23 Dec 2021

Two Henleys too many as construction firm loses name to competitor in trade mark dispute

By Dean Gerakiteys, Justin Kardi

A successful claim for trade mark infringement has again highlighted the risks of failing to conduct adequate due diligence before commencing to trade under a business name (Henley Arch Pty Ltd v Henley Constructions Pty Ltd [2021] FCA 1369).

Sydney-based property developer Henley Constructions Pty Ltd (HC), which began to trade under the name "Henley Constructions" in 2006, was found to have infringed several registered trade marks owned by Melbourne-based home builder Henley Arch Pty Ltd (Henley Arch), and to have engaged in misleading or deceptive conduct, or conduct likely to mislead or deceive, in contravention of the Australian Consumer Law.

A tale of two Henleys

Henley Arch was founded in Victoria in 1989.  Since then, it has grown to become one of the largest home builders in Australia.  In 2003, it commenced marketing its services online.  In 2006, it applied to register trade marks including the word HENLEY for building and construction services in class 37 and architectural, engineering, design, drafting and interior design services in class 42.  Henley Arch's trade marks were subsequently granted.

HC was founded in New South Wales in 2006.  With its focus on constructing multi-dwelling residential apartments in the suburbs of Sydney, HC's business went unnoticed by Henley Arch for approximately 10 years until a supplier brought it to Henley Arch's attention in 2017.  Henley Arch immediately sent a cease and desist letter to HC, putting it on notice of its rights and demanding that HC change its name.

Instead of agreeing to change its name, HC dramatically increased its marketing spend and redesigned its logo to emphasise the word "Henley".  In response, Henley Arch commenced proceedings.

Good faith use requires reasonable inquiries

In its defence to Henley Arch's claims of statutory trade mark infringement, HC argued that its use of "Henley Constructions" was a good faith use of its own company name, and/or that the extended period in which it traded unchallenged under the name "Henley Constructions" would entitle it to its own trade mark.

The Court accepted that HC's founder and sole director and shareholder, Peter Sarkis, had relied on the fact that "Henley Constructions" was available on the ASIC registers.  However, the Court also found that Mr Sarkis was aware of Henley Arch before settling on a name, as the evidence showed his wife identified Henley Arch's website through online searches and brought it to his attention.  In those circumstances, the failure of Mr Sarkis to make further reasonable inquiries fell short of what is required of a person acting "honestly and in good faith".  This means that HC's use of the name "Henley" was found by the Court to be tainted by "dishonesty".

In respect of the period of unchallenged use, the Court held that any trade mark application by HC for "Henley Constructions" would not be successful.  HC did not deny that "Henley Constructions" was deceptively similar to "Henley", and was unable to establish that its concurrent use was honest or that other circumstances would make it proper to accept an application for registration.  The Court held that HC was not entitled to register "Henley Constructions" because any application would have been refused or successfully opposed on the basis of Henley Arch's existing marks.

Henley Arch succeeds on all issues in dispute

Henley Arch was also successful in its claims under the Australian Consumer Law, with the Court finding that consumers in the market for building and constructions services were likely to be misled into the belief that HC was associated with Henley Arch, via HC's false representations made through its use of the "Henley Constructions" name.

The Court also rejected a cross-claim brought by HC, which sought to remove Henley Arch's trade marks and/or limit their registration in some way.  In doing so, the Court held that:

  • while "Henley" is a suburb name and a surname shared by some licenced builders, meaning it is not to any extent inherently adapted to distinguish, Henley Arch's extensive use of the name as at each of the priority dates meant it had in fact come to distinguish its services from those of other traders;
  • Henley Arch's trade marks should not be removed for non-use, or geographically limited to exclude New South Wales, as although Henley Arch had a limited market presence in that state, the market for building services in Australia was and is a national market and, regardless, at all relevant times Henley Arch had some use its trade marks in New South Wales; and
  • Henley Arch's trade marks should not be limited to the construction of houses only, as consumers in the market for building and construction services would not appreciate a difference between constructing houses and multi-dwelling apartments, meaning such a limitation would draw "too fine a distinction".

Don't forget your due diligence when creating a trade mark

Henley Arch's success on all issues in dispute highlights the valuable protection offered by a registered trade mark.  It also illustrates the risks of failing to conduct proper due diligence on a potential business name. 

In particular, it is important to remember that the availability of a business name or company name does not itself indicate freedom to use that name.  Likewise, even if the use of a name by a business is unchallenged for many years, a registered trade mark owner may still have success in suing that business for trade mark infringement once the infringing use is eventually brought to its attention.

Legal disputes over the right to use a name can be costly, as can the need to rebrand and communicate that change to customers and suppliers. 

Please contact Clayton Utz if you would like any assistance or advice conducting trade mark due diligence or are concerned that another trader may be infringing your trade mark rights.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.