SAMBBASIVAM v CHETTY AND RAMANATHAN HC WN CIV-2010-485-1931

SAMBBASIVAM v CHETTY AND RAMANATHAN HC WN CIV-2010-485-1931 17 May 2011IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYCIV-2010-485-1931UNDER the Trade Marks Act 2002IN THE MATTER OF an appeal from the decision of the AssistantCommissioner of Trade Marks dated 6September 2010 (T17/2010)AND IN THE MATTER OF New Zealand trade mark registrations607289 NALLI'S stylised and device and648960 NALLI'S stylised (series)BETWEEN SHRI NALLIS SAMBBASIVAMAppellantAND NALLI KUPPUSWAMI CHETTY ANDNALLI KUPPUSWAMI RAMANATHANTRADING IN PARTNERSHIP AS NALLIRespondentsHearing: 31 March 2011Counsel: S A Fogarty and M I Kempthorne for appellantB M Sullivan for respondentJudgment: 17 May 2011RESERVED JUDGMENT OF DOBSON J[1] This was an appeal under the Trade Marks Act 2002 (the Act) from a decision of the Assistant Commissioner of Trade Marks revoking two marks owned by the appellant.[2] The first mark, number 607289, was a device mark registered on 6 September 2001 for class 24, in relation to textiles:[3] The second mark, number 648960, is a device mark registered on 23 May 2002 in relation to class 25, comprising goods including saris, headgear and footwear:[4] Revocation of the marks had been sought by the respondents on the grounds of lack of use, when the existence of the trade marks was raised as a ground for refusing to accept the respondents' own application to register a trade mark using their same name, Nalli, for goods in classes 14 (jewellery) and 24 (furnishing fabrics). It appears that the parties are step-cousins, and hence share the same family name.[5] The test for revocation of a trade mark that is relevant to the present appeal is that in s 66(1)(a) of the Act. That provision provides:66 Grounds for revoking registration of trade mark(1) The registration of a trade mark may be revoked on any of the following grounds:(a) that, up to the date 1 month before the date of the application for the revocation of the registration of the trade mark, a continuous period of 3 years or more elapsed following the actual date of registration during which the trade mark was not put to genuine use in the course of trade in New Zealand, by any owner for the time being, in relation to the goods or services in respect of which it is registered:[6] The prospect of there being suspended use of the trade marks under s 66(1)(b) was dismissed by the Assistant Commissioner, and is not pursued on appeal.[7] The applications for revocation were filed on 8 and 12 August 2008, so therelevant issue was whether the appellant's marks had been used in New Zealand in the period of three years up to one month before the applications were filed. Accordingly, the relevant period for considering use was from 8 and 12 July 2005 to 8 and 12 July 2008.[8] In opposing revocation, the owner filed evidence of use of the marks with the Intellectual Property Office of New Zealand (IPONZ) by way of three statutory declarations that were dated 11 and 12 December 2008. This evidence comprised:a statutory declaration of the daughter of the owner of the mark, Sindhoor Nalli;two declarations from New Zealand residents who completed declarations in similar terms, confirming that they had ordered items from the owner's shopin Mumbai, India, and in both cases had them delivered to them in New Zealand by Sindhoor Nalli, the owner's daughter, who they paid for theitems.[9] Both the purchasers confirmed that they received saris wrapped up as theyhad been sent from Mumbai, and that the wrapping carried the Nalli's trade mark.[10] The respondents then filed evidence in support of their application for revocation by way of a statutory declaration dated 17 June 2009. That was from a private investigator in Auckland, who investigated the presence of the marks. He conducted a Google search via the internet, and reported on the perceived absence of any commercial presence, in any physical sense, in New Zealand. The owners responded to that by a statutory declaration dated 15 October 2009 from an Auckland patent attorney then acting for the appellant. It stated that the internet search conducted for the respondents had accessed only an ancillary site and not the main site operated by the appellant, which the patent attorney suggested would have been more informative and responsive. The patent attorney also claimed familiarity with a significant number of people in Auckland who were of Indian origin, and who knew of the businesses of both parties and were able to distinguish between them.[11] Thereafter, the respondent sought permission to file evidence in reply out of time on 1 December 2009. After exchanges of letters between IPONZ and those acting for the parties, IPONZ declined the request. The substantive application for revocation was set down for hearing on 17 August 2010. The day before that hearing, the appellant applied for permission to file a second statutory declaration from Sindhoor Nalli dated 16 August 2010, which was also obviously substantially out of time.[12] The Assistant Commissioner dealt with the application to adduce further evidence out of time at the outset of the hearing on 17 August 2010 and included her reasons for declining the application in her substantive judgment.The application to admit late-filed evidence[13] Because a decision on the exclusion or inclusion of the further evidence influences an assessment of the substantive grounds for revocation, it is appropriateto deal first with the appellant's challenge to the decision of the AssistantCommissioner to refuse permission for its introduction.[14] Sindhoor Nalli's first declaration dated 11 December 2008 described her position as being resident in Auckland since February 2006 as a student at theManukau Institute of Technology. She declared that in addition to studying she hadacted as her father's agent for saris and other products in New Zealand, and that ―as such I participate in the sales that have been made. Sindhoor Nalli then detailedsales to the two purchasers who had completed separate declarations and confirmed that those items had been delivered in the original packaging as received from the family shop in India, which included Nalli's trade mark. She also stated that she had been advertising the family store ―by giving away about 75 business cards, each of which bear the trade mark registered as no 648960.[15] Her second declaration expressed her wish to support the evidence that shehad given in the 11 December 2008 declaration ―by providing some exhibits. Shethen exhibited what she described as photographs of a small sample and a largesample of the Nalli's packaging that included the trade mark 607289, and that she declares were used in the two sales she had described in her earlier declaration. She also exhibited a copy of the one of the business cards her earlier declaration had referred to her distributing in New Zealand.[16] The regulations made under the Act restrict the prospects for evidence to be adduced on such proceedings out of time. Regulation 34(2) requires a party wishing to do so to apply to the Commissioner for permission to file it. Such applications are to be assessed in accordance with reg 35, subrule (2) of which requires that an application must contain, among other things, an explanation why the evidence could not have been filed earlier and any other ground or grounds for making the application. Regulation 35 also provides for a procedure of exchange of positions from parties to the proceedings, and for the Commissioner to notify the parties of theCommissioner's decision. That procedure was, by consent, truncated in the presentcase because of the shortness of time.[17] As to the grounds for the Commissioner's decision, reg 34(3) provides:The Commissioner must allow the evidence to be filed only if –(a) the Commissioner considers that there are genuine and exceptional circumstances that justify filing the evidence; or(b) the evidence could not have been filed earlier.[18] There was no evidence in support of the application to adduce evidence late that provided any explanation as to why it could not have been filed earlier, or whatthe ―genuine and exceptional circumstances were in relation to the evidence.Instead, the Assistant Commissioner was advised that the late filing was a deliberate strategy by the patent attorney then acting for the appellant. Apparently, the patent attorney appearing at the hearing volunteered to provide evidence about the point, ifnecessary. It was argued for the appellant that the ―exceptional circumstances werereflected in the content of the evidence itself, in that it clarified what the first Nalli declaration had said, and put it in pictorial form.[19] The leave sought was opposed on grounds including the owner's failure tocomply with the evidentiary requirement, so that there was no basis on which the Commissioner could find genuine and exceptional circumstances for the purposes of reg 34(3). The Assistant Commissioner's ruling reflected her view that:1the owner has not come close to establishing either of the grounds inregulation 34(3) of the Regulations. Indeed, I am uncertain as to how these grounds could ever be made out if there was a deliberate strategy on the part of the patent attorney not to file the second Nalli declaration at the appropriate evidential stage in the proceedings.[20] The decision most relied on in the Assistant Commissioner's decision as to the scope of ―genuine and exceptional circumstances, and in argument of thepresent appeal, was that of the High Court in The Muir Electrical Company Pty Ltd v The Good Guys Group Ltd.2 That decision in turn adopted observations of the Supreme Court in R v Rajamani that the issue of whether exceptional circumstances exist is not a matter of judicial discretion.3 Rather, it is a matter of fact requiring judicial assessment. Any residual discretion may not be exercised until such time as exceptional circumstances have been found to exist.[21] In the Muir Electrical decision, Lang J also cited the earlier decision of Hammond J in Awa v Independent News Auckland Ltd:41 IPONZ decision T17/2010, 6 September 2010 at [21].2 The Muir Electrical Company Pty Ltd v The Good Guys Group Ltd HC Auckland CIV-2009-404-4965, 18 December 2009.3 R v Rajamani [2008] 1 NZLR 723 (SC)4 Awa v Independent News Auckland Ltd [1996] 2 NZLR 184 at 186.As to such, the term ―exceptional circumstances when used in a statute isnever free from difficulty. As a matter of general approach, it is usuallyconstrued as meaning something like ―quite out of the ordinary. Andobviously the onus must be on the applicant to establish entitlement in face of the statutory language.[22] Those sources led Lang J to observe:5The Commissioner will therefore be entitled to grant an extension in circumstances that are quite out of the ordinary. That threshold may be reached by virtue of a single factor or by the combined weight of all relevant factors. In the final analysis, however, the extension cannot be granted unless the circumstances of the case are exceptional.[23] There is still no evidence of the circumstances in which the second Nalli declaration was withheld. Without any evidence at all, the genuineness of the explanation cannot be tested in the sense of assessing its integrity. The Court is invited to infer that the failure to file a declaration in a timely way was cavalier gaming of the rules by the patent attorney then acting. Hopefully such poor judgement is exceptional, although Mrs Sullivan suggested that non-compliance with timetabling requirements that is caused by patent attorney error should not beaccepted as ―exceptional.[24] In Muir, oversight by patent attorneys in missing a deadline was found―regrettably, as not being unusual or out of the ordinary.[25] In the present context, I agree with the approach adopted by the Assistant Commissioner. The appellant faces at least two difficulties. The first, that the circumstances of the exceptionally late attempt to file additional evidence were not addressed in evidence. That prevents substantial weight being put on Mr Fogarty'sargument that the appellant should not be punished for errors on the part of the patent attorney then acting. Without evidence, it is not appropriate to assume that the owner was entirely unaware of the error. It may be that the tactic was the subject of instructions from the owner on an adequately informed basis, or at least that the timetabling requirements for provision of all evidence in the revocation proceedings was conveyed to the owner.5 At [85].[26] A related and ancillary point is that this was not the first attempt in the proceedings before the Assistant Commissioner to adduce further evidence out of time. The appellants had successfully opposed the respondents' attempt to adducefurther evidence some nine months before the initiative for the appellant on the day before the hearing.[27] As to the nature of the reason itself, even if ―exceptional, an attempt to gametimetabling, inferentially for tactical advantage, is the antithesis of a genuine reason for granting any dispensation. Such conduct is to be discouraged. However, if, as Mr Fogarty invited me to infer, the appellant was entirely ignorant of the tactic being deployed, I am not persuaded that the circumstances should be treated as―exceptional and genuine merely to protect the uninvolved client from the errors ofthe patent attorney. Whilst I accept that proceedings involving the state of the Register of Marks ought to strive for outcomes that reflect the true position, there will be circumstances in which the manner in which proceedings are conducted will affect the outcome. To approach such issues on the basis that parties should always be protected from errors by those acting for them is, with respect, unrealistic.[28] Mr Fogarty argued that the approach of the Assistant Commissioner on the point was flawed because she did not have regard to the nature and relative importance of the evidence, as a component of her assessment of whether there were genuine and exceptional circumstances. Mr Fogarty argued that comparing theappellant's case opposing revocation when supported by just the first series of declarations, with the case supported by the second Nalli declaration as well, showed that genuine and exceptional circumstances were indeed made out. Certainly, the nature of what any additional evidence would add to the case for a party to proceedings under the Act, and the circumstances in which that additional component only became available after other evidence had been lodged, might relevantly influence the assessment of genuine and exceptional circumstances. However, I do not see this as one of those cases and would not be prepared to arrive at the opposite conclusion, after this point is taken into account.[29] It could be argued for the appellant that the evidence is only supplementary, and unlikely to be controversial. It adds credibility to the first Nalli declaration andprovides additional material on which to find that representations of the marks have been involved in transactions on behalf of the owner of the marks in New Zealand. Those matters were available earlier, but were deliberately withheld. It is accordingly not a situation where the nature of the additional evidence can make out or even support a claim that the circumstances in which it was sought to be filed were genuine and exceptional.Was there use of the marks in the relevant period?The law[30] The statutory test in s 66(1)(a) cited in [5] above is to be assessed in light of definitions in ss 6 and 7 of the Act.[31] Section 6 of the Act relevantly provides:6 Meaning of use of signIn this Act, unless the context otherwise requires, every reference to—(a) the use of a sign in relation to goods is a reference to the use of the sign on, or in physical or other relation to, goods:.Section 7 sets out the meaning of use of a trade mark:7 Meaning of use of trade mark(1) In this Act, unless the context otherwise requires, use, in relation to a trade mark, includes—(a) use in a form differing in elements that do not alter the distinctive character of the trade mark in the form in which it was registered; and(b) applying the trade mark to goods or services or to materials for the labelling or packaging of goods or services in New Zealand solely for export purposes; and(c) the application in New Zealand of a trade mark to goods or services to be exported from New Zealand, and any other act done in New Zealand in relation to those goods or services that, if done in relation to goods or services to be sold or otherwise traded in New Zealand, would constitute use of a trade mark in relation to those goods or services for which the use is material under this Act or at common law; and(d) the use of the trade mark by—(i) the owner; or(ii) if the owner is a collective association, a member of the collective association.(2) References in this Act to use of a trade mark by the owner includes use by a person other than the owner if that use is authorised by, and subject to, the control of the owner.(3) The use of the whole of a registered trade mark is also a use of any registered component part of a trade mark registered in the name of the same owner.[32] Because of the breadth of s 7(3), the Assistant Commissioner determined that if the owner establishes use of the first mark, then that would also amount to having established use of the second mark.6 That finding is not challenged and was appropriate in the circumstances of this dispute.[33] The test as to whether there has been use of a mark focuses on the genuineness of activity involving it, and it will not be sufficient if there has been a pretended use or merely preliminary use. Beyond that, Mr Fogarty emphasised that there is no de minimus rule testing the sufficiency of use before it qualifies as such under the Act, and that in appropriate circumstances, a single use of a mark may be sufficient to qualify under s 66(1)(a). He cited three English decisions to illustrate the point. First, in GERBER Trade Marks, Vice-Chancellor Sir Andrew Morritt observed on appeal:7The hearing officer did not, and on the evidence could not, find that there had been no use because the mark GERBER was plainly on the label and 1,200 jars of baby food had been sold in the Haywards Heath area. Theconclusion of the hearing officer can only be justified if ―use for thepurpose of section 26(1)(b) must be not only bona fide but real commercial use on a substantial scale. In my judgment there is no such requirement.[34] Secondly, in Laboratoire de la Mer Trade Mark,8 the United Kingdom Court of Appeal dealt with revocation proceedings in which the only use of the mark had been on consignments of goods imported into Scotland by an agent, who intended to resell by appointing members of the public as sub-agents, to sell products at private6 IPONZ decision at [41].7 GERBER Trade Marks [2002] EWHC 428, [2003] RPC 1 at [25].8 Laboratoire de la Mer Trade Mark [2005] EWCA Civ 978, [2006] FSR 5 at [33]-[34].parties which it appears were cosmetics based on seaweed products. There was no evidence of any sales of the goods to members of the public as consumers or end users. The approach adopted by the Court of Appeal to the assessment of use included the following observations:The modest amount of the quantities involved and the more restrictednature of the import market did not prevent the use of the mark on the goods from being genuine use on the market. The Court of Justice made it clear that, provided the use was neither token nor internal, imports by a single importer could suffice for determining whether there was genuine use of the mark on the market.The use was real, though modest, and did not cease to be real and genuine because the extinction of the importer as the single customer in the United Kingdom prevented the onward sale of the goods into, and the use of themark further down, the supply chain in the retail market, [35] The third decision referred to is the earlier one in NODOZ Trade Mark.9 In that case, Wilberforce J observed:It may well be, of course, that in a suitable case one single act of user of the trade mark may be sufficient; I am not saying for a moment that that is not so; but in a case where one single act is relied on it does seem to me that that single act ought to be established by, if not conclusive proof, at any rate overwhelmingly convincing proof.[36] Mr Fogarty did acknowledge that this approach from NODOZ was commented on in GERBER in the following terms:10Counsel for Products relies on NODOZ for the proposition that a single transaction may constitute use so as to avoid deletion of a mark on the grounds of non-use. it is true that such a possibility was recognised by Wilberforce J, but the case establishes no more than the obvious proposition that the use relied on must be proved by sufficient evidence.[37] For her part, Mrs Sullivan emphasised that the use must be genuine in character, as distinct from pretended, artificial, fictitious, token or internal, and that the use of it had to be in the course of trade meaning for the purposes of trade. On these two points, she cited Ansul BV v Ajax Brandbeveiliging BV.11 Observations in that judgment from the Court of Justice of the European Communities included:129 NODOZ Trade Mark [1962] RPC 1 at 7.10 GERBER at [13].11 Ansul BV v Ajax Brandbeveiliging [2003] RPC 40 at [37]-[38].12 At [36]-[39].That ―genuine use denoted use that is not merely token, serving solely topreserve the rights conferred by the mark.It cannot be use that is just internal by the undertaking concerned. The protection the mark confers and the consequences of registering it in terms of enforceability vis-à-vis third parties cannot continue to operate if the mark loses its commercial raison d'être.When assessing whether there has been genuine use of the trade mark, regard must be had to all the facts and circumstances relevant to establishing whether the commercial exploitation of the mark is real, in particular whether such use is viewed as warranted in the economic sector concerned to maintain or create a share in the market for the goods or services protected by the mark.Use of the mark need not always be quantitatively significant for it to be deemed genuine as that depends on the characteristics of the goods or services concerned on the corresponding market.[38] Mrs Sullivan also cited from Shanahan's Australian Law of Trade Marks and Passing Off as to the meaning of the words ―in the course of trade as the expressionis used in s 66(1)(a) of the New Zealand Act.13 That text observes:14the words ―in the course of trade mean ―for the purposes of trade rather than ―in trade, so that there may well be use in the sense of the 1995 Actthough the transaction contemplated is never completed. These words are also wide enough to cover steps necessary for the production of goods or provision of services, as well as the actual placement of the product or service upon the market. (References omitted.)Approach of Assistant Commissioner[39] The Assistant Commissioner considered the evidence of the supplies of goods from the appellant's Mumbai shop to the two New Zealand domiciled purchasers, as13 Davison and others Shanahan's Australian Law of Trade Marks and Passing Off (4th ed,The Law Book Company, 2008).14 At [5.3005].well as references to the distribution of business cards and the consequences of a website being accessible in New Zealand. The Assistant Commissioner also considered and dismissed the relevance of a visit by the owner in 2006 to assess the prospects for a business in New Zealand. She treated those activities as preliminary investigations.[40] In relation to the two sales, the Assistant Commissioner found that there was not sufficient to attribute use of the mark to the goods that were delivered. The Assistant Commissioner was doubtful that the activity here constituted trade in New Zealand where the goods had been ordered directly from the owner's shop inMumbai and the activity was confined to the delivery by the owner's daughter, and receipt by her of payment. The Assistant Commissioner rejected that activity aspotentially representing trade here because the terms of the daughter's visa wouldpreclude her doing so.[41] With respect, I take the opposite view on the last aspect of this reasoning. If the requisite elements of genuine use in the course of trade are otherwise made out, the fact that the use is effected by a person who would be acting in breach of a student visa could not deprive it of standing as a genuine use.Discussion[42] There is nothing in the scant evidence of dealings in New Zealand in respect of goods from the Mumbai shop operated by the owner of the marks that would suggest that those dealings were contrived to protect the marks from any challenge of non-use. Certainly, the claimed use of the marks would not survive anyde minimus test if there was one. There is no evidence that use in New Zealand of the marks involved the holding of stock here, there are no premises used for a business that relies on the marks, and nor has there been any conventional promotion of the marks.[43] What is in issue is the status of two isolated transactions. In both cases, thepurchaser of goods ordered them from the Nalli's shop in Mumbai, India. One declarant, Jacob Stephens, states that he has known the shop since 1993, and beforethe relevant transaction he had bought about 10 items on earlier occasions. The other declarant, Hermant Desh Bandhu, states that he learned of the shop in Mumbai―through Sindhoor and a few of my friends. Both confirm that they received theitem in the form in which it had been sent from Mumbai and that the wrappingcarried ―the Nalli's trade mark.[44] There is no evidence as to how Sindhoor Nalli accounted for the proceeds of these sales and one credible inference is that her involvement was arranged to supplement her financial resources in New Zealand. Notwithstanding thatreservation, these isolated sales do appear to involve genuine use of the appellant'smark and they do appear to have been undertaken ―for the purposes of trade as that gloss has been applied to the phrase ―in the course of trade in s 66(1)(a) of the Act.[45] In arriving at this provisional view, I have differed from the Assistant Commissioner because I am prepared to treat Sindhoor Nalli's involvement asconstituting part of activity in New Zealand that is for the purposes of trade, even if that attribution to her may create an issue as to non-compliance with the terms of a student visa permitting her to be here. I have also had regard to the statements in her declaration to the effect that her family aspires to have a business in New Zealand so that the isolated instances described may be seen as the beginnings of on-going business, albeit on a very modest scale.[46] I consider that the activity qualifies as genuine when such a small number of dealings might in other contexts not qualify as such, because of the nature of the goods in respect of which the mark is used. Two transactions in the space of the relevant three-year period in other contexts such as, say, a high volume manufacturing business, might be so insignificant as to not justify a finding that the use is genuine. However, business on a very modest scale as an adjunct to a principal business in Mumbai and branches in South Africa, Malaysia, Singapore and Dubai may qualify as genuine without the same minimum level of activity that would be required in other contexts to establish its genuine character.[47] The other aspect of concern to the Assistant Commissioner was the sufficiency of proof. She was concerned that the use of the mark may have related tothe owner's retail services and not to the goods covered by the relevant marks. Shewas also concerned that the consistent references in all three of the declarations tothe wrapping of the goods having ―carried the Nalli's trade mark provided inadequate specification as to which mark was referred to.[48] So far as Sindhoor Nalli's claim to have distributed about 75 business cardsthat bore the trade mark registered as number 648960, the Assistant Commissioner was concerned as to the inadequacy of detail as to the period in which that had occurred, and the prospect that the use reflected in whatever promotion that represented could only be in relation to the owner's retail services in India, ratherthan in relation to the goods in the course of trade in New Zealand. In addition, the Assistant Commissioner treated distribution of business cards as only preparatory activity, and would not be enough to constitute relevant use of the marks.15[49] I agree with the Assistant Commissioner in relation to the distribution of business cards and have not included that activity within the transactions that I find potentially sufficient to establish use in the course of trade in New Zealand.[50] As to the balance of the reservations identified in the AssistantCommissioner's decision, the owner bore an onus to establish use of the requisitecharacter on the balance of probabilities. The challenges on behalf of the respondents were not denying that the transactions had occurred as described, but rather objecting to the transactions having been inadequately proven. However, there is no basis for arguing that the transactions did not occur as described. It is merely that the descriptions of them are scant. Again, the analysis of adequacy of evidence is a case-specific consideration and in the present circumstances I am satisfied that the reference to the mark is to the first trade mark registered, number 607289, and that the use is referable to the goods in respect of which the mark was registered.[51] As Mr Fogarty urged, in the end, such proceedings ought to strive to have the Register accurately reflect entitlements and I am satisfied that sufficient use was made out in this case to oppose the application for revocation of the first mark.15 See IPONZ decision at [52].[52] It is accepted that such a finding is sufficient to avoid a finding of revocation of both marks.[53] Accordingly, I am satisfied that the appeal should succeed. I therefore order that trade mark registration 607289 and 648960 remain on the Register. The costs ordered by the Assistant Commissioner are reversed, and the appellant is entitled to costs on a 2B basis for the present appeal proceedings.Dobson JSolicitors:A J Park Law, Auckland for appellantHenry Hughes & Co, Wellington for respondent