trade mark

Traditionally, a trade mark has been defined as a badge of origin. However, the question is whether this is limited to origin of manufacture. An early definition contained in Kerly on Trade Marks, 1894 (as cited in UK and Australian court decisions) is as follows:

“A trade mark is a symbol which is applied or attached to goods offered for sale in the market so as to distinguish them from similar goods, and to identify them with a particular trader, or with his successors as the owners of a particular business, as being made, worked upon, imported, selected, certified, or sold by him or them”.

On its face, this was a fairly generous definition and it did not restrict the badge of origin theory to situations where the proprietor has participated in the actual manufacture of the goods.

In 1945, the House of Lords (UK) stated in Aristoc v. Rysta:

“…it seems to me beyond doubt that hitherto a registered trade mark has been understood as being used in relation to the goods for the purpose of indicating the origin of the goods, in other words, for the purpose of indicating either manufacture or some other dealing with the goods in the course of business before they are offered for sale to the public”.

In the above statement origin is related to either manufacture or some other dealing with the goods.

In 1909 in the Brewing Employees’ Union case the High Court of Australia, after reviewing “….the statute law of England and the Australian Colonies up to 1900 and of the authoritative expositions of the law with respect to trade marks in British Courts of Justice”, stated:

“The term ‘trade mark’…meant a mark which is the visible symbol of a particular kind of incorporeal or industrial property consisting in the right of a person engaged in trade to distinguish by a special mark goods in which he deals or with which he has dealt, from the goods of other persons.

This concept of a trade mark can be regarded as including five distinct elements:-

1)        A right which is the nature of property;

2)        The owner of the right must be a person natural or artificial, engaged in trade;

3)        The right is appurtenant or incident to the dealing with goods in the course of his trade;

4)        The owner has such an independent dominion over the goods to which the mark is to be affixed as to entitle him to affix it to them; (It is not material whether this right is incident to his possession of the goods or arises under an agreement with the owner of them)

5)        The mark distinguishes the goods as having been dealt with by some particular person or persons engaged in trade; (use of the word ‘particular’ is not as meaning that the person in question is indicated nominatim, but as indicating that he is a person who has an independent individual right with respect to the goods in question, and who is capable of ascertainment upon inquiry).

It is interesting that the High Court back in 1909 recognised that the trade mark owner need not have “possession” of the goods, but must have some “independent dominion” or control over the goods under an agreement. On the basis of this 1909 case,  it is fair to conclude that as long as there is a “dealing” in the goods in the course of business, even though the goods may be in the possession or ownership of another (usually the manufacturer), this is a sufficient link for the purposes of indication of origin.

As the law developed, a “dealing” in the products became related to control over the quality of the goods. In 1969, the UK Court of Appeal observed in the G.E. Case that:

“…the public should recognise the symbol or word in question as being used as a trade mark by someone who is responsible for the product being what it is and having the quality which it in fact has”.

In 1991, in considering the various functions of trade marks, the Australian Federal Court in the Caplets Case stated:

“Whatever may be the effect of the recent developments…it remains the case that the primary function of a trade mark…is that of distinguishing the commercial origin of goods or services sold under the mark. The registered mark serves to indicate, if not the actual origin of the goods or services, nor their quality as such, the origin of that quality in a particular business, whether known or unknown by name.

In addition, a registered mark may serve secondary or derivative functions. But the fact that it does so does not detract from the importance of the mark’s primary function”.

After 1969, it appears that the law had developed to reflect a slightly different view to the earlier badge of origin theory, tying in origin to “quality”, rather than a “dealing” in the goods. In other words, if the trade mark did not indicate source of manufacture, it indicated a source which was responsible for the quality of the product. The late learned US author Stephen Ladas put this in strong terms, when he stated:

“The true concept of trade marks (is that they are) essentially symbols or badges indicating sources of origin of the goods bearing such. The word “origin” denotes at least that the goods are issued as vendible goods under the aegis of the proprietor of the trade mark who thus assumes responsibility for them”.

Recently, in 1998 in the Montana Case the Australian Federal Court, after reviewing UK and Australian decisions, stated:

“…the essential purpose of a trade mark continues to be indication of the origin of goods. A purchaser’s inquiry about the origin of goods will usually be answered by identifying their manufacturer. In rare cases, the identity of the manufacturer may be unimportant; some other trader may have taken such an active role in selecting, or controlling the quality of, the goods as to constitute their origin, in practical terms”.

An active role in the selection or control of the quality of the goods is less onerous than bearing a responsibility for them. Selecting the quality of goods is not the same as being the origin of that quality or even controlling the quality. It is more of an approval of quality. In some trading situations, there is one origin as to source of manufacture and another for bearing responsibility for quality of manufacture and yet another for selection of or approval of the quality of a product.  An interesting additional aspect of the Montana case was the comment by the Court that it may be possible to add a second mark in relation to a product to signify the origin of its distribution as opposed to manufacture. This raises the question as to whether there can be different origins for the one product, the distinction being dictated by the nature of the trade mark usage.

Trade marks have developed functions other than as an indication of origin. For example, a trade mark can be a marketing tool or a promotional tool. One needs to appreciate that whatever the function of a trade mark, it is a valuable “tool” and it can take various forms. In 1941 the US Supreme Court stated:

“If it is true that we live by symbols, it is no less true that we purchase goods by them. A trade mark is a merchandising short-cut which induces a purchaser to select what he wants, or what he has been led to believe he wants. The owner of a mark exploits this human propensity by making every effort to impregnate the atmosphere of the market with the drawing power of a congenial symbol. Whatever the means employed, the aim is the same – to convey through the mark, in the minds of potential customers, the desirability of the commodity upon which it appears. Once this is attained, the trade mark owner has something of value”.

In 1988 the Australian Federal Court in the Pacific Dunlop Case stated:

“The American cases proceed on the footing, which is indicated by the evidence in this case as to be shared with Australia, that the existence of sponsorship or other approval or commercial connection between persons in the public eye and goods or services placed on the market is a matter of significance to consumers. After all, one might ask, would traders be prepared, as the evidence indicates in the present case, to pay considerable sums to such persons for their commercial involvement in trading enterprises if traders were not shrewdly aware of the value to them of that involvement for the sale of their goods or services?”

From the consumer’s point of view, a secondary function of a trade mark, such as an entertainment related mark, is to signify a connection between the entertainment property appearing on the goods and the entertainment property owner. If exactly the same product was on sale without the entertainment related mark and property, would it be likely to be attractive to a consumer, who no doubt would have the choice of a variety of such products? It is not necessarily the quality of the product that attracts consumers in such cases, but the entertainment related mark and property.

When one examines the essence of the quality control processes in the licensing of entertainment properties, the main focus is quality control in the use of properties. There is an element of quality control over the product or selection of the quality of the product. However, the focus is on the use of the entertainment related mark and property. With respect, some judges have not fully appreciated the commercial realities of such control, for example, in New Zealand Tot Toys Case in 1992 it was stated:

“Character merchandising is probably a poor guide to origin of quality since more often than not the choice of a licensed user in an unrelated field will have turned upon nothing more profound than his or her qualifications as the highest bidder”.

It is appropriate to also consider the UK House of Lords decision in 1984 in the Holly Hobbie Case where Lord Bridge made the following comments in that case:

“But character merchandising deceives nobody. Fictional characters capture the imagination, particularly of children, and can be very successfully exploited in the marketing of a wide range of goods. No one who buys a Mickey Mouse shirt supposes that the quality of the shirt owes anything to Walt Disney Productions”.

Lord Brighton, with whom the other Lords agreed, stated:

“No doubt in a number of cases, …a provision for quality control by the licensor over the goods of the licensee has been relevant in establishing a connection in the course of trade between the licensor and such goods. Such decisions are confined to their own factual circumstances, and I can discern no general rule that the mere ability to control quality is always to be sufficient to establish the required connection…For my part, I am quite prepared to accept that character merchandising, in the sense of the exploitation of the reputation of famous marks by making them available to a wide variety of products, has become a widespread trading practice on both sides of the Atlantic. It may well be that it is perfectly harmless and in most cases probably deceives nobody”.

Lord Brighton may be drawing a distinction between the mere ability to control quality and actual participation in the quality control process.

In the Sydney 2000 Olympic Games Image Guidelines, the following statement appeared:

“If the Olympic design imaging is to carry out this mission effectively, it is vital that it be used with integrity, consistency and care. All applications of the images should aim at the highest standard of care”.

This represents a very high quality standard, but it is a standard which has as its focus the use of the entertainment marks/images themselves in order to preserve their integrity and ensure consistency in their usage. There is nothing objectionable in such fact, after all, the marks or images are more important to the consumer than the actual quality of the product itself. However, the quality of the product needs to be approved – not so much from the point of view of accepting any responsibility for the origin of product itself, but rather in the maintaining of the reputation and integrity of the properties concerned. The importance to the consumer in such an environment is the appearance of the properties on the goods or services. The consumer is well aware that products have not been manufactured by the Sydney 2000 Olympic Games organisation and does not really care who has manufactured the goods. The value in the product is that it has been selected and approved to carry the properties. The focus on the usage is intense so far as the usage of the properties on the goods or services is concerned – it is in effect created, restricted and policed by the property owner. However, in most situations no actual contribution is made to manufacture, other than a selection or approval process.

Emerging Issues on the Function of trade marks

  1. A trade mark such as an entertainment or art related mark needs to be distinguished from any concept which connects it with the notion of responsibility for the quality of the goods on which it appears. However, its importance as a communication link with the consumer relevant to the nature of the product needs to be recognised. The notion of responsibility carries with it the potential risk of some Court in the future holding an entertainment mark owner as being liable (wholly or contributably) for damages in respect of a defective product or in breach of laws relating to standard of manufacture. It is advisable in such situations to make it clear that in approving the quality of a product, the property owner is approving the quality of the product with regard to its acceptability to carry the mark in question and not for any purpose relating to manufacturing standards of the product or laws/regulations relating thereto.

In such situations trade mark owner should be looked upon as the origin of goods only so far as concerns the approval of or the selection of the quality of the product to carry the mark and as being responsible for the quality of the presentation of the mark and property to which it relates, upon or in relation to the product.

  1. In instances where an entertainment related mark and property is used as a decorative feature on goods, is this trade mark use? Strictly speaking, such use does not sit well with the primary function of trade marks to denote origin. However, pursuant to the issue raised above, it may be the case that in such instances, the mark functions as a second trade mark on the goods, to denote the “approval” or “selection” of the product to be sold through its association with the mark or property. It tells the consumer that the appearance of the well-known property related mark on the product means that the quality of the product has been accepted or selected by the owner of the mark and property and that the usage of the mark and property has been approved and subjected to the high standard of reproduction and manner of usage stipulated by the owner. After all, this is what the consumer is paying for and the importance to the consumer is the connection with say the entertainment mark owner, not the person who may bear the responsibility for the product itself. So, there may be a mark which indicates the responsibility for the quality of product itself (the trade mark of the licensee) and a second mark which indicates the acceptance or selection of that quality to bear the second mark which relates to a desirable well known property mark used thereon. In such situation, both marks relate to the same product as far as their distinct indications of origin are concerned and their connection is their respective responsibility for the product (on the one hand) and approval/selection of the quality of the product (on the other hand).

It could be said that there appears to be a stretch in traditional theories of the function of a trade mark in cases such as entertainment marks in that such marks do not strictly adhere to the manufacturing origin theory. The underlying point is that a trade mark is a communication link to a consumer. It can tell the consumer about quality, more to the point about consistency of quality. It can tell the consumer about the origin of that quality. But in the case of marks such as entertainment property related marks the consumer is not listening; all he/she wants to hear is that he/she is buying a connection between the product and the entertainment mark owner.

If you have any queries in respect to this article, please contact Andy Chrysiliou on achrysiliou@ChrysiliouIP.com.au or Protect@ChrysiliouIP.com.au