Court of Appeal Confirms ‘Actual’ v ‘Notional’ Use Distinction

In 2020 NZCA 306 Pharmazen Limited v Anagenix IP Limited the Court of Appeal confirmed that the likelihood of actual use is not relevant to discharging the onus of establishing lack of deception or confusion on a notional use basis.

In 2010 Anagenix achieved registration for its brand ACTAZIN in relation to kiwifruit powder in classes 5 and 29. Its product was sold in New Zealand for a short period in 2012, but a business decision was made to only sell into overseas markets on account of potential patent infringement. In 2016 Pharmazen applied to register ActiPhen, which relevantly included kiwifruit powder in class 5. After being accepted by IPONZ it was opposed by Anagenix principally on account of being likely to deceive or cause confusion under sections 25(1)(b) and 17(1)(a).

In assessing the section 25(1)(b) ground the Assistant Commissioner readily found the goods to be similar and that the marks are visually and phonetically similar, and concluded that a significant number of relevant consumers would likely be caused to wonder when seeing the ActiPhen mark in the absence of the ACTAZIN mark. Whereas section 25(1)(b) is assessed on a notional use basis, section 17(1)(a) is assessed on the basis of actual use. Given that ACTAZIN was only marketed to the New Zealand public for a short period in 2012 the Assistant Commissioner found that there was insufficient evidence of awareness to satisfy the reputational threshold under section 17(1)(a).

Pharmazen appealed to the High Court, where the Judge essentially arrived at the same conclusions under sections 25(1)(b) and 17(1)(a). The Judge also rejected Pharmazen’s contention that the distinct findings under sections 25(1)(b) and 17(1)(a) showed inconsistency by the Assistant Commissioner, and that it is in line with Court of Appeal precedent (under the Trade Marks Act 1953) to the effect that under section 25(1)(b) actual use and reputation in the opposer’s mark is not relevant.

Before the Court of Appeal Pharmazen contested both the section 25(1)(b) finding that ActiPhen is deceptively or confusingly similar to ACTAZIN, aned the distinction between notional use and actual use in the determination of that section. In the latter respect Pharmazen took particular issue with the application of that distinction where the opposer’s mark is not currently or likely to be marketed to the New Zealand public, arguing that the determination of whether the New Zealand market is likely to be deceived or confused needs to take into account the likelihood of the opponent participating in the market.

The Court of Appeal noted that while sections 17(1)(a) and 25(1)(b) use similar language and do not explicitly employ any respective distinction between actual use and notional use, that there is a long history of the Courts employing that distinction on account of the different purposes of the two sections. The purpose of section 17(1)(a) is to protect the public from deception or confusion, whereas the purpose of section 25(1)(b) is to protect the proprietor’s registered mark from the registration of a deceptively or confusingly similar mark. While the applicant can avoid section 25(1)(b) if they receive the consent of the registered proprietor, there is no such equivalent for section 17. For the public to be at risk of deception or confusion there must have been actual use of the registered mark. By contrast the purpose of protecting the proprietor’s interest in their registered mark can be satisfied by considering the likelihood of deception or confusion when the applicant’s mark is used in a normal and fair manner in a notional market.

The Court of Appeal also noted that requiring actual use in the New Zealand market for section 25(1)(b) purposes would mean that use of the mark for export would not be relevant, which is inconsistent with sections 7(1)(b) & (c), which deem the use of a mark for export purposes to be use in New Zealand. The Court of Appeal considered it would be paradoxical that sections 7(1)(b) & (c) can save Anagenix’s mark from a finding of non-use, but the same export use could not be relevant for section 25(1)(b) purposes. It was further noted that the infringement provisions of section 89 also only requires consideration of the likelihood of deception or confusion when the applicant’s mark is used in a normal and fair manner in a notional market, and that were Pharmazen’s mark to be registered they would have a defence to a finding of infringement.

In considering the similarity of ActiPhen to ACTAZIN the Court of Appeal found there to be sufficient similarities to conclude that they are relevantly similar and that the effect of some of the differences would depend upon how the words are pronounced. As both marks are invented words with no apparent meaning the conceptual comparison is neutral. Both marks are of similar length, have three syllables, share the first syllable and end with the same letter.

Pharmazen contested the relevance of the first shared syllable given that the botanical name for green kiwifruit is Actinidia deliciosa and that kiwifruit contains the enzyme Actinidin. However, the Court of Appeal found there to be a lack of any persuasive evidence to the effect that ACT is a recognised abbreviation of either Actinidia or Actinidin and as such is not generic or descriptive.

The Court of Appeal found the respective parties preferred pronunciations and the pronunciations preferred by the Assistant Commissioner and trial Judge to evidence that the two words are capable of a variety of pronunciations. It noted the lack of independent or expert evidence on likely pronunciation and took the view that both marks would be pronounced with a falling inflexion, thereby reducing the relevance of the last syllable.

The Court of Appeal also found the conclusion by the Delegate of the Australian Trade Mark Office that the two marks are not confusingly similar to not be of relevance, given that the Australian legislation puts the onus is on the opposer to establish deceptive similarity, whereas in New Zealand the applicant has to establish that their mark is unlikely to deceive or confuse.

Author: Quinn Miller

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