Jane Glover Barrister – Mediator – Adjudicator

SECTION 25(1)(B) APPLECART STANDS FIRM

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I was taken aback to read a submission advanced by Pharmazen in Pharmazen Ltd v Anagenix IP Ltd [2020] NZCA 3016, namely that actual market use and conditions should be relevant to the assessment of confusion and deception under s 25(1)(b) of the Trade Marks Act 2002 as well as to the assessment of confusion and deception under s 17(1)(a) . Such a bold submission! And what would the consequences be if it were accepted?!

I acknowledge that to a non-trade mark practitioner this might sound like an absurd over-reaction, but after reading innumerable cases holding that the assessment under s 25(1)(b) is made on a “fair and notional use” basis it was confronting to experience a full-frontal assault on this long-standing principle. I felt distinctly unmoored. (Who would have thought that the proper application of s 25(1)(b) would be so central to my sense of world order? I don’t even want to think about what that says about me.)

BACKGROUND

This was a trade mark opposition concerning an application to register the word mark ActiPhen for nutriceutical products. The opponent owned the trade mark ACTAZIN in relation to similar products.

The opponent did not sell ACTAZIN products in the domestic market, however, due to the risk of infringing a relevant New Zealand patent. It made a business decision in 2012 to sell ACTAZIN products only outside New Zealand so long as the patent remained in force.

Accordingly, its ground of opposition under s 17(1)(a), which is based on actual use and reputation in New Zealand, was dead in the water. The Court of Appeal decision focused solely on s 25(1)(b).

CHALLENGE

In a power move startling in its heresy, Pharmazen made a determined effort to convince the Court of Appeal to throw out the s 25(1)(b) rule book. As you will recall, ye anciente Book of Rules provides thus:

  • And lo, when a decision-maker is called to assess the likelihood of deception and confusion for the purposes of s 17(1)(a), let her compare the actual use and reputation of the opponent’s mark with the fair and notional use of the mark that is the subject of the trade mark application.
  • And yet, when a decision-maker is called to assess the likelihood of deception and confusion for the purposes of s 25(1)(b), let her compare the fair and notional use of both marks. Let no considerations of actual use or reputation taint her analysis, which shall be based purely on the state of the Register itself.

COURT OF APPEAL DECISION

Despite the audacity of the challenge, I needn’t have worried. The decision of the Court of Appeal, given by Brown J, represented a firm defence of the status quo. Fortunately, too, the Court’s reasoning was more sophisticated than my own kneejerk, “But that’s not right!”

As you might expect, the Court canvassed the many decisions upholding the Book of Rules, and explained that the reason for the different approaches is that s 17(1)(a) is concerned primarily with protecting the public from deception and confusion, whereas s 25(1)(b) is concerned primarily with the fair allocation and protection of property rights. This difference is underscored by the fact that s 25 is subject to s 26(1)(a), which provides that if the owner of trade mark C consents to the registration of trade mark A, then the Commissioner is obliged to accept the application for registration of trade mark A. There is no equivalent power of consent in the context of s 17(1)(a), which makes perfect sense given that this provision is designed to protect the public.

The Court also looked at the overall structure of the Act, and noted that allowing “actual market” considerations into the s 25(1)(b) assessment would create a number of anomalies:

  • The definition of “use” of a trade mark in s 7 deems the use of a trade mark in relation to export goods to be use of a trade mark in New Zealand. An “actual use” approach to s25(1)(b) as contended for by Pharmazen would treat export use as irrelevant because it would be unlikely to cause deception or confusion in a New Zealand market.
  • Further, as a result of the operation of s 7, export use is sufficient to protect a registered trade mark from applications for removal on the basis of non-use. It would be odd if a mark could not be removed for non-use, yet its owner was deprived of the ground of opposition in s 25(1)(b) that is afforded to registered proprietors.
  • It is well-established that the test for infringement under s 89 is concerned with the notional use of the registered trade mark compared with the actual use of the allegedly infringing mark. In that context, it is irrelevant whether the proprietor has made actual use of the registered mark. It makes sense for the rights that flow from registration of a trade mark to function in the same way in both opposition and infringement contexts.

COMPARISON OF MARKS

Both the Assistant Commissioner and the High Court held that the marks ACTAZIN and ActiPhen were deceptively similar. In equivalent proceedings in Australia, however, the Delegate came to the opposite conclusion.

It is interesting to note that the Court of Appeal did not find the Australian decision persuasive, on the basis that under s 144 of the Australian Act the opponent has the onus of showing that there is an existing or pending trade mark in relation to which the opposed trade mark is either substantially identical or deceptively similar. By contrast, in the New Zealand context it was for Pharmazen to establish that its use of the mark ActiPhen would not be likely to deceive or confuse. The onus of proof is reversed. (Gault J recently made the same point in the High Court in Arzneimittel v Combe International Ltd [2020] NZHC 1679 at [59].)

WHERE DOES THAT LEAVE US?

Shaken, stirred, but ultimately right back where we started. All is well with the world.

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Jane Glover

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By Jane Glover
Jane Glover Barrister – Mediator – Adjudicator

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