FEDERAL COURT OF AUSTRALIA Toddler Kindy Gymbaroo Pty Ltd v Gymboree Pty Ltd [2000] FCA 618 TRADE MARKS – cancellation – transitional provisions of Trade Marks Act 1995 (Cth) ("1995 TM Act") – effect of prescriptive validity under s 234 of 1995 TM Act – whether s 234 of 1995 TM Act contains sole grounds on which a mark originally registered under the Trade Marks Act 1955 (Cth) ("1955 TM Act") may be removed from Register – whether, on facts, prescriptive validity has been lost – whether actual use is an essential requirement of s 234(2)(e) of 1995 TM Act – relevant time for considering whether use of mark would be likely to deceive or confuse under combined operation of s 234(2)(d) of 1995 TM Act and s 28(a) of 1955 TM Act – whether, on facts, use of mark likely to deceive or cause confusion at relevant time – marks used in relation to gymnasia services for young children – similarity of words "Gymbaroo" and "Gymboree" TRADE MARKS – cancellation – whether mark should be cancelled for lack of ownership – whether marks substantially identical or deceptively similar – signficance of visual context in which similar words appear in the marks – whether mark should be cancelled on ground that it is substantially identical with or deceptively similar to a trade mark that has acquired a reputation in Australia – discretion to cancel mark – relevance of delay, copying and reputation to exercise of discretion TRADE MARKS – cancellation – whether mark should be cancelled for non-use – whether registered owners authorised use of mark by franchisees in the relevant period – construction of franchise agreement – circumstances surrounding franchise agreement – degree of control exercised by franchisors over operations of franchisees – whether actual use that was made by franchisees was authorised use – whether marks were used by franchisees in relation to the services in respect of which the marks were registered – relevance of decided cases concerning use in relation to goods TRADE MARKS – infringement – whether marks are deceptively similar TRADE PRACTICES – misleading or deceptive conduct – conduct of offering franchises and providing gymnasia services for young children – consideration of evidence that members of public making inquiries about services of respondent knew of services of applicant – relevant time for considering conduct alleged to be misleading and deceptive – relevant sections of public – nature of business – similarity of names TRADE PRACTICES – injunctions – whether injunction should be granted to restrain offering of franchises – whether injunction should be granted to restrain provision of services – relevance of delay – relevance of copying of mark TORTS – passing off Trade Marks Act 1995 (Cth) ss 7, 8, 10, 27, 33, 40, 41, 44, 57, 58, 60, 88, 92, 94, 100, 101, 120, 233, 234 Trade Marks Act 1955 (Cth) (repealed) ss 22, 28, 61 Trade Practices Act 1974 (Cth) ss 52, 53, 80, 82 Campomar Sociedad, Limitada v Nike International Ltd [2000] HCA 12 applied Mid Sydney Pty Ltd v Australian Tourism Company Ltd (1998) 42 IPR 561 at 571-4 referred to Mid Sydney Pty Ltd v Australian Tourism Company Ltd (1998) 40 IPR 20 referred to Berlei Hestia Industries Ltd v The Bali Company Inc (1973) 129 CLR 353 at 360-1 referred to Southern Cross Refrigerating Co v Toowoomba Foundry Pty Ltd (1954) 91 CLR 592 at 595 applied Campomar Sociedad, Limitada v Nike International Ltd (1998) 85 FCR 331 at 338, 342, 375 applied Carnival Cruise Lines Inc v Sitmar Cruises Ltd (1994) 31 IPR 375 applied SAP Australia Pty Ltd v Sapient Australia Pty Ltd (1999) 169 ALR 1 applied Registrar of Trade Marks v Woolworths Ltd (1999) 45 IPR 411 referred to Thai Gypsum Products Co Ltd v Waring and Gillow Pty Ltd (1994) 29 IPR 99 referred to Pioneer Kabushiki Kaisha v Registrar of Trade Marks (1977) 137 CLR 670 at 683 referred to Vieright Pty Ltd v Myer Stores Ltd (1995) 31 IPR 361 at 372 applied S & I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd (1998) 168 ALR 36 at 405 referred to Thai World Import & Export Co Ltd v Shuey Shing Pty Ltd (1989) 17 IPR 289 at 302 applied Applied Business Technology Pty Ltd v Grandmaster Computers Pty Ltd (1999) 161 ALR 31 at 34 referred to The Boots Company (Australia) Pty Ltd v Smithkline Beecham Healthcare Pty Ltd (1996) ATPR 41-459 at 42,598 referred to Al Hayat Publishing Company Ltd v Sokarno (1996) 34 IPR 214 referred to BR Gamer (Investments) Pty Ltd v Gamer (1993) ATPR 41-200 referred to BM Autosales Pty Ltd v Budget Rent A Car Pty Ltd (1976) 51 ALJR 254 referred to Greyhound Pioneer Australia Ltd v Pioneer Motor Service Pty Ltd (1997) 38 IPR 385 referred to Visa International Service Association v Beiser Corporation Pty Ltd (1983) ATPR 40-373 referred to Glev Pty Ltd v Kentucky Fried Chicken Pty Ltd (1994) ATPR 41-299 at 41,981 applied Shanahan Australian Law of Trade Marks and Passing Off 2nd edition at p 247 TODDLER KINDY GYMBAROO PTY LTD AND MARGARET KENT KERR SASSE AND HARRY ARTHUR SASSE v GYMBOREE PTY LTD AND GYMBOREE CORPORATION NG 142 OF 1996 MOORE J 12 MAY 2000 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 142 OF 1996 BETWEEN: TODDLER KINDY GYMBAROO PTY LTD First Applicant MARGARET KENT KERR SASSE and HARRY ARTHUR SASSE Second Applicants AND: GYMBOREE PTY LTD First Respondent GYMBOREE CORPORATION Second Respondent GYMBOREE PTY LTD First Cross Claimant GYMBOREE CORPORATION Second Cross Claimant TODDLER KINDY GYMBAROO PTY LTD First Cross Respondent MARGARET KERR KENT SASSE Second Cross Respondent HARRY ARTHUR SASSE Third Cross Respondent JUDGE: MOORE J DATE OF ORDER: 12 MAY 2000 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Parties to file within 21 days short minutes to give effect to these reasons. 2. Parties to file within 14 days submissions on the question of costs. 3. Matter stood over to 7 June 2000. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 142 OF 1996 BETWEEN: TODDLER KINDY GYMBAROO PTY LTD First Applicant MARGARET KENT KERR SASSE and HARRY ARTHUR SASSE Second Applicants AND: GYMBOREE PTY LTD First Respondent GYMBOREE CORPORATION Second Respondent GYMBOREE PTY LTD First Cross Claimant GYMBOREE CORPORATION Second Cross Claimant TODDLER KINDY GYMBAROO PTY LTD First Cross Respondent MARGARET KERR KENT SASSE Second Cross Respondent HARRY ARTHUR SASSE Third Cross Respondent JUDGE: MOORE J DATE: 12 MAY 2000 PLACE: SYDNEY REASONS FOR JUDGMENT A: Introduction 1 These proceedings are the product of commercial tension between an American and two Australian businesses bearing similar names engaged directly or indirectly in providing developmental and gymnasia programs for young children and their parents in Australia. The proceedings take the not unusual form of allegations and counter allegations of contravention of s 52 of the Trade Practices Act 1974 (Cth) ("the TP Act"), passing off and associated claims and counter claims based on the Trade Marks Act 1995 (Cth) ("the 1995 TM Act"). The litigation commenced when an application by Toddler Kindy Gymbaroo Pty Limited ("TKG") and Mrs Margaret Kent Kerr Sasse and Mr Harry Arthur Sasse was filed on 20 February 1996 seeking a declaration that the first respondent Gymboree Pty Limited ("Gymboree") had engaged in conduct that was misleading and deceptive or likely to mislead or deceive contrary to s 52 of the TP Act. Passing off was also alleged. The applicants sought an order restraining Gymboree from using the name "Gymboree" or "Gymbaroo" in relation to any service it provided, an order restraining Gymboree from passing off its services as those of the applicants, and an order restraining Gymboree from using any trade mark identical or substantially or deceptively similar to any registered trade mark of the applicants. 2 Gymboree cross claimed against TKG and Mr and Mrs Sasse alleging they had engaged in conduct contravening ss 52, 53(c) and 53(d) of the TP Act, and provisions of the Fair Trading Act 1989 (Qld), and had tortiously passed off their business as that of Gymboree. Orders removing and cancelling certain trade marks associated with TKG were also sought as were related orders arising from the use of the trade marks by TKG. Gymboree Corporation ("Gymboree Corp") also cross-claimed raising similar issues concerning the use of trade marks by TKG. This judgment deals only with liability, injunctive relief and the proceedings under the 1995 TM Act. B: Background – an overview 3 TKG is a company incorporated in Australia and the second applicants, Mr and Mrs Sasse, are the sole directors and shareholders. Gymboree is a company incorporated in Australia and the second respondent, Gymboree Corp is a company incorporated in the United States. What follows is an overview of events leading to the present proceedings. Some of the factual matters referred to are contentious and the evidence on these matters is considered in more detail later and findings made. However this overview does refer to facts which, if not later canvassed in detail, constitute findings about events leading to these proceedings. B: (i) Margaret Sasse 4 Mrs Sasse is the managing director of TKG and is a trained nurse. She married Mr Harry Sasse in 1951. From 1969 to 1973 Mrs Sasse taught secondary school, with a particular interest in teaching remedial English. While teaching remedial English she trialed motor sensory development techniques that focussed on developing a motor base in young children considered essential for higher levels of learning. In 1973 she became a director of ANSUA (A New Start for the Under-achiever Association) a charitable organisation formed to aid children with learning difficulties or delayed development caused by minor nervous system dysfunction. Through ANSUA Mrs Sasse became involved in new approaches to the treatment of children with developmental, learning and/or behavioural difficulties, organised seminars in Melbourne and Sydney for teachers and parents, and initiated the establishment of a school for intelligent underachievers. She promoted the notion the organisation should establish ANSUA centres throughout Australia but resigned in 1982 because it would not. 5 She believed it was important to establish centres to provide children (from birth to early school age) and their parents with the education and skills necessary to prevent the development of learning difficulties at school age. She also believed that apart from traditional kindergartens and play groups there was no-one else providing a service of this type in Australia. Her research at the time revealed only one "Kindy Gym" in South Australia. However this was a play centre only and did not accord with her focus on parent/child development and education. The first centre Mrs Sasse established was in 1982 in East Kew, Victoria, and it was aimed at enhancing motor development through assisting children to learn to their potential; to provide a means of preventing later school learning difficulties; to foster an awareness among parents of the importance of early childhood development, health, behaviour and learning; and to provide a watchdog early intervention service and guidance to parents. 6 In early 1983 Mrs Sasse travelled to the United States to research what was being done in the field and visited a number of centres including a Gymboree Corp centre and a centre called "Playful Parenting". She met Mr Jack Capon, a motor program specialist in the United States. Mr Capon had developed "Peceptual Motor Programs" ("PMP") which were concerned with the effect of a person's ability to receive and interpret information on their performance. 7 She published several papers during the 1970s and in 1979 wrote and published a book entitled If Only We'd Known, which has since been revised and reprinted five times and has sold approximately 12,000 copies worldwide. In 1986 she published a first reader entitled Jump into Reading with Gymbaroo with individual flash cards. In 1984, in conjunction with her sister Dr Sheil, she produced the first of a series of videos on early childhood development. The videos have been marketed through TKG's centres Australia-wide and approximately 4,000 have been sold. Mrs Sasse initiated the publication of a magazine called First Steps which is published by TKG and available throughout Australia for a fee and is distributed free to parents whose children attend TKG centres. During most of the 1990s the magazine was issued several times each year. The magazine was in its twenty-first issue as at April 1998 and TKG has 750 subscribers throughout Australia, New Zealand and South Africa. In 1985 TKG was the subject of an article in the National Professional Women's Magazine, Portfolio and in 1996 and 1997 Mrs Sasse was nominated for the Telstra Business Women's Awards and on both occasions was selected as a finalist. B: (ii) Toddler Kindy Gymbaroo Pty Ltd (TKG) 8 TKG has for some years conducted a business throughout much of Australia that provides movement, exercise coordination and gymnastic activities for young children to enhance motor development. It acquired the business in 1984. The business was first established in Victoria in 1982 when Mrs Sasse registered the business name "Toddler Kindy Gyms (Victoria)" in that state and commenced trading at the Kew centre. In June 1983 TKG was incorporated under the name "Toddler Kindy Gym Pty Ltd". Its name changed to TKG on 10 July 1986. In December 1983 Mrs Sasse registered the business name "Toddler Kindy Gymbaroo" in Victoria. The business of Toddler Kindy Gyms (Victoria) was sold to TKG in July 1984. In 1984 Mrs Sasse registered the business name "Gymbaroo" in Queensland (9 February 1984), South Australia (13 February 1984), Western Australia (15 February 1984), Northern Territory (28 February 1984) and New South Wales (19 April 1984). Since 1984, TKG has progressively established centres and franchises in Victoria, New South Wales, Queensland and other parts of Australia providing programs on which the business is based. 9 On 15 June 1984 Mrs Sasse and Mr Sasse secured registration of a trade mark containing the name "Toddler Kindy Gymbaroo" and a device comprising a child and kangaroo (the A mark). A further two trade marks (the B and C marks) have been registered in Australia by Mr and Mrs Sasse and another in New Zealand. The A, B and C marks are in Schedule 1 to this judgment. In 1986 TKG began franchising Gymbaroo centres and this process continues. By early 1998 there were fifty-two centres in Australia, ten owned by TKG and the remaining forty-two operated by thirty-eight franchisees. There were also ten franchised centres in New Zealand. B: (iii) Gymboree Pty Ltd (Gymboree) 10 Gymboree was incorporated on 23 August 1984 under the name Merchandise and Securities Finance Pty Ltd. Mrs Andrea Graham and Mr David Graham were then and remain its directors and shareholders. On 25 April 1985 they changed the name of the company to "Gymboree Pty Ltd". Mrs Graham, who is a trained physiotherapist with experience in paediatrics generally and spastic children in particular, first became aware of the Gymboree program in 1984 when reading a magazine article about Gymboree Corp while travelling in the United States. She contacted Gymboree Corp to obtain further information about the program with a view to securing the grant of rights to conduct the program in Australia. 11 Gymboree was licensed by Gymboree Corp as a franchisee to use a play and movement program owned by Gymboree Corp. The program is a sensory movement program for babies, toddlers, infants and children under the age of five years and their parents, as a means of enhancing motor sensory development, coordination, balance, body awareness, visual sensations, sound and touch experiences. Mr and Mrs Graham commenced promoting and operating the program using the name Gymboree at a site in Kenmore, a western suburb of Brisbane in mid 1986. Classes were initially conducted in a church hall and 145 children were enrolled in the first term. The first franchise agreement between Gymboree and Gymboree Corp was dated 20 January 1986. The agreement contained an option for Gymboree to become the master sub-franchisor in Australia of the play program. Gymboree exercised the option in August 1989 and entered a master franchise agreement. The Grahams have conducted the business using the Gymboree program since 1986 and since July 1998 have conducted that business under the name "Gymboree Play with a Purpose". Gymboree is licensed to conduct the program, use the registered trade marks of Gymboree Corp and the name "Gymboree", grant franchises to third parties to conduct the program throughout Australia and sub-license those third parties to use trade marks of Gymboree Corp and the name "Gymboree" in connection with the program. The Gymboree trade mark ("the GC mark") is in schedule 1 to this judgment and was registered by Gymboree Corp on, effectively, 22 May 1985 in Australia. 12 A centre was opened in the southern suburbs of Brisbane in 1986 or 1987 and was sold to a franchisee in 1994 and now operates at Mount Gravatt. A further centre was opened by Gymboree in 1987 in Aspley, a northern suburb of Brisbane, and continues to operate, although now at a different location (McDowall Everton Park). In 1994, as the demand for classes increased, the business conducted at Kenmore moved to larger premises in Indooroopilly, another western suburb of Brisbane. The business employed six teachers in December 1998. The program runs for four terms each year. In December 1998 each Gymboree site had approximately 300 children enrolled in classes per term. Two franchised sites also operate in South East Queensland on the Sunshine Coast and on the Gold Coast. Two other franchised centres (at Logan and Caboolture) operated for a period in the 1990's but are now closed. B: (iv) Gymboree Corp 13 The business of Gymboree Corp had its origins in a business established in the United States by Mrs Joan Barnes in 1976 providing parent and child interactive play programmes. Gymboree Corp was first incorporated in California in 1979 and floated as a publicly listed company in 1993. It first franchised its play programs domestically in 1980 and outside the United States in 1984. Companies have been incorporated in Canada, Ireland, the United Kingdom, Japan and Hong Kong to facilitate international expansion. From 1994 the franchising of the program was undertaken by Gymboree Play Programs, Inc. ("Gymboree Inc"). Gymboree Corp and Gymboree Inc operate or franchise three hundred centres in the United States and ninety elsewhere, namely in Canada, Mexico, Colombia, Korea, Taiwan, France, Singapore, Indonesia and Australia. C: The evidence on material questions of fact 14 The following is a consideration of the evidence concerning what I view as material facts and, in particular, material facts in issue. In the proceedings the parties relied on extensive affidavit evidence and many volumes of documents were tendered. I have not referred to all this material and I have endeavoured to address only facts in issue which bear upon the ultimate issues presented for determination. C: (i) Mrs Sasse's 1982/83 trip to the USA and the adoption of the names "Gymbaroo" and "Toddler Kindy Gymbaroo" 15 The Kew centre commenced operations in June 1982 as a pilot scheme conducted in a Uniting Church hall. The business name "Toddler Kindy Gyms (Victoria)" had been registered on 31 May 1982 by Mrs Sasse. During the 1982/83 Christmas period, Mrs Sasse visited the United States. It is clear from letters in evidence that Mrs Sasse had, from probably early 1982, been corresponding with individuals in the United States in the same general field of interest as hers and was doing so with a view to travelling to the United States. It is common ground that during this trip, Mrs Sasse met with a representative of Gymboree Corp. It was Mr Robert Jacob who was then the Director and Vice-President of Franchising for Gymboree Corp. His duties included the marketing of franchises. 16 There was a marked divergence in the evidence of Mrs Sasse and Mr Jacob as to what happened at the meeting. Mr Jacob's evidence was comparatively detailed. He said, in an affidavit sworn on 28 September 1998, he believed they met on 14 February 1983. He had been telephoned by Mrs Sasse in the preceding week from Los Angeles to arrange a meeting. Mrs Sasse brought with her extensive material on Gymboree which was the type of material available for distribution at Gymboree Corp franchised and owned centres. It was brochures, pamphlets and other material explaining the Gymboree Corp play program. He said Mrs Sasse tried to pick up a lot of printed material when she was with him. Mr Jacob's affidavit contains either one version of two parts of the conversation with Mrs Sasse or two versions of the one part. His account involved Mrs Sasse indicating an interest in obtaining a Gymboree Corp franchise for Australia and indicating she had visited a number of Gymboree Corp centres around Los Angeles and San Francisco. Mr Jacob then indicated that Gymboree Corp was not in a position to issue franchises in Australia at that time. Mr Jacob's evidence was that the next time he heard of Mrs Sasse was in "approximately 1986 or 1987" when Gymboree had commenced trading in Australia as a Gymboree Corp franchisee. He was sent a brochure on TKG by Mrs Graham. Mr Jacob annexed to his affidavit a letter to Baker & McKenzie in Chicago dated 26 March 1986. It read: "Re: Gymbaroo – Australia Dear Marty: Enclosed is a copy of an article which appeared in March 1985 about Gymbaroo. The founder of the company, as you can see is Margaret Sasse and her company name is Toddler Kindy. Also enclosed is a photocopy of my appointment calendar for Monday, February 14, 1983, which indicates Margaret Sasse visited me from 10:00 to about 11:00 a.m. at our offices in Burlingame. She had called me the previous week from Los Angeles where she had observed some Gymboree centers and wanted to meet with me on her way back to Australia. She advised she was interested in starting this type of business and would consider a Gymboree franchise. I gave her some basic brochures about the Gymboree program. I believe there was a memorandum written of that visit. As of today, I cannot locate it in the file. If I do, I will send a copy to you. This will confirm our conversation yesterday for you to proceed immediately to complete the registration of the Gymboree trademarks in the five categories for Australia. If you need a waiver from our franchisee David Graham, you or your Sidney [sic] office should contact D. Flamming at Elliot, Stubs & Bonutto, the Graham's [sic] solicitors and attorneys at 40 Queens Street, Brisbane, Australia telephone 221-3300. You should also explore how we may stop or at the least limit the use by Toddler Kindy of the name Gymbaroo once our trademarks are registered. Sincerely," (emphasis added) 17 The enclosed diary extract forming part of the annexure to the letter was for 17, 18 and 19 February 1983 (the right hand page of an open book) and, in his affidavit, Mr Jacob attributed its inclusion to his secretary copying the wrong side of his diary entry for that week as the annexure. 18 Mrs Sasse's evidence in an affidavit sworn 9 February 1999 was that she had not heard of Gymboree Corp before travelling to the United States, had probably been given Mrs Joan Barnes name by Mr Jack Capon and it was her Mrs Sasse wished to meet. It was from Mr Capon that Mrs Sasse first heard of Gymboree Corp. She briefly visited one Gymboree centre as well as their headquarters and neither then nor later did she have any interest in obtaining a Gymboree franchise. She did recall some parts of the conversation with whoever she spoke to at Gymboree Corp. One part was an enquiry by the Gymboree Corp representative about where Australia was, coupled with an enquiry about how she spoke such good English. The other part was a blunt intimidation from the representative she would not be able to see Mrs Barnes as she was doing aerobics. 19 In my opinion, the starting point in considering these competing accounts of Mrs Sasse's visit to the Gymboree Corp headquarters is the letter of 26 March 1986 which states that Mrs Sasse had indicated she "was interested in starting this type of business and would consider a Gymboree franchise". Mr Jacob's oral evidence and the letter are unsatisfactory evidence in several respects. First it is clear from a handwritten memorandum of Mr Jacob of 21 March 1986 that he had, that day, spoken to Mr Graham about TKG opening a site about 30 miles from Brisbane. In cross examination Mr Jacob accepted that it was likely he had spoken to Mr and Mrs Graham about TKG in 1985. This is at odds with his affidavit evidence that he did not hear of Mrs Sasse, after the 1983 visit, until "approximately 1986 or 1987" when he was sent a brochure. 20 The letter of 26 March 1986 was plainly a response to the phone conversation with Mr Graham. Mr Jacob's intention to write such a letter was referred to in the handwritten memorandum of 21 March 1986 which was tendered by counsel for the applicants. The copy of the letter annexed to Mr Jacob's affidavit did not contain the diary entry for 14 February 1983 and Mr Jacob resiled, in cross-examination, from his explanation that his secretary had copied the wrong page. Nor did the annexure contain the copy of the article referred to in the first paragraph. However I accept the authenticity of the document, in the sense that I accept that it is a document created in 1986 and extracted from the files of Gymboree Corp. 21 Mr Jacob had no reason, in a letter to lawyers acting for Gymboree Corp (copied to others within the company) to provide a false account of what he then recalled had been said at a meeting three years earlier. It is, of course, possible that his recollection was then faulty. However the letter must be considered with other evidence. I have little difficulty in discounting entirely the evidence of both Mr Jacob and Mrs Sasse of their present recollection of what was said at the 1983 meeting. First the conversation occurred over fifteen years ago. Second Mr Jacob was, in several respects, not an entirely reliable witness whorevised and modified his evidence on several matters. However I do not think he was, at any point, attempting to give a deliberately distorted account of events. Third Mrs Sasse did not appear to me to be an entirely reliable witness. Her interest in the proceedings is manifest. Her demeanour on many occasions revealed a person who was intent on fairly assertively giving evidence in a way most favourable to her case. I did not gain the impression that she was prepared to give evidence in a frank and balanced way if, to do so, was against her interests. 22 The following is evidence, in addition to the letter of 26 March 1986, that does, in my opinion, help resolve what was said in the 1983 meeting. I accept that a significant objective of the trip Mrs Sasse made to the United States was to meet with people who, like her, were interested in child development. However it is also clear that at that point, Mrs Sasse was on the verge of developing a considerable business based on this interest. The registration of business names in many Australian states within a year following the February 1983 meeting evidences Mrs Sasse's interest in the commercial exploitation of her interest. In my opinion it is probable that Mrs Sasse, when she travelled in the United States, had an eye to the commercial exploitation of her ideas and consistent with that, was interested in talking to a company operating in the same field and raising with them, perhaps only to extract further information that might be of use to her including commercial use, the prospect of securing a franchise. This is consistent with her having met with the person within the company who was responsible for marketing franchises. I am satisfied that Mrs Sasse did canvas with Mr Jacob the possibility of securing a franchise to operate the Gymboree Corp program in Australia. 23 The next event of significance is the adoption by Mrs Sasse of the name "Gymbaroo". This occurred some time during 1983. Precisely when is not clear. Its use was first manifest in the application for registration of the business name "Toddler Kindy Gymbaroo" in Victoria in December 1983. Mrs Sasse's explanation in her affidavit evidence for the adoption of the name "Gymbaroo" was that, at a time when she was using the name "Toddler Kindy Gym", she wanted to ensure there was no confusion with the "Kindy Gym" in South Australia and also because she wanted to apply for a trade mark and was told by the "Trade Marks Office" that the word gym could not be the subject of a trade mark. She therefore added to the end of the words "gym" the sound "ba" which she said children readily identified as the sound of a lamb and "roo" which she said Australian children readily identify with a kangaroo. The first application for registration of a trade mark made by Mrs Sasse was 15 June 1984. It was for registration of the A mark. 24 Mrs Sasse agreed in cross-examination that when she first registered the business name "Toddler Kindy Gyms (Victoria)" in 1982 she was aware of the use of the name "Kindy Gym" in South Australia. She could have then adopted a name that did not use the words "Kindy Gym (or Gyms)" if confusion was a matter of concern. The time which elapsed between what appears to be the first use of the name, in the registration of the business name in Victoria in December 1983, and the application for registration of a trade mark was six months. Any advice from the "Trade Marks Office" must have been before the adoption of the name and thus before December 1983. However enquiries of the "Trade Marks Office" were presumably in contemplation of an application for the registration of a mark. It is not apparent why there was a delay between enquiry, if in fact enquiries were made before December 1983, and application. While these considerations do not, of themselves,warrant the rejection of the explanation of Mrs Sasse, they add to the obvious consideration, namely the similarity between the name adopted in late 1983 and the exposure to a substantially similar name in early 1983. Even if I accept Mrs Sasse's explanation of why the two components, "ba" and "roo" were chosen for use in conjunction with the word "gym", and I do in relation to the "roo" given the contemporaneous use of the kangaroo in the trade mark, that does not warrant a conclusion that the name was not selected by Mrs Sasse as an adaptation of the word "Gymboree". 25 Notwithstanding her explanation, I am satisfied that Mrs Sasse was attracted to the name "Gymboree", decided to create a name with many of its features but adapted to give it an Australian flavour by changing the last two vowels while adopting a kangaroo as part of the mark she intended to use. The company, TKG, was incorporated in June 1983 but, at that stage, using the word "Gym" and not "Gymbaroo" in the name. It is likely that at this stage Mrs Sasse had not decided to create a new name and was content to continue to use the name she had originally adopted in 1982. However by the end of 1983 she commenced to expand her business. In a December 1983 newsletter to parents at the Kew centre, the opening of new centres in 1984 at Mooroolbark and Sunshine was noted. Reference was made in the newsletter to "Toddler Kindy Gym(s) expanding in 1984 both outwards and internally". In my view, at the time this expansion was in prospect, Mrs Sasse decided to adopt what she thought would be an appropriate image for the business which involved the incorporation of the word "Gymbaroo" in its name as an adaption of the word "Gymboree" and the development of a mark which differed from the one used at that time which was an image which included a child swinging from a bar. C: (ii) The use of "Gymbaroo" and "Toddler Kindy Gymbaroo" before 22 May 1985 26 There was an issue about when the word "Gymbaroo" was first used in describing and promoting the business of TKG and its use, if any, before 22 May 1985 which was the notional date of registration of the GC Mark in Australia. In evidence is a flyer relating to a centre at Mooroolbark. It declares that: "Toddler Kindy Gymbaroo is opening" and contains an invitation to parents to attend a free open day on 30 January though the year is not mentioned. The significance of this flyer is that it is said by the applicants to evidence the early use of the word "Gymbaroo" as part of the promotion of the business of TKG and to signify the business. The flyer contains a reference to "Gymbaroo centres" and "How Gymbaroo will help your child's future". It is a use of the word "Gymbaroo", it was submitted by the applicants, that was evident, at the latest, in very early 1984. That was because the Mooroolbank centre opened in early 1984. The respondents contested that the flyer was used at this stage and put in issue that it was used in either 1984 or 1985. 27 In evidence are enrolments forms which indicate classes were undertaken at the Mooroolbank centre in 1984 in at least terms 2 and 3 of 1984. The flyer contains the A mark for which registration was not sought until 15 June 1984. While it is conceivable the mark was created in early January 1994, that is before an opening on 30 January 1994, the evidence does not establish it had been created by then. However the declaration that the centre "is opening" might be thought to point fairly clearly to the flyer having been created before 30 January 1984. A flyer in a similar format is in evidence which relates, in the one document, to the opening of two centres, South Camberwell and East Kew. The flyer declares "Toddler Kindy Gymbaroo is opening in South Camberwell/East Kew". The centre said to be opening in East Kew was the centre which had already been operating since 1982 and was the first (and pilot) centre. A similar observation can be made about a flyer in a similar format concerning both the Blackburn North centre and the Forrest Hills centre. The flyer said of each centre that it "is opening". The Blackburn North Centre had opened in September 1984 and the Forrest Hills centre opened in early 1985. The declaration in the flyer that each centre referred to "is opening" cannot be taken literally if it is read as "first opening". 28 I find that the Mooroolbark flyer was an adaptation of a pro forma flyer created for the re-opening of that centre for the commencement of the year 1985, along with a number of other centres to which I refer shortly, and not for the opening of the Mooroolbark centre in 1984. Flyers were created for the centres that existed at the beginning of 1985 or were to open in early 1985 that is, before March 1985. It is clear, in my view, these flyers were created in probably December 1984 or January 1985 (and certainly no later than then) as the specimen in evidence relating to South Camberwell/East Kew (and referring to open days on 31 January and 1 February) has been used tocreate a carbon copy of a letter of 11 October 1985 from the Manager of the Blackburn centre to the local church about the use of the church hall for 1986. That flyerwas obviously surplus later used for another purpose. What occurred, in my view, is that a standard form flyer was created for distribution in early 1985 (though it was used later as well) involving attendance at an open day to be conducted at each centre for the commencement of term one in 1985. The names of centres which had opened before January 1985 or were to open early that year were printed onto the standard form flyer which was distributed in the local area. The identity of the centre or centres referred to in the flyer was dependent on the area in which it was to be distributed. 29 As mentioned earlier, in the body of the flyer there is reference to "Gymbaroo centres" and "HowGymbaroo will help your child's future". It is palpably clear that from at least January 1985 TKG used the word "Gymbaroo" and "Toddler Kindy Gymbaroo" to describe its business, its programs and its centres in promotional material though not exclusively by those names. Flyers in the same format as that used for the open day at the Mooroolbark centre were used for the open days at centres at Brighton (open day on 23 February 1985), Geelong (open day on 2 February 1985), Blackburn, Forrest Hill open day (on 1 February 1985 and 30 January 1985 respectively) and South Camberwell/East Kew (open days on 31 January 1985 and 1 February 1985 respectively). 30 A Gymbaroo Newsletter is in evidence which was published before term two in 1985, and before 22 May 1985. The word "Gymbaroo" is prominent in the heading, and is used often in the newsletter to describe (adjectivally or by itself) the program, the business, the centres, the children and the parents. For example, on the first page of the six page document, the word "Gymbaroo" is used to describe a class ("(n)ear the end of every Gymbaroo class you hear ..."), a program ("… the Gymbaroo program"), and the business and its objectives (" "Gymbaroo" offers a similar program …", " "Gymbaroo" has expanded their sessions …", " "Gymbaroo" is all about …", " "Gymbaroo" endeavours to provide ..."). 31 There are in evidence a considerable number of newspaper clippings including notices and advertisements for the years 1982, 1983, 1984 and 1985 concerning Mrs Sasse and the programs and centres. In 1984 and 1985 there were numerous references in them to "Gymbaroo" or "Toddler Kindy Gymbaroo". The clippings are extracted from local, metropolitan and regional papers and some from magazines. The most graphic use of the word "Gymbaroo" is found in an article in the 26 September 1984 edition of a local Melbourne paper, the Progress Press (which, according to a cutting in evidence, in 1982 had a circulation of over 78,000). The article reads in part: "Gymbaroo develops children's skills What is a gymbaroo? No, it's not a type of wallaby and no, it's not an aboriginal word for gymnasium. Gymbaroo is a concept designed to enhance motor development in children and maximise their genetic potential. There are gymbaroo centres in Kew, Mooroolbark and Blackburn North and all of them are attracting wide-spread interest. The idea is the brainchild of Margaret Sasse, author of The Importance of Being an Infant. …" It is apparent from the evidence that TKG, and before that Mrs Sasse, represented the business, the program and the centres in a variety of ways and by a variety of descriptions and names. However I am satisfied that by 22 May 1985 which is the registration date of the GC mark, the word "Gymbaroo" both by itself and as part of the collocation "Toddler Kindy Gymbaroo" was used by TKG to signify its business and the services it provided and the word would have been fairly widely known amongst members of the public and, in particular, parents of young children, in metropolitan Melbourne and Geelong and less well known but known elsewhere in Victoria. Both the word and the collocation would have been associated with the business then operated by TKG and the courses it ran. I am not satisfied that, at that point, the word "Gymbaroo" and the collocation "Toddler Kindy Gymbaroo" was known to the public elsewhere in Australia. C: (iii) The further early development of the TKG business 32 Returning briefly to 1984, it should be noted that on 1 July 1984 Mr and Mrs Sasse executed an agreement selling to TKG (then named Toddler Kindy Gym Pty Ltd) a business. 33 By the end of 1985, TKG had established seventeen centres in Victoria, one in Western Australia and one in New South Wales. One Victorian centre closed a year later. In the first six months of 1986 a further five centres opened, one in Western Australia, two in or near Sydney one in Victoria and one in Townsville. The Townsville centre opened in March 1986 though closed late that year. Mrs Sasse and her daughter, Mrs Janet Williams, gave evidence that a centre opened on Magnetic Island in 1985 and while a contemporaneous newspaper article based on an interview with Mrs Sasse suggests otherwise, their evidence as to this centre was not challenged and I accept it. In the second six months of 1986, two more centres opened in New South Wales (one in Albury) and one in Victoria. In 1985 and 1986 TKG, mainly through Mrs Sasse, engaged in considerable promotional activity both in Victoria and elsewhere. In evidence is a folder (predominantly relating to the years 1985 and 1986) of press releases, letters to newspapers, letters to the producers of television programs and circular letters promoting the activities of TKG. Overwhelmingly the business or centres are referred to as "Toddler Kindy Gymbaroo" or "Gymbaroo". Also in evidence are several scrapbooks of newspaper clipping, which include clippings for the period 1982 to 1986. The clippings are either articles about the TKG program or centres or advertisements promoting the centres or, at the end of the period, inviting applications for franchises. In many instances when the collocation words "Toddler Kindy Gymbaroo" were used, the word "Gymbaroo" was given prominence by highlighting or larger print. 34 The franchising of the business commenced in 1986. In that year four franchised centres were opened, and the following year another four. 35 The position of TKG in the market place at about this time was acknowledged by Mr Graham in a letter to Mr Jacobs dated 16 October 1986 setting out matters to be discussed at a planned meeting between the Grahams and Mr Jacob in November in the United States. Mr Graham wrote: "… It is unlikely at this stage that we will be looking to take up the Australian option. Our figures are just not good enough to be confident about selling franchises. In the more populous states there is the problem of other competition and the not inconsiderable problem of Gymbaroo. … Just a final word about the opposition. This appears to consist of · Playful Parenting which is being franchised out of Perth. The founder has been out on a visit but we don't know what other support there is. We hear that franchises are selling for $20,000. · Gymbaroo is well established now and the similarity of name is going to make it difficult to penetrate the market in the areas where it is established – especially Victoria. · Tumble Tots have just about disappeared. As you know they were employee operated with the employer being a sizeable company. There [sic] were strong in Brisbane before Andrea set up. They are still operating but just. In Brisbane there is also the ANSUA which is a non profit outfit which is not very good. The other two main operators, Playful Parenting and Gymbaroo have not set up in Brisbane so far." C: (iv) The growth of TKG to the present, its activities in Queensland and Mrs Sasse's knowledge of Gymboree's business 36 In the earlier overview I mentioned that by early 1998 there were fifty two Gymbaroo centres in Australia, ten owned by TKG and the remaining forty two operated by thirty eight franchisees. I have also just referred to the origins of TKG and its growth until 1986. 37 From mid 1986 TKG's business continued to expand in the following way. Throughout the second half of the 1980's and into the 1990's the number of Gymbaroo centres continued to increase in Victoria, New South Wales, the Australian Capital Territory and Western Australia. One centre opened in Tasmania (Launceston) in 1992 but closed in 1995. Two centres opened in South Australia, one at Tusmore (1995) and Hawthorn (opened 1998), which are suburbs of Adelaide. Between 1990 and 1994 a total number of 39,654 children were enrolled in Gymbaroo centres throughout Australia. Between 1995 and 1998 there were 38,929 enrolments though this figure may include enquiries about enrolment. At the end of 1997 (term 4) Gymbaroo centres ran in excess of 600 sessions for approximately 7,200 children. New centres continue to open, the most recent being at Glebe in New South Wales and Hobart in Tasmania. Enquiries have been received by TKG from many parts of Australia concerning the possible establishment of a Gymbaroo franchise. 38 Some measure of central control has been exercised over all Gymbaroo centres by TKG though a considerable measure of informal independence has been exercised by franchisees in the conduct of their businesses though not as to the contents of the courses themselves. This central control has been sought to be exercised not only through franchise agreements and management agreements but also through TKG's Teacher Training Manual, Franchise Operations Manual and Term Theme Programmes for Teacher Guidance. I am satisfied that, as to the core operations of the franchisees in implementing the Gymbaroo programmes, there has been a general consistency of approach giving rise to a homogenous identity for all Gymbaroo centres. This has been reinforced by the Gymbaroo newsletter and parent hand-outs. It is also reinforced by the holding of national conferences and regular visits to all centres by Mrs Sasse or another senior representative of TKG. 39 TKG has advertised its centres in various magazines since as early as 1986. The range of magazines in which TKG advertised increased in the early 1990's. Magazines containing advertisements included: Australia's Parents, Kidsafe, Good Taste, The Baby Source Book, Mother and Child Health Care, Infant Times Service Centre, Sydney's Child, Melbourne's Child, Brisbane's Child, Kids in Brisbane, Women's Weekly, Nursing Mothers, Baby and Beyond and Mother and Child Health Guide. Gymbaroo centres have also been promoted in newspapers. The names "Gymbaroo"and "Toddler Kindy Gymbaroo" have been commonly used in the advertisements. Advertising and promotional expenditure since the 1989/1990 financial year has amounted to $1,192,589 though a significant portion of this was spent in publishing First Steps magazine which was first published by TKG in 1990. This magazine has been distributed nationally by Gordon & Gotch to newsagents throughout Australia. In 1991 and 1992 it was distributed free to clients of Nappy Wash in Victoria, and to parents whose children attended Gymbaroo centres. The evidence suggests:- (a) In about January 1991, 10,000 copies of the magazine were printed. (b) In about August 1991, at least 80,250 copies were printed for distribution (6,000 to the first applicant; 8,000 to Gordon & Gotch; 65,000 to the Nappy Wash Service; 500 to Camden District Hospital; 500 to Gosford District Hospital and 250 to Fairfield District Hospital). (c) In the Spring of 1992, 103,000 copies of the magazine were printed for distribution (6,000 to the first respondent; 8,000 to Gordon & Gotch; 65,000 to Nappy Wash in Victoria; 25,000 for hospitals in Sydney, Brisbane and Canberra). (d) In about May 1992, 80,000 copies of the magazine were printed. (e) In about March 1992, approximately 8,000 copies were delivered to Gordon & Gotch for national distribution; in about September 1992 65,000 copies were distributed to hospitals in New South Wales, Victoria and Queensland, and 5,800 copies were to be distributed nationally through Gymbaroo centres. (f) In about August 1993, 110,000 copies of the magazine were printed for distribution (8,100 to Gordon & Gotch; 6,000 to the first applicant; 65,000 copies to Nappy Wash in Victoria; the balance for distribution to hospitals in New South Wales, Queensland and the Australian Capital Territory). 40 While the direct evidence about printing and distribution was incomplete and a little confusing I am satisfied that a significant number (in excess of 50,000) copies of the magazine were distributed annually to the public in 1991, 1992 and 1993. The position concerning direct distribution since then is less clear. 41 There was an issue about the extent to which the word "Gymbaroo" or the words "Toddler Kindy Gymbaroo" were used in First Steps to describe TKG's business, programs or centres. I have perused the various editions of the magazine in evidence. I accept that in early editions the use of the word "Gymbaroo" (either by itself or as part of the collocation "Toddler Kindy Gymbaroo") was limited. But its limited use is significant. In the first edition, applications for subscriptions were to be sent to "GYMBAROO" (the word used by itself) which appeared fairly prominently in a half page promotion. Likewise, a half page advertisement for TKG centres contained the word "GYMBAROO" in upper case and larger and more prominent than the lower case "Toddler Kindy". Further, one page contained a price list for products sold by TKG and a person ordering was invited to post the order form to "GYMBAROO" (the word used by itself). The same general use of the word is found in the Spring 1990 edition, the Autumn 1991 edition (the subscription promotion was a quarter page next to an advertisement for a scooter "available direct from Gymbaroo"), the Spring 1991 edition, and the December 1991 edition. However there were, over this period, some minor changes in the use of the word. For example the subscription promotion was altered so that the cheques were to be made payable to "GymbaROO" (the word used by itself) but were to be sent to "Toddler Kindy GymbaROO Pty Ltd". While in these editions the collocation "Toddler Kindy Gymbaroo" is used on several occasions, so too is the word "Gymbaroo" by itself. This use of both the word "Gymbaroo" and the collocation "Toddler Kindy Gymbaroo" continued in the Autumn/Winter 1992 edition (with the first use in the magazine of the graphic representation of the collocation of words appearing in the B and C marks but with the word "Gymbaroo" more prominent). In the two 1993 editions the word "Gymbaroo" appeared by itself or with "Toddler Kindy" but with the letters "roo" in capitals and larger than the surrounding text. I should mention that in the Autumn/Winter 1993 edition there was an article about TKG's centres. It commenced: "Toddler Kindy GymbaROO, or "TKG" as it is affectionately known by many mums, dads and teachers, provides lots of fun and learning for infants to school age children". 42 Issue No. 11, published probably before July 1994, (an advertisement refers, inter alia, to a show to be held in early July 1994 in Brisbane) was described in the editorial as a "new look First Steps". From that point the word "Gymbaroo" was used, by itself, more frequently though use of the collocation "Toddler Kindy Gymbaroo" continued. First Steps magazine has been an insert in Australia's Parents magazine, I infer, since 1995. Australia's Parents is a nationally distributed magazine (as well as overseas). It is published bi-monthly with an ABC audited circulation of 40,717 (for the period January to June 1997). The total yearly circulation is approximately 244,300 copies. 43 TKG had also been advertising in Australia's Parents magazine since 1994. TKG has retained some of the enquiry reports compiled by the magazine since 1995. The retained records show that there have been at least 1,788 enquiries Australia-wide relating to Gymbaroo centres generated by the magazine's readership over a three year period since early 1995. 44 Apart from the print media there has also been the promotion of TKG in the electronic media during both the 1980's and 1990's. Television segments have included: the Midday Show with Ray Martin televised nationally in 1987, Healthy Wealthy and Wise televised nationally in 1993 on Channel 10, the Small Business Show, televised nationally on Channel 9 in 1998, and the Family Circle Show televised nationally on Channel 10 later in 1998. 45 TKG activities are, indirectly, promoted through the sale of videos. As mentioned earlier, in 1985, in conjunction with Dr Sheil, the first video of five in the "Ladder of Learning" video series was produced. As advertised in First Steps the videos are identified with TKG though the connection is not apparent in the videos themselves. The videos are sold widely throughout Australia and internationally. I accept the evidence that approximately 4,000 videos in the series have been sold. In the period 1 July 1994 to 30 April 1999, 2,577 videos in the series were sold. These sales include sales to health services, schools, tertiary institutions, libraries, bookshops, hospitals and local councils as well as private purchasers. 46 TKG maintains a no charge Optus 1800 number which it commenced in late 1995. Its use is illustrated by use in the six month period between September 1998 and January 1999. In that period there were 1,986 calls made to the number as follows:- 903 from New South Wales, 298 from Victoria, 300 from Queensland, 113 from South Australia, 251 from Western Australia, 100 from the ACT, 4 from Tasmania and 3 from the Northern Territory. Since 1990 TKG advertising and marketing has included participation in the Baby Fair and Children's Expo in Perth and Melbourne in 1990 and 1991 and more widely around Australia in the "Parents, Babies and Children's Shows" (Sydney, Melbourne, Adelaide and Perth) annually since 1992. At these exhibitions TKG equipment is set up at booths for children to play on and flyers and copies of the First Steps magazine are handed out. 47 By 1994, a Gymbaroo perceptual motor program had been developed for 2-4 year olds for use by other child care centres. These programs have been widely advertised under a format highlighting the word "Gymbaroo" and are sold in packages which include the necessary equipment and the program information. Approximately twenty programs have been sold. TKG has undertaken two joint marketing activities with large corporations. There was an arrangement (in 1995) with Kimberly-Clarke Australia Ltd where TKG dodgers were included with"Huggies" nappies in Baby Bounty Bags which were distributed to new mothers at maternity hospitals throughout Australia, and an arrangement (in 1998) with Petersville Ltd and Peters Foods Australia Pty Ltd (in relation to a product Nestle Milo) entitling purchasers of that product to a free session at a TKG centre. In the former, the dodgers use the word "Gymbaroo" by itself, and in the latter a height chart was to be issued to prospective users of TKG's services containing at two points the expression "Toddler Kindy Gymbaroo" with the word "Gymbaroo" printed in larger and more prominent type. 48 Since 1996 TKG has maintained a webside for those seeking information concerning TKG over the internet. TKG sponsored further lecture tours by the following overseas experts: Jack Capon in July 1989 and in May/June 1993 Jack Capon and Jack Evans (jointly sponsored by ANUSA). 49 I should, at this stage, refer to the recent establishment of TKG centres in Queensland. I have already referred to the centres at Townsville and Magnetic Island that operated in 1985/86. A centre was reopened in Townsville in 1989 by Mrs Sasse's daughter who lived there. A centre opened in Cairns in 1997. At least one centre operated for a time in Central Queensland in the 1980's. However it was not until either late 1989 or early 1990 that TKG sought to establish a real presence in South East Queensland. It then purchased four centres run by ANUSA which had commenced operating centres in Queensland in 1984. The centres had been run by ANUSA using TKG equipment and had been operated under the name "Toddler Kindy Gym(s)." The centres which were purchased (in the sense that the equipment was bought by TKG) were at Nundah, Graceville, Red Hill and Breckenridge. By the end of 1994, of these centres, the only centre still operating was the Red Hill centre which had moved to Toowong though another TKG centre opened briefly at Windsor, a suburb of Brisbane, in 1995/96. 50 Also relevant is when Mrs Sasse became aware of Gymboree's activities in that state and more generally. Evidence was led by Gymboree Corp from Mr Alan McCrundle. He said he had been interested in franchising opportunities and had become aware that Gymboree Corp offered franchises for conducting play programmes for children. An inquiry of Gymboree Corp led to contact with Mr and Mrs Graham which led, indirectly, to contact with Mrs Sasse. Mr McCrundle met with Mrs Sasse in probably late 1991 to discuss becoming a TKG franchisee. However at the meeting Mr McCrundle indicated he was also looking at the possibility of becoming a Gymboree franchisee. To this, according to Mr McCrundle, Mrs Sasse said that if he bought a Gymboree franchise and opened centres in Sydney, she would open up next door and drive him out of business. Mrs Sasse could not recall the meeting but implied she would have recalled it had it taken place. Mr McCrundle was not cross-examined. In evidence is a letter dated 11 December 1991 from Mr McCrundle to the Grahams repeating the substance of his conversation with Mrs Sasse. I accept his evidence. It was objected to. However his evidence concerns a fact in issue and is not inadmissible under Part 3.7 of the Evidence Act 1995 (Cth) or otherwise inadmissible. 51 Moreover Mrs Sasse gave evidence of having been aware of Gymboree since she noticed them at exhibitions. While the evidence is somewhat vague as to when this might have been, the evidence of Mrs Sasse together with that of Mrs Graham about Gymboree's promotional programme would suggest that this would have been at an exhibition held at Brisbane in 1991. I am satisfied that by the end of 1991 at the latest, Mrs Sasse was aware of Gymboree's activities both in Queensland and, potentially, as a franchisor in Queensland and elsewhere in Australia. I should note that Mrs Sasse gave evidence that in 1986 she became aware that Gymboree Corp had applied to register a trademark. I am satisfied that then she assumed they were positioning themselves to enter the Australian market. C: (vi) The use of the A, B and C marks 52 As noted earlier the A mark was registered by Mr and Mrs Sasse on 15 June 1984. It was not in issue that the A mark was used by TKG and its franchisees until 1989 or 1990 when use of the A mark was, to at least some extent, displaced by use of the B and C mark. In issue was whether there was use of the A mark during the period 13 May 1993 to 13 May 1996 (Gymboree's cross-claim) or 23 November 1994 to 23 November 1997 (Gymboree Corp's cross-claim) which, for the purposes of s 92(4)(b) of the 1995 TM Act, are said to be the relevant periods of non-use. Before turning to the evidence concerning the use of the A mark in those periods, I should note that registration of the B and C marks was applied for on 18 May 1993 and it was not in issue that, as a matter of fact, both marks had been used prior to that by TKG. Their use was the subject of a written agreement between Mr and Mrs Sasse and TKG, executed on 29 June 1993 in which the Sasses granted TKG the exclusive right to use the B and C marks and to sub-license the use of them. 53 The use of the A mark relied on by TKG was the use by TKG of two advertising boards containing the A mark at exhibitions and open days, the use of letterhead by franchisees containing the A mark, the supply to a Sydney franchisee of parent information sheets containing the A mark and the distribution to parents of the sheets by the franchisee and the distribution of staff notes in the relevant period which contained the A mark. 54 Mrs Sasse gave evidence in an affidavit sworn 23 April 1999 that between 1993 and 1997 she regularly attended exhibitions in Adelaide, Brisbane, Melbourne and Sydney to promote TKG's business. Part of the display included a round ply board 90 centimetres in diameter featuring the A mark. Throughout 1998 it was on display at the Kew premises of TKG. Other more equivocal evidence of Mrs Sasse was that there was also displayed at exhibitions and open days a second ply board containing promotional text and the A mark in the bottom right hand corner. Photographs in evidence of an exhibition stand do not evidence the use of either board. It was submitted by counsel for Gymboree Corp that this evidence concerning the use of the boards should be rejected. Had the round ply board been used in the way deposed to by Mrs Sasse one would have expected it to have appeared in the photographs of the stand which Mrs Sasse exhibited to an affidavit of 30 April 1998 and described by her at that time as "the typical set up of play areas and booths at exhibitions". Having regard to the way the issues in proceedings emerged, the April 1998 affidavit was not addressing the use of the A mark though the April 1999 affidavit was. No satisfactory explanation was given of why one or both the boards did not appear in the photographs. Moreover the periods in question, spanning May 1993 to November 1997, were well after TKG had, overwhelmingly, begun using the B and C marks, and not the A mark, in promoting its business. The evidence, on balance, points to the boards not being used. I am not satisfied that the boards were used in the relevant periods in the way deposed to by Mrs Sasse. 55 Evidence was given by Mrs Isabelle Skeates who is a director of Varebi Pty Ltd ("Varebi") which operates, as a franchisee, a Gymbaroo centre at East Lindfield in Sydney. The franchise agreement was executed in January 1989. It was a term of the agreement that Varebi would "conform to such standards, methods and procedures as approved by" TKG (clause 9.1). Varebi was given an operations manual which has been updated. The manual presently provides that "All business stationery used in the conduct of the Franchised Business must be only that issued by 'GymbaROO' ". The agreement also provided that the franchisee acknowledged TKG had "ownership and exclusive right to the trade marks and trade names 'Gymbaroo' … including all … marks … used in connection with or applicable to [TKG's] programme". However by clause 2.1, Varebi was granted a licence to operate a centre "using the trade marks and trade names 'Toddler Kindy Gymbaroo' …" When Varebi commenced operating it was provided with stationery by TKG. However after that, Varebi created its own stationery using a computer which included in the letterhead the A mark. Its use is evidenced during the relevant period by a letter dated 13 September 1996 to the local council enclosing rent for a hall used by Varebi. Mrs Skeates' evidence was that the letterhead had been and continues to be used by Varebi. I accept this evidence. 56 Evidence was given by Mrs Janet McKittrick who has been a franchisee since 1986 running a centre at Cheltenham in Victoria. Since then she has used a "with compliments" slip containing the A mark to pay rent, responding to inquiries, sending information during term, I infer to parents, and issuing refunds. The slips are from pads of approximately 1000 pages Mrs McKittrick had printed when she first entered the franchise. I accept this evidence. The franchise agreement, dated 19 November 1986, contains provisions concerning compliance with standard methods and procedures and ownership of marks in the same terms as the Varebi agreement. 57 Evidence was given by Mrs Lesley Sharpe who, after having managed two TKG owned centres, became a franchisee in 1992. Her franchise agreement was not in evidence and it is not possible to determine what were its terms. Mrs Sharpe gave evidence that she had been using the A mark on various promotional and other material from 1992 to 1998. I accept her evidence. She gave several examples. In January 1994 she distributed a flyer on street corners, to doctors' surgeries and libraries advising of an open day at the franchised centre she ran at Double Bay. The flyer was one created by Mrs Sharpe who had cut and pasted an early flyer, dating from probably 1985 or 1986, and adapted by her for the promotion of her centre. In the result, the flyer contained in the bottom right hand corner, the A mark. She also gave evidence that in June 1994 she sent a letter to 30-50 parents, which again was in a format resulting from the cutting and pasting of other documents. It included prominently at the bottom of the letter the A mark. She gave further evidence that in 1994 and 1995 she handed out (to approximately 100 parents per term – 400 per year in total) or sent out (after phone enquiries) timetables. The heading of the document contained, amongst various graphics, the A mark. Again Mrs Sharpe had created this document by cutting and pasting other documents. She (or her partner Mrs Gadeley) also handed out in the period 1993-1997 various parent information sheets describing aspects of the Gymbaroo program and which contained the A mark in the heading. She accepted they were copies of old and mostly superseded documents which she (or Mrs Gadeley) had, as to some of them, retained from her time as a teacher prior to beginning a franchise in 1992. At least one of the information sheets handed out was a cut and paste of other and earlier documents. There is, in evidence, an invoice dated 23 November 1994 indicating Mrs Gadeley was sent 100 information sheets entitled "Baby Gymnastics". Mrs Sasse said that the version sent contained the A mark though accepted that that version had been superseded. I am not affirmatively satisfied that the older version was sent. It is not apparent Mrs Sasse had any direct knowledge of which version was sent. It is true that Mrs Sharpe's evidence was that the earlier version was distributed by her. But her evidence leaves open the possibility that the version distributed by her was from a stockpile she and Mrs Gadeley had retained and not from copies in the superseded form sent to Mrs Gadeley in November 1994. 58 There were, in evidence, staff notices (one dated April or June 1993, one dated June 1993 and one dated 6 June 1995) which were sent to the TKG centres and the franchisees nationally to be shown to all staff. Each contain the A mark in the heading. 59 I generally accept the above evidence and it establishes use of the A mark during the relevant periods spanning May 1993 to November 1997 with the qualification that I do not accept the evidence establishes use of the A mark at exhibitions by its use on display boards. C: (vii) The beginnings of Gymboree and the Grahams' knowledge of TKG. 60 While TKG (and before its incorporation, Mrs Sasse) was, in the years 1982 to 1986 building its business and doing so particularly in 1985 and 1986, Mr and Mrs Graham were doing the same, in those latter years and on a more modest scale, in South East Queensland. Mrs Graham visited the United States in September 1984 where she read of the Gymboree Corp program. She rang the company and asked for material to be sent to her. She did so with a view to securing the grant of rights to conduct the program in Australia. Material was sent to her and it included an application for a franchise which she completed and sent back to Gymboree Corp. She thereafter had several conversations with Mr Jacob. On 26 April 1985 Mr and Mrs Graham changed the name of a shelf company they owned to "Gymboree Pty Ltd". Mr and Mrs Graham travelled to the United States in early 1986 and there executed, on 26 January 1986, a franchise agreement and US$36,000 was paid at about this time by the Grahams to the Corporation. The Grahams began promoting the program shortly after their return and commenced operating their first centre in May 1986, in an Anglican Church hall in Kenmore, a western suburb of Brisbane. 61 An issue in these proceedings is when Mr and Mrs Graham first became aware of TKG's activities and the extent of their knowledge of them. Mrs Graham's evidence in an affidavit of 11 December 1998 was that she first heard of TKG's activities in a conversation with Mr Jacob in 1986 though was not told its name nor Mrs Sasse's name. Counsel for the applicants submitted this occurred much earlier and the Grahams' knowledge was more extensive. Mrs Graham said her conversation with Mr Jacob about a "similar program in Melbourne" occurred two days before she and Mr Graham left for the United States. This was 7 January 1986. It is clear from her version of the conversation that she already knew about the "similar program" in Melbourne. The respondents produced during discovery two documents which were put to Mrs Graham in cross-examination. One was an advertisement from The Age dated 2 November 1985 calling for expressions of interest in a "Gymbaroo Franchise". The other was what appears to be an advertorial from a magazine Parent and Child dated October/November 1985. It refers to the existence of TKG's centres in Melbourne, Perth and Sydney. It is probable Mrs Graham was sent these two clippings by a friend in Melbourne, Mrs Macushla O'Loan. 62 In determining when Mr and Mrs Graham received these advertisements a number of factors need to be considered. It is relatively clear that they had been received by Mrs and Mr Graham by 21 March 1986. It was then that Mr Graham had a conversation with Mr Jacob and his note of that conversation has already been referred to. Mr Jacob noted that Mr Graham had "just discovered" Gymbaroo and had sought the registration of a business name before Mr Graham sought the registration of "Gymboree" as a business name. Mr Graham indicated to Mr Jacob that they may not have proceeded with, I infer, the franchise resulting from the January agreement had they known "of Gymbaroo's" prior registration of the business name. Mr Jacobs recorded that Mr Graham was concerned "about identity problems and relative (?) market confusion". In his note of 21 March 1986 Mr Jacob referred to the existence of "14 franchisees sold". This is probably Mr Jacob's understanding, though incorrect, of what he was told by Mr Graham based on the November 1985 advertisement from The Age in which reference was made to 14 Gymbaroo centres. 63 In the ordinary course one would have expected Mrs O'Loan to have cut out the advertisements at the time they appeared. That is, in November 1985. It is unlikely that she would have done so at some later stage. It is probable that she then knew of the Grahams' interest in obtaining a franchise from Gymboree Corp. One would also expect, in the ordinary course, for a friend who had cut out advertisements of this type to forward them to the interested party sooner rather than later. Even in the unlikely event that they were not sent shortly after they were cut out of the publication, it is probable that Mrs O'Loan would have sent them before, at the latest, 7 January 1996 when Mrs Graham spoke to Mr Jacob. It is also probable that Mrs Graham spoke to Mrs O'Loan before speaking to Mr Jacob. In my view the most likely explanation of this evidence is, and I find, that Mrs O'Loan saw the advertisements, cut them out and then forwarded them to the Grahams who would have received them some time before mid-December 1995. At this time or shortly after, Mrs Graham and Mrs O'Loan spoke by phone. As a result of seeing the two advertisements and her conversation with Mrs O'Loan, Mrs Graham would have known both of the existence of TKG and the use of the name "Gymbaroo" if she and her husband did not already know. What the Grahams did not then appreciate and probably only learnt some time shortly before 21 March 1996 was that Mrs Sasse had secured in the state of Queensland, the immediate area of interest for the Grahams, registration of the business name "Gymbaroo". This would have alerted the Grahams to both the difficulty of securing registration of the business name "Gymboree" and the interest, either actual or potential, of Mrs Sasse in Queensland. C: (viii) The growth of Gymboree and the franchising by Gymboree 64 I have already referred to the growth of Gymboree and the expansion of its business in and around Brisbane. Since 1986 its centres and programs have been extensively promoted in that area. It entered a master franchise agreement with Gymboree Corp in August 1989 and began promoting franchises as a business in 1989. From that time the Grahams have received enquiries from prospective franchisees at a fairly constant rate. I infer from the location from which enquiries were made that the promotion was Australia-wide. By at least June 1990 Gymboree was advertising franchises in magazines and in early 1991 advertising, by way of entry, in Directory of Australian Franchise Opportunities. The entry did not signify that any limit existed within Australia as to when a franchisee might conduct a franchised business. In evidence is an advertisement to similar effect in the July 1994 edition of Sydney's Child and in, by way of entry, the 1996/1997 Franchising Yearbook and Directory. In that latter entry it is noted that Gymboree was "looking to expand: Aust. wide". This is the joint objective of Gymboree and Gymboree Corp as is apparent from Gymboree's conduct and the express evidence of Mr Campbell, the President of Gymboree Play Programs Inc, a subsidiary of Gymboree Corp. C: (ix)The use of the GC mark 65 There has been some, but limited, use of the GC mark in Australia. At least in 1986, the GC mark appeared in letterhead used by the Grahams but that letterhead was used only very occasionally and its use stopped some years ago. The GC mark appears in a large ball and "air bag" presently used at the Gymboree centre (now franchised) at McDowall Everton Park and has been used since the centre opened in 1987 (then located at Aspley). The GC mark was in use in 1994 on similar equipment at the Indooroopilly centre. Generally the word "Gymboree", as used by the Grahams in promotional and other material, has been in a quite different and stylised form than that appearing in the GC mark. D: Cancellation of the GC mark D: (i) The legislative framework for the cancellation of a mark registered under the 1955 TM Act 66 Before considering the various cancellation or removal applications it is convenient to consider the operation of s 234 of the 1995 TM Act. That sectionprovides that a trade mark in Part A of the Register maintained under the Trade Marks Act 1955 (Cth) ("1955 TM Act") is to be treated as validly registered in certain circumstances but subject to identified exceptions. Section 234(2) provides: "(2) In any legal proceedings: (a) the original registration under the repealed Act of a trade mark referred to in paragraph (1)(a); or (b) the original registration under this Act of a trade mark referred to in paragraph (1)(b); is taken to be valid in all respects after a period of 7 years from the date of registration of the trade mark unless it is shown that: (c) the original registration was obtained by fraud; or (d) the registration of the trade mark would be contrary to s 28 of the repealed Act; or (e) the trade mark did not, at the commencement of the proceedings, distinguish the goods or services of the registered owner in relation to which the trade mark is used from the goods or services of other persons." It can be seen that par (2)(d) depends upon the operation of s 28 of the 1955 TM Act which provided: "A mark: (a) the use of which would be likely to deceive or cause confusion; (b) the use of which would be contrary to law; (c) which comprises or contains scandalous matter; or (d) which would otherwise be not entitled to protection in a court of justice; shall not be registered as a trade mark." 67 Section 234 is one of a number of transitional provisions in Pt 22 and is found in Div 2 of that part. Div 2 deals with the status under the 1995 TM Act of trade marks registered under the 1955 TM Act. 68 The applicants submitted that s 234 of the 1995 TM Act effectively established a condition precedent to an application to cancel the registration of a mark maintainable under other provisions of the 1995 TM Act based on the grounds on which the registration of a trade mark could have been opposed: see s 88(2)(a). Grounds of this character relied upon by the applicants were, in relation to the GC mark, that Gymboree Corp is not the owner of the trade mark: s 58, that the GC mark is similar to a trade mark that has acquired a reputation in Australia: s 60, and that the GC mark is deceptively similar to the A mark: s 44(2). For the purposes of the grounds in s 58 and s 60 the applicants rely upon the existence of a trade mark which is not a registered mark but rather the word "Gymbaroo". 69 The respondents took issue with this analysis of s 234. It was submitted that the only basis upon which the registration of a trade mark otherwise protected by s 234 could be impugned was on the grounds identified in s 234(2). Counsel for the second respondent developed the argument this way. Section 234(2) confers prescriptive validity on a trade mark on substantially the same basis as s 61 of the 1955 TM Act. By operation of s 61, the original registration of a trade mark was to be taken to be valid in relevant legal proceedings unless the original registration was obtained by fraud, the trade mark offended against s 28 or the trade mark was not, at the commencement of the proceedings, distinctive of the goods and services of the registered proprietor. The nature of the protection afforded by s 61 was described by Shanahan Australian Law of Trade Marks and Passing Off 2nd ed. at p. 247 in the following passage which counsel for the second respondent adopted: "But other provisions of the Act prohibit only the initial act of registration, and s. 61 thus presents a complete bar to expungement of a Part A mark under those provisions, subject only to the exceptions provided by paras (a), (b) and (c). Section 33 has been regarded as such a provision and it would seem therefore that a mark that might have been refused registration under s. 33 cannot be expunged on the basis of that section once the original registration is protected by s. 61, even if the conflicting earlier registration still exits at the time expungement is sought. Section 40 (relating to false claims to proprietorship) falls naturally into the same category and it is difficult in fact to see any provision (other than s. 28) that does not." It was submitted that a prescriptively valid trade mark under the 1955 TM Act "could not be attacked under sections 33 and 40" of that Act on grounds of deceptive similarity with a registered mark with earlier priority (s 33) and lack of proprietorship (s 40). 70 Thus s 61 permitted, effectively, rectification only on grounds of fraud and breach of s 28. Section 234(2) should be approached on the footing that it, likewise, permitted rectification only on those grounds. As fraud was not being raised in these proceedings then, it was submitted, the only ground for cancelling the registration of the GC mark was because it contravened s 28 of the 1955 TM Act. 71 Senior counsel for the applicants accepted that if s 61 conferred prescriptivevalidity on a trade mark, then it was immune from attack under s 33 and 40 of the 1955 TM Act. However, it was submitted, that immunity was lost if one of the conditions in pars (a), (b) or (c) of s 61 was satisfied. If lost, the registration was open to attack on any relevant ground. Section 234 operates, it was submitted, in the same way. 72 I was not referred to any authority expressly addressing the construction and application of s 61 of the 1955 TM Act as the issue has arisen in these proceedings nor the proper construction of s 234. Section 61, in terms, renders valid the original registration of the trade mark. Both pars (a) and (b) of that section concern matters which impliedly: see Farley (Australia) Pty Ltd v JR Alexander & Sons (Queensland) Pty Ltd (1946) 75 CLR 487 at 493 or expressly: see s 28, underpin the original registration and are matters that can be relied on in an application for rectification under s 22(1)(b). That is, the existence of fraud or non-compliance with s 28 at the time of entry into the Register can later be raised as a basis for rectification, because the entry was "wrongly made". There has been, of course, a division of judicial opinion whether the requirements of s 28 are ongoing which has been settled by the judgment of the High Court in Campomar Sociedad, Limitada v Nike International Ltd [2000] HCA 12; (2000) 169 ALR 677. 73 Notwithstanding that s 61, in terms, addresses the validity of the original registration, par (c) of that section identifies, as a matter that removes the prescriptive validity, a circumstance arising after registration. That is, that at the time of the commencement of the proceedings, the trade mark was not distinctive. Paragraph (c) focuses on that time rather than the time of original registration when distinctiveness might be considered: see ss 24-26. There is some support for the view that loss of distinctiveness, at least distinctiveness founded on use, provided a ground of removal (apart from that provided for in s 56): see New South Wales Dairy Corporation v Murray Goulburn Co-operative Co Ltd (1989) 86 ALR 549 at 584-585 per Gummow J. 74 After the passage in Shanahan quoted in paragraph 69 above, the following is said: "However, if any of the circumstances set out in paras (a), (b) and (c) [of s 61] is established, the validity of the registration is then open to attack as an entry "wrongly made" in the Register on the basis of any defect at all that might have been raised in opposition proceedings. Moreover, this will be so even though the defect in question has since been remedied, although that circumstance will no doubt be relevant to the exercise of the court's residual discretion to refuse rectification. It is important to appreciate that s. 61 does not itself provide substantive grounds for rectification, paras (a), (b) and (c) merely establishing preconditions to attack on grounds arising elsewhere." On this approach s 61 did not operate in the way contended by counsel for the second respondent. 75 However the present task is to ascertain the effect of s 234. The purpose of s 234(2) is to confer prescriptive validity on a trade mark registered under the 1955 TM Act but by reference to criteria at least similar to those that would have, under that Act, created prescriptive validity by operation of s 61. The critical question is then whether, even if s 61 of the 1955 TM Act also identified and limited the bases on which the mark could be removed under s 22 of that Act, cancellation under the 1995 TM Act can only occur on the same bases. There are, in my opinion, difficulties with the approach that cancellation referable to pre-conditions for registration can, and can only, occur on those limited bases (identified in s 234(2)(c), (d) or (e)). 76 Section 233 deems, without qualification, trade marks registered under Part A or Part B of the 1955 TM Act, to be registered trade marks under the 1995 TM Act. Section 88 deals with rectification arising, relevantly, by cancellation or removal. Section 88(2) declares that an application for an order of rectification can be made on the grounds specified in that subsection "and on no other grounds". There is an obvious tension between this provision and s 234(2) if that latter provision identifies not only the bases on which prescriptive validity is lost but also the grounds on which the Register can be rectified in relation to a trade mark first registered under the 1955 TM Act and which is, prima facie, prescriptively valid because of s 234(2). 77 While that tension can be resolved by treating a trade mark with prescriptive validity (by operation of s 234) as excluded from the provisions of s 88(2), the language of s 234 and s 88 do not warrant that conclusion. All s 234 does is to declare the original registration valid unless one of the enumerated circumstances which deny prescriptive validity arises or exists. If the prescriptive validity is not impeached then, it would appear, a ground in s 88(2) that, in effect, permitted a direct challenge to the original registration would not be an available ground. If the prescriptivevalidity was lost because one (or more) the circumstances in pars (c), (d) or (e) existed, then any ground in s 88(2) would be available though some, such as s 88(2)(e), might be made out by establishing a circumstance in one of pars (c), (d) or (e). Moreover the language used in s 234 does not suggest that the circumstances in pars (c) to (e) are themselves grounds for removal from the Registrar. They are, in terms, only identified as bases upon which prescriptive validity might be lost. I am satisfied that if a trade mark to which s 234(2)(a) or (b) applies loses prescriptive valid because a circumstance in paragraphs (c) to (e) is established, then all grounds identified in s 88 are available to seek an order of rectification. This approach accords with observations of the Full Court in Mid Sydney Pty Ltd v Australian Tourism Company Ltd (1998) 42 IPR 561 at 572 (lines 30-33). D: (ii) The status of the GC Mark – has it lost prescriptive validity? (a) failure to distinguish the services of Gymboree Corp – s 234(2)(e) 78 I now move to a consideration of whether the prescriptive validity afforded the GC mark by s 234 has been lost. The applicants submitted it has been lost on two grounds. The first was that the GC mark did not, at the commencement of the proceedings (relevantly March 1997), distinguish the services of Gymboree Corp in relation to which the trade mark is used from the services of other persons: see s 234(2)(e). This submission was based on the extremely limited use made of the mark by Gymboree. It was not in issue that use by Gymboree could be taken to be useby Gymboree Corp. The essence of the submission was that as there had been no use, the mark did not, indeed could not, distinguish Gymboree Corp's services. 79 Gymboree Corp's response was to treat s 234(2)(e) as concerning loss of distinctiveness. That loss was not to be ascertained by a consideration of the use made of the mark but rather a consideration of whether the mark had been allowed to become so descriptive that others will be able to use it in good faith. 80 The operation of s 234(2)(e) was considered by Hill J in Mid Sydney Pty Ltd v Australian Tourism Company Ltd (1998) 40 IPR 20 and, indirectly, bya Full Court in the appeal (1998) 42 APR 561 at 571-574. The parties in the appeal approached the matter on the basis that if the ground for cancellation indirectly identified in s 41(2) (through s 88(2)(a) and s 57) was made out then "the threshold test under s 234(2)(e) was necessarily satisfied". The Full Court accepted this was so. However s 41(2) concerns whether a trade mark is capable of distinguishing, relevantly, an applicant's services. That might be so because the mark is inherently adapted to distinguish (s 41(3)) or through use, does distinguish (s 41(6)(a)) or a combination (s 41(5)). Plainly enough, a trade mark that is not, on either basis, capable of distinguishing services, is unlikely to actually distinguish them at some later point. 81 However the language and structure of s 234(2)(e) directs attention, in my opinion, to the issue of whether the trade mark distinguishes the services of the registered owner in the context of use being made of the trade mark. The words "the trade mark is used" signify actual and not prospective or theoretical use. The section raises for consideration whether there is use by the registered owner and, if so, whether, in that context, the mark distinguishes the services of the owner. That latter inquiry would itself raise considerations of the type referred to in s 41(3), (5) or (6). If however there is no use, there can be no distinguishing of services as contemplated by s 234(2)(e). In the present case there is effectively no use of the GC mark and whatever might be the inherently distinguishing characteristics of the GC mark, it did not, in use, distinguish the services of Gymboree Corp. Counsel for Gymboree Corp did not submit that there was use of the GC mark that might satisfy s 234(2)(e) if use was a necessary element of that paragraph. However Gymboree Corp did rely on s 7 of the 1995 TM Act. Section 7(1) raises for consideration whether there has been use of the GC mark with additions or alterations that do not substantially affect the identity of the mark. Gymboree Corp relied on "the printing of the word [Gymboree] in typescript different from that of the registration". What specific printing is relied on was not identified. I see no reason for approaching, in these proceedings, the question of whether s 234(2)(e) is satisfied on the basis that the use of the word "Gymboree" might constitute use of the GC Mark. Indeed no specific reason was advanced having regard to the circumstances of this case. (b) The GC mark would be likely to deceive or cause confusion – s 234(2)(d) and s 28(a) 82 The second ground relied on by the applicants as establishing that the GC Mark has lost its prescriptive validity was that use of the mark would be likely to deceive or cause confusion: see s 234(2)(d) of the 1995 TM Act together with s 28(a) of the 1955 TM Act. Senior counsel for the applicants submitted that in considering whether s 234(2)(d) is satisfied (when reliance is placed on s 28(a)) it is necessary to answer the factual question of whether the GC mark would be likely to deceive or cause confusion as at the time of the commencement of the cancellation proceedings: as to the relevant time see Berlei Hestia Industries Ltd v The Bali Company Inc (1973) 129 CLR 353 at 360-361. The test of deception or confusion is that found in Southern Cross Refrigerating Co v Toowoomba Foundry Pty Ltd (1954) 91 CLR 592 at 595. No question of blameworthy conduct arises as it might in expungement proceedings involving a validly registered mark which became deceptive through supervening acts or conduct: Campomar Sociedad, Limitada v Nike International Ltd (1998) 85 FCR 331 at 338, 342, 375. The applicants submitted that the use of the GC mark would result in a substantial number of people wondering whether or not it might be the case that the services offered under the mark are one and the same as the services of "Gymbaroo". 83 Counsel for Gymboree Corp submitted that contravention of s 28 of the 1955 TM Act for the purposes of s 234(2)(d) of the 1995 TM Act required not only that the use of the mark would be likely to deceive or cause confusion but also that the proprietor, Gymboree Corp, had been guilty of blameworthy conduct. 84 The above summary is of submissions made before the decision of the High Court in Campomar Sociedad, Limitada v Nike International Ltd [2000] HCA 12. The submission that blameworthy conduct needs to be considered must be rejected. Moreover the judgment of the High Court makes clear that, for the purposes of the 1955 TM Act the relevant time to ascertain whether s 28 has been complied with is the deemed date of registration (though looking to the future: see par 72 of the judgment) and not the time the cancellation proceedings were commenced. 85 A difficult question arises concerning the time deceptive similarity is to be considered if the operation of s 28(a) arises indirectly through s 234(2)(d). As just mentioned, s 28, in its operation within the statutory framework of the 1955 TM Act,directs attention to the circumstances existing at the time of registration (but with regard to the future). However s 234(2)(d) speaks of whether the registration of the trade mark "would be contrary to section 28". The use of the conditional present may suggest consideration of the contemporary operation of s 28 having regard to present circumstances. It is more likely, however, that it means "would be contrary to s 28 if s 28 was still in force". If so, the inquiry remains as it was under the 1955 TM Act. Moreover if the GC mark was likely to deceive or cause confusion when it was registered, that would have, in the circumstances of this case, remained the position. Accordingly I approach the matter by considering the operation of s 28 in May 1985. 86 The High Court in Campomar Sociedad, Limitada v Nike International Ltd (above) made plain at par 83 that the test for determining the question of whether the use of a mark would be likely to deceive or cause confusion was that discussed by Kitto J in Southern Cross Refrigerating Co v Toowoomba Foundry Pty Ltd (1954) 91 CLR 592 at 595. There must be a real tangible danger of confusion occurring that might arise, in the present case, if an ordinary person entertained a reasonable doubt that gymnasia services for young children and their parents provided in association with the use of the GC mark would be being provided by the same person providing gymnasia services for young children and their parents using the mark "Gymbaroo". That is, the services came from the same source. 87 I should add, parenthetically, that I have described both the services of Gymboree Corp (in prospect) (and also the services actually provided by Gymboree), and the services of TKG as well, as the provision of gymnasia services for young children and their parents because I do not view the way the services have been provided nor the contents of the programs as materially different. Indeed no real attempt of substance was made by any party to these proceedings to demonstrate otherwise. There was, perhaps understandably, an attempt by the parties (at least on Mrs Sasse's part) to deprecate (in a legitimate way) the program of the competitor. However that was not reflected, in a forensic sense, in a contention there was a material difference in the services each provided. Thus the description I have used is adequate and it is unnecessary to descend into the minutiae of the two programs and the philosophies that underpin them though I accept that this description does not reveal the views of the proponents of the programs about their profound and fundamental worth. 88 I am satisfied there would be confusion of the relevant character. The reputation of the word "Gymbaroo" and "Toddler Kindy Gymbaroo" in May 1985 was discussed in par 31 above. The words "Gymboree" and "Gymbaroo" are very similar. They are both invented tri-syllabic words. They both evoke notions of fun or frivolity coupled with a reference to gymnasia or exercise. They look and sound the same: see Re Pianotist Company Ltd's Application (1906) 23 RPC 774 at 777. The only points of dissimilarity are those emerging from the use of the "a" and "oo" in the latter word which have a limited visual impact and might result in a different concluding inflection in that word depending on the speed with which (and up to a point, the manner in which) the word is spoken. However the first syllables of these two words are of greater significance: see Re London Lubricants (1920) Ltd's Application (1925) 42 RPC 264. 89 I am satisfied that at the time of its registration, use of the GC mark would be likely to, at least, cause confusion. The same result arises if the definition in s 10 is applied. Whether that definition is to be notionally imported into s 28 as rendered applicable by s 234, which I doubt, is unnecessary to decide. Thus, on this additional ground of likely deception or confusion the prima facie prescriptive validity conferred in the GC mark by s 234 has been lost. D: (iii) Whether the registration of the GC mark should be cancelled (a) lack of proprietorship 90 I now turn to the grounds relied on by the applicants in support of the cancellation of the registration of the GC mark. The first is that Gymboree Corp was not the owner of the GC mark: ss 27 and 58. This submission is based on the contention that TKG had used the word "Gymbaroo" as a trade mark in relation to the services provided by TKG such as to establish proprietorship of that mark and it does not matter if the use was a limited use: see Re Trade Mark "Thunderbird" (1974) 48 ALJR 456 at 459 and First Tiffany Holdings Pty Ltd v Tiffany and Company (1989) 13 IPR 589 at 591. 91 Counsel for Gymbaroo Corp accepted that a claim to prior proprietorship could arise if the marks were substantially identical though he initially proceeded to make the comparison with the A mark, not the word "Gymbaroo" relied on by TKG. It was also submitted that the evidence did not support a necessary finding that a substantial number of people would recognise "Gymbaroo" as connected with TKG. Reference was made to Kendall Co v Mulsyn Paint and Chemicals (1963) 109 CLR 300, Taverfar Pty Ltd v Life Savers (Australasia) Limited (1988) 12 IPR 159 and Unidrive Pty Ltd v Dana Corporation (1995) 32 IPR 155 at 160. 92 If the mark used by TKG was precisely the same mark that Gymboree Corp secured registration of then proprietorship would fairly readily be resolved in favour of TKG. However TKG could still have been the proprietor if they were not identical. The proper approach was discussed by Gummow J in Carnival Cruise Lines Inc v Sitmar Cruises Ltd (1994) 31 IPR 375 who said (after referring to a passage from the judgment of Dixon J in The Shell Co of Australia Ltd v Rohmand Haas Co (1949) 78 CLR 601) at 391: "When the decision is understood in this way, it does not supply any general authority for the proposition that in the case of disputed claims to proprietorship under the present statute anything less than substantial identity between the two marks will suffice. The phrase "substantially identical" as it appears in s 62 (which is concerned with infringement) was discussed by Windeyer J in The Shell Co of Australia Ltd v Esso Standard Oil (Australia) Ltd (1963) 109 CLR 407 at 414. It requires a total impression of similarity to emerge from a comparison between the two marks. In a real sense a claim to proprietorship of the one extends to the other. But to go beyond this is, in my view, not possible." See also Karu Pty Ltd v Jose (1994) 53 FCR 15 at 22-23; 30 IPR 407 at 415 and PB Foods Ltd v Malanda Dairy Foods Ltd [1999] FCA 1602. 93 Thus substantial identity is, for the purpose of determining proprietorship, to be determined by ascertaining whether a total impression of similarity emerges from a comparison between two marks side by side. If such a comparison is made between the GC mark and the word "Gymbaroo" as used by TKG before 22 May 1985 then, in my view, the marks cannot be treated as substantially identical. The dissimilarities referred to earlier in par 88 point, in my opinion, to a lack of substantial identicality. That is, while the two marks are very similar, the dissimilarities distinguish one from the other. (b) Substantially identical or deceptively similar to the unregistered mark "Gymbaroo" 94 The second ground relied on by the applicants to cancel the GC mark (one that can be raised in opposition proceedings) is that it is substantially identical with or deceptively similar to a trade mark that has acquired a reputation in Australia: see s 60. That is, the mark constituted by word "Gymbaroo". I earlier discussed, in pars 26 to 31 above, the use that had been made by TKG of the word "Gymbaroo" and the collocation "Toddler Kindy Gymbaroo" by 22 May 1985. By then at least nine centres were operating in metropolitan Melbourne and one in Geelong. I am satisfied that at this time the mark constituted by the word "Gymbaroo" had a reputation, in Melbourne, Geelong and elsewhere in Victoria at least in the market for the provision of services of the type provided by TKG. It thus had a reputation in Australia for the purposes of s 60. 95 I have already discussed, in pars 86 to 89 above, in the context of s 28, whether the GC mark would be likely to deceive or cause confusion: see generally SAP Australia Pty Ltd v Sapient Australia Pty Ltd (1999) 169 ALR 1 at par 46. That is now reflected in the defined meaning of "deceptively similar". Thus the consideration I earlier undertook can be imported into this consideration of s 60(a) and (b) and I am satisfied that the GC mark was, at the time of its registration, deceptively similar to the mark "Gymbaroo" and, because of the latter's reputation, would have been likely to deceive or cause confusion in the areas in which it had acquired a reputation. The registration of the GC mark was not geographically limited and no submission was made that the geographical limits to the reputation impacted on the relevant operation of s 60. (c) Deceptive similarity to A mark 96 The last ground relied on in support of the cancellation of the GC mark is the ground in s 44(2). It was contended that the GC mark is deceptively similar to the A mark. No submission of substance was advanced by the applicants as to why this is so beyond asserting that if, as the respondents contended, the B and C marks are deceptively similar to the GC mark then, by parity to reasoning, the same must be so of the A mark. While s 10 contains a definition of "deceptively similar" that applies to s 44(2), that definition directs attention to whether one mark "so nearly resembles" another mark that it is likely to deceive or cause confusion. It is unlikely, at least in the circumstances of this case, that this definition travels beyond the approach of Kitto J referred to in par 86 above: see Registrar of Trade Marks v Woolworths Ltd [1999] FCA 1020, (1999) 45 IPR 411. There is nothing about the two marks which would lead a person to believe the GC mark was the mark of TKG, that is, the A mark. It is true that the A mark contains the word "Gymbaroo". However the visual context in which that word appears does not, in my opinion, render it as a significant detail that might lead to deception or confusion. (d) Discretion whether to cancel 97 The applicants have established grounds for the cancellation of the GC mark. However, as a matter of discretion, should it be cancelled? The existence of a discretion was not challenged. Three matters were raised by counsel for Gymboree Corp to support the exercise of the discretion against cancellation, namely copying, delay and the reputation of "Gymboree". As to delay, I am satisfied that there has not, in substance, been delay. As earlier discussed, the GC mark has effectively not been used since registered. It existence in the Register was of no apparent practical consequence to the Sasses or TKG. Its registration assumed significance in these proceedings. There is no issue that the application to cancel the GC mark was a defensive one in answer to the application to cancel the B and C marks. In these circumstances a failure on TKG or the Sasses' part to apply to cancel the GC mark, though its registration was generally known of by Mrs Sasse since 1986, does not justify exercising the discretion not to order rectification by cancelling the registration of the mark. 98 Copying (at least in the sense of adaptation) has, as a matter of fact, been established. Its significance is another matter. Counsel for Gymboree Corp referred to Aston v Harlee Manufacturing Co (1960) 103 CLR 391 at 400 to support a proposition that the courts frown on borrowing from abroad. Counsel for the applicants submitted that borrowing from abroad was not unlawful: The Seven Up Company v OT Ltd (1947) 75 CLR 203 at 211, 216. A convenient and fairly recent discussion of the legal consequences of copying an overseas mark and using it in Australia can be found in Thai Gypsum Products Co Ltd v Waring and Gillow Pty Ltd (1994) 29 IPR 99. 99 Even accepting, as I do, that the word "Gymboree" has a widely established reputation overseas, and acknowledging that Gymboree Corp has several other marks now registered under the 1995 TM Actwhich are word marks (the word being "Gymboree" but not registered in class 41) and the name Gymboree is used by its franchisees in Australia, the position nonetheless is that notwithstanding the registration of the GC mark in 1985, that mark has not been used, other than the most perfunctory way, in Australia. While non use has not been relied on by the applicants as a ground for removal of the GC mark from the Register, it remains the fact that the mark has fallen into desuetudeand, in my opinion, that outweighs these other considerations concerning the origins of the word "Gymbaroo" and the reputation of "Gymboree". 100 Accordingly, I propose to order that the Register be rectified by cancelling the registration of the GC mark. E: Cancellation of B mark and C mark 101 Gymboree Corp sought the cancellation of the B mark and the C mark on the basis that each was substantially identical with or deceptively similar to the GC mark: see ss 88(2)(a) and 44(2)(a) of the 1995 TM Act. No issue was taken with the submission of the applicants that if the registration of the GC mark was cancelled then the basis for cancellation of the B mark and C mark fell away. Given that a case has been made out for the cancellation of the GC mark, it is unnecessary to consider further the application to cancel the B and C marks. F: Challenge to the A mark 102 Both Gymboree and Gymboree Corp applied for the removal of the A mark from the Register for non-use: see s 92(1) of the 1995 TM Act. Gymboree Corp had carriage of the submissions. The contention of Gymboree Corp, based on s 92(4)(b), was that at no time during the relevant periods of three years preceding the filing of the non-use applications, did the registered owners of the A mark, Mr and Mrs Sasse, use the mark in Australia. As mentioned earlier, the relevant periods commenced on 13 May 1993 and concluded on 23 November 1997. It was not in issue that it was necessary for Mr and Mrs Sasse to rebut the contention and establish use: see s 100(1)(c) and (3). 103 The central issue raised by the application is whether such use that was, in fact, made of the A mark was use by Mr and Mrs Sasse. The submissions of Gymboree Corp were that the agreement between TKG and Mr and Mrs Sasse on 29 June 1993 (referred to in para 53above) expressly authorised the use by TKG of the B mark and C mark as a licensee and authorised the sub-licensing by TKG of those marks. However at least from the 29 June 1993, TKG was neither authorised to use the A mark nor authorised to license its use. It was also submitted that even if TKG was authorised to use the A mark, such use of it that had been made by the franchisees was not itself authorised use. Lastly it was submitted that even if there had been relevant authorised use, it was not use connected with services in relation to which the mark was registered. 104 The June 1993 agreement was between Mr and Mrs Sasse, on the one part, and TKG on the other. The recitalsincluded: "WHEREAS: A. … B. Sasse are the registered owners of the corporate name "Toddler Kindy GymbaROO" and the Trade Marks of GymbaROO shown here in Schedule Item 1 for Australia and for all other countries in which the business of GymbaROO operates, ("the Marks"). C. … D. GymbaROO seeks to be granted a license [sic] to use the registered Marks of Sasse in the conduct of its operations both in Australia and overseas." 105 The marks in Schedule Item 1 were the B and C marks. The terms of the agreement included: "THIS DEED RECORDS THAT THE PARTIES HAVE AGREED THAT: 1. GRANT Sasse shall grant to GymbaROO the exclusive rights to use the Marks of Sasse in the operation and conduct of its business in Australia and throughout the world, subject to the terms and conditions contained herein. 2. … 3. SUB-LICENSES [sic] GymbaROO shall have the right to sub-license the use of the Marks to other parties, the subject of franchise or license [sic] agreements, at any time and at the sole discretion of GymbaROO. 4. … 5. … 6. FRANCHISEES AND LICENSEES It shall be the responsibility of GymbaROO to ensure that franchisees and licensees holding sub-license [sic] rights to the Marks comply with standards of maintenance and use of the Marks as advised by Sasse from time to time. 7. …" 106 Counsel for Gymboree Corp appeared to accept that TKG's use of the A mark, commencing by at least 1984, was with the permission of and under the control of Mr and Mrs Sasse. That concession is, in my opinion, plainly correct. However, it was submitted, after use of the B and C marks commenced in 1989/1990 and their registration on 18 May 1993, the authority of TKG to use the A mark was lost. That occurred because authority to use the A mark was withdrawn when use of the B and C marks was authorised and the June 1993 agreement manifest the arrangements then prevailing. That is, TKG was expressly authorised to use the B and C marks and not authorised to use the A mark. The lack of express authorisation to use the A mark reflected the withdrawal of authority following the registration of the B and C marks. Counsel for Gymboree Corp relied not only on the terms of the agreement but also the evidence in an affidavit sworn on 18 April 1997by Mr Sasse, when speaking of the 1993 agreement: "Although this [the agreement] may have formalised the arrangement that existed, it changed nothing in practice." 107 This is said to establish, when viewed with related affidavit evidence of Mr Sasse, that the status quo was formalised by the 1993 agreement and the status quo was authorised use of, and only of, the B and C marks. 108 I do not accept this. It is clear from the evidence that TKG, under the control of the Sasses, was, during the early 1990's, moving from using the A mark to represent its business to using the B and C marks to do so. It is to be inferred, in my view, that the 1993 agreement was in the terms it was because the focus of the Sasses' attention was on the future use of the B and C marks. It is also to be inferred that the Sasses were unconcerned about dealing formally with the continuing and future use of the A mark by TKG or anyone authorised by TKG to use it, as the use was likely to be limited. It was for that reason that the 1993 agreement does not refer to it. The 1993 agreement and the evidence of Mr Sasse does not establish a prior withdrawal of authority from TKG to use the A mark. TKG had been, since at least 1984, authorised by the Sasses to use the A mark and that authority continued notwithstanding the express authorisation in the 1993 agreement to use the other marks. 109 However counsel for Gymboree Corp submitted that even if TKG was authorised to continue to use the A mark, and was doing so in the relevant period the use by some franchisees of the mark in that period was not, itself, authorised use. I earlier referred in par 55 to the terms of the franchise agreements with Varebi and Mrs McKittrick. At one stage it appeared a submission was made that the use of the A mark by the three franchisees was not authorised. To the extent this submission was based on what was said to be the withdrawal of authority from TKG in 1993 to use the A mark, I do not accept it. To the extent that it was based on the terms of the written franchise agreement I do not accept it either. The written agreement with Varebi and Mrs McKittrick is not a model of clear drafting. The precise terms of the agreement with Mrs Sharpe are unknown. Whatever the terms of the written agreement mean I am satisfied they did not, in terms, preclude use of the A mark. Moreover the practices of TKG, either directed or sanctioned by the Sasses, point unambiguously to authorising use of the A mark (or for that matter the B and C marks) by a franchisee in the promotionof the centre(s) to which the franchise related. It is true that the written agreement, together with the operationsmanual, suggest a requirementconcerning the source and use of stationery that was comparatively inflexible and did not permit the creation and use of letterhead and the like in the way that had been done by the franchisees in question. However Mrs Sasses's evidence, which I accept, (and it is consistent with the evidence of the individuals involved in these franchises), was to the effect that TKG (and the Sasses) permitted the franchisee a measure of latitude about how they administered the franchise at least as it related to matters such as creating and disseminating promotional material and creating and using stationery. 110 The ultimate question, as I perceive it, is whether the use of the A mark during the relevant period was "authorised use" as defined in s 8 of the 1995 TM Act. That section provides: "(1) A person is an authorised user of a trade mark if the person uses the trade mark in relation to goods or services under the control of the owner of the trade mark. (2) … (3) If the owner of a trade mark exercises quality control over … services: (a) dealt with or provided in the course of trade by another person; and (b) in relation to which the trade mark is used; the other person is taken, for the purposes of subsection (1), to use the trade mark in relation to the goods or services under the control of the owner. (4) … (5) Subsections (3) and (4) do not limit the meaning of the expression under the control of in subsections (1) and (2)." 111 In my opinion, this definition does not attempt to travel, for present purposes, beyond the bounds of what emerged from English and Australian authorities concerning the effect of licensing surveyed by Aickin J in Pioneer Kabushiki Kaisha v Registrar of Trade Marks (1977) 137 CLR 670 at 683: "These cases demonstrate that the essential requirement for the maintenance of the validity of a trade mark is that it must indicate a connexion in the course of trade with the registered proprietor, even though the connexion may be slight, such as selection or quality control or control of the user in the sense in which a parent company controls a subsidiary. Use by either the registered proprietor or a licensee (whether registered or otherwise) will protect the mark from attack on the ground of non-user, but it is essential both that the user maintains the connexion of the registered proprietor with the goods and that the use of the mark does not become otherwise deceptive. Conversely registration of a registered user will not save the mark if there ceases to be the relevant connexion in the course of trade with the proprietor or the mark otherwise becomes deceptive." See also Polo Textile Industries Pty Ltd v Domestic Textile Corporation Pty Ltd (1993) 42 FCR 227 at 237-239 and Dwyer "Trade Mark Licences – Is the 'Authorised User' System under the Trade Marks Act 1995 (Cth) Working?" (1997) 8 AIPJ 174. 112 Section 8 does not directly address control of the use of the mark, as suggested by counsel for Gymboree Corp, but rather control of the provision of the service in relation to which the mark is used by the putativeauthorised user. 113 In the present case the evidence establishes that while franchisees are afforded some latitude of the type just discussed, they nonetheless are expected to and do implement the program as formulated by TKG (and Mrs Sasse) and that TKG ensured that was so. That was done to ensure that the quality of the service is maintained and comparatively uniform. The franchisees were, in my opinion, authorised users during the relevant period. The use by them of the A mark was use for the purposes of s 92(4)(b). It was thus the use of the registered owner: see s 7. Moreover the A mark was used by TKG itself in its 6 June 1995 staff notice. Again that can be taken to be use by the registered owner. 114 It was submitted by counsel for Gymboree Corp that these instances of use of the A mark were not in respect of the class of services for which the mark is registered, namely "gymnasia for pre-school children." Reference was made to "Hospital World" Trade Mark [1967] RPC 595, VISA Trade Mark (1985) RPC 323 and Crooks Michell Peacock Stewart Pty Ltd v Kaiser (t/a Commercial Art & Industrial Design) (1994) 29 IPR 225. Both English authorities concerned the question of whether a mark was "used … in relation to goods … indicating … a connection in the course of trade between the goods [and an authorised user]". (see s 68 of the Trade Marks Act 1938 (UK)). Both authorities are of limited assistance in resolving the question of, in my opinion, whether a mark is used in relation to the provision of services. The Australian authority likewise concerned the use of marks in relation to trade in goods which was the basis on which registration of the contentious mark was sought. 115 The relevant question in these proceedings is whether the proven use of the A mark by TKG and the franchisees was "in relation to services" under the control of the Sasses: see ss 7(5) and 8(1), whether that use was use "in respect of … the services … in respect of which" the A mark is registered: see s 92(2)(b) and (4)(b) which are the services identified in the cancellation application and, probably additionally, whether it was used in the course of trade in the service: see ss 8(3)(a) and 17. While there is room to doubt that the use of the A mark on an internal staff notice was use in the course of trade in the services, that is not so in relation to the flyers and promotional material used by Mrs Sharpe and the slipsused by Mrs McKittrick. That latter use was use for the purposes of s 92. 116 It has not been demonstrated that grounds exist for cancelling the A mark. In view of this conclusion it is unnecessary to deal with the submissions made by, in particular, the applicants concerning s 7 and s 101 of the 1995 TM Act. G: Alleged infringement of A, B and C marks 117 The applicants seek to restrain the use of the word "Gymboree" as a trade mark on the footing that it is deceptively similar to the A, B and C marks: see s 120 of the 1995 TM Act. The first question is whether there is deceptive similarity. The consideration of this issue in the context of infringement proceedings is undertaken in the manner discussed by the Full Court in SAP Australia Pty Ltd v Sapient Australia Pty Ltd (1999) 169 ALR 1 at 12-13 which involves the imperfect recollection of the mark sought to be protected and whether the challenged mark would be mistakenly believed to be the same: as to authorities concerning marks of the character of those under consideration see Conde Nast Publications Pty Ltd v Taylor (1998) 41 IPR 505, Johnson & Johnson v Kalnin (1993) 26 IPR 435, Dial-An-Angel Pty Ltd v Sagitaur Services Systems Pty Ltd (1990) 19 IPR 171 and Gardenia Overseas Pty Ltd v The Garden Co Ltd (1994) 29 IPR 485. 118 With the A mark, I have little difficulty in rejecting the contention there is deceptive similarity. The only basis that the marks might be thought to be the same derives from the inclusion of the word "gymbaroo" below the leaping kangaroo. The word is not, overall, a prominent feature of the mark and is no more prominent, in a comparative sense, than the other words "toddler" and "kindy". However the leaping kangaroo and child are, in the image within the two circles, far more dominant elements of the mark. Moreover the circles themselves are a dominant visual feature of the mark. It is possible that in imperfectly recalling the A mark the word "gymbaroo" may be all or substantially all that is recalled and its close similarity to the word "gymbaroo", both visually and aurally has the potential to cause confusion which might engender a belief that the marks were the same. However this, in my opinion, is unlikely. I am satisfied that the word "Gymboree" is not deceptively similar to the A mark. 119 Similar considerations arise in relation to the B and C marks which can conveniently be considered together. With both marks the word "Gymbaroo" is visually far more prominent than in the A mark. However so too are the words "Toddler Kindy" and the proximity of the three words, visually, tends to focus attention on them as a collocation of words and not individual words. In addition, the kangaroo and child (and in the C mark, the flag as well) are a prominent feature of both marks. Moreover, the letters "oo" at the conclusion of "Gymbaroo" are rendered more prominent than much of the other text by their size, underlining and position in the mark. That is, their position next to the kangaroo to which one's attention tends to be drawn. Indeed, the presence of the kangaroo itself highlights the "oo" as part of "roo" which is a popular contraction of the word kangaroo. There is, in relation to the B and C marks, some greater prospect that an imperfect recollection of the B and C marks would be only of the word, or would be dominated by the word, "Gymbaroo" and, if so, the similarity of that word with the word "Gymboree" could engender a belief that the marks were the same. However I think that is unlikely given that both marks contain other elements that are also likely to be recalled. In particular, the prominence of the "oo", as just discussed, highlights an important dissimilarity between the words "Gymbaroo" and "Gymboree". I am satisfied that the word "Gymboree" is not deceptively similar to the B and C marks. H: The application for relief under the TP Act. 120 The final form of relief sought under the TP Act by the applicants (at this stage of the proceedings) was declaratory and injunctive relief directed to use by or on behalf of Gymboree of either the word "Gymboree" or "Gymbaroo" in the provision of movement, exercise co-ordination or gymnastics activities for young children outside specified local government areas in South East Queensland. Gymboree resisted the making of orders under that Act, on the footing there is no demonstrated contravention of s 52. Nonetheless if such contravention is established, then Gymboree contended that the applicants have engaged in such conduct and, likewise, should be restrained. Injunctive relief against TKG sought by Gymboree was firstly to restrain it operating in South East Queensland and secondly in the whole of Queensland. 121 Much of the relevant evidence has already been considered. However mention should be made of affidavits read by the applicants concerning whether the use of the word "Gymboree" was misleading or deceptive. Several were from individuals who expressed opinions about the likelihood of people being confused or misled. That evidence is inadmissible but, in any event, adds nothing. However there are three other affidavitswhich,if admitted, evidence many conversations staff at the headquarters of TKG have had with members of the public evidencing at least confusion and another from a counsellor with ANSUA in Queensland to similar effect. As evidence of the state of mind of the caller or inquirer, it is admissible: see Vieright Pty Ltd v Myer Stores Ltd (1995) 31 IPR 361 at 372 and now s 72 of the Evidence Act 1995 (Cth). I admit the evidence. The use that may be made of the evidence is another matter: see e.g. S & I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd (1998) 168 ALR 396 at 405. 122 The applicants also relied on telephone inquiry forms retained by Mrs Graham tending to indicate that those making inquiries of Gymboree about franchises knew of TKG. However this evidence establishes, in my opinion, nothing more than those making the inquiry knew of TKG or the centres and/or programs it operated (directly or through franchises). This evidence says nothing about whether the inquirer believed Gymboree to be the same business. 123 A convenient starting point in considering the relief sought under the TP Act is when the conduct complained of is to be assessed. It was submitted by counsel for Gymboree that, in so far as its conduct is alleged to contravene s 52, it is the time the conduct commenced. As to when Gymboree commenced conducting centres in Queensland, it was in 1986. The relevant time is, as Gummow J explained in Thai World Import & Export Co Ltd v Shuey Shing Pty Ltd (1989) 17 IPR 289 at 302, the date of the commencement of the conduct complained of and this is so not only ina passing off suit (about which there is no controversy) but also in proceedings alleging contravention of s 52 though subsequent conduct is also relevant: see also Applied Business Technology Pty Ltd v Grandmaster Computers Pty Ltd (1999) 161 ALR 31 at 34 though see the contrary suggestion in SAP Australia Pty Ltd v Sapient Pty Ltd (above) at par 53. 124 In the present proceedings various permutations of conduct and points in time were adverted to as relevant. Ultimately, however, it does not matter when the impugned conduct is considered as the result is the same. Nonetheless it is convenient to approach the matter in the way suggested by Gummow J in Thai World. 125 The contravening conduct of Gymboree relied on by TKG in its third further amended statement of claim was, expressed in a summary way, the use of the name "Gymboree" by Gymboree in conducting centres and offering franchises which might lead people to believe they were centres of, or franchise agreements with, TKG. The former commenced in 1986 and the latter in 1989. 126 I earlier dealt with the evidence concerning the extent to which the names "Toddler Kindy Gymbaroo" and the word "Gymbaroo" have been used by TKG to carry on and promote its business, centres and programs and are likely to be associated with them. In my view that association is likely to be made by two sections of the public. The first are the parents of young children who are potential consumers of the service provided by TKG and its franchisees. The second are those who may be interested in procuring a franchise to conduct a child development/gymnasia program of the type developed by TKG. 127 It is highly improbable that in mid-1986, the establishment of one centre by Gymboree in Brisbane constituted conduct contravening s 52 given that at that time, the bulk of the TKG centres were in Victoria (18) and there were limited numbers elsewhere (three in New South Wales, two in Western Australia and one in Northern Queensland). It is improbable there were parents in or around Brisbane at this time who might have wished to consume services of the type offered by Gymboree who had also heard of the word "Gymbaroo" and/or expression "Toddler Kindy Gymbaroo". The evidence does not support an affirmative conclusion there were consumers who might have mistaken the business, centre and program of Gymboree for that of TKG. This would have remained the position during the late 1980's which was the period in which Gymboree expanded its operations in the Brisbane area, at least until the entry of TKG into the Brisbane market in about 1990. The conduct of Gymboree in opening and operating its first centre and opening, directly or through franchisees, other centres in and around Brisbane was not conduct in contravention of s 52. 128 However different considerationsarise in relation to the conduct of Gymboree as a master sub-franchisor of Gymboree Corp. In 1989, and certainly by the beginning of 1990, Gymboree was seeking out franchisees in areas of Australia where TKG would have had an established reputation, namely Victoria and New South Wales. 129 It has been a difficult task assessing the probable effect of all the activities of TKG, to which a large and diverse body of evidence was directed, and the probability of those activities creating a reputation which might result in people being misled or deceived by Gymboree's activities. Ultimately, however, I am satisfied the matter should be approached this way. For the purposes of considering the operation of the TP Act (and were it necessary, the passing offaction) the relevant reputation arises in a geographical area, in my view, because two features are present. The first is the marketing and promotion and any evident interest at relevant times in TKG's programs or centres (manifest by, for example, the sale of videos, enquiries on the 1800 number, enquires about franchises and subscriptions to First Steps). The second is the existence of a number of centres distributed within the area in a way, and for a period of time, that would lead to knowledge of the centres and programs, over time, developing in the population of the area. By these two means it is probable TKG acquired a relevant reputation. That would be certainly so in relation to parents of young children as potential consumers and more probable than not amongst those interested in acquiring a franchise. It is for this reason I have referred to the existence of the reputation in 1989 and early 1990 in Victoria and New South Wales only as it was in these two areas only where these two features were present at that time. 130 As to the position of potential franchisees, the proper approach in ascertaining whether the conduct complained of contravened s 52, was discussed by a Full Court in SAP Australia Pty Ltd v Sapient Pty Ltd (above). In those proceedings it was alleged that the use of the word "Sapient" by the respondent in its name was conduct proscribed by s 52. The applicant also used the word "Sapient" as part of the name used in conducting its business. The Full Court said at par 51 (treating the reference to customer as a reference to potential franchisee): "[51] The first criticism of his Honour's reasoning on the TP Act claims focused on his observation that while the evidence showed that the dual use of the name "Sapient" could cause initial confusion, given the sophisticated nature and magnitude of the purchasing decisions of the relevant class of customer, it was unlikely that at the point of contract a customer would be confused as to the identity or nature of the company with which he or she was dealing. In response, it was rightly observed that misleading or deceptive conduct in trade or commerce is not limited to conduct which induces or is likely to induce entry into a transaction. So to propose would be to limit s 52 of the TP Act in a way not justified by its terms. Conduct which misleads a customer so that, under some mistaken impression of a trader's connection or affiliation, he or she opens negotiations or invites approaches may be misleading or deceptive even if the true position emerges before the transaction is concluded – TEC & Tomas (Australia) Pty Ltd v Matsumiya Computer Co Pty Ltd (1984) 1 FCR 28 at 38; State Government Insurance Corporation v Government Insurance Office of New South Wales (1991) 28 FCR 511 at 563; Trade Practices Commission v Optus Communications Pty Ltd (1996) 64 FCR 326 at 340. It is consistent with that general proposition, however, to accept that conduct may not be misleading or deceptive or likely to mislead or deceive, notwithstanding that it may engender temporary and commercially irrelevant error – see Lumley Life Ltd v IOOF of Victoria Friendly Society (1990) ATPR 40-987 at 50,838 per Lockhart J. The characterisation of conduct as "misleading or deceptive or likely to mislead or deceive" involves a judgment of a notional cause and effect relationship between the conduct and the putative consumer's state of mind. Implicit in that judgment is a selection process which can reject some causal connections, which, although theoretically open, are too tenuous or impose responsibility otherwise than in accordance with the policy of the legislation. In some cases there will be a selection process analogous to that which arises under s 82 of the TP Act in a determination of whether or not a claimed loss was caused by a contravention – State Government Insurance Corporation at 562." 131 In my opinion there was, after Gymboree commenced soliciting for franchisees, a real prospect that individuals in Victoria and New South Wales interested in obtaining or investigating obtaining a franchise in response to Gymboree's advertising would respond because they believed it was a franchise being offered by TKG. The nature of the business was unusual and the similarity between the names substantial. I do not think that anything turns on the "Australian identity" of the TKG program, a matter relied on by counsel for Gymboree. It is probable that, at the very least, some potential franchisees would have open discussion with Gymboree in the mistaken belief that it was the business of TKG. 132 As TKG consolidated its position in Western Australia in the 1990's (with centres opening in Como in 1990, Applecross (formerly Como) and Karrinyup in 1992, Fremantle in 1993, Kingsley in 1995 (an extension of Karrinyup), Kalgoorlie in 1996 and Bunbury in 1998) it is probable that a sufficient reputation developed for potential franchisees from Western Australia to be misled or deceived into believing franchises offered by Gymboree were to run the TKG program. I am not satisfied this is so in South Australia, Tasmania, Queensland or the Northern Territory or outside Australia. I am satisfied that the promotion of franchises by Gymboree using the name "Gymboree" in Victoria, New South Wales and Western Australia commencing in 1989 constitutes conduct in contravention of s 52. 133 It appears from the evidence that Gymboree has had no success in securing franchisees to operate Gymboree centres outside Queensland. However if it does then the consequences are likely to be, for reasons I shortly explain in relation to the operation of TKG centres in South Eastern Queensland, that parents who might consume gymnasia services provided by Gymboree franchisees using the name "Gymboree" in Victoria, New South Wales and Western Australia, could well be misled or deceived into believing they were gymnasia services provided by TKG. Some support for this conclusion derives from the evidence referred to in par 121 above. In this respect injunctive relief akin to a quia timet injunction might be justified: see s 80(4) and Hoover Co (Australia) Pty Ltd v Spackman (1998) 44 IPR 167 (predominantly a trade marks case) Aerospatiale Societe Nationale Industrielle v Aerospatiale Helicopters Pty Ltd (1986) ATPR 40-700 and Vieright Pty Ltd v Myer Stores Ltd (1995) 31 IPR 361. However I would be prepared to entertain submissions concerning the scope of any such injunction having regard to any limits on the power to make it. 134 I turn now to consider the conduct of TKG alleged by Gymboree to contravene s 52. In Gymboree's cross-claim, in its final form, the impugned conduct appears only to be, in substance, TKG conducting programs and centres using the word "Gymbaroo" in Queensland rather than the offering of franchises in that state. However the relief finally sought extended to restraining, inter alia, TKG from authorising others to use the name "Gymbaroo" in a similar way. This would presumably include use by franchisees. 135 The impugned conduct commenced in 1989 or 1990 when TKG acquired the ANUSA centres. At that stage there were three Gymboreecentres operating in the Brisbane metropolitan area and one on the Gold Coast (two of these centres were operated by a franchisee). Since 1986 the centres (having opened in 1986 [two centres], 1987 [one centre] and 1989 [one centre]) have been extensively promoted and I am satisfied that at the time TKG first entered the market in South East Queensland, the business and programs of Gymboree would have been widely known in Brisbane and surrounding areas to parents of children who might use those programs and also potential franchisees from that area. I am also satisfied that, by TKG commencing to operate centres in Brisbane, it was probable that these parents and potential franchisees might have been led to believe that the centres operated by TKG were businesses and/or centres associated with, and conducting the programs of, Gymboree. In commencing to operate the centres, TKG engaged in conduct proscribed by s 52 and also did so by offering franchises to operate centres in that area. The contravening conduct of both Gymboree and TKG is continuing. 136 Having concluded that both TKG and Gymboree have engaged in conduct in contravention of s 52, and there is no indication either will desistfrom engaging in that conduct, it is necessary to consider whether injunctive relief should be granted and, if so, in what terms. 137 Gymboree resisted injunctive relief against it on the basis that TKG had delayed in bringing the proceedings and was seeking to protect the use of a name Mrs Sasse had copied. Accepting delay is a relevant consideration: see e.g The Boots Company (Australia) Pty Ltd v Smithkline Beecham Healthcare Pty Ltd (1996) ATPR 41-459 at 42,598 and Al Hayat Publishing Company Ltd v Sokarno (1996) 34 IPR 214 (cases concerning interlocutory injunctive relief) and BR Gamer (Investments) Pty Ltd v Gamer (1993) ATPR 41-200 and BM Auto Sales Pty Ltd v Budget Rent A Car Pty Ltd (1976) 51 ALJR 254, I am not satisfied that the delay therehas been between 1991 (Mrs Sasse knew, at the latest, of Gymboree's franchising program in late 1991) and the time the proceedings commenced in February 1996 is a reason for refusing injunctive relief even taken together with other considerations. Delay can be of particular relevance if it facilitates entry into the market by the respondent: see Greyhound Pioneer Australia Ltd v Pioneer Motor Service Pty Ltd (1997) 38 IPR 385 but the market position of TKG and Gymboree has (in the broad sense) since 1990/1991, and since Gymboree commenced marketing franchises in Australia, been essentially the same. While TKG did nothing between 1991 and 1996 to attempt to restrain Gymboree's conduct it did not take any active steps that would have led Gymboree into believing that its contravening conduct was accepted. 138 Similarly and accepting that the conduct of copying the Gymboree Corp name is a relevant consideration: see e.g. Visa International Service Association v Beiser Corporation Pty Ltd (1983) ATPR 40-373 I am not satisfied that the fact that the name "Gymbaroo" is a copied name, should of itself or with other considerations, justify the refusal of injunctive relief. It is true that the name adopted by TKG is a deliberate adaption of the name that TKG now seeks to restrain Gymboree from using. However the power conferred on the Court by s 80 is not simply to protect individual rights. The following observations of von Doussa J in Glev Pty v Kentucky Fried Chicken Pty Ltd (1994) ATPR 41-299 at 41,981 are apt: "However, it must be remembered that these proceedings are brought under the umbrella of the Trade Practices Act which is an Act for the protection of consumers. There is an element of public interest involved. That being so, the Court will be slower to withhold relief than would be an equity court in a suit involving individual interests alone. The "unclean hands" argument is a matter to be taken into account, but it may not be a matter that would lead to the withholding of a remedy if the public interest appeared to require a remedy to protect consumers." 139 I have already indicatedthat if Gymboree continues to offer franchises resulting in the use of the name "Gymboree" in the markets where TKG has a long established presence, it is likely potential consumers of the services provided by TKG will be deceived and misled. 140 Gymboree, through the Grahams, have known of the activities of TKG since they commenced operating their business in 1986. They have not sought to restrain TKG from using the word "Gymbaroo" and since then the business of TKG has expanded and consolidated. These considerationstend to balance the consideration flowing from the deliberate use, by adaptation, of the name "Gymboree" by Mrs Sasse. An injunction should issue to restrain the contravening conduct of both Gymboree and TKG but limited to what is necessary in the circumstances: see Campomar Sociedad Limitada v Nike International Ltd [2000] HCA 12 at par 111 and not for the purpose of creating monopoly rights. That would be, as to TKG, an injunction restraining it for carrying on business, directly or through franchisees, using the name "Gymbaroo" in the areas in which Gymboree can operate directly or indirectly centres under the 1986 agreement, namely the local government districts of Brisbane, Logan, Ipswich, Cleveland/Redland Bay and Redcliffe. As to Gymboree, that would be an injunction restraining it from offering franchises to residents in New South Wales, Victoria and Western Australia and offering franchises to establish centres using the name "Gymboree" in New South Wales, Victoria and Western Australia though subject to my remarks in para 133 above. 141 The claim based on passing off would not lead to a materially different result than that emerging from the claim for relief based on the TP Act and, accordingly, it is unnecessary to deal with that claim in detail. Conclusion 142 I presently have the impression, particularly from the evidence of Mrs Sharpe and Mrs Sasse (which I need not now detail) that these proceedings were instituted almost by happenchance. I also gained the impression during directions hearings that there was, at times, a real interest on the part of those involved to resolve, by agreement, all issues between them and no particular interest in the proceedings continuing. However they have. Whether, at this late stage, there is any prospect of the matter settling I do not know. However I propose to give the parties 21 days to consider that issue and, in the meantime, for the parties to bring in orders to give effect to these reasons. During that period any submissions on costs should be filed and served by all parties and filed no later than 14 days after the date of the publication of these reasons. I certify that the preceding one hundred and forty-two (142) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore. Associate: Dated: 12 May 2000 Counsel for the applicants/cross respondents: Mr D M Yates SC with Mr G Holley Solicitor for the applicants/cross respondents: Deacons Graham & James Counsel for the first respondent/first cross claimant: Ms J Baird Solicitor for the first respondent/first cross claimant: Dunhill Madden Butler Counsel for the second respondent/second cross claimant: Mr A Franklin Solicitor for the second respondent/second cross claimant: Griffith Hack Dates of Hearing: 3-7 May, 22 July, 10 August 1999 Date of Judgment: 12 May 2000 SCHEDULE 1 Page 1 of 2 The "A" Mark The "B" Mark SCHEDULE 1 Page 2 of 2 The "C" Mark The"GC"Mark