Sexwax Inc v Zoggs International Ltd [2014] NZCA 311

Court of Appeal of New Zealand

O’Reagan P, Stevens and Miller JJ

22 May 2014, 9 September 2014

Trade marks – opposition – identification of mark relied on by opponent – comparison of whole of opponent’s mark with mark applied for – awareness or reputation of opponent’s mark – definition of ‘market’ not a perquisite – importance of segregating awareness from consideration of likely confusion or deception – the finding that the purchasing public of New Zealand was the relevant “market” was erroneous – likelihood of confusion or deception established – Trade Marks Act 2002 (NZ) s 17(1)(a)

Facts:

 

The appellant (Sexwax) had since the 1980s marketed a large-selling brand of surfboard wax through a New Zealand distributor. Its mark, the MR ZOG’S SEX WAX mark, was a distinctive logo but was unregistered in New Zealand. In addition to its surfboard wax, Sexwax also sold a wide range of products including T-shirts, sweatshirts, rash guards, swimwear, wax combs and beach towels which were all labelled or decorated with either the words MR ZOG’S SEX WAX and design mark or used the word ZOG. The product was sold in retail shops all over New Zealand and through the online auction site, Trade Me.

For the period November 1997-June 2010 wax and surfboard-related products were 65% of the appellant’s sales in New Zealand. Around 27% comprised T-shirts on which the complete logo or a dominant reference to SEX WAX was on them. The MR ZOG’S SEX WAX label in whatever form was usually prominent and occupied the whole of the front or back of the T-shirt.

The respondent (ZOGGS) was founded in Australia in 1992. Its original products comprised goggles, with the name ZOGGS being an adaptation or abbreviation of the word goggles. These were sold in New Zealand from around 1994. Zoggs then began manufacturing swimwear under the label ZOGGS TOGS. New Zealand sales under the label commenced in the mid-1990s. Some 17,000 items sold in New Zealand in the period April 2006-February 2011 primarily through aquatic centres, swim schools and small aquatic retailers.

In December 2009 Zoggs applied to register ZOGGS in class 25 in respect of clothing, footwear, headwear, swimwear, swim caps, warm up suits, T-shirts, jackets, beachwear, leisurewear, skiwear, sports clothing and wetsuits. The application was opposed by Sexwax on a number of grounds but in particular under s 17(1)(a) based on the prior awareness of its unregistered trade mark MR ZOG’S SEX WAX. Sexwax also relied on five other unregistered trade marks comprising or including the word ZOGS.

At first instance the Assistant Commissioner declined the application on a number of grounds, including s 17(1)(a). On appeal Zoggs was successful, the High Court finding that the mark MR ZOG’S SEX WAX was quite dissimilar to the ZOGGS’ mark. This was on the basis that the concept of Sex Wax was attention grabbing and the single feature of the logo sufficient to linger with people. Further, the Judge endorsed the Assistant Commissioner that the relevant market was the general purchasing public of New Zealand. He held that this was very large in size and not a specialist market. He concluded that there was no risk of confusion. The Judge also concluded (“with less conviction”) that on balance he would also have allowed the appeal against a finding of sufficient reputation.

Sexwax appealed on the s 17(1)(a) ground alone contending that there was a sufficiently substantial awareness of its mark for goods in class 25. Further, that Zoggs had not discharged the onus of showing no reasonable likelihood of confusion or deception resulting from use of the ZOGGS’ mark. The key issues on appeal were:

  1. What was the nature of the mark owned by Sexwax?

  2. What was the reputation or awareness of that mark?

  3. Had Zoggs discharged the onus of showing that there was no reasonable likelihood of deception or confusion arising from the notional use of the ZOGGS’ mark. 

    Held, allowing the appeal:

    What was the opponent’s mark? 

  1. The Court was satisfied that MR ZOG’S SEX WAX logo was recognised or remembered as a matter of general reputation by reference to the MR ZOG’S element [41].

    What was the opponent’s reputation/awareness?

    The correct approach to s 17(1)(a)(iv) 

  2. The judgment under appeal erred in not comparing the whole of the MR ZOG’S SEX WAX mark, including the MR ZOG’S position with the mark applied for [39].

  3. It was artificial to attempt to sever the SEX WAX element from the other components of the logo mark relied on by the appellant [37]. Deception or confusion may arise by the use, not just of the whole of the mark or logo, but of one or more of its essential features. Identification of an essential feature will depend partly on the Court or Tribunal’s own judgment and partly on the nature of the available evidence, particularly with regard to the goods in question [38]. 

    New Zealand Breweries Ltd v Heineken Bier Browerij Maatschappij NV [1964] NZLR 115 at 134.

  4. Under s 17(1)(a) the Court begins by enquiring whether the opponent’s mark has a reputation in New Zealand at the relevant date. Such a reputation need not be widespread; it all depends on the nature of the marks and the goods to which it is applied. Where marks are used in respect of goods with only a very narrow or specialised use or purpose, the mark may be known only to a small number of people. In other cases a mark may be applied to goods sold very broadly or applied to numerous different goods under a brand’s penumbra. This is the initial enquiry into the “circumstances of the trade” [48].

  5. The assessment of the likelihood of deception or confusion is a fact-specific enquiry. It is a matter of assessing “practical business probabilities” having regard to all the surrounding circumstances and the degree of similarity of the marks. Judicial decisions have established a materiality threshold for confusion or deception, requiring the applicant to prove that registration will not cause deception or confusion amongst a ‘substantial number of persons’. The terminology used in the judgments varies with the setting and is ultimately a question of significance of the numbers in relation to the awareness of the marks in question [49].

  6. Case authorities demonstrated that the risk of confusion is properly measured by reference to those who may be exposed to the applicant’s goods and aware of the opponent’s mark. Absent exposure to goods bearing the applicant’s mark, there will be no risk of confusion [54].

  7. Re Transfermatic Trade Mark [1966] RPC 568; Re Edward Hack’s Application (1940) 58 RPC 91; Lee & Son (London) Ltd’s Application (1955) 72 RPC 75; Pioneer Hi‑Bred Corn Company v Hy-Line Chicks Pty Ltd [1978] 2 NZLR 50 referred to.
  8. Courts have occasionally reached for the concept of a ‘market’ to assist when enquiring whether a substantial number of persons are likely to be confused [55]. Use of the concept of a market as the relevant frame of reference is, however, context-specific [56]. It may be a convenient analytical tool through which to assess reputation and measure the risk of deception. But the legislation does not refer or insist upon a market definition and the exercise is not always required and may not be necessary [57].

  9. When considering commercial dealings with goods and the states of mind of prospective or potential purchasers of goods of the kind to which the applicant may apply its mark (proposition 7 in Pioneer), the Assistant Commissioner had erred at first instance when describing the relevant market as “the general purchasing public”. That was over-broad [63]. Similarly the Judge appealed from was in error when he adopted the Assistant Commissioner’s finding and affirmed that this was the relevant market. The error was compounded when the Judge referred to the next step as being to assess if the opponent had established an awareness of its mark in the relevant market. This skewed the analysis by framing the question so broadly [64].

  10. The correct focus under s 17(1)(a) is on the awareness of the opponent’s mark in relation to prospective purchaser of the goods to which its mark attaches and individuals and entities involved in that trade; not the entirety of the purchasing public of New Zealand. The question of likelihood of deception or confusion must then be assessed against that reputation, considering the fair notional use of the goods bearing each of the marks [65]. It is important not to conflate the tests for establishing an awareness or reputation [of the opponent’s mark] in an industry or in New Zealand with the test of establishing that a substantial number of those persons are likely to be deceived or confused. Each aspect requires separate consideration [70].

  11. The facts supported the existence of a reputation in New Zealand for the MR ZOG’S SEX WAX mark, particularly in surf and beachware and accessories [73]. This reputation existed as at December 2009 amongst those exposed to the mark, including purchasers of the surfboard wax, T-shirts and other Sexwax branded products and purchasers of other products or those browsing in outlets selling Sexwax products [74] and [76].

    Likelihood of deception or confusion 

  1. The judge’s approach to the likelihood of deception or confusion, i.e. the purchasing public of New Zealand generally was erroneous. Such an approach would significantly reduce the utility of s 17(1) as a public protection measure. There are few products outside very large international brands that could occupy a position in terms of awareness that, proportional to the entire population of a country, constitutes sufficient awareness in this manner. That arguably would rule out the protection from deception or confusion afforded by s 17(1)(a) for any niche brand, or any niche area of the market that cannot command a requisite popularity or size. On that basis some brands might never reach that level of awareness [84].

  2. Here the possibility of confusion could extend not only to the sale of Zoggs’ products from surf shops but also to people being aware of the appellant’s mark, having encountered Zoggs-branded products in other retail outlets, particularly sports and beachwear stores. Given the similarities between the MR ZOG’s element and the ZOGGS mark, there was a clear potential connection between the brands. Any retention of the SEX WAX element in the purchaser’s mind would not be enough to cancel out the ZOG’s connection [85]. Conceptual similarity does not need to evince a shared origin of the brands. Rather the use of the MR ZOG’s element in the complex mark and ZOGGS is enough to tie the brands together and spark a connection in the minds of consumers [86]. There was an overlap or confluence in products sold in surf shops, sports shops and surf retail shops selling beachwear. Given the awareness of the MR ZOG’S SEX WAX mark by individuals concerned, the Court was satisfied there was a reasonable likelihood those individuals would be confused or deceived by the registration of the ZOGGS mark for goods falling within that intersection. Thus individuals would be caused to wonder whether there was some connection between the two marks at issue [87].

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