When does “honest concurrent use” of a trade mark cease to be so?

In Zip v Firstmac, the High Court of Australia has clarified the operation of the honest concurrent defence against allegations of infringement of a registered trade mark, which had been a question of uncertainty prior to this decision.¹

This decision is a reminder that businesses must ensure they conduct thorough trade mark searches (through the trade mark register) and should obtain legal advice before adopting and using a mark, particularly where there may be similarities to registered trade marks.

In terms of the findings, the key takeaways are that:

• the defence of honest concurrent use must be assessed at the time of each alleged infringement, and requires that the potential infringing party positively proves they had a state of mind that was honest according to the standards of ‘ordinary, decent people’;
• awareness of a conflicting registered trade mark and failure to address known risks (such as receiving an adverse report identifying a conflicting registered trade mark) will likely undermine any claim to honest use; and
• where faced with awareness of a potentially conflict registered trade mark, parties consider whether they genuinely believe that the continued concurrent use and adoption of their trade mark would not be likely to cause confusion of consumers.

Facts of the appeal

The respondent Firstmac Ltd (Firstmac) is a non-bank lender and has owned the registered word mark “ZIP” for financial affairs (loans) (in Class 36 “services”) since September 2004 (Firstmac Mark). Firstmac used the Firstmac Mark in connection with home loan products offered to customers for a number of years, before ceasing to offer its ZIP home loan products to new customers at the start of 2014.

The appellant companies, Zip Co Ltd and Zipmoney Payments Pty Ltd (Zip Companies) founded by Mr Diamond and Mr Gray in 2013, are a ‘buy now pay later’ provider.

The events leading to the dispute are summarised as follows.

• in mid-2012, Mr Diamond began contemplating establishing a business offering short-term lending to consumers. Later in the year, Mr Diamond and Mr Gray discussed about the name ‘ZIP’;
• by November 2012, Mr Diamond registered the domain name zipmoney.com.au;
• by early 2013, Mr Gray and Mr Diamond conducted internet searches for ‘ZIP’ quite frequently however found no results in relation to Firstmac’s home loans;
• by mid-2013, the Zip Companies were incorporated, still unaware of the Firstmac Mark;
• in August 2013, one of the Zip Companies, Zipmoney Payments Pty Ltd (Zipmoney) lodged trademark applications for ZIP-related logos (2013 Applications). In October 2013, IP Australia issued Zipmoney with adverse examination reports (Adverse Reports);
• the Court accepted that at least at the point of the Adverse Reports, Mr Diamond became aware of the Firstmac Mark and understood that it posed a potential barrier to the registration of Zipmoney’s marks, despite him giving the Adverse Reports little attention;
• it did not occur to Mr Diamond that Zipmoney should seek legal advice or respond to the Adverse Reports. The Zip Companies then began using their marks commercially in November 2013, launching their ‘Zip Money’ consumer credit product;
• by February 2015 (after applying for an extension of time), the 2013 Applications lapsed. In June 2015, Zipmoney subsequently made further attempts to secure trade marks for “ZIP” and “ZIPMONEY” registration in Class 36. IP Australia again issued adverse examination reports based on similarity to the Firstmac Mark;
• rather than seek Firstmac’s consent for the use of the ZIP and ZIPMONEY marks, on 19 August 2016, Zipmoney brought an application under sections 92(1) and 92(4)(b) of the Trade Marks Act 1995 (Cth) (TM Act) for the removal of the Firstmac Mark from the Register for non-use, which was rejected by a delegate of the Registrar of Trade Marks; and
• on 22 March 2019, Zipmoney filed a second application for the removal of the Firstmac Mark from the Register for non-use. In response, in June 2019, Firstmac commenced infringement proceedings against the Zip Companies. The Zip Companies sought to rely on the defence of honest concurrent use under sections 122(1)(f) and 122(1)(a) together with section 44(3) of the TM Act.

The primary Judge’s rulings

Markovic J found that the Zip Companies had infringed the Firstmac Mark by the use of ZIP simpliciter, the stylised Zip marks and the domain name www.zip.co. but that ‘ZIP PAY’ and ‘ZIP MONEY’ did not infringe the Firstmac Mark. Her Honour found that the Zip Companies succeeded in making out the defence of honest concurrent use as:

• the combined effect of sections 122(1)(f) and 122(1)(a) together with section 44(3) of the TM Act required the defence of honest concurrent use to be considered at the date of the alleged infringing conduct; and
• since the first half of 2013, Mr Gray and Mr Diamond acted honestly in their development of the Zip Companies’ marks.

The Full Court’s decision

The Full Court unanimously allowed Firstmac’s appeal and found:

• the Zip Companies’ marks were deceptively similar to the Firstmac Mark and the trial judge erred in placing the same weight on the words ‘Zip’ and accompanying words; and
• the Zip Companies failed to affirmatively prove that the Zip Companies’ use of the mark in November 2013 was honest given Mr Diamond’s knowledge of the Firstmac Mark and the Adverse Reports.

The High Court Appeal

On appeal by the Zip Companies, the two primary questions that confronted the High Court were:

• what is the date at which the defence in s 122(1)(f) and (a), read with s 44(3) of the TMA applies?; and
• what is the meaning of ‘honesty’?

The Zip Companies submitted that:

• the Full Court erred in finding the date of assessment to be the date of the first infringing use (being November 2013);
• the correct approach is to assess honest concurrent use at the date of the defence raising it, or alternatively, the date of the hearing when that defence is pressed.; and
• honesty must be assessed subjectively.

The High Court unanimously dismissed Zip Companies’ appeal for the following reasons.

Date of the application of the defences
The Court, upholding the Full Court’s decision, found the time at which the defences of honest concurrent use are to be assessed is at the time of each alleged potential infringement because the defence is purported to ‘maintain coherence with the scheme concerning registration’.²

Assessing honest concurrent use at a later date, such as the date of filing the defence or the hearing, would be a “radical break in the history of the doctrine of honest concurrent use”.

The defence does not operate “once and for all potential infringements” based on the defence to the first infringement, meaning that the defence of honest concurrent use applies separately to each potential infringement of a trade mark.

The meaning of ‘honesty’
The Court confirmed that honesty is to be assessed based on ‘the standards of ordinary, decent people’.³ Their Honours (cautioning that there was no fixed list of circumstances that can give rise to doubts about whether a person’s state of mind was honest) identified several factors which informed their determination of honesty in this case, such as:

• whether the person held ‘a genuine belief that use and adoption of its mark would not be likely to cause confusion’. An important factor in determining this genuine belief is whether the person had knowledge of the competing mark;⁴ and
• deliberately avoidance of searching IP Australia Register can give rise to an inference of dishonesty.

Based on these factors, the High Court found the Zip Companies has not proven the honesty of their conduct, in that the Zip Company:

• knew about the Firstmac Mark, given that the Zip Companies had been refused registration of its marks (by way of the Adverse Reports) and accordingly were inferred to be aware of a ‘material impediment’ to the legitimate use of their marks;
• chose to not engage with, or seek any legal advice, with respect to the Adverse Reports before launching products using the ZIP marks; and
• did not lead sufficient evidence that:
  • despite knowing about this material impediment, that Mr Diamond considered whether consumer would experience no confusion between the Firstmac Mark and the Zip Companies’ marks; and
  • Mr Diamond had not been reckless in failing to do so.

Lavan comment

Businesses should:

• conduct thorough trade mark searches and obtain legal advice before adopting and using a mark, particularly where there is any indication of a conflicting registration;
• respond proactively to adverse reports and continuously reassess risks, as continuing use after becoming aware of potential conflicts can undermine any claim of honest concurrent use; and
•  keep clear evidence of decision-making in respect of any honest concurrent use of a trade mark (including whether the business has considered whether consumers would experience confusion by use of the mark).

If you require assistance with registering trade marks, advice in respect of potential infringements (whether taking action, or defending, against allegations of infringement) or would like advice on how best to protect your brand and intellectual property, please do not hesitate to contact partner Iain Freeman or special counsel Andrew Sutton.

Disclaimer

The information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.

Footnotes

1. [2026] HCA 16.

2. Ibid [48].

3. Ibid [57].

4. Ibid [61]-[62].