High Court clarifies ‘honest concurrent use’ in Zip Co Ltd v Firstmac Ltd

Firstmac has been the registered owner of the word mark ‘ZIP’ in class 36 in respect of financial affairs (loans) (Firstmac Mark) since 20 September 2004. 

In 2012, Mr Diamond, co-founder of the Zip Companies, began developing an online short-term lending business and considered the name ‘ZIP’ as a short, catchy name intended to evoke speed. 

In early 2013, his co-founder, Mr Gray, conducted internet searches for ZIP, which returned no results for Firstmac's ZIP home loan products. Mr Diamond also conducted frequent internet searches for the name ZIP while planning and developing the business and did not recall seeing any reference to Firstmac or its use of the name ZIP during those searches.

By June 2013, Mr Diamond and Mr Gray had settled on using the names ‘ZIP’ and ‘ZIP MONEY’ for their business, without being aware of the Firstmac Mark.

The Zip Companies filed trade mark applications for the ZIP MONEY and ZIP logos in August 2013. Before filing the applications, Mr Diamond did not search the Register of Trade Marks or seek legal advice about the registration.

In October 2013, the trade mark applications received adverse examination reports citing the Firstmac Mark as a barrier to registration. From the time of receiving these reports at the latest, Mr Diamond was aware of Firstmac and that IP Australia considered that the existence of the Firstmac Mark potentially precluded the registration of the Zip Companies trade mark applications. 

The Zip Companies' first used the marks in November 2013 when they offered their ‘Zip Money’ consumer credit product to Australian consumers.

The Zip Companies’ trade mark applications lapsed in February 2015.

In June 2015, The Zip Companies again sought trade mark registration, including for the words ZIP and ZIPMONEY in class 36. By this time, the Zip Companies' business had 6212 customers and revenue of around $400,000. IP Australia again issued adverse examination reports stating that the marks sought to be registered were similar to the Firstmac Mark.

In June 2019, Firstmac commenced infringement proceedings against the Zip Companies. 

At first instance, the Federal Court found that the Zip Companies had established defences of honest concurrent use under ss 122(1)(f) and 122(1)(fa), read with s 44(3) of the Trade Marks Act. The Full Court reversed this finding, holding that the Zip Companies had failed to prove honesty at the date of first potential infringement in November 2013.

The principal issues considered by the High Court included:

• the time at which the defences of honest concurrent use in sections 122(1)(f)-(fa), read together with s 44(3) of the TMA are to be assessed; and
• the meaning of ‘honest’ under s 44(3)(a) of the Trade Mark Act.

The Zip Companies argued that the Full Federal Court incorrectly treated the date for assessing honest concurrent use as the date of first potential infringement. They argued that the relevant date should instead be the date they filed their defence or, alternatively, the date of the hearing before the trial judge.

The High Court held that this argument undermined the purpose of the honest and concurrent use defence. This approach would introduce a ‘radical break’ in the history of the doctrine of honest concurrent use by transforming the doctrine from one that assesses honesty at the time of the concurrent use into one that assesses honesty at the time of filing a defence, or at trial, and applying that assessment retrospectively.

The High Court unanimously rejected the Zip Companies’ assessment and found that the defence must be assessed at the date of the alleged infringing conduct. 

In this case, the date for assessing honest and concurrent use was November 2013, being the date, the Zip Companies first used ZIP as a trade mark. 

The High Court referred to the following principles regarding the meaning of ‘honest’: 

• In determining whether an act is dishonest in the ordinary sense of that word it is necessary to identify ‘the knowledge, belief or intent which is said to render that act dishonest’ and to assess dishonesty by reference to that knowledge, belief, or intent. The standard of dishonesty is assessed by the standards of ordinary, decent people and not as a ‘Robin Hood test’, by reference to the subjective standard of honesty held by the person alleged to have been dishonest (at [57]).
• In assessing whether a person has proved their honesty, an important factor will be whether they knew of the competing mark. However, the mere knowledge of the competing mark will not preclude a finding of honesty (at [62]). 
• A person may have better prospects of establishing honesty if the person had no knowledge of another's mark at the date of the alleged infringing use of that other mark. The person seeking to prove honesty may have to convince a court that they did not deliberately abstain from searching the Register for fear of what it might reveal, since the use of the Register for inquiry before seeking registration of a mark is its obvious and intended function. A careless failure to search the Register will not, by itself, establish a lack of honesty. A person might therefore establish that they had honestly overlooked the importance of such an inquiry before using an adopted mark in an otherwise honest manner (at [63]).

The High Court found that the trial judge erred in assessing honesty at a point earlier than the date of first potential infringement, which distorted the onus of proof. 

Instead, the honesty of the Zip Companies should have been assessed at the time they first used their marks in November 2013, after Mr Diamond and Mr Gray had received the initial adverse reports and became aware of the Firstmac Mark.

The High Court noted that the issue was not whether the Zip Companies were dishonest, but whether they had discharged their onus of positively proving their honesty.

From November 2013, Mr Diamond knew of the Firstmac Mark through the adverse examination reports. However, the Zip Companies did not lead sufficient evidence to establish that, despite this knowledge, Mr Diamond believed consumers would experience no confusion that might benefit the Zip Companies, or that the failure to consider these matters was not reckless. 

These evidentiary gaps precluded a finding that the Zip Companies had proved their honesty.