Stephens Lawyers and Consultants Trade Mark Legal Update: October 2013
Under Australian law there is no legal requirement to register a trade mark or brand name to use it, however there are many benefits of trade mark registration. Although protection against misrepresentation under Australian Consumer Law1 and passing off is available to both owners of registered and unregistered trade marks, such actions can be expensive, time consuming and produce unpredictable results when compared to actions for trade mark infringement of registered trade marks under the Australian Trade Marks Act (1995).
The recent Federal Court decision Rea Group Ltd v Real Estate 1 Ltd2 (“Rea Group Case”) highlights the benefits of trade mark registration over claims relying on misleading and deceptive conduct and false representations under the Trade Practices Act (now known as the Australian Consumer Law)3 and passing off at common law.
Rea Group the owner of the successful Australian on-line real estate advertising and marketing business operated under the domain names and trading names “realestate.com.au” and “realcommercial.com.au” failed in its trade practices and passing off claims against Real Estate 1, a rival internet business which was using similar domain and trading names “realestate1.com.au” and “realcommercial1.com.au” but succeeded in its trade mark infringement claim.
The Rea Group Case also highlights the problems associated with protecting descriptive commonly used words as domain names, trade name and trade marks when these words or similar words are used by a rival businesses. Companies can avoid these problems by using invented words or distinctive words as domain names, brand names, trading names and trade marks and registering them as trade marks.
Rea Group Ltd v Real Estate 1 Ltd 4
Rea Group’s Business
The Rea Group had been operating an on-line residential real estate advertising business in Australia since 1998 under domain name “realestate.com.au”. In 2002 Rea Group launched a separate website for advertising of commercial real estate under the domain name “realcommercial.com.au”. By 2002 Rea Group was the market leader in the Australian online real estate advertising market. By 2011 approximately 95% of all real estate agents subscribed to Rea Group’s web property portals and advertised their listed residential and commercial real estate. The on-line traffic to “www.realestate.com.au” increased exponentially from approximately 150,000 visits in 2000 to approximately 6.7 million visits the month of June 2011. Similarly the number of visits to “www.realcommercial.com.au” grew from about 72,000 in January 2005 to approximately 400,000 in October 2011.
Rea Group had registrations of composite trade marks which included the phrase “realestate.com.au” and/or logo in respect of services in classes 35, 36, 38 and 42. Some of these trade mark registrations dated back to October 19995. Class 36 services included “Real estate affairs, including the provision of access to real estate information and analysis over a global computer network…” Class 35 services included “advertising of real estate in electronic….format”. Since November 2002, Rea Group also had registrations of composite trade marks which included the phrase “realcommercial.com.au” and/or logo in respect of services in classes 9, 35, 36 and 426.
Rea Group achieved market popularity and dominance through extensive advertising campaigns to promote awareness of its brands, “realestate.com.au” and “realecommercial.com.au” to both consumers and real estate agents. Between 2005 and 2011, the Rea Group purchased more than $9million of advertising to promote the realestate.com.au website portal. Between 2006 and 2011(excluding 2010), Rea Group had purchased about $510,000 media advertising to promote the realcommercial.com.au website portal7.
Real Estate 1 Business
Mr. Luff, one of the Respondents in the proceedings and a director of Real Estate 1, deliberately rebranded his existing Real Estate 1 on-line real estate advertising business using the names “realestate1.com.au” and “realcommercial1com.au”, which closely resembled Rea Group’s on-line real estate marketing businesses8. This was part of Mr. Luff’s exit strategy. He hoped that Real Estate 1 would be taken over by the Rea Group. Mr. Luff’s presentation to prospective investors in December 2009 made the comment – “Our choice of name and brand was no accident. We wanted to capture market share in the space quickly. A little cheeky I know. But so be it. It has worked”9.
From about March 2009 to late October 2010 Real Estate 1 used “realestate1.com.au” as a part of its domain and branding of its website. In response to the litigation, “com.au” was removed from the branding on the Real Estate 1 website, so that it reverted to “realestate1” plus its logo. However it continued to use the domain name “realestate1.com.au” as its domain for the domestic property portal of its website10.
From about August 2009 to October 2010 the domain name “realcommercial1.com.au” was used for the commercial property portal of the Real Estate 1 business. In response to the litigation and from about late October 2010, Real Estate 1 changed its domain name to “realestate1commercial.com.au” and altered the branding on its website to “realEstate1commercial” with a logo11.
Although Real Estate 1 was a competitor to the Rea Group, it was relatively an insignificant participant in residential and commercial property portal market. In the month of October 2011, realestate.com.au ranked as the number 1 property portal in Australia with over 16 million visitors representing some 34% of total visits to property portals and realestate1.com.au ranked at 121 with about 25,500 visits representing 0.0544% of total property portal visits12.
Trade Practices and Passing Off Claims
Bromberg J. dismissed Rea Group’s claims for contravention of section 52 of the Trade Practices Act, and passing off. Based on the evidence before Bromberg J, he was not satisfied that Real Estate 1 by the use of the term “realestate1.com.au”in a URL on a search result page engaged in misleading or deceptive conduct in contravention of the s52 of the Trade Practices Act and passing off.
Was the impugned conduct that of Real Estate 1?
Bromberg J accepted that the impugned conduct, being the use of either “realestate1.com.au” or “realcommercial1.com.au” displayed in sponsored links and organic search results which relate to the property portals of Real Estate 1, was that of Real Estate. Although the heading, URL and page description which appeared in the organic search results were technically determined by a search engine, Real Estate 1 included on its web pages megatags for both the heading and page description designed to facilitate the adoption and display of that content in organic search results produced by search engines and also created and paid for the content of sponsored links13.
The relevant class
As there was no direct evidence of actual confusion on the part of individual consumers, the case proceeded on the basis that that representations were made to a class of identifiable consumers. Bromberg J identified the class as “people who have access to a computer connected to the internet and who use search engines to view real estate listings on property portals. The class, therefore is the actual or prospective users of REA’s property portal. …… ‘Ordinary’ or ‘reasonable’ persons within that class that will have a basic understanding and knowledge of computers, the internet and how to use search engines.”14
Bromberg J considered that the ‘ordinary’ or ‘reasonable’ member of the class will perceive that representations made in or by a sponsored link are representations of the advertiser. In the case of an on-line business which trades through the internet, the ‘ordinary’ or ‘reasonable’ member of the class will perceive the representations made in or by an organic search result relating to such a business, as a representation made by the business concerned.15
Are REA’s names distinctive of its business?
Real Estate 1 conceded that by the use of the combination of brand elements including logos used to promote REA’s residential and commercial real estate portals, REA had developed a reputation in the Australian market. However, Real Estate 1 contended the name “realestate.com.au” was descriptive term and REA had failed to establish that the term, when appearing on the search results page, had become distinctive of REA’s business. Bromberg J considered that as a term, “realestate.com.au” is only faintly recognizable as an intended name for a brand or business16. However, because of the extensive advertising of the term in connection with REA’s residential portal, Bromberg J considered that it was likely that when “realestate.com.au” is displayed as a trading or domain name for that portal, it is recognised as such by a significant number of Australian consumers who use property portals17. Bromberg J found that a secondary meaning had been established in the term “realestate.com.au” and that a substantial number of consumers associated the term with REA’s online residential property portal business18.
Bromberg J considered that the term “realcommercial.com.au” comprising of concocted words was not as strongly descriptive of a property portal of the REA Group in the way that ‘realestate.com.au”. Having regard to the evidence of substantial advertising and extensive use of the name ‘realcommercial’ by consumers when trying to locate the ‘realcommercial.com.au’ website, Bromberg J found that a secondary meaning had been established in that term “realcommercial.com.au” and that a significant number of consumers associate the term with REA’s online property portal business19.
Causation and the extent of differentiation required to avoid confusion.
Bromberg J applied the principles established in Hornsby Building Information Centre v Sydney Building Information Centre (1978)20 that when a descriptive name is used to identify a brand or business, any misconception on the part of consumers may be the result of the indistinct name adopted by the business rather than any conduct on the part of the competitor. Where descriptive names are used, then only small differences in names used by a competitor will suffice to avoid misconception by consumers. Bromberg J accepted the reasoning of Stephens J in Hornsby that “the creation of any monopoly in descriptive names would be to mock the manifest intent of the legislation” [Trade Practices Act].
Bromberg J considered that because words “real estate” were highly descriptive, then any business involved in the sale or rental of real estate under that name alone had no prospects of establishing that the words are distinctive to its business. REA Group contended that the combination of “real estate” with “com.au” created a term which was distinctive of REA’s residential portal business. Bromberg J considered that the phrase “real estate” and suffix “com.au” was widely used in commerce and there was extensive use of trading and domain names for property portals which included these features. Applying Hornsby Bromberg J concluded that “only a small difference in a competitor’s trade name” would “render the latter immune from action”21.
Bromberg J considered that where businesses use descriptive terms to identify their business, this will be recognised by consumers who can be expected to be more vigilant when searching for a particular online real estate business and small differences are less likely to lead to error22.
Bromberg J was of the view that “realcommercial.com.au” contained a distinctive dominant term, which in and of itself connoted the existence of a source of business and brand. A small difference in the name by a competitor was unlikely to avoid misrepresentation of an association or affiliation23.
Were members of the class likely to have been misled or deceived by the use of “realestate1.com.au”
At trial REA Group did not press with its case that the use of the impugned domain on the Real Estate 1’s residential property portal was misleading or deceptive but focused its case on whether the use of “realestate1” in a URL on search results pages. REA contended that such use resulted in consumer traffic intending to go the REA’s realestate.com.au portal being diverted to the Real Estate 1’s residential property portal. REA contended that the use of “realestate1.com.au” suggests an affiliation with REA’s residential portal. Real Estate 1 argued that the additional “1” in its ULR was sufficiently prominent to dissociate it from “realestate.com.au” 24. REA contended that consumers undertaking searches would miss the “1”.
Bromberg J accepted that an erroneous assumption of affiliation as a consequence of a poor recall on the part of the consumer was possible but he did not consider this to be something that necessarily flowed from the conduct of Real Estate 1 but was in part a function of the indistinctive name chosen by REA. Bromberg J considered that this type of confusion was the kind that Stephen J in Hornsby said “was not anything to which s52 is directed to” 25.
Bromberg J considered that the identified class of consumers would be more vigilant in the context of a market where close variants of ‘realestate.com.au’ are common on search result pages and small differences in the description is likely to be perceived as a mark of distinction between traders. Bromberg J was of the view that consumers with ordinary recall specifically looking for ‘realestate.com.au’ on a search page result who see “1”, will not be mislead or deceived into assuming an affiliation between the portal being searched for and “realestate1.com.au” 26.
On the evidence before the court, of Real Estates 1’s organic search results and sponsored link activities where “realestate1.com.au was used in a URL on a search page result, Bromberg J was not satisfied that REA had established that a not insubstantial number of ‘ordinary’ or ‘reasonable’ persons in the class have or were likely to have been misled or deceived. Bromberg dismissed REA’s claim for misleading and deceptive conduct and passing off in respect of its use of ‘realestate1.com.au’ in Real Estate 1’s URL27.
A not insubstantial number of consumers
Bromberg J, in determining whether a not insubstantial number of consumers within the class were or were likely to be misled, rejected Real Estate 1’s contention that the number involved should be evaluated as a proportion of the total number of visits to the realestate.com.au website. He considered that that proportional approach could result in a large number of consumers gaining no protection against misleading and deceptive conduct simply because in proportion terms, they represent a small fraction of a very large class28.
Bromberg J accepted that it was possible that some consumers without prior experience of ‘realestate.com.au’ website may not have appreciated that the Real Estate 1 website was not a REA site, but he considered that the number was likely to be not material having regard to the way searches are conducted and where ‘realestate1.com.au’ appeared on the search page. Bromberg J also accepted that it was possible that consumers who had prior exposure to the REA website may have been momentarily diverted to the ‘realestate1.com.au’ website if they had missed the “1” in the search result but because of the different branding of REA and the Real Estate 1 website they would not have been misled29.
In determining whether a not insubstantial number of consumers within the class identified were or were likely to be misled, Bromberg J, did not include consumers who would not have been deceived other than in a transitory or insignificant manner.
Bromberg J also considered whether there were any practical or commercial consequences resulting from the conduct, that it is the momentary diversion to Real Estate 1 website. Bromberg J accepted that Real Estate 1 would have gained additional traffic, but REA had not established any loss of advertising because of the marginal increase in traffic to Real Estate 1 website. REA continued to hold the number 1 position in the on-line real estate portal business30.
Real Estate 1 intent
REA contended that Real Estate 1 conduct was engaged in with the intent to take advantage of goodwill associated with REA’s website31 and with an intention to deceive consumers32. It is to be noted that under Australian law there is no requirement to prove “intention” on the part of a trader to mislead or deceive or to pass off, however the courts have taken the view that the intent of the trader may be of evidentiary value reaching a finding on the matter33.
Although Real Estate 1’s intent was a matter that Bromberg J took into account, however it did not affect his conclusion that REA had not established misleading and deceptive conduct or passing off in relation to the impugned use of “realestate1.com.au” 34. The fact that Bromberg J gave little evidentiary value to Real Estate 1’s intent is difficult to reconcile with his Honour’s views and findings in respect of the evidence. The evidence accepted by the Judge appears to support a passing off claim, in particular:
1. Real Estate 1’s rebranding exercise which commenced in March 2009, involved a deliberate strategy by Real Estate 1 to have its brands closely resemble the brands used by REA for REA’s property portals as it wanted to capture part of the market share quickly in this space; and
2. Real Estate 1’s exit plan was for REA to buy it out.
Bromberg J also expressed the view that that the director of Real Estate 1, Mr Luff’s motivation to rebrand “were for mixed reasons. Some commercial and some far less honourable.” 35 Bromberg J found that Mr Luff was motivated to try and divert traffic from realestate.com.au and other real estate portals through the search engine marketing exercise in which it engaged. Bromberg J also found Mr Luff was at least in part motivated to adopt realestate1.com.au as his brand because he wanted to take advantage of the reputation of “realestate.com.au”35a.
Were members of the class likely to have been misled or deceived by use of “realcommercial1.com.au”?
As Real Estate 1 had ceased to use “realcommercial1.com.au” as a part of its domain name and trading name, after proceedings had commenced, at trial REA did not press its misleading and deceptive conduct and passing off case. Accordingly, Bromberg J dismissed this part of the case.
Bromberg J observed that “realcommercial” was distinctive and its use by Real Estate 1 suggested an affiliation with REA’s commercial property portal. Real Estate 1 was responsible for any likely deception in the use of ‘realcommercial1” as its domain name and trading name. However, any likely confusion from search results would likely have been monetary and immediately dispelled when the consumer accessed the website of “realcommercial1.com.au” 36.
Trade Mark Infringement Claim
Under Australian trade mark law, a person infringes a registered trade mark if the person uses as a trade mark, a sign that is substantially identical with or deceptively similar to the trade mark in relation to goods or services in respect of which the trade mark is registered 37. A trade mark is considered to be deceptively similar to another trade mark “if it so nearly resembles that other trade mark that it is likely to deceive or cause confusion” 38.
REA succeeded in its trade mark infringement claims in respect of “realcommercial” and “realestate.com.au” registrations, however failed to establish that Real Estate 1’s use of “realestate1.com.au” as a part of its logo amounted to trade mark infringement.
Bromberg J was troubled by the fact that REA had obtained trade mark registration and monopoly rights in respect of descriptive words which he considered should be available to others in commerce. Real Estate 1 did not challenge the validity of the trade mark registrations39.
SL&C Comment
The decision certainly gives rise to some appealable points. The fact that REA had chosen a descriptive name for its business certainly did not assist it in prosecuting the case under the Trade Practices Act (now the Australian Consumer Law) and for passing off. It is clear from the decision that Bromberg J did not want to give REA monopoly rights to the words “real estate” in combination with “com.au” designation used in URL domain names. Would the outcome of this case have been different if REA had actual evidence from consumers who had been misled?
Benefits of Trade Mark Registration
The valid registration of a trade mark in Australia gives the owner of that registered trade mark the exclusive right to use, license, franchise, sell or otherwise commercialise the trade mark in respect of the goods and services for which it is registered. These rights are subject to those of owners of common law trade marks that were in existence prior to the registration of the trade mark.
Australian Trade mark registration is for a period of ten years and can be renewed every ten years for a further period of ten years upon payment of the renewal fees to IP Australia. The trade mark must be used in Australia in respect of the goods or services for which it is registered. The non-use of a registered trade mark can result in an action for its removal from the Trade Mark Register for non-use.
The benefits of trade mark registrations include:
1. Monopoly rights in the trade mark in respect of the class of goods or services in which the trade mark is registered, subject to existing common law trade marks;
2. Provided you continue to use your registered trade mark, a simple and inexpensive way of maintaining those monopoly rights indefinitely by renewing your registration for consecutive ten year periods;
3. Providing you with a valuable business asset which can be sold, licensed, franchised or otherwise commercialized;
4. It provides a publicly available record of the registration which can be searched by a competing business and act as a deterrent to it from using the same or similar trade mark in relation to the same or similar goods or business activities to those in the class in which your trade mark is registered;
5. Provided you choose a distinctive mark or invented word as your trade mark (instead of descriptive/commonly used words) then, when seeking to prevent others/competitors from infringing your trade mark or unfairly using a similar mark in respect of the same or similar goods or services as those for which you have registered your trade mark, you will have:-
– more certainty of a successful outcome than just relying on your rights under the Australian Competition and Consumer Law, 2010 (previously the Trade Practices Act 1974) or common law passing off; and
– greater likelihood of a fast and, therefore, more cost-effective resolution.
Katarina Klaric | Principal
STEPHENS Lawyers & Consultants | Suite 205, 546 Collins Street,
Melbourne VIC 3000 Australia
T + 61 3 8636 9100 | F + 61 3 8636 9199 | E [email protected]
P.O. Box 16010 Collins Street West VIC 8007 Australia
www.stephens.com.au
Stephens-Klaric Legal Pty Ltd (ACN 117 672 376) trading as Stephens Lawyers & Consultants
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© Stephens Lawyers & Consultants. October 2013. Authored by Katarina Klaric. Edited by Rochina Iannella.
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1 The Australian Consumer Law part of the Competition and Consumer Act 2010 (the former Trade Practices Act 1974)
2 Unreported Decision BC201302952. Also see [2013] FCA 559
3 The claims in the case were brought under former Trade Practices Act 1974(Cth), sections 52 and 53. The equivalent provisions are section 18 and 29 of the Australian Consumer Law.
4 Unreported Decision BC201302952. Also see [2013] FCA 559
5 Unreported Decision BC201302952, page 7
6 Unreported Decision BC201302952, page 7
7 Unreported Decision BC201302952 page 8
8 Unreported Decision BC201302952 pages 10 and 30
9 Unreported Decision BC201302952 page 30
10 Unreported Decision BC201302952 page 10.
11 Unreported Decision BC201302952 page 10 and 11
12 Unreported Decision BC201302952 page 11
13 Unreported Decision BC201302952 page 14
14 Unreported Decision BC201302952 page 15. Bromberg J adopted the approach taken by the High Court and Nicholson J (at first instance) in Australian Competition and Consumer Commission v Trading Post Australia Pty Ltd (2011) 197 FCR 498.
15 Unreported Decision BC201302952 page 15
16 Unreported Decision BC201302952 page 16
17 Unreported Decision BC201302952 page 17
18 Unreported Decision BC201302952 page 18
19 Unreported Decision BC201302952 page 18
20 Hornsby Building Information Centre v Sydney Building Information Centre (1978)140 CLR 216
21 Unreported Decision BC201302952 page 18-21
22 Unreported Decision BC201302952 page 21
23 Unreported Decision BC201302952 page 21
24 Unreported Decision BC201302952 page 21
25 Unreported Decision BC201302952 page 22
26 Unreported Decision BC201302952 page 22
27 Unreported Decision BC201302952 page 29 and 31
28 Unreported Decision BC201302952 page 28.
29 Unreported Decision BC201302952 page 29.
30 Unreported Decision BC201302952 page 29.
31 Unreported Decision BC201302952 page 31.
32 Unreported Decision BC201302952 page 31.
33 See: Telmak Telproducts (Aust) Pty Ltd. v. Coles Myer Ltd (1989) 89 ALR 48 at 69 (Wilcox and Einfeld JJ)
34 Unreported Decision BC201302952 page 29.
35 Unreported Decision BC201302952 page 29 – 30
35a Unreported Decision BC201302952 page 29 – 30.
36 Unreported Decision BC201302952 page 31.
37 Section 120(1) Trade Marks Act 1995 (Cth)
38 Section 10 Trade Marks Act 1995 (Cth)
39 Unreported Decision BC201302952 page 36.