PHARMAZEN LIMITED v ANAGENIX IP LIMITED [2020] NZCA 306

PHARMAZEN LIMITED v ANAGENIX IP LIMITED [2020] NZCA 306 [23 July 2020]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA348/2019[2020] NZCA 306BETWEEN PHARMAZEN LIMITEDAppellantAND ANAGENIX IP LIMITEDRespondentHearing: 29 April 2020Court: Brown, Dobson and Nation JJCounsel: J V Ormsby and B J Entwistle for AppellantG F Arthur and J L Calvert for RespondentJudgment: 23 July 2020 at 11.30 amJUDGMENT OF THE COURTA The appeal is dismissed.B The appellant must pay the respondent costs for a standard appeal ona band A basis and usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Brown J)[1] The respondent (Anagenix) is the registered proprietor of the trade markACTAZIN for goods and services in classes 5 and 29, in particular kiwifruit extractpowder as a dietetic substance or ingredient for medical use. The appellant(Pharmazen) applied to register its trade mark ActiPhen in respect of what are acceptedin this Court to be similar goods. The decision of the Assistant Commissioner ofTrade Marks declining that application1 was upheld on appeal by the High Court.2[2] On this appeal Pharmazen challenges the finding that ActiPhen is similar toACTAZIN and the conclusion in the context of s 25(1)(b) of the Trade Marks Act 2002(the Act) that the use of ActiPhen is likely to deceive or confuse.Registrability of similar trademarks[3] The focus of this appeal is the interpretation and application of s 25(1)(b) ofthe Act. Section 25 relevantly states:25 Registrability of identical or similar trade mark(1) The Commissioner must not register a trade mark (trade mark A) inrespect of any goods or services if—(a) it is identical to a trade mark (trade mark B) belonging toa different owner and that is registered, or has priority undersection 34 or section 36,—(i) in respect of the same goods or services; or(ii) in respect of goods or services that are similar to thosegoods and services, and its use is likely to deceive orconfuse; or(b) it is similar to a trade mark (trade mark C) that belongs toa different owner and that is registered, or has priority undersection 34 or section 36, in respect of the same goods orservices or goods or services that are similar to those goods orservices, and its use is likely to deceive or confuse;(2) Section 26 overrides subsection (1).[4] Section 26 states:26 ExceptionsThe Commissioner must register trade mark A if—(a) the owner of trade mark B, trade mark C, or trade mark D (as the casemay require) consents to the registration of trade mark A; or1 Pharmazen Ltd v Anagenix IP Ltd [2018] NZIPOTM 27 [Assistant Commissioner's decision].2 Pharmazen Ltd v Anagenix IP Ltd [2019] NZHC 1520 [High Court judgment].(b) the Commissioner or the court, as the case may be, considers thata case of honest concurrent use exists, or other special circumstancesexist, that, in the opinion of the court or the Commissioner, makes itproper for the trade mark to be registered subject to any conditionsthat the court or the Commissioner may impose.[5] Mr Ormsby's argument for Pharmazen also placed significant reliance ons 17(1)(a). Section 17(1) states:17 Absolute grounds for not registering trade mark: general(1) The Commissioner must not register as a trade mark or part of a trademark any matter—(a) the use of which would be likely to deceive or causeconfusion; or(b) the use of which is contrary to New Zealand law or wouldotherwise be disentitled to protection in any court; or(c) the use or registration of which would, in the opinion of theCommissioner, be likely to offend a significant section of thecommunity, including Māori.[6] Given the nature of the argument to be considered, it is also convenient to notethe jurisdiction to remove a trade mark registration on account of the owner's non-use.66 Grounds for revoking registration of trade mark(1) The grounds for revoking the registration of a trade mark are asfollows:(a) that at no time during a continuous period of 3 years or morewas the trade mark put to genuine use in the course of tradein New Zealand, by the owner for the time being, in relationto goods or services in respect of which it is registered:(1A) For the purposes of subsection (1)(a), continuous period meansa period that commences from a date after the actual date ofregistration and continues uninterrupted up to the date 1 month beforethe application for revocation.(2) However, there are not grounds for revoking the registration of a trademark for its non-use if its non-use is due to special circumstances thatare outside the control of the owner of the trade mark.(3) Subsection (1)(a) does not apply if the owner commences or resumesgenuine use of the trade mark in the course of trade in New Zealandafter the expiry of the 3-year period and before the application forrevocation is made.(4) Any commencement or resumption of use referred to in subsection (3)after the expiry of the 3-year period but within the period of 1 monthbefore the making of the application for revocation must bedisregarded unless preparation for the commencement or resumptionbegan before the owner became aware that the application may bemade.[7] Relevant to the present case the definition of trade mark use in s 7 includes:7 Meaning of use of trade mark(1) In this Act, unless the context otherwise requires, use, in relation toa trade mark, includes—(b) applying the trade mark to goods or services or to materialsfor the labelling or packaging of goods or services inNew Zealand solely for export purposes; and(c) the application in New Zealand of a trade mark to goods orservices to be exported from New Zealand, and any other actdone in New Zealand in relation to those goods or servicesthat, if done in relation to goods or services to be sold orotherwise traded in New Zealand, would constitute use ofa trade mark in relation to those goods or services for whichthe use is material under this Act or at common law;Relevant background[8] Because this appeal is concerned solely with s 25(1)(b) the facts can bebriefly stated.[9] The Anagenix group of companies as described by its managing director isa collective of New Zealand nutraceuticals companies with an interest in naturalproducts relating to digestive health, including kiwifruit powder. Anagenix developsingredients for supplements and has also developed some finished products for sale.[10] The trade mark ACTAZIN, coined by Anagenix in 2007, was registered inNew Zealand with an effective date of registration of 27 October 2009 in respect ofthe following goods:Class 5: kiwifruit extract powder as a dietetic substance or ingredient adaptedfor human health and medical use including dietary, health and nutritionalsupplements, medical food and functional foods and beverages;Class 25: kiwifruit extract powder as a dried fruit ingredient in themanufacture of food and chilled dairy products, including drinking yoghurts.The managing director of Anagenix deposed that the first syllable, ACT, originatedfrom the botanical name for kiwifruit, Actinidia, and the name of the enzymeActinidin, although he acknowledged that "not everyone is aware of this fact."[11] ACTAZIN was the trade name for the first product developed by Anagenix,a kiwifruit powder concentrate produced from New Zealand green kiwifruit. Since thefirst sales in 2009 in the United States, Anagenix has sold its ACTAZIN productprimarily to businesses overseas. The product was sold in New Zealand for a numberof months commencing in February 2012 but in mid-2012 Anagenix ceased sellingACTAZIN products in New Zealand because of the potential infringement ofa recently granted patent. The managing director of Anagenix deposed that, whileAnagenix did not accept the validity of that patent, a business decision was taken tosell ACTAZIN products only outside New Zealand while the patent is in force.[12] Pharamazen develops, manufactures and markets specialised nutritionalingredients for human and animal dietary supplement products. Its product brandedActiPhen comprises 100 per cent kiwifruit powder consisting of both flesh and skinand contains no artificial additives. The chief executive officer of Pharmazenexplained that the trade mark is a combination of Acti and Phen where:"(a) "Acti" is the designated abbreviation for "Actinidin" being theprotease enzyme unique to kiwifruit and also representing actinidiadeliciosa, the botanical name for green kiwifruit; and(b) "Phen" is a reference to the phenolic compounds of ActiPhen.Phenolic compounds are phytonutrients — naturally occurringcompounds in plants that are generally there to provide protectionagainst adverse factors like UV radiation and infection, amongst otherthings. Research has shown that these compounds have healthpromoting benefits."[13] On 4 May 2016 Pharmazen lodged its application to register the ActiPhen trademark in relation to the following goods in class 5:3Food preparations adapted for medicinal purposes; pharmaceuticalpreparations; pharmaceutical preparations containing enzymes;pharmaceutical preparations to support gut health and digestion; dietarysupplements for humans and animals (for medicinal purposes); antioxidants(dietary supplements); kiwifruit powder for use as an ingredient in dietarysupplements (medicinal purposes); kiwifruit powder (not for medicinalpurposes) for use as an ingredient in dietary supplements; kiwifruit powder(not for medicinal purposes) for use as an ingredient in animal feedsupplements.[14] Anagenix opposed the application on three grounds:(a) ActiPhen is similar to Anagenix's trade mark registered in respect ofgoods that are the same or similar to Pharmazen's goods, and use ofActiPhen by Pharmazen is likely to deceive or confuse (s 25(1)(b));(b) use of ActiPhen would be likely to deceive or cause confusion(s 17(1)(a); and(c) use of ActiPhen is contrary to law because it would amount to a breachof ss 9, 10 and 13 of the Fair Trading Act 1986 (s 17(1)(b)).The Assistant Commissioner's decision[15] Addressing first the s 25(1)(b) ground of opposition, the AssistantCommissioner identified three key issues:4(a) whether the goods were similar;(b) whether the trade marks were similar; and(c) whether the use of ActiPhen would be likely to deceive or confuse.3 The application also sought registration in respect of class 16 goods such as printed materialrelating to class 5 goods.4 Assistant Commissioner's decision, above n 1, at [51].[16] By reference to the factors relevant to the assessment of similarity recognisedin British Sugar Plc v James Robertson & Sons Ltd5 the Assistant Commissionerconcluded that there could not be any real doubt as to the similarity of the respectivegoods, accepting Anagenix's submission that there was a considerable overlapbetween them.6[17] The Assistant Commissioner considered that the two marks were visuallysimilar and that, while not phonetically identical, there was a substantial degree ofsimilarity in their likely natural pronunciation.7 On the evidence available theAssistant Commissioner concluded that a significant numbers of persons in therelevant market looking at the ActiPhen mark in the absence of the ACTAZIN markwould be likely to be caused to wonder whether the ActiPhen mark was the same as,or related to, the ACTAZIN mark.8[18] While upholding the objection under s 25(1)(b), the Assistant Commissionerdetermined that there was insufficient evidence of awareness of the ACTAZIN markin the relevant New Zealand market to satisfy the reputational threshold unders 17(1)(a) in the circumstances where Anagenix had not sold or marketed ACTAZINin New Zealand since 2012.9 The lack of awareness was also dispositive ofthe Fair Trading Act grounds advanced by the respondent through s 17(1)(b).10The High Court judgment[19] On appeal Pharmazen contended that the Assistant Commissioner's decisionon s 25(1)(b) was wrong and inconsistent with the conclusion that registration ofActiPhen would not contravene s 17(1)(a).[20] Addressing the same three issues as the Assistant Commissioner, Cull J agreedthat there could not be any real doubt as to the similarity of the parties' respectivegoods.11 On the issue of similarity between the marks the Judge concluded:5 British Sugar plc v James Robertson & Sons Ltd [1996] RPC 281 (Ch) at 296–297.6 Assistant Commissioner's decision, above n 1, at [53].7 At [60].8 At [71].9 At [75]–[76].10 At [82].11 High Court judgment, above n 2, at [39].[58] I find there are both visual and aural similarities of the marks.Accepting the fair and notional use of the marks as they might be represented(as ACTAZIN and ACTIPHEN), I find the marks look similar, and I considermost New Zealanders would be likely to pronounce the words as "ACT-i-fen"and "ACT-i-zin", which would make them phonetically extremely similar,with the only difference being "f" as opposed to "z".In the Judge's view the placement of "ACT" at the beginning of each of the markswould be the focus of a person's recollection of the product and, with themonophthong vowel following the syllable "ACT", made the final syllable of lesserimportance. The Judge considered that the descriptive nature of the prefix "ACT", asbeing derived from the botanical name for kiwifruit, was not commonplace orcommon knowledge and there was no conceptual meaning to either mark, making itmore difficult to distinguish them as they do not imply any specific meaning.12[21] On the third issue Pharmazen submitted that as Anagenix's ACTAZIN productwas not in the New Zealand market, there was no possibility that ActiPhen could beconfused with Anagenix's mark and therefore the s 25(1)(b) test could not be satisfied.This was said to be consistent with the Assistant Commissioner's finding unders 17(1)(a) that there was no likelihood of confusion or deception because Anagenixdid not have a reputation in the New Zealand market.[22] Referring to this Court's decision in Anheuser-Busch Inc v Budweiser BudvarNational Corp,13 Cull J identified the key principle to be that, when a trade mark holderis relying on s 25(1)(b), its own actual use and reputation are not relevant andconsequently the Court was not required to consider the actual use of Anagenix's trademark.14 Hence the Assistant Commissioner's finding rejecting Anagenix's ground ofopposition under s 17(1)(a) was not inconsistent with the conclusion on s 25(1)(b).15Issues on appeal[23] An agreed list of issues was filed in the following terms:12 At [60]–[61].13 Anheuser-Busch Inc v Budweiser Budvar National Corp [2003] 1 NZLR 472 (CA).14 High Court judgment, above n 2, at [74].15 At [78]–[79].The legal test1 Whether or not the High Court and the Commissioner were wrong toconclude that the assessment under s 25(1)(b) only involvedconsideration of notional fair use of the respective trade marks andinstead ought to have considered:(a) Whether or not use of the appellant's trade mark was likely todeceive or confuse within the actual New Zealand market;(b) Whether or not there was a likelihood of use by parties in anactual New Zealand market wherein a considerable section ofthe public would be likely to be deceived or confused.2 Did the High Court err in finding that the key principle when atrade mark holder is relying on s 25(1)(b) is that its own actual useand reputation are not relevant and, therefore, finding that theAssistant Commissioner was not required to consider the actual useof the respondent's mark?3 Did the High Court err by:(a) finding that it was irrelevant that the respondent had noproduct in the New Zealand market?(b) failing to consider the evidence that the respondent had noproduct on the New Zealand market at the relevant date?(c) failing to assess whether the evidence established that therespondent was unlikely to ever have any product availableon the New Zealand market and, if so, failing to consider thatevidence?(d) placing too much weight on the respondent's registration andon any export market?The comparison of trade marks4 Whether or not the High Court and the Commissioner were wrong toconclude that the marks are both visually and orally similar so that theuse of the appellant's trade mark is likely to cause deception orconfusion for the purpose of s 25(1)(b) of the Trade Marks Act 2002?5 What is the likely pronunciation(s) of the trade marks and are thetrade marks orally similar? Whether or not the High Court erred inconcluding that most New Zealanders would be likely to pronouncethe trade marks as "Act-i-fen" and "Act-i-zin"?6 Whether or not the High Court correctly assessed the visual, aural andconceptual similarities of the trade marks including any notional fairuse? Did the High Court place too much weight on the notional fairuse of ActiPhen in uppercase letters?7 How significant is the common first syllable ACT? Did theHigh Court and the Commissioner err in fact by placing too muchweight on the syllable "ACT" and finding that "ACT" is notcommonplace or common knowledge?8 Did the High Court fail to adequately consider other differencesalleged by the Appellant in respect of the trademarks?9 Did the High Court and the Commissioner err by concluding that theappellant had failed to satisfy the onus of proving, on the balance [of]probabilities, that the use of ActiPhen would not be likely to causedeception or confusion under s 25(1)(b)?[24] However we will consider the parties' arguments by reference to the followingbroad questions:(a) Is use by the registered owner of trade mark C a prerequisite fora successful opposition under s 25(1)(b) to an application to registertrade mark A?(b) Is ActiPhen similar to ACTAZIN?(c) Given the registration of ACTAZIN, has Pharmazen demonstrated onthe balance of probabilities that its use of ActiPhen is not likely todeceive or confuse?Is use by the registered owner of trade mark C a prerequisite for a successfulopposition under s 25(1)(b) to an application to register trade mark A?Pharmazen's contention[25] The thrust of this aspect of the appeal is a challenge to Cull J's statement:16[74] The key principle is that when a trade mark holder is relying ons 25(1)(b), its own actual use and reputation are not relevant. The Court istherefore not required to consider the actual use of Anagenix's trade mark.[26] Emphasising the reference in s 25(1)(b) to "[the trade mark's] use is likely todeceive or confuse", Pharmazen's submission stated:12 [Pharmazen invites] the Court to conclude that while a distinguishingfeature of s 25(1)(b) is the assessment of use of the mark in a normal16 High Court judgment, above n 2.and fair manner, so that "reputation" is not necessarily relevant todeception and confusion; that assessment of notional fair use cannotbe so wholly divorced from statutory language to result in a findingthat the market will be "likely to be" deceived and confused incircumstances where the opposing party does not, and has no intentionof, participating in the relevant market.13 In other words, this appeal invites the Court to conclude that thestatutory language will not be overridden by a pure hypotheticalanalysis that assumes market participation, when the evidence is thatsuch participation did not exist at the relevant date (and will not existin the future).Mr Ormsby submitted that a comparison of ss 17(1)(a) and 25(1)(b) reveals nodiscernible difference between them based on the language deployed by Parliament.Hence actual use was relevant to the analysis in relation to both.[27] However for at least 75 years it has been recognised that the antecedents ofss 17(1) and 25(1)(b) involve different tests. As the Privy Council observed ina New Zealand appeal, Hannaford & Burton Ltd v Polaroid Corp, with reference toss 16 and 17 of the Trade Marks Act 1953:17Turning now to the merits of the appeal, the questions for decision wereconveniently stated by Mr Price, adapting the form of questions posed byEvershed J in Re Smith Hayden & Co Ltd's Application (1945) 63 RPC 97,101, as follows:(1) Having regard to the actual use of "Polaroid" in October 1966 is thecourt satisfied that "Solavoid" if used in a normal and fair manner inconnection with sunglasses would be reasonably likely to deceive orcause confusion among a substantial number of persons? and(2) (Under s 17(1)) assuming use by the respondent of its trade mark"Polaroid" in a normal and fair manner for sunglasses, is the courtsatisfied that there would be reasonable likelihood of deception orconfusion among a substantial number of persons if "Solavoid" wasused in a normal and fair manner also for sunglasses?[28] Notwithstanding his submission that there was no discernible differencebetween ss 17(1)(a) and 25(1)(b), Mr Ormsby confirmed that he was not challengingthe approach in Polaroid so far as it went. Rather his point was that neither Polaroidnor any subsequent case had been required to confront the scenario presented by thecurrent case where there had been no actual use by the registered proprietor of the17 Hannaford & Burton Ltd v Polaroid Corp [1976] 2 NZLR 14 (PC) at 18. Sections 16 and 17 ofthe Trade Marks Act 1953 equate to the current ss 17 and 25 respectively.trade mark. In such a case he contended that the Polaroid principles were notdefinitive.[29] He argued that it is not part of the notional fair use assessment to import a levelof market participation which does not exist: the High Court and Assistant Commissioner wrongly assessed thesimilarity of the marks being used in a normal and fair manner and alsointerpolated market participation of ACTAZIN that ostensibly did not exist atthe relevant date for assessment and is unlikely to exist at any time.An assessment of use of the marks in a normal and fair manner must beconsidered against the backdrop of the actual relevant market.[30] Observing that the legislation is protective, existing to prevent confusion in therelevant market, Mr Ormsby submitted: when Parliament chose the words "its use is likely to deceive or confuse",it intended that the actual use of the mark (under any fair and notionalassessment) would actually cause deception or confusion to real persons in anactual market in New Zealand.On any reading of the evidence, such deception or confusion is not "likely" becausein Pharmazen's submission there is simply no market and no use that would causesuch confusion.[31] Thus Mr Ormsby's argument treads a fine line between acknowledging thats 25(1)(b) involves a notional use of trade mark C for the confusion analysis whilesimultaneously contending that the analysis necessitates an actual market in whichthere is actual use of trade mark C.Discussion[32] Under pt 2 of the Act, which concerns the registrability of trade marks,registration of an application may be refused either on absolute (subpt 2) or relative(subpt 3) grounds. Section 17 specifies absolute grounds whereas s 25 is in subpt 3.The distinction between the two sections was helpfully explained by Clifford J inBritish American Tobacco (Brands) Inc v NV Sumatra Tobacco Trading Co (in thecontext of the equivalent provisions, ss 16 and 17 respectively, of the Trade Marks Act1953):18[36] Both sections, as can be seen, use the phrase "likely to deceive orcause confusion". In s 16(1), that is one of the grounds which makes it notlawful to register a mark. In s 17(1), that is the ground on which registrationis to be declined.[37] The two sections, as is well recognised, serve different purposes andwork in different ways, although there are considerable similarities as regardsdetermination of the question of the likelihood of deception or confusion.[38] The purpose of s 16(1) is to protect the public rather than theproprietary rights of traders involved in a dispute as to the use of a particularmark. The public are, as relevant, to be protected from undesirable confusionarising from the registration of a trade mark. The purpose of s 17(1) is, bycontrast, to protect a registered mark, and the interest the proprietor of thatmark has, from the registration of a potentially deceptive or confusing similarmark. In Pioneer Hi-Bred, a case under s 16 of the 1953 Act, Richardson Jput the position this way:Whereas s 17 is concerned with the comparison between tworival marks relating to the same goods or description of goods ofwhich one is already on the Register, s 16 is not so limited.It extends to cases where the public is likely to be deceived orconfused merely by the mark in question. (at 61).[33] That distinction echoed the long-established position under the Trade MarksAct 1938 (UK) where, in relation to the equivalent provisions in ss 11 and 12(1),Lord Upjohn in BALI Trade Mark said:19This is the chief distinction between section 11 and section 12. Section 12 isprincipally a weapon in the hands of a registered proprietor though it is notnecessary that he personally should object. Here no use by the registeredproprietor need be shown; it is purely a question of similarity. Section 11 is,as I have said, for the protection of the public and anyone may object, but ifhe relies only on similarity he must prove the practical likelihood of confusionto the public [34] That the protection afforded by s 25(1)(b) is of the owner's interest isunderscored by the new provision in s 26(a) of the Act which confers on the owner oftrade mark C the power of consent to the registration of trade mark A. If the owner oftrade mark C consents, then the Commissioner is obliged to accept the application forregistration of trade mark A. There is no equivalent power in the context of s 17.18 British American Tobacco (Brands) Inc v NV Sumatra Tobacco Trading Co HC WellingtonCIV-2007-485-2814, 11 November 2008.19 BALI Trade Mark [1969] RPC 472 (HL) at 496.[35] In our view those distinctly different purposes of the two provisions providethe explanation why different parameters apply in the inquiry as to a likelihood ofconfusion between two marks. In both ss 17(1)(a) and 25(1)(b) the activity underscrutiny is the anticipated normal and fair use of the trade mark for which registrationis sought. However in the s 17(1)(a) analysis, the base comparator is the manner inwhich another trade mark has already been used in fact. By contrast, in the s 25(1)(b)analysis the comparator is an assumed use of an existing registered trade mark (trademark C), albeit in a normal and fair manner.[36] As Mr Arthur contended, Pharmazen's argument erroneously endeavours tointroduce s 17(1)(a) reputation considerations into the s 25(1)(b) analysis. It does soby importing consideration of actual use via the identification of the market as an"actual market".20 Plainly the comparison of the assumed normal and fair use ofACTAZIN and the anticipated normal and fair use of ActiPhen must be undertaken inthe context of a market comprising the likely purchasers of the trade marked products.But in the s 25(1)(b) analysis that market is itself notional. We agree with Mr Arthurthat introducing the concept of a so-called "actual market" into the s 25(1)(b) analysiswould leave no space for the application of a notional use.[37] The approach advocated by Pharmazen would produce inconsistencies withother provisions of the Act. Mr Arthur draws attention to s 7(1)(b) and (c) which havethe effect of deeming the application of a trade mark to export goods to be use of thetrade mark in New Zealand.21 However the Pharmazen approach would treat such useof the trade mark as irrelevant for the purposes of s 25(1)(b) for the reason that it wouldnot be use likely to cause deception or confusion in a relevant New Zealand market.[38] Mr Arthur further submitted that extrapolating Pharmazen's reasoning wouldresult in conflict with the infringement provision in s 89(1)(c) which provides thata registered trade mark is infringed if a similar trade mark is used on goods similar tothe goods in respect of which the trade mark is registered if that use would be likelyto deceive or confuse. It is well established that the infringement test postulatesnotional use of the registered trade mark compared with the actual use of the allegedly20 See [28]–[30] above.21 At [7] above.infringing trade mark.22 In the infringement context whether there has been actual useof the registered mark is not relevant.[39] We further observe there would be tension between the Pharmazen propositionand s 66 which stipulates the circumstances in which a registered trade mark can beremoved for non-use.23 Provided there is some genuine use of a trade mark duringany continuous period of three years, the trade mark will not be vulnerable to removalfor non-use.24 Furthermore revocation will not proceed where there are specialcircumstances outside the control of the trade mark owner which result in thenon-use.25 Even if there are no sales in New Zealand of products bearing the trademark, the application of the trade mark on goods for export recognised in s 7(1) willqualify as use so as to defeat an application for removal.[40] The paradox with Pharmazen's argument is that while, because of Anagenix'sexport usage, there could not be a successful application for removal of the ACTAZINtrade mark, Anagenix would nonetheless be deprived of the ground of opposition ins 25(1)(b) afforded to registered proprietors. Upon registration of ActiPhen,Pharmazen would have the infringement defence conferred by s 93.[41] For these reasons, the answer to the first issue is No. The second limb of thePolaroid formulation26 applies irrespective of whether there has been use by the ownerof trade mark C.Is ActiPhen similar to ACTAZIN?Pharmazen's contention[42] Pharmazen focused on five alleged errors in the assessment by Cull J of thesimilarity of the marks:(a) the likely pronunciation of the marks;22 Anheuser-Busch Inc v Budweiser Budvar National Corp, above n 13, at [87].23 At [6] above.24 Trade Marks Act 2002, s 66(1)(a).25 Section 66(2).26 At [27] above.(b) the focus on similarity of the marks in their uppercase form (under thenotional fair use assessment);(c) the weight placed on the first syllable "Act";(d) the failure to recognise the different phonetic, visual and auralstructures of the marks; and(e) the failure to recognise that the marks were not so similar as to cause areal danger of confusion in the relevant market.[43] In concluding that most New Zealanders would be likely to pronounce thewords as "ACT-i-fen" and "ACT-i-zin", which was different from the view of theAssistant Commissioner, Mr Ormsby contended that the High Court erroneouslyinterposed an entirely different vowel, namely "i", into ACT-a-Zin. Observing thatthere was no evidence before the High Court or the Assistant Commissioner that mostNew Zealanders would pronounce the words in that manner, he submitted that themost likely pronunciation is "Act-Ti-Fen" with the second most likely being"Act-Te-Fen". It was said that the location of the capital "P" in the middle of ActiPhenwould place a different emphasis on the last syllable and make it more pronounced.[44] Secondly, it was submitted that the High Court placed too much emphasis onthe notional fair use of ActiPhen in uppercase letters when assessing the similarity ofthe marks. While acknowledging that a notional fair use assessment involvesconsideration of any permutations of the mark, it was argued that similarity on onelevel does not mean the marks are so similar as to create a real danger of confusion.As the High Court had earlier acknowledged, the marks to be visually compared wereACTAZIN and ActiPhen.[45] With reference to what it described as the prefix "ACT," Pharmazen submittedthat the High Court placed too much weight on the first syllable with the consequencethat the marks were compared in their constituent parts in isolation rather than beingviewed as a whole. It further submitted that the High Court had failed to consider thenature of the relevant market when deciding that the claimed descriptive nature of theprefix is not commonplace or common knowledge. It was Pharmazen's contentionthat the prefix is inherently descriptive in the relevant market comprisingmanufacturers in the nutraceutical market.[46] In concluding that the marks were visually and aurally similar, Pharmazensubmitted that the High Court failed to consider:(a) the different length of the marks — ActiPhen (eight letters) andACTAZIN (seven letters);(b) the ACTAZIN mark has an epithetic vowel and ActiPhen uses thediagraph "Ph", thereby creating different visual and aural structures;(c) the last syllable of ActiPhen contains four letters as compared withACTAZIN's three; and(d) the marks contain very different phonetic, aural and visual structures,namely "Ti-Fen" or "Te-Fen" in comparison to "a-Zin" which, onviewing the marks as a whole, are very different in look and sound.Referencing the Court of Appeal decision in Polaroid, Pharmazen submitted that it isthe totality of impression of the two marks that is of fundamental importance.27Discussion[47] We endorse the High Court Judge's summary of the relevant principles for thesimilarity assessment:28(a) the Court should consider the marks in their entirety; the overall or netimpression of the marks should be considered;27 Polaroid Corp v Hannaford & Burton Ltd [1975] 1 NZLR 566 (CA).28 High Court judgment, above n 2, at [24], derived from the judgment of Winkelmann J inIntellectual Reserve Inc v Sintes HC Auckland CIV-2007-404-2610, 13 December 2007 at [16].(b) while differences between two marks may be significant, it is thesimilarities which are most significant, whether visual, audible,distinctive, or conceptual;(c) the impression or idea conveyed by the marks is important in assessinghow they will be recalled; the idea of a mark is more likely to berecalled than its precise details;(d) comparison is not of the opponent's mark with the mark of the applicantwhen taken side by side, but taking into account imperfect recollectionin all the circumstances in which the products might be sold; and(e) the marks are to be compared as they would be encountered in the usualcircumstances of trade.[48] Both trade marks are invented words. Neither has an apparent meaning.Nor does either convey an impression or an idea.[49] The trade marks are of similar length (seven letters compared with eight) andhave three syllables. They share the first syllable "Act" and they conclude with theletter "n". In our view there is a significant visual similarity between them.[50] We recognise that where a trade mark incorporates a word that is commonplacefor the relevant goods, that part will be less distinctive than other parts of the trademark.29 Pharmazen relies on that proposition in support of its contention that the firstsyllable of ActiPhen is descriptive, given that the botanical name for green kiwifruitis Actinidia deliciosa and that kiwifruit contains the enzyme Actinidin.[51] However on our review of the declarations there is no persuasive evidencesuggesting that ACT is an accepted and recognised abbreviation of Actinidia orActinidin. We consider that the Judge and the Assistant Commissioner were correct29 See Platinum Homes (NZ) Ltd v Golden Homes (1998) Ltd HC Wellington CIV-2005-485-1870,11 August 2006 at [20].in their conclusions that ACT is not descriptive, generic or a common part oftrademarks for the relevant goods.[52] There was no independent or expert evidence as to the likely pronunciation ofthe two trade marks. The parties advocated in favour of the following pronunciations:ACTAZIN ActiPhenPharmazen Act-a-Zin Ac-te-FenAnagenix Act-uh-zin Act-uh-fin[53] While considering there was a substantial degree of similarity, theAssistant Commissioner considered the more likely natural pronunciation to be thatproposed by Pharmazen.30 By contrast the Judge concluded that most New Zealanderswould be likely to pronounce the words as "ACT-i-fen" and "ACT-i-zin", with theconsequence that the only difference would be "f" as opposed to "z".31[54] In our view invented words such as the two marks in question are likely togenerate a variety of pronunciations. That is amply demonstrated by the evidence inthis case and the different findings of the Assistant Commissioner and the Judge.Our perception is that the second syllable of ActiPhen would be pronounced "teh"(as in "te reo") while the third syllable would sound like "fayrn" (as in "fair").However we consider that, like ACTAZIN, ActiPhen would be uttered with a fallinginflexion (like Harrison or episode). Both trade marks would be pronounced withprimary emphasis on the first syllable "Act". As the Judge noted,32 this Court in NVSumatra Tobacco Trading Co v British American Tobacco (Brands) Inc33 drewattention to the observation of Sargent LJ in Re London Lubricants (1920) Ltd'sApplication:34 [T]he tendency of persons using the English language to slur thetermination of words also has the effect necessarily that the beginning ofwords is accentuated in comparison, and, in my judgment, the first syllable ofa word is, as a rule, far the most important for the purpose of distinction.30 Assistant Commissioner's decision, above n 1, at [60].31 High Court judgment, above n 2, at [58].32 At [59].33 NV Sumatra Tobacco Trading Co v British American Tobacco (Brands) Inc [2010] NZCA 24,(2010) 86 IPR 206 at [32].34 Re London Lubricants (1920) Ltd's Application (1925) 42 RPC 264 (CA) at 279.[55] We accept Mr Arthur's submission that a significant number of people, bothconsumers and manufacturers, would be likely to pronounce ActiPhen in a mannerwhich involves the same rhythm, structure and sound as the way in which they wouldpronounce ACTAZIN. Consequently we reach the same conclusion as theAssistant Commissioner and the Judge that the two trade marks are similar.[56] Subsequent to the decision of the Assistant Commissioner, a decision wasreleased by the Registrar of Trade Marks in Australia on the opposition by Anagenixto Pharmazen's application for registration of ActiPhen.35 On the issue of similaritythe Registrar's delegate reasoned:21. While it is true that the trade marks all contain some similar lettersand some letters may potentially be interchangeably mispronounced,I am not satisfied that the Trade Mark is deceptively similar to theopponent's trade mark, particularly when the trade marks areconsidered, as they must be, as wholes. The spelling differencesbetween the 'coined' terms is significant and even though all thetrade marks may share some of the same three letter prefix and endwith the letter "n", the trade marks are likely to be pronounceda number of different ways by the general monolingual Australianconsumer particularly when the suffixes of the trade marks are sodifferent. I do not believe that ActiPhen would be pronounced in sosimilar a fashion as ACTAZIN by a significant number of consumers.The differences in spelling between the trade marks is simply toogreat.[57] However we do not find the Australian decision persuasive given that it wasmade in the context of s 44(1) of the Trade Marks Act 1995 (Cth). In such oppositionsthe opponent has the onus of showing that there is an existing or pending trade markin relation to which the opposed trade mark is either substantially identical ordeceptively similar. Anagenix was not able to discharge that onus. However in theNew Zealand context it is for Pharmazen to establish that its use of ActiPhen wouldnot be likely to deceive or confuse.35 Anagenix IP Ltd v Pharmazen Ltd [2018] ATMO 142, noted in the High Court judgment,above n 2, at [45].Given the registration of ACTAZIN, has Pharmazen demonstrated on thebalance of probabilities that its use of ActiPhen is not likely to deceive or confuse?Pharmazen's contention[58] Pharmarzen's argument hinges on it having succeeded on the first issue.Mr Ormsby submitted that when the issue of deception or confusion of theNew Zealand market is assessed holistically, there is no context to consider in thehypothetical scenario under s 25(1)(b) because goods branded ACTAZIN are simplynot available. He contended that it is nonsensical to reach a decision that a substantialnumber of persons in the relevant market could be confused when the market does notexist and is unlikely to ever exist, due to a grant of patent.[59] Pharmazen also prayed in aid the English decision in Och-Ziff ManagementEurope Ltd v Och Capital LLP36 and European Court of Justice decision inO2 Holdings Ltd v Hutchison 3G UK Ltd37 in support of the proposition that actualtrade mark use is relevant. Reliance was also placed on this Court's decision inDaimler AG v Sany Group Co Ltd, in particular upon the following passage:38The notional use of the Daimler marks does not alter the conclusion that theSany mark is not similar to the Daimler marks and use of the Sany mark is notlikely to deceive or confuse. It is relevant, as Sany submits, that there is stillnothing to suggest that Daimler and Sany will find themselves competing in amarket where the purchasers or prospective purchasers are not discerning.[60] Mr Ormsby submitted that not only will Anagenix and Pharmazen not findthemselves in a competing market but if they ever were to, they both accept that therelevant market, the New Zealand nutraceutical market, is highly specialised andtherefore discernible.Discussion[61] Our conclusion on the first issue provides the answer to Pharmazen's primarycontention that, in the absence of actual use of ACTAZIN, there can be no likelihoodof deception or confusion by Pharmazen's use of ActiPhen. The likelihood of36 Och-Ziff Management Europe Ltd v Och Capital LLP [2010] EWHC 2599 (Ch), [2011] Bus LR632.37 Case C-533/06 O2 Holdings Ltd v Hutchison 3G UK Ltd [2008] ECR I-4231.38 Daimler AG v Sany Group Co Ltd [2015] NZCA 418, (2015) 14 TCLR 191 at [48].confusion or deception in the s 25(1)(b) analysis is not to be assessed by reference tothe actual use or reputation of trade mark C as the relevant measure.[62] Rather, as Gault P explained in Budweiser, the notional comparisoncontemplates any fair use of the trade marks in relation to any of the goods coveredby the registrations. It is useful to set out the paragraph in its entirety:39[66] The comparison of trade marks to ascertain whether there is deceptiveor confusing similarity contrary to s 17(1) of the Trade Marks Act so as toestablish a ground for removal of registrations is an entirely notional exercise.It contemplates any fair use of the marks in relation to any of the goodscovered by the registrations. Opinion evidence that the marks are or are notconfusingly similar is of limited value. That is for the Court. Evidence ofwhat actually is occurring in the marketplace reflects particular forms of useand cannot fully answer the question. Evidence of the absence of actualconfusion might be explained by reference to particular factors such asadditional label features or market circumstances that will not always bepresent. By way of example, in the present case, when the Judge dealt withthe passing-off claim (in which actual usage is at issue) the Judge said thateven if he had found the trade marks deceptively similar he could still haverejected passing off because of the distinguishing market factors such asmarket sectors, likely customers, and promotion strategies. Those factorsmight explain the absence of confusion but have no relevance in the trademark comparison by reference to any fair use of the marks.[63] On a proper analysis there is no authority which supports Pharmazen'sproposition. As Mr Arthur pointed out, both the Och-Ziff and O2 Holdings casesconcerned trade mark infringement. They are not authority for the proposition that anowner's actual use is relevant in s 25(1)(b) oppositions.[64] We recognise that there is support in the evidence for the proposition thatmanufacturers who are purchasers of the parties' products are likely to be discerningwith the consequence that the prospects of confusion between the trade marks on thepart of manufacturers should be unlikely. Consequently if the demand side of thenotional market comprised only manufacturers, then Pharmazen's argument inreliance on Daimler would likely have traction.[65] However the issue of confusion and deception is to be determined by referenceto any of the goods covered by the registrations. In our view the specification of theclass 5 goods in the ACTAZIN registration is sufficiently broad to include retail39 Anheuser-Busch Inc v Budweiser Budvar National Corp, above n 13.sales.40 That conclusion is supported by the evidence relating to the licensed Englishproduct, Actazin Kiwi Extract, marketed by Holland & Barrett.[66] Similarly, the specification of goods in class 5 for the ActiPhen registration issufficiently broad to include products for sale directly to consumers. In that regard wedraw attention to the reference to "pharmaceutical preparations to support gut healthand digestion". The issue is not whether Pharmazen intends to sell product at retailunder the ActiPhen brand but whether to do so would be a fair use of the trade markhaving regard to the scope of the registration.[67] Consequently we agree with Mr Arthur that the notional market would includeordinary consumers buying products from health shops or other outlets for foodpreparations adapted for medicinal purposes and dietary supplements for medicinalpurposes. While we did not understand Mr Ormsby to seek to extrapolate the Daimlerproposition to ordinary consumers, there would be no justification in our view for theproposition that, either on the basis of price or sophistication of the product, thereshould be attributed to ordinary consumers the discernment of a manufacturer whenmaking a purchase with imperfect recollection of a product previously purchased.[68] Hence we conclude that Pharmazen has not demonstrated that its use ofActiPhen is not likely to deceive or cause confusion with products bearing theACTAZIN brand.Result[69] The appeal is dismissed.[70] Pharmazen must pay Anagenix costs for a standard appeal on a band A basisand usual disbursements.Solicitors:Wynn Williams, Christchurch for AppellantIn-Legal, Wellington for Respondent40 At [10] above.