The Perils of Non-Use: Is your trade mark at risk?

By Devin Elliott, Lawyer

Suppose that you are the sole director and owner of two companies, ABC Trading Company Pty Ltd (Trading Company) and ABC IP Company Pty Ltd (IP Company). Your business is conducted solely through Trading Company. Trading Company buys raw materials, manufactures widgets, and sells them to consumers under the brand name ‘iWidget’. IP Company, on the other hand, does not actively trade, but it is the registered owner of the ‘iWidget’ word mark and logo (in the relevant trade mark classes for Trading Company’s use of the trade marks in relation to widgets).

Both the word mark and logo are used by Trading Company in relation to the widgets it sells, but neither are used by IP Company in relation to any goods or services. IP Company has also not authorised Trading Company to use the trade marks. In the circumstances described above, IP Company is potentially at risk of both trade marks being removed from the register if a non-use application is filed against them.

1 – On what grounds can a non-use application be filed?

A non-use application can be brought on one or both of the two grounds listed in section 92(4) of the Trade Marks Act 1995 (Cth) (the Act). A non-use application may be brought if:

• On the day the trade mark application was made, the applicant had no intention in good faith of using the trade mark (within the meaning of the Act) in relation to the goods/services to which the non-use application relates and the registered owner of the trade mark has not used the trade mark (or not used it in good faith) in Australia in relation to those goods/services at any time before the day which is one month prior to the day on which the non-use application is filed.

• The trade mark has been registered for a continuous period of 3 years ending on the day which is one month prior to the day on which the non-use application is filed and, during that 3-year period, the registered owner has not used the trade mark (or not used it in good faith) in Australia in relation to the goods/services to which the application relates.

Note that the time periods in which the owner of the trade mark can defend against a non-use application by starting to use the trade mark end one month before the non-use application is filed. This allows prospective non-use applicants one month to attempt to negotiate with the non-using party before lodging a non-use application.

2 – What does it mean to use a trade mark within the meaning of the Act?

Section 7 of the Act stipulates that a trade mark is used by its registered owner if the owner uses the trade mark upon goods, or in physical or other relation to goods or services (e.g. using a logo when marketing goods/services, etc.) or if another entity engages in authorised use of the trade mark. Per section 8 of the Act, authorised use occurs where the registered owner authorises another entity to use its trade mark in relation to goods/services, but only to the extent that the authorised user uses the trade mark under the control of the owner of the trade mark.

In our example above, IP Company is not using its trade marks in relation to goods/services, nor has it authorised Trading Company to use its trade marks, and even if it had it is dubious whether IP Company is exercising sufficient control over how Trading Company is using those trade marks.

3 – How can the risk of a non-use application being filed be mitigated?

The simplest solution is for the registered owner to begin using the trade marks as soon as possible. However, in our example above, IP Company does not want to actively trade, and so will not be using the trade marks in relation to goods/services.

An alternative solution could be for IP Company to assign the trade marks to Trading Company. This would thwart a non-use application as Trading Company is actively using the trade marks in relation to goods/services. However, this may have capital gains tax (CGT) consequences, as the assignment of a trade mark is a disposal of a CGT asset.

Another solution, and likely the best solution in our example, is for IP Company to authorise Trading Company to use the trade marks. This can be achieved by way of an agreement which licenses the trade marks to Trading Company for some consideration, and which ensures IP Company will exercise a sufficient level of control over Trading Company’s use of the trade marks going forward.

If you need any assistance with the preparation of a license agreement, the assignment of trade marks, or any other trade mark related advice, please contact the writer at devin.elliott@mst.com.au or (03) 8540 0293.