White SW Computer Law
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 +====== Commencement of Trade Mark ownership ======
 +
 +===== Steve White, Principal - White SW Computer Law =====
 +
 +===== Introduction =====
 +
 +The Constitution empowered the Commonwealth to make laws in relation to trade marks(( //​Commonwealth of Australia Constitution Act 1900//, s51(xviii) )).  In exercise of this power, the //Trade Mark Act 1995// (Cth) (“TMA”) provides that a registered trade mark is personal property(( TMA, s21 )) and regulates the registration and enforcement of trade marks. ​ However, for centuries, trade marks have been ‘created’ merely by a trader using a sign to distinguish his or her goods or services from those of other traders.  ​
 +
 +Australia has a first to use trade mark system, which acknowledges that trade marks are created by use, regardless of whether they are registered or not.  However, the TMA will allow registration of a trade mark where the applicant intends to use, but has not as at the filing date actually used the trade mark.  This leads to some similarity between Australia’s first to use trade mark system and the first to register systems of countries such as China and Japan.
 +
 +===== First to Use System =====
 +
 +==== Common Law Trade Marks ====
 +
 +Essentially,​ a trade mark identifies that goods or services originate from a particular trader, with some commentators describing trade marks as “symbols of goodwill”(( Smith, //G Intellectual Property Valuation, Exploitation,​ and Infringement Damages// (2005), p42 )).
 +
 +As described by the US Supreme Court, //“…the aim //[of a trade mark owner]// is … to convey through //[a trade]// mark, in the minds of potential customers, the desirability of the commodity upon which it appears. ​ Once this is attained, the trademark owner has something of value.”//​(( //​[[case_links#​Mishawaka Rubber & Woollen Mfg. Co. v S.S. Kresge Co|Mishawaka Rubber & Woollen Mfg. Co. v S.S. Kresge Co]]// 316 US 203 at 205 (1942). )).  The Court goes on to describe “the commercial magnetism” of a trade mark.
 +
 +If a trader successfully creates and uses a trade mark in relation to his or her goods or services, he or she will have, subject to making out the requirements of the tort of passing off, a common law right to take action against other traders who subsequently use that trade mark, without permission, in relation to the same goods or services.  ​
 +
 +However, if the unauthorised use does not amount to a misrepresentation which is actionable as passing off or as conduct likely to mislead or deceive under Pt V of the //Trade Practice Act 1974// (Cth) (“TPA”) or the Fair Trading legislation of the states and territories,​ the other party is free to use the name(( LexisNexis, //Patents, Trade Marks & Related Rights//, Vol 1A (Svc 99), ¶48,066 )).  This might occur where the unauthorised use occurs in a different state or region. ​ The scope of protection of common law trade marks will generally be limited to the geographic area in which the trade mark owner sells their goods or services or any areas where the reputation of the mark has been established.
 +
 +==== Registered Trade Marks ====
 +
 +A person does not acquire any exclusive right to use the name, word or unregistered mark merely because he or she was the first to use it(( LexisNexis, //Patents, Trade Marks & Related Rights//, Vol 1A (Svc 99), ¶48, 066 )).  However, a person who claims to be the owner of a trade mark who uses or intends to use the trademark in relation to goods or services may apply for registration of the trade mark(( TMA, s6 )).  In general, a person who can show that he or she is the first person to have used a trade mark in Australia is entitled to claim to be the owner of it(( LexisNexis, //Patents, Trade Marks & Related Rights//, Vol 1A (Svc 101), ¶51,065 )).  This may occur even if the use made of the mark is minimal(( //​[[case_links#​Malibu Boats West Inc v Catanese|Malibu Boats West Inc v Catanese]]//​ (2000) 51 IPR 134 )).  It is not necessary to show that the use made of the mark is such as to establish reputation in the mark; the applicant will be entitled to claim to be the owner of a mark for the purposes of registering a trade mark even if he or she would not be able to bring an action for passing off or contravention of Pt V of the TPA(( //​[[case_links#​Kendall Co v Mulsyn Paint and Chemicals|Kendall Co v Mulsyn Paint and Chemicals]]//​ (1963) 109 CLR 300, per Kitto J at 304 )).
 +
 +Although it is not necessary to register a trade mark to use it, registration enhances the protection available at common law by providing an exclusive right to use, license or sell that particular trade mark.  Registration is the source of the owner’s title to exclusive use of the mark rather than it being mere evidence of the rights acquired through use and hence it is not necessary to prove the reputation required in other causes of action to be successful.
 +
 +However, registration does not give a trade mark owner absolute certainty as to their rights or monopoly over the trade mark.  For example:
 +  * Prior use of a business name may be held to be use of the name as a trade mark in which case the owner of the business name will take priority over a subsequent application to register the same or substantially identical mark as a trade mark(( LexisNexis, //Patents, Trade Marks & Related Rights//, Vol 1A (Svc 99), ¶48,092 )).
 +  * Registration of a trade mark is also no defence to an action in passing off(( See TMA, s230(1) ​ However, it does provide relief in certain circumstances with respect to damages claims. )).
 +  * The TMA also allows for concurrent users of the same mark to continue their use when one of the users has registered the trade mark:
 +     * Section 124(( TMA )) provides that a person does not infringe a registered trade mark by using an unregistered trade mark that is substantially identical with, or deceptively similar to, the registered trade mark in relation to similar or closely related goods or services if the person ​ has continuously used in the course of trade the unregistered trade mark in relation to those goods and services from a time before the earlier of the date of registration or use by the registered owner, their predecessor in title, or a registered user.
 +     * Subsections 44(3) and (4)(( TMA )) also provides for concurrent registration in the cases of “honest concurrent use”, “other circumstances” and “prior and continuous use”.  ​
 +
 +These types of exemptions reduce the strength of a first to file owner’s trade mark protection. ​ For example, the criteria to be taken into account when applying subsection 44(3) include: the degree of confusion likely between the trade marks in question; whether instances of confusion have in fact occurred; the honesty or otherwise of the concurrent use; the extent of use in duration, area and volume; and the relative inconvenience that would be caused to the respective parties if the applicant'​s trade mark should be registered or not registered(( //John Fitton & Company Limited'​s application for a trade mark// (1949) 66 RPC 110 )).  These factors act to strengthen the protection afforded to an actual user at the expense of the usual monopoly enjoyed by a registered trade mark owner.
 +
 +The United States is also a first to use system and rights to a trade mark can be acquired by either being the first to use the mark in commerce or being the first to register the mark(( 15 U.S.C. § 1127(a) )).  However, in general in the US, proof of use of the trade mark must be supplied before a registration can issue. ​ This is not a requirement in Australia.
 +
 +In Australia, it is possible, in some circumstances,​ to register a trade mark even when the applicant has no intention to use the trade mark in relation to the designated goods or services. ​ For example:
 +  * Section 185(( TMA )) provides that if, because of the extent to which a registered mark has been used in relation to all or any of the goods or services in respect of which it is registered, it is likely that its use in relation to other goods and services will be taken to indicate that there is a connection between those other goods or services and the registered owner of the trade mark, the owner may register a defensive trade mark in respect of those goods and services even if the registered owner does not use or intend to use the trade mark in relation to those services.
 +
 +In both the US and Australia, an applicant can file a trade mark application based on an intent to use (“ITU”). ​ An ITU application has the effect of being deemed to be constructive use of the trade mark, which enables the ITU applicant to prevent later actual users from usurping the ITU applicant’s superior priority rights.  ​
 +
 +A finite period is provided, during which the ITU applicant must make actual use of the trade mark.  Provided this requirement is met, a third party’s post-application use of the trade mark will not destroy the ITU’s priority based on the earlier filing date.  In Australia, in general, a cancellation procedure can be invoked where the trade mark has not been used for a continuous period of three years(( TMA, s92(4)(b) )), however, a non-use application cannot be filed until a period of five years from the filing date has elapsed(( TMA, s93(2) )).
 +
 +The incorporation of ITU applications into a first to use trade mark system, makes such a trade mark system more similar to a first to file trade mark system in that in some circumstances,​ the first to file will have priority over a first to use party. ​ For example, in the US an ITU applicant has been held to be entitled under §7(c)(( //Lanham Act 1946// (US) )) to rely upon the filing date of its application in an opposition filed by a party alleging common law rights based on use prior to any actual use which might be asserted by the applicant(( //​[[case_links#​Zirco Corp v American Tel & Tel Co|Zirco Corp v American Tel & Tel Co]]//, 21 USPQ 2d 1542 (TTAB 1991) )).
 +
 +In summary, under a first to use trade mark system, the owner of a mark is the person who was the first to use that mark in commerce. ​ In Australia, for common law trade marks, trade mark protection only extends to the areas where marked products are sold or advertised, where their reputation is established. ​ Registered marks are protected nationally, regardless of where they are used.
 +
 +===== First to Register System =====
 +
 +In comparison, a first to register system gives priority to the person who is the first to file an application for registration. ​ In general, a first to file system allows the first party that files an application for registration to obtain, for example, trade mark rights, even if another trader has used a mark from an earlier date.
 +
 +Although Australia’s trade mark system is a first to use system, in relation to business names, the application filed first is entitled to priority(( //Business Names Act 1962// (Vic), s10A )).  The registration of company names is also a first to file system. ​ There is no procedure by which the owner of a business name can oppose the registration of a name likely to be confused with or mistaken for that name(( LexisNexis, //Patents, Trade Marks & Related Rights//, Vol 1A (Svc 99), ¶48,​043. ​ Query however, the possibility of using s10A of the //Business Names Act Vic 1962// (Vic) in conjunction with administrative law relief. )).   ​However,​ registration of a company or business name does not give any positive rights of proprietorship(( LexisNexis, //Patents, Trade Marks & Related Rights//, Vol 1A (Svc 99), ¶48,043 )) and provides no defence to an action in passing off, under Pt V of the TPA or for trade mark infringement. ​ The registration of domain names is also a first to file system. ​ The .com.au domain name system purports to be one in which no proprietary rights subsist(( See for instance auDA Policy 2005-05 //​Clarification of Domain Name Licence - Prohibition on Sale of Domain Name// (available at [[http://​www.auda.org.au/​policies/​auda-2005-05/​]]),​ clause 2.1.  Presumably this is based on the registrant agreeing that such rights do not exist. ​ It is, however, trite law that proprietary rights do exist in some licences. )).
 +
 +Many other countries have adopted a first to file system for trade marks, with one of the aims of such a system being to give greater certainty to a registered trade mark owner that their trade mark rights are protected and in turn encourage trade. ​ However, a first to file system has the potential to allow a rogue applicant to defeat a legitimate trade mark owner'​s rights by filing a trade mark application,​ thus effectively blocking use of the trade mark in that country until the mark becomes vulnerable to removal for non-use or the registration otherwise terminates, for example through non-payment of official fees.
 +
 +Some first to file systems have protection against such rogue applicants incorporated. ​ For example, a UK application must contain a declaration that the mark is being used or that there is a bona fide intention to use the mark(( //Trade Marks Act 1994// (UK), s32(3) )).  Therefore, if the applicant has made a false declaration,​ their application may be attacked using an argument of bad faith.
 +
 +In 1994, the United Kingdom changed from a first to use to a first to file system in order to give effect to the European Trade Mark Directive of 21 December, 1988.  This change was required to harmonise the UK legislation with other EU Member States.  ​
 +
 +In general, the first to file a trade mark application will now have the prior right. ​ However, unregistered trade marks used in the course of trade prior to the date of application will be recognised where the owner of the earlier right can establish that the use has been extensive enough for a passing off action based on the unregistered trade mark to succeed(( Trade Marks Act 1994 (UK), s11(3) )). 
 +
 +Many Asian countries have a first to file trade mark system, including, amongst others, the significant trading nations for Australia: China and Japan.
 +
 +===== Similarities and Differences =====
 +
 +The first to use and first to file systems are not uniform, each having a number of exemptions from the general rules (such as the Australian provisions relating to honest concurrent use), and there are some similarities between the two systems despite their obvious differences in priority of ownership. ​ These similarities include:
 +  * Recognition of famous marks – under both trade mark systems, the rights of owners of famous marks(( TMA, s120(3) )) are protected by provisions that prevent the registration of such marks by third parties and later filed applications by the owners of such marks may have priority, as required under the Paris Convention;
 +  * Under both systems, a trade mark application may be filed based merely on an intent to use;
 +  * Where trade mark applications are filed based on an intent to use, there is generally a finite period during which use of the trade mark must commence to avoid forfeiting the registration if an interested third party seeks to cancel the registration for non use of the mark;
 +  * In some circumstances,​ an unregistered mark may prevail over a registered trade mark if it was in use before the application for the registered mark was filed, in the area in which the unregistered trade mark’s recognition and reputation are high;
 +  * The tests for infringement of trade marks under both systems are, in general, similar. ​ These are likely to include issues such as: the strength of the mark; the proximity of the goods; the similarity of the marks; evidence of actual confusion; the similarity of marketing channels used; the degree of caution exercised by the typical purchaser; the alleged infringer’s intent(( //​[[case_links#​Polaroid Corp. v. Polarad Elect. Corp.|Polaroid Corp. v. Polarad Elect. Corp.]]//, 287 F.2d 492 (2d Cir.) (1961) ));
 +  * Under both systems, trade mark owners can, in addition to an action for trade mark infringement,​ take action under unfair competition laws and consumer protection laws;
 +  * Where an application can be made under a first to use system, based on mere intent to use, the situation is very similar to that under a first to file system. ​ For example, in the US, an actual user who begins after another’s Intent to Use (“ITU”) filing date cannot obtain an injunction against the ITU applicant’s use because this would prevent the applicant from proceeding to perfect its registration rights(( McCarthy, J //McCarthy on Trademarks and Unfair Competition//​ (4th ed.), Vol 3 (3/2001), p19-71, ​ )).  As with the general principle behind first to file systems, this supports the policy of encouraging and rewarding the early filing of applications,​ so as to put claims to marks on the public record as soon as possible(( McCarthy, J //McCarthy on Trademarks and Unfair Competition//​ (4th ed.), Vol 3 (3/2001), p19-72 )).
 +  * Trade mark protection under both first to use and first to file systems generally involve a combination of trade mark law, criminal law, unfair competition law and consumer protection law.
 +  * There is likely to be a large degree of similarity where a first to use and a first to file trade mark system are both based on similar treaty and / or agreement obligations,​ such as under the Madrid Protocol, the Paris Convention, the Madrid Agreement and or TRIPs.
 +
 +Other than the difference in priority of ownership between the first to use and the first to file, the other key differences between a first to use and a first to file trade mark systems are:
 +  * A first to file system encourages earlier registration by providing greater certainty of protection of trade mark rights to the first person to file an application for registration;​
 +  * The main encouragement in a first to use trade mark system to register a trade mark comes from the fact that it is, in general, cheaper and easier to enforce registered trade mark rights as compared to common law trade marks and the scope of remedies available to a trade mark owner are, in general, wider for registered trade marks;
 +
 +===== Conclusion =====
 +
 +Whilst each system has pros and cons it is important to note both systems have and will continue to exist for some time.  ​
 +
 +Further sometimes the line between the two systems becomes very blurred. ​ For instance, a first to file system can be interpreted as a first to use system, if the act of filing an application is held to be constructive use.
 +
 +In any event trade marks owners and users should be well advised as the application of the each system in each jurisdiction in which they conduct business or intend to conduct business.
 +
 +**STEVE WHITE**\\
 +**WHITE SW COMPUTER LAW**\\
 +**OCTOBER 2006**\\
 +
 +**www.computerlaw.com.au**
 +
 +**© White SW Computer Law 2006**
 +
 +This article is a guide only and should not be used as a substitute for proper legal advice, readers should make their own enquiries and seek appropriate legal advice. ​
  

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