Case law
73 In Pioneer Kabushiki Kaisha v Registrar of Trade Marks [1977] HCA 56; (1977) 137 CLR 670, a case decided under the 1955 Act, at 683 Aickin J said:
These cases demonstrate that the essential requirement for the maintenance of the validity of a trade mark is that it must indicate a connection in the course of trade with the registered proprietor, even though the connection may be slight, such as selection or quality control or control of the user in the sense in which a parent company controls a subsidiary. Use by either the registered proprietor or a licensee (whether registered or otherwise) will protect the mark from attack on the ground of non-user, but it is essential both that the user maintains the connection of the registered proprietor with the goods and that the use of the mark does not become otherwise deceptive. Conversely, registration of a registered user will not save the mark if there ceases to be the relevant connection in the course of trade with the proprietor or the mark otherwise becomes deceptive.
74 In The Ritz Hotel Ltd v Charles of the Ritz Ltd (1988) 15 NSWLR 158; (1988) 88 ALR 217 ("Ritz Hotel"), also decided under the 1955 Act, there was an issue as to whether the mark was "distinctive" of a trade mark owner (which involved consideration of whether the mark "was adapted to distinguish goods…with which that person is or may be connected in the course of trade") and whether the trade mark owner used the mark so as to preclude removal for non-use. The trade mark owner was a wholly owned subsidiary of Charles of the Ritz Group Ltd ("CRG"). At 199, McLelland J found that the trade mark owner neither participated in, nor controlled any aspect of the production of goods marketed in Australia under the relevant marks. His Honour considered whether a mark would be described as a "house mark" of the whole corporate group of which the trade mark owner was a member. Rejecting the proposed application of reasoning of the English Court of Appeal in Revlon Inc v Cripps & Lee Ltd (1980) 6 FSR 85, his Honour said:
To say, with Buckley LJ, that the mark had become in effect a "house mark of the whole group", indicating that the goods originate from the group but not from any particular part of the group, does not seem to me to solve the difficulty, because the group, considered as an entity (as it must be on this approach) is necessarily not the same as any particular company within the group, yet it is a particular company, namely the proprietor of the mark, between which and the relevant goods the mark must…indicate a connection in the course of trade …
The practical reality of the situation is as it seems to me, that the [trade mark owner] had no connection at all with the production or distribution of any goods distributed by Bentley in Australia …
I should add that the position would in my view be quite different if the registered proprietor of the subject marks had not been the [trade mark owner] but the company through which the relevant enterprise was in fact managed and controlled, namely CRG, which in a real and practical sense represents the relevant group.
75 Shanahan comments at [80.520] that "the deficiencies in the registrations in question were but a consequence of the manner in which the companies had chosen to arrange ownership of the marks, and it is hardly surprising therefore that [McLelland J] ultimately refused expungement on discretionary grounds".
76 In C A Henschke & Co v Rosemount Estates Pty Ltd [2000] FCA 1539; (2000) 52 IPR 42, the Full Court briefly considered the concept of "authorised user". The following passage (at [68]-[71] of the Full Court's reasons) sets out the primary judge's finding and the Full Court's relevant consideration:
[68] The following reasoning led his Honour to the conclusion that the use by the partnership was authorised use:
Where, as here, there is an immediate impediment of a testamentary character to the transfer of the trade mark to those persons in whom the beneficial ownership resides, and where, as here, the executors allow the mark to be used by the partnership (there is clear evidence of their continuing acquiescence in this) and in a manner which preserves its integrity, value and reputation, it seems to me it properly can be said that, consistent with the reason and end of the executors' ownership, both the user and the use of the trade mark are under their control. This conclusion can be justified in either of two ways. First, as executors, they are relevantly exercising quality control (s8(3)) by allowing the person most likely to ensure that control, Stephen Henschke, to conduct the business. I would note in this that the executors, as partners and/or shareholders, are in a position on the evidence before me to know if and when a matter of proper concern in relation to quality arises. Secondly, alternatively, as executors of Cyril Henschke's estate, they are in very distinctive family and business circumstances now exercising such control over this part of the estate, as would in the circumstances justify it being said, consistently with s8(5) that the partnership's use is under their control. I consider that that subsection can properly be invoked in this unusual case. Consistent with the purposes of maintaining quality control over the "goods" in question (s8(3)) and, possibly, the maintenance of "financial" control over the user's trading activities (s8(4)), a purposive construction of s8(1) and s8(2) in light of s8(5) would in my view accommodate the actions of the executors as executors since at least some time in 1998.
[69] It is, we think, neither to do an injustice to the argument on behalf of Rosemount nor to diminish its force to say that it amounted, in summary, to a submission that none of the matters referred to by his Honour established the existence of quality control of the kind contemplated by s8(3), financial control as contemplated by s8(4) or control in any more general sense contemplated by s8(5).
[70] There is, we consider, a good deal of force in that submission. The evidence does not appear to have suggested any basis on which the executors might be said to have exerted financial control over the partnership's trading activities. While, clearly enough, there was a degree of consultation over matters going to "quality", it was also clear that decisions in that respect, ultimately, were made by Mr Stephen Henschke. If a power, on the part of the executors, to revoke the authority had been relied upon, the evidence suggested that a powerful retort might well have been that there were obstacles, both practical and legal, standing in the way of such a course, and, in any event, it would perhaps be a bold argument that a mere revocable authority is sufficient to ensure that the licensor has "control" for the purposes of s8.
[71] Broadly, the concept of "authorised user" represents a significant departure from the regime of the earlier legislation. The new statutory scheme has not yet been the subject of substantial consideration by the Court; we were referred only to McHattan v Australian Specialised Vehicle Systems Pty Ltd (1996) 34 IPR 537, an interlocutory decision in which the question which arose in this case did not have to be considered. It remains to be decided to what extent those earlier authorities which were concerned with whether use, authorised by the registered owner, by someone other than a registered user, sufficiently indicated a connection with the registered owner remain significant in relation to questions of "control" under s8. It may be that "control" within s8(5) has a reach substantially as wide as the "connection" which would be held to be sufficient under the old regime, applying the observations of Aickin J in Pioneer Kabushiki Kaisha v Registrar of Trade Marks (1977) 137 CLR 670 at 680-683 and of Burchett J in Polo Textile Industries Pty Ltd v Domestic Textile Corp Pty Ltd (1993) 42 FCR 227 at 237-239. Because, in our view, his Honour gave a separate, independent, ground for his decision (to which we shall come) and because argument concerning the effect of the present statutory scheme was relatively brief, we prefer to say no more about this aspect of the case, than that, if the principles stated in Pioneer and Polo remain substantially applicable, there is a good deal to be said for his Honour's conclusion.
77 In Health World Ltd v Shin-Sun Australia Pty Ltd [2008] FCA 100; (2008) 75 IPR 478, Jacobson J found that Nature's Hive Pty Ltd was not an authorised user of the relevant mark where there was nothing to suggest that the trade mark owner (Shin-Sun Australia Pty Ltd) exercised either quality control or financial control, such as in the way that a parent company may exercise control over a wholly owned subsidiary. At [199], noting that the trade mark owner and user had different shareholders but common directors, his Honour said:
[I]t may be unlikely that Ms Shin would remove her parents as directors of Nature's Hive. But that is not an answer to the separate corporate identity of Shin-Sun and the power of Ms Shin as the majority shareholder to revoke any exercise of control flowing from common directorships.
78 The issue of authorised use, user and control was recently considered by a five-member Full Court bench in Lodestar Anstalt v Campari America LLC [2016] FCAFC 92; (2016) 244 FCR 557 ("Lodestar"). The factual context was different from this case: in particular, the trade mark owner and the user were not part of a single corporate group. At [22], Greenwood J concluded that, on the facts, the asserted control was "illusory and failed to reflect any proper control by the owner of the trade marks of the quality" of the relevant products.
79 Besanko J gave the majority judgment of the Court saying, at [95]-[97]:
[95] The meaning of "under the control of" in s 8 is informed by the principle stated by Aickin J in Pioneer, that is to say, that the trade mark must indicate a connection in the course of trade with the registered owner. The connection may be slight, such as selection or quality control or control of the user in the sense in which a parent company controls a subsidiary. It is the connection which may be slight. Aickin J was not saying the selection or quality control or financial control which may be slight. I think the principle stated by Aickin J informs the meaning of "under the control of" for the following reasons. First, the attribute of control by the registered owner was a key feature of the principle stated by Aickin J as his Honour's remarks make clear. The same may be said of the approach taken in England as the English cases to which I have referred make clear. Furthermore, two of the examples given by Aickin J in Pioneer of a sufficient connection, namely, quality control and financial control are embodied in s 8 (subs (3) and subs (4)). This suggests to me that Parliament did not intend to effect a major change in the law in enacting s 8 in the Act. This conclusion is supported by the report of the Working Party. The Working Party expressed the view that a sufficient connection in the course of trade between the registered owner and the goods or services of the licensee should remain the law. Finally, I am fortified in reaching this conclusion by the fact that both Gyles J at first instance and the Full Court in Yau took a similar approach.
[96] "Control is defined in the Macquarie Dictionary (6th ed, Macquarie, 2013) to mean the following:
Vt 1. To exercise restraint or direction over; dominate; command.
2. To hold in check; curb
n 4. The act or power of controlling; regulation; domination or comment.
[97] I think control in s 8 means actual control in relation to the use of the trade mark and it means actual control in relation to the trade mark from time to time. I think (as the primary judge did) that that is the primary meaning of the word, and the English cases, so far as they go, support that conclusion. Control involves questions of fact and degree as does the notion of a sufficient connection. There must be control as a matter of substance. For example, I do not think that it could be suggested that the mere fact that the registered owner granted a licence or revocable authority to use the trade mark would be sufficient without more established control within s 8. That would be inconsistent with the approach taken under the 1955 Act and the Trade Marks Act 1938 (UK). Had it been Parliament's intention it could be effected by a much simpler provision than s 8.
80 Besanko J further observed at [98] that actual control is "a question of fact and degree". It will depend on the facts of the case. His Honour described a scenario where a licence agreement contains a term that sets in detail a quality standard to be achieved and the details in the agreement are such that it is not necessary for the registered owner to give directions or instructions from time to time. His Honour also recognised that there will be situations where the licensee, aware of its obligations, may faithfully comply with those obligations without any entreaties or demands from the licensor. Besanko J said that the primary judge (Perram J) had such a situation in mind when he referred to cases where there was obedience to the trade mark owner "so instinctive and complete that instruction was not necessary".
81 Trident Foods referred to HS TM, LLC v Schein Orthopadie-Service KG [2016] ATMO 63 ("Schein"), a Trade Marks Office case that involved a subsidiary trade mark owner and a parent authorised user. Schein was apparently heard prior to, but decided post Lodestar. The submission put in Schein was that:
… [t]here is no evidence that any use of the trade marks by Henry Schein, Inc. or its unidentified related entities is under the control of the Opponent. Specifically, there is no evidence of quality control which would qualify under s 8(3), financial control under s 8(4) or any other control which might satisfy s 8(5). It is stated in paragraph 6 of the [declaration made by the Senior Vice President and Secretary of the Opponent] that each manager of the Opponent is an employee of the company Henry Schein, Inc. An employee is hardly in a position to exercise control over the employer.
82 At [23] of Schein that submission was rejected, with Hearing Officer Kirov finding that there is "nothing unusual" in a large company such as Henry Schein, Inc and/or its predecessors incorporating a wholly owned subsidiary in order to hold its worldwide trade mark (or, for that matter, patent or other IP right) portfolio. Hearing Officer Kirov went on to say that it is a:
"very common practice" because, inter alia, it efficiently streamlines processes for the prosecution and renewal of properties in the portfolio and it avoids the need to record name changes, mergers or assignments around the world should the parent company restructure or change names.
83 Trident Foods submitted that any other finding would have been unjust and would make a "mockery of the law" as the commercial reality is that many organisations structure their affairs such that the trade marks are held by a separate entity, including wholly owned subsidiaries.
84 Following the reasoning of the Full Court in Lodestar, I concluded that authorised use involves use under the "actual" control of the trade mark owner. There must be control "as a matter of substance", although the connection with the registered owner indicated by the trade mark may be slight.