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Monday, April 22, 2013

Apple appeals unappealing 'app store' outcome

By Lawyer Sarah Lux

Today will mark the first directions hearing in what is likely to be a hotly contested Federal Court appeal by Apple, Inc. against the recent rejection by the Australian Trade Marks Office of its application to register the mark APP STORE in classes 35, 38 and 42.
 
Background

Earlier this year, a Delegate of the Registrar of Trade Marks found that the mark APP STORE is not capable of distinguishing Apple's software retail services (class 35), telecommunication services (class 38) or web-based services (class 42), and rejected the application under sub-section 41(6) of the Trade Marks Act 1995 (Cth).

Apple's experience in the Office was vexed. Its application was originally objected to by the Examiner under section 44 of the Act, on the basis that it was too close to existing registered trade mark 1156967 for APPSTORE. Apple subsequently purchased that mark, the objection was withdrawn and the application was accepted. However, this acceptance was revoked by the Registrar under sub-section 41(6) of the Act in respect of class 35 services (retail store services featuring computer software), on the basis that APP STORE is only to some extent capable of distinguishing those services. Apple's evidence of use was regarded by the Examiner as insufficient to overcome this objection, and Apple requested a hearing before a Delegate of the Registrar.

Decision

The hearing produced an unfavourable outcome for Apple. The Delegate not only upheld the objection in relation to class 35 services, but went much further, deciding that APP STORE has no capacity at all to distinguish any of the services in classes 35, 38 or 42 to which the application related, pursuant to the much more stringent ground of objection under sub-section 41(6) of the Act.

The Delegate noted that APP STORE can be defined in ordinary English as 'a store (or retail outlet) that sells or provides computer application programs', and considered that the term is 'relatively straight forward, easily defined and well understood by modern digital-savvy consumers'. She pointed to examples from Apple's own evidence that indicated that Apple has sometimes used the mark descriptively.

Apple had pointed out that the previous registration it had acquired for APPSTORE had not attracted any similar distinctiveness objection at the examination stage. However, the Delegate responded that 'it is not possible to ascertain whether the examiner ever assessed or conducted appropriate research to determine if the expression APPSTORE had any descriptive meaning.' In addition to insinuating that the prior mark had been registered in error, the Delegate suggested that the fact that APPSTORE was previously registered by a third party actually supported the conclusion that traders other than Apple would legitimately wish to use the term in relation to their goods and services.

The Delegate noted Apple's evidence that over 850 million applications had been downloaded in Australia through Apple's Australian App Store service since its launch in July 2008, and accepted that the APP STORE mark had been used extensively in Australia.  (It is worth noting that the App Store launch occurred only seven days before the application's priority date, and that strictly only use within that seven day period should have been relevant to the sub-section 41(6) objection).  However, the Delegate noted that in most cases APP STORE was used in combination with the well known trade mark APPLE, as well as other expressions such as iTunes, iPhone, iPad or iMac. This made APP STORE a 'limping mark', which was not on its own distinctive of Apple's services.

The Delegate concluded that APP STORE was descriptive, and that Apple had not demonstrated through evidence that the mark had acquired a meaning related to Apple which overshadowed its descriptive meaning. The application was therefore rejected in relation to all three applied-for classes under sub-section 41(6).

Comment

Apple will have an opportunity to put on new evidence for the Federal Court appeal, which will be a hearing de novo of this application. Overcoming a section 41(6) objection tends to require very substantial evidence of the acquired meaning of a mark, which Apple may not be able to provide in light of the fact that there were only seven days of use between the launch of the App Store in Australia and the date of the application.

Apple is likely to focus instead on demonstrating that APP STORE is at least to some extent capable of distinguishing its retail, telecommunications and web-based services. To do so, it will emphasise the novelty of the APP STORE mark and concept as at the priority date, and may also put on evidence from third parties attesting to recognition of the trade mark meaning of APP STORE in the market at that time. This would complement the evidence it put before the Office from a linguistics professor, that APP STORE did not have a commonly understood or used meaning in 2008.

Some commentators have suggested that the decision may be moot, as Apple could rely on existing registration number 1156967 for APPSTORE to protect its mark. However, as noted above, the Delegate's reasons insinuate that the prior mark may have been registered in error. Apple faces some risk that a competitor will use this opportunity to apply for cancellation of the APPSTORE mark on the basis that it was wrongly registered. The mark could also be challenged on the basis of non-use, if the space between the words APP and STORE which appears in Apple's uses of the mark is regarded as a key feature.

The Federal Court appeal may also shed light on Apple's strategy in approaching this application. The Examiner's original objection applied only to class 35 goods, and it would have been open to Apple to pursue a divisional application to register APP STORE in classes 38 and 42, which would have proceeded to registration. Apple may have chosen not to avail itself of this opportunity on the basis that having all three classes considered together by the Office, and ultimately by the court, might increase the likelihood that the most descriptive component of the application (in relation to class 35) might be accepted together with the more distinctive component (in relation to classes 38 and 42). 

The Australian decision and appeal occur within an international context of legal battles in relation to use of the APP STORE mark. Apple and Amazon are embroiled in litigation in the US over the 'Amazon Appstore', with a trial scheduled for August. Apple's US application to register APP STORE, which has been opposed by Microsoft, will remain in limbo by agreement between the parties until the dispute between Apple and Amazon is resolved.

A version of this article first appeared in the World Trademark Review Daily on 8 April 2013

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