C: (iv) The growth of TKG to the present, its activities in Queensland and Mrs Sasse's knowledge of Gymboree's business
36 In the earlier overview I mentioned that by early 1998 there were fifty two Gymbaroo centres in Australia, ten owned by TKG and the remaining forty two operated by thirty eight franchisees. I have also just referred to the origins of TKG and its growth until 1986.
37 From mid 1986 TKG's business continued to expand in the following way. Throughout the second half of the 1980's and into the 1990's the number of Gymbaroo centres continued to increase in Victoria, New South Wales, the Australian Capital Territory and Western Australia. One centre opened in Tasmania (Launceston) in 1992 but closed in 1995. Two centres opened in South Australia, one at Tusmore (1995) and Hawthorn (opened 1998), which are suburbs of Adelaide. Between 1990 and 1994 a total number of 39,654 children were enrolled in Gymbaroo centres throughout Australia. Between 1995 and 1998 there were 38,929 enrolments though this figure may include enquiries about enrolment. At the end of 1997 (term 4) Gymbaroo centres ran in excess of 600 sessions for approximately 7,200 children. New centres continue to open, the most recent being at Glebe in New South Wales and Hobart in Tasmania. Enquiries have been received by TKG from many parts of Australia concerning the possible establishment of a Gymbaroo franchise.
38 Some measure of central control has been exercised over all Gymbaroo centres by TKG though a considerable measure of informal independence has been exercised by franchisees in the conduct of their businesses though not as to the contents of the courses themselves. This central control has been sought to be exercised not only through franchise agreements and management agreements but also through TKG's Teacher Training Manual, Franchise Operations Manual and Term Theme Programmes for Teacher Guidance. I am satisfied that, as to the core operations of the franchisees in implementing the Gymbaroo programmes, there has been a general consistency of approach giving rise to a homogenous identity for all Gymbaroo centres. This has been reinforced by the Gymbaroo newsletter and parent hand-outs. It is also reinforced by the holding of national conferences and regular visits to all centres by Mrs Sasse or another senior representative of TKG.
39 TKG has advertised its centres in various magazines since as early as 1986. The range of magazines in which TKG advertised increased in the early 1990's. Magazines containing advertisements included: Australia's Parents, Kidsafe, Good Taste, The Baby Source Book, Mother and Child Health Care, Infant Times Service Centre, Sydney's Child, Melbourne's Child, Brisbane's Child, Kids in Brisbane, Women's Weekly, Nursing Mothers, Baby and Beyond and Mother and Child Health Guide. Gymbaroo centres have also been promoted in newspapers. The names "Gymbaroo"and "Toddler Kindy Gymbaroo" have been commonly used in the advertisements. Advertising and promotional expenditure since the 1989/1990 financial year has amounted to $1,192,589 though a significant portion of this was spent in publishing First Steps magazine which was first published by TKG in 1990. This magazine has been distributed nationally by Gordon & Gotch to newsagents throughout Australia. In 1991 and 1992 it was distributed free to clients of Nappy Wash in Victoria, and to parents whose children attended Gymbaroo centres. The evidence suggests:-
(a) In about January 1991, 10,000 copies of the magazine were printed.
(b) In about August 1991, at least 80,250 copies were printed for distribution (6,000 to the first applicant; 8,000 to Gordon & Gotch; 65,000 to the Nappy Wash Service; 500 to Camden District Hospital; 500 to Gosford District Hospital and 250 to Fairfield District Hospital).
(c) In the Spring of 1992, 103,000 copies of the magazine were printed for distribution (6,000 to the first respondent; 8,000 to Gordon & Gotch; 65,000 to Nappy Wash in Victoria; 25,000 for hospitals in Sydney, Brisbane and Canberra).
(d) In about May 1992, 80,000 copies of the magazine were printed.
(e) In about March 1992, approximately 8,000 copies were delivered to Gordon & Gotch for national distribution; in about September 1992 65,000 copies were distributed to hospitals in New South Wales, Victoria and Queensland, and 5,800 copies were to be distributed nationally through Gymbaroo centres.
(f) In about August 1993, 110,000 copies of the magazine were printed for distribution (8,100 to Gordon & Gotch; 6,000 to the first applicant; 65,000 copies to Nappy Wash in Victoria; the balance for distribution to hospitals in New South Wales, Queensland and the Australian Capital Territory).
40 While the direct evidence about printing and distribution was incomplete and a little confusing I am satisfied that a significant number (in excess of 50,000) copies of the magazine were distributed annually to the public in 1991, 1992 and 1993. The position concerning direct distribution since then is less clear.
41 There was an issue about the extent to which the word "Gymbaroo" or the words "Toddler Kindy Gymbaroo" were used in First Steps to describe TKG's business, programs or centres. I have perused the various editions of the magazine in evidence. I accept that in early editions the use of the word "Gymbaroo" (either by itself or as part of the collocation "Toddler Kindy Gymbaroo") was limited. But its limited use is significant. In the first edition, applications for subscriptions were to be sent to "GYMBAROO" (the word used by itself) which appeared fairly prominently in a half page promotion. Likewise, a half page advertisement for TKG centres contained the word "GYMBAROO" in upper case and larger and more prominent than the lower case "Toddler Kindy". Further, one page contained a price list for products sold by TKG and a person ordering was invited to post the order form to "GYMBAROO" (the word used by itself). The same general use of the word is found in the Spring 1990 edition, the Autumn 1991 edition (the subscription promotion was a quarter page next to an advertisement for a scooter "available direct from Gymbaroo"), the Spring 1991 edition, and the December 1991 edition. However there were, over this period, some minor changes in the use of the word. For example the subscription promotion was altered so that the cheques were to be made payable to "GymbaROO" (the word used by itself) but were to be sent to "Toddler Kindy GymbaROO Pty Ltd". While in these editions the collocation "Toddler Kindy Gymbaroo" is used on several occasions, so too is the word "Gymbaroo" by itself. This use of both the word "Gymbaroo" and the collocation "Toddler Kindy Gymbaroo" continued in the Autumn/Winter 1992 edition (with the first use in the magazine of the graphic representation of the collocation of words appearing in the B and C marks but with the word "Gymbaroo" more prominent). In the two 1993 editions the word "Gymbaroo" appeared by itself or with "Toddler Kindy" but with the letters "roo" in capitals and larger than the surrounding text. I should mention that in the Autumn/Winter 1993 edition there was an article about TKG's centres. It commenced: "Toddler Kindy GymbaROO, or "TKG" as it is affectionately known by many mums, dads and teachers, provides lots of fun and learning for infants to school age children".
42 Issue No. 11, published probably before July 1994, (an advertisement refers, inter alia, to a show to be held in early July 1994 in Brisbane) was described in the editorial as a "new look First Steps". From that point the word "Gymbaroo" was used, by itself, more frequently though use of the collocation "Toddler Kindy Gymbaroo" continued. First Steps magazine has been an insert in Australia's Parents magazine, I infer, since 1995. Australia's Parents is a nationally distributed magazine (as well as overseas). It is published bi-monthly with an ABC audited circulation of 40,717 (for the period January to June 1997). The total yearly circulation is approximately 244,300 copies.
43 TKG had also been advertising in Australia's Parents magazine since 1994. TKG has retained some of the enquiry reports compiled by the magazine since 1995. The retained records show that there have been at least 1,788 enquiries Australia-wide relating to Gymbaroo centres generated by the magazine's readership over a three year period since early 1995.
44 Apart from the print media there has also been the promotion of TKG in the electronic media during both the 1980's and 1990's. Television segments have included: the Midday Show with Ray Martin televised nationally in 1987, Healthy Wealthy and Wise televised nationally in 1993 on Channel 10, the Small Business Show, televised nationally on Channel 9 in 1998, and the Family Circle Show televised nationally on Channel 10 later in 1998.
45 TKG activities are, indirectly, promoted through the sale of videos. As mentioned earlier, in 1985, in conjunction with Dr Sheil, the first video of five in the "Ladder of Learning" video series was produced. As advertised in First Steps the videos are identified with TKG though the connection is not apparent in the videos themselves. The videos are sold widely throughout Australia and internationally. I accept the evidence that approximately 4,000 videos in the series have been sold. In the period 1 July 1994 to 30 April 1999, 2,577 videos in the series were sold. These sales include sales to health services, schools, tertiary institutions, libraries, bookshops, hospitals and local councils as well as private purchasers.
46 TKG maintains a no charge Optus 1800 number which it commenced in late 1995. Its use is illustrated by use in the six month period between September 1998 and January 1999. In that period there were 1,986 calls made to the number as follows:- 903 from New South Wales, 298 from Victoria, 300 from Queensland, 113 from South Australia, 251 from Western Australia, 100 from the ACT, 4 from Tasmania and 3 from the Northern Territory. Since 1990 TKG advertising and marketing has included participation in the Baby Fair and Children's Expo in Perth and Melbourne in 1990 and 1991 and more widely around Australia in the "Parents, Babies and Children's Shows" (Sydney, Melbourne, Adelaide and Perth) annually since 1992. At these exhibitions TKG equipment is set up at booths for children to play on and flyers and copies of the First Steps magazine are handed out.
47 By 1994, a Gymbaroo perceptual motor program had been developed for 2-4 year olds for use by other child care centres. These programs have been widely advertised under a format highlighting the word "Gymbaroo" and are sold in packages which include the necessary equipment and the program information. Approximately twenty programs have been sold. TKG has undertaken two joint marketing activities with large corporations. There was an arrangement (in 1995) with Kimberly-Clarke Australia Ltd where TKG dodgers were included with"Huggies" nappies in Baby Bounty Bags which were distributed to new mothers at maternity hospitals throughout Australia, and an arrangement (in 1998) with Petersville Ltd and Peters Foods Australia Pty Ltd (in relation to a product Nestle Milo) entitling purchasers of that product to a free session at a TKG centre. In the former, the dodgers use the word "Gymbaroo" by itself, and in the latter a height chart was to be issued to prospective users of TKG's services containing at two points the expression "Toddler Kindy Gymbaroo" with the word "Gymbaroo" printed in larger and more prominent type.
48 Since 1996 TKG has maintained a webside for those seeking information concerning TKG over the internet. TKG sponsored further lecture tours by the following overseas experts: Jack Capon in July 1989 and in May/June 1993 Jack Capon and Jack Evans (jointly sponsored by ANUSA).
49 I should, at this stage, refer to the recent establishment of TKG centres in Queensland. I have already referred to the centres at Townsville and Magnetic Island that operated in 1985/86. A centre was reopened in Townsville in 1989 by Mrs Sasse's daughter who lived there. A centre opened in Cairns in 1997. At least one centre operated for a time in Central Queensland in the 1980's. However it was not until either late 1989 or early 1990 that TKG sought to establish a real presence in South East Queensland. It then purchased four centres run by ANUSA which had commenced operating centres in Queensland in 1984. The centres had been run by ANUSA using TKG equipment and had been operated under the name "Toddler Kindy Gym(s)." The centres which were purchased (in the sense that the equipment was bought by TKG) were at Nundah, Graceville, Red Hill and Breckenridge. By the end of 1994, of these centres, the only centre still operating was the Red Hill centre which had moved to Toowong though another TKG centre opened briefly at Windsor, a suburb of Brisbane, in 1995/96.
50 Also relevant is when Mrs Sasse became aware of Gymboree's activities in that state and more generally. Evidence was led by Gymboree Corp from Mr Alan McCrundle. He said he had been interested in franchising opportunities and had become aware that Gymboree Corp offered franchises for conducting play programmes for children. An inquiry of Gymboree Corp led to contact with Mr and Mrs Graham which led, indirectly, to contact with Mrs Sasse. Mr McCrundle met with Mrs Sasse in probably late 1991 to discuss becoming a TKG franchisee. However at the meeting Mr McCrundle indicated he was also looking at the possibility of becoming a Gymboree franchisee. To this, according to Mr McCrundle, Mrs Sasse said that if he bought a Gymboree franchise and opened centres in Sydney, she would open up next door and drive him out of business. Mrs Sasse could not recall the meeting but implied she would have recalled it had it taken place. Mr McCrundle was not cross-examined. In evidence is a letter dated 11 December 1991 from Mr McCrundle to the Grahams repeating the substance of his conversation with Mrs Sasse. I accept his evidence. It was objected to. However his evidence concerns a fact in issue and is not inadmissible under Part 3.7 of the Evidence Act 1995 (Cth) or otherwise inadmissible.
51 Moreover Mrs Sasse gave evidence of having been aware of Gymboree since she noticed them at exhibitions. While the evidence is somewhat vague as to when this might have been, the evidence of Mrs Sasse together with that of Mrs Graham about Gymboree's promotional programme would suggest that this would have been at an exhibition held at Brisbane in 1991. I am satisfied that by the end of 1991 at the latest, Mrs Sasse was aware of Gymboree's activities both in Queensland and, potentially, as a franchisor in Queensland and elsewhere in Australia. I should note that Mrs Sasse gave evidence that in 1986 she became aware that Gymboree Corp had applied to register a trademark. I am satisfied that then she assumed they were positioning themselves to enter the Australian market.
C: (vi) The use of the A, B and C marks
52 As noted earlier the A mark was registered by Mr and Mrs Sasse on 15 June 1984. It was not in issue that the A mark was used by TKG and its franchisees until 1989 or 1990 when use of the A mark was, to at least some extent, displaced by use of the B and C mark. In issue was whether there was use of the A mark during the period 13 May 1993 to 13 May 1996 (Gymboree's cross-claim) or 23 November 1994 to 23 November 1997 (Gymboree Corp's cross-claim) which, for the purposes of s 92(4)(b) of the 1995 TM Act, are said to be the relevant periods of non-use. Before turning to the evidence concerning the use of the A mark in those periods, I should note that registration of the B and C marks was applied for on 18 May 1993 and it was not in issue that, as a matter of fact, both marks had been used prior to that by TKG. Their use was the subject of a written agreement between Mr and Mrs Sasse and TKG, executed on 29 June 1993 in which the Sasses granted TKG the exclusive right to use the B and C marks and to sub-license the use of them.
53 The use of the A mark relied on by TKG was the use by TKG of two advertising boards containing the A mark at exhibitions and open days, the use of letterhead by franchisees containing the A mark, the supply to a Sydney franchisee of parent information sheets containing the A mark and the distribution to parents of the sheets by the franchisee and the distribution of staff notes in the relevant period which contained the A mark.
54 Mrs Sasse gave evidence in an affidavit sworn 23 April 1999 that between 1993 and 1997 she regularly attended exhibitions in Adelaide, Brisbane, Melbourne and Sydney to promote TKG's business. Part of the display included a round ply board 90 centimetres in diameter featuring the A mark. Throughout 1998 it was on display at the Kew premises of TKG. Other more equivocal evidence of Mrs Sasse was that there was also displayed at exhibitions and open days a second ply board containing promotional text and the A mark in the bottom right hand corner. Photographs in evidence of an exhibition stand do not evidence the use of either board. It was submitted by counsel for Gymboree Corp that this evidence concerning the use of the boards should be rejected. Had the round ply board been used in the way deposed to by Mrs Sasse one would have expected it to have appeared in the photographs of the stand which Mrs Sasse exhibited to an affidavit of 30 April 1998 and described by her at that time as "the typical set up of play areas and booths at exhibitions". Having regard to the way the issues in proceedings emerged, the April 1998 affidavit was not addressing the use of the A mark though the April 1999 affidavit was. No satisfactory explanation was given of why one or both the boards did not appear in the photographs. Moreover the periods in question, spanning May 1993 to November 1997, were well after TKG had, overwhelmingly, begun using the B and C marks, and not the A mark, in promoting its business. The evidence, on balance, points to the boards not being used. I am not satisfied that the boards were used in the relevant periods in the way deposed to by Mrs Sasse.
55 Evidence was given by Mrs Isabelle Skeates who is a director of Varebi Pty Ltd ("Varebi") which operates, as a franchisee, a Gymbaroo centre at East Lindfield in Sydney. The franchise agreement was executed in January 1989. It was a term of the agreement that Varebi would "conform to such standards, methods and procedures as approved by" TKG (clause 9.1). Varebi was given an operations manual which has been updated. The manual presently provides that "All business stationery used in the conduct of the Franchised Business must be only that issued by 'GymbaROO' ". The agreement also provided that the franchisee acknowledged TKG had "ownership and exclusive right to the trade marks and trade names 'Gymbaroo' … including all … marks … used in connection with or applicable to [TKG's] programme". However by clause 2.1, Varebi was granted a licence to operate a centre "using the trade marks and trade names 'Toddler Kindy Gymbaroo' …" When Varebi commenced operating it was provided with stationery by TKG. However after that, Varebi created its own stationery using a computer which included in the letterhead the A mark. Its use is evidenced during the relevant period by a letter dated 13 September 1996 to the local council enclosing rent for a hall used by Varebi. Mrs Skeates' evidence was that the letterhead had been and continues to be used by Varebi. I accept this evidence.
56 Evidence was given by Mrs Janet McKittrick who has been a franchisee since 1986 running a centre at Cheltenham in Victoria. Since then she has used a "with compliments" slip containing the A mark to pay rent, responding to inquiries, sending information during term, I infer to parents, and issuing refunds. The slips are from pads of approximately 1000 pages Mrs McKittrick had printed when she first entered the franchise. I accept this evidence. The franchise agreement, dated 19 November 1986, contains provisions concerning compliance with standard methods and procedures and ownership of marks in the same terms as the Varebi agreement.
57 Evidence was given by Mrs Lesley Sharpe who, after having managed two TKG owned centres, became a franchisee in 1992. Her franchise agreement was not in evidence and it is not possible to determine what were its terms. Mrs Sharpe gave evidence that she had been using the A mark on various promotional and other material from 1992 to 1998. I accept her evidence. She gave several examples. In January 1994 she distributed a flyer on street corners, to doctors' surgeries and libraries advising of an open day at the franchised centre she ran at Double Bay. The flyer was one created by Mrs Sharpe who had cut and pasted an early flyer, dating from probably 1985 or 1986, and adapted by her for the promotion of her centre. In the result, the flyer contained in the bottom right hand corner, the A mark. She also gave evidence that in June 1994 she sent a letter to 30-50 parents, which again was in a format resulting from the cutting and pasting of other documents. It included prominently at the bottom of the letter the A mark. She gave further evidence that in 1994 and 1995 she handed out (to approximately 100 parents per term - 400 per year in total) or sent out (after phone enquiries) timetables. The heading of the document contained, amongst various graphics, the A mark. Again Mrs Sharpe had created this document by cutting and pasting other documents. She (or her partner Mrs Gadeley) also handed out in the period 1993-1997 various parent information sheets describing aspects of the Gymbaroo program and which contained the A mark in the heading. She accepted they were copies of old and mostly superseded documents which she (or Mrs Gadeley) had, as to some of them, retained from her time as a teacher prior to beginning a franchise in 1992. At least one of the information sheets handed out was a cut and paste of other and earlier documents. There is, in evidence, an invoice dated 23 November 1994 indicating Mrs Gadeley was sent 100 information sheets entitled "Baby Gymnastics". Mrs Sasse said that the version sent contained the A mark though accepted that that version had been superseded. I am not affirmatively satisfied that the older version was sent. It is not apparent Mrs Sasse had any direct knowledge of which version was sent. It is true that Mrs Sharpe's evidence was that the earlier version was distributed by her. But her evidence leaves open the possibility that the version distributed by her was from a stockpile she and Mrs Gadeley had retained and not from copies in the superseded form sent to Mrs Gadeley in November 1994.
58 There were, in evidence, staff notices (one dated April or June 1993, one dated June 1993 and one dated 6 June 1995) which were sent to the TKG centres and the franchisees nationally to be shown to all staff. Each contain the A mark in the heading.
59 I generally accept the above evidence and it establishes use of the A mark during the relevant periods spanning May 1993 to November 1997 with the qualification that I do not accept the evidence establishes use of the A mark at exhibitions by its use on display boards.