Bodies Corporate and Intellectual Property

AccomNews Monday, October 1, 2012

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Following the recent decision in the Federal Court of Australia in Mantra IP P/L v Spagnuolo [2012] FCA 769 (Q1 Case), there has been renewed interest in the registration of trademarks incorporating the names of strata buildings and other community management schemes.

The Q1 case has generated this interest because it highlights the benefits of and necessity for sound intellectual property protection strategies for:

1. developers of schemes; and
2. the bodies corporate of existing schemes that do not already have registered trademarks.

Sadly, while intellectual property management is common practice in other forms of business, it has not been the norm in relation to schemes; except for larger schemes and schemes under management by operators such as the Mantra Group.

The Q1 case: The Q1 case involves a dispute over the attempt by Manta IP P/L to register trademarks with IP Australia related to the Gold Coast building called Q1. In September 2005 the company now known as Sunleisure Hotels & Resorts P/L was appointed caretaker and letting agent by the body corporate for the residential component of the Q1 building. Since then Sunleisure has operated a resort at the Q1 building called the Q1 Resort & Spa and in mid-2007, Sunleisure became a part of the Mantra Group of companies.

Before Mantra attempted to register the disputed trademarks with IP Australia, other letting agents with no contractual relationship with the Q1 body corporate began trading by association with the Q1 building. However, when Mantra did attempt registration it was these letting agents that objected because they considered it a threat to their now established businesses.

One such objector was Spagnuolo, the owner of two apartments in the Q1 building and a party to letting agreements with the owners of a number of other apartments. He operates a short term holiday accommodation business under the name Q1 Holidays Gold Coast.

Initially, Mantra’s application for registration of the trademarks was rejected by IP Australia on the basis that:

1. the trademarks could be deceptive or misleading;
2. the phrase “Q1” should be available for use by anyone; and
3. the Q1 body corporate may not renew its contract with the Mantra Group meaning that Mantra would continue to hold its Q1 trademarks in relation to caretaking and letting services even though the rights to caretaking and letting services from the Q1 building may have passed to someone else.

The Q1 case was in essence, Mantra’s appeal against the decision by IP Australia and an attempt to dismiss Spagnuolo’s objection.

It should be noted that the name of a scheme is not capable of being registered as a trademark. This is because a trademark must be “used, or intended to be used, to distinguish goods and services”. In that regard a trademark for a scheme could not be registered because they distinguish one scheme from another and not goods and services.

The Q1 case considered whether:

1. a person could obtain registration of a trademark where that trademark is also the name of a scheme;
2. the registration of the trademark would mislead and deceive members of the public to believe that only the registered owner of the trademark was entitled to offer units for let in the scheme; and
3. the applicant for registration of the trademarks was the owner of the trademarks and entitled to apply for registration.

The Court held, in relation to these three issues, that:

1. the Q1 trademark was capable of distinguishing the Mantra Group’s services from competing services provided by others;
2. the use of the trademark Q1 alone would not mislead or deceive members of the public;
3. Mantra IP was the owner of the unregistered trademark Q1and entitled to apply for its registration; and
4. there was no other ground for rejection of Mantra’s applications to register the term Q1as a trademark.

Conclusion: What then can be taken from the Q1 case for developers, bodies corporate and letting managers?

While the names of schemes themselves cannot be registered as trademarks, the name of a scheme can be registered in relation to goods and services. Trademark registration is an important part of brand protection for any business. Registration of a scheme’s name as a trademark by its developer could mean that the value of caretaking and letting rights may be greater when being first sold.

The registration of a scheme’s name as a trademark will not prevent:

1. other traders operating from within that scheme from using the scheme’s name to indicate the location of their business; or
2. competing businesses from using the name of the scheme when referring to units available in that scheme.

But, it will give the owner a competitive advantage. For example, while Spagnuolo will still be able to offer units in the Q1 building for letting and he will be able to use the term Q1 in relation to those units, it appears unlikely that he will be able to continue to trade as Q1 Holidays Gold Coast without breaching Mantra’s trademark.

Trademarks and other intellectual property, such as domain names, are valuable property that can be acquired and maintained relatively cheaply. If bodies corporate do not register trademarks and domain names in relation to their scheme third parties may do so. This exposes bodies corporate to a number of risks, as follows:

1. If the caretaker or letting agent registers the trademark circumstances may arise where they will still hold the trademark bearing the Scheme’s name even though they are no longer under contract;
2. Speculators could seek to profit by taking advantage of commercial opportunities in this area; and
3. If third parties register trademarks and domain names the body corporate could lose control over the use of the name associated with its scheme.

As owners of the scheme and persons who have invested in the scheme’s brand, the body corporate should be concerned with being able to control the use of the scheme’s name so that misuse and unauthorised use does not damage the name and reputation of the scheme or reduce the value of their investment.

It is therefore recommend that:

1. Developers who are developing schemes register intellectual property in the names of the schemes in order to protect their investment and increase the potential value of their development;
2. Bodies corporate of existing schemes should, if it is not already registered, register the name of their building or scheme so that they can control the use of the name of the Scheme in order to protect their investment and the scheme’s brand; and
3. Caretakers and letting agents should, if it is not already registered, register the name of the scheme so that they can maintain a competitive advantage and protect their investment in the management rights of the scheme.

Kane Jacobsen
Macgillivrays Lawyers