Waikato Business News August/September 2020
Waikato Business News has for a quarter of a century been the voice of the region’s business community, a business community with a very real commitment to innovation and an ethos of co-operation.
Waikato Business News has for a quarter of a century been the voice of the region’s business community, a business community with a very real commitment to innovation and an ethos of co-operation.
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WAIKATO BUSINESS NEWS <strong>August</strong>/<strong>September</strong> <strong>2020</strong><br />
35<br />
When IP rights are bona vacantia<br />
it ain’t no vacation<br />
In my last article I wrote about the importance of doing<br />
thorough due diligence on any business or asset acquisition.<br />
I<br />
recommended drawing up a<br />
list of due diligence issues,<br />
including identifying and<br />
verifying ownership of all intellectual<br />
property assets. With<br />
this article I explore a related<br />
issue – the risk of IP rights being<br />
bona vacantia after a business’s<br />
assets have been sold.<br />
What is bona vacantia?<br />
Bona vacantia is Latin and<br />
means ‘unclaimed goods’.<br />
More broadly, it means<br />
unclaimed property. ‘Property’<br />
includes intangible assets like<br />
trade marks, patents, copyright,<br />
trade secrets and designs.*<br />
The issue of IP assets being<br />
bona vacantia most commonly<br />
arises in relation to registered<br />
IP rights.<br />
When does bona<br />
vacantia apply?<br />
Property owned by a company<br />
(limited or unlimited) is<br />
deemed to be bona vacantia if,<br />
immediately before the company<br />
is removed from the New<br />
Zealand Companies Register<br />
(the “Register”), the property<br />
has not been distributed or disclaimed<br />
by the company. (In<br />
the context of IP rights, ‘distributed’<br />
means assigned by<br />
way of deed or otherwise in<br />
writing to a new owner; ‘disclaimed’<br />
means withdrawn,<br />
cancelled or surrendered.)<br />
On removal of the company<br />
from the Register, ownership<br />
rights in the property vest in –<br />
pass to – the Crown. The Crown<br />
takes ownership of the property<br />
because the company no<br />
longer exists as a legal person<br />
and under New Zealand law<br />
the property must be owned<br />
by someone – it cannot remain<br />
ownerless. By way of example,<br />
if ABC Limited owns a registered<br />
trade mark but does not<br />
assign or cancel the registration<br />
before the company is removed<br />
from the Register, the Crown<br />
will become the owner of that<br />
registration on removal of the<br />
company from the Register.<br />
Similarly, if XYZ New Zealand<br />
(an unlimited company) owns<br />
a granted patent but does not<br />
assign or surrender the patent<br />
before the company is removed<br />
from the Register, the Crown<br />
will become the owner of that<br />
patent on removal of the company<br />
from the Register.<br />
Can you get your<br />
property back?<br />
If property does vest in<br />
the Crown, all is not lost.<br />
Property can be recovered by<br />
a person “who would have<br />
been entitled to receive all or<br />
part of the property, or payment<br />
from the proceeds of its<br />
realisation, if it had been in the<br />
hands of the company immediately<br />
before the removal of<br />
the company from the New<br />
Zealand register”.<br />
The recovery process is<br />
not a simple one, however,<br />
and may involve restoring a<br />
company to the Register. (I<br />
say ‘may’ because for registered<br />
trade marks at least,<br />
entitled persons can pursue a<br />
private process directly with<br />
the Treasury which does not<br />
involve restoring the company<br />
to the Register.) If the<br />
company is restored to the<br />
Register, then, subject to certain<br />
exceptions, any property<br />
vested in the Crown re-vests in<br />
the company as if the company<br />
had not been removed from<br />
the Register.<br />
This ‘restoration without<br />
interruption of right’ can<br />
be pivotal in retaining and<br />
enforcing IP rights – as a trade<br />
mark owner in England found<br />
out recently.<br />
In Fit Kitchen Ltd & Anor<br />
v Scratch Meals Ltd,** the<br />
plaintiff, Fit Kitchen Limited<br />
(“FKL”) successfully<br />
sued the defendant, Scratch<br />
Meals Limited (“SML”),<br />
for trade mark infringement<br />
and passing off. A key feature<br />
of the case was whether<br />
the trade mark relied on by<br />
FKL was valid.<br />
FKL applied to register<br />
its FIT KITCHEN logo trade<br />
mark (“Trade Mark”) on 8<br />
<strong>August</strong> 2016. Unbeknownst<br />
to its director at the time, the<br />
application was made six days<br />
after FKL had been removed<br />
from the UK’s Companies<br />
Register for failing to file its<br />
annual accounts. The failure<br />
was due to an address mix-up.<br />
On discovering the company<br />
had been removed, FKL’s<br />
director applied to restore the<br />
company to the Register; the<br />
company was duly restored<br />
on 11 December 2017. In<br />
December 2016, while FKL<br />
was not on the Companies<br />
Register, however, SML began<br />
using a similar FIT KITCHEN<br />
logo mark; it did so until<br />
November 2019.<br />
In infringement proceedings<br />
brought by FKL in the<br />
Intellectual Property Enterprise<br />
Court, SML argued,<br />
among other things, that FKL’s<br />
INTELLECTUAL PROPERTY ISSUES<br />
> BY BEN CAIN<br />
Ben Cain is a Senior Associate at James & Wells and a Resolution<br />
Institute-accredited mediator. He can be contacted at 07 957 5660<br />
(Hamilton), 07 928 4470 (Tauranga) and benc@jaws.co.nz.<br />
trade mark registration was<br />
invalid because on the date<br />
FKL applied to register its<br />
trade mark it was a dissolved<br />
company, and a dissolved company<br />
cannot apply for a trade<br />
mark. Much to FKL’s relief,<br />
the Court disagreed. Applying<br />
very similar law to that in<br />
New Zealand, the Court found<br />
that as FKL was deemed to<br />
have continued in existence<br />
at all times, including on 8<br />
<strong>August</strong> 2016, the trade mark<br />
application was properly made<br />
by FKL and the Trade Mark<br />
belonged to FKL.<br />
Take homes<br />
To avoid a significant headache,<br />
all companies with IP<br />
assets should ensure:<br />
(a) the company’s details on<br />
the Companies Register are<br />
correct;<br />
(b) the company keeps a<br />
detailed register of all its IP<br />
assets, whether registered/<br />
granted or not;<br />
(c) the company’s contact<br />
details for any IP assets<br />
on the Intellectual Property<br />
Office of New Zealand<br />
database (and any<br />
other databases, including<br />
domain name registrars) are<br />
correct;<br />
(d) if the company has an IP<br />
agent, the agent has up-todate<br />
contact details for the<br />
company; and<br />
(e) if the directors and shareholders<br />
of the company<br />
intend to wind the company<br />
up, then in preparation for<br />
removal from the Companies<br />
Register all IP assets<br />
are assigned in the proper<br />
fashion to a new owner/new<br />
owners before removal.<br />
If any readers of this article<br />
require specific advice, or<br />
know someone who does, then<br />
contact James & Wells or your<br />
nominated IP attorney. Don’t<br />
leave it until it is too late!<br />
*Refer the definition of ‘property’<br />
in section 2 of the Companies<br />
Act 1993<br />
** [<strong>2020</strong>] EWHC 2069 (IPEC)<br />
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