Clipsal turns off the lights for Clipso in trade mark dispute

If you thought that registering a trade mark gave you the right to use it, you'd be wrong. While a trade mark registration is good for bringing infringement claims and will provide a defence to trade mark infringement claims, it does not provide a defence to actions for misleading or deceptive conduct or passing off.

A recent Federal Court decision has highlighted the limitations of relying on trade mark registration as a defence to these types of claims.

CLIPSAL and CLIPSO

CLIPSAL is a well-known brand in Australia and is registered as a trade mark for various electrical goods.

In 2009, Mr Abdul Kader founded Clipso Electrical Pty Ltd and caused it to register and use CLIPSO as a trade mark for various electrical goods, similar to those sold under the CLIPSAL brand. Clipsal Australia objected to Clipso Electrical's use of the CLIPSO trade mark, and eventually sued it for infringing the CLIPSAL trade mark. Clipsal Australia also claimed that Clipso Electrical's use of the CLIPSO trade mark meant it had engaged in misleading and deceptive conduct and passing off.

Trade mark infringement

Clipsal Australia had no success in its trade mark infringement claim, because Clipso Electrical's registration of the CLIPSO trade mark gave it a complete defence. However, Clipsal Australia was successful in arguing that the CLIPSO trade mark registration should be cancelled on various grounds, including that Clipso Electrical had registered CLIPSO in bad faith. The result is that the CLIPSO trade mark will be cancelled. Once that occurs, Clipso Electrical will no longer be able to rely on it as a defence to any future infringement of the CLIPSAL trade mark.

Misleading and deceptive conduct - who's buying Clipsal and Clipso?

Clipsal Australia argued that Clipso Electrical's conduct in using the CLIPSO trade mark was misleading or deceptive due the similarity between CLIPSO and the well-known CLIPSAL brand.

The Court analysed in detail the relevant market and drew a distinction between electrical contractors (who would not be misled due to their expertise) and others in the market such as consumers, retailers and builders (who could be misled due to their lack of expertise).

As a result, the Court found that Clipso Electrical's use of the CLIPSO trade mark was misleading or deceptive.

Passing off Clipso as Clipsal?

Once the Court found that Clipso Electrical had engaged in misleading or deceptive conduct, it was a short step for it to find that Clipso Electrical had also engaged in passing off.

Passing off involves a misrepresentation that one person's goods are those of another person who has a reputation in the relevant goods.

Clipsal Australia has a significant reputation in Australia for the CLIPSAL brand, and Clipso Electrical had engaged in passing off by adopting a similar brand which was likely to result in members of the public mistaking CLIPSO for CLIPSAL.

Personal liability for Clipso's director

Mr Abdul Kader was the director of Clipso Electrical. Of itself, this does not make him liable for its conduct. However, the Court found Mr Abdul Kader was personally liable for the conduct of Clipso Electrical because of his close personal involvement in its dishonest conduct. This means Clipsal Australia will have recourse to the personal assets of Mr Abdul Kader, if Clipso Electrical does not have sufficient assets to meet the claim. The amount of liability was not decided by the Court in this decision. The amount will either be agreed by the parties or determined by the Court on another day. No doubt Clipsal Australia will also be looking to recover its legal costs.

Key points for trade mark owners

Registering a trade mark can be an effective strategy for stopping others from using similar trade marks. However, it provides a limited defence if the trade mark is similar to an existing well-known brand in the same market. It is important to investigate whether use of a trade mark could amount to misleading or deceptive conduct or passing off.

A comprehensive search should identify unregistered similar trade marks for consideration. However, as the CLIPSAL/CLIPSO decision highlights, existing registered trade marks with a significant reputation should also be considered.

The Trade Marks Office does not consider the reputation of existing registered trade marks when examining new trade mark applications. So, the fact that a new trade mark is allowed to be registered does mean it can be used without the risk of a misleading or deceptive conduct or passing off claim.