A recent decision by Perram J in the Federal Court case Solar Technology AG v Beyond Building Systems Pty Ltd [2012] FCA 1483 provides some instructive illustrations of the law of passing off and trade mark infringement.
The case concerned use of the trade marks 'SUNNY BOY' and 'SUNNY ROO' in relation to solar inverters.
SMA Solar Technology AG (SMA Germany) manufactures a number of energy supply and transformer devices and sells them in Australia through its subsidiary SMA Australia Pty Ltd (SMA Australia) under brands incorporating the word 'SUNNY'. One of the devices is a solar inverter sold under the brand 'SUNNY BOY'. SMA Germany holds a number of registered trade marks in Australia that incorporate the word 'SUNNY', including a registered trade mark for the plain words 'SUNNY BOY' registered in respect of energy supply and transformer devices including solar inverters.
SMA Germany and SMA Australia (collectively SMA) brought proceedings against Beyond Building Systems Pty Ltd (BBS) and Ipevo Pty Ltd (Ipevo) alleging that BBS and Ipevo had engaged in passing off, misleading or deceptive conduct and trade mark infringement through use of the words 'SUNNY ROO' in relation to solar inverters and other products such as solar panels.
The trade mark 'SUNNY ROO' had been used by BBS but BBS went into liquidation in 2012. SMA also brought proceedings against Ipevo (which shared a director with BBS), alleging that it was a joint tortfeasor and was knowingly concerned in the conduct.
BBS commenced operations in 2007, marketing and selling solar inverters manufactured by other companies, including SMA Germany. In 2010, BBS decided to market its own range of solar inverters and other products and installation services using the brand 'SUNNY ROO'. BBS used the plain words 'SUNNY ROO' in relation to its inverters and also the following logos (SUNNY ROO Logos):
Ipevo held a registered trade mark for the leftmost logo above, which it licensed to BBS. Neither BBS nor Ipevo held a registered trade mark for the plain words SUNNY ROO, and the registered SUNNY ROO Logo was only registered in respect of certain classes of goods and services (including solar panels), none of which included solar inverters.
The Court's findings
Passing off and misleading or deceptive conduct
Perram J accepted evidence that by 2007, the words SUNNY BOY, when used in connection with solar inverters, had come to signify to the industry and Australian public a connection to SMA and that SMA had substantial goodwill in the words SUNNY BOY.
His Honour found that through its use of both the plain words SUNNY ROO and the SUNNY ROO Logos on its inverters and other solar devices, BBS had suggested that its inverters and other devices had a connection with SMA and exploited SMA's goodwill.
This was supported by evidence that consumers were, on a number of occasions, misled into thinking that the SUNNY ROO inverters were manufactured by SMA. Not only had some customers called SMA Australia thinking they manufactured SUNNY ROO products, but some even attempted to return defective SUNNY ROO inverters to SMA Australia for repair. Perram J described these incidents as 'powerful evidence of the misleading capacity of the SUNNY ROO mark when used in proximity to a solar inverter'.
On the basis of these findings, SMA succeeded in both passing off and misleading and deceptive conduct claims.
Trade mark infringement
Perram J found that the plain word mark SUNNY ROO was deceptively similar to SMA Germany's registered plain words mark SUNNY BOY and that BBS's use of SUNNY ROO in relation to its inverters and its installation services infringed SMA Germany's registered trade mark. His Honour noted in particular the considerable aural similarity of the marks and that there was a not small degree of visual similarity. His Honour found that the idea suggested by SUNNY ROO (of the word SUNNY followed by a short name) was likely to resonate with the perhaps imperfect recollection of the SUNNY BOY mark by a consumer, so as to cause the consumer to be confused between the marks.
Perram J accepted that matters were more complex in the case of use of the SUNNY ROO Logos. However on balance His Honour found that the logos were deceptively similar to the SUNNY BOY mark because the similarities were sufficient to cause consumers to wonder or entertain a reasonable doubt as to whether the product might come from the same trade source.
Interestingly, Perram J found that inverters were not goods of the same description as solar panels, and therefore BBS's use of SUNNY ROO in relation to sale of its solar panels was not an infringement of the SUNNY BOY mark. However he found there was an infringement when used in relation to BBS' inverter installation services.
Ipevo's liability
A key finding in establishing Ipevo's liability as a joint tortfeasor for passing off and trade mark infringement was that Ipevo was the entity holding the registered trade mark for the SUNNY ROO Logo and it had licensed use of the logo to BBS under a written licence agreement. The Court found that the licensing arrangement also licensed BBS to use the plain words SUNNY ROO as a derivative of the registered SUNNY ROO Logo. As a result of the licensing arrangement Ipevo was implicated in a joint design with BBS to use the logo and the plain words in exploitation of SMA's goodwill.
Perram J also accepted that Ipevo was knowingly concerned in BBS's misleading and deceptive conduct. He found that Ipevo's senior management must have been aware of BBS's use of the SUNNY ROO mark and its similarity to the SUNNY BOY mark in the market, particularly when one of its directors was also a director of BBS.
Some lessons
This case illustrates a number of points:
- Even if you have a registered trade mark, you can be found to be engaged in passing off or misleading or deceptive conduct by use of the mark, if the use of the mark in fact conveys a misrepresentation to the public by suggesting a connection with a competing business which has an established reputation. In this case, it was found that use of both of the SUNNY ROO Logos constituted passing off and misleading or deceptive conduct (including in relation to solar panels) even though one of the logos was registered for solar panels. Companies should scan the market they are operating in and take care not to choose brands which may suggest a connection with an existing competing business.
- BBS was using the plain words mark SUNNY ROO without registration, and its registered SUNNY ROO Logo was not registered for inverters. If BBS had registrations for the marks it was using in respect of the goods it was using them on, it would at least have had a defence against the trade mark infringement actions (although not against the passing off and misleading or deceptive conduct claims). Companies should ensure that their trade mark registrations and their actual use of the marks are aligned. Further, the process of applying for registration of marks provides a discipline which assists in ensuring that existing marks are considered. In this case, had BBS applied for the plain words SUNNY ROO, the prior registered mark SUNNY BOY may have been cited against it.
- Licensors of trade marks may be found jointly liable for passing off or trade mark infringement arising from their licensees' use of the licensed marks. This needs to be taken into account in the structuring of trade mark ownership and licensing arrangements and risk allocation provisions in trade mark licences.
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