By: Melinda Upton, Rohan Singh, and Anjali Narendra

It is common practice for businesses to engage in trade mark licence agreements as a means to facilitate building brand awareness. However, the High Court of Australia’s refusal to grant special leave to appeal the Full Court of the Federal Court’s decision in Lodestar Anstalt v Campari America LLC [2016] FCAFC 92 (Lodestar Anstalt v Campari America LLC), is a reminder that trade mark licensors must retain a degree of ‘actual control’ over a licensee’s use of their trade mark in order to avoid removal for non-use.

On 16 November 2016, the High Court held that there is ‘no reason to doubt the correctness of the decision of the Full Federal Court’ leaving in place the decision in Lodestar Anstalt v Campari America LLC, summarised below.

The case involved an application initiated by Lodestar Anstalt (Lodestar) which claimed that Skyy Spirits, part of the Campari Group (Campari), was not using their registered ‘Wild Geese’ and ‘Wild Geese Wines’ trade marks for a continuous three year period. Therefore, they were vulnerable to a removal action on the basis of non-use. Campari had entered into a trade mark licence agreement with Wild Geese Wines Pty Ltd (WGW) which were the original owners of the marks and were now using the marks as licensee of Campari.

As registered owners of the trade marks, the onus was on Campari to submit evidence of use to rebut the removal application. Campari referred to their exclusive perpetual licence with WGW as an example of authorised use pursuant to Section 8 of the Trade Marks Act 1995 (TMA) and as a result argued WGW’s use was the equivalent of use by Campari as specified in Section 7 of the TMA.

Therefore, the crux of the case rested upon the Court’s interpretation of ‘authorised use’. The TMA prescribes ‘control’ as a determinant for authorised use and the Court considered whether Campari had sufficient control over WGW’s use.

In the first instance, Perram J felt compelled to conclude that the licence agreement constituted authorised use due to the Federal Court’s decision in Yau’s Entertainment Pty Ltd v Asia Television Ltd [2002] FCAFC 78 where ‘a mere theoretical possibility of contractual control’ established authorised use. However, this was unanimously overturned by the Court who found that ‘actual’ control, in substance, was necessary.

The Full Court took a practical approach in assessing the licence agreement, preferring to assess the practical implications of crucial clauses. Even though quality control could be exercised under the licence agreement, this was not regarded as evidence of any actual quality control over the goods and services provided under the mark. It was held that the relevant terms of the licence agreement had no practical effect on the business of WGW.

As a result, WGW’s use of the trade marks was not authorised use and therefore did not assist in defending the removal application for non-use. Besanko J also emphasised that the degree of control required to establish authorised use will vary in different circumstances.

Practical implications 

This decision acts as a reminder that trade mark licensors cannot simply rely upon the existence of a licence agreement to prove authorised use. Licensors should ensure they can prove they are actively controlling the use of their trade marks to avoid removal for non-use.