The Federal Court recently enforced registered trade marks in relation to a number of websites marketing holiday accommodation. The Court’s orders demonstrate the commercial advantages of having registered trade marks. The Court ordered that a number of domain names be transferred to the trade mark holder, that the content of websites and source code meta-tags be changed and that certain online advertising conduct cease.
The Court also decided that the owner of management and letting rights in a strata-titled building owning trade marks containing the building name could enforce those trade marks against off-site accommodation providers, even though the trade marks for the letting business were the same as the name of the building.
The decision of Mantra Group Pty Ltd v. Tailly Pty Ltd [2010] FCA 291 was handed down by the Court on 26 March 2010 and has been eagerly awaited by the hotel and management rights industries.
The facts
Mantra Group (“Mantra”) is the second largest accommodation provider in Australia. Mantra owns the management and letting rights for the Circle on Cavill apartment complex at Surfers Paradise. This apartment complex is strata-titled, comprising 644 residential apartments. Mantra is a licensed real estate agent, and as the exclusive onsite letting agent appointed by the body corporate for the complex, manages the rental of over 250 apartments in the complex. The original developer of the complex, Sunland Group, registered three trade marks relating to Circle on Cavill, including CIRCLE ON CAVILL as a word mark. These registrations are now owned by Mantra.
Tailly leased 39 apartments in the Circle on Cavill resort from owners of the apartments on long term leases. Tailly then sub-let these apartments to holiday-makers on a short term basis, such as for the night or for the week. Tailly is not a licensed real estate agent. To source bookings, Tailly established a large number of websites. These websites:
had domain names that were similar to or mis-spellings of the “Circle on Cavill” trade mark, such as circleoncavile.com.au and ecircleoncavill.com;
used “Circle on Cavill” in the banner, title and text of these websites, sometimes over 250 times on a website; and
used “Circle on Cavill” in the meta-tags of the websites, which is source code in the websites used to assist search engines to index the websites.
Tailly also used terms similar to “Circle on Cavill” as keywords for Google advertisements presented to people searching for “Circle on Cavill” on search engines such as Google.
Mantra brought Federal Court proceedings against Tailly in September 2009, claiming that this conduct infringed its registered trade marks, and that Tailly had engaged in misleading and deceptive conduct in breach of the Trade Practices Act (“TPA”).
Tailly’s defence
Tailly argued that because the official name of the building and the body corporate was “Circle on Cavill”, and because Tailly sub-let apartments in that building, then Tailly was entitled to use “Circle on Cavill”. Tailly argued that its use of “Circle on Cavill” was good faith use to indicate the geographical location of its apartments and services. Moreover, Tailly argued that the Circle on Cavill trade mark registrations should be cancelled because “Circle on Cavill” had become a generic term.
The Federal Court judgment
The Court found that Tailly used “Circle on Cavill” as a trade mark and infringed Mantra’s registered trade marks. Some uses by Tailly were regarded as descriptive uses, rather than trade mark uses, and therefore did not infringe the trade marks (e.g., “Circle on Cavill offers extensive leisure resort facilities”). However, the Court found that the descriptive use of those words paled into insignificance by comparison to the other use Tailly made of “Circle on Cavill”.
The Court rejected Tailly’s defence that “Circle on Cavill” was a sign used in good faith by Tailly to indicate the geographical origin of Tailly’s services. The Court found that the term “geographical origin” used in the Trade Marks Act refers to the name of a country, region, city, town or similar geographical area, but does not encompass a privately owned building. Moreover, the Court found that Tailly had not acted in good faith when deciding to use “Circle on Cavill”.
The Court also found that “Circle on Cavill” was not a generic term. Mantra’s trade mark registrations were not removed from the Trade Marks register.
The Court did not decide the misleading and deceptive conduct allegations and has asked the parties to make further submissions if they wish the Court to deliver a decision on this aspect of the case.
Relief
The Court made broad orders against Tailly.
Tailly was ordered to transfer ten domain names to Mantra;
Tailly was restrained from using the term “Circle on Cavill” and similar terms as a trade mark to advertise accommodation, including as part of a domain name, metatag, search engine keyword or business name; and
Tailly was ordered to pay its profits to Mantra for bookings sourced via the infringing websites in relation to accommodation provided in Mantra-managed resorts.
The Court’s judgment has a number of implications, both for those engaged in Internet marketing and those involved in the management rights industry.
Implications for internet marketing
The Court made it clear that it is not permissible to use another’s trade mark as part of a domain name where the domain name links to a website that uses a registered trade mark to advertise services in respect of which the trade mark has been registered. In these circumstances, the Court will transfer the domain name to the trade mark owner. The Court did not consider whether passively holding a domain name would amount to trade mark infringement.
Moreover, a person may infringe a registered trade mark by using the trade mark as a badge of origin in website banners and headings, even if they use the trade mark descriptively elsewhere on the website, or use the registered trade mark in combination with their own or other trade marks.
Implications for management rights industry
This decision highlights the importance of registered trade mark protection for those purchasing management rights. As a result of this decision, we recommend the following:
developers should register trade marks for a new development prior to selling any apartments;
trade marks registered by developers should cover any future letting or management business and should be assigned to the owner of the management rights;
where possible, the body corporate and building name should be different to the name of the letting rights business, to avoid arguments that the trade mark is used in a descriptive sense by the infringer; and
the letting agreement and building by-laws should make it clear that the onsite letting agent has the exclusive rights to operate a business on the premises, and that no other lot should be used for business or commercial purposes.
Mallesons represented Mantra in the litigation.