Clients pay for lawyer's mistakes
In Edwards v Liquid Engineering 2003 Pty Ltd [2008] FCA 970 (26 June 2008), Justice Gordon's preamble points out the excessive costs and consumption of Court resources that have been incurred in the case as a consequence of incorrect identification of legal issues. She emphasises that “parties should not be encouraged to bring inapposite claims on the grounds that they are cheaper” because this can backfire. Here, the respondent sought a cheaper avenue for relief by bringing a non-use application before the Trade Marks Office as opposed to bringing a revocation action in the Federal Court. Justice Gordon ordered costs against the respondent for that part of the proceeding that had been misclassified.
Along similar lines, in the recently decided case of E. & J. Gallo Winery v Lion Nathan Australia Pty Limited [2008] FCA 934 (20 June 2008), discussed on the Australian Trade Marks Law Blog last week, Lion Nathan pleaded that their client had used ‘Barefoot Radler’ as its sign but wanted to argue at trial that the sign was ‘Barefoot Radler’ plus the device of a bare foot. The Court confined them to their defence as pleaded.
These cases highlight, in different ways, the importance of getting the pleadings right from the outset and show that the Court will hold parties responsible for such blunders.
Background
The parties in the present case sell a variety of engineering products such as anti-corrosive preparations and motor fuel additives. Edwards was employed by the predecessor in business of Liquid Engineering 2003 Pty Ltd (LE 2003) at which time he applied to register ‘Exit Rust’ and ‘Fuel Set’ as trade marks (the marks). These applications proceeded to registration without opposition from either LE 2003 or its predecessor but in February 2005, LE 2003 brought a successful application for removal of the marks under Section 92(4) of the Trade Marks Act 1995 (the Act). That decision was successfully appealed by Edwards. However, during that appeal Justice Gordon pointed out that the correct avenue for LE 2003 should have been to bring an application for expungement of the marks on the basis that Edwards was not the owner rather than removal for non-use. LE 2003 proceeded to bring such an application and also claimed trade mark infringement of its own mark ‘Liquid Engineering’.
Infringement by Edwards of the 'Liquid Engineering' mark
Justice Gordon decided in favour of LE 2003 in finding that use of the ‘Liquideng’ mark by Edwards was an infringement under Section 120 (1) of registered trade mark ‘Liquid Engineering’. Justice Gordon was of the opinion that the marks were deceptively similar since “the overall impression that would be formed by an ordinary person is that ‘Liquideng’ is simply the short form of ‘Liquid Engineering”.
Justice Gordon also independently arrived at a conclusion of deceptive similarity on the basis that Edwards intended to appropriate the registered mark. Edwards had signed numerous invoices whilst working for his previous employer that included a reference to the company’s website www.liquideng.com.au just above the signature block. Edwards failed to rebut the presumption that he was at some level intending to trade on association with his previous employers.
Submissions by Counsel for Edwards that the ‘Liquid Engineering’ mark was always used in association with a whirl pool device were of no consequence, as was its estoppel argument. Edwards' estoppel claim was based on the long period of time between LE 2003 finding out about the infringement and the formal claim being brought. Justice Gordon pointed out that Section 129 of the Act was always available had Edwards thought that the threats were unjustified.
As an aside, it is worth noting that Justice Gordon did not bother considering whether the marks in question were substantially identical since clearly they were not. This approach can be compared with the technique used by the Court in the Gallo decision and commented on last week here by Mark Davison. Our feeling is that Justice Gordon, being female, does not like to waste time.
Cancellation of 'Exit Rust' and 'Fuel Set' marks
In response to LE 2003 revocation action, Edwards argued that LE 2003 were not the owners of the marks. However, Justice Gordon was not convinced that ownership had not been transferred when the business was sold and pointed out that ‘post-contractual conduct is not admissible on the question of what a contract means’.
Justice Gordon found LE 2003 to be the true beneficial owner of the ‘Exit Rust’ and ‘Fuel Set’ marks. She declared that Edwards had held each of the marks on constructive trust for LE 2003, and its predecessor in business, during the relevant times. It has been commented by Rob Roy Rankin that constructive trusts are becoming more popular in IP matters. If so, some IP practitioners may need to pull out the 'Equity and Trusts' books and refresh.
