October 23 2012
In Winnebago Industries Inc v Knott Investments Pty Ltd (No 2) ( FCA 785), a single judge of the Federal Court of Australia found that an Australian company that had adopted the US brand Winnebago in 1982 had engaged in passing off and misleading and deceptive conduct.
Despite what the court described as the "extraordinary delay" on the part of Winnebago Industries Inc in bringing the action against Knott Investments Pty Ltd and its director Bruce Binns, the court found that the Winnebago brand, logo and reputation had been deliberately exploited to the benefit of Knott and ordered Knott to rebrand its business and products.
The case highlights the risks in adopting overseas brands for use in Australia (some of which can persist for many years).
Winnebago is now a well-known American manufacturer of motorhomes and has manufactured recreational vehicles (RVs) in the United States since the 1960s. Winnebago has exported these RVs to other countries, such as the United Kingdom, Europe and Canada. However, it has not exported (and until recently had no intention to export) any vehicles to Australia.
From approximately 1982, Knott started using the Winnebago name and associated logo on its own RVs, which it manufactured and sold in Australia.
Winnebago became aware of Knott's activities in 1985, but did little about the infringement until 1991, when it started negotiations with Binns. A settlement agreement was reached between Knott and Winnebago in 1992 (although the court held, in the Australian context, that this did little more than reserve Winnebago its rights to take action against Knott).
Knott continued to use the Winnebago brand in Australia and registered the trademark in Australia in 1997. It was only when Winnebago began seriously to consider Australia as a potential export market in 2010 that it decided, after a 25-year delay, to commence proceedings in the Federal Court to prevent Knott's use of the Winnebago brand.
Passing off, misleading and deceptive conduct and false representations
It was argued by Winnebago that Knott had passed off its business as Winnebago, or as being connected to Winnebago, and passed off the RVs manufactured by it as having been manufactured by (or under the licence of) Winnebago. Importantly, the court held that Winnebago had to establish that it had a sufficient reputation in Australia when Knott started manufacturing RVs using the Winnebago name in 1982. The court held that this also applied to the statutory causes of action for misleading and deceptive conduct and false representation.
In 1982 Winnebago sold no products and conducted no advertising in Australia. However, Winnebago tendered evidence of its significant reputation outside Australia and evidence of the large number of Australians that had travelled to the countries in which Winnebago sold RVs. Further, Winnebago submitted that the appearance of Winnebago's RVs in films and on television had given the brand considerable exposure in Australia.
On the evidence, the judge found that the Winnebago brand did have a sufficient reputation in Australia in 1982. He held that a substantial number of potential customers looking to buy or rent RVs in Australia would have been aware of Winnebago and its RVs. In particular, the judge noted that the circumstances under which Knott adopted the Winnebago name and logo indicated that Binns considered that the Winnebago brand had a reputation among a significant enough number of people in Australia. The judge noted that "by adopting the Winnebago name and the Winnebago logo in connection with his business in Australia [Knott] would get the benefit of any reputation which Winnebago and Winnebago RVs had in Australia".
The judge went further and held that, in registering the WINNEBAGO trademark in 1997, Binns had "intentionally hijacked the Winnebago marks in Australia in a bold attempt to pre-empt Winnebago's opening its doors here".
It was argued by Knott that the court should refuse relief because of the extraordinary delay by Winnebago in bringing the action. However, the judge held that it was "tolerably clear" that Winnebago had not wished to embark on expensive litigation to protect its rights earlier "principally because it had no intention of exporting to the Australian market any of its Winnebago branded RVs". Therefore, the judge did not consider this delay to be a proper basis for refusing relief.
However, the judge indicated that in any final orders Knott and its dealers should be given a reasonable time to rebrand their businesses and products.
The Winnebago case is significant as it provides an example of the circumstances under which a foreign company can establish a sufficient reputation in Australia for the purpose of bringing an action for passing off and misleading and deceptive conduct. In this case, there were three main factors that were critical to the success of the overseas brand owner.
In Binns' own testimony, he acknowledged that there was sufficient awareness of Winnebago and its products in Australia to make adoption of the brand worthwhile. He stated: "I chose the name because they were a respected company in America and they produced a good product." Binns was unable to provide any alternative credible explanation as to why he had adopted the Winnebago brand.
The court was more willing to find that there had been misleading and deceptive conduct due to instances of advertising, promotional activity and representations made to Knott's dealers, where some connection with Winnebago in the United States had been attempted. Particularly damaging was an advertisement placed in June 1995 in a caravan magazine, which stated: "You'd expect nothing less from Winnebago, the world's most respected name in luxury motor homes." The court held that this conduct made it clear that Knott was suggesting an association with Winnebago - a suggestion that was misleading, deceptive and false.
The court held that Winnebago's products in the United States were targeted at tourists - this included Australian tourists who would have been likely to have become aware of Winnebago in their travels. By implication, if Winnebago's products had not been products likely to be used or seen by tourists from Australia (if the product was, for example, home insurance), it might have been more difficult for Winnebago to demonstrate sufficient reputation in Australia.
The appropriation of a trademark from a foreign owner is a well-known and longstanding practice in Australia. The High Court, in the Yanx case, stated: "to try and register in Australia a word which the applicant, to the knowledge of the respondent, is using elsewhere…is sharp business practice. But it is not in itself fraudulent or a breach of the law" ( 82 CLR, at 202). However, there is an inherent risk in adopting an overseas brand with little or no apparent reputation in Australia. In adopting an overseas brand, there is always a risk of the inference being drawn that the circumstances of its adoption demonstrate that there was believed to be a reputation in the overseas brand of which to take advantage. Advertising and promotional activity must be undertaken carefully to avoid suggesting false associations with the overseas brand owner. This case illustrates how these risks can arise many years later.
For further information on this topic please contact Tim Clark or Jennifer McGarvie at Piper Alderman by telephone (+61 2 9253 9999), fax (+61 2 9253 9900) or email (firstname.lastname@example.org or email@example.com).
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