Fonterra is signalling a full-year loss of up to $675 million for 2018-19.
In this particular case Kono NZ LP (‘Kono’) had a trade mark registered for its KOHA logo , used as a secondary wine label to its primary TOHU brand. The KOHA logo trade mark was ultimately revoked from the Trade Marks Register (upon application by Te Pa Family Vineyards Limited (‘Te Pa’)) after Kono failed to prove sufficient genuine use of the mark in the last three years (or that special circumstances existed to justify the non-use of its mark).
Non-use under the Trade Marks Act
In New Zealand, the continuing validity of a trade mark registration depends upon the continuing use of the trade mark in relation to the goods and/or services for which it is registered. A trade mark registration may become vulnerable to revocation (upon application by a third party) if the trade mark has not been genuinely used in trade in New Zealand in relation to the goods or services for which it was registered during a continuous period of three years after its registration date. The use does not however need to be substantive, provided it is genuine use as a trade mark in trade.
However, a trade mark may not be revoked if its non-use is due to special circumstances that are outside the control of the trade mark owner. The Kono case demonstrates an application of the relevant legal principles underlying this exception to the general non-use principle.
Challenge to the KOHA logo
Te Pa brought the challenge to Kono’s KOHA logo trade mark registration because Te Pa was wanting to use the mark KOHA in New Zealand on its wine. It wanted to obtain its own trade mark registration for KOHA and was being blocked by Kono’s earlier trade mark registration for the KOHA logo.
At the revocation hearing before the Assistant Commissioner of Trade Marks, Kono accepted that it had not used its stylised KOHA logo during the relevant three year period, and attempted to rely on the defence that its non-use was due to ‘special circumstances’.
The Commissioner pointed to the following principles relevant to assessing whether special circumstances in fact exist:
The circumstances must be “peculiar or abnormal” and result from external forces, rather than voluntary decisions of the trade mark owner;
It is sufficient to show that the non-use occurred in circumstances that would have made it impractical in a business sense to use the trade mark, rather than impossible; and
There must be a causal link between the alleged special circumstances and the non-use of the trade mark.
Kono claimed to have had a continuing intention to make use of the KOHA mark, but argued that it was, during the relevant three year period, precluded from doing so due to poor grape yields leading to insufficient volumes of wine being produced to justify use of such secondary/export brand (KOHA). Instead, it focused on marketing and sales of the wine that was produced under Kono’s popular primary TOHU mark.
Kono further argued that the increased popularity and demand for its primary label wines (under the TOHU brand) combined with lower grape yields over the three year period, resulted in less surplus product being available for marketing and sale under the KOHA brand.
However, the Commissioner considered that there was insufficient evidence to support Kono’s claim that reduced availability of grapes was “peculiar or abnormal”, and held that Kono’s evidence did not establish that it was “impracticable in a business sense” for Kono to use the KOHA brand during the relevant three year period.
The Commissioner instead accepted Te Pa’s claim that deciding to market the wine it did have under Kono’s primary TOHU mark (rather than its KOHA mark) indicated a deliberate internal business decision to prefer one brand over the other.
The Commissioner also considered that Kono’s decision to favour its primary TOHU brand and divert vintage accordingly, negated the required causal link between the claimed environmental factors and the period of non-use.
Therefore the Commissioner concluded that Kono had failed to prove that ‘special circumstances’ justified its non-use of its stylised KOHA logo, and Te Pa’s application for revocation of Kono’s trade mark registration was successful.
The Kono case is a reminder to use your registered trade mark, or risk losing it. Given a trade mark registration provides you with valuable New Zealand wide protection against someone else using your brand (or a confusingly similar brand) on the same or similar product, it is worth maintaining your trade mark registrations through ongoing use of the mark. A trade mark registration also provides exclusive rights to brands used on products solely to be exported from New Zealand.
So in the context of the branding of wine, this recent case emphasises the importance of monitoring your trade mark registrations for, and use of, secondary (and/or third and fourth) wine labels, to avoid them becoming vulnerable to revocation for non-use and allowing a competitor to enter the market using the same or similar brand to that which you recently marketed your own goods and services under.
The Kono case also emphasises that if an owner of a trade mark registration seeks to rely on the ‘special circumstances’ defence to non-use, it is paramount that a causal link is established between an external factor beyond the owner’s control and the non-use of the mark (i.e. that the external factor actually prevented the owner from making use of the mark, or made use impractical in a business sense).
If you’re worried that one of your brands might be potentially vulnerable to challenge for non-use, or if you want to obtain protection for any of your brands that you haven’t yet registered as trade marks, you should contact your IP lawyer before it is potentially too late.