Consider this very common scenario:

1. a trade mark is coined and used by entity A,

2. it is decided the trade mark should be registered,

3. an IP holding company is to own the registration,

4. the trade mark is “assigned” from entity A to the IP holding company,

5. THEN a trade mark application is filed in the name of the IP holding company.

Now consider that according to Kraft v Bega, the resultant registration would be invalid under s 27 of the Trade Marks Act 1995 (Cth) (TMA)!

This is because step 4 cannot be done. An unregistered trade mark is not property. It does not have its own goodwill separate from the goodwill of the business of entity A. Unless the assignment agreement transfers the business of entity A to the IP holding company (which it should not, as that would defeat the purpose of having an IP holding company), there has been no valid assignment of the trade mark and the IP holding company cannot claim to be the owner of the trade mark at the time the trade mark application is filed.

We know from Pham Global Pty Ltd v Insight Clinical Imaging Pty Ltd [2017] FCAFC 83 that when a trade mark application is filed in the name of an applicant who is not the owner of the trade mark at the time the trade mark application is filed, there is a defect in the application that cannot be cured by subsequent assignment. Recently registered trade marks may be revoked by the Registrar under s 84A of the TMA and older registrations may be cancelled by the courts under s 88 of the TMA.

Will Kraft v Bega lead to the revocation or cancellation of a great number of registered trade marks? We have seen owners of granted software patents left with nothing after re-examination in the light of subsequent case law which defined manner of manufacture in such a way that excluded their inventions. Is it now trade mark owners’ turn to face the brutal reality that judicial clarifications of the law are retrospective?

Will it lead to a spate of new filings for trade marks that are already seemingly registered (where the registered owner knows the registration to be invalid as the agreement that purported to assign the trade mark to the registered owned was executed before the application for the registration was filed and is therefore invalid)?

While we watch to see how the consequences of Kraft v Bega play out for others, what should we do ourselves?

1. Review the purported chain of title of any valuable trade marks to ascertain whether there has been an invalid assignment of an unregistered trade mark from a user of the trade mark separately from the business of the user of the trade mark to the intended owner of the trade mark prior to the filing date and, if so, file a fresh application for the valuable trade mark in the name of the user of the trade mark first and then assign the trade mark to the intended owner of the trade mark after the application for the trade mark has been filed;
2. Ensure that future practice is to file applications for registration of all possible trade marks from the outset, to avoid the difficulty of assigning/licensing unregistered trade marks, and transferring goodwill generated through use of unregistered trade marks;
3. Where applications for registration of trade marks cannot or have not been filed from the outset, file any future applications for them in the name of the user of the trade mark first and then assign the trade mark to the intended owner of the trade mark after the application for the trade mark has been filed. This assignment may be done while the application is still pending, as s 106 of the TMA provides that a trade mark “whose registration is being sought” may be assigned with or without the goodwill of the business. In such a case, the assignee would be required to license the unregistered trade mark back to the user. Much of the commentary about Kraft v Bega claims that the case is authority that the goodwill generated through use of an unregistered trade mark by a licensee does not inure to the benefit of the licensor. However, this may not be the case for unregistered trade marks where an application for registration is pending. After all, why would s 106 allow a trade mark whose registration is being sought to be assigned, unless it was the intention of the legislature that the assignee could authorise 3rd party use in the same way as any other trade mark owner (i.e. with the use, including goodwill associated with the use, inuring to the benefit of the licensor)?; and
4. Goodwill associated with the use of the trade mark inures to the benefit of the trade mark owner either from the registration date or, as I have argued above, the date the application for registration is assigned under s 106 of the TMA. But goodwill associated with the use of the trade mark prior to this remains the property of the user unless/until the business of the user is assigned to the trade mark owner. Where any action for passing off and/or misleading and deceptive conduct relates to a period of time that both pre- and post- dates the registration date for a trade mark, ensure that the action is brought in the names of both the registered owner of the trade mark and any entities that used the trade mark in the relevant period prior to its registration. This isn’t impossible, but it does add complexity to law suits, which are already usually prohibitively costly for trade mark owners.