It is important to choose a trade mark that does not have a resemblance to that of a market leader: the CLIPSAL trade mark decision

In Clipsal Australia Pty Ltd v Clipso Electrical Pty Ltd (No 3) [2017] FCA 60, the owner of the well known mark CLIPSAL objected to CLIPSO’S use and registration of the similar mark CLIPSO.

The CLIPSO trade mark had been successfully registered but it was ultimately found that the director of the respondent was aware of the market leader’s well known trade mark CLIPSAL when he registered the mark, and that he intended to trade off the reputation of the CLIPSAL mark in order to sell his own products. The CLIPSO trade mark registration was therefore cancelled, and the use of the mark was held to constitute misleading or deceptive conduct under the provisions of the Australian Consumer Law, and to constitute passing off.

Background and facts

Clipsal established that it was the clear market leader in relation to light switches and power points, and its CLIPSAL trade mark was well known in relation to these goods after extensive and long-standing use of the trade mark in Australia which dated back to 1920. Clipsal had also registered the CLIPSAL trade mark in relation to all goods in Class 9 in 1989.

There were two respondents in this case, Clipso and its director, Mr. Abdul Kader. In 2008, Mr Abdul Kader founded Clipso, registered the trade mark CLIPSO in relation to a range of electrical goods in Class 9, and subsequently began use of the CLIPSO trade mark in relation to electrical accessories including switches and sockets at around the end of 2008.

Clipsal objected to Clipso’s use of the CLIPSO trade mark, and commenced proceedings against Clipso for:

misleading or deceptive conduct under the Australian Consumer Law;
passing off;
cancellation of the CLIPSO trade mark registration; and
infringement of its trade mark registrations for CLIPSAL and the “dolly switch” shape mark.

The consumers in the relevant market – misleading and deceptive conduct

In its defence, Clipso contended the persons in the market in which the CLIPSO and CLIPSAL branded products are sold would not be misled or deceived by use of the CLIPSO trade mark. Clipso argued that this was because the people in the market are professionals, such as electrical contractors or electrical wholesalers, rather than end-consumers, who are not professionals and more likely to be misled. They argued that because of the level of exposure which electrical contractors and wholesalers had to the market leader’s trade mark CLIPSAL, this mark was so well known to them that they would not be misled or deceived by Clipso’s use of its CLIPSO trade mark.

Perram J rejected Clipso’s argument in relation to the relevant consumers and held that, “the relevant class of consumer consists not only of industry participants, but also of a small group of end-consumers who actually buy switches and sockets for themselves, and another not insignificant group who dictate or otherwise influence the purchasing activities of the electrical contractors, architects and builders etc. engaged on their behalf.” As a result, the relevant market in which the trade marks were used was found to be broader than only professional contractors and wholesalers.

His Honour determined that, due to the similarity between the CLIPSO trade mark and the CLIPSAL mark, ordinary and reasonable consumers would consider that there was a connexion between the respective businesses. It was therefore held that the use of the CLIPSO trade mark in the relevant market was misleading or deceptive. It was also held that Clipso had engaged in passing off by adopting a similar mark to CLIPSAL which would result in confusion by members of the public, and Clipsal would suffer loss or damage as a consequence of that confusion.

Cancellation of the CLIPSO registration

Clipsal was successful in its action for cancellation of the CLIPSO trade mark registration on the grounds that:

The CLIPSO trade mark was deceptively similar to the CLIPSAL mark and registered for similar goods to those covered by the CLIPSAL trade mark registration;
Clipsal had acquired a reputation in the CLIPSAL trade mark in the relevant market for electrical goods before the priority date for registration of the CLIPSO mark, such that use of the CLIPSO mark would be likely to deceive or cause confusion;
The application for the CLIPSO mark was made in bad faith on the basis that “Mr Abdul Kader registered the CLIPSO mark fully aware of the existence of the CLIPSAL mark, and intending to trade off its reputation in order to sell the first respondent’s (Clipso) similar goods”.

Trade mark infringement

In its defence to Clipsal’s claim that the use of the CLIPSO trade mark infringed the CLIPSAL registration, Clipso argued that the way in which it was actually using the CLIPSO mark in a different logo to that of the CLIPSAL mark meant that use of the mark was not misleading to consumers. Clipso also argued that the CLIPSAL mark was so famous that no person in the market could be deceived by use of the CLIPSO mark. However, both of these arguments were rejected by the Court in holding that the use of CLIPSO infringed the registered CLIPSAL mark.

Interestingly, until the CLIPSO mark was actually cancelled from the Register, Clipso could use the defence to infringement available under section 122(1)(e) which provides that a person does not infringe a registered mark if “the person exercises a right to use a trade mark given to a person under this Act”. However, now that the registration is cancelled, any future use of the CLIPSO mark will infringe the CLIPSAL trade mark registration.

Clipsal also claimed that Clipso infringed its registered shape mark for a “dolly switch” (an electrical switch). However, Clipsal was not successful in this claim because it was held that Clipso did not use their dolly switch as a trade mark in relation to their products, and Clipsal did not have a reputation in relation to the dolly switch shape trade mark in identifying its products.

Lessons from this decision

Care should always be taken when choosing a trade mark to ensure that it is a sufficiently original choice and that it does not too closely resemble any marks already in the same market. Registering a trade mark will provide a defence to infringement of other registered marks in most cases, but this defence could ultimately fail if it is found that you should never have been allowed to register the mark in the first place (for example, if you chose a mark that was too similar to a competitor’s well known mark). It is also important to note that a trade mark registration does not provide any defence to actions for misleading and deceptive conduct or passing off. Obtaining professional advice when selecting a new trade mark will assist in avoiding any such problems down the track.

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