltd - [1984] HCA 73 - HCA 1977 case summary — Zoe

[27]

In the absence of objection, Mr. Orcutt was permitted at the trial to say that Loew's "felt" that Philip Morris "had given an obligation to deliver" to Loew's the above-mentioned "marketing plan". Mr. Orcutt was, however, not present at the discussion of 16 November 1976 which was the only occasion on which it is suggested that such a proposed plan was mentioned: "the details" of that discussion had been reported to him by Mr. Howley. Mr. Howley's direct evidence and the contemporaneous record of the discussion contained in the "Minutes", which are plainly to be preferred to Mr. Orcutt's evidence on the point, indicate that no such "obligation" had, in fact, been expressly undertaken by Philip Morris. In the context of previous statements that Philip Morris would let Loew's have its "impressions" and that Loew's would be interested to "receive" a "proposal" from Philip Morris, it is possible that there was a common understanding that Philip Morris would provide Loew's with information about its marketing plans when it "opened discussions with Loew's to obtain the appropriate licenses" to manufacture and market the new product in Australia. Be that as it may however, there is no basis in the evidence for a finding that Philip Morris either undertook to act on behalf of Loew's or was in fact so acting in relation to the preparation of that marketing plan and there is no finding to that effect in any of the judgments in the courts below. To the contrary, the evidence plainly indicates that the marketing plan was to be prepared by Philip Morris acting on its own behalf so that it might be placed before its own "Australian management". The proper conclusion from all the evidence is that expressed by Hope J.A. in the Court of Appeal, namely, that the discussions and communications "in respect of the project of selling the new cigarettes in Australia" were and remained business discussions and communications "between business people dealing, in this regard, at arms length".

[37]

The prior use of a trade mark which may suffice, at least if combined with local authorship, to establish that a person has acquired in Australia the statutory status of "proprietor" of the mark, is public use in Australia of the mark as a trade mark, that is to say, a use of the mark in relation to goods for the purpose of indicating or so as to indicate a connexion in the course of trade between the goods with respect to which the mark is used and that person: see, generally, Shell Co. of Australia Ltd. v. Esso Standard Oil (Australia) Ltd. [4] ; Re Registered Trade Mark Yanx; Ex parte Amalgamated Tobacco Corporation Ltd. [5] ; and the definition of trade mark in s. 6(1) of the Trade Marks Act. The requisite use of the mark need not be sufficient to establish a local reputation and there is authority to support the proposition that evidence of but slight use in Australia will suffice to protect a person who is the owner and user overseas of a mark which another is seeking to appropriate by registration under the Trade Marks Act. In such a case, the court "seizes upon a very small amount of use of the foreign mark in Australia to hold that it has become identified with and distinctive of the goods of the foreign trader in Australia": see Seven Up Co. v. O.T. Ltd. [6] ;Aston v. Harlee Manufacturing Co. [7] . In so far as the trade mark " kent golden lights " is concerned, Loew's was the author, owner and user of that mark in the United States. Assuming, in its favour, that evidence of but slight use in the course of trade in Australia would suffice to establish its status as proprietor of the mark, as distinct from merely precluding another from establishing local authorship, the question arises whether there was evidence of even such slight use. For Philip Morris, it is submitted that there was no evidence at all of any relevant use. That submission accords with the conclusion reached by Helsham C.J. in Eq., at first instance, and by Glass J.A. who was the only member of the Court of Appeal who found it necessary to determine the question.

[40]

The Court was referred to a large number of cases and to some administrative decisions in which consideration has been given to what constitutes a use or user of a trade mark for the purposes of the statutory notion of proprietorship of the mark before registration. The cases establish that it is not necessary that there be an actual dealing in goods bearing the trade mark before there can be a local use of the mark as a trade mark. It may suffice that imported goods which have not actually reached Australia have been offered for sale in Australia under the mark (Re Registered Trade Mark Yanx; Ex parte Amalgamated Tobacco Corporation Ltd. [8] ) or that the mark has been used in an advertisement of the goods in the course of trade: Shell Co. of Australia v. Esso Standard Oil (Australia) Ltd. [9] . In such cases, however, it is possible to identify an actual trade or offer to trade in the goods bearing the mark or an existing intention to offer or supply goods bearing the mark in trade. In the present case, there was not, at any relevant time, any actual trade or offer to trade in goods bearing the mark in Australia or any existing intention to offer or supply such goods in trade. There was no local use of the mark as a trade mark at all; there were merely preliminary discussions and negotiations about whether the mark would be so used. The cigarette packets and associated advertising material were delivered to Philip Morris to demonstrate what Loew's was marketing in other countries and what Philip Morris might market, under licence from Loew's, if it decided to manufacture and trade in the goods in Australia and to use the mark locally at some future time. There was no relevant trade in the goods in Australia and the delivery of the cigarette packets and associated material to Philip Morris did not, in the circumstances, constitute a relevant user or use in Australia of the mark " kent golden lights " for the purpose of indicating or so as to indicate a connexion in the course of trade between the new cigarettes and Loew's. It follows that Moorgate has failed to establish proprietorship of the mark " kent golden lights " either at the time Philip Morris applied to register the mark " golden lights " or at the time when the licence agreement expired. It is unnecessary to consider whether, if Moorgate had succeeded in establishing such proprietorship, its rights in respect of the mark " kent golden lights " would have been protected by the provisions of Art. VI of the licence agreement notwithstanding that the new low tar and nicotine cigarettes were not "Licensed Products" under that agreement or whether, even if its rights in the mark " kent golden lights " were within the protection of Art. VI, that protection extended to preclude Philip Morris from applying for registration of the mark " golden lights ". It should, perhaps, be mentioned that Moorgate did not argue in this Court that the fact that advertisements of the United States " kent golden lights " cigarettes came into Australia via American magazines meant that there had been a relevant use or user of the name in Australia: see Seven Up Co. v. O.T. Ltd. [10] .

[42]

The argument that Philip Morris' application for registration of the trade mark " golden lights " was in breach of an implied term of the licence agreement may be briefly disposed of. The express provisions of the agreement protect the licensor's right and interest in the trade mark kent itself. The suggested implied term is to the effect that "during the agreement [the licensee] would do nothing to hinder or prevent the development of any line-extension or other right in respect of" that trade mark. As a matter of internal linguistics, there is nothing in the agreement itself to indicate that any such term was assumed to exist. Viewed against the factual matrix of the agreement (see Prenn v. Simmonds [11] ), such a term would have surprising consequences. It would, for example, preclude the licensee from seeking to maintain or protect its own trade marks, regardless of how long they had been owned and of the circumstances in which they had been acquired, if the maintenance or protection of them would "hinder or prevent" the development of "any line-extension or other right in respect of the trade mark " kent " ". Unless qualified, it would, for example, preclude Philip Morris from seeking to hinder or prevent the introduction by the licensor of a line extension under the name " kent lights " or, to take an extreme case, under the name " kent marlboros " notwithstanding the fact that " lights " and " marlboro " were registered trade marks of the Philip Morris group. It would preclude any competition at all between the licensor and licensee for acquisition or use of a name which the licensor might wish to use as a "line-extension" of kent notwithstanding the fact that the proposed "line-extension" related to a product which was not covered by the terms of the licence agreement. Plainly, the implication of such an unqualified term cannot be justified on the basis that it would make the agreement correspond with some evident underlying intention of the parties. Nor is it warranted by any need to give the agreement the business efficacy which the parties to it must have intended. It follows that there is no basis for the implication of the suggested term: see, generally, B.P. Refinery (Westernport) Pty. Ltd. v. Shire of Hastings [12] ; Secured Income Real Estate (Australia) Ltd. v. St. Martins Investments Pty. Ltd. [13] ; Codelfa Construction Pty. Ltd. v. State Rail Authority of N.S.W. [14] . If there be, on established principle, any basis for the implication of a provision in the licence agreement precluding the licensee from hindering or preventing the development of a line extension in respect of the kent trade mark, it must be confined to a more limited provision applying only to a line extension which was or would be itself a "Licensed Product" under the licence agreement. Philip Morris' application for registration of the trade mark " golden lights " would not have constituted a breach of any such more limited provision since, as has been seen, the proposed line extension " kent golden lights " was not in respect of cigarettes which were or would be included in the "Licensed Products" under the licence agreement. I turn to Moorgate's claim that Philip Morris was in breach of some fiduciary duty.

[45]

The necessary starting point of Moorgate's claim of breach of fiduciary duty is the identification of some fiduciary duty on the part of Philip Morris which precluded Philip Morris from seeking to obtain for itself the benefit of registration of the mark " golden lights ". It is not suggested that any such fiduciary duty flowed from the general relationship of licensee and licensor. What is submitted is that, in the context of that general relationship, Philip Morris "undertook the fiduciary duty of acting for or in its licensor's interest in respect of the brand and mark kent golden lights ". As I read the judgments of Helsham C.J. in Eq., at first instance, and of Hope J.A. (with whom Moffitt P. was in general agreement) in the Court of Appeal, that submission, which essentially is one of fact, is in conflict with the findings of both the trial judge and the Court of Appeal. Its basis is an assertion that Philip Morris undertook to act on behalf of Loew's in preparing the marketing plan mentioned in the discussion between Mr. Hurley (of Philip Morris) and Messrs. Howley and Roberts (of Loew's) which took place in New York on 16 November 1976 and which has been already examined in some detail. As has been seen, that assertion is not supported by the evidence and must be rejected. The effect of its rejection is that the submission that Philip Morris was under a fiduciary duty to act on behalf of Loew's in respect of the brand mark " kent golden lights " is bereft of any factual basis and Moorgate's claim of breach of fiduciary duty must fail. It is unnecessary to consider whether, if Philip Morris had undertaken a fiduciary duty to act on behalf of Loew's with respect to the investigation of the marketability of the new cigarettes in Australia, the content of that fiduciary duty would, in the circumstances of the present case, have precluded Philip Morris from pursuing its own interests by seeking to register the mark " golden lights " after Loew's had, by assignment to Moorgate, deprived itself of any ability to enter into any arrangement with Philip Morris for the manufacture or marketing in Australia of the proposed cigarettes.

[50]

The allegedly confidential information is identified by Moorgate as being the "marketing results, advertising, position paper and the knowledge that [Loew's] wanted to introduce the brand in Australia". Putting to one side for the moment information about what Loew's desired or intended to do, examination of the designated material discloses that it consisted of the type of general information and argument that one would expect a company desiring to license the manufacture and marketing in Australia of a new type of cigarette under a "line extension" of its parent mark to communicate to an "arms-length" potential licensee which already manufactured and marketed a competing product. In particular, the evidence did not establish that any of the material was in fact regarded as confidential by Loew's or that Loew's at any time requested Philip Morris to treat or regard it as confidential. In argument, senior counsel for Moorgate tended to restrict the suggested confidential information to the information that Loew's wanted to introduce the new cigarettes in Australia under the brand mark " kent golden lights ". In that regard however, the evidence established neither that any such information was communicated to Philip Morris nor that, if it had been, it was even accurate. All that the evidence indicated was that Loew's was anxious that Philip Morris agree to manufacture and market the new cigarettes, possibly under the name " kent golden lights ", in Australia under an agreement which would provide for the payment by Philip Morris to Loew's of a royalty upon sales. It is probably implicit in the material in evidence that Loew's would have wished, in the event that Philip Morris was not interested, to obtain some other licensee but the evidence is quite silent as to whether Loew's ever had any desire or intention itself to manufacture or market the new product here. If the allegedly confidential information is restricted to the information that Loew's desired to obtain a licensee who would manufacture and market the new product in Australia, there was nothing in the evidence nor in the nature of that information that established that it was regarded by Loew's as confidential or that it was, in fact, confidential. In the result, the evidence failed to establish that any part of the designated information possessed the necessary element of confidentiality or secrecy or that the preservation of its confidentiality or secrecy was of substantial concern to Loew's. Indeed, senior counsel who then appeared for Moorgate expressedly conceded, in his final address on the trial, that the information acquired by Philip Morris from Loew's in relation to the possible introduction of the new cigarettes in the Australian market was "non-confidential".

[56]

The majority judgment in International News Service assumed, rather than sought to establish, that such "unfair competition in business" was, in itself, an actionable wrong. The "underlying principle" was stated to be "much the same as that which lies at the base of the equitable theory of consideration in the law of trusts - that he who has fairly paid the price should have the beneficial use of the property. Pom. Eq. Jur. s 981" [23] . That equitable principle is, however, applicable to determine beneficial ownership of property which is capable of being the subject of a trust (see Pomeroy's Equity Jurisprudence, 5th ed. (1941), vol. 3, s 981) and cannot logically either found a conclusion that published news, as distinct from copyright in its presentation or arrangement, itself constitutes property, or provides any basis for a general cause of action for unfair competition. The judgment went on to assert [24] that the "news matter" should be regarded as "the mere material from which [the] two competing parties are endeavouring to make money" and be treated as "quasi-property for the purposes of their business because they are both selling it as such" and that, so regarded and treated, the "news material" had been "misappropriated" by the defendant. It is not explained why the information which had been published should have been regarded by the majority of the Supreme Court as "mere material from which" a party was endeavouring to make money, why that information should have been "treated" as "quasi-property" when it had long been the common law that, in the absence of rights of patent, trade mark or copyright, information and knowledge are not the property of an individual, or why a person who had gathered and published information about world events should be seen as owning the information in the sense that the "unfair" use of it by another in competition in a manner that was contrary to that party's business interests constituted "misappropriation". In addition to misappropriation, the judgment [25] identified "elements of imitation - of false pretense - in defendant's practices" but stated that "these elements, although accentuating the wrong, are not the essence of it". It is difficult to know whether "misappropriation" of "news material" should be regarded as a separate basis of the decision or as but one instance of the general wrong of "unfair competition in business" to which the judgment had earlier referred. Either way, one searches in vain in the majority judgment for any identification of the ingredients of that general wrong.

[66]

[t]he fact is that the substance of the plaintiff's complaint goes to interference, not with its enjoyment of the land, but with the profitable conduct of its business. If English law had followed the course of development that had recently taken place in the United States, the "broadcasting rights" in respect of the races might have been protected as part of the quasi-property created by the enterprise, organization and labour of the plaintiff in establishing and equipping a racecourse and doing all that is necessary to conduct race meetings. But courts of equity have not in British jurisdictions thrown the protection of an injunction around all the intangible elements of value, that is, value in exchange, which may flow from the exercise by an individual of his powers or resources whether in the organization of a business or undertaking or the use of ingenuity, knowledge, skill or labour. This is sufficiently evidenced by the history of the law of copyright and by the fact that the exclusive right to invention, trade marks, designs, trade name and reputation are dealt with in English law as special heads of protected interests and not under a wide generalization. His Honour added [41] that the judgment of Brandeis J. contained "an adequate answer both upon principle and authority to the suggestion that the defendants are misappropriating or abstracting something which the plaintiff has created and alone is entitled to turn to value". Dixon J. identified that answer as being that "it is not because the individual has by his efforts put himself in a position to obtain value for what he can give that his right to give it becomes protected by law and so assumes the exclusiveness of property, but because the intangible or incorporeal right he claims falls within a recognized category to which legal or equitable protection attaches". 1. (1937) 58 C.L.R. 479. 2. (1918) 248 U.S. 215 [63 Law. Ed. 211]. 3. (1937) 58 C.L.R., at p. 509. 4. (1937) 58 C.L.R., at pp. 508-509. 5. (1937) 58 C.L.R., at p. 509.

At a glance

Court

Decision date

Before

Source

Judgment (70 paragraphs)

Parties