Fanatics about trade mark infringement, cancellation and honest concurrent use in Australia

 

126 pages and 497 paragraphs later, we find out what happens when two businesses with similar branding coexist for several decades and then find their business activities slowly moving closer to each other’s, leading to friction and disputes…

In Australia:

• Honest concurrent use requires formal evidence that the later applicant held an honest belief that adopting its mark would not lead to consumer confusion or deception.
• The defence to infringement that a person (including a company) is using its own name in good faith as a trade mark is limited to word marks. The defence does not extend to stylised marks nor does it extend to any use(s) other than the alleged infringer’s full corporate name, less any corporate indicia (such as LLC, Pty or Ltd).
• Cancellation of a registered trade mark is not retrospective and takes effect from the date of the Court’s judgement. Where a defendant relies on a trade mark registration as a defence to infringement, the defendant remains protected against infringement until the registration is cancelled by the Court.

Background

FanFirm Pty Ltd is an Australian business that has operated since 1997 but incorporated in 2004. It began as a travelling cheer squad for the Australian Davis Cup tennis team but subsequently expanded into offering sports-related goods and services, such as travel, tours, sports apparel and other merchandise. Since at least 2002, FanFirm used the trade mark FANATICS in connection with the sale of sports apparel and retail services for various types of sports-related merchandise. FanFirm registered the word mark, FANATICS, in Classes 9, 16, 24, 25, 32, 38 and 39 in 2008.

 

Fanatics, LLC is an American company that operates an online retail store for sports merchandise, including licensed apparel, including to Australian consumers. Until December 2010, Fanatics, LLC used the trade mark FOOTBALL FANATICS for its retail services, but then changed to use the word mark FANATICS and the following stylised mark: (“the FANATICS flag mark”). Both of these trade marks are registered in Australia in Classes 35 (including retail services) and 42 (computer services and creating and maintaining retail websites for others).

 

The parties coexisted in Australia for a number of years and opposed each other’s trade mark applications in 2010, 2013 and 2019 (with various oppositions being withdrawn) but the real conflict began in 2020, when Fanatics, LLC’s business presence in Australia intensified through a business deal with one of Australia’s largest sports merchandise retailers and began to sell merchandise related to Australian professional sporting teams. FanFirm commenced proceedings against Fanatics for:

• Trade mark infringement;
• Rectification of the Register through cancellation of Fanatics’ trade mark registrations;
• Misleading and deceptive conduct in breach of the Australian Consumer Law; and
• Passing off,

while Fanatics cross-claimed with the same allegations against FanFirm.

 

Justice Helen Rofe oversaw the proceedings in the Federal Court of Australia, issuing her decision on 17 July 2024. Her Honour’s decision was limited to liability and did not extend to an assessment of damages, which will be determined later.

Justice Rofe found that Fanatics’ use of the FANATICS flag mark on clothing, headgear, sports bags, water bottles, towels, scarves, flags, footwear and blankets infringed FanFirm’s FANATICS registration. While there is no doubt that the FANATICS flag mark is deceptively similar to the FANATICS word mark, Justic Rofe made the interesting assessment that sports bags and water bottles are goods of the same description as sports apparel because they are sold in the same stores and intended for people playing sport (paras [251] to [253].

 

Fanatics argued that it had the following defences to infringement:

• It was using its corporate name in good faith;
• It was an honest concurrent user of the mark and, on that basis, would be entitled to registration of the mark if Fanatics’ applied to register it; and
• It was exercising its right to use a mark as registered by virtue of its registrations for FANATICS and the FANATICS flag mark.

The first two defences were dismissed because:

• The corporate name defence is only effective where the mark being used consists of the corporate name of the infringer minus any corporate indicia (Pty Ltd, LLC, etc) therefore it only applies to word mark use and was not relevant to use of the infringing FANATICS flag mark (which was stylised); and
• Fanatics was not an honest concurrent user because it was aware of FanFirm’s marks (and had opposed one) at the time it chose to adopt the FANATICS name and mark yet had chosen not to adduce any evidence in these proceedings that Fanatics – at the time of adoption – was of the honest belief that no confusion would arise from its adoption and use of the FANATICS flag mark. Justice Rofe found that Fanatics’ failure to adduce such evidence led to the conclusion that the mark was not honestly adopted. FanFirm was also able to demonstrate that it would be able to successfully oppose registration of any application(s) filed by Fanatics to enable this defence.

In relation to the final defence, Justice Rofe agreed that Fanatics’ registrations did provide a statutory defence to what would otherwise be infringing conduct. However, the defence would no longer be available to Fanatics because the registrations would be cancelled as a result of FanFirm’s cancellation action against the registrations (discussed further below).

 

While Fanatics asserted that FanFirm’s provision of retail services (Class 35) under the FANATICS mark infringed Fanatics’ registration. However, the claim was unsuccessful because FanFirm established that it was a prior user of the FANATICS mark in relation to retail services, which is a defence to infringement (s124). Justice Rofe was also of the view that FanFirm’s FANATIC registration provided a statutory defence to the alleged infringement because FanFirm’s allegedly infringing retail services were provided in relation to the range of goods covered by FanFirm’s FANATICS registration.

FanFirm sought cancellation (s88) of Fanatics’ registrations on the basis that FanFirm could have successfully opposed the registrations on several other grounds (deceptively similar marks – s44, Fanatics was not the owner of the mark – s58, prior reputation in a confusingly similar mark – s60) and because of the circumstances applying at the time when the application for rectification was filed, Fanatics’ use of the trade mark was likely to deceive or cause confusion (s88(2)(c)). Fanatics argued that the Court should exercise its discretion to keep the marks on the Register because of the absence of any confusion between the parties’ goods and services over a decade of coexistence. However, Justice Rofe found that FanFirm had satisfied the grounds for cancellation and it would not be proper to exercise the Court’s discretion in favour of Fanatics because it was fully aware of FanFirm and its trade marks when it chose to adopt its trade marks and chose to proceed anyway.

 

FanFirm’s FANATICS and FANATICS flag mark registrations were cancelled but Justice Rofe confirmed that cancellation does not have a retrospective effect, saying that a registration will provide a defence to infringement while it remains on the Register. However, once cancellation has been ordered by the Court, the registration will not act as a defence against any future or subsequent infringing acts.

Both parties claimed that the other party’s activities amounted to misleading and deceptive conduct in breach of the Australian Consumer Law and the tort of passing off. Both causes of action rely on similar elements but generally misleading and deceptive conduct has broader applications and is easier to establish than passing off.

 

To successfully establish misleading and deceptive conduct, the parties needed to:

• Specifically identify the contravening conduct;
• Identify that the conduct took place “in the course of trade”;
• Establish what meaning the conduct conveyed to consumers; and
• Determine that the conduct was misleading or deceptive or likely to mislead or deceive.

These elements are assessed at the date that the impugning conduct commences.

 

While there was no difficulty in the parties establishing the first two requirements, Justice Rofe found that neither party’s conduct amounted to misleading and deceptive conduct because of how the businesses were positioned and operating at the time the impugning conduct commenced (in 2010). In light of all of the circumstances, consumers were not likely to be misled or deceived by either party’s conduct.

 

For the same reasons, Justice Rofe found that passing off had also not been established by either party.

Fanatics came away as the losing party in this decision, largely because it chose to enter the Australian marketplace with the FANATICS mark and FANATICS flag mark even though it knew of FanFirm’s prior use of its FANATICS mark in Australia for similar business activities.

 

Fanatics’ inability to attest to an honest adoption of its new branding stymied most of its defences to infringement and prevented Justice Rofe from exercising the Court’s discretion in favour of keeping Fanatics’ marks on the Register and avoiding cancellation.

 

The decision, which is open to appeal until 14 August 2024, is an excellent reminder that the first user of a trade mark will triumph over a later adopter or concurrent user, particularly if the circumstances of the later party’s adoption of its brand are called into question.