Henley v Henley Constructions No room for two Henleys in the national building industry

What you need to know

• Henley, one of the largest home builders in Australia, has been successful in its claims of trade mark infringement and misleading and deceptive conduct against Henley Constructions Pty Ltd and its founder, Patrick Sarkis.
• Despite denials, the Court found that Patrick Sarkis was made aware of Henley when he established his company in 2006. He then escaped Henley's attention for a decade while he used his company to construct his own private low-rise apartment development projects in suburban Sydney.
• In 2017, Patrick Sarkis ramped up his company's public-facing use of the "Henley" trade mark, bringing his business to the attention of Henley. He then continued to do so despite being put on notice of Henley's rights in the mark.
• Patrick Sarkis and his company were also unsuccessful in removing or limiting Henley's trade marks. The Court found his company was not entitled to registration of the mark "Henley Constructions" despite a lengthy period of use, and that it could not take the benefit of the "good faith" use of own name defence.
• The Federal Court will now restrain any further use of "Henley" by Patrick Sarkis and his company, with financial remedies to be determined separately.

What you need to do

• Do not approach the selection of a new brand by taking inspiration from businesses already trading in the industry, even if those businesses appear to be located in another state or country.
• Before adopting a new business name or brand, make proper enquiries to establish that the name is free to use in Australia. You should at least conduct searches of the name on Google and the online Australian trade marks register.
• If your searches reveal that someone in a different state or territory has already used the name, do not assume that their rights are limited to their state or territory. Consider whether your market is a national one in Australia – which is likely to be the case if you promote your goods and/or services online.
• If you begin using the name and nobody challenges your use, even for years, do not assume that you are in the clear. A trade mark owner is not obliged to closely monitor whether anybody else is using its mark in Australia, and private uses of brands that go unnoticed until public-facing marketing begins do not necessarily support defences to infringement claims.

Henley's reputation in Australia

Henley was established in Victoria in 1989, and quickly grew to become one of the largest home builders in Australia. By the mid-1990s, Henley operated in Victoria, South Australia, New South Wales, the ACT and Queensland under the "Henley" trade mark.

In the early 2000s, Henley scaled back its operations in New South Wales to focus on its operations in Victoria, Queensland and South Australia, but it continued to build some houses in New South Wales and also built houses in other states for customers located in New South Wales.

In 2003, Henley began marketing its services at www.henley.com.au. Since then, this website has had significant numbers of visitors, and Henley has built homes for customers, from all over Australia and overseas.

Establishment of Henley Constructions

In late 2006 in Sydney, Patrick Sarkis founded Henley Constructions Pty Ltd. He did not conduct any proper searches to establish whether the name Henley was free to use, despite being told by a contractor that another builder had previously used the name "Henley" in New South Wales.

The Court also found, contrary to Sarkis's evidence, that his wife had conducted a Google search for "Henley" that revealed the website at www.henley.com.au, and had told him about it. Despite knowing about Henley, Patrick Sarkis merely relied on the fact that "Henley Constructions Pty Ltd" was available for registration with ASIC as it was not an exact match with any Henley group company names.

Henley Constructions' conduct

From 2006 to around 2017, Henley Constructions primarily built low-rise apartments for Patrick Sarkis' own development companies, which were then sold to the public under the branding of the relevant development vehicle.

In around 2017, Henley Constructions ramped up its public-facing marketing of the "Henley Constructions" brand. This attracted Henley's attention, and when Henley put Henley Constructions on notice of Henley's rights, Henley Constructions and Patrick Sarkis doubled down on their marketing efforts, including via social media and a redesign of the company logo that placed greater emphasis on the word "Henley".

The Court ultimately decided in Henley's favour on all of the issues in dispute concerning Henley Constructions and Patrick Sarkis' use of "Henley Constructions" (and various other "Henley" formative marks), and accordingly held that they had infringed Henley's trade mark rights.

Henley Constructions' defences

Henley Constructions argued that its use of "Henley Constructions" was the use of its own name in good faith (ie it had a "use of own name" defence). However, the Court found that Patrick Sarkis' failure to conduct proper enquiries in 2006, despite knowing about Henley, meant that he had not acted in good faith in adopting the name.

Henley Constructions also argued that, because it had used the name since 2006, it would be entitled to its own trade mark registration for "Henley Constructions". However, the Court found that any application by Henley Constructions to register the mark would be successfully opposed by Henley, on any one of the grounds raised by Henley (including that Henley is the owner of the "Henley" mark in Australia for building services).

Henley Constructions' cross-claim

Henley Constructions unsuccessfully sought to remove and/or limit some of Henley's trade mark registrations on the following grounds:

• The name "Henley" was not distinctive in relation to building services when Henley filed for and obtained its trade mark, because it is a suburb name and a surname:
  
  • The Court found that, regardless of the inherent lack of distinctiveness of the word "Henley", Henley's extensive use of the mark since 1989 meant that the mark had acquired distinctiveness and had done so by the time an application to register the mark had been filed by Henley.
• Henley had misled the examiner of its trade mark applications about the extent of its reputation in "Henley":
  
  • The Court found that no misleading representations had been made.
• Henley hadn't used its marks in relation to apartments (as distinct from houses):
  
  • The Court agreed with Henley that distinguishing between building houses and building apartments would be to make "too fine a distinction", and the relevant consumers would not appreciate the difference.
• Henley had stopped using its mark in New South Wales:
  
  • The Court found that the building market in Australia was, and is, a national one, such that Henley's reputation in one state (eg Victoria) would spill over into another (eg New South Wales). In any case, Henley had in fact used its marks in New South Wales, in part because at all relevant times it had built properties in Victoria for investors located in New South Wales.

Henley's ACL claim

The Court also found that Henley Constructions and Patrick Sarkis' use of "Henley Constructions" constituted misleading and deceptive conduct under the Australian Consumer Law, as consumers of building services would likely be misled to believe that Henley Constructions was associated with Henley.

Patrick Sarkis

The Court found that Patrick Sarkis was jointly liable for, and aided and abetted, the infringing conduct as he was the only person responsible for making management decisions for his company at all relevant times. He was the sole shareholder of the company and ultimately approved all marketing decisions. The Court found that Patrick Sarkis engaged in conduct that was "deliberate and recklessly indifferent to the risk of creating consumer confusion" and that he was "knowingly involved" in the wrongdoing.

Relief

The Court will shortly grant the non-pecuniary relief sought by Henley (including restraining Henley Constructions and Patrick Sarkis from using "Henley"). Henley has also sought an account of the profits derived from Henley Constructions' infringing conduct, but the case on quantum will be heard at a later date.

Ashurst acted for Henley in this proceeding.

Authors: Kellech Smith, Partner and Will Scott, Senior Associate.