Who Really Owns Your Business’s Trade Mark? Federal Court of Australia Confirms That a Trade Mark Can Be Registered in The Name of a Company’s Sole Director and Shareholder

Ensuring trade marks are registered in the correct name is of critical importance, especially when registration of the trade mark is challenged.

This was amply demonstrated in the recent Federal Court of Australia decision of Watson as Trustee for the Watson Family Trust v Cosmetic Warriors Ltd [2022] FCA 700.

Cosmetic Warriors Ltd applied to remove a trade mark for “LUSH” registered in class 25 for ‘clothing, footwear and headgear’ on the basis that the trade mark had not been used by the owner during the past 3 years. The owner of the LUSH trade mark, Mr Watson, operated a clothing retailing business through a range of companies, which were later consolidated into a single entity called HD Brands Pty Ltd. Watson was the sole director and shareholder of these various companies.

Under Australian trade mark law, a trade mark is used by the registered owner where another party uses the trade mark under the actual control of the owner. Previous Australian decisions have confirmed that an IP holding company uses a trade mark where other companies within the same corporate group use the mark where those companies all operate with a “unity of purpose”. However, it was previously unclear whether the same principle would apply where a trade mark was owned by an individual director or shareholder of companies that actually conducted business under the trade mark.

In the first instance decision before the Trade Marks Office, the LUSH mark was removed on the basis that any of the mark was effectively use by HD Brands and Watson’s other companies, rather than Watson personally.

On appeal, Greenwood J accepted that Watson was a ‘one man band’ who attended ‘personally to all operations of the business’. As such, Watson effectively conducted his businesses through his companies as his ‘alter ego’ and the sale of goods bearing the LUSH mark was under his personal control.

Accordingly, Watson was able to prove use of the LUSH mark during the non-use period and registration of the trade mark was maintained.

In this case, the registered owner was able to successfully defend registration of his trade mark because he was effectively a sole trader. This decision could have unforeseen adverse consequences. For example, does this mean that trade marks registered in the name of trading companies are now invalid because they should have been registered in the name of the individual running the company?

Furthermore, if the business was more complex and other individuals were involved in managerial decision-making, the Court may well have reached a different conclusion. The removal of a trade mark on technical grounds could have potentially devastating consequences for an established brand. Identifying the correct trade mark owner can also impact on other factors such as tax, business valuations and asset protection. Businesses should therefore obtain proper advice to ensure that trade marks are registered in the name of the correct entity.

By Gregory Pieris, Talia Le Couteur Scott and Harlee Bolger

Copyright © 2024, K&L Gates LLP. All Rights Reserved.