How Zip Co leveraged its common law rights to usurp First Mac during their trademark dispute
The recent decision of J Markovic in Firstmac Limited v Zip Co Limited [2023] FCA 540 is an important reminder to pay careful attention to the strength of common law trade mark rights in Australia.
After Australia’s largest non-bank lender, Firstmac filed a lawsuit against consumer lender Zip Co, for trade mark infringement in 2019, the Federal Court of Australia ruled in favour of Zip Co who used common law use as a defence. Moreover, the court cancelled Firstmac’s registered trade mark rights.
Here’s an overview:
Firstmac Limited (Firstmac) was the registered owner of Australia TM No.1021128 ZIP for “financial affairs (loans)” in Class 36.
Several trade marks used by Zip Co were found to be substantially identical to Firstmac’s registered trade mark rights. However, Zip Co was able to successfully assert the defence of “honest concurrent use”, as demonstrated below:
Firstmac owned trade mark rights to ZIP from 20 September 2004 and used the term ZIP for a home loan service between 2005 and 2014.
Late in 2018, Firstmac re-introduced the ZIP home loan and a ZIP debit product, which was later sold through Loans.com.au.
Zip Co commenced use of the ZIP trade mark for its buy now, pay later service in November 2013 and continued to use it from this time to the present as the business grew.
Zip Co was successful in its crossclaim to cancel Firstmac’s Australia TM No. on the grounds of non-use and that any use of the ZIP trade mark by Firstmac would cause confusion with Zip Co’s ZIP trade marks.
Continue reading the full case study
How Zip Co leveraged its common law rights to usurp First Mac during their trademark dispute
In 2019, Australia’s largest non-bank lender, Firstmac (Firstmac Limited), filed a lawsuit before the Federal Court of Australia against consumer lender Zip Co (Zip Co Ltd and ZipMoney Payments Pty Ltd) for trade mark infringement. Specifically, on behalf of Zip Co using the ZIP trade mark for its buy now, pay later service. Despite various shortcomings on Zip Co’s behalf, the court ruled in favour of Zip based on their ability to assert their defence of ‘honest concurrent use’ of several Zip Co trade marks.
[Disclaimer] Please note: some legal information has been summarised for readability purposes.
First Up. What is honest concurrent use?
Honest concurrent use is a defence used by Applicants who want to overcome an objection regarding the use of a pre-existing trade mark. Five criteria are considered:
1. Degree of confusion likely between trade marks. Factors include:
The degree of public inconvenience (the impact of public confusion regarding ownership).
Triple identity (identical or substantially identical use of a trade mark, for the same goods/ services, in the same geographical area).
The nature of the trade mark itself (if the trade mark is commonplace, purchasers are not likely to expect exclusive proprietorship).
2. Whether confusion has in fact occurred. Applicants must declare that confusion surrounding trade mark use has occurred.
3. Honesty of use. Applicants must establish the honest use of a trade mark. For identical/ substantially identical use, it’s recommended that Applicants furnish a statement that covers:
Their level of awareness of the other trademark.
Why in the face of knowledge, they persisted to use it.
4. Extent of use in duration, area and volume. Applicants must give evidence as to why the trade mark was used before the priority date of the applied trade mark. This includes:
History and explanation regarding the adoption of the trade mark.
The use of the trade mark concerning the goods/services in which the trademark has been used.
Any advertising undertaken
5. Relative inconvenience. The level of inconvenience caused to the respective parties if the trade mark is registered. Points to consider:
Applicants citing inconvenience directly related to goodwill will likely want to secure their registration rights.
If registration is unavailable and continued use is liable to infringe, inconvenience may result in the abandonment of the trademark and relative goodwill.
Back to the Case Study. Summary of trade mark use:
Firstmac Limited was the registered owner of Australia TM No. 1021128 ZIP for “financial affairs (loans)” in Class 36.
Zip Co didn’t conduct a search of the Australian Trade Mark Register but they did conduct searches of the internet prior to the decision to adopt the term ZIP.
While several trade marks used by Zip Co were found to be substantially identical to Firstmac’s registered trade mark rights, Zip Co was able to successfully assert the defence of ‘honest concurrent use’, as demonstrated below:
Firstmac owned trade mark rights to ZIP from 20 September 2004 used the term ZIP for a home loan service between 2005 and 2014.
Late in 2018, Firstmac re-introduced the ZIP home loan and a ZIP debit product, which was sold through Loans.com.au.
Zip Co commenced use of the ZIP trade mark for its buy now, pay later service in November 2013, and continued to use it from this time, to the present as its business grew.
Zip Co was also successful in its crossclaim to cancel Firstmac’s Australia TM No. on the grounds of non-use and that any use of the ZIP trade mark by Firstmac would cause confusion with their own ZIP trade marks.
‘As a general guide…if a trade mark has been used for 10 years or so before its priority date, and if turnover of goods under that trade mark has been extensive, then the provisions of paragraph 44(3)(a) can most likely be applied, even in the case of “triple identity”’.
Discussion
The fact that Zip Co later became aware of Firstmac’s trade mark rights to ZIP didn’t mean that Zip Co’s decision to continue to use the ZIP trade mark was dishonest. On the basis that ZIP is an everyday word (not an invented word), and the lack of evidence of confusion, the court ruled in favour of Zip Co’s defence of honest concurrent use.
As for Zip Co’s non-use crossclaim, J Markovic found that Firstmac’s use of ZIP was not “used as a trade mark” but as a descriptor of a product. The reference to the ZIP home loan on statements to borrowers and the later use of ZIP home loan and ZIP debit only identified a product and the term ZIP did not function as a badge of origin.
J Markovic found that even though Firstmac was the owner of a registered trade mark for the word ZIP, its use of the ZIP trade mark would cause people to wonder if Firstmac’s services originated from Zip Co. Given the extent of use of the term ZIP by Zip Co, and the limited use of ZIP by FirstMac, the court found that there was a risk to the public if they confused Firstmac with their registered trade mark. As a result, the court ordered Firstmac’s trade mark registration to be cancelled.
Zip Co was able to use the trade mark ZIP from November 2013 to August 2016 without Firstmac’s knowledge. During this time, Zip Co grew its business and developed valuable common law use rights which enabled Zip Co to not only defend Firstmac’s trade mark infringement claim but to usurp the ZIP trade mark from Firstmac.
To avoid losing their trade mark rights, owners should:
Use trade marks as source identifiers, not product descriptors which can jeapordise their trade mark rights.
Be vigilant in monitoring for trade mark infringement. Beyond maintaining your trade mark opposition watches of IP registers, owners should conduct regular sweeps of the internet, industry publications, social media platforms, domain names, and company name registers
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