Special circumstances as a defence to non-use revocation actions

In New Zealand, trademark non-use revocation actions can be defended by showing there are special circumstances justifying the non-use (Trade Marks Act 2002 (NZ), Section 67, 66(2)). This article explores the framework for assessing special circumstances in New Zealand and discusses recent case law that deals with this issue.

In InterAg v Bayer Intellectual Property GmbH [2020], the Intellectual Property Office of New Zealand (IPONZ) held that a regulatory ban did not qualify as special circumstances justifying non-use of a trademark (InterAG v Bayer Intellectual Property GmbH [2020] NZIPOTM 21).

InterAg owned trademark registrations for 'Cidirol' covering pharmaceuticals and veterinary products in Class 5. InterAg acknowledged there had been no use of the trademarks since 2007, but argued that a 2007 ban on certain oestrogen products justified the non-use.

IPONZ held that InterAg's decision not to use the 'Cidirol' trademarks on any products since 2007 was a commercial decision and did not qualify as special circumstances. Although the regulatory ban itself was special, InterAg could not show the non-use period of 13 years was due to the regulatory ban. The trademark registrations were revoked.

In InterAg v Bayer, the court applied the framework for assessing special circumstances as set out by the High Court (HC) in Fokker Brothers Inc Limited v Fokker Brothers Limited [2020] NZHC 953. In this case, the HC held that to successfully defend a non-use revocation action on the grounds of special circumstances:

a) there must be special circumstances;

b) the non-use of the mark must be due to those circumstances; and

c) those circumstances must be outside the control of the owner of the trademark.

According to the HC, the Trade Marks Act 2002 (TMA) does not impose a particularly high threshold for establishing special circumstances, as special simply means out of the ordinary. In Fokker Brothers, the HC held that the breakdown of a personal relationship between a shareholder and director of a company, leading to the director developing the same trademark under a different business, was sufficiently out of the ordinary to qualify as special circumstances.

Before Fokker Brothers, special circumstances were assessed through application of the framework set out in Manhaas Industries (2000) Limited v Fresha Export Limited HC WN CIV-2011-485-001255 [July 24 2012], where the HC summarised the relevant principles as follows:

1) For circumstances to be special, they must be peculiar or abnormal and arise through external forces.

2) It is not necessary to show the special circumstances made use of the trademark impossible. It is enough to show those circumstances made it impracticable in a business sense to use the trademark.

3) There must be a causal link between any special circumstances and the non-use of the trademark.

Under Manhaas, special circumstances were peculiar or abnormal and arose through external forces. However, under Fokker Brothers, special circumstances are simply something out of the ordinary and do not have to arise through external forces. Arguably, this updated framework should make it easier for trademark owners to successfully defend non-use revocation actions on the grounds of special circumstances.

Until recently, a trademark owner who could not show special circumstances could ask the commissioner to use his discretion to save the trademark from revocation. Until the Supreme Court (SC) decision of Crocodile International Pte Ltd v Lacoste [2017], the commissioner had a residual discretion to allow a trademark to remain on the register even if the trademark owner could not successfully defend the non-use revocation action (Crocodile International PTE Ltd v Lacoste [2017] NZSC 14).

In some earlier non-use revocation actions, the commissioner had used his discretion to allow trademarks to remain on the register even where special circumstances had not been shown. In Cure Kids v National SIDS Council of Australia Ltd [2014] and Griffin's Foods Limited v Bluebird Foods Limited [2015], the reasons given for the non-use (a medical controversy and a weevil infestation, respectively) did not qualify as special circumstances (Cure Kids v National SIDS Council of Australia Ltd [2014] NZHC 3366; Griffin's Foods Limited v Bluebird Foods Limited [2015] NZIPOTM 9). However, the commissioner used its discretion to save the challenged trademarks from revocation.

Since 2017, the commissioner can no longer save trademarks from revocation if the trademark owner fails to establish use or special circumstances. Although this poses a problem for trademark owners who fail to successfully defend non-use revocation actions, the Fokker Brothers case balances the removal of the commissioner's discretion by relaxing the framework for establishing special circumstances. Consequently, it should now be easier for trademark owners to successfully defend non-use revocation actions on the grounds of special circumstances.

The Fokker Brothers case has relaxed the framework for establishing special circumstances by clarifying that special circumstances are simply something out of the ordinary and do not have to be external, peculiar or abnormal.

However, even if trademark owners can show that circumstances were out of the ordinary (such as a regulatory ban in InterAg v Bayer), they will also have to show that the non-use of their trademark was due to those circumstances.

Therefore, strong evidence of a causal connection between the alleged special circumstances and the non-use will be necessary to successfully defend a non-use revocation action on the grounds of special circumstances. If InterAg could have shown a stronger causal connection between the regulatory ban and the non-use of its "Cidirol" trademarks in InterAg v Bayer (perhaps if the non-use period had been shorter than 13 years), it may have launched a more successful defence against the non-use revocation action.