How Rights in Trade Marks can be Lost in Australia! The Alarming Result of the Colorado Case
By Jamie Nettleton, Partner
12 February 2008
In 2006, Colorado Group's action against Strandbags over the infringement of the trade mark “Colorado”, with subsidiary claims of misleading conduct and passing off, was heard in the Federal Court of Australia. At the time, Strandbags lodged a counterclaim seeking an order to remove Colorado Group’s “Colorado” word trade mark from the Trade Marks Register.[1] This matter was the subject of a recent appeal before the Full Court of the Federal Court.[2]
Background
Colorado Group is an Australian public company which, in the past, had operated a footwear business through two subsidiaries, Williams the Shoemen and Mathers Shoes. In 1991, the businesses were consolidated in Colorado Group, which now operates several different retail chains, including the “Colorado” chain of stores which markets clothing with rugged outdoor characteristics.
Colorado Group’s claim to the “Colorado” mark dates back to 1982, when Williams the Shoemen stores sold backpacks marketed to schoolchildren with a “Colorado” logo, possibly accompanied by a "simple mountain motif". The “Colorado” brand was successful and, in 1992, the then parent company, Woolworths Corporation, decided to open a chain of “Colorado” stores in Australia based around a line of “Colorado” merchandise.
Strandbags operates a chain of stores throughout Australia selling bags, backpacks, leather goods and travel items. Edgarlodge Pty Ltd began marketing items under the “Colorado” brand during the 1980s and, in 1991, registered a combination trade mark consisting of the word “Colorado” and an American Indian design, which was used on a number of different items, including backpacks, briefcases and handbags. In 1998, Strandbags purchased the “Colorado” mark and associated business from Edgarlodge. Subsequently, Strandbags continued to market goods under the “Colorado” brand name.
First Instance Decisions
The decisions of Justice Finkelstein focussed on the issues of proprietorship and distinctiveness.
In respect of the validity of Colorado Group’s registration of the “Colorado” word trade mark, the Court noted that one of the ways to claim proprietorship of a mark is through prior use of the mark, provided that nobody else can demonstrate an earlier use.
Colorado Group was the first to use the “Colorado” logo in combination with their simple mountain motif on backpacks. However, Colorado Group sought to extend its trade mark protection beyond the combination mark to cover the word “Colorado” without the logo in respect of additional goods such as wallets, purses, bags, and belts.
It was not necessary to resolve the validity of the “Colorado” word trade mark separately from the simple mountain motif because evidence was produced to the effect that Colorado Group may have used the word alone on some items: in those cases, the burden was on Strandbags to prove otherwise. Colorado Group was therefore able to claim proprietorship over the “Colorado” word trade mark in conjunction with backpacks.
Colorado Group began selling accessory items such as wallets in 1993 but, unlike backpacks, there was no evidence to suggest that the “Colorado” word mark was used on these products without the accompanying “simple mountain motif”. Therefore, the Court refused to extend this protection to other types of bags, purses, or wallets, noting that trade mark protection only covers the use of a mark in connection with particular goods and services.
In contesting Colorado Group’s proprietorship of the mark, Strandbags attacked the distinctiveness of the “Colorado” mark, claiming that it was generic and a geographical indicator rather than indicative of particular goods and services. Justice Finkelstein rejected this argument noting that, in this case, the mark is inherently distinctive because the word “Colorado” is used in relation to backpacks in a manner that is arbitrary and fanciful and not designed to indicate a particular place of origin.
Colorado Group’s inability to separate the combination mark components meant that it could not claim use of the “Colorado” word mark alone until 1997 in relation to these accessory items. On the other hand, there was substantial evidence that Edgarlodge used the “Colorado” word mark on handbags, as well as on a swing tag affixed to handbags, purses and wallets beginning in 1991. Based on Edgarlodge’s first use, Strandbags was able to demonstrate proprietorship of the word mark in regard to these items.
Appeal
Both Colorado Group and Strandbags appealed the findings of Justice Finkelstein.
On the issue of proprietorship and whether the goods were goods of the same kind, the Full Court of the Federal Court upheld the decision of Justice Finkelstein, namely that backpacks are not the same kind of goods as purses and wallets, which in turn are not the same as bags. Whilst Colorado Group had first used the “Colorado” mark in respect of backpacks, it was not the proprietor of the "Colorado" mark in respect of bags, wallets or purses.
On the issue of distinctiveness, in concluding that "Colorado" on its own was not inherently able to distinguish the goods and services of Colorado Group from those of other traders, the Full Court overturned Justice Finkelstein's decision. The question to be asked was whether the word "Colorado" had a "signification" which other traders may wish to use in respect of similar goods. The signification evoked by the word “Colorado” included ruggedness, trekking and the Rocky Mountains. Other traders might want to use the word "Colorado" for such attributes.
Colorado Group was unable to prove that it had acquired a secondary meaning in the “Colorado” mark. Although Colorado Group was able to show use of the word "Colorado", together with a device, on shoes, clothes, signage and advertising, such use was still not capable of distinguishing Colorado Group's goods from the goods of other traders.
Accordingly, the Full Court ordered the cancellation of the registration of the "Colorado" mark in respect of backpacks.
Conclusion
The Full Court decision that the "Colorado" mark is not inherently distinctive, despite evidence of years of use, is alarming for trade mark owners. This aspect of the decision raises questions as to the certainty that trade mark registration ordinarily provides, in particular, if it is arguable that the mark is a geographic indicator.
There were a number of issues considered in the Colorado cases which occur frequently in practice, namely where two parties have been using the same trade mark (which is registered by one of them) for a considerable period of time.
A detailed analysis is required to determine proprietorship of a trade mark including:
- How was the mark used;
- Who used the mark first;
- What mark was used; and
- What were the goods to which the mark was applied?
Other issues will be relevant, but a complete analysis of the rights of ownership in the mark is required. Unfortunately, despite extreme care being taken, it is often the case that a complete picture emerges only once evidence is assembled for the Court hearing.
It is prudent that this review be conducted before embarking on court proceedings as there is always a risk that court action may result in all rights in the mark being lost and/or only a pyrrhic victory being obtained.
[1] Colorado Group Limited v Strandbags Group Pty Limited (2006) FCA 160; Colorado Group Limited v Strandbags Group Pty Limited (No 2), (2006) FCA 880.
[2] Colorado Group Limited v Srandbags Group Pty Ltd [2007] FCAFC 184 (28 November 2007)