Watson as Trustee for the Watson Family Trust v Cosmetic Warriors Ltd [2022] FCA 700

Author: Ian Aldridge, Progressive Legal

A Federal Court decision has held that a trademark can be registered in the name of a company’s sole shareholder and director.

In Watson as Trustee for the Watson Family Trust v Cosmetic Warriors Ltd [2022] FCA 700 (‘Watson’) it was held that the use of the relevant trade mark was used by the appellants entities as an authorised user, and not the appellant himself who was actually the registered owner of the mark. 

Facts

• Appellant (Watson) was the registered owner of ‘LUSH’, a trademark for goods described as clothing, footwear and headgear. 
• 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. 
• Respondent (Cosmetic Warriors) sought revocation of appellant’s trademark arguing that at no time during the period of three years from filing of application had Watson, as registered owner, used the trade mark in Australia. 
• Cosmetic Warriors argued that the trade mark was not being used as badge of identification so as to distinguish goods dealt with or supplied in course of trade by person from goods so dealt with or provided by any other person. 
• At first instance, the Registrar’s delegate found that appellant failed to discharge the burden to prove use of trade mark and directed that the trade mark be removed from Register. 

Issue

Whether the appellant discharged the burden arising under s 100(1)(c) of the Trade Marks Act 1995 (Cth) (the Act) in relation to the question arising under s 92(4)(b) of the Act as to whether in the relevant period contemplated by that section there was use of the trade mark in Australia? 

Held (Greenwood J)

Decision of the Registrar’s Delegate directing the Trademark to be removed from the register be set aside.  

Watson was able to successfully defend registration of his trademark because he was effectively a sole trader.  

In reaching this conclusion Greenwood J considered the degree and extent of control exercised by Mr Watson over the entities. 

In particular, it was noted that: 

“Those features of control described by Mr Watson are matters of control exercised by him in conducting the business through the vehicle of each entity. In other words, he determined all of those matters; personally exercised complete financial control over all trading activities by the entities; regarded the entities as his “alter ego”; and personally determined all of the matters to be determined as described at [27] and [71] of these reasons”2.   

And: 

“These arrangements are unusual because Mr Watson is engaging with entities he controls and which he sees as his alter ego, and everything they did or did not do, is a function entirely of the guiding mind of Mr Watson as the guiding mind of each entity, in circumstances where he is also the registered owner of the trade mark. Normally, the registered owner of the trade mark would be at arms‑length from the relevant entity and questions would ordinarily arise about the extent to which the trade mark owner has exercised control and authority, financial and otherwise, over the entity granted the right to use the trade mark in the course of trade in goods for which it is registered”.3 

In other words, the “use” of the Trademark is taken to be use by Mr Watson through the entities.  

Thus, use by both entities of the trademark “Lush” in relation to the goods (garments) was an “authorised use” of the trademark by an “authorised user” under the control of the owner of the trade mark – that being Watson. 

Reasoning

Watson was registered owner of the trade mark as Trustee for Watson family trust. Watson contended that anything done with or in relation to the trade mark was done in his capacity as trustee.  

Watson also argued that he was taken to have used the TM for the purpose of s 92(4)(b) as a question of fact and law, entities associated with Watson used the TM in their capacity as authorised users.  

Since 1981 Watson has been selling clothing and has done so by carrying under many different trading names either on his own behalf or by companies controlled by him. Watson never carried on a trading business under the name “Lush” 

Watson was the sole director and sole shareholder of a company called HD Brands (‘HDBPL’).  

HDBPL had carried on a business known as “Hound Dog” which sold “lush branded clothing”. 

HDFO = trading name 

HDBPL deregistered on 6 April 2020 

Watson claimed he authorised and licensed HDBPL to use the Trademark “Lush” which he said was “subject to his absolute control” .4 Among other things, the license included terms such as: 

1. All orders for clothing under the label depicting the TM were to be made by Watson;  
2. All consignments which depicted the TM were to be inspected by Watson etc. 

Watson relied upon evidence by a supplier based in India known as Global. First of three transactions with this brand had the description “Lush”. 

Watson tended personally to all business operations such as purchasing stock, receiving and display of all stock, sale of stock, all financial and managerial matters.5 

Greenwood J accepted the contentions that Global had a long relationship with Mr Watson and has supplied clothing to him as a wholesale supplier6 and that the garments which were said to bore the label “lush” did so in the form depicted in the photographs supplied by Watson.  

“Accordingly, the real issue in this case is whether there is probative evidence of a sale of a garment (or sales of garments) bearing the label or brand “Lush” in the relevant period and whether the relevant trading entity controlled by Mr Watson has used the label or brand as a trademark in the course of trade in goods for which the mark is registered”7.  

Lush was being used as a Trademark because: “The label attached to the goods, or put another way, used in connection with the goods, was the registered trade mark and it was used to differentiate the particular clothing, in the course of the particular trade, from the garments of other traders. These were goods sold by Mr Watson’s entities so marked.”8 

Greenwood J was satisfied that the TM “Lush” was being used not by Watson (registered owner) but by either or both of the mentioned entities. 9 

There was no doubt that in the relevant period, Watson saw that each entity was entirely subject to his decision making and control, as well as exercising the authority to sell the goods bearing the “Lush” mark.10 

Greenwood J was satisfied that the relevant entities were authorised users.

Conclusion

While it appears this decision serves as precedent for the proposition that a person will be found to have used a trademark if they can illustrate they exercised a high degree of control of its use through a  relevant entity, the Watson decision is arguably narrow in scope.  

The narrowness of its scope appears to be confined to instances where the registered trademark owner is a “one-man” band. As such, it is unclear how this may apply to cases where there are multiple directors or owners of the impugned Trade Mark. 

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