Huggies wins on Appeal - Overlapping trade channels may lead to overturning of trade marks registration
In Kimberley-Clark Worldwide, Inc v. Goulimis 2008 FCA 1415 (16 September 2008), the applicant (Kimberley-Clark) made an appeal to the Federal Court of Australia and successfully quashed the Registrar’s decision on 17 January 2008. The Registrar had allowed the respondent to register the trade mark HUGGIE MUMMY, classified under Class 35, a service class relating to the “direct selling of baby toddler’s toys, videos, CD’s books, games and accessories”. The applicant and the respondent’s trade marks were not registered in overlapping classes. The reason for the Registrar’s allowance of the respondent’s trade mark registration in the first place was that the Registrar found ‘the respondent’s service and the applicant’s goods have little in common but for the ultimate consumers – parents of babies and toddlers’.
The appeal was made under s 56 of the Trade Marks Act 1995 (Cth)(Act) and heard by Justice Jagot of the Federal Court in Sydney.
The applicant is the registered owner of various trade marks containing the word HUGGIES, with priority dates preceding the respondent’s priority date of 15 November 2007. The HUGGIES trade marks for disposable nappies are well known to the Australian public, and have been used in Australia since 1987 by the applicant’s parent company.
In the course of HUGGIES’s rise to fame, its range of products broadened to include other baby products such as “absorbent underpants, toilet training pants, baby wipes, pyjamas and swimwear for babies and toddlers, changing pads, wash cloths, bath washes, powders and lotions”.
The respondent failed to attend the hearing due to ‘medical reasons’. On 11 August 2008, the respondent filed some unsworn evidence with the Court and it could not be tested anyway, due to the respondent’s absence. Therefore, Justice Jagot proceeded with the hearing in the respondent’s absence and without taking into account the inadmissible evidence which she had submitted.
The applicant asserted that registration of the respondent’s trade mark must be rejected on any one of the following grounds under the following statutory provisions of the Act:
- under s 42 of the Act, that use by the respondent would be contrary to law;
- under s 44, that the respondent’s trade mark is deceptively similar to the applicant’s trade mark in respect of similar goods or closely related services OR the priority date of the respondent’s registration is not earlier than the priority date of the (applicant’s) or the other trade mark in respect of similar goods or closely related service;
- under s 59, that the respondent does not intend to use, or authorize the use of the trade mark in Australia;
- under s 60, that the respondent’s trade mark is registered under a particular goods or services that is deceptively similar to the applicant’s trade mark, that before the priority date for the registration of the respondent’s trade-mark in respect of those goods or services, the applicant’s trade mark had acquired a reputation in Australia AND because of the reputation of the applicant’s trade mark, the use of the respondent’s trade mark would be likely to deceive or cause confusion.
Held
The Court held, inter alia, that the respondent’s trade mark in respect of its services is deceptively similar to the applicant’s trade mark in respect of its goods. The main reason is pertinent to the form of marketing or sale of the respondent’s goods, in particular, the words, ‘direct selling’. Accordingly, Justice Jagot at 30 said:
“I do not construe the activity of direct selling as limited to door-to-door sales. That is one method of direct selling but there are others…including, for example, internet sales (whether from a website maintained by the respondent or via links from other websites to the respondent’s website), sales from market stalls, sales from a HUGGIE MUMMY branded shop, as well as sales to end consumers under arrangements with other retailers (for example, by lease or licence of part of the space or a counter within a shop or through factory outlet centres or, as the opponent (in this case, the applicant) submitted, by canvassing at places frequented by those responsible for caring for babies and toddlers”.
Furthermore, Justice Jagot held that there is a ‘substantial overlap’ between the applicant’s trade channels and the ‘normal and fair use’ of the respondent’s trade marks permitted by direct selling. Justice Jagot at 31 said:
“The methods of sale within the scope of “direct selling” are more restrictive than the retail channels used by the opponent. Nevetheless, normal and fair use of the respondent’s mark in accordance with the rights to use conferred by registration (in contrast to any particular use) involves substantial overlap with the opponent’s trade channels, particularly in terms of the locations within which sales may occur and marketing of the products. For example: - (i) links to methods of purchase to the products of both the respondent and the applicant may appear on common websites (such as those used by the opponent to sell its goods, particularly those with a focus on babies and toddlers) and (ii) the products may appear for sale close to each other in stores and outlets (even if the selling arrangements is direct by the respondent from her own counter or area and through an intermediary by the opponent”.
Even so, the court had also taken into account the usual principles set down in the legislation to assess whether or not the respondent’s trade mark should proceed to registration. This includes considering the respondent’s trade mark as a whole.
The court found for the applicant under ss. 42, 44, 59 and 60 of the Act, allowed the appeal, ordered that the respondent’s trade mark registration be rejected, that the respondent pay the applicant’s costs of appeal and for the opposition proceeding before the Registrar.
So what?
Consider this quote:
[At 42] “These products are likely to be bought quickly, on a recurrent basis, without much thought (at least after the first occasion for purchase) and, in the case of sales of the opponent’s goods, by reference to the essential brand identifier.”
Fighting with multinationals is good fun but it helps to have: (a) deep pockets; and (b) correctness on your side. One wonders what the applicant was smoking when she decided that applying for HUGGY MUMMY would be a good idea.
Look at it from a marketer’s point of view. The marketing of consumer goods sold on a low value high volume basis is all about peer approval and acceptance, fashion and trust because the ‘switching cost’ of changing brands is minimal. Mass selling is expensive and a multi-national such as Kimberley Clark throws buckets of money at the marketing required to support its brands. Put aside, for a moment, its natural inclination to protect that investment.
Because Kimberley-Clark spent lots of money on marketing, the HUGGIES brand was well known for the goods, so the consumer’s ‘imperfect recollection’ was also taken into account. If consumers are familiar with a mark, its use in relation to particular goods or services is a relevant consideration. There was a ‘real likelihood that some people will wonder’ whether the respondent’s direct selling of the HUGGY MUMMY goods had, as its source, Kimberley-Clark. These are the tests to apply and the commercial considerations when deciding whether to springboard off a large company’s brand.
The admissions from the respondent [at 50] that her trade mark was “only…a business idea at his stage” and was “still a long way off from doing anything” was not a defence: it showed a lack of intention to use the trade mark and was another reason HUGGY MUMMY nappies idea was poo-pooed and has now been disposed of.
