Cross-border licensing – Maxim Media Inc. v Nuclear Enterprises

The Federal Court decision in Maxim Media Inc. v Nuclear Enterprises Pty Ltd [2024] FCA 1443 involved an interlocutory application seeking injunctive relief by Maxim Media Inc. and Maxim Inc. (together, Maxim) (Applicants) for alleged breaches of sections 18 and 29 of the Competition and Consumer Act 2010 (Cth), passing off and infringement of a registered trade mark under section 120 of the Trade Marks Act 1995 (Cth).

The application was made against Nuclear Enterprises Pty Ltd (Nuclear) and Mr Michael Ronald Downs (Mr Downs) (Respondents).  Maxim, a US-based multimedia business, sought to restrain the respondents from using as a trade mark the word “Maxim” or any word that includes the word “Maxim”:

“…in relation to the publication of a magazine or a website on or in relation to men’s lifestyle, interests and popular culture, or in relation to tour operations or travel services, or in relation to model management or model booking services”.^[1]

The grounds that the Applicants sought relief were based on:

• breach of contract;
• estoppel;
• trade mark infringement;
• abandonment;
• misleading and deceptive conduct and the tort of passing off; and
• accessorial liability against Mr Downs the second respondent.

This article does not discuss the issues of estoppel of abandonment.

Breach of contract

The first ground which was considered by Rofe J was based on an alleged breach of contract pursuant to the terms of a licence agreement (Licence) granted by Maxim’s predecessor, Alpha Media Group Inc. (Alpha), to Nuclear in 2011.  The Licence granted Nuclear the exclusive right to publish ‘MAXIM Magazine’ and operate the associated website in Australia and New Zealand.  It also included an exclusive right to use the ‘Maxim’ trade mark for these purposes.

The Licence expired in 2016, but Nuclear continued publishing the magazine, using the trade mark and paying an annual fee to Maxim.  The Applicants argued that the parties operated under the terms of an ‘implied licence agreement’ based on their conduct and a course of dealings.  However, the Respondents submitted that the existence of an implied licence by conduct are ‘rare’ and required evidence to be proven, citing Ying Mui Pty Ltd v Hoh (No 3) [2017] VSC 29; 349 ALR 296.  Based on the lack of evidence, the Respondents submitted that the Applicants’ alleged breaches of the Licence which had expired some eight (8) years ago.

The Applicants also claimed that Nuclear breached the terms of the Licence and the alleged implied agreement by applying to register the ‘MAXIM’ trade marks in Australia, failing to pay licence fees, and continuing to use of the Maxim trade marks without authorisation.

The Respondents argued that the Licence had expired and that the parties’ post-expiration conduct suggested different terms.  It also submitted that the governing law of the Licence is New York law, potentially impacting the enforceability of certain clauses.

Trade mark infringement

The Applicants alleged that Nuclear had infringed its registered trade mark pursuant to section 120 of the Trade Marks Act 1995 (Cth) (TM Act) because it had used the ‘MAXIM’ mark without authorisation.  However, it was noted that the Applicants did not hold any registered trade marks for ‘MAXIM’ in Australia, raising the issue of whether they had standing to sue for infringement.

The Applicants argued that they should be recognised as the beneficial owner of the ‘MAXIM’ trade marks registered in Australia by Nuclear by the imposition of a constructive trust, which would grant them standing to sue for infringement.

It was submitted by Counsel for the Respondents that Nuclear holds registered trade marks for ‘MAXIM’ in Australia, which it provides a defence to infringement claims under the TM Act.

The question of whether a constructive trust can be imposed and whether it would overcome the statutory defence under Australian trade mark law are complex legal issues central to the case.

Cancellation of trade marks

The Applicants also sought to revoke the Maxim trade marks that had been registered in Australia by Nuclear and submitted that the applications could have been opposed on various grounds, including deceptive similarity.

Misleading and deceptive conduct and passing off

The Applicants also alleged that by continuing to publish the ‘MAXIM Magazine’ under its own name, Nuclear had engaged in misleading or deceptive conduct under the Australian Consumer Law and that they had committed the tort of passing off.  The Applicants claimed that consumers are likely to believe that Nuclear’s publications are associated with or endorsed by Maxim, leading to potential confusion and harm to Maxim’s reputation.

The Respondents argued that Maxim has not established a reputation in Australia and that any perceived association with the ‘MAXIM’ brand is attributable to Nuclear’s long-standing authorised use.

The issues of reputation, consumer perception, and the potential for misleading or deceptive conduct were areas of dispute in this part of the case.

Accessorial liability

The Applicants sought to hold Mr Downs, the sole director of Nuclear, personally liable for the alleged breaches of contract, trade mark infringement and misleading and deceptive conduct.

However, it was held that to establish Mr Downs’ personal liability, it would require proving his direct involvement in the infringing activities, which Maxim had not demonstrated conclusively.

What did the Court ultimately find?

In regard to the breach of contract allegation, the Court found that the Applicants had a prima facie case for breach of contract.  It was held in relation to the other causes of action that the Applicants did not have a prima facie case against the Respondents.  Rofe J concluded in relation to the misleading and deceptive conduct allegations that there was a weak prima facie case based on this ground and passing off.

Unfortunately for the Applicants, there was insufficient evidence adduced which would indicate the level of involvement required by Mr Downs that would render him personally liable.

For the reasons listed above, Rofe J refused to grant the interlocutory relief and stated that, due to the complexity of the issues raised, this matter would have been better dealt with by an ‘expedited hearing’ as opposed to an interlocutory application.

Lessons for cross-border licensing

In this case, it seems plain that it would have been better for the Applicants to have entered into a new licence agreement as opposed to allowing the old one to expire.  The terms of the renewed  licence could have addressed many of the deficiencies in the pleaded case and could have avoided the need for the application in the first place.

Links and further references

Legislation

Competition and Consumer Act 2010 (Cth)

Trade Marks Act 1995 (Cth)

Cases

Maxim Media Inc v Nuclear Enterprises Pty Ltd [2024] FCA 1443

Hashtag Burgers Pty Ltd v In-N-Out Burgers, Inc [2020] FCAFC 235

Ying Mui Pty Ltd v Hoh (No 3) [2017], VSC 29; 349 ALR 296

Further information about cross-border licensing

If you need advice on cross-border licensing or IP licence agreements, contact us for a confidential and obligation-free discussion:

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

[1] Rofe J at paragraph 3 of Maxim Media Inc. v Nuclear Enterprises Pty Ltd [2024] FCA 1443.

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