A recent case highlights some important issues for owners of registered trade marks who license the marks to third parties. In particular, the case impresses the need for owners to have and to exercise rights to monitor and control the licensee's use of the mark. Failure to do this over a period of time can, as this case shows, jeopardise the ongoing validity of a trade mark.
All trade mark owners should be aware that any registered mark may be vulnerable to removal from the register if it is not used for a continuous period of three years or more. Ensuring ongoing use is relatively straightforward where the trade mark owner uses the registered mark itself, but can become problematic when the owner has granted an exclusive license in the mark, such that only the licensee is permitted to use it. For example, use of a mark by a licensee will be effective to defeat a non-use application only if it is "authorised use". This requires the trade mark owner to be exercising some control over the licensee's use of the mark.
The recent decision of the Federal Court in Skyy Spirits v Lodestar Anstalt  illustrates how this issue can arise. Skyy owned a registered trade mark for 'WILD GEESE' for wine and other alcoholic beverages, and had granted a perpetual, exclusive licence in the mark to Wild Geese Wines Pty Ltd (WGW). Lodestar, wishing to clear the way for it to be able to market its whiskey products in Australia using the 'Wild Geese' trade mark, applied to have Skyy's mark removed for non-use. Skyy had never used the trade mark and so had to rely on WGW's use. The critical question in the case was whether WGW's use of the mark constituted 'authorised use'.
The court found that, although the licence agreement theoretically granted some audit and quality-control powers to Skyy, in practice Skyy had not exercised those powers: Skyy never requested samples of WGW's products for testing and never audited WGW's labels to ensure the trade mark was being used correctly. As such, WGW had full discretion over its use of the trade mark. The court concluded that the licence agreement "was not intended by the parties to it to deliver anything but the appearance of control".
In that context, the judge deciding the case held that:
- The concept of 'control' should involve an enquiry into an actual state of affairs and should not be satisfied by a mere possibility of control; but
- Precedents established by superior courts in earlier cases meant that he was bound to take a different approach and accept that a mere theoretical possibility of a trade mark owner exercising control is sufficient to constitute 'authorised use'.
This meant that Skyy succeeded in maintaining its registered trade mark, because WGW's use of the mark counted as authorised use.
However, the decision is deliberately framed as an invitation to higher courts to reopen this issue, and it would not be surprising if the test was narrowed considerably in coming years so that only actual control is adequate to establish authorised use.
With this in mind, trade mark owners should:
- Carefully review their trade mark licence agreements to ensure that they provide rights for them to inspect, audit and control the use of the marks by licensees; and
- Exercise those rights on a regular basis, for example by requiring licensees to seek approval for any changes to labels, branding and other uses of the trade mark.
Article by David Jackson.
  FCA 509: http://www.austlii.edu.au/au/cases/cth/FCA/2015/509.html