What you need to know
- The High Court of Australia has dismissed Kraft's application for special leave to appeal its peanut butter get-up dispute with Bega.
- Therefore, the decision of the Full Federal Court of Australia in this matter will stand.
- The Full Federal Court confirmed that unregistered trade marks can only be assigned with the goodwill of the associated business but did not address the licensing of unregistered marks which leaves some uncertainty on that issue.
What you need to do
- If your business has unregistered marks which are of value, consider applying to register them.
- Consider carefully and seek advice when licensing trade marks, particularly unregistered trade marks.
- Be aware that the ability to assign registered trade marks with goodwill is now also in doubt and that "common law rights" may not pass with registered marks unless business goodwill is also being sold.
Special leave application
Having failed at both the first instance and appeal level of the Federal Court, Kraft applied for special leave to appeal the decision regarding the ownership of the peanut butter trade dress to the High Court of Australia.
In our June 2019 edition of IP @Ashurst we wrote about the implications of the first instance decision here, and in an IP @ Ashurst Update in April 2020 we wrote about the Full Federal Court's decision here.
On 13 November 2020, Kraft argued that the High Court should grant it special leave to appeal the Full Federal Court's decision. Unfortunately for Kraft, the application was dismissed with costs.
What does that mean for unregistered trade marks?
This decision by the High Court to refuse special leave means that Bega retains the rights to the peanut butter trade dress in Australia. For unregistered trade marks more broadly, while the Full Federal Court clearly stated that unregistered trade marks can only be assigned with the associated business goodwill, it did not provide definitive guidance regarding the licensing of unregistered marks.
At first instance, the primary judge indicated that unregistered marks may not be able to be licensed without an assignment of the underlying goodwill, which is contrary to common practice. However, the Full Court declined to express a view on that issue because it was not central to the case between Kraft and Bega. As a result, there is now some uncertainty about the licensing of unregistered trade marks in Australia. But what is clear is that goodwill rights acquired through use cannot be transferred in a licensing arrangement meaning that a licensee of an unregistered mark can acquire reputation and rights to the mark over time.
Therefore, any licensing arrangements entered into involving unregistered marks need to be carefully considered and drafted to ensure that the licensor's rights are protected to the extent possible, and to limit any acquisition of rights by the licensee. In addition, businesses should consider applying to register any unregistered trade marks that are of value to the business (such as colour schemes and product get up) because registered trade marks provide additional protections and can be assigned without goodwill (section 106 of the Trade Marks Act 1995).
Authors: Annika Barrett, Senior Expertise Lawyer; Kellech Smith, Partner.
