Trademark licensors beware

A company has registered a logo for solar panels and installation services and licenses the logo to another company for use in relation to marketing solar energy systems. This sounds fairly routine, so what could possibly go wrong? Quite a bit, as shown by the recent Federal Court of Australia decision in SMA Solar Technology AG v Beyond Building Systems Pty Ltd ([2012] FCA 1483 (21st December 2012)).

Ipevo Pty Ltd owned a trademark registration for a logo incorporating the words SUNNY ROO and a stylised kangaroo in relation to solar panels and the installation of solar panels. 

The registration dated from August 2009. Ipevo licensed Beyond Building Systems (BBS) to use the logo in return for an annual licence fee.

SMA Solar Technology owned an earlier registration for the mark SUNNY BOY in relation to “energy supplying devices” including “solar inverters”. SMA is a dominant player in the Australian market for solar inverters, and it was found in the case that the Sunny Boy brand enjoys a substantial reputation in Australia.

SMA sued BBS, alleging that its use of the SUNNY ROO logo and word mark infringed SMA’s rights in SUNNY BOY and constituted both passing off and a breach of the Consumer Law.  

There was substantial evidence before the court that consumers had been misled by BBS’s use of the SUNNY ROO logo and word mark. For example, on one occasion a defective Sunny Roo inverter was sent to SMA for repair. The judge held that it was inevitable that BBS’s use of the SUNNY ROO word mark and logo would cause public confusion, and consequently he found that BBS had passed off its products as those of SMA and infringed SMA’s registration.

By the time of the trial, BBS was in liquidation and so did not take an active part in the proceedings. However, SMA also sought relief against Ipevo as licensor of the SUNNY ROO mark. Ipevo had not sold products or provided services under the mark, but the judge found that Ipevo was liable as a joint tortfeasor for passing off and trademark infringement by reason of having licensed the SUNNY ROO word mark and logo to BBS.

Ipevo and BBS were related companies in that they shared a common director, but the precise extent of their relationship is not clear from the case. However, the judge’s decision in relation to Ipevo’s liability did not depend on the relationship between the companies.

Thus, Ipevo found itself liable for both trademark infringement and passing off, and SMA’s costs, in circumstances where essentially all that it had done was to license another company to use its registered mark.

The following lessons and issues emerge from the case:

  • It is a mistake to assume that a registered mark can be used or licensed without risk of breaching third-party rights. Registration is no defence to a passing-off action or breach of the Consumer Law.
  • Registration is a defence to an infringement action (Sections 23 and 122(1)(e) of the Trademarks Act). However, for reasons which are not apparent from the case, Ipevo did not rely on that defence. In any event, that defence would not have extended to use of the SUNNY ROO word mark as it was not separately registered.   As an aside, based on the wording of Section 122(1)(e), it is unclear whether that defence extends to use of a registered mark by a licensee (although it presumably would if the licensee’s use constitutes “authorised use”, as this is deemed to be use by the registered owner).
  • Be careful what you license - Ipevo argued that it had licensed use only of the SUNNY ROO logo, not the word mark, and that SMA’s case really concerned the word mark SUNNY ROO. This argument was rejected, in part because the judge found that the word mark was derived from the logo and was thus covered by the “improvements” clause in the licence agreement and licensed to BBS. As the judge found that both SUNNY ROO and the logo were deceptively similar to SUNNY BOY, this argument would ultimately not have helped Ipevo. However, in some cases a licensor might be able to avoid liability where a licensee has used only part of a registered mark in breach of the licence terms.
  • Consider the scope of your application – an issue in the case was whether “solar panels” were similar to “solar inverters”. The judge, perhaps surprisingly, found that they were not. He relied primarily on the ground that they perform different technical functions, notwithstanding the common trade channels through which they are sold and the fact that both products are needed in a solar power system. SMA’s infringement claim therefore failed in relation to BBS’s sale of solar panels, in circumstances where filing a slightly broader application would have produced a different result.

This is an Insight article, written by a selected partner as part of IAM's co-published content. Read more on Insight

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