4 April, 2017
Clipsal Australia Pty Ltd v Clipso Electrical Pty Ltd (No 3) [2017] FCA 60 (3 February 2017)
What you need to know
The Federal Court has held that the registered trade mark CLIPSO should be cancelled on the basis that it was registered in bad faith, deceptively similar to the prior registered mark CLIPSAL and likely to deceive and cause confusion with the CLIPSAL mark.
While Clipso’s registration for CLIPSO protected it from a trade mark infringement claim, Justice Perram considered that Clipso was still liable for passing off and had breached ss 18, 29(1)(g) and (h) of the Australian Consumer Law (ACL).
However, the Court also held that Clipso had not infringed the applicant’s shape mark covering an electrical “dolly switch”, because Clipso was not using the shape as a badge of origin.
This case illustrates the importance of strong and credible evidence in proving or defending trade mark cancellation and infringement actions. The unreliability of Clipso’s key witness was detrimental to its defence, and contributed to Clipsal establishing that the CLIPSO mark was registered in bad faith, and that Clipso’s conduct amounted to passing off and breached the ACL.
Equally, Clipsal’s case was supported by adducing evidence of actual consumer confusion arising between the two marks, and its strong evidence of the reputation that it had developed in the CLIPSAL brand.
This case also reconfirms the difficulties of enforcing rights in shape marks involving functional elements. Where there is evidence that relevant consumers would view the alleged infringing use as embodying the shape mark’s functional elements, it is unlikely that such conduct will amount to infringement, as it falls short of use “as a trade mark”.
What you need to do
When adopting a new brand, comprehensive searches should be undertaken to ensure that the use of the brand, even if it becomes registered as a trade mark, will not expose the owner to a claim for passing off or breaches of the ACL.
If you receive reports of customer confusion arising from the sale of a competing product, keep comprehensive records of those reports.
Undertake marketing campaigns featuring your shape trade marks so that customers identify those shapes as brands in their own right.
Background
The applicant, Clipsal Australia Pty Ltd (Clipsal), is well-known in Australia for its range of electrical accessories bearing the CLIPSAL mark, including “Bakelite” or “dolly switches”. Clipsal (through its predecessor) had originally used the CLIPSAL mark since the 1920s for light switches.
Clipsal owns numerous registered marks in relation to the CLIPSAL brand, including:
- a word mark CLIPSAL, registered since March 1989 in relation to telephone apparatus, equipment and accessories in class 9 (CLIPSAL Word Mark); and
- a shape mark consisting of the 3-dimensional shape of a switch dolly, registered since December 2003 in relation to electrical wiring accessories, electric switches and switched power outlets in class 9 (CLIPSAL Shape Mark).
The respondents in the proceedings were Clipso Electrical Pty Ltd (Clipso) and its director, Mr Abdul Kader. Mr Kader had rebranded his electrical imports business as Clipso in late 2008 and registered the mark CLIPSO in relation to class 9 goods. Mr Kader gave evidence that he developed the CLIPSO mark by examining the class 9 list of goods, which he noted contained the words “clip” and “clips” numerous times. He added the “O” as a suffix, to imply familiarity. Despite initially denying knowledge of the CLIPSAL brand, Mr Kader conceded that he was aware of the brand, but considered that as IP Australia had accepted the CLIPSO mark, he had no reason to be concerned about the CLIPSAL Word Mark.
After the CLIPSO mark was registered, Clipso began using the mark on its product packaging, catalogues and website. Clipso also sold a light switch product which wholly incorporated the CLIPSAL Shape Mark.
Credit attack on Clipso’s key witness
The credibility of Mr Kader’s evidence was subject to significant scrutiny. Critically, Justice Perram considered that Mr Kader was an unreliable witness and his evidence was false and incredible on numerous accounts. His Honour also found that Mr Kader was motivated to adopt the CLIPSO mark due to its close similarity with the CLIPSAL Word Mark.
As Mr Kader was Clipso’s key witness, these findings significantly undermined Clipso’s case, and supported Clipsal’s contention that the mark had been registered in bad faith. Further, as a result of his direct involvement in Clipso’s impugned conduct, and his own dishonest conduct, his Honour found Mr Kader personally liable for Clipso’s conduct.
Cancellation of the CLIPSO mark
Clipsal applied to cancel the CLIPSO mark on the basis that:
- it was substantially identical or deceptively similar to the CLIPSAL Word Mark (under s 44 of the Trade Marks Act 1995 (Cth) (the Act));
- due to Clipsal’s reputation in the CLIPSAL Word Mark in relation to the same goods, use of the CLIPSO mark is likely to deceive or cause confusion (under s 60 of the Act); and/or
- the application for registration was made in bad faith (under s 62A of the Act).
His Honour found that all three cancellation grounds were established.
Substantial identity and deceptive similarity
Although both marks shared the root phrase “CLIPS”, the CLIPSO mark and the CLIPSAL Word Mark were not substantially identical due to the visual differences. However, his Honour found that the two words were aurally very similar, and as the relevant market for the goods included non-professional consumers, there was an increased likelihood that consumers of electrical accessories would be confused by Clipso’s use of the CLIPSO mark. Clipsal’s case on deceptive similarity was strengthened by evidence from an electrician that he was caused to wonder whether CLIPSO was a discount line produced by CLIPSAL.
Reputation in the CLIPSAL Word Mark
Clipsal also established that it had developed a significant prior reputation in the CLIPSAL Word Mark in relation to all of the goods in respect of which CLIPSO was registered. Clipsal adduced evidence that it sold over 14,000 products (falling within class 9) under the CLISPAL brand, and had annual sales exceeding $500 million. This evidence, coupled with the Court’s findings on deceptive similarity, led Justice Perram to hold that use of CLIPSO would be likely to deceive or cause confusion.
Bad faith
As noted above, Justice Perram found that Mr Kader was fully aware of the CLIPSAL Word Mark and intended to trade off Clipsal’s reputation in applying to register, and using, the CLIPSO mark. His Honour considered that:
"It is not commercially appropriate behaviour to sell competing products into the market under a very similar name, with the actual intention of misleading consumers into thinking that they are buying a different product."
Clipsal therefore successfully established that Clipso had applied to register the mark in bad faith.
Clipso’s misleading or deceptive conduct
Clipsal also contended that Clipso’s conduct in adopting and using the CLIPSO mark amounted to misleading or deceptive conduct, and falsely represented a connection with Clipsal’s business, in breach of the ACL. Clipsal submitted that the same conduct amounted to passing off, due to its significant reputation in the CLIPSAL brand which would be damaged as a result of Clipso’s conduct.
In finding that Clipso had contravened sections 18, 29(1)(g) and (h) of the ACL and engaged in passing off, Justice Perram gave detailed consideration to the relevant class of consumers alleged to have been misled. Clipso had contended that the relevant market was limited to electrical contractors and wholesalers, and that these specialist consumers were allegedly less likely to have been misled or deceived by the similarities between the two brands.
However, his Honour accepted Clipsal’s submissions that the relevant market included end consumers. Although the relevant switches could only (legally) be installed by licensed electricians, Clipsal successfully adduced evidence demonstrating that end-consumers were increasingly influencing choices made by architects and builders engaged on their behalf on aesthetic design details such as light switches. Accordingly, the Court held that Clipso’s conduct was likely to cause confusion among members of the general public, who formed part of the relevant market for the products. Clipsal would suffer damages as a result of this conduct, due to the potential for trade to be diverted.
No infringement of the CLIPSAL Shape Mark
The Court found that Clipso was not using the CLIPSAL Shape Mark “as a trade mark” in relation to their CLIPSO branded light switches. Although the two products were “essentially indistinguishable”, his Honour considered that there was no evidence that Clipsal had developed a reputation in the CLIPSAL Shape Mark such that consumers would associate that particular shaped dolly switch with Clipsal. Since the shape of Clipsal’s products was no more than an “ordinary light switch”, Clipsal’s infringement claim failed.
For further information, please contact:
Kellech Smith, Partner, Ashurst
kellech.smith@ashurst.com
