Federal Court Rules on HARRY POTTER Trademark Dispute Between Clothing Company and Time Warner Entertainment Company

Federal Court Rules on HARRY POTTER Trademark Dispute Between Clothing Company and Time Warner Entertainment Company

The Federal Court recently ruled on a dispute over the trade mark HARRY POTTER between a clothing company and the Time Warner Entertainment Company, which owns the rights to make movies based on the Harry Potter books.

By Colin Oberin, Partner, and Cynthea Reynolds, Lawyer

Background to the case

This case involved an appeal from the Registrar of Trade Mark's decision to allow Stepsam Investments Pty Limited (Stepsam) to register HARRY POTTER in class 25 in relation to clothing. Stepsam licensed the trade mark to Wombat Enterprises Pty Ltd (Wombat), who had been selling women's clothing under this trade mark since approximately 1994. The Registrar rejected an opposition by Time Warner Entertainment Company, LP (Time Warner) (which owns rights to make movies based on J K Rowling's Harry Potter books), and registration was allowed under section 41(5) of the Trade Marks Act 1995 (Cth) (the Act).

In its appeal to the Federal Court, counsel for Time Warner modified their position and contended that Stepsam's registration of the trade mark should be limited to adults' clothing. However, Stepsam argued that it was entitled to have the trade mark registered in relation to all types of clothing.

Legal issues

Time Warner relied on four grounds of opposition:

  • the trade mark is not capable of distinguishing Stepsam's goods from the goods and services of other persons (s41);

  • the use of the trade mark by Stepsam would be contrary to law (s42(b));

  • Stepsam does not intend to use, or authorise the use of, the mark in Australia, or to assign it to a body corporate for use in Australia (s59); and

  • the Registrar accepted the application for registration on the basis of representations that were false in material particulars.

All grounds of opposition failed.

Section 41: capable of distinguishing

The court endorsed the explanation of s41 given by Justice Branson in Blount Inc v Registrar of Trade Marks (1998) 40 IPR 498 at 504-505. That is, the decision maker must conduct a three-staged inquiry into whether the trade mark is capable of distinguishing the goods from the goods of other persons. In summary, the three stages involve questioning:

a. whether the trade mark is inherently adapted to distinguish the designated goods from the goods or services of other persons by itself (s41(2); b. if not, whether the trade mark is to some extent inherently adapted to distinguish the designated goods from the goods or services of other persons, either in conjunction with evidence of use, intended use or 'other circumstances' (s41(5)); or c. if the trade mark is not to any extent inherently adapted to distinguish the designated goods from the goods or services of others whether, because of evidence of the extent of the mark's use, that trade mark is nonetheless capable of distinguishing the goods (s41(6)). In the event that the court is satisfied as to (a), then consideration of neither (b) nor (c) will be necessary.

The court held that the first limb of s41 was not satisfied in this case, but that s41(5) was applicable. The court rejected Time Warner's arguments that the name failed to satisfy s41(5) because it was not used by Stepsam before the priority date (ie the user was Wombat, not Stepsam) and the use by Wombat was limited to low-priced women's clothing. In relation to the limited use argument, the court stated that it is commonplace for a manufacturer or distributor of women's clothing to add to its range of related goods. Thus, the court found that, given the following factors, s41(5) was satisfied and the ground of opposition failed:

  • the extent to which the trade mark is inherently adapted to distinguish Wombat's goods;

  • the fact that there is only a small chance of the mark being used by a person named Harry, Harold or Henry Potter;

  • the volume of sales of HARRY POTTER women's clothing before the priority date; and

  • the closeness of the relevant fields (ie women's clothing and children's clothing).

Section 42(b): contrary to law

Time Warner argued that use of the HARRY POTTER trade mark on clothing for children and teenagers would be 'contrary to law' because it would mislead and deceive (or is likely to mislead or deceive) customers and would constitute a breach of s52 of the Trade Practices Act 1975 (Cth). It was argued that HARRY POTTER has now acquired a secondary meaning directly associated with the Harry Potter books, films and merchandising. Thus, a substantial number of persons seeing the name HARRY POTTER on clothing would be misled or deceived into making a purchase in the mistaken belief that they would be acquiring clothing with some legitimate association with the Harry Potter boy wizard character.

The court held that Time Warner's argument effectively asserts a monopoly over the words HARRY POTTER, at least in relation to products intended to be purchased by, or on behalf of, children and teenagers. Also, the court affirmed the principle that the application of s42(b) should be considered at the priority date, although prospective conduct after registration could be considered. The court held that, as at 26 February 1998, any association in the Australian public's mind between the name 'Harry Potter' and a product would not have been with the fictitious character created by J K Rowling, but rather with Wombat's clothing. This was based on the fact that, at the priority date for Stepsam's application, Wombat operated 17 clothing stores in New South Wales and Queensland, the first Harry Potter book was published only shortly before Stepsam's priority date, with only approximately 2000 copies having been sold in Australia by that time.

The court considered that the visual content of the trade mark was relevant. Not only are the initial letters of each word on the clothing label in lower case, as distinct from the upper case letters used in all the J K Rowling character merchandising, but the label contains none of the graphics that reinforce identification of the character being merchandised. Thus, mere use by Stepsam or Wombat of the subject trade mark on clothing (even for children) would not be likely to mislead the public into believing the clothing was associated with Time Warner or the Harry Potter books or films. The court noted that, if the trade mark was used in a different way in future, that situation might change – that is, any s52 case that is brought on such grounds in the future can be determined on its merits.

The marked dissimilarity between the fields of activity engaged in by the parties was also considered relevant. The court stated that it is usual for a merchandiser to use pictorial material reminiscent of the character, which is a phenomenon markedly absent from Wombat's clothing.

Section 59: intention to use

Time Warner argued that, at the application date, Stepsam did not have a bona fide intention to use the trade mark (or to authorise it to be used by Wombat), except in relation to women's clothing, to which it had been applied before that date. Time Warner argued that the applicant must have a definite and real intention to deal in certain goods and not a mere general intention of extending the business at some time. However, the court endorsed the rider that this intention does not necessarily have to be immediate or be formed within a limited time. The court accepted Stepsam's evidence that it had always intended to extend the range of clothing into other areas. This was sufficient to support the existence of a real and definite intention to take this step at some time.

Section 62(b): false representations

In regard to s62(b) of the Act, it was contended that Stepsam made false representations regarding the extent to which the trade mark had been used by Stepsam by virtue of the following comments:

  • 'The Trade Mark has been used for five years in a quite extensive manner...'; and

  • '...the Trade Mark was first used... in Australia upon clothing... in 1994'.

Time Warner asserted that these statements were false, as the trade mark had been used only for a select range of women's fashion and that the trade mark had not been used in every part of the Commonwealth of Australia. However, the court held that the products upon which the trade mark was used are correctly to be described as 'clothing', notwithstanding that those products represented only part of the range of products that are clothing (ie women's clothing). Also, Stepsam's use of the trade mark 'in Australia' contains no implication that sales occurred in every part of the Commonwealth of Australia.

Conclusion

The HARRY POTTER trade mark has been registered by Stepsam in class 25 (clothing). At 1 March 2004, there has been no appeal filed with the Full Federal Court.