Scintilla – a flash, a spark, an iota. Shorthand for creativity and an indicator of inventiveness under Australian law.

Thursday, June 9, 2016

A kick in the Uggs, and litigation to boot

By Lev Gutkin, Law Graduate

Deckers Outdoor Corporation has recently commenced legal proceedings against Australian Leather Pty Ltd in the Illinois Northern District Court for alleged infringements of its UGG trade marks, which has re-enlivened the debate in Australia regarding how it is possible for an American company to prevent Australians from calling their classic Aussie winter boots 'Uggs'. According to a petition to Malcolm Turnbull which was started by Nick Xenophon (and has so far clocked 4826 supporters), Deckers has sought extensive remedies, including punitive damages in the millions of dollars, delivery-up and destruction of Australian Leather Pty Ltd's stock, and transfer of its bank funds to Deckers.

Deckers' Ugg boots connection traces back to a business started by Australian accountant Brian Smith, who, when travelling to California in the 1970s, identified a gap in the footwear market that he thought could be filled by the classic Australian Ugg boot. He built the business over the following years, and in 1995, his business Ugg Holdings Inc, including its US-registered 'UGG' trade mark (No. 1,973,743), was acquired by Deckers.

In 1999, Deckers obtained an Australian trade mark registration for the following composite mark:

However, Deckers does not have a trade mark, in relation to footwear, for the word 'UGG' in Australia or New Zealand, even though it does have such a mark in the United States (among a range of others).

The question is, why does Deckers hold such different trade marks in Australia and New Zealand, in comparison with those acquired in the rest of the world?

A generic term? Don't bet your boots on it.

A trade mark cannot be obtained for a generic term describing the goods in question. You might ask: isn't UGG a generic term for the iconic sheepskin boots? To put it briefly: it depends where you are. A trade mark will only give rights in relation to the territory of the country where it is registered.

In Australia, the Trade Marks Office has found that the words UGH BOOT(s), UG BOOT(s) and UGG BOOT(s) are generic terms for a specific style of sheepskin boot, and lack any inherent capacity to distinguish the particular goods. As a result, there are 141 registered trade marks in Australia that include the word 'Ugg'. The position is the same in New Zealand.* Ultimately, while these terms are considered generic in relation to footwear in Australia and New Zealand, Deckers has trade marks for 'Ugg' and its variants throughout the rest of the world. Further, Deckers has a trade mark in Australia for the word 'UGG' in respect of non-boot products, including bags, wallets and key cases.

In a 2005 decision of the United States District Court of California, Deckers Outdoor Corporation v Severn, Deckers alleged trade mark infringement of its 'UGG' mark by Severn. Severn argued in its defence that the word 'UGG' was a generic term for a particular style of boot, and consequently could not receive trade mark protection. The Court found, however, that the term was not generic in the United States, the affidavit evidence submitted by Severn was 'at best … only anecdotal' and that evidence of advertisements using the word 'UGG' in the United States were in fact advertisements placed by Brian Smith himself. The fact that the term may have been seen as generic in Australia was not relevant. It was further found that, while the 'doctrine of foreign equivalents' in the United States would prevent the English translation of a generic non-English word being a trade mark, it does not apply in circumstances where an English word is seen as generic in another English speaking country, but not in the United States.

Trade mark proceedings in Australia and the United States

In 2004, Deckers began threatening Australian manufacturers of Ugg boots with legal action due to their use of 'UGG' in relation to the famous sheepskin boot. This led to the forming of The Australian Sheepskin Association by Australian manufacturers seeking to resist Deckers' efforts.

Also in 2004, Luda Productions unsuccessfully brought an application for removal of the composite UGG Australia mark shown above for non-use under s 92 of the Trade Marks Act 1995 (Cth).

Deckers brought proceedings against some Australian manufacturers in Australia, which were settled by those manufacturers agreeing to comply with Deckers' demands. Seeing that some of those individuals continued to engage in infringing behaviour, Deckers brought further legal proceedings, which ultimately culminated in a summary judgement decision for trade mark infringement and in a number of individuals being given prison sentences for contempt of court.

Further, in Deckers Outdoor Corporation v Ozwear, a decision of the United States District Court of California, it was found that Australian company Ozwear, operator of the website, infringed Deckers' US trade mark for 'UGG' by selling products including sheepskin boots bearing the UGG mark to US customers online.

Does a brand containing the word 'Australia' mean it must be Australian made?

In short, the answer, unhelpfully, is: 'it depends'.

In the Deckers v Severn case it was also argued that Deckers' use of the 'UGG Australia' trade mark was a false designation of origin, as some of the boots were not in fact manufactured in Australia. No deception was found, for the following reasons

  • Deckers' boots had labels stating the country of manufacture;
  • most of the sheepskin used by Decker originated in Australia, even if final assembly occurred elsewhere; and
  • the style of boot in question originated in Australia.

This does not mean that companies are free to make false claims that their Ugg boots are made in Australia. In May 2016, the ACCC fined Kingdom Groups International $10,800 for using the 'Australian Made' logo when its Ugg boots were in fact made in China. In 2011, the Federal Court fined Marksun Australia $430,000 (and required them to pay an additional $50,000 of the ACCC's legal costs) for breaches of the Australian Consumer Law. This was due to it misleading consumers that its Ugg boots were made in Australia, and for improper use of the 'Australian Made' logo.

Take away points

The take-away lesson from these unfortunate events is the need take great care to avoid infringing the mark of another. Even a term that may seem at first glance to be generic or not distinctive may be treated differently in other countries. The consequences of infringement will still be just as dire.

Any Australians thinking of establishing a new brand would be wise to remember that whether or not a particular word or phrase can be trade-marked will vary from country to country. Even if a particular phrase is considered generic in Australia, that may not be the case elsewhere. In such situations, it is important to seek to obtain foreign trade mark protection as broadly as possible, to avoid others being able to effectively lock you out of a foreign market.

*As reported by The Dominion Post in 2008, a spokeswoman of the Intellectual Property Office of New Zealand explained that ugg boots, and the alternative spellings ug and ugh, were generic terms for the sheepskin boots, and so could not be trade-marked for footwear. 

No comments:

Post a Comment