The Importance of Due Diligence in Brand Searches
A string of recent decisions from the Australian Federal Court has emphasised the importance of undertaking due diligence trade mark searching before launching a new brand. Not taking the necessary steps to determine availability of the mark may compromise not only a trader’s ability to rely on honest concurrent use provisions in seeking trade mark registration, but good faith provisions as a defence to trade mark infringement.
It is well established in Australian trade mark law that the first user of a trade mark in Australia is the true owner of that mark for the relevant goods and services. Such prior use may be relied upon by an applicant in circumstances where a similar trade mark is already registered by demonstrating that the applicant has; a) used the trade mark before the priority date of the registered mark; and b) use of the mark has been continuous until at least the priority date of the applicant’s own trade mark application.[1] Where a trader does not have prior use to a relevant trade mark registration, but has nonetheless been coexisting in the market for some time, it may also be possible to overcome prior marks on the basis of honest concurrent use[2], which requires the Registrar to be satisfied as to: a) the honesty of the use; and b) the extent of the use taking into account the relevant circumstances.
Use may also provide a defence to claims of trade mark infringement on the basis that the mark is used in good faith to indicate certain qualities (such as a person’s name, place of business, or characteristics of the goods or services), or that the trader would likely obtain trade mark registration were they to apply for it[3]. However, it has become increasingly clear that “honesty” in the adoption of a trade mark and good faith use of that trade mark must be clearly substantiated, and the question of whether the applicant conducted sufficient due diligence searches prior to use of the trade mark is one on which the courts – and Trade Marks Examiners – are placing increasing reliance.
The question of good faith was recently tested in Hemmes Trading Pty Limited v Establishment 203 Pty Ltd[4](Establishment) in which ESTABLISHMENT 203, used in relation to restaurant services, was found to infringe the trade mark ESTABLISHMENT registered for inter alia restaurant, hotel and nightclub services. The respondent Establishment 203 Pty Ltd claimed non-infringement in circumstances where they had operated an abattoir and meat business under the name Establishment 203 since 1997, and use of the mark in relation to restaurant services was good faith use of their own name. However, this was rejected as although the judge accepted Mr Menegazzo, the respondent’s managing director, genuinely believed that the respondent was entitled to use the mark for restaurant services, it was considered that a reasonable and honest person would have conducted trade mark searches or sought advice from existing legal counsel, and in doing so would have identified the other party’s existing registration.
This approach has been supported in The Practice Pty Ltd v The Practice Business Advisers & Tax Practitioners Pty Ltd[1] (Practice). In this case, use of THE PRACTICE solus and those words as part of the 
mark (Logo) in relation to business advisory and tax practitioner services were found to infringe the prior 
trade mark registered for inter alia accounting, taxation, financial planning, wealth management and lending advisory services.
The respondent was unable to establish the two pleaded defences to infringement under s 122 of the Trade Marks Act 1995 (Act), namely, that use of the ordinary English words “THEPRACTICE Business Advisers & Tax Practitioners” as it appears within the Logo was used descriptively in good faith , or that the respondent would obtain registration of the Logo in the respondent’s name if it were to apply for it.
The respondent’s own evidence was that use of the Logo served a “dual function” which included the function of “acting of (sic) a badge of origin for [its] services”. Further, the respondent was unable to establish that it could have obtained registration of the Logo under either the honest concurrent use or “other circumstances” provisions of the Act because: (a) it had never used the Logo prior to its incorporation on 13 January 2017, which was around the time of the first infringing use when the putative application needs to be assessed; and (b) the use by the respondent’s sole director, Mr Hassan, which he argued should be imputed to the respondent, was not found to be honest.
In coming to this conclusion, the Court held that Mr Hassan had not conducted reasonable or diligent searches at any relevant time to ascertain the ability to use the trade mark. In particular, Mr Hassan had only conducted searches of the Business Names Register for the complete phrases “THE PRACTICE (IT AND ACCOUNTANCY)” and “The Practice Business Advisers and Tax Practitioners”, and he did not conduct searches in any register or database (including the Trade Marks Register) for broader variants such as “THE PRACTICE”, which would have undoubtedly found the applicant’s business registration for that name as far back as 2001.
Even if a trade mark is initially adopted in good faith, the use of that mark may cease to be in good faith once the existence of another party and its registration is known, and the potential for confusion in the marketplace. This was also the case in Establishment, where the respondent received a letter of demand from the applicant’s solicitors regarding the alleged infringement, and still proceeded with use of the trade mark despite being put on notice as to the existence of the applicant’s registration and potential for confusion.
In light of both Establishment and Practice, the adoption and use of a trade mark must not only be honest, but based on diligent and continued good faith efforts by a trader to ensure that their mark does not infringe upon the rights of others. Put simply, ignorance is not an excuse, and the lack of appropriate searching prior to adoption of a trade mark may be fatal to a claim of honest concurrent use and/or good faith use.
It is more important than ever to conduct due diligence searching when choosing a new brand, including the Trade Marks Register and common law searches, to make best efforts to ensure that the proposed mark is available for the proposed goods and services. Good record keeping is also imperative as a trader may be required to provide evidence of the conducting and outcome of these searches.
Recommendations for trade mark owners:
- Conduct appropriate due diligence searches for any proposed new brand, or expansion of an existing brand.
- Keep a record of such searching including search parameters, dates, and results.
- File a trade mark application to establish a priority date and claim to ownership.
- Seek professional advice to ensure that due diligence requirements are met.
Wrays can assist businesses with appropriate due diligence searching and the protection of their trade mark assets.
[1] Trade Marks Act 1995 (Cth) at s 44(4) [2] Ibid at s 44(3)(a) [3] Ibid at s 122(1) [4] [2024] FCA 1100 [5] [2024] FCA 1299