APPLE INC. v SWATCH AG (SWATCH SA) (SWATCH LTD)  

 Intellectual Property Office of New Zealand

Assistant Commissioner Alley

23 December 2019, [2019] NZIPOTM 30 3179 3546

Trade marks – convention priority – similar trade marks – likely to deceive or confuse – contrary to law and disentitled to protection – well known marks – intention to use – registrability – distinctive character – Trade Marks Act 2002 – Fair Trading Act 1986 – Passing Off.

Facts:

The Applicant, Apple Inc. (“Apple”), designs, manufactures and markets a wide range of personal computers, mobile communications and media devices, and portable media players.  It also sells a variety of related software, services, peripherals, networking solutions, and third-party digital content [14]. 

In 2013 Apple applied to register the following trade marks in New Zealand:

Trade mark no.                       Trade mark                            Filing date     Goods description
989093 IWATCH       

5 December 2013 

(Convention priority date of 5 June 2013 claimed)                       

Class 9: Computer software; computers; computer hardware; computer peripherals; wireless communication devices; audio and video devices; global positional system devices; accessories, parts, components, and cases for all of the foregoing goods.
Class 14: Chronometric instruments, timepieces; accessories, parts, components and cases for all of the foregoing goods.
1042166 IWATCH

5 December 2013

 (Convention priority date of 5 June 2013 claimed)

Class 9: Security devices; monitors and monitoring devices; cameras; radios; accessories, parts, components, and cases for all of the foregoing goods.
Class 14: Bracelets; accessories, parts, components, and cases for all of the foregoing goods.

Both applications claim convention priority from United States application no. 85951867 for IWATCH in the name of Brightflash USA LLC (“Brightflash”) and having a priority date of 5 June 2013 [22].  Brightflash is an affiliate of Apple [19].

Application no. 989093 for IWATCH was originally filed by an affiliate of Apple Inc, Brightflash. The applicant was assigned to Apple by way of a deed executed on or about 4 June 2015 [19].

During the examination process for application no. 909093, the Intellectual Property Office of New Zealand (“IPONZ”) offered to accept the IWATCH mark for some of the goods in Apple’s initial application if these were divided out. These goods are included in the divisional application no. 1042166, which was accepted by the IPONZ on 19 May 2016 [20].

On 7 July 2016, IPONZ issued Apple with a notice of intention to reject application no. 989093 on the basis that the mark is descriptive and non-distinctive, and therefore should not be registered pursuant to ss.18(1)(c) and 18(1)(b) of the Trade Marks Act 1995  (New Zealand) (“the Act”) [17].  A hearing on IPONZ’s proposed rejection was held and on 9 December 2016, the Assistant Commissioner N Alley held that Apple had established acquired distinctive character under s.18(2) of the Act. Therefore, IPONZ was directed to accept application no. 989093 and it was accepted on 18 January 2017 [18].

The Opponent, Swatch AG (Swatch SA) (Swatch Ltd) (“Swatch”) is a wholly owned subsidiary of The Swatch Group, the world’s largest watchmaking group. Swatch is responsible for the design, distribution and service of wristwatches sold under the SWATCH brand [10]. Swatch opposed registration of application nos. 989093 and 1042166 on the following grounds:

a)      Priority challenge – s.36 of the Act;

b)      Similar trade marks – s.25(1)(b) of the Act.  Swatch relied on its own New Zealand trade mark registrations for SWATCH,[1] ,[2] ITOUCH,[3] and ,[4] (“Swatch’s registered marks”).

c)      Likely to deceive or confuse – s.17(1)(a) of the Act.  Swatch relied on its SWATCH, , ISWATCH, and  marks.

d)      Contrary to law and disentitled to protection – s.17(1)(b) of the Act.

e)      Well known marks – s/25(1)(c) of the Act.

f)       No intention to use – s.32(2) of the Act.

g)      Not registrable as a trade mark – s.18 of the Act.

Held, dismissing the oppositions:

Section 36 of the Act – priority challenge

Swatch’s assertions

Swatch claimed that Brighflash’s United States Convention application no. 85951867, from which priority is claimed, was not the first application for the IWATCH mark made in a convention country. Rather, it submitted that the first convention country applications are Apple’s Jamaican applications for IWATCH and iWATCH in classes 9 and 14, which date back to 3 December 2012 [22]. Swatch therefore asserted that because the opposed applications were not filed within six months of the Jamaican applications, the opposed applications are only entitled to a priority date equal to their New Zealand filing date of 5 December 2013 [23].

Priority date was particularly important in this case because a convention priority date of 5 June 2013 as the relevant date would mean that Swatch could not rely on its ITOUCH and  registrations for the s.25(1)(b) ground of opposition.

Pleadings issue

Before the Assistant Commissioner could consider the substance of Swatch’s priority challenge, she had to address a procedural issue raised by Apple ahead of the hearing. 

Apple observed that Swatch’s notice of opposition plead that Apple and Brightflash “are effectively the same parties for the purposes of determining convention priority” [25].  Apple asserted that evidence as filed by Swatch supported this pleading [27].  However, in written submissions, Apple submitted that Swatch contended a legally and factually different allegation that there was in fact an agency relationship between Apple and Brightflash [26], [28]. 

Apple further submitted that there was a real risk of unfairness if Swatch was permitted to run its agency argument, especially given that Apple’s pleadings and own evidence was filed on the basis that Swatch was going to argue that Apple and Brightflash are effectively the same parties [28]. 

In contrast, Swatch submitted that the pleading issue as raised by Apple was a distinction without a difference [29].

Findings on the pleadings issue

The pleadings define the scope of issues in dispute and serve as important notice to the opposing party as to the live issues in the proceeding.  An opposing party entitled to have a clear understanding to the case they have to meet.  Otherwise unfairness to the opposing party is a likely consequence [31]. 

Chettleburgh v Seduce Group Australia Limited [2012] NZHC 2563, (2012) 98 IRP 306 at [66] referred to.

Section 27(1) of the New Zealand Bill of Rights Act 1990 provides that every person has the right to the observance of the principles of natural justice by any tribunal which has the power to make a determination in relation to that person’s rights, or interests protected or recognised by law.  Fairness of procedure is a fundamental principle of natural justice [32].

On application of the principles of natural justice, Apple’s objection that Swatch had not pleaded the ground it sought to raise in submissions was upheld [34]. Consideration of whether Apple and Brightflash were effectively the same, or affiliates in any way was therefore relevant to the priority challenge [34].

Findings on the priority challenge

On the evidence put before the Assistant Commissioner, Brightflash was an affiliate of Apple.

was entitled to claim priority in the opposed applications from US trade mark application no. 85951867 [58], [63]. The parties that made the original Jamaican applications and the US application for IWATCH were not the same person. The phrase “that person” at the end of s.36(2) of the Act means that subsection (1) does not apply to any subsequent applications for a trade mark in the convention country [58].

Swatch’s priority challenge was therefore unsuccessful. The priority date for the opposed applications, and the relevant date for the proceedings, was held to be 5 June 2013 (“the relevant date”) [63].

This meant that Swatch could not rely on its ITOUCH and ISWATCH marks under the s 25(1)(b) ground of opposition because the New Zealand priority dates for these marks post-dated 5 June 2013.

Section 25(1)(b) – similar trade marks?

The comparison, under s.25 of the Act, is between use of both the opposed mark and the opponent’s registered marks in a normal and fair manner. The comparative exercise under s.25(1)(b) is an entirely notional one.  It contemplates any fair use of the marks in relations to any of the goods covered by the registration [65]. 

There are three inter-related elements to the inquiry under s.25(1)(b) of the Act [67]:

(a)          Are the opposed goods the same as or similar to the goods covered by the opponent’s registered marks?

(b)          If so, is the opposed mark similar to the opponent’s registered marks for the same or similar goods identified by the first enquiry?

(c)          If so, is use of the opposed mark likely to deceive or confuse?

NV Sumatra Tobacco Trading Company v British American Tobacco (Brands) Incorporated [2010] NZCA 24, (2010) 86 IPR 206 (CA); NV Sumatra Tobacco Trading Company v New Zealand Milk Brands Limited [2011] NZCA 264 referred to.

Similarity of the IWATCH and SWATCH / marks

The following factors are relevant to the exercise of comparing marks [69]:

(d)          The two words must be judged both by their look and their sound.

(e)          The goods to which the marks are to be applied and the nature and kind of customer who is likely to buy these goods must be considered.

(f)           All the surrounding circumstances must be considered as well as what is likely to happen if each of the marks is used in a normal way as a trade mark for the goods of the respective owners of the marks.

In re Pianotist Co.’s Application (1906) 23 RPC 774, 777; New Zealand Breweries Ltd v Heineken’s Bier Browerij Maastschappij NV [1964] NZLR 115 referred to.

The totality of impression of the two marks is of fundamental importance [70].

Polaroid Corp v Hannaford and Burton [1975] 1 NZLR 566 (CA); Portacom New Zealand Ltd v Port A Room Ltd HC Auckland CIV-2007-404-2536, 6 December 2007; Coca-Cola Canada v Pepsi-Cola Canada (1942) 59 RPC 127; Warner-Lambert Co v SmithKline Beecham Plc HC Wellington, CIV-2003-485-959, 3 October 2003 referred to.

Allowance must be made for imperfect recollection [74].

De Cordova v Vick Chemical Coy (1951) 63 RPC 103 referred to.

The idea conveyed by the marks is also significant in assessing how they will be recalled [75].

Anheuser-Busch Inc v Budweiser Budvar National Corp [2003] 1 NZLR 472 referred to.

The first word of a composite mark is usually the most important for comparison [76] but this is only a general rule [77].

London Lubricants (1920) Limited’s Application (1925) 42 RPC 264; Telecom IP Ltd v Beta Telecom Ltd [2006] NZHC 1132 referred to.

The focus is on the similarities, not the differences, between the marks.  “Similarity” is an elastic concept. There are degrees of similarity, and minor degrees are tolerable [78]. 

VB Distributors v Matsushita Electric Industrial Co (1999) 9 TLCR 349; N V Nutricia v Cambricare New Zealand Limited [2012] NZHC 1344; The European Limited v The Economist Newspaper Limited [1998] FSR 283 referred to.

While there are some visual, aural, and conceptual similarities between IWATCH and SWATCH/, overall the marks have a low degree of similarities. This is particularly so where the “WATCH” element is descriptive of the opposed goods or their purpose [87]. Therefore, the IWATCH and SWATCH/ marks were considered not sufficiently similar for the purposes of s.25(1)(b) of the Act [91]. 

Would use of the IWATCH mark be likely to deceive or confuse?

Having found that the marks were not sufficiently similar for the purposes of s 25(1)(b), it was not necessary to address whether use of IWATCH would be likely to deceive or confuse. However, for the sake of completeness and (out of abundant caution) the Assistant Commissioner briefly canvassed this question [98].

When assessing the likelihood of confusion, and in particular, the similarity of marks and goods, there is a degree of interdependence, meaning that a higher degree of similarity of the marks may offset a lesser degree of similarity of the goods and vice versa [107].

Canon Kabushiki Kaisha v MGM Inc [1999] RPC 117 referred to.

The opposed goods may be sold to the general public for consumption or domestic use.  Taking into account her own experience and reactions as a member of the public, along with the relevant evidence before her, the Assistant Commissioner considered that use of the IWATCH mark on the opposed goods was not likely to deceive or confuse a significant number of persons [109].

Pioneer Hi-Bred Corn Company v Hy-Line Chicks Pty Ltd [1978] 2 NZLR 50 referred to.

Swatch’s ground of opposition under s.25(1)(b) was therefore unsuccessful [110].

Section 17(1)(a) – likely to deceive or confuse?

Section 17(1)(a) protects the public interest by refusing to accord monopoly rights to a mark, the use of which is likely to deceive or confuse those in the market for the relevant goods [111].

Pioneer Hi-Bred Corn Company v Hy-Line Chicks Pty Ltd [1978] 2 NZLR 50; Sexwax Incorporated v Zoggs International Limited [2014] NZCA 311 referred to.

The applicant has the overall onus of establishing on the balance of probabilities that the opposed mark does not offend against s.17(1)(a) of the Act. First, however, the opponent has the onus of establishing awareness of its marks as at the relevant date, in this case 5 June 2013 [114].

Awareness of opponent’s marks

Apple accepted that the marks SWATCH and  had the required level of awareness among New Zealand consumers at the relevant date.  However, it denied that there was sufficient awareness of the ISWATCH marks in New Zealand prior to the relevant date [117]. 

The Assistant Commissioner considered that evidence relating to the awareness of the ISWATCH mark as at the relevant date was minimal at best [118].  She therefore found that Swatch had not discharged the onus on it of showing awareness of its ISWATCH mark in New Zealand at the relevant date. This was despite the relatively low threshold for establishing awareness under s.17(1)(a) of the Act [123]. 

Similarly, the Assistant Commissioner found that Swatch had failed to discharge its onus of showing awareness of its  device mark [124].

Likelihood of deception or confusion

In view of the findings on the awareness of the ISWATCH and  device marks, it was unnecessary to consider the likelihood of deception or confusion between these marks and the IWATCH mark. However, given that Apple accepted the SWATCH and  marks had the necessary awareness in New Zealand, it was necessary to consider the likelihood of deception or confusion in the context of these marks [125]. 

The test for determining whether or not a mark is likely to deceive or confuse under s 17(1)(a) is a fact-specific inquiry [127].

Smith Hayden & Co Ltd’s Application (1945) 63 RPC 97 referred to. 

While a consideration of similarities between the marks is relevant to an assessment of likely deception or confusion, a comparison of the marks is not determinative under s 17(1)(a). The ultimate test is whether likelihood of deception or confusion has been disproved [128].

MAN Truck & Bus AG v Shaanxi Heavy-Duty Automobile Co. Limited [2017] NZHC 2821 referred to.

Section 17(1)(a) is concerned with confusion resulting from use of the opposed mark regardless of whether the goods are the same, similar or entirely different. Therefore, the relevant consideration is the use of the opponent’s mark as against the notional fair use of the opposed marks [129].

Nexcorp Australia Proprietary Limited v Next Retail Limited [2016] NZIPOTM 17; Anheuser-Busch Inc v Budweiser Budvar National Corp [2003] 1 NZLR 472; Disney Enterprises, Inc v Monster Energy Company [2014] NZIPOTM 39 referred to.

The question of likely confusion must be assessed against the reputation of the opponent’s marks. The stronger the reputation of the opponent’s marks, the greater the likelihood of confusion [133].

Sexwax Incorporated v Zoggs International Limited [2014] NZCA 311; Disney Enterprises, Inc v Monster Energy Company [2014] NZIPOTM 39; NZME Publishing Limited v Trade Me Limited [2017] NZIPOTM 21 referred to

The Assistant Commissioner agreed that the SWATCH mark had a significant reputation in New Zealand as at the relevant date, particularly in relation to watches and that this increased the likelihood of deception or confusion [133]. However, Apple’s evidence established that its family of “I” prefix marks also had a strong reputation in New Zealand as at the relevant date, particularly in respect of consumer electronic goods. It was noted that the prefix “I” is the common feature that links many of Apple’s trade marks. In this context, the fact that the first letter of the SWATCH/ marks is “S” rather thank “I” took on greater weight in terms of differentiating the respective marks [134].

Therefore, on the balance of probabilities, the Assistant Commissioner found that if Apple uses its IWATCH mark in a normal and fair manner in connection with the opposed goods, it will not be reasonably likely to cause deception or confusion among a substantial or significant number of persons [136].

Swatch’s ground of opposition under s.17(1)(a) was therefore unsuccessful [137].

Section 17(1)(b) – contrary to law and disentitled to protection

Swatch claimed that use of the IWATCH mark by Apple would be contrary to ss. 9, 10, 13 and 16 of the Fair Trading Act 1986 (New Zealand) and/or would constitute passing off at common law [139]. 

The Assistant Commissioner found that, given use of IWATCH is not likely to deceive or confuse under s.17(1)(a), use of IWATCH would not reach the higher thresholds necessary to amount to passing off or a breach of the relevant sections of the Fair Trading Act [143].  The ground under s.17(1)(b) was therefore rejected.

Tyremax LP v Bridgestone Licensing Services, Inc [2017] NZIPOTM 13; Shenzen Motoma Power Co Ltd v Motorola Trade Mark Holdings LLC [2016] NZIPOTM 25 referred to.

Section 25(1)(c) – well known marks?

The following issues arise under s.25(1)(c) of the Act [145]:

(a)   Is the opposed mark, or an essential element of it, identical or similar to the opponent’s mark, which is well known?

(b)   Are the opposed goods and services the same as or similar to the grounds of the opponent? 

(c)   If not, would use of the opposed mark be taken as indicating a connection in the course of trade with the opponent?

(d)   If the answer to issue (b) or (c) is yes, would use of the opposed mark be likely to prejudice the interests of the opponent?

At the hearing, counsel for Swatch accepted that the ISWATCH marks were not well known in New Zealand [146]. Apple accepted that Swatch’s SWATCH mark is well known under s.25(1)(c) but did not appear to accept that Swatch’s  mark is well known under s.25(1)(c) [147]. The Assistant Commissioner noted that while there were some examples of the   mark being used in New Zealand before the relevant date, the evidence did not establish that it was well known in New Zealand at that time [147].

Consistent with earlier findings, the Assistant Commissioner found that Apple’s use of IWATCH would to be likely to prejudice Swatch’s interests [157].  

Swatch’s ground of opposition under s.25(1)(c) was therefore unsuccessful [158].

Section 32(2) – no intention to use on the goods in the specification?

Pleadings issue

The clear purpose of s.32(2) is to avoid specifications for registered marks being unjustifiably broad.  The focus of s.32(2) is whether the breadth of the specification for the goods is justified, not whether the applicant intended to use the mark [164].

The Assistant Commissioner acknowledged that the identity of the applicant will be a relevant factor in determining whether the specification is justified under s.32(2). However, the issue under a s.32(2) ground is not whether the applicant intended to use the mark. That is an issue for consideration under s.32(1) of the Act, under which an opponent may allege that an applicant cannot claim to be the owner of the mark because it did not have a sufficiently definite intention to use the mark [165]. 

The Assistant Commissioner accepted that Swatch had impliedly relied on s.32(1) of the Act in its written submissions. She therefore considered this ground of opposition as pleaded so that the issue was whether the application should be refused in accordance with s.32(2) on the basis that Apple did not intend to use the IWATCH mark in respect of the relevant goods for which registration was sought [166].

Legal principles and analysis

Section 32(2) only comes into play if the specification in the opposed application includes either [167]:

(a)“all of the goods and services included in the class”; or

(b)“a large variety of goods or services”.

The Assistant Commissioner accepted that the opposed applications do not cover all of the goods or services included in classes 9 or 14 [168].  She also accepted that the specifications of goods for class 9 and 14 in application no. 989093 do not cover a wide variety of goods [170], [171].  The specification of goods in classes 9 and 14 for application no. 1042166 are even narrower and so clearly do not cover a large variety of goods [172].

The fact that an applicant has filed a trade mark application is prima facie evidence of its intention to use the mark.  The inference of intention to use may, however, be displaced by evidence showing there is no intention to use [174].

Effem Foods Limited v Cadbury Limited HC Wellington CIV-2005-485-1487, 21 March 2007; Monster Energy Company v Ox Group Global Pty Limited [2017] NZHC 2393; IPONZ Practice Guidelines: Classification and Specification at 4.1 referred to.

Division of an application to address distinctiveness objections is not of itself indicative of a lack of intention to use the opposed mark on the goods that have been divided out [182].

The Assistant Commissioner held that there was no evidence to displace the presumed intention to use that arises on application [184]. 

Opposition proceedings are not the only opportunity to challenge the scope of a trade marks specification of goods and/or services. Non-use is a ground for revocation under s.66(1) of the Act, where the owner has not put the mark to genuine use for a continuous period of three or more years [185].

In the event that she was wrong in her finding on the pleadings issue, the Assistant Commissioner also went on to consider whether a ground based on a claim that the applicant did not intend to use the IWATCH mark, and therefore could not claim to be the owner under s.32(1) of the Act, would also fail [189].

The issue regarding an intention to use is whether the evidence has the effect of displacing the presumption that the applicant had an intention to use the IWATCH marks [193].  However, the Assistant Commissioner found that the evidence did not conclusively prove that Apple had no intention to use the IWATCH mark at the application date.  She noted that entities are entitled to apply for multiple trade marks for one product, and in practice it is not unusual for a product to be sold under a number of marks.  An applicant may also wish not to use a mark until it is registered [195]. 

Monster Energy Company v Ox Group Global Pty Limited [2017] NZHC 2393; Effem Foods Limited v Cadbury Limited HC Wellington CIV-2005-485-1487, 21 March 2007; The Scotch Whisky Association v The Mill Liquor Save Ltd [2012] NZHC 3205; Aston v Harlee Manufacturing Co (1960) 103 CLR 391, 400 referred to.

Even if the pleadings had alleged that Brightflash had no intention to use, the Assistant Commissioner considered that the evidence did not, on the balance of probabilities, rebut the presumption of an intention to use from the application [197]. She therefore considered that Brightflash was entitled to rely on the prima facie intention to use that arose from the IWATCH applications in issue and that the evidence did not rebut this presumption [200]. 

Swatch’s ground of opposition under s 32(2) was therefore unsuccessful [201].

Section 18 – not registrable as a trade mark?

Section 18(1)(c) of the Act - descriptiveness

This was considered in respect of application no. 1042166 only [204].

sign may allude to a characteristic of the goods, yet still be registrable.

Comments by the Third Board of Appeal in Laser Tracer, Case R0062/1998-3 referred to.

It is sufficient if any one meaning of the mark in question is understood by the average consumer to describe the relevant goods. The average consumer is the average consumer of the specified goods. The average consumer is deemed to be reasonably well-informed and reasonable observant and circumspect.

The Assistant Commissioner considered that average consumers are unlikely to understand IWATCH, when applied to monitors or monitoring devices, as describing or indicating the nature of those goods or some attribute they possess. She was therefore of the view that the IWATCH mark only alludes to a characteristic of monitors and monitoring devices, particularly where they have an internet related feature. Therefore, she found that IWATCH is not descriptive and does not fall foul of s.18(1)(c) of the Act [217].

Section 18(1)(b) of the Act - distinctiveness

The finding that IWATCH is not a descriptive term for the goods covered by application no. 1042166 supports a conclusion that average consumers and traders of those goods, or at least a significant proportion thereof, will regard IWATCH as sufficiently distinctive to be an indication of trade origin [222].

IWATCH was found to be sufficiently distinctive for application no. 1042166 to meet the requirements of s.18(1)(b) of the Act [225]. 

Section 18(1)(d) – signs or indications that have become customary

The Assistant Commissioner found that the evidence did not support a finding that IWATCH has become customary in the current language or in the bona fide and established practices of trade for the opposed goods covered by application no. 1042166 [228].

Section 18(2) of the Act – acquired distinctiveness

The Assistant Commissioner upheld Apple’s submissions that it had shown acquired distinctiveness under s 18(2) [241].  Further, because of differences in language between s. 18(2) and the equivalent UK provision, she considered that she was not bound by the decision of Justice Arnold in the UK High Court on a similar issue [244].    

Apple Inc. v Arcadia Trading Ltd [2017] EWHC 440; Le Cordon Bleu v Commissioner of Trade Marks [2012] NZHC 724 referred to.

The trade mark application was therefore allowed to proceed to registration.

 

[1]              Trade mark registration no. 161671 in class 9.

[2]              Trade mark registration no. 166247 in class 14.

[3]              Trade mark registration no. 982903 in class 14.

[4]              Trade mark registration no. 986048 in classes 14 and 35.