Trade mark ownership: get it right the first time

Trade marks are valuable assets for businesses, as they protect the goodwill and reputation developed in the business’ brand. Registration of a trade mark provides its owner with exclusive rights to use that trade mark with respect to the goods and/or services it claims, and provides a statutory means for enforcement if the trade mark is infringed. However, the benefits of trade mark registrations are reliant on them being validly registered.

An issue for valid trade mark registration can arise from ownership of the trade mark. If a trade mark is registered by someone other than its owner, this can result in the trade mark’s registration being invalid. Incorrect ownership of a trade mark may therefore prove to be a fatal flaw. The ownership of a trade mark is always open to challenge during its lifetime.

To be entitled to apply to register a trade mark in Australia, the Trade Marks Act 1995 (Cth) (Act)[1] requires that the applicant must claim to be the true owner of that trade mark.

At common law, the owner of a trade mark is the first person to author and use that trade mark in Australia with respect to specific goods and/or services. If the trade mark has not yet been used, ownership is determined by a combination of authorship, filing of an application for the trade mark in Australia with respect to specific goods and/or services and the whether the applicant:

• intends to use the trade mark;
• has authorised, or intends to authorise, another person to use the trade mark; or
• intends to assign the trade mark to a corporate entity that is about to be constituted, and that corporate entity will use the trade mark.

If an applicant is not the owner, or does not intend to use, authorise another to use, or assign the trade mark to a body corporate for the body corporate to use[2], there is a risk that the registration of the trade mark may be challenged, for example by a party seeking to:

• use the defect in ownership of the trade mark as a defence to allegations of infringement of the trade mark; or
• register the trade mark themselves.

The courts have made it clear that defects in ownership cannot be remedied, making it critical that trade mark applications are filed by the correct applicant. This was demonstrated in the Full Federal Court’s decision in Pham Global Pty Ltd v Insight Clinical Imaging Pty Ltd (Pham)[3].

In this case, Mr Pham personally applied for a trade mark that was not yet in use in Australia. The trade mark was then used by Pham Global Pty Ltd (Pham Global), a company that Mr Pham was the sole director of, rather than Mr Pham personally. The registration of Mr Pham’s trade mark was opposed by Insight Clinical Imaging Pty Ltd (Insight) on the basis that Mr Pham was not the owner of the trade mark and never personally intended to use the trade mark, nor did he intend to licence Pham Global to use the trade mark.

Mr Pham sought to overcome this ground for opposition by assigning the trade mark to Pham Global. At the time, defects in trade mark registrations related to ownership were often sought to be resolved by assignment of the trade mark to the correct owner. However, the Full Federal Court held that the assignment was invalid because Mr Pham was never the true owner of the trade mark and therefore was not entitled to assign any rights in it. Insight’s opposition to the registration of Mr Pham’s mark was therefore successful on the basis that, at the time of filing, Mr Pham was not the owner of the trade mark at common law and did not have the required intention to use the trade mark.

The Court made clear in Pham that defects in ownership cannot be corrected by assignment. Fundamentally, defects in ownership cannot be remedied and accordingly, it is imperative that the applicant must be correct at the time the trade mark is filed.

The effects of incorrect ownership may not be felt for some time, if ever. However, the ownership of trade mark registrations are always open to challenge and therefore will always pose a risk to a company’s brand and asset protection in the event of opposition or infringement. Accordingly, there must be careful scrutiny as to the correct ownership of a trade mark before an application for registration is filed.

To be an authorised user of a trade mark, the user must use the trade mark under the control of the trade mark owner[1]. The trade mark owner must be able to demonstrate that it exercises actual quality and/or financial control over the authorised user[2]. However, the case law as to the requirements of authorised use is not entirely settled. For example, if a subsidiary authored and used a trade mark with minimal interference from its parent company, the true owner is likely the subsidiary. However, if a trade mark is authored by the parent company, but used by the subsidiary under the financial control of the parent company, then the subsidiary is likely an authorised user and the true owner is likely the parent company. Accordingly, determination of the true owner is fact-dependent.

It must also be remembered that there is not only one true owner for each trade mark. Anyone can own a trade mark, provided that the ownership was valid at the time of filing. A validly filed trade mark be assigned and dealt with at will. In corporate groups, it is common for the intended owner of the trade mark to be different from the true owner. For example, where IP is to be owned by a dedicated IP holding company, in which case:

• if the company is using an unregistered trade mark, the trade mark should be filed in the name of the trading entity that is using the trade mark. The trade mark can subsequently be assigned to the IP holding company, with appropriate arrangements in place for ongoing use; or
• if the trade mark is not yet in use, it can be filed in the name of the IP holding company. To establish that the IP holding company is the author of the trade mark, and therefore the true owner, the design and development of the trade mark should be instructed by and paid for by the IP holding company.

This process can be applied whenever the trade mark will ultimately owned by an entity that is not the true owner.

Filing a trade mark in the incorrect name can have severe implications. Often, issues in ownership do not arise unless the trade mark is infringed, opposed or removal proceedings are commenced. These are high-stakes circumstances where defects in ownership may result in invalidity and/or unenforceability of the trade mark.

It is important for trade mark owners to carefully consider their trade marks and whether they have been validly filed. Where there are defects in ownership, the trade mark should be refiled as soon as possible.

This article provides general commentary only. It is not legal advice. Before acting on the basis of any material contained in this article, seek professional advice.

Author: Jacinta Zheng

Position: Lawyer

Practice: Transactions

[1] Trade Marks Act 1995 (Cth), s 27.

[2] Trade Marks Act 1995 (Cth), ss 58 and 59.

[3] [2017] FCAFC 83.

[1] Trade Marks Act 1995 (Cth), s 8(1).

[2] Trade Marks Act 1995 (Cth), s 8(3).

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