Campomar Sociedad, Limitada & Anor v Nike International Ltd & Anor S41/1999 [1999] HCATrans 475 (11 November 1999)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S41 of 1999

B e t w e e n -

CAMPOMAR SOCIEDAD, LIMITADA

First Appellant

NIKE COSMETICS SA

Second Appellant

and

NIKE INTERNATIONAL LIMITED

First Respondent

NIKE AUSTRALIA PTY LTD

Second Respondent

Office of the Registry

Sydney No S42 of 1999

B e t w e e n -

CAMPOMAR SOCIEDAD, LIMITADA

Appellant

and

NIKE INTERNATIONAL LIMITED

First Respondent

NIKE AUSTRALIA PTY LTD

Second Respondent

GLEESON CJ

GAUDRON J

McHUGH J

GUMMOW J

KIRBY J

HAYNE J

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 11 NOVEMBER 1999, AT 2.26 PM

Copyright in the High Court of Australia

MR D.K. CATTERNS, QC: May it please the Court, I appear with my learned friend, MS J.R. BAIRD, for the appellants in the first matter and the appellant in the second matter. (instructed by Mallesons Stephen Jaques)

MR D.F. JACKSON, QC:: If the Court pleases, I appear with my learned friend, MR J.V. NICHOLAS, for the respondents in each matter. (instructed by Sprusons Solicitors)

GLEESON CJ: Yes, Mr Catterns.

MR CATTERNS: May it please the Court. We were going to start with the trademarks first if your Honours think that is convenient. Because there have been so many different judicial opinions with respect to the construction of section 28 of the Trade Marks Act 1955 including, in particular, in the judgment of the Court in the New South Wales Dairy Corporation Case referred to by all of us in our submissions, we thought it might be simplest to go straight to the 1955 Act and try and deal with the various provisions of it which the various Justices and other judges have relied on in coming to the conflicting views rather than attempt to line up, with respect, teams on either side of each alternative construction.

KIRBY J: That is an understandable approach if there is no holding of the Court and my understanding is there is no holding on the matter, but do you understand that to be common ground, because otherwise we would just have to look for the holding? At least that is the logical first step, to find what the Court has held and then move from there.

MR CATTERNS: In the New South Wales Dairy Corporation Case, your Honour. It was not argued before their Honours. The question of the continuing operation of section 28 was not argued. I think that is completely clear. The question that was argued was given continuing operation, is there a requirement of blameworthy conduct and then, if so, was it shown in the instant case? Your Honours, we submit that it is quite clear that there is no holding as to the first question, although each of the Justices dealt with the matter at varying degrees of length, your Honour.

KIRBY J: Well, if it was not necessary for the orders in that case, then it is not part of the holding of the Court, as I understand the principles.

MR CATTERNS: I would respectfully agree, your Honour. That is why we respectfully submit that our course that we propose is the quickest way to get there, although, of course, we would take your Honours to the reasoning process in the Court.

I understand your Honours have a copy of the 1955 Act there. If your Honours would not mind going first to section 24, just because that is where the relevant heading appears - that section is not, itself, presently relevant. It is in Part IV of the Act dealing with registrable trademarks, and after three sections which deal with the question of distinctiveness, 24, 25 and 26, and then a question of colour in 27, the Act comes to the relevant provision which a number of justices and other judges have said, on its face, and in context, clearly relates to the time at which registration is sought. Your Honours know the relevant parts are:

A mark:

(a) the use of which would be likely to deceive or cause confusion -

or:

(d) which would otherwise -

and "otherwise" is important on the section part of the argument -

be not entitled to protection in a court of justice;

shall not be registered as a trade mark.

Your Honours, in particular the words "shall not be registered" give rise to a prima facie construction that this means we are looking at the time of registration - - -

GLEESON CJ: How does supervening illegality apply to (b)?

MR CATTERNS: Your Honour, by the trade mark proprietor being restrained by whatever law it is in years to come, at the later date that your Honour is postulating. It may be that the mark does not get removed but no damage in the public interest is done. It is the same answer we give to some of the other public interest arguments that have been used to support the continuing operation. I intend that to answer your Honour's question it will be further developed later, if I may, your Honour.

Your Honours, the words "shall not be registered", on their face, make the section look as if it is dealing with the moment of registration. Your Honours, not much, if anything, can be taken by us to support our case from the words "would be" because, although there is an element of futurity in that which might be slightly contrary to the continuing operation idea of imagining looking at the mark 10 years later, say, I do not think we can draw anything from that because at the moment you are applying for registration you may never have used your mark, and at the time of registration some element of futurity is present, the normal and fair use of the mark is being considered, as the High Court said in the Southern Cross Refrigerating Case.

So, your Honours, on its face, and there is no need to belabour it, and in context so far the section suggests that it applies only at the moment of registration but, your Honours, both this Court in the Moo v Moove Case, the House of Lords in GE over to at least in this Court in Berlei v Bali and in other courts this continuing operation has been discerned from a number of indicia in the Act and in policy. The most important or perhaps at least the initial indicator in the Act is section 22, your Honours, in the earlier part, which is Part III, dealing with the register, and, your Honours, section 22(1)(b) is the relevant provision. It says:

Subject to this Act, a prescribed court may, on the application of a person aggrieved or of the Registrar, order the rectification of the Register:

.....

(b) by the expunging or amendment of an entry wrongly made in or remaining in the Register -

So, your Honours, there is no doubt that an entry wrongly remaining in the register can be expunged and a number of the courts which have held in favour of the continuing operation of section 28 get considerable support in the view of their Honours or their Lordships from the second part of (b) "or remaining in the Register" and the reasoning goes something like this, if I do it justice: those words have to be given work to do. What work is there? Well, let us look at what work there is. Is it necessary to give section 28 a continuing operation to give this paragraph work to do?

Now, of course, your Honours, that is, we respectfully submit, not a canon of statutory construction that would go without saying in all cases that you distort the meaning of section (b) to give meaning to section (a), but there is a simpler answer, we respectfully submit, and his Honour Justice McHugh gave it in the New South Wales Dairy Corporation Case.

There is work for this to do in this Act - section 56(3). It appears there is no dispute. His Honour Chief Justice Mason also noted that 56(3) can provide some content to 22(1)(b), but his Honour had an answer to that - a further answer to that - based on the legislative history and I will come to what his Honour Justice McHugh said about that. Your Honours, the idea of section 56 is to deal with a word that has become, to use the jargon, generic, no longer able to distinguish the goods of the proprietor, such as a popular word like "Hoover" may or may not have become generic as the name of a vacuum cleaner or the act of vacuuming; or "caterpillar" with respect to certain type of treads; or "duco" with respect to the paint on your car, those familiar sort of ideas.

The way it operates, your Honours, is that 56(1) says use as the description per se does not defeat you but "where there is a well known and established use of a word as the name or description of an article" by people in the trade, not use just in relation to the proprietor of the mark, then, in effect, it has become generic. The High Court dealt with that matter tangentially, perhaps, in the Barrier Cream Case - Faulding, that we give a reference to, then, or it has been a patent and you have had a patent monopoly in the article, hence the word, but the word has become the name of the article, then subsection (3), the registration:

shall be deemed for the purposes of section 22 to be an entry wrongly remaining in the Register.

So, your Honours, that leaves us in the position that there is work for 22(1)(b) second part to do. Of course there is plenty of work for 22(1)(b) first part, wrongly made, to do.

But then his Honour Chief Justice Mason says, but this provision or its equivalent, section 71, was in the 1905 Act and there was no section 56 then, so calling section 56(3) in aid does not work. Well, with respect, his Honour Justice McHugh found the answer to that, which is that there is another provision in the 1905 Act whereby a mark - nothing to do with the conditions of section 56 whereby a mark has become generic - his Honour pointed out that under the 1905 Act there was a case where the mark would be wrongly remaining in the register, namely, where it had become separated from the goodwill of the business, because under the 1905 Act, as distinct from the 1955 Act and the 1995 Act, the trade mark under the old Act, the trade mark had to be attached to the goodwill. So, as his Honour Justice McHugh pointed out in New South Wales Dairy Corporation, the earlier equivalent of section 22(1)(b) had work to do under that Act, because a trade mark which had lost its goodwill - been separated from its goodwill, say, by sale of the business, the mark remaining behind - was one wrongly remaining in the register. So, your Honours, we respectfully submit, in short, that section 22(1)(b) does not provide a firm foundation to construe section 28, other than in accordance with its plain meaning.

KIRBY J: You plunge straight into the detail of the sections and I understand that there may be no answer to that, but at some stage it would help me, because I am not as familiar with this Act as you are, to have your submissions on what the overall structure and operation of the Act contemplated. It may be that in that, as well as in the detail, there is an answer to what section 28 means, because it may be that the history of trade marks law over a long period has yielded some indication of how you do not get on the register or you get on and can be removed and so on.

MR CATTERNS: Your Honour, it does.

KIRBY J: You take your own time. I realise that it is important to go through the glimmers of light from the section that there may be some structural answer as well to the problem.

MR CATTERNS: Perhaps if your Honour does not mind I will answer it briefly and come back to it if I may. There is clearly a policy that people not be misled or, to use the words of 28(a), "deceived or confused". That is clearly one of the initial, if not the initial, policy behind legislation for trade marks beginning in England in 1875. There is no question that that is an important policy consideration. We would submit that it is also right to say that, as I think his Honour Justice McHugh also points out in New South Wales Dairy Corporation, there is an additional policy which may or may not conflict which is to confer and protect proprietary rights. For example, you can get a trade mark without a sliver of reputation, never having traded to use the mark at all, and the Act, as long as it is not at the moment of registration, according to our submission, as long as it is not deceptive or confusing and you otherwise meet the conditions of the Act such as distinctiveness, then you are granted a species of property, and, unlike a passing off or a nowadays section 52 case, you do not have to prove reputation to succeed.

The other crucial condition is that the mark must be either distinctive or capable of becoming distinctive. In other words, the mark is able to signify to consumers that a connection in the course of trade between you and the goods, the proprietor - now called the owner - and the goods. This is the final point I was going to say in answer to your Honour's question: a further aspect of the first public policy which is the protection of consumers, the public, from being deceived or led into confusion is that this Act always tolerates some degree of confusion, or the possibility of it, and this, too, is discussed in detail in the New South Wales Dairy Corporation Case.

GUMMOW J: Do we not have to get to section 58(3) sooner rather than later? Does that not apply here? What does it mean, because you have registration and Mr Jackson has a registration.

MR CATTERNS: Not in the same class, your Honour.

GUMMOW J: Look at 58(3):

whether for the same goods or services or other goods or services - - -

MR CATTERNS: Yes, your Honour. I am happy to go to 58, and it is relevant, of course, to the public policy question because that is one of the matters that the Full Court refers to in the New South Wales Dairy Corporation Case. If I may go to 58(1), if your Honour does not mind going to (1) first, to the scheme:

the registration of a trade mark in Part A or Part B of the Register, if valid, gives to the registered proprietor of the trade mark the right to the exclusive use of the trade mark in relation to the goods or services in respect of which the trade mark is registered and to obtain relief in respect of infringement of the trade mark in the manner provided by this Act.

That, of course, does not give you a right to engage in misleading conduct or passing off, as indeed section 68 tells you, so the possession of a trade mark has never been thought to give you, as it were, a licence to engage in deceptive conduct or conduct which will mislead or which will confuse.

GUMMOW J: It enables the registered proprietor to sue others - - -

MR CATTERNS: That is right, your Honour.

GUMMOW J: - - -but it may not confer an immunity on the proprietor against suit against the proprietor by others.

MR CATTERNS: Does not, your Honour, with respect.

GUMMOW J: Yes.

MR CATTERNS: That is precisely it, your Honour. When some of the Justices in the New South Wales Dairy Corporation Case regard - - -

GUMMOW J: Except where that other is himself or herself or itself a registered proprietor; it is then you have 58(3).

MR CATTERNS: In the case of 58(3) - perhaps I could go to that now. I am sorry it has taken so long, your Honour. In (2), of course, there can be "conditions or limitations", or there could be and have been under this Act. In (3):

Where 2 or more persons are proprietors of registered trade marks which are substantially identical or deceptively similar, whether for the same goods or services or other goods or services, rights of exclusive use of either.....are not (except so far as their respective rights have been defined by the Registrar or a prescribed court) acquired by any 1 of those persons as against any other of those persons by registration of the trade marks but each of those persons has otherwise the same rights as against other persons (not being registered users) as he would have if he were the sole registered proprietor.

That is a corollary to section 34 which allows:

marks which are substantially identical or deceptively similar -

to be registered in cases of "honest concurrent use". So, your Honours, in that class of case the Act does tolerate a degree of deception or confusion. I say "confusion" because the concept of "deceptively similar" is defined in section 6(3), so we come back to the same concept. It is defined:

a trade mark shall be deemed to be deceptively similar to another trade mark if it so nearly resembles that other trade mark as to be likely to deceive or cause confusion.

Deceptive similarity relates to the comparison of the marks; "likely to deceive or cause confusion" refers to what happens when it is used, remembering that section 28 talks about a mark, "the use of which". So, if I may go back to 58(3), your Honours, the net effect of section - - -

GUMMOW J: Well, these rights of exclusive use that are being spoken of there, what are they? They cannot be simply the rights under 58(1) because they are limited to the goods for which you registered. Do you see what I am getting at?

MR CATTERNS: Yes, I do, your Honour.

GUMMOW J: What is 58(3) doing? Is it speaking of rights of exclusive use beyond rights as a registered proprietor?

MR CATTERNS: I submit not, your Honour, but I do understand what your Honour is putting to me. May I make a submission about the broader - - -

GUMMOW J: I would have thought you would want to say yes, actually.

MR CATTERNS: Well, your Honour, the first purpose - - -

GUMMOW J: Seeing you are being sued for passing - - -

MR CATTERNS: Well, your Honour, I submit that the section is about granting a right to sue. Just as when the Patents Act gives you an exclusive right, it does not provide you with a defence against anybody, it gives you a right to sue.

GUMMOW J: It is exclusive right to sue in relation to the use of the mark on goods or services for which it is registered.

MR CATTERNS: Yes, your Honour, that is right, your Honour.

GUMMOW J: That is 58(1). 58(3) is wider. What is the rationale of the wider area of interdependent immunity that flows from the concurrence of a registration? Think about it if you want - - -

MR CATTERNS: Your Honour, I think I have the answer, if I may.

GUMMOW J: I do not want to hold you up, but it seems to me that is the starting point of this case. You have two marks for Nike: one is for perfume, one is for sports goods.

MR CATTERNS: Your Honour, I think I have the answer to your Honour's question - I hope I have.

GUMMOW J: All right.

MR CATTERNS: If your Honours would not mind going to section 33(1), that is the section 34 which I went to a moment ago, which is in effect an exception, and that is when there is another mark, a conflicting mark, in front of you and it says:

Subject to this Act, a trade mark is not capable of registration by a person in respect of goods if it is substantially identical with or deceptively similar to a trade mark which is registered.....by another person in respect of the same goods, of -

surely "or" -

goods of the same description as those goods or of services that are closely related to those goods -

So, your Honour, the collision which can defeat you under 33 is broader than good for good, and in other words, broader than your right under 58(1).

GUMMOW J: Yes. This is all about getting on the register.

MR CATTERNS: Exactly, your Honour. So 33(1), you can be stopped by a mark that is the same as yours with respect to the same goods or a broader category, namely, goods of the same description.

GUMMOW J: Yes.

MR CATTERNS: Section 34, however, will allow - - -

GUMMOW J: As you can under 28 with use.

MR CATTERNS: Yes.

GUMMOW J: Yes. So?

MR CATTERNS: Well, they are a team, your Honour: 33, 34 and 58(3).

GUMMOW J: Why?

MR CATTERNS: Because 33 says you are stopped by a mark which is deceptively similar in relation to your goods or goods of the same description. 34, however - - -

GUMMOW J: Yes. When you say "stopped", you just mean it should not be registered.

MR CATTERNS: I beg your pardon, your Honour. That is right. It is not capable of a registration, subject to the Act. Then we go to the next section, 34, which allows it to be registered in the case of "honest concurrent use" and your Honour sees that, again, it does not have to be the same goods. It is "the same goods or services or other goods or services" and the section which gives effect to your having been allowed on the register because you are an honest concurrent user is 58(3) and the idea of 58(3) is you cannot sue each other but you have the exclusive rights as against - the phrase is "as against other persons". So, your Honour, the reason for the broader - - -

GUMMOW J: But how could you sue each other? That is - - -

MR CATTERNS: Because by section 58(1), standing alone, you have the exclusive right.

GUMMOW J: No, no, no. By definition they are not goods in this example for which the other person has registered. That is my point. So, therefore, what are the rights of exclusive use being talked about? Anyhow, I do not want to hold you up. I just wanted to draw your attention to it. It troubles me.

MR CATTERNS: Thank you, your Honour. If I might think about that for a minute or two and Ms Baird - - -

GUMMOW J: Well, come back to it in due course.

MR CATTERNS: Yes, your Honour, but if I just may finish, your Honours, on 58(3). Subject to what his Honour Justice Gummow has put to me, having been allowed on the register, the second mark - the first mark is registered; a second mark which would otherwise be refused registration because of section 33 is permitted on the register - - -

GUMMOW J: And cannot be taken off, can it, under 61, is it, after seven years?

MR CATTERNS: That is right, your Honour.

GUMMOW J: So they stay there forever.

MR CATTERNS: Unless, as I will come to in a minute, the gate of section 61 is opened by one of the paragraphs (a), (b) or (c) having been satisfied.

GUMMOW J: But on the example of section 34, they are not.

MR CATTERNS: I beg your pardon, your Honour? Yes, yes, that is right, your Honour.

GUMMOW J: So they are sitting there for perpetuity after seven years, provided they are used, of course - - -

MR CATTERNS: Yes, your Honour.

GUMMOW J: - - - and not rendered liable to removal for non-use and then 58(3) applies to them.

MR CATTERNS: Yes, your Honour, and they can sue each other but not the rest of the world.

GUMMOW J: Other way around.

MR CATTERNS: I am sorry, the other way around, your Honour. They can sue the rest of the world but not each other.

GUMMOW J: But they could not have sued each other anyway because they are not registered for - - -

MR CATTERNS: In respect of the same goods they could have, of course, your Honour, but not with respect to the goods that your Honour has added.

GUMMOW J: Well, the question is: what is the legislative history of that?

MR CATTERNS: I had not considered that, your Honour, and we will keep thinking about it, if your Honour would not mind. Your Honours, but despite my inability to answer his Honour's last question, which we will answer in due course, I hope, the submission that we would like to make about section 58 in addition is this: although it does give you - - -

GUMMOW J: Well, it does support you. It does support you in so far as the Act contemplates that you can have marks on the register which remain on the register even though they are confusing.

MR CATTERNS: Yes, your Honour, and that was where I was answering his Honour Justice Kirby's question.

GUMMOW J: Which is your primary submission, yes.

MR CATTERNS: And, your Honours, secondly though, contrary to some of what is said in New South Wales Dairy Corporation Case, this does not give the proprietor of a deceptive or confusing mark any licence to sell his goods. Neither 58(1) nor 58(3) does that; it gives you no permission to pass off, et cetera, and that answers, in part, some of the public interest arguments that have been made in support of the continuing construction.

Your Honours, then an important section, including one which whose counterpart was relied on quite heavily by Lord Diplock in the GE Case, is section 61, and, your Honours, that provides, what is sometimes called, presumptive validity, but it certainly provides a considerable level of protection of the marks that were in Part A, which were the distinctive marks, to put it shortly, that have been on the register for more than seven years. Your Honours it says:

In legal proceedings relating to a trade mark registered in Part A of the Register (including applications under section 22) the original registration -

and that is, we submit, the consideration of the mark at the time of its initial registration -

shall, after the expiration of 7 years from the date of the original registration, be taken to be valid in all respects, unless it is shown:

(a) that the original registration was obtained by fraud -

to put it shortly, your Honours, there is no forgiveness for the fraud, even though seven years have elapsed -

(b) that the trade mark offends against the provisions of section 28 -

which is the crucial paragraph, but may I come back to that, and -

(c) that the trade mark was not, at the commencement of the proceedings, distinctive of the goods or services of the registered proprietor.

Now it has long been held that loss of distinctiveness is not a ground of expungement, but a mark that is not covered by section 61 or a similar protection under section 60, can be removed as one wrongly made, if it was not distinctive at the time of registration. So (c), together with (a) and (b), the metaphor is, opens the door so that you can go back and challenge the original registration of this mark as not having been distinctive or capable of distinguishing, at the time of registration.

Similarly (b), if "the trade mark offends" - and of course that is in the present tense - eight years later, let us assume, against the provisions of section 28, then the door is open. It is all about under what circumstances are we allowed to challenge the original registration and the answer is under (3), fraud, not distinctive "at the commencement of the proceedings" and present contravention of offence against section 28, and that is all of the grounds including the one, your Honour the Chief Justice drew my attention to, contrary to law. But that is not a ground of expungement there and then; it is a way of going back to looking at the original registration, which is what that section is all about.

Now, your Honours, it is right to say that section 28 has a continuing operation in that it is relevant to section 61(1)(b), but this section does not extend its operation so that section 28 can constantly be invoked against a mark that has become deceptive or likely to cause confusion. So, your Honours, its importation here, for the purpose of a test, to go back and challenge the original registration, does not show that the section has a continuing operation for all purposes.

GUMMOW J: Now just to go back to Justice Kirby's question to you, what is the rationale of all of this?

MR CATTERNS: The rationale for all of this here, your Honour, is that a proprietor who has led a quiet life for seven years ought to be able to continue to regard his or her mark as her property.

GUMMOW J: Even though it may be swamped by a later, but larger and more apt to advertise, concern?

MR CATTERNS: Well, especially so. That is the big concern, of course, the swamping by the assiduous infringers.

GUMMOW J: It is a slop-over problem, is it not? It is a response, is it, to the slop-over problem?

MR CATTERNS: This section here is not, your Honour.

GUMMOW J: No, but the scheme of the Act, to permit the earlier mark to stay there, even though there is this supervening state of affairs? Is that what it is doing?

MR CATTERNS: Yes, it is part of that. The idea is, you have got a mark that has been on the register for seven years. Except in three special circumstances, you are entitled to keep it and not be the victim of the assiduous infringer.

GUMMOW J: They might not be infringing.

MR CATTERNS: Or the assiduous swamper such as our friends in this case. The innocent swamper.

GUMMOW J: You might not have been able to sue them for infringement.

MR CATTERNS: Might not, that is right.

GUMMOW J: You might not have been able to sue them for passing off, either, because you are not famous enough.

MR CATTERNS: No, your Honour.

GUMMOW J: You have not got a slop over.

MR CATTERNS: No, your Honour, we do not. We do not have a reputation at the relevant date, so, we could not sue for passing off or section 52 and our friends do not sell goods anywhere near our class.

GUMMOW J: That makes it a law about adjusting competition, does it not?

MR CATTERNS: Yes, as I put to his Honour as the second of the policies, allowing people's property to be protected. Section 61 is a property protection section and 60 is a lesser one where you have got a narrower - it relates purely to the question of distinctiveness. So, although, of course, it says "offenders" in the present tense the section does not say 28 applies for all purposes. If section 28 did apply for all purposes - and this is an important submission for us - then satisfaction of (b) would be enough. You would never need to go back to the original registration and defeat it because on our friend's arguments if it offends against the provisions of section 28 it has gone. Why would you then need to go back and contest the original registration?

So, we respectfully submit that 61(1)(b) does not support the continuing operation and, indeed, in light of the submission we have just made, is to the contrary. We believe that they are the three sections, that is 22, 58 and 61, which are called in aid of the continuing operation. Then there are the two public policy considerations. One is that the holder of a deceptive mark should not be allowed to use it. As we have submitted, the Act gives no licence or right to the holder of a deceptive mark to use it as they are subject to all of the general law, including the law of passing off. Section 68 says that but provides a limited defence in the case of innocent passing off. In other words, until notice.

Other than that, the Act provides no defence against being engaged in misleading conduct. The alternative public policy argument is the reverse of it which is that the mark which is deceptive and likely to cause confusion is on the register and you might still be able to stop people. The difficulty with that is that at least in most cases the whole theory of this is, when one comes and has a look at section 28 again, is that the mark is not entitled to protection in a court of justice.

Those who hold that there is a continuing operation, in most cases, with respect, feel constrained also to hold that there must be some blameworthy conduct leading to disentitlement in a court of justice. So, with respect, that public policy problem does not arise. So, your Honours, we respectfully submit that in short there is nothing in the Act to take us away from the plain meaning of section 28 which is in its terms directed to the moment of registration, and so the policy considerations are at best tenuous and so there is no reason to go beyond those plain words.

The further policy difficulty, of course, your Honours, is the one his Honour Justice Gummow adverted to which is that if you allow section 28 to have a continuing operation, then the proprietor of the mark is vulnerable to being swamped, such as in a case like this where it was done by entirely innocent conduct on our friend's part, or by the assiduous infringer. That is a public policy thing to tend against the continuing operation of 28 and it also leads - as all members of the Court said in the New South Wales Dairy Corporation Case, it forces one to come up with what your Honour Justice Gummow called an adventure in statutory interpretation, to protect the trade mark owner from the mark having become confusing for reasons that are not his or her fault.

The fact that this interpretation forces one into a worse type of interpretation, a yet further stretching of language, is something which, we would respectfully submit, tells against that construction being right. We certainly were not going to take your Honours to the almost century of judicial exegesis that leads us to the New South Wales Dairy Corporation Case and we imagine that your Honours will need to read all the judgments at leisure but we thought we would take your Honours to the case at least briefly if that is convenient.

KIRBY J: Just before we do that, is there any collection anywhere of the history of this, how it began with the English Act and then proceeded? I realise we must construe our statute but - - -

MR CATTERNS: A number of the Justices in New South Wales Dairy Corporation give a fairly full discussion.

KIRBY J: Does that give some clue as to international standards in this area, because one would think this is an area where one should strive, if one can, within the language of our Act to be consistent with other major trading countries with whom we deal?

MR CATTERNS: Your Honour, if anything, the international framework of this is an international compact to protect each others trade marks subject, of course, to public policy of protection of the public.

KIRBY J: Presumably, different countries have slightly different public policy. Countries with huge mega-corporations will doubtless want to protect them very vigorously and countries with mini-corporations may not be quite so assiduous. I do not know.

MR CATTERNS: Australia is a party to the Paris Convention for the Protection of Industrial Property, thereby we undertake - perhaps I will not do it on the run, but we are party to that, where we give certain protection to each other's trade marks, or rights of trade mark, although - - -

KIRBY J: Is that expressed in terms of, "as from the moment of registration"?

MR CATTERNS: I do not believe there is anything in the Convention that bears on this point, your Honour, but we will have a look at that.

KIRBY J: Yes, if you would do that, because in an age of global trade one would think that generally speaking the common construction of our statutes and the common law should move in general harmony with international concepts.

MR CATTERNS: Yes, your Honour. It follows from our submissions that this Court would be disagreeing with what Lord Diplock said in the GE Case, but the UK Act has since been amended, and we have not checked - - -

KIRBY J: What did his Lordship say? "Just stick to your own statute", did he?

MR CATTERNS: No, I am sorry, your Honour.

KIRBY J: That would be a very English thing to say.

MR CATTERNS: No, his Lordship said that there is a continuing operation of the English equivalent of section 28.

KIRBY J: I see.

MR CATTERNS: In short, 10 years later, or eight years later, I think as it was here, a mark which, on our case, was not deceptive at registration can be expunged for having become deceptive, although his Lordship says "only if that likelihood of deception has resulted from", I think his Lordship's words are, "some blameworthy conduct on the part of the proprietor".

KIRBY J: Has that been followed in countries like Malaysia and Singapore? One often finds in these sorts of things that those sorts of principles from England are followed throughout the Commonwealth of Nations.

MR CATTERNS: I do not know, your Honour, I am sorry. We will check that too, if I may. I should say, perhaps, at least so far as Australia goes, that the new Act, our 1995 Act, has enacted for a continuing operation. In other words, there is a ground whereby your mark can be removed for having become likely to deceive or cause confusion.

KIRBY J: That is in your favour, is it not, in the sense that the previous Act had such a division, I think, did it not, the 1905 Act? Then there was an amendment which was said to be the same, but the question is, "Is it?", and now there is a subsequent Act which you say has made it clear. The course of legislative history may be important; I do not know.

MR CATTERNS: In short, I would agree with your Honour, respectively. Perhaps if I may go to New South Wales Dairy Corporation where the section your Honour is referring to is set out, and deal with it as we get there, your Honours. It is New South Wales Dairy Corporation v Murray Goulburn Co-Operative Company Limited [1990] HCA 60; 171 CLR 363, and it is 100 pages long, and we really were not proposing to read lengthy passages.

KIRBY J: Your voice has taken on a note of anguish.

MR CATTERNS: We will attention to the relevant passages of their Honours' reasonings, your Honour. We have attempted to meet the reasons of the Justices who are against what I am now putting to the Court by referring to the sections that their Honours refer to, and we will not repeat ourselves about that.

Can I just remind your Honours of the facts in that case. His Honour the Chief Justice sets them out at page 369. To do it chronologically, the respondent, Murray Goulburn - this is at 369 about point 7 on the page - was the registered proprietor of the mark Moo, "registered with effect from 26 August 1966". The respondent came into that by way of an assignment on 29 September 1987 and soon after that started to sell goods with "Moo" on them.

The appellant, who was the applicant below, had the word "Moove" - and that is at the top of page 369 - registered with effect from 1 November 1978 - - -

GUMMOW J: In respect of dairy products.

MR CATTERNS: In respect of dairy products, yes, your Honour. So Moo was in the position of being a prior mark but from about 1979 to 1988 the applicant had engaged in heavy promotion of its product, so that by the commencement of the proceedings the earlier mark had become likely to deceive or cause confusion, as his Honour Justice Gummow held at first instance. The appeal was fought on the question of whether or not - it was accepted, as I have submitted, that section 28 did have a continuing operation and the question was whether or not the conduct of the respondent, largely doing nothing with its mark and letting Moove develop the reputation, which, if I may use the phrase that has been used, swamped it, whether that conduct was blameworthy - held no.

His Honour Justice Gummow at first instance held that allowing the mark to lose distinctiveness was blameworthy and that was overturned in the Full Court. His Honour the Chief Justice at page 371 said that the only relevant argument was whether:

at the date of institution of the proceedings the mark contravened s 28 -

so that is at the later date, and at the top of 372 his Honour said that:

on its face s 28 appears to be directed simply to the act of registration of a trade mark, the section has a secondary operation -

Berlei:

The extent of that secondary operation is central to this appeal.

Then over the next couple of pages his Honour considers his Honour Justice Gummow's reasons so far as the question of distinctiveness goes and discusses at the bottom of 374 Lord Diplock's blameworthy conduct test, but then, your Honours, after a discussion of what his Honour himself had said in the Berlei Case, at 376 says that:

the arguments presented by the parties in the present case proceeded on the footing that s 28 authorizes the removal of a mark the use of which has become deceptive.....no doubt because the view which I expressed in Berlei Hestia conforms with the interpretation -

in GE, but his Honour says:

That interpretation is, of course, related to the substantial question -

of "blameworthy conduct" because, if it does have a continuing operation, most Justices have thought that one also needs to read in "blameworthy conduct". His Honour then considers the English section, which your Honours can see is expressed slightly differently from our section, and your Honours can see how much easier it is to read "blameworthy conduct" into that section, because it says:

by reason of its being likely to deceive or cause confusion or otherwise, be disentitled -

So it is clear that it has to be by reason of its being likely to deceive, inter alia, disentitled. I will come back to that, if I may, your Honours. His Honour then sets out section 114 of the predecessor Act which is the section your Honour Justice Kirby referred me to.

KIRBY J: Have I missed something, or are not the critical words, the words italicised, "used"?

MR CATTERNS: Yes, they are, your Honour.

KIRBY J: I mean "used" is continuing.

MR CATTERNS: Your Honour, there were two views of that - - -

KIRBY J: I see.

MR CATTERNS: - - - but that is, with respect, how his Honour Justice McHugh reads it and we respectfully submit that that must be right, but it does appear as if it is continuing.

KIRBY J: Our Act is simply "registered" which, on the face of things, is an Act of an official kind by an official with a power to register.

MR CATTERNS: Yes, your Honour.

KIRBY J: Whereas the English Act was "used or registered".

MR CATTERNS: So that is the Australian Act, the - - -

KIRBY J: The Australian Act is just "registered".

MR CATTERNS: I am sorry, I think your Honour is looking at - - -

KIRBY J: I am sorry, I am sorry. I am looking at the old Australian Act.

MR CATTERNS: Yes, that is section 113 of the old Act.

KIRBY J: Yes.

MR CATTERNS: Your Honour, I suppose there are three possibilities of what that means. They are these: First, what your Honour is putting which is that it relates to some continuation of a deceptive mark on the register. Probably the better view, with respect. Secondly, and it was so used in the case of McKenzie v Leslie [1909] HCA 38; (1909) 9 CLR 247, which is not on our list, your Honours. It was used as a source of power to impose a condition, or at least a source of a reason, to impose a condition on the use of a mark restricting use in New South Wales. Thirdly, and most unlikely, it could be read on its face as some form of prohibition a la section 52 of the Trade Practices Act but there is no other provision in the old 1905 Act that gives any mechanism to enforce such a prohibition, so, your Honours, we respectfully submit that the most likely meaning of that is "used or".

Then his Honour refers to the Dean Committee Report which said that the new section 28 which that Committee recommended was, in substance, the same effect as section 114. Now, there are two ways to respond to that. Our learned friends respond by saying, "Well, that shows that is to be read", as your Honour Justice Kirby put to me, "namely as having a continuing operation", and the Dean Committee thinks that it has the same effect. His Honour Justice McHugh - as I will try and make good in a while - says that is not right, it would be unlikely that the Dean Committee would say that the same words with or without "used or" would have the same effect. They look like they make a big difference when one looks at it, as they do, because when one now looks at section 28 the effect one gets, on its face, is not of continuing operation. We only get continuing operation from elsewhere. So, with respect, his Honour Justice McHugh is right, in our submission. His Honour goes on and says at the top of 377 - - -

McHUGH J: The Dean Committee did say that, in substance, they thought section 28 did have the same meaning as the old 114, except for the words "or morality", did they not?

MR CATTERNS: That is right, your Honour, it was "contrary to law or morality". They said, "We are taking "morality" out".

McHUGH J: Yes.

KIRBY J: One hesitates to say it, but, on the face of the statute to which we must ultimately be loyal, the Dean Committee was wrong.

MR CATTERNS: I respectfully agree, and that is what his Honour Justice McHugh says in this judgment in this case. His Honour the Chief Justice did not go quite as far as his Honour Justice McHugh. His Honour goes on:

The reason for omitting the words "used or" is not immediately clear. Perhaps the Committee thought they added nothing in the case where the use of a trade mark was disentitled to protection in a court of justice, for whatever reason, or in the case where a design was scandalous, in which event common law would govern its use. But the omission of the words serves to focus attention upon the content of pars. (a) to (d) of section 28 as they are expressed and to suggest that the Committee did not regard ongoing use as the concern of section 28, or, for that matter, section 114 -

contrary to what I have just been submitting to your Honours.

Certainly the words do not appear in the successive United Kingdom provisions.

Then his Honour discusses the course of the English authorities and, with respect, that is extremely helpful, but we respectfully submit that there is so much water under the bridge we can safely skip it now and approach the reasoning of this Court.

Then at the top of page 379, his Honour's own reasoning continues and he says:

the interpretation of Justice Eve, favoured by Lord Reid -

which is the one for which we contend in this case -

derives very strong support from the actual terms of section 28.

But that leaves the problem that it is going to be still on the register, and the proprietor has rights under section 58. We have already made our submission, with respect, that that does not alter things because it does not give you a right to engage in misleading conduct. So we skip that, your Honours. Then his Honour again says that:

the natural and prima facie meaning -

is that an entry -

"shall not be registered" -

but we do not get much, with respect, out of the use of the future tense of "would be" that his Honour refers to at the bottom of the page.

Then, your Honours, his Honour discusses section 61 on page 380 and gains support from that, and we have made our submission that support ought not to be got from that. Then on page 381 his Honour deals with support from section 22(1)(b), notices what we have submitted now about section 56(3) and says that there was no predecessor of section 56(3) and, as we have submitted, his Honour Justice McHugh had the answer to that.

If I may skip, your Honours, at the bottom of page 382 his Honour says:

the arguments for and against the broad construction of section 28 are finely balanced.

But his Honour prefers the one contrary to ours.

GUMMOW J: Which page is that?

MR CATTERNS: At the bottom of page 382, your Honour, beginning "As the foregoing analysis reveals".

GUMMOW J: Yes.

MR CATTERNS: I should have gone on, at five lines from the bottom - but this is the section 58 submission really, your Honours:

There is also the consequence of the narrow interpretation, already mentioned, that the registered proprietor of a mark.....is entitled to exercise the statutory rights -

Well, your Honours, there is no entitlement to engage in passing off and on the basis that his Honour goes on further, which is, for this to be a problem, the mark is disentitled to protection, then they will not be able to exercise any rights against any third parties.

KIRBY J: The Act does contemplate that there can be two marks and for expungement of a mark subsequently. Why is that not the logical way in which it should operate? That is to say, you can get yours registered and you are not then liable to be deregistered because somebody else comes into the market, but if subsequently it can be shown that you are misleading, then you can be expunged.

MR CATTERNS: That is a vice the solution to the vice is that if you are misleading you will be restrained by the rest of the general law - - -

GUMMOW J: Yes, the mere fact you have lost your registration will not stop you misleading.

MR CATTERNS: Precisely, with respect.

GUMMOW J: You would need an injunction against you on some ground.

MR CATTERNS: Yes. So, it is no charter to mislead.

McHUGH J: There are a number of cases where - there are plenty of cases - I do not know if there are plenty, but there are a number of cases where a passing off action has actually succeeded against the proprietor of a registered mark, are there not, I think?

MR CATTERNS: Yes, your Honour. For a century - - -

GUMMOW J: They are referred to at the bottom of 382 where we are.

MR CATTERNS: Yes, your Honour, thank you. There is a reference to one there.

GUMMOW J: Yes.

MR CATTERNS: That is, with respect, totally settled and often the consequence is they are restrained from using their misleading mark and in due course it can be removed for non-use but not by a continuing operation of section 28, we submit.

GUMMOW J: Now, whilst the mark is there, though, it is a means of restraining a third or fourth party through an infringement action. I am not putting it against you but that is the consequence, is it not?

MR CATTERNS: Yes, your Honour, but not always because his Honour will go on to say, "The mark is disentitled to protection in a court of justice, otherwise this problem has not occurred". It is only when it is the proprietor's fault such that it is disentitled to protection in a court of justice. So, it is only the innocent proprietor who will be able to restrain third and fourth parties. If they are not an innocent proprietor or if they have engaged in conduct sufficient to disentitle them the mark in a court of justice and there is the necessary relation between the conduct and the tendency to confuse. So, that is not a problem. The innocent proprietor, although his mark has become likely to deceive or cause confusion that is tolerated. He is not allowed to do - to engage in any conduct. He might be able to restrain other, if he or she is innocent, but not if he is engaged in what is called "disentitling conduct".

Now, we seek to rely on the holdings of the Court that blameworthy conduct - if we are wrong about continuing operation then it would follow from the judgments of the Court here that blameworthy conduct is required, and we respectfully submit that probably the right course is not for us to take time now on that because our friend's seek leave to contend against the holdings here - - -

McHUGH J: So, you support me on the first point but reject me on the second point?

MR CATTERNS: With respect, we see the force of your Honour's reasoning on the second point and indeed we are in a little bit of a cleft stick because we say the necessity to engage in the adventure, which your Honour deprecates, tells against the other construction but we hang our hat on, for example, Justices Dawson and Toohey, if we have to, and we submit - - -

GUMMOW J: At the end of the day you are in trouble, are you not, under section 52 unless you can rely on the erroneous, whatever it is called, misconception doctrine?

MR CATTERNS: Or assumption.

GUMMOW J: Assumption.

MR CATTERNS: It is a causation issue, your Honour. I will try not to let those words - - -

GUMMOW J: But that is the way it pans out, is it not?

MR CATTERNS: Yes, your Honour, although - - -

GAUDRON J: You would get different relief under section 52, would you not, from what it - you would not be expunged under section 52?

MR CATTERNS: That is right, your Honour, and as his Honour Justice Lehane said, we would lose on our current conduct and we would be restrained but as his Honour Justice Lehane recognised there may be some conduct that we could engage in using our trade mark that would not be misleading. We have come up with the silly example of the Nike Shakespeare range, to pick something intended to be antithetical to the Nike footwear - - -

GUMMOW J: By adding material to the registered word.

MR CATTERNS: Yes, your Honour. If we had Nike, the Shakespeare range, with Ophelia perfume and Hamlet aftershave, on the facts, people might not be misled in terms of section 52, we would be happily using our trade mark and, so, it matters to us to keep our mark in short, or it is of value to us. Your Honour, therefore, I felt we probably could skip the remain of his Honours reasons where his Honour deals with the question of blameworthy conduct. The necessity for blameworthy conduct we can skip, but the nature of what blameworthy conduct is we need to deal with and just, if I may - his Honour the Chief Justice was in the minority there because, in effect, his Honour said that sitting on your hands and not defending your mark, and allowing the assiduous infringer, would be blameworthy. Your Honours, that is at 385 point 6. His Honour says:

if a mark's loss of distinctiveness leads to the use of the mark becoming deceptive or a cause of confusion -

picking up his Honour Justice Gummow's reasons at first instance -

due to the blameworthy conduct -

That is our crucial submission on blameworthy conduct, your Honours. But the blameworthy conduct is not blameworthy conduct per se; it is not sharp practice; it is not a perception of commercial advantage. It must be conduct that has caused the likelihood to deceive or cause confusion and we respectfully submit that it is our friend's activities that have caused the likelihood because they, perfectly innocently, have so spread their reputation, so diluted it, so broken the connection in the course of trade between their precise goods and their name, that they are the cause of the misconception. That is our case both on blameworthy conduct and on section - - -

GUMMOW J: How does this notion of blameworthy conduct get into the Act? Does it get into the Act at the stage of section 22? In other words, is it a ground for exercising a discretion not to take the mark off.

MR CATTERNS: Your Honour, that has been suggested lately but it is not the ground by which any of the members of the High Court here got it.

GUMMOW J: How else is it founded in the words of the Act?

MR CATTERNS: Two ways, your Honour. Your Honour describes it as an adventure in statutory interpretation and we do not disagree, but it is the corollary - it gets into the Act in two ways: either in a policy way, as being, in a sense, required as a corollary of the continuing operation - and his Honour Justice Mason does say that - or by reading section 28(a) as informed by (d) giving otherwise in (d) work to do, as Justices Dawson and Toohey say, so, in effect, to read (a) and (d) conjunctively despite the "or". Your Honours know this is not our primary position and we confess that the - - -

GUMMOW J: But it is just a line that somehow, it seems to me, is drawn to alter what otherwise might be the balance between these conflicting proprietary and competitive interests which the Act does not seem to draw.

MR CATTERNS: Yes, your Honour. I do not think Lord Diplock invented it but he, with respect, popularised it. His Lordship sees the problem of the innocent proprietor whose mark is swamped by an assiduous infringer or an assiduous brand extender and, having held it as a continuing operation of section 28, searches around for a concept to protect the proprietor from that. Answer, blameworthy conduct. In other words, you have to have caused it. The germ of the idea, with respect, is the words "disentitled to protection in a court of justice".

So we say, "Oh, fine, if you have done something that has led to the disentitlement in a court of justice, or perhaps just in policy terms, are otherwise blameworthy, then you will be vulnerable to those acts, otherwise not."

CALLINAN J: Mr Catterns, can I just ask you a question: you said a short time ago that the causes - I think you were talking about the causation were the actions of the respondents, their conduct; is that what you said?

MR CATTERNS: Yes, your Honour.

CALLINAN J: I wonder whether that is strictly right, and I do not think this is against you, but if you look at page 1000 in volume 5 you look at the finding at first instance. About line 25:

Evidence establishes that the well-known sporting organisation Adidas.....market a sports fragrance.....Essentially the Nike International case is that the placing of the NIKE sport fragrance in the same area of pharmacies as other sports fragrances, particularly the Adidas sports fragrance, was likely to mislead or deceive -

It seems to me that that may have occurred entirely independently of any action on your clients' part, or indeed, for that matter on the respondents' part. If you take that, together with the proposition that appears in a letter, and it is referred to by his Honour, but at page 227 - this was the correspondence, I think, before the registration in Australia. There may have been an earlier letter in which Mr Jackson's clients made it clear that they had no interest in sporting matters at all. They said that sport was not part of their image, in effect.

MR CATTERNS: Yes, your Honour.

CALLINAN J: You take that fact, which is undisputed; indeed, it is an admission, perhaps, on the part of Mr Jackson's clients, and the finding at page 1000, is that not the basis for an argument that this is entirely independent of any conduct on your part, that it is conduct by others?

MR CATTERNS: Your Honour, that is the way we put our section 52 case.

CALLINAN J: It is just you do not seem to have relied upon that finding.

MR CATTERNS: We have not relied on page 1000, that is so, your Honour.

CALLINAN J: I do not know why you do not. I do not know why you have not. It seems to me to be quite helpful to you.

MR CATTERNS: It is, with respect. It would be very analogous to the shop assistants in the Parkdale v Puxu Case who cut off the labels. The people who were actually misled in the Parkdale v Puxu Case were, in a number of cases the label was hidden or tucked in or cut off in some cases.

CALLINAN J: But might it not also be relevant to a question of blameworthiness or otherwise on your part?

MR CATTERNS: We submit they are highly-related issues, and his Honour Justice Burchett, in effect, doubled them together. But, your Honour, I think the reason we cannot - we can adopt, with respect, everything your Honour has said about page 1000 but we had not previously read his Honour Justice Sheppard as being quite as narrow as that. Because, your Honour, that paragraph, for example - - -

CALLINAN J: No, but he purports to be stating what the respondents' case is. It is not merely his finding. He is saying that the case was - he says:

Essentially the Nike International case is -

and that seems to have been the contention of the respondents. The contention seems to be that the confusion occurred as a result of what thereafter follows, and that seems to me to be neither blameworthy conduct nor conduct on the part of your clients at all, nor, indeed, even conduct on the part of the respondents.

MR CATTERNS: We gratefully adopt everything your Honour says, but I think in fairness both his Honour Justice Sheppard and their Honours in the Full Court went broader in looking at that problem.

CALLINAN J: Well, do not worry about the Full Court. This is a finding of fact at the moment.

MR CATTERNS: That is so, your Honour. The reason I am not accepting a gift, which is, so far as it goes, I think, risk-free, is I just want to be careful to be - - -

CALLINAN J: You have been led there before by one Justice of the Court.

MR CATTERNS: No, your Honour, with respect, we so agree with what your Honour has said so far as it goes that I am not frightened, but I want to be correct about the case because, your Honour, it is very well established passing off law, for example, that to cast an instrument of deception into the market can be misleading and, if you cast a fragrance into the market that is just as a matter of course going to be stuck on the shelf in a certain place - - -

CALLINAN J: No, but on this basis it might be arguable, it seems to me, that the market it has been cast into is a very narrow market indeed. It is a sports fragrance market and that seems to have been a market in respect of which the respondents disavowed, perhaps, any interest at all by that - I think it was a telex or a fax they sent in 1986.

MR CATTERNS: Yes, your Honour, and, of course, your Honour, so long as we have a registered trade mark, they have to disavow it because they cannot sell fragrance under the name Nike because we own the trade mark.

CALLINAN J: But they disavowed it before you even had the trade mark.

MR CATTERNS: They did, indeed, your Honour, in those documents, but, your Honours, the other - perhaps tiresomely tedious on my part - the proper reason I am not embracing what falls from your Honour completely is that this - well, this is one of the problems with his Honour's reasons. Your Honours know that we submitted to the Full Court that his Honour had not addressed our product Nike simpliciter and had only dealt with the Nike sport fragrance - your Honour sees here the Nike sport fragrance - - -

CALLINAN J: Yes, I understand your argument on that.

MR CATTERNS: That did not seem to us to be a special leave point, your Honours, and so we are not troubling the Court with that here, but it does not mean we are not entitled to explore the limitations of his Honour's findings, we would respectfully submit, and that is another matter, if I may add to what your Honour has said. His Honour is there talking about - that is a finding about the sport fragrance, held by the Full Court that his Honour's findings apply to the sport alone product, which is the only one we threatened now to use, but, your Honour, it is the absolute heart of our blameworthy conduct case, which I oversimplified, and our section 52 case that we are not the cause of people being misled or deceived in terms of section 52 or deceived or confused in terms of section 28.

It is a causation question and, although the erroneous assumption or erroneous preconception cases that his Honour Justice Gummow mentions, those phrases have taken a bit of a beating perhaps at levels below this Court and it is unnecessary to support them in the exact phrasing that comes from the McWilliam's Wines Case, of course, your Honour. The idea that is involved in that, which is causation, who is responsible for people going astray, is absolutely fundamental and, while I am there, if I may, your Honours, we think that the Hornsby Building Information Centre Case is a critical case on the same issue because the Court there, agreeing with his Honour Justice Stephen, said that what caused the people going wrong there, thinking that the two building information centres were associated, was the choice of the eloquently descriptive name, indeed, an eloquently descriptive name which had a quasi-official ring to it.

It is they who have broadened the mark. If one looks at it in terms of secondary meaning, in 1985 the word "Nike" meant, high quality well-engineered shoes from a given proprietor. The way one pleads secondary meaning. The word "Nike" signifies or is likely to signify to persons in Australia shoes of the applicant. By 1994, it meant - - -

GLEESON CJ: Mr Catterns, can I interrupt you to ask a question that does not bear on the merits of your argument at all, but at what stage of this dispute or litigation did your clients jettisoned "Sport"?

MR CATTERNS: Upon the letter of demand, I think, or soon after - straight away, your Honour, and it was a very short period of time that we used "Sport".

GLEESON CJ: So that there has never been, throughout this litigation, any attempt by your client to, if this is the right word, justify its conduct in relation to "Sport"?

MR CATTERNS: Your Honour is right, we have not.

GLEESON CJ: Thank you.

MR CATTERNS: And we made that clear to his Honour Justice Sheppard, tendered, I think, exhibit 1, being the conduct that we intended to engage in, which had - - -

GAUDRON J: The purport of Justice Sheppard's finding is that there is no conduct in which you can engage which would not be misleading.

MR CATTERNS: That is right, your Honour; his Honour's finding, if I may say so, as interpreted by the Full Court, because we have difficulty finding any finding that Nike Simpliciter is misleading.

GLEESON CJ: Does that mean that your trade mark has been rendered useless by the success of the respondents?

MR CATTERNS: Your Honour, not completely, importantly, but as his Honour Justice Lehane said, and as I mentioned a little while ago, one can think of examples, including my far-fetched one, about Nike Shakespeare. Disclaimers always have difficulties, your Honour, particularly in a low-level product, because it might be worse; it might be damaging our friend saying, no connection with the well-known footwear company, but it might be within the whim of a marketer to come up with a useful product, but heavily constrained in our use of it, at least, your Honour, if not utterly defeated.

GUMMOW J: But you are saying you would not be passing off because of the additional material you had put on.

MR CATTERNS: Yes, your Honour; passing off all of section 52.

GUMMOW J: All of section 52, but you would still be using your mark and, more importantly, stop somebody else using it, per se.

MR CATTERNS: We would, yes, your Honour, and we would not be removed from non-use.

GLEESON CJ: Even putting to one side the concept of sport, your clients brought their mark into the Australian market encouraged by the reputation of the respondents, did they not?

MR CATTERNS: Well, I would not agree with that, with respect, your Honour; aware of, and the letters show a perception of - if I can use a cant word - a synergy, at least, and it depends in part about how specific the secondary meaning in our friend's word "Nike" is and how - - -

McHUGH J: But did not Justice Lehane take a view consistent with what the Chief Justice just put to you, at the bottom of page 73 and 74?

MR CATTERNS: I think the answer to your Honour's question is yes, but I am just - - -

McHUGH J: Yes.

MR CATTERNS: Yes.

CALLINAN J: Was that based simply upon the letters or was it based upon the cross-examination of your clients' director?

MR CATTERNS: He was cross-examined. I do not believe he was cross-examined - principally upon the letters, I believe, but we could take your Honours to that.

CALLINAN J: Can you check that and find for me whether it was put, if it was put, to your clients' director?

MR CATTERNS: Yes. We made some submissions about some of the letters not being put to Mr Corrales. If I may just stop on this point, your Honour. Intention is never enough for passing off. Fraud, in the passing off sense is not enough. As his Honour Justice Gummow explains, for example, in the Conagra Case and, indeed, as the High Court explained long ago in the Australian Woollen Mills Case, intention can help a court infer that what you set out to do will succeed but merely lying in wait hoping to achieve an advantage essentially begs the question of whether or not it is misleading or deceptive conduct. His Honour Justice Gummow has discussed the question of fraud in relation to remedies in passing off and so on but the sine qua non of passing off and section 52 - this type of section 52 - is the misrepresentation and lying in wait, hoping to achieve an advantage is not enough.

May I just take your Honours to a point that might be a convenient one to show the different points of view on this. Mr Blanket was the expert in marketing who gave the evidence about brand extension and the practices of people, including, Adidas. His affidavit is in volume 3, page 499.

CALLINAN J: Justice Sheppard said it was only tangentially relevant. He seems to have been impressed by it. It seems to me that he has acted on it.

MR CATTERNS: That is right, with respect, your Honour, and the majority in the Full Court, if anything, take it further. What I am about to submit, your Honour, is that when one reads what he says in his paragraph 10, it does not go very far at all.

CALLINAN J: What is the reference?

MR CATTERNS: It is in volume 3 at 499. He gives his qualifications and at the bottom of 500 - - -

GUMMOW J: How did this get in? How is paragraph 10 admissible?

McHUGH J: Without objection.

CALLINAN J: No objection.

GUMMOW J: This man is a lecturer in advertising and promotions at Macquarie University.

McHUGH J: Justice Sheppard said it....no objection - - -

GUMMOW J: Things have changed since I was around.

MR CATTERNS: It was a refreshingly - your Honour knows what some of these affidavits are like.

GUMMOW J: Yes, I used to strike them out with the slightest provocation.

MR CATTERNS: At least those who drafted this affidavit did not go to the ultimate question which one often sees, and your Honour remembers that different judges have different practice about allowing this evidence in and arguing about it later.

GUMMOW J: That is the mischief, you see, it is allowed in and then it assumes this enormous importance, as this seems to have done.

MR CATTERNS: But the paragraph - he describes brand extensions at the bottom of 500. I am not disagreeing with what your Honour is putting to me, needless to say. At 501 he gives some examples of what he means by brand extensions, including in the field of fragrances where Chanel and other designers' brand extended to perfume, paragraph 7; Dunhill cigarettes; and in paragraph 9 he describes the fragrance market. But the paragraph, your Honours, is 10, as your Honour Justice Gummow said. This is my point, your Honours, in answer to what your Honour the Chief Justice put to me. The reputation had been diluted to this:

The brand name.....is an extremely well known brand name which has been heavily advertised and promoted by "sporty", "sexy", "energetic" and "youthful" imagery. It is well adapted -

that is not anything that will help us with consumers. He is just saying from his point of view at the business side of it for use in relation to those products -

The use of the NIKE name on such products would be a natural extension from sporting footwear.....from both the manufacturers' and the consumers' standpoint. The imagery associated with the NIKE name when used in connection with a range of personal care products would be likely to give rise to a highly desirable set of emotional responses -

Now, your Honours, that is not necessarily the same as saying, "People will conclude a connection in the course of trade between the" - perhaps we deliberately left it in, your Honours, I cannot remember. But to invoke an emotional response in Nike is another way of saying that our friends have diluted - - -

GUMMOW J: A happy emotional response.

MR CATTERNS: No, your Honour, sexy, I think.

GLEESON CJ: It says "Just Do It".

MR CATTERNS: And sporty. Your Honours, that is the paragraph that downed us apart from a couple of consumers. Now, what one might call the person in the street type consumers were largely not persons in the street. They were, in some way, sensitised by having something to do with Nike, the applicant. So, it was this gentleman and the pharmacists who beat us. Perhaps while I am doing this, your Honours, if I could go then to a couple of the pharmacists' evidence in volume 2.

GLEESON CJ: But that is what I am trying to understand about the disappearance of the concept of sport from the case. What the pharmacist did was in the context of a product using sport, was it not?

MR CATTERNS: Yes, your Honour.

GLEESON CJ: Was the inference drawn, and I am not suggesting it should not have been, but was the inference drawn that even absent the word "sport" the pharmacist would do the same thing? They would put you up on the shelf with Adidas.

MR CATTERNS: Nobody says that, your Honour. I do not believe either - - -

GLEESON CJ: I wondered whether the inference was also drawn that that was exactly what your clients would have intended the pharmacist to do.

MR CATTERNS: Your Honour, I do not see that, with respect, in either his Honour Justice Sheppard's reasons or the Full Court. As your Honour knows, our submission is that his Honour's reasons are very - there is no finding about Nike simpliciter, we say. Your Honours, just quickly, this is by no means exhaustive, if I could just draw your Honour's attention to a couple of the pharmacists. At the bottom of 57 in volume 2, and picking up what your Honour the Chief Justice puts to me, there is a discussion of the display in the pharmacy, exhibit GJN1. But at the bottom there is the cross-examination of him exploring his assumption - perhaps we were fonder then of the phrase "erroneous assumption" than we are now, but he said, "I automatically assumed that it was somehow associated with the Nike sportswear company". Then he is asked a few questions, your Honours:

The product name is NIKE and consequently I would have thought the product that's called NIKE is associated with NIKE sportswear.

Do you -

think they have:

the exclusive right to use the word NIKE in various fields of commerce?---Yes.

.....?---Sportswear, anything that NIKE want to put their name to that they feel that they can market. I believe that they've got a right to use that name and so therefore that's what led me to believe that that fragrance was owned by NIKE.

It flows from trade marks:

do you assume that they have got a range of trademarks.....?---Yes, that's an assumption that I'm making just purely on the name NIKE. There's no way that I can sit back and research every product that I'm sold, so I sort of figure that if it says NIKE it's NIKE.

Then, your Honours, Mr Winnett is at 63 and he was approached by a sales representative at 63 and at the top of 64 we began our rather repetitive assumption in cross-examination at the top of the page and at line 10 says "any sort of products". His Honour leapt in and said, "How far are you prepared to go?" "Food?" At line 14. "Yes." "Or liquor?" "Yes." And the reductio ad absurdum is pet food at line 26.

KIRBY J: Yes. Well, that is not out of the question. People go running with dogs. I have seen them myself.

MR CATTERNS: Yes, your Honour, but then, speaking of public policy, our friends have got a monopoly - and I do not mean to use that word emotively, but they have the exclusive right to use the word "Nike" with respect to any product in the whole world of commerce, if our friend's argument would be right, and that something must be wrong with that somewhere and we submit that what is wrong with it, particularly in a case where they have diluted their own reputation so that it is merely sexy and energetic, powerful, they have got a very strong reputation, they have diffused it, then it is not our fault and, to pick up again what his Honour the Chief Justice put to me, even if we perceive a benefit from an emotional association with an energy, then that is not misleading conduct because merely to hope or, as the old passing-off cases say, strain every nerve to achieve - somebody being misled is not enough. It is you have, in fact, got to be the person doing the misleading.

Your Honours, that was really the nub of our section 52 case and our blameworthy conduct case. Although his Honour Justice Lehane said at the passage your Honour Justice McHugh took me to - could I remind your Honours what his Honour Justice Lehane said about causation at page 72 of volume 1 which is about line 15:

In this case, on the basis of the findings made by the trial judge, it may readily be seen that the use of the appellants' -

His Honour is in the context of blameworthy conduct here -

marks has become likely to deceive or cause confusion principally because, no doubt through vigorous and successful promotion, the respondents have acquired a reputation in the name "Nike" which extends beyond the boundaries of the categories of goods in respect of which they use the name or their own registered marks.

CALLINAN J: Mr Catterns, I am sorry to come back to it, but it is troubling me. Can you explain to me how you were found to be blameworthy when at page 227 in volume 2, where the communication from the respondents appears, the respondents had said quite unequivocally, they are not interested in fragrances, not interested in perfume and they are not interested in sport. Now, put sport out of it, it is not an issue here now. But they make it clear when they say:

We understand you have registered the name "Nike".....covering "perfume and essences", we must caution you not to suggest or imply that any "Nike" products you produce are sponsore-approved by Nike

It seems to me that they, in effect, defined for you the conduct that they would have thought was acceptable, and they told you what was unacceptable. I just, at the moment, I cannot get past that if one is looking at blameworthiness or otherwise.

MR CATTERNS: Your Honour, I would not seek to push your Honour past that, with respect, but we ran an estoppel argument - - -

CALLINAN J: It does not seem to have been given any attention at all in the primary judgment.

MR CATTERNS: Well, your Honour, we stressed it, including stressing it as an estoppel, which is not now - - -

CALLINAN J: Well, leave aside estoppel for the moment, but is there any reason why it cannot be a definition, and having evidentiary effect in that regard, a definition by the respondents of the conduct that they were telling you back in 1986 they would find acceptable?

MR CATTERNS: My initial response is, no, your Honour, there is no reason, but to anticipate our friends, they might say in a sense it begged the question - - -

CALLINAN J: They cannot contradict that, and if you simply use - I mean, I would not have thought they could contradict and they did not make any attempt to contradict what they wrote, as I understand it - - -

MR CATTERNS: Not until the initiation of proceedings, if this is the last letter in the chain, that is right, your Honour.

CALLINAN J: And they are really saying, as I read that letter, and I cannot read it any other way, that so long as you do not in some way imply in the presentation of your product endorsement or sponsorship, then they either, depending how you read it, will not complain or could not be heard to complain.

MR CATTERNS: I respectfully agree with your Honour, but we lose for two reasons. One, our friends say that the mere use of the word "Nike" contains such an implication.

CALLINAN J: Well, it is a pity they did not say that back in 1986 when they knew plainly you were going to use that name.

MR CATTERNS: I respectfully agree. Secondly, your Honour, we lost because we lay in wait, because of the passage that his Honour - - -

CALLINAN J: But you had been telling them for months before that you intended to sell perfume.

MR CATTERNS: Worldwide, your Honour, yes, including in the United States where we have had a trademark since 1964, since 1940 in Spain, our predecessors. That is right, your Honour, but the reason we lost is, though, that we, in short, at 74, your Honour, in the passage his Honour Justice McHugh drew to my attention:

if the appellants' conduct -

and I would read that as even if the appellant's conduct -

has not given rise to the likelihood that the use of their mark is likely to deceive or cause confusion, it may properly be characterised as conduct calculated to take advantage of that likelihood -

We respectfully submit that that does not answer the question to say you are taking advantage of a likelihood and the reason I go to Mr Blanket is the benefit we get is just a vague association with something energetic - not, in our submission, although our friends disagree, a connection of the passing off type, namely, their goods or goods licensed, et cetera, by them.

CALLINAN J: The finding seems to be at 1,032 where Justice Sheppard refers to the conversation. About line 45 it begins. He said that:

Mr Ruiz took this as an indication that this part of the market, i.e. the market for toiletries and cosmetics for use by persons engaged in sport, was being left to him so that he could take advantage of it himself.

MR CATTERNS: Yes, your Honour.

CALLINAN J: What was wrong with that?

MR CATTERNS: We would respectfully adopt what your Honour says.

GLEESON CJ: Was there any questioning of your client, Mr Ruiz, in the evidence as to his target market or was this, I suppose, overtaken by the jettisoning of Sport?

MR CATTERNS: Yes. It was put to him that he was deliberately passing off, your Honour.

GLEESON CJ: I mention one of the things that might have been put to him - I do not know whether it was - was that whilst no doubt there are scholars of Greek antiquity who use fragrances, he was probably rather more hoping to attract the custom of people who were energetic and young and sexy, or at least saw themselves in that light, and that might be why the word "Nike" would be attractive.

MR CATTERNS: Your Honour, with respect, that is right, and that is why we wrote to the Nike company, which led to the telex that his Honour Justice Callinan drew attention to. We perceived a benefit from a synergy between the companies, but that is not quite the same as saying, we perceive a benefit by lying in wait in Australia or taking advantage of our friend's reputation in that we will communicate a representation of it being their goods or licensed, et cetera, by them, but it was really their goods; it was brand extension.

GLEESON CJ: Mr Catterns, we are going to adjourn now, but just for gauging the progress tomorrow, how long do you expect to require for your submissions?

MR CATTERNS: Your Honours, in a way we have done a great part of the section 52 at the same time; I hope less than an hour, your Honour.

GLEESON CJ: What about you, Mr Jackson?

MR JACKSON: Your Honours, I would be two hours, perhaps a little more.

GLEESON CJ: We will adjourn until 10.15 in the morning.

AT 4.20 PM THE MATTER WAS ADJOURNED

UNTIL FRIDAY, 12 NOVEMBER 1999