13 – Business Law Newsletter
In this edition:
- Don’t be a victim of your own success – put your (trade) mark on it
- Director Residency – Are You Well Connected?
- Business Law Team
Don’t be a victim of your own success – put your (trade) mark on it
Have you ever been to Australia and wondered why Burger King is not Burger King? For those non-fast food eaters, Burger King (BK) is actually Hungry Jack’s in Australia.
In the 1970s, Jack Cowin decided to introduce the franchise into Australia. Cowin was confronted with a terrible dilemma – the trade mark for Burger King was already registered, to a take away shop in Adelaide. Cowin settled on the name Hungry Jack’s, with the first store opening in Perth in 1971. Despite opening as Hungry Jack’s the battle to secure the BK brand continued. However, in 2003 BK finally gave up attempting to acquire the BK brand in Australia and stuck with Hungry Jack’s. Simply put, BK fell short by not trade marking its brand in the countries that it intended on expanding to.
How can you ensure this doesn’t happen to you?
Register your Trade Mark
A trade mark is “any sign capable of being represented graphically and distinguishing the goods of one person from those of another person”. A trade mark can consist of anything from a name, picture, colour, smell, word, shape or an image, or a combination of those elements.
BK’s Would-be Trade Mark Benefits
An Australian trade mark for the BK brand would have gone a long way towards protecting the brand of the business. Some benefits to trademarking the BK brand from the outset would have been:
- the ability to use the ® symbol once the trade mark had been officially registered, and use the ™ symbol once the trade mark had been applied for;
- the added legal protection from other traders who may have attempted to imitate or copy the BK brand;
- to secure BK’s place in the fast food industry; and
- the ability to assign or sell the trade mark had it been registered before the take away shop in Adelaide.
BK would have been the recipient of these benefits but-for the registration of ‘Burger King’ by the Adelaide takeaway shop. This is a position that we do not want our clients to be in – rather, we want you to be at the front of the queue.
You didn’t Trade Mark your brand, now what?
If you don’t register your trade mark, you run the risk of someone else using your brand and associating your business’s goodwill with their brand or business. Trade mark law in New Zealand applies the concept of “first in time” meaning that where a trade mark has already been registered, no similar or identical trade mark can be registered by another company that provides similar services.
We stress brand protection at the front end because we know the extensive time, cost and energy consumed by trying to protect your unregistered trade mark from business competitors. Without registration, you will be relying on remedies under the Fair Trading Act 1986 or common law remedies for the tortious act of passing off if someone is, without authorisation, using your brand and/or trying to associate their business with yours.
Therefore the cost of protecting your business’s brand from the outset is a fraction of the cost that you may be faced with if you then seek redress for unauthorised use of your brand by another party. Our advice is to register your trade mark as soon as possible to avoid any issues down the track.
Use it or lose it
Sometimes even having a registered trade mark is not enough. Once your trade mark is registered, use it far and wide, so far that people who see your brand instantly associate it with your business. Forbes recently released results which found that the value of brand reputation was almost as important as the actual assets. For example, some interesting facts are:
- the words “trampoline” and “thermos” used to be trade marked but lost them due to genericization;
- the Coca-Cola trade mark was first registered in 1893; and
- the McDonalds arches are more recognised than the Christian cross.How can we help?
- extensively searching all of the appropriate platforms to establish whether your brand can be registered in the first instance;
- confirming that your trade mark will not be infringing anyone else’s trade mark;
- helping you choose the right classes for your trade mark;
- drafting trade mark applications to ensure you have the most appropriate protection; and
- helping you to resolve any issues which may arise, such as objections to your trade mark application.
Building a brand is hard work. Protecting it is even harder. Let us do that for you. Contact the Corporate Team at Lane Neave for assistance with all of your brand protection needs.
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Director Residency – Are You Well Connected?
As of last year, it became an essential requirement of all New Zealand companies that at least one director must either live in New Zealand, or live in an enforcement country (presently only Australia), and also be a director of a company registered in that country. If a company does not meet this requirement, the Registrar of Companies (Registrar) will initiate de-registration of the company.
There is no guidance in the Companies Act 1993 (Act) as to what is required for a director to be deemed to ‘live in New Zealand’, and until recently, no direction from the Courts. One director, Malcolm Carr has won his appeal against the Registrar in Re Carr  NZHC 1536, providing useful guidance on the ‘live in New Zealand’ requirement. The Court has made it clear that it is not necessarily how much time you spend in New Zealand that matters, but also the extent of your connections to New Zealand, both personally and professionally.
NZ Resident Director Requirement
Recent amendments to the Act made it compulsory for all companies in New Zealand have a director who meets the above requirements. Prior to this, there had been no requirements around the residency of directors in New Zealand. The reason for the change was that a company should have someone in New Zealand who can be held to account for that company. In particular, they should be responsible for the company’s administrative affairs (such as reporting and record-keeping obligations).
In the absence of any guidance in the Act, the Registrar has established its own test for whether a director automatically meets the requirement, or whether his or her circumstance needs further evaluation. Essentially, if a director lives in New Zealand for 183 days (or more) in a 12 months period he or she is deemed to reside in New Zealand for the purposes of the Act. It is only if a director falls short of this that his or her status will be questioned further. This was the case for Mr Carr who challenged the decision of the Registrar.
Mr Carr did not meet the 183 day threshold, in that he customarily spends only one third of the year in New Zealand; at no point over the last six years has he spent more than 183 days in New Zealand in any given year. It is upon this basis that the Registrar determined Mr Carr did not ‘live in New Zealand’ for the purposes of the Act, and therefore all of the companies of which he was the sole director were non-compliant.
Mr Carr successfully argued that a broader approach, beyond just the days spent in New Zealand, should be taken into consideration.
In addition to considering that one third of the year was a significant amount of time (albeit below the 183 day threshold set by the Registrar), the Court considered the following to be relevant:
- the director’s connection to New Zealand;
- the director’s ties to New Zealand (both personally and professionally); and
- the director’s manner of living while he is here.
In Mr Carr’s case, the matters that supported this included the fact that his partner resides in New Zealand for most of the year, that he owns a home here (which he lives in while in New Zealand), he is a member of various clubs and organisations, and his primary physician is his New Zealand GP. He also owns businesses requiring his oversight, owns land and has bank accounts in New Zealand. The Court held that he “generally presents as a any New Zealand business person would”.
Ultimately, Mr Carr’s situation did not allow him to escape his obligations or accountability to his companies under the Act. Because the primary purpose of the requirement is enforcement, the Court considered that more weight should be placed on the ties a director has to New Zealand and the regularity of periods of stay in New Zealand. While the time a director spends in New Zealand is important, and can give a director an automatic ‘in’, it does not definitively rule anyone out.
How can we help?
Lane Neave can help with any of your queries regarding this requirement or any other corporate governance matter. Whether at the time of incorporation, winding up of the company, or somewhere in between, the Corporate Team has the expertise to assist.
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Business Law Team
If you have any queries in respect of the above, or any other business law issues, please contact a member of Lane Neave’s Business Law Team:
Disclaimer: The content of these articles are general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.