Harry Potter and the Order of the Federal Court

By Catherine Lee.

Key Points:
First use remains the strongest criterion for any disputed ownership of a trade mark.

There has been a great deal of discussion in the popular press recently regarding the rights of a person who uses a trade mark first, but does not register it, against a person who later arrives on the scene and registers a trade mark under the Trade Marks Act 1995 – especially a famous and powerful later arrival.

A recent decision of the Federal Court powerfully illustrates that first use remains the strongest criterion for any disputed ownership.

A most extraordinary coincidence

This case began with what may appear as the most extraordinary coincidence.

Long before the first publication of the now famous "Harry Potter" books by JK Rowling in 1997, the owners of an Australian company involved in clothing stores, Mr Farah and Ms Jennifer, made up the name "harry potter" (all in lower case, in a sans serif font) for a line of women's clothing, because they thought it "would have wide appeal as an Australian masculine name". Every year since 1994, their stores had sold hundreds of thousands of units of "harry potter clothing" and by the year ended 30 June 1998 had achieved sales exceeding $9,000,000. Although the "harry potter" mark had only been used on women's clothing, Mr Farah and Ms Jennifer stated that it was their intention to use it on men's and children’s clothing also.

On 26 February 1998, one of their companies, Stepsam Investments Pty Ltd, applied to IP Australia to register the trade mark "harry potter" (all in lower case sans serif) in respect of clothing.

In the meantime, as everyone knows, a publishing phenomenon took place, with the meteoric rise to fame of the "Harry Potter" books of JK Rowling. Time Warner acquired from Ms Rowling the right to make films based on her books. At the date of Stepsam's trade mark application, however, only some 2,000 copies of the first of the Harry Potter books had been sent for sale in Australia, and the book had not yet made any impression in Australia.

In due course, Time Warner opposed Stepsam’s application to register the mark "harry potter". The Registrar of Trade Marks dismissed the opposition and permitted the application to proceed to registration. Time Warner appealed the Registrar’s decision, seeking orders for it to be set aside and for the application for registration to be refused. Early in the hearing of its appeal, however, Time Warner modified its position. It was no longer totally opposed to Stepsam's application for registration, but contended that registration of the trade mark should be limited to adults' clothing. Stepsam rejected this limitation and argued that it was entitled to have the mark registered in relation to all types of clothing.

Why did Stepsam win?

The Federal Court found in favour of Stepsam on the following grounds:

• while "Harry Potter" may be a person’s name and hence incapable of being owned as a trade mark by anyone, Stepsam had established sufficient use of the mark in respect of clothing to satisfy the court that it had its own de facto reputation in respect of clothing, so that relevant purchasers of goods at the time of the application was made would associate the mark with Stepsam.
• even though JK Rowlings’ Harry Potter had become so extraordinarily famous, Time Warner could not argue that Stepsam's use would be contrary to law because it would mislead or deceive consumers (and thus breach section 52 of the Trade Practices Act). The court pointed out that this decision had to be made as at the date of Stepsam’s application, and not in light of subsequent events. As at February 1998, any association in the public mind in Australia between the name "Harry Potter" and clothing would have been with Stepsam.
• the court was satisfied that Stepsam’s application for the trade mark was made with the bona fide intention to use it on men's and children’s clothing, as well as women's clothing, or at least Time Warner could not prove otherwise.
• Stepsam’s application was otherwise a genuine one and had not been accompanied by any "evidence or representations that were false in material particulars".

What can muggles learn from the case?

It is not known if Time Warner intends to appeal this decision. Even if it ultimately fails in its opposition (because at the time of the original application the Harry Potter character was not famous enough) then Time Warner could still apply under section 88(2)(c) of the Trade Marks Act for revocation of Stepsam’s mark. This sort of action would be based on an argument that Stepsam’s mark has (since registration) become deceptive or confusing because of the fictional character’s current fame. The court in this case did not rule out the possibility that, if Stepsam decided to use its trade mark in any form other than the lower case sans serif form shown in the application, or in any other way so as to capitalise on Ms Rowling’s or Time Warner’s reputation in their fictional character, such an application could be successful and/or Stepsam could be found to be in breach of section 52 of the Trade Practices Act. In any event, Stepsam will need to be careful how it uses the "harry potter" mark in the future.

In the meantime, Stepsam has also applied for registration of the name "HARRY POTTER" (in no particular form of graphical representation) in respect of watches, jewellery and the like (class 14), and this application has also been accepted by the Registrar of Trade Marks.