Five-zip: Unanimous High Court clarifies what it takes to "honestly" avoid trade mark infringement

If a business uses a trade mark that is the same as or similar to someone else’s registered mark, it may have a defence to trade mark infringement if it can show "honest concurrent use". But what does that mean in practice?

The High Court's unanimous decision in Zip Co Ltd v Firstmac Ltd [2026] HCA 16 answers that question. The key takeaway: a business relying on this defence must prove it was acting honestly – judged by the standards of ordinary, decent people – at the time of each act of alleged infringement. It cannot rely on what came before, or what it did years later, to excuse use that was not honest when it occurred.

Perhaps more importantly, the case is a cautionary tale for any business launching a new brand. If you know there might be a problem with someone else’s trade mark and you ignore it hoping it will go away, the consequences can be devastating, including potentially a very substantial liability in damages, legal costs and rebranding expenses.

ZIP vs Zipmoney

Firstmac is a non-bank lender and Australia’s largest in that category. It registered the word mark "ZIP" in 2004 for financial services (Class 36). Firstmac used the mark on home loan products from 2005, stopped offering new ZIP loans in 2014 (while continuing to service existing ones), and relaunched a ZIP home loan through an affiliated online lender in September 2018.

Meanwhile, in 2012, the founders of what would become Zip Co (Mr Diamond and Mr Gray) were developing a buy-now-pay-later business. In early 2013, Mr Gray searched the internet for the name "ZIP" but found no reference to Firstmac. The pair decided to use “ZIP” and “ZIPMONEY” as their brand names.

Zipmoney was incorporated in June 2013. In August 2013, trade mark applications were filed for the ZIP MONEY and ZIP logo marks.

In October 2013, IP Australia rejected those applications, expressly noting that the proposed marks closely resembled Firstmac’s registered mark for similar services. This was a clear warning sign.

What happened next?

Not a great deal. Despite being told their proposed marks conflicted with an existing registration, Zip Co’s founders did not:

• seek legal advice;

• respond to the reports; or

• search the Trade Marks Register.

Instead, Zip Co launched its business under the “ZIP” marks in November 2013 just weeks after receiving the adverse reports.

The court battle between Firstmac and Zip Co begins

By 2019, Zip Co had grown into a major fintech business with revenue exceeding $84 million, over 16,000 merchant partners and 1.3 million customers. But the unresolved trade mark problem had not gone away.

Firstmac commenced infringement proceedings in June 2019. By that point, Zip Co had twice tried (and failed) to knock Firstmac’s registration off the Trade Marks Register on the grounds of non-use. The case would travel through three levels of court before reaching the High Court.

At first instance, the Federal Court (May 2023) sided with Zip Co. Justice Markovic found that Zip Co’s use of the ZIP marks was “honest” and its defences succeeded. Critically, Justice Markovic found that composite marks like “ZIP PAY” and “ZIP MONEY” were not deceptively similar to Firstmac’s mark, a point that would later be overturned.

On appeal in March 2025, the Full Federal Court unanimously reversed the trial decision. It held that:

• composite marks like “ZIP PAY” and “ZIP MONEY” were deceptively similar and infringed Firstmac’s mark;

• Zip Co had not proved honest concurrent use at the relevant time, being November 2013, when it first used the marks in trade;

• Firstmac had used its mark as a trade mark from September 2018, so removal for non-use was not justified; and

• cancellation of Firstmac’s registration under section 88(2)(c) was not warranted.

Why the High Court found in favour of Firstmac

The High Court unanimously dismissed Zip Co’s appeal and confirmed that Zip Co had not proved it was acting “honestly” at the time of its first use of the ZIP marks, and therefore could not rely on the honest concurrent use defence.

The decision turned on two key questions:

When is honesty assessed?

• The honest concurrent use defence is assessed separately for each occasion of potential infringement, not once and for all.

The Court held that the defences “are defences to each occasion of alleged potential infringement. They are not collective defences to be assessed once and for all”. In practical terms, this means a business cannot point to the fact that it was acting innocently at an earlier stage to excuse later use that was not honest.

In other words, the Trade Marks Act treats trade mark infringement as separate acts, so defences to such infringements must also be considered as separate acts. Consequently, an alleged infringer cannot rely on a single or initial finding of honesty to excuse all past and future infringing conduct.

• Honesty must be proved at the date of each potential infringement and not at the date of filing a defence, nor at the date of trial.

Zip Co argued that honesty should be assessed at the date it filed its defence (August 2019) or the date of trial (March 2022), which would have allowed it to rely on years of subsequent growth and goodwill. The High Court unanimously rejected this. What matters is whether the business was honest at the time it started using the mark. A business cannot cure an initially problematic use by pointing to later events.

What does "honest" actually mean?

The High Court confirmed that honesty is about the defendant’s actual state of mind, judged against the standard of ordinary, decent people. Importantly, the Court cautioned against equating mere carelessness with dishonesty, but emphasised that a failure to take obvious steps can make it practically impossible to prove honesty.

There is no fixed checklist, but several principles on honesty in a trade mark context emerged from the decision:

• The defendant must positively establish an "honest" state of mind.

The question is not whether the defendant was dishonest. The question is whether the defendant has successfully discharged its onus to prove an "honest" state of mind at the relevant time(s), to the standard expected of ordinary, decent people.

• Knowledge of a competing mark does not preclude "honesty".

Mere knowledge of a competing mark alone will not necessarily mean the defendant was dishonest. But knowledge will ordinarily weigh heavily against a finding of honesty, particularly where the business knows of a material obstacle to its use and proceeds without addressing it.

A defendant who genuinely believes its mark will not cause confusion may still succeed, but only if it can explain why it held that belief. If you are on notice of a competing mark and have no good reason to think confusion will not arise, you are unlikely to discharge the onus.

• Recklessness may impede "honesty".

Failing to turn one's mind to the question of whether confusion might arise between the marks may also be sufficient to preclude a finding of honesty.

The High Court emphasised that Zip Co’s founder failed to lead any evidence that he had even considered whether confusion might arise, or that he was not reckless in failing to do so. Simply not intending to be dishonest is not enough – you must positively prove an honest state of mind.

• Failure to search the Trade Marks Register will not, by itself, establish dishonesty.

Although a failure to search the Register does not automatically preclude honest concurrent use, deliberate avoidance of searching (or deliberately ignoring adverse search results) may support an inference of dishonesty. Businesses should ensure their pre-launch conduct cannot later be characterised as wilful blindness.

• The standard relates to "honesty", not reasonableness.

In its concluding remarks, the High Court cautioned against conflating carelessness with dishonesty. But the practical reality is clear: if you fail to take the obvious steps, such as searching the Register or seeking legal advice, you will struggle to prove you were acting honestly.

What went wrong for Zip Co?

Zip Co made belated attempts to address the issue, but by then it was far too late. The Court’s findings tell a clear story of what not to do:

• After receiving the adverse reports identifying the Firstmac Mark, the Court held that Zip Co was "aware of a material impediment to the use of" the ZIP Application Marks.

• Despite being on notice from October 2013, Zip Co did not obtain legal advice, respond to the adverse reports, or search the Trade Marks Register before launching in November 2013.

• Zip Co twice tried to have Firstmac’s mark removed for non-use. The first attempt was rejected by a delegate of the Registrar in 2018; the second succeeded at trial but was overturned on appeal.

• Composite marks like "Zip Pay" and "Zip Money" also infringed Firstmac’s mark. The addition of a generic descriptive word did not avoid deceptive similarity.

• No evidence was led as to why Mr Diamond believed consumers would not be confused between the ZIP Application marks and the Firstmac Mark. As a result, the Court found that Zip Co could not prove "honesty" at the time it started using the ZIP Application marks.

The consequences are significant. The appeal having been dismissed, Zip faces declarations of infringement, injunctions and an inquiry into damages. At a practical level, Zip Co will need to rebrand in Australia or negotiate a licence from Firstmac to continue using the ZIP marks, on top of paying Firstmac’s substantial legal costs.