Reputation in trade mark infringement: why some courts think it matters and why it should not

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This article was first published in 2010 in Vol. 38 of the Federal Law Review, at p. 231.

Mark Davison*

Australian case law on infringement of registered trade marks has placed an increasing emphasis on the reputation of the owner of the registered trade mark in determining whether infringement has occurred. Consideration of the trade mark owner's reputation has been included in determining whether the sign used by the defendant is deceptively similar to the registered trade mark and, more recently, in determining whether the defendant has used its allegedly infringing sign 'as a trade mark'. Neither development is consistent with either the law relating to registered trade marks or the underlying policy reasons for the system of registration. This article discusses the case law which has introduced the tendency of the courts to consider the reputation associated with an owner of a registered trade mark in determining infringement proceedings, the reasons why such an approach is not consistent with the legislation nor with the rationale underlying our registered trade mark system.

In particular, one of the objectives of the registered trade mark system is to provide a bright line that delineates the property rights of the registered owner. The bright line is publicly available information as to who has the rights in a trade mark and what those rights are.1These rights are defined by reference to the act of registration, not by reference to the rights to protection of the reputation of the registered owner conferred by a passing off action which are independent of the rights flowing from registration. Consequently, if the rights conferred by registration are diminished or enhanced by reference to the trade mark owner's reputation, the exercise of delineating the rights of the owner in advance would be rendered nugatory to the extent that they are so diminished or enhanced. For that reason alone considerable caution should be exercised before introducing evidence of a trade mark owner's reputation in the process of determining whether its trade mark has been infringed.


While the trade mark registration system grew out of the original tort of passing off, there are fundamental differences between the way in which the registered system confers protection on trade marks and the way in which the tort of passing off

* Professor, Faculty of Law, Monash University and Special Counsel, Knightsbridge Lawyers.

indirectly confers protection on trade marks.2Under the tort of passing off, protection is not conferred on the trade mark per se. Instead, the protection is conferred on the reputation associated with the trade mark. This fundamental proposition was the cause of some debate for many years but is now an entrenched and irrefutable proposition. The leading English authority on the point is the House of Lords decision in Spalding and Brothers v AW Gammage Ltd ('Spalding v Gammage'), decided soon after the turn of the 20 th century.

The facts of the seminal case exemplify the point. The plaintiff, Spalding, produced various types of balls. Each was described as an 'Orb' with various epithets such as 'Improved Orb' or 'Improved 1910 Orb' or 'Improved Sewn Orb' being ascribed to different types of the Orb ball. As a consequence, Spalding acquired a significant reputation with the public that was associated with 'Orb' balls. The balls described as 'Improved Orb' or 'Improved 1910 Orb' were moulded and regarded as inferior balls to the 'Improved Sewn Orb' which, as the name suggests, was sewn together. Spalding discontinued the manufacturing and sale of the moulded balls in order to make and sell the 'Improved Sewn Orb'. The defendant obtained a supply of the moulded balls but advertised them for public sale with the description of 'Improved Sewn Orb'.

Consumers were misled by the defendant's conduct. Spalding had acquired independent reputations for both of its Orb balls and consumers were generally aware of the two types of balls and the respective qualities and prices of each. The defendant's conduct passed off the moulded balls as the sewn, higher quality balls. The House of Lords held that the nature of the property owned by Spalding was not in the name itself but in the goodwill of the trader.

There appears to be considerable diversity of opinion as to the nature of the right, the invasion of which is the subject of what are known as passing off actions. The more general opinion appears to be that the right is a right of property which naturally demands an answer to the question — property in what? Some authorities say property in the mark, name, or get up properly used by the defendant. Others say, property and business or goodwill likely to be injured by the misrepresentation. If the right invaded is a right of property at all, there are, I think, strong reasons for preferring the latter view. In the first place, cases of misrepresentation by the use of a mark, name, or get up do not exhaust all possible cases of misrepresentation. If A says falsely, 'These goods I am selling are B's goods,' there is no mark, name or get up infringed unless it be B's name, and if he falsely says, 'These are B's goods of a particular quality' where the goods are in fact B's goods, there is no name that is infringed at all. Even in the case of what are sometimes referred to as common law trade marks the property, if any, of the so-called owner is in its nature transitory, and only exists so long as the mark is distinctive of his goods in the eyes of the public or a class of the public. Indeed, the necessity of proving this distinctiveness in each case as a step in the proof of the false representation relied on was one of the evils sought to be remedied by the Trade Marks Act 1875 (UK), which conferred a real right of property on the owner of a registered mark.3

Consequently, the issue is whether the defendant has engaged in misleading conduct that involved wrongly associating it or its product with the plaintiff's reputation. In order to determine that question, the totality of the defendant's conduct must be weighed against the reputation associated with the plaintiff's product.

The full details of the nature and extent of the plaintiff's reputation must be determined in each case, as stated by the House of Lords in Spalding v Gamage. As also pointed out by the House of Lords, the evidentiary implications of such a requirement in every case are significant for both parties, particularly the plaintiff which must establish the nature and extent of its reputation. Indeed, the more important the reputation of the plaintiff, the more likely that it will incur greater legal costs in proving that reputation. A large and extensive reputation will usually be the product of many years of business and marketing of that business. The plaintiff will have to provide evidence of how long it has been in business, the geographical extent of it business, its distribution network, the volume of its sales over time, details of its marketing and promotion activities, including details of the forms of media in which it has advertised and the nature of the advertising.

The latter may well be the very basis of the passing off action as the defendant's alleged passing off may be based on the adoption of a similar marketing approach. For example, in the iconic Australian passing off case of Cadbury Schweppes v The Pub Squash Co Ltd ('Pub Squash Case'),4one of the major features of the case was the plaintiff's claim that it had established a reputation for its soft drink Solo that was associated in the minds of consumers with its advertising theme which, in turn, associated Solo with the kind of lemon squash that country pubs used to make. In making out its case, Cadbury Schweppes provided detailed information about its advertising and its sales that was both commercially sensitive information and time consuming to gather and collate. It gave a breakdown of how much it had spent on television and radio advertising in each state as well as details of its spending on billboards and cinema advertising. Within each of these categories of advertising, it needed to establish what amount of the advertising related to the pub theme and what amount related to other themes such as that of the Solo man, a macho individual who engaged in rugged outdoor activities before slamming down a can of Solo. Precise details of its sales in 1974 and 1975 were provided with the all of its competitors then knowing that it sold two million seven hundred and eleven thousand dozen cans of Solo in 1974 and the breakdown of those sales by state and territory.

After establishing the extent and nature of the plaintiff's reputation, the full details of the defendant's conduct must also be examined. All manner of facts might influence the final decision. For example, in the Pub Squash Case, one of the issues was whether the defendant intended to pass off its Pub Squash lemon squash as being associated with Solo. Intention to deceive consumers was relevant to the issue of whether deception had in fact occurred because if such an intention exist, it is a relatively small step to conclude that the defendant had achieved its objective. Consequently, considerable energy was devoted to the discovery of documents relating to the timing of the defendant's decisions about issues such as its packaging and its advertising program, analysis of those documents and cross-examination of the defendant's officers about the processes and discussions that took place in the course of putting its Pub Squash lemon squash on the Australian market. Again, considerable time and money were invested in this inquiry and it is worth noting that Cadbury Schweppes won this battle and lost the war. Powell J concluded that while the defendant had intended to pass off its products as being associated with Solo, it had not actually done so and the small step from intention to actual outcome had not been taken by the defendant.

Other aspects of the defendant's conduct had to be examined in the light of previous practice. For example, one of the claims made by the plaintiff was that the defendant's use of a yellow can for its lemon squash was part of its deceptive conduct as the plaintiff's Solo can was yellow. In turn, this required consideration of the practice in the Australian soft drink industry about the use of yellow cans for lemon flavoured soft drinks. All of these issues of minutiae meant that the trial itself went for 26 days with 64 witnesses and 65 exhibits.

In some circumstances, such as the Pub Squash Case itself, it is impossible to avoid the forensic technicalities of passing off actions and their statutory equivalents. However, if such actions can be avoided by the use of bright legal lines that clearly delineate the rights of the respective parties,5the transaction costs of expensive litigation and the costs of the uncertainties surrounding such litigation can be avoided or at least dramatically reduced. It is precisely for this reason that the registered trade mark system was created.

Yet the advantage of such a system is seriously eroded if considerations such as the reputation of a registered trade mark are introduced into the determination of questions such as whether the registered trade mark has been infringed.


The relationship between common law trade marks that are protected indirectly via passing off which protects the owner's reputation and registered trade marks is often difficult to determine with precision. Those difficulties are exacerbated by the fact that many trade marks might be protected by both actions for passing off and actions for infringement of the registration of that trade mark.

One distinction between the two causes of action is clear. In contrast to the position in passing off where property exists only in the reputation associated with a business, a registered trade mark is property in itself. In addition, the legislation clearly defines the bundle of rights that constitute that property and what conduct will contravene the registered owner's property rights.

Infringement of registered trade marks

The basic starting point for consideration of infringement of registered trade marks is s 120 of the Trade Marks Act 1995 (Cth). Section 120(1) states that:

A person infringes a registered trade mark if the person uses as a trade mark a sign that is

substantially identical with, or deceptively similar to, the trade mark in relation to goods

or services in respect of which the trade mark is registered.

There are two key aspects of this subsection. The first is that the defendant must be using a sign as a trade mark. The second is that the sign used by the defendant and the plaintiff's registered trade mark must be substantially identical or deceptively similar. Neither need nor should involve a consideration of the reputation of the owner of the registered trade mark, yet Federal Court decisions have managed to introduce the concept into consideration of infringement proceedings on a regular basis.

Use as a trade mark

The concept of use as a trade mark is fundamental to infringement of registered trade marks. Without use of the trade mark as a trade mark, none of the infringement sections of the legislation apply.

The concept takes its meaning from the definition of a trade mark in s 17 of the Act which states that:

A trade mark is a sign used … to distinguish goods or services … provided in the course

of trade by a person from goods or services … provided by any other person.

In the context of trade mark infringement, this means that the question is whether the defendant is using its trade mark (the allegedly infringing trade mark, not the registered trade mark) as a means of differentiating its goods from other goods.

The circumstances in which a defendant uses its allegedly infringing sign would be relevant. For example, if the defendant uses a word in a manner which gives it greater prominence than other words on the packaging of the product, this may suggest that the word is being used as a trade mark whereas the use of the same word in a less prominent manner may suggest the opposite. An example of this is the decision in Re Johnson and Johnson Australia Pty Limited v Sterling Pharmaceuticals Pty Limited.6The applicant in that case had registered the word CAPLETS in respect of its paracetamol product. The shape of the drug in question was that of a capsule but it was in tablet form, without the usual slick coating of a capsule, and so the word CAPLETS had both a distinctive aspect to it and a descriptive aspect. On its packaging, the appellant used the word prominently together with the well known ® symbol to indicate that CAPLETS was the name of its product rather than a word describing the shape of the pharmaceutical in the box. The respondent used the word 'CAPLETS' on its packaging but in a very different manner. The word was 'one-third the height and much thinner than the word TYLENOL' and was used in conjunction with the name of the generic drug, paracetamol, in such a way as to emphasis its descriptive nature. 'At the bottom of the front panel of the packet in small blue print appear the words: "Each caplet contains PARACETAMOL 500 mg." The word "paracetamol" predominates.' The respondent was found not to be using CAPLETS as a trade mark.

The concept of using a sign as a trade mark has no relationship whatsoever to the reputation of the owner of the trade mark that has allegedly been infringed. The only consideration is what the defendant has done with its sign.

As the Full Federal Court decision in Coca-Cola Co v All-Fect Distributors Ltd ('Coca-Cola Case') demonstrates, the appropriate inquiry is to identify what is the sign that the defendant is using so as to distinguish its goods or services from those of other traders. This inquiry is divorced from any consideration of what is the plaintiff's trade mark or a comparison of the defendant's mark and the plaintiff's trade mark. Nor, in this inquiry, is there any consideration of the plaintiff's reputation or any conduct of the defendant that may be perceived as riding on that reputation. The focus is exclusively on identifying what words, graphics, shapes, sounds, scents or combination of them have been used by the defendant and whether they have been used to distinguish its goods or services from other goods or services.

In that case, the defendant sold a black, cola flavoured lolly that was folded and then wrapped in paper. When unwrapped and unfolded, the lolly had a shape that physically resembled the shape of the well known Coca-Cola bottle. It also had the word 'Cola' in the middle of the lolly. Coca-Cola had registered since 1934 the two dimensional drawing of its bottle and it alleged that the cola flavoured lolly infringed its trade mark. The matter was brought under s 120(2) of the legislation but the issue of 'use as a trade mark' is identical to the issue under s 120(1).

At first instance, Merkel J found for the defendant on the basis that it had not used the shape of its confectionery as a trade mark. But in doing so, he conflated the issues of use 'as a trade mark', the similarity of the defendant's sign and the plaintiff's registered trade mark and the issue of whether consumers were or would be confused by the defendant's conduct.

The 'use' of a mark is actual use as a trade mark indicating origin, in the sense of a 'badge of origin': see Johnson v Johnson at 335 per Lockhart J and the cases there referred to. The 'badge of origin' concept is reflected in s 17 which defines 'trade mark' as a sign used or intended to be used to distinguish goods or services dealt with 'in the course of trade' by a person from goods or services dealt with or provided by any other person. A trade mark is used for the purpose of infringement if the mark is presented to actual or potential consumers in a manner which has the likely effect of indicating in their minds a connection between the goods in question and the goods protected by the trade mark.

On appeal, the Full Court pointed out that the issue of use as a trade mark was quite separate from the issue of whether consumers would perceive any connection between the defendant's goods and the plaintiff's goods. In expressing its views, it drew upon the seminal High Court decision on the point in The Shell Co of Australia v Esso Standard Oil (Aust) Ltd ('Shell Oil Case').7Shell had screened television advertisements that used an oil drop depicted as a cartoon character that changed its shape during the course of the advertisement. At one or two points in the advertisement, the oil drop took on a shape similar to Esso's registered trade mark. The similarity between that shape and Esso's registered trade mark was not relevant to the question of trade mark use, that is, whether Shell's cartoon character was being used to indicate a connection between Shell's oil products and Shell.

With that decision firmly in mind, the Full Court had this to say about use as a trade mark: The authorities provide no support for the view that in determining whether a sign is used as a trade mark one asks whether the sign indicates a connection between the

alleged infringer's goods and those of the registered owner. … the question is whether

the sign used indicates origin of goods in the user of the sign; whether there is a connection in the course of trade between the goods and the user of the sign. Thus in Shell at 424-425 Kitto J, with whom Dixon CJ, Taylor and Owen JJ agreed, said:

Was the appellant's use, that is to say its television presentation, of those particular pictures of the oil drop figure which were substantially identical with or deceptively similar to the respondent's trade marks a use of them 'as a trade mark'?

With the aid of the definition of 'trade mark' in s 6 of the Act [the Trade Marks Act 1955 (Cth)], the adverbial expression may be expanded so that the question becomes whether, in the setting in which the particular pictures referred to were presented, they would have appeared to the television viewer as possessing the character of devices, or brands, which the appellant was using or proposing to use in relation to petrol for the purpose of indicating, or so as to indicate, a connection in the course of trade between the petrol and the appellant. Did they appear to be thrown on to the screen as being marks for distinguishing Shell petrol from other petrol in the course of trade?

And later his Honour said: … no viewer would ever pick out any of the individual scenes in which the man resembles the respondent's trade marks, whether those scenes be few or many, and say to himself: 'There I see something that the Shell people are showing me as being a mark by which I may know that any petrol in relation to which I see it used is theirs.'. (Emphasis in the original.) There are two fundamental propositions that flow from the Full Court's re­statement of the position in the Shell Oil Case and the application of that position in the Coca-Cola Case. The first is that 'use as a trade mark' has absolutely nothing to do with whether consumers have been confused or deceived or are likely to be confused or deceived by the defendant's conduct. For that reason alone, the reputation of the owner of the allegedly infringed registered trade mark is necessarily irrelevant to the inquiry.

The second and related proposition is that even if a consideration of substantial identity or deceptive similarity involves the reputation of the owner of the registered trade mark (and it is argued that they do not), trade mark use is an entirely separate concept from substantial identity or deceptive similarity.

The point is being made here because some recent case law has suggested that determining whether a defendant has used its sign use as a trade mark may be related to the reputation of the owner of the registered trade mark. In Alcon Inc v Bausch & Lomb (Australia) Pty Ltd ('Alcon Case') 8the plaintiff objected to the defendant's use of the plaintiff's registered trade mark 'BSS' on its small bottles of ophthalmic irrigation products. The trade mark infringement issue focussed almost exclusively on whether the defendant had used the plaintiff's trade mark 'as a trade mark' because, quite obviously, the sign used by the defendant and the plaintiff's trade mark were identical. The defendant claimed that it was using 'BSS' to describe its products or an aspect of the products. In particular, it claimed that 'BSS' stood for Balanced Salt Solution and, consequently, that it was only seeking to use a shorthand expression on its labelling to indicate that its products were a balanced salt solution.

The case revolved primarily around the issues of whether Bausch & Lomb had used the trade mark as a trade mark and related issues as to whether the trade mark should remain registered, primarily on the grounds that it was not distinctive.

The actual label used by the defendant on its 19 ml bottles read as follows:


BSS 19 ml




BAUSCH & LOMB 4010000

Whether the defendant was using the letters 'BSS' as a trade mark required a

detailed analysis of the context of that use. Set out below are some of the facts relied upon by Foster J in forming the conclusion that the defendant was using 'BSS' as a trade mark:

The following factors are relevant to the present question:

(a) The letters 'BSS' appear in block white letters in the top section of the label with the royal blue background. The trade mark 'AQSIA™' appears in the same part of that label. The letters used to form 'AQSIA™' are larger than those used to form 'BSS'. This part of the label is intended to be separate from and more prominent than the rest of the label. The impression created by the positioning of 'AQSIA' and 'BSS' is that this part of the label is dealing with branding of the product;

(b) The word 'sterile' appears immediately underneath the blue backgrounded top part of the label. It is a description, at least to some extent, of the contents of the bottle.

(c) The name 'BAUSCH & LOMB' appears on the bottom half of the label in block blue letters against a white background;

(d) There is no other indication on the bottle or on the plastic sachet as to the contents of the bottle;

(e) The sachets are supplied in the cardboard box described at [5] above. That box is a dispenser. Importantly, in a number of places, the words 'balanced salt solution' appear on the box but the letters 'BSS' do not;

(f) The trade mark 'AQSIA™' and the corporate name 'BAUSCH & LOMB' also appear prominently on the box;

(g) The Product Information Leaflet in the box does not mention 'BSS' but does refer to 'balanced salt solution'.

(h) The letters 'BSS' have brand significance in the relevant trade in Australia. They are known to be the applicant's trade mark. The applicant has a reputation in the product identified by reference to the mark (Alcon BSS). (Emphasis added.)
Points (a)-(g) above have a clear and direct connection to the issue of trade mark use. In addition, they involve a relatively limited and simple inquiry. The evidentiary costs of establishing this information are small. They also focus exclusively on the defendant's conduct and whether it constitutes conduct designed to distinguish its ophthalmic irrigation products from other such products by use of the sign 'BSS'.

The last point is vastly more problematical. The introduction of the relevance of the reputation of the plaintiff for 'BSS' immediately introduces the evidentiary complexities that arise in passing off actions, the limitation of which is one of the purposes of the registered system. Further, the comparison of the defendant's conduct in using 'BSS' on its labels together with a reference to the reputation of 'BSS' implies that some analysis of confusion of consumers, actual or likely, is taking place. At this point in the consideration of infringement of the registered trade, such an analysis is inappropriate as explained by the Full Court in the Coca-Cola Case.

There are some arguments for considering the trade mark owner's reputation in this case which can be seductive. The defendant's basic argument was that 'BSS' was a generic term within the relevant industry that was shorthand for balanced salt solution. It gave considerable evidence based on various articles in trade journals in an attempt to establish the point but that evidence was ultimately rejected. Instead, the plaintiff both questioned the defendant's evidence of the descriptive use of 'BSS' in Australia and provided evidence of its use of 'BSS' as a trade mark in Australia. Foster J accepted the plaintiff's evidence that BSS was not a descriptive term within the industry in Australia but one which was distinctive of its products.

The difficulty for a judge faced with determining whether use as a trade mark has occurred is that he or she needs to assess the meaning of the sign that has been used by the defendant as part of the process of deciding whether the use was use as a trade mark or some other use such as a descriptive use. In the case of word signs, some decision has to be made as to the meaning of the word. Consequently, the approach of Foster J was to consider the evidence of the trade usage of BSS and decide whether BSS meant balanced salt solution or whether it was considered to be distinctive of the plaintiff's goods. As the defendant was arguing that it was using the term descriptively, there is no doubt that the defendant's evidence of the descriptive meaning of the sign had to be considered. The case is somewhat unusual in that the defendant had to justify its claim that the sign was 'descriptive' in nature. Usually, when the sign is descriptive or has a descriptive meaning that may be attributable to it in the context in which it is used, its descriptiveness or, at least, its potential descriptiveness will be obvious. In rare circumstances, such as these, it may be necessary for the defendant to adduce evidence on the point.

Yet the consideration of that evidence of the descriptive nature of the sign at that point in the infringement inquiry did not mean that it was appropriate to consider the evidence of the reputation of the trade mark owner. Even if a sign is descriptive according to its primary meaning, it may still be used as a trade mark. If the situation were otherwise, a sign that is devoid of inherent distinctiveness within the meaning of s 41(3) of the Trade Marks Act 1995 (Cth) could never acquire distinctiveness via use and registration as a trade mark. In fact that is not the case as s 41(5) and (6) permit registration of signs that either have a small degree of inherent distinctiveness or none at all. It is only by the use of such a descriptive sign as a trade mark (as opposed to other non-trade mark use) that it can become distinctive for the purposes of s 41 and registration.

Similarly, an inherently distinctive trade mark may be used in a manner which is not use as a trade mark as well as being used as a trade mark. Again, if it were otherwise, the test of infringement under the previous legislation would not have needed the implied requirement of use as a trade mark that was imposed by the High Court in the Shell Oil Case.

Hence, any sign is potentially distinctive and may potentially be used as a trade mark. It is true that descriptive signs are more likely to be used descriptively and inherently distinctive signs are more likely to be used as trade marks than in a descriptive manner.9For that reason, evidence as to whether the letters BSS were capable of being descriptive in nature, that is whether the letters BSS had any meaning, was relevant to the question of use of a trade mark. However, evidence of the reputation of the plaintiff's trade mark was not relevant because the issue was whether BSS was being used by the defendant as a trade mark, not whether there had been extensive use by the plaintiff of BSS as a trade mark. There is no need for an inquiry into whether the plaintiff's registered trade mark is distinctive, that is, whether it is capable of distinguishing its goods or services from other goods or services. By definition, the plaintiff's registered trade mark is distinctive and capable of being used as a trade mark. If it were not, it would not be entitled to registration or to continuing registration. If a lack of distinctiveness is the allegation then that is a separate inquiry to be made when considering any claim for rectification of the register. It is not relevant to the inquiry into 'use as a trade mark' by the defendant which should focus exclusively on the defendant's conduct and not engage in any comparison between the defendant's conduct and the plaintiff's reputation.

While such a result may seem counter-intuitive, the contrary view generates even greater difficulties. The compartmentalisation of the different elements of infringement (and, if relevant, the validity of the registration) is critical to the integrity of the registration system. To do otherwise invites a descent into a generalised consideration of whether consumers were confused or likely to be confused by the defendant's conduct, assessed in its entirety, having regard to the trade mark owner's reputation. Once that point is reached, the value of registering a trade mark is significantly diminished as too are the general advantages associated with the system of registration.

In addition, if the reputation of the registered trade mark is to be considered in the question of use, the defendant's reputation for any signs it uses in conjunction with its allegedly infringing signs should also be considered. For example, in the Alcon Case, if the trade mark 'AQSIA' had a strong reputation, its presence on the label next to or above 'BSS' would be even more relevant to whether the former was the sole trade mark being used by the defendant and may support the proposition that 'BSS' was being used descriptively. Such evidence of the defendant's reputation for a trade mark used by it in conjunction with the allegedly infringing sign should also be ignored in the context of trade mark infringement.

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