1 Introduction

The world is becoming ever-more branded, filled with marks and slogans, and other means to capture people’s limited attention and financial resources. At the same time, consumers are increasingly concerned about where a product comes from, how it was made, and where it will end up.Footnote 1 They want to support local producers, products that were manufactured in a socially acceptable manner (slave- and child-labour free, for example), and which are not bad for the environment.Footnote 2 This may reflect genuine concern or the desire to be connected with certain movements or viewpoints.Footnote 3 These are, however, credence qualities – characteristics about a product that a consumer cannot easily learn the truth about before or after purchase and consumption, regardless of how much experience that consumer has had buying that kind of product.Footnote 4 When it comes to credence qualities, there is an information asymmetry between manufacturers and consumers.Footnote 5 Credence qualities can be contrasted with search or experienced qualities, such as the price of a good or the taste of it, respectively.Footnote 6

Knowing that consumers are concerned about social production conditions and the environmental effect of the products they purchase, marketers have incentives to use imagery and words that signal to consumers that a product was produced in a socially conscious way or is environmentally friendly. This might be by using the image of a laughing child, green packaging or a picture of a dolphin, for example. Or it might involve using words like “kind” or “green”.Footnote 7 “Social-washing” and “green-washing” have been an issue for many years, where the term “washing” is used to cynically refer to an organisation presenting a false public image – washing their products or services clean through words, imagery and perception.Footnote 8 A newer marketing trend is “pink-washing”,Footnote 9 where companies express their “wokeness” (or social-cultural progressiveness)Footnote 10 about sexual and gender identity to sell their goods and services.Footnote 11

The corollary to this is a rising sense of scepticism.Footnote 12 Consumers are becoming savvy to these kinds of tactics and devices that manufacturers use to sell their wares. They have started to look for labels that indicate that a product is authentically what they want, as assured and monitored by a third-party.Footnote 13 Certification trade marks are an example of such labels. Examined and registered though government intellectual property offices, these assist to combat the information asymmetry between manufacturers and consumers. The most widely recognised certification trade mark is likely the “Fairtrade” mark.Footnote 14 When first developed, this mark sought to allay consumer concerns about how their cocoa (chocolate), coffee and bananas were farmed, and whether the farmers and workers received fair prices and wages. A certification trade mark functions as a trust system by signalling that there has been certification against a standard.Footnote 15 If credible, the trust in a certification trade mark transforms a credence quality into a search attribute.Footnote 16 Certification trade marks can also act as evaluative and directive labels because they (should) pre-analyse information for consumers – saving consumers time from having to read packaging information, understand this information and interpret it correctly.Footnote 17 This is important in light of research that shows that more is not necessarily better when it comes to information disclosures.Footnote 18

However, there are entities that claim to “certify” or “accredit” that manufacturers or service providers meet certain standards, but these entities do not have certification trade marks. They have “normal”Footnote 19 trade marks or unregistered quality assurance labels.Footnote 20 This can happen as there does not need to be any apparent distinction between certification trade marks and normal or unregistered marks, and trade mark law does not specifically prohibit this kind of behaviour. Furthermore, the signal effect of different kinds of words, colours and visual features are well understood.Footnote 21 Yet, using normal or unregistered marks as quality assurance labels takes advantage of the trust mechanism of certification trade marks. It does so by hijacking the signal function of certification trade marks. While literature exists addressing the proliferation and veracity of quality assurance labels,Footnote 22 little has been written on the issues relating to using normal trade marks for class 42 certification services. This article fills that gap, firstly, asking what happens when consumers cannot trust the trust system, and, secondly, analysing how we can re-build the trust system.

This article uses “Rainbow Tick” in Australia and New Zealand as a case study to analyse the consequences of using quality assurance labels that are not registered as certification trade marks. Rainbow Tick is a normal trade mark in New Zealand,Footnote 23 the owner of which claims to have a “certification mark” relating to the social quality of “accepting and valuing people in the workplace, embracing the diversity of sexual and gender identities”.Footnote 24 A Radio New Zealand article suggested that Rainbow Tick is a mere “box-ticking” exercise,Footnote 25 and illustrative of “pink-washing”.Footnote 26 It brought forth employees of Rainbow Tick “certified” organisations whose experience contradicted the claim that Rainbow Tick shows an organisation is “progressive, inclusive and dynamic”.Footnote 27 Australia also has a registered “Rainbow Tick” trade mark,Footnote 28 but it has not faced the same controversy. This is despite the fact that it is also only registered as a normal trade mark. As discussed in this article, this is possibly because of the different manner in which the trade mark owners have conducted themselves.

Part 2 of this article introduces the New Zealand Rainbow Tick and shows why it is pertinent that it has been registered as a normal trade mark. Namely, this is prone to negatively affect the trust system of certification trade marks. The New Zealand Rainbow Tick is compared and contrasted with Australia’s.Footnote 29 This part is necessarily somewhat descriptive, as one needs to know what certification trade marks are in order to understand why they create trust systems, what that trust embodies and the consequences of hijacking the signals of certification trade marks. Not being able to trust in a trust system has consumer law consequences, which are also addressed. Part 3 then analyses how using a normal trade mark like a certification trade mark negatively impacts the trust function of certification trade marks. The article demonstrates in Part 4 that the issue can be ameliorated. The article ends with some concluding remarks.

2 Signal Hijacking

2.1 A Look at New Zealand

The Rainbow Tick trade mark is owned by Kāhui Tū Kaha Ltd (KTKL).Footnote 30 The Rainbow Tick arose from a contract that KTKL had with Auckland District Health Board to provide liaison services and training on the provision of services to people from LGBTTI (Lesbian, Gay, Bisexual, Transgender, TakatāpuiFootnote 31 and Intersex) communities.Footnote 32 Rainbow Tick’s website lists 60 organisations that have paid to use its trade mark to signal they are diverse and inclusive. Though Rainbow Tick had its beginning in the health service industry, these 60 organisations are diverse, including Air New Zealand (the national carrier), the Human Rights Commission (an independent Crown entity), University of Otago and Russell McVeagh (a law firm reported as having a culture of sexual misconduct, sexism and lack of diversityFootnote 33).

Rainbow Tick is not a certification trade mark, but a normal trade mark combining words and an image, as illustrated in Fig. 1a). The trade mark is registered for the following services:

  • Certification services (class 42).

  • Medical services; mental health services (class 44).

  • Personal and social services rendered by others to meet the needs of individuals; social work services (class 45).

Fig. 1
figure 1

a NZ TM No. 973581 (application 1 March 2013, registered 3 September 2013); b Mark Used by Rainbow Tick “Certified” Entities (unregistered)

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According to the Rainbow Tick website, “Rainbow Tick is a certification mark for organisations that complete a Diversity & Inclusion assessment process. … The certification process tests whether a workplace understands and welcomes sexual and gender diversity. The process involves an on-going quality improvement process”.Footnote 34

Note that KTKL has a valid trade mark to provide certification services. That is, it is not a problem that it uses a normal trade mark in relation to its certification services. The problem is that it claims to have a certification mark when it does not. Furthermore, it is a mark that has a tick, which makes it look like a certification trade mark. In addition, the mark used by its “certified” entities states that they have been “certified” (see Fig. 1b). This matters because normal trade marks and certification trade marks differ in many significant ways. The following part compares and contrasts normal trade marks and certification trade marks.

Normal trade marks are ubiquitous. “Samsung”, “BMW”, “Nestlé” and “Coca Cola” are examples. Normal trade marks have to be capable of “distinguishing the goods or services of one person from those of another person”.Footnote 35 The purpose of normal trade marks is to act as a “badge of origin” – they tell consumers about which trader a good or service comes from.Footnote 36 They lower search-costs by offering consumers a short cut for finding goods that satisfy their preferences.Footnote 37 Normal trade marks are theorised to promote economic efficiency. In addition, normal trade marks embody goodwill related to the trader’s reputation. They thereby function as an indicator of quality (whether good or bad).Footnote 38 These two functions are theorised to work together to incentivise traders to maximise the quality of their goods or services.Footnote 39

Certification trade marks are not as common as normal trade marks. Some everyday examples are “Fairtrade” (noted above), “Environmental Choice New Zealand”Footnote 40 and “Australian Made”.Footnote 41 Certification trade marks do not convey anything about which trader a good or service comes from, or the reputation of a trader per se. They cannot, since many traders can use them. Instead, certification trade marks indicate some quality or characteristic about the good or service itself. They serve a “trust function”.Footnote 42 They do so, in part, by signalling to consumers that there has been some assessment (often by an independent third-party) that the relevant quality or characteristic is true.Footnote 43 For example, when a consumer sees the “Fairtrade” trade mark on chocolate, the consumer knows Fairtrade has made sure the farmers of the cocoa in the chocolate have decent working conditions and pay.Footnote 44 Thus, certification trade marks have to be capable of:

distinguishing, in the course of trade,—

  1. (i)

    goods certified by any person in respect of origin, material, mode of manufacture, quality, accuracy, or other characteristic from goods not so certified; or

  2. (ii)

    services certified by any person in respect of quality, accuracy, performance, or other characteristic from services not so certified.Footnote 45

Given the different functions of normal trade marks and certification trade marks, it should come as no surprise that it is harder to register the latter than the former. Extra requirements to register a certification trade mark allow for trust systems to be created around such marks. Both kinds of marks have to be capable of graphical representation.Footnote 46 However, unlike normal trade marks, the applicant for a certification trade mark cannot carry on trade in the goods or services of the kind certified.Footnote 47 This ensures that the certification process is done by a neutral third-party. It can be a reason why an entity might apply for a normal trade mark rather than a certification trade mark, in New Zealand. In contrast, in Australia, this restriction on how the registered owner could use the certification trade mark was the law under the Trade Marks Act 1955 (Cth), but is no longer the case under the current Trade Marks Act 1995 (Cth).Footnote 48

The New Zealand Commissioner of Trade Marks considers multiple additional factors when deciding whether to register a certification trade mark.Footnote 49 This includes assessing whether the applicant is competent to certify the goods or services in respect of which the certification trade mark is to be registered.Footnote 50 According to the Intellectual Property Office of New Zealand (IPONZ) Practice Guidelines, this is twofold: (1) the competency to ensure that the mark is only used on goods or in relation to services that possess the required characteristics; and (2) the competency to operate the certification regime, which encompasses monitoring and controlling users.Footnote 51 That is, the applicant must be able to enforce the use of the mark vis-à-vis the standards.

Competency is assessed internally and externally. Regarding the former, the applicant must adduce evidence that it “intends to control use of the mark and that they have access to the skills and resources to ensure certification is authoritative”.Footnote 52 External competency relates to the perception of those to be certified. The applicant must show that “it has the confidence of the wider section of the relevant trade in the applicant’s ability to certify the particular goods or services”.Footnote 53 This may be through “declarations or letters from reputable people in the trade attesting to the applicant’s reputation in the trade”.Footnote 54 This assessment of competency is relatively stringent. By way of comparison, Australian requirements regarding competency are not as rigorous, as discussed further below.

In addition, the Commissioner considers whether the draft regulations (standards), which will govern the use of the certification trade mark, are satisfactory.Footnote 55 The regulations have to set out exactly how the certification regime is to be governed, controlled and maintained, and “precisely what the trade mark signifies in relation to the specified goods and services”.Footnote 56 IPONZ policy notes that this is “of high importance for certification as any person should be able to see exactly what is required in order for goods or services to qualify to use the mark”.Footnote 57

Amongst other things, the regulations:

  • must contain provisions relating to when the owner is to certify the goods or services,

    • defining as precisely as possible the characteristics in respect of which goods and services are to be certified, and

    • outlining the methods to be employed for certification;

  • must contain provisions relating to when the owner is to authorise the use of the trade mark,

    • based on objective criteria, capable of objective assessment,

    • which does not lead to any discrimination.Footnote 58

The draft regulations also have to contain any other provisions the Commissioner requires or permits.Footnote 59 For example, the Commissioner might require that the regulations include a right of appeal to the Commissioner if the owner refuses to certify goods or services, or to authorise the use of the trade mark, in accordance with the regulations. IPONZ policy additionally requires that the “structure and frequency of any fees stipulated in the regulations must be fully described in the regulations”.Footnote 60 IPONZ will ask the applicant to justify the fee if it appears to be “unduly high”, to ensure that “any body that applies for the certification mark and meets the specified criteria is not unduly excluded from use on the basis of cost”.Footnote 61

Finally, the Commissioner considers whether, in all the circumstances, the registration applied for would be in the public interest. There may be strong public-policy drivers (possibly even legislation in place) for standardisation and certification, for example, relating to energy efficiency or food nutrition. The fee structure is part of the public interest consideration, as it might affect public policy and laws around standardisation.Footnote 62 To illustrate, New Zealand has Government-dictated consumer information and safety standards for certain products, overseen by the Commerce Commission.Footnote 63 If someone were to certify products with respect to one of these standards, this would per se be in the public interest. However, if the fees demanded were unduly high, IPONZ could hold it to be contrary to public policy and not in the public interest (unless the fees were lowered).

The standards of a real certification trade mark are publicly available at the IPONZ premises and through IPONZ’s website.Footnote 64 This means that anyone can see exactly what a certification trade mark signifies.Footnote 65 Furthermore, the standards can only be changed by application to the Commissioner of Trade Marks. The application is examined on the same basis as the original application. If satisfactory, the Commissioner “may” alter the standards.Footnote 66

By applying for a normal trade mark for certification services, KTKL’s certification services did not have to undergo review through IPONZ. One does not know if it is competent to do the certification it says it does. The Rainbow Tick developed from KTKL’s services relating to the provision of health-related services to LGBTTI. Competence in this does not necessarily equate to competence to determine whether an entity is sexual and gender inclusive.

What KTKL does may or may not be in the public interest, but it is not possible to know this because its standards are not public.Footnote 67 The Rainbow Tick states that the “certification process tests whether a workplace understands and welcomes sexual and gender diversity” by evaluating an “organisation’s level of LGBTTI inclusion in five areas”: policies, staff training, staff engagement and support, external engagement, and monitoring. However, it is not clear how KTKL evaluates these factors or how much “inclusion” is sufficient.

It is also difficult to know whether the standards to be “certified” for Rainbow Tick are consistently applied across different organisations. Radio New Zealand has reported that the standards applied to be “certified” for the Rainbow Tick and the costs of “certification” are not consistent across different entities.Footnote 68

KTKL’s behaviour is curious as it helped Standards New Zealand to develop a standard on “Rainbow-Inclusive Workplaces: A Standard for Gender and Sexual Diversity in Employment”.Footnote 69 Standards New Zealand is a business unit within the Ministry of Business, Innovation and Employment, which specialises in developing standards. It is unclear why KTKL does not use this standard for its “certification”. The Standards New Zealand standard includes five criteria: governance, organisational management, engagement, service delivery, and monitoring. These are quite different from KTKL’s five criteria.

One could posit that KTKL might not have applied for a certification trade mark because it is not possible to create an objective measure of sexual and gender inclusivity. However, the creation of the Standards New Zealand standard disproves this. Moreover, New Zealand law and regulation does not require that the registered standard is largely accepted by the relevant community or industry. As noted above, it requires sufficient preciseness and that it is in the public interest. As noted, the Standards New Zealand standard shows that sufficient preciseness is possible in this area and one would think that it would be relatively simple to argue (in a socially progressive country such as New Zealand)Footnote 70 that inclusivity (safe work-places for the Rainbow community) is in the public interest.

There are legitimate commercial reasons why KTKL might not have applied for a certification trade mark.Footnote 71 In New Zealand, it costs the same to apply for normal and certification trade marks. However, the latter requires more input from a trade mark attorney, to prepare the standards, collect evidence of competency etc., which can be costly. It is possible that it could not prove competency to the level required by the law. In such cases, a valid strategy is to apply for a normal trade mark first, gain competency and then file for a certification trade mark. Furthermore, KTKL avoids the possibility that its decisions whether to license its mark or not are appealed to the Commissioner of Trade Marks. KTKL maintains absolute control over its process and rules for granting licences and to whom it grants them.

However, by registering a mark that looks like a certification trade mark and claiming to have a certification mark, one arguably hijacks the signal effect and trust function of certification trade marks. The average consumer will not look beyond the mark, simply seeing it and presuming that it has behind it what all authentic certification trade marks have. However, if one delves deeper, one quickly discovers that this is not the case – there are no publicly available standards and, thus, no clear indication of what the mark represents. The revelation that this is commonly the case with quality assurance labels affects consumers’ ability to trust in trust systems.Footnote 72 This in turn distorts the signal of real certification trade marks as trust systems.

Despite this, trade mark law places very few limits on how trade mark owners can use their marks.Footnote 73 One can register a normal trade mark and license others to use that trade mark under whatever (legal) terms the owner and the licensee agree upon.Footnote 74 This can include the owner first checking that certain conditions are satisfied. There are valid reasons for this. For example, the owner of a fashion label trade mark might want to ensure the production quality of a clothing manufacturer or its employment conditions before licensing its trade mark to that manufacturer.

There may, however, be consumer law implications of stating or implying that one has a certification mark, when one does not.Footnote 75 In New Zealand, the Fair Trading Act 1986 regulates misleading or deceptive conduct. There is a strong argument to be made that claiming to have a certification mark when one has a normal trade mark is likely to mislead or deceive. Entities that pay for “certification” are likely unaware that they are paying to license a normal trade mark, which has not undergone the scrutiny that real certification trade marks go through to be registered. For example, there is a real risk that they are misled into believing that the mark owner is competent to do the “certification”. There is equally a real risk that they are misled to believe that all entities are “certified” against the same standards, for the same fee (or fee schedule), as this is what occurs with a certification trade mark. In turn, that the licensed entities use the trade mark as if it were a certification mark is also potentially misleading or deceptive.

2.2 A Comparison with Australia

Shortly after the application to register “Rainbow Tick” was filed in New Zealand, La Trobe University filed a similar trade mark in Australia (see Fig. 2a). Comparable with KTKL’s New Zealand mark, La Trobe University’s Australian Rainbow Tick signifies that an organisation is “committed to safe and inclusive practice, and service delivery for Lesbian, Gay, Bisexual, Transgender and Intersex (LGBTI) people”.Footnote 76 It is limited to organisations that provide health-related services.

Fig. 2
figure 2

a Australian Trade Mark No. 1563566 (application 19 June 2013, acceptance advertised 7 November 2013); b Mark Used by Rainbow Tick “Accredited” Entities

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It is a figurative trade mark, consisting of the words “Rainbow Tick” and the correct symbol (the tick) in concentric circles. It is registered for the following services:

  • Advisory services for business management and promotion of good business practices; business consultancy services relating to management systems and business practices (class 35).

  • Training and education services (class 41).

  • Certification services; accreditation services relating to the application of quality standards (class 42).

  • Certification services (licensing) (class 45).

Like its New Zealand counterpart, the Australian Rainbow Tick is registered as a normal trade mark, though Australia also has certification trade marks.Footnote 77 Unlike webpages relating to the New Zealand mark, webpages pertaining to the Australian Rainbow Tick do not make claims of having a certification trade mark. Instead, the webpages refer to an accreditation programme.Footnote 78 The accreditation is performed against the Rainbow Tick Standards, which are publicly available.Footnote 79 The standards are incorporated into a broader document, entitled “Rainbow Tick Guide to LGBTI-inclusive Practice”.Footnote 80 These have been (and continue to be) developed by Rainbow Health Victoria (formerly Gay and Lesbian Health Victoria, GLHV).Footnote 81 This is a health and well-being policy and resource unit, funded by the Victorian Government. It sits within the Australian Research Centre in Sex, Health and Society (ARCSHS) at La Trobe University (a public university).Footnote 82 In addition, the accreditation process is undertaken by a third-party, Quality Innovation Performance Limited (QIP).Footnote 83 The relationship between the different entities is illustrated in Fig. 3. QIP has existed for over 25 years as a not-for-profit accreditation agency, which specialises in accreditation services.Footnote 84 At the time of writing, QIP listed 40 accredited entities, which are entitled to use the mark exemplified in Fig. 2b.

Fig. 3
figure 3

Parties Involved with the Australian Rainbow Tick Trade Mark

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In light of the fact that there are publicly available standards, there is the appearance of validity given through the connection with La Trobe University and the Victorian Government, and QIP specialises in accreditation, the question arises of why those involved chose not to apply for a certification trade mark. Applications for certification trade marks are filed with the Australian intellectual property office (IP Australia), which checks that the mark itself is capable of graphical representation and is distinctive (as all registered trade marks have to be). The application must include the rules governing the use of a certification trade mark, which must specify:

  • the certification requirements that goods and/or services must meet;

  • the process for determining whether goods and/or services meet the certification requirements;

  • the attributes that a person must have to become an approved certifier;

  • the requirements that a person, who is the owner of the certification trade mark or an approved user, must meet to use the certification trade mark in relation to goods and/or services;

  • the other requirements about the use of the certification trade mark by a person who is the owner of the certification trade mark or an approved user; and

  • the procedures for resolving disputes.Footnote 85

After performing a preliminary check, the Registrar of Trade Marks must send the application on to the Australian Competition and Consumer Commission (ACCC).Footnote 86 The ACCC is Australia’s equivalent of the New Zealand Commerce Commission. It is the Federal regulator of competition and consumer law. The ACCC must be “satisfied” that:

  • the attributes a person must have to become an approved certifier are sufficient to enable the person to assess competently whether goods and/or services meet the certification requirements; and

  • the rules would not be to the detriment of the public; and

  • the rules are satisfactory.Footnote 87

Note that the assessment of competency in Australia is a lower standard than in New Zealand. In New Zealand, competency of the actual certifier must be proven internally and externally. In contrast, in Australia, the ACCC assesses whether the description of the hypothetical certifier would allow for competent certification. Furthermore, that rules must not be to the “detriment of the public” is not same as the requirement in New Zealand that they be in the public interest. There are many things that fall between these two concepts – that are neither in the public interest, nor a detriment to the public. The criterion in Australia is easier to surpass.

The ACCC examines the effectiveness of the rules. It also assesses whether the rules would be likely to raise any concerns relating to competition, unconscionable conduct, unfair practices, product safety and/or product information.Footnote 88 If the ACCC is satisfied, it gives a certificate to that effect, which it sends to the Registrar of Trade Marks.Footnote 89 The ACCC may require the applicant to make modifications “as the Commission considers necessary” before it gives its certificate.Footnote 90

The Registrar of Trade Marks must publish the rules governing the use of a certification trade mark.Footnote 91 The rules cannot be varied without the approval of the ACCC.Footnote 92 To give approval, the ACCC must be satisfied that the rules as varied “would not be to the detriment of the public” and are satisfactory (as outlined above).Footnote 93 Furthermore, the owner of a certification trade mark can only assign the property with approval from the ACCC.Footnote 94

By using the ACCC in this manner, the Australian regime directly addresses the intellectual property, competition and consumer law interface. The ACCC oversees Australia’s mandatory standards regarding safety and product information.Footnote 95 Because of this, it makes sense that the ACCC examines the regulations for a certification trade mark application, rather than IP Australia. The Commerce Commission is similarly the regulator of product safety and information standards in New Zealand.Footnote 96 Arguably, analogous to Australia, the New Zealand Commerce Commission is better placed than IPONZ to examine the regulations of an application for a certification trade mark.

The ACCC’s mandate is broader than IPONZ’s examination, because it also assesses the regulations from a competition and consumer law point of view. From this perspective, it appears to be a more strenuous process to register, vary and assign a certification trade mark in Australia than New Zealand. The additional checks by the ACCC may constitute a reason (not existent in the New Zealand context) why one might choose not to pursue a certification trade mark. That being said, there are no apparent competition or consumer law concerns relating to the Australian Rainbow Tick.Footnote 97 Furthermore, as noted above, the assessment of competency and how the rules would affect the public are relatively low standards in Australia. However, as discussed, there are valid reasons why one might apply for a normal trade mark over a certification trade mark.

Of course, just because the ACCC did not assess its accreditation programme as a certification trade mark application is not to say that the Australian Rainbow Tick is outside the ACCC’s purview. If concerns were raised to the ACCC that Rainbow Health Victoria, QIP, or one of its accredited entities, were contravening Australian competition or consumer law (which is very similar to New Zealand’s),Footnote 98 it could investigate this and enforce the law as necessary. After all, the mark looks like a certification trade mark when it is not. It is worth reiterating, however, that Rainbow Health Victoria has not stated that it has a certification trade mark, and its standard is publicly available. In addition, the accreditation is done by a third-party specialist accreditation service provider, making it harder to argue misleading or deceptive conduct vis-à-vis the competency of the accreditor.

That is to say, Rainbow Health Victoria’s conduct might hijack the signal effect of certification trade marks because of its appearance. However, the abuse of the trust system of certification trade marks is minimal, because what they have done only marginally distorts that signal. What Australian consumers presume when they see Australian certification trade marks is more or less reflected in the Australian Rainbow Tick.

3 A Trade Mark Law Problem

This article has discussed how companies can register normal trade marks (for class 42 certification services), but use them like certification trade marks. Depending on the appearance of the marks and the behaviour of their licensees, this use might be misleading or deceptive to their clients and the public, who see these marks and attribute more to them than what they in fact embody. Put another way, there can be a disjunction between reality and consumer perception.

One might see potential misleading/deceptive conduct as purely a consumer law problem, as it is about the marketing signals made to consumers. However, the reason why such behaviour might be misleading or deceptive is that it hijacks the trust-system signal of certification trade marks. Put another way, such behaviour would not be misleading or deceptive if not for the positive presumptions that consumers have vis-à-vis certification trade marks. Furthermore, as examined in the following, the theorised function of normal trade marks is also affected. They are, thus, trade mark law problems.

In the context of certification trade marks, Margaret Chon has noted the lack of accountability of certifiers in the United States. She asked, “who is watching the watchdogs?”.Footnote 99 This part of the article asks who is watching all the self-declared watchdogs? It argues that trade mark law should be keeping a closer eye.

When assessing self-declared watchdogs, one should acknowledge that normal trade marks also have a trust function. The colours, imagery and words they use will evoke certain ideas and emotions. The exact evocation of a mark will depend on its social construction, as continually developed by its users and consumers.Footnote 100 Furthermore, the trust function is intertwined with the source and reputation functions.Footnote 101 That is, if a trader has a reputation for being socially responsible, then that trader’s trade mark will signal this.Footnote 102

However, the trust function of normal trade marks should be “weaker” than that of certification trade marks.Footnote 103 This is because it relates to the trader rather than the goods or services to which the mark is attached. To illustrate, a trader might have a good reputation for paying fair wages to its workers in T-shirt production. This might have flow-on effects for its reputation in shoe manufacturing, for example. Though, in fact, it is possible that the trader is actually unfair when it comes to paying its shoe workers. In contrast, the trust function of certification trade marks relates to the goods or services to which they are attached (see Table 1).

Table 1 Trust function of trade marks
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Furthermore, the extra requirements needed to register a certification trade mark, discussed above, contribute to their trust function. In particular, there is often third-party certification and that standards must be publicly available makes it easier for a consumer to understand the meaning of a certification trade mark.Footnote 104 In comparison, the degree to which individual traders are socially responsible is more opaque and changes to this are not readily traceable.

The potential trade mark issues related to self-declared watchdogs are not limited to pinkness,Footnote 105 or indeed entities that do not have certification trade marks. Furthermore, self-declared watchdogs are a global concern. In the introduction of this article, the author noted that Fairtrade is a classic certification trade mark, and it is registered as such in the European Union (EU) and New Zealand. Yet, it is registered as a normal trade mark in Australia, Canada and the US.Footnote 106 This is similarly the case with another well-known certification trade mark, owned by the Forest Stewardship Council (FSC).Footnote 107 The FSC purports to certify that products derived from wood, such as paper and timber, are manufactured from forests managed in an environmentally and socially responsible manner. However, the FSC only has normal trade marks in Australia, New Zealand, Canada and the EU,Footnote 108 and only applied for a certification trade mark in the US on 1 December 2017.Footnote 109

Using normal and unregistered trade marks like certification trade marks distorts their source function. For example, the Rainbow Tick trade marks should act as badges of origin, but they do not. If a consumer sees a Rainbow Tick on a product, this does not tell the consumer who the manufacturer is. Instead, by hijacking the trust signal of certification trade marks, using normal and unregistered trade marks like certification trade marks appropriates the trust function of the latter. However, not all normal and unregistered trade marks used as quality assurance labels create trust systems like true certification marks.

At the same time, the appropriation of the trust function dilutes the signal that certification trade marks are supposed to convey. This occurs because the line between the different kinds of trade marks is blurred. If, from the consumer’s perspective, there is no sharp distinction between the various kinds of trade marks, certification trade marks lose their ability to signal trust.

The dilution potential is particularly strong if consumers only experience quality assurance labels like the New Zealand Rainbow Tick, where there are no publicly available standards or costing schedule, yet the scheme is referred to as a certification mark. Such consumers may come to believe that all quality assurance labels are like this, diluting the trust function of certification trade marks. Even if consumers experience a mix of quality assurance labels (some normal or unregistered trade marks and some certification trade marks), inconsistent experiences may cause confusion and result in the consumers losing trust in all such marks.

When behaviour is potentially misleading or deceptive and dilutes the signal of authentic certification trade marks, it negatively affects consumer trust in labelling systems (see Fig. 4).Footnote 110 In other words, consumers need to be able to trust in all quality assurance marks in order for certification trade marks to fulfil their function.Footnote 111

Fig. 4
figure 4

Consequences of Using Normal or Unregistered Trade Marks Like Certification Trade Marks

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Yet, if one can essentially use normal or unregistered trade marks like certification trade marks, and consumers do not realise that this has occurred, there is no incentive to undergo the more strenuous process of applying for a certification trade mark. From another perspective, if the administrators of other quality assurance labels essentially cheat, and mistrust in all such labels is consequently rife, there is no incentive to register a genuine certification trade mark.

Manufacturers have economic incentives to mislead. If there is no incentive to get a certification trade mark, labels become “cheap talk” and consumers become less trusting of the market.Footnote 112

The root of this is that trade mark law does very little to regulate how trade mark owners use their property. The same can be said about the law around unregistered trade marks. In Australia and New Zealand, the tort of passing off protects unregistered marks from being used by third parties in a way that would deceive consumers, and cause diversion of sales or damage to the mark.Footnote 113 However, the tort does not regulate how the owners use these marks. Instead, trade mark law and the tort of passing off are centred on unauthorised use of identical or similar marks that disrupt the source signal of marks. They are not focussed on the ability of normal or unregistered trade marks to interrupt the trust function of certification trade marks. This results in a reliance on consumer law to step in.

The following part looks at ways in which trade mark law could be better applied to incentivise the registration of quality assurance labels as certification trade marks rather than normal trade marks. It seeks to clean the signal of certification trade marks and re-build consumer trust.

4 Cleaning Up Trade Mark Law

The following suggests four proactive measures that would limit the ability to use the trade mark system in a misleading or deceptive manner. They require only minor changes to the way trade mark law is applied.

4.1 Deception/Confusion if a Normal Mark Looks Like a Certification Trade Mark

The first measure is that normal trade marks should not be registered if they are likely to deceive or cause confusion that they are certification trade marks. The two “Rainbow Tick” trade marks analysed in this article are examples.Footnote 114 The word “tick” and the imagery used imply that they are certification marks.Footnote 115

This would only require an application of existing law in jurisdictions where it is a ground to not register a trade mark if its use would be likely to deceive or cause confusion.Footnote 116 Both Australia and New Zealand also allow for the revocation of registered marks on the ground that they were likely to deceive or confuse at the time of registration,Footnote 117 or if, as a result of the post-registration use of the trade mark by the owner or licensee, the trade mark is likely to deceive or confuse.Footnote 118

Confusion or deception are typically raised when the trade mark sought is similar to an existing mark, taking into account the classes for which the registration is sought.Footnote 119 Confusion or deception can also relate to what a mark might indicate about the products or services to which it is attached, such as a certain quality, characteristic or geographic origin.Footnote 120 The suggested application of confusion/deception provisions could be considered an extension beyond existing case law, as they pertain to confusion/deception vis-à-vis the nature of a mark itself, rather than in relation to other marks or the products/services with which it is used. However, there is a strong case to be made that the marks at issue actually indicate something about credence qualities and that the goods/services have gone through a certain certification process. Hence, the confusion or deception of the average consumer in a particular market does relate to the goods or services on which the mark is attached.

Moreover, New Zealand and Australian legislation state that marks will not be registered if their use would be contrary to law.Footnote 121 In New Zealand, this ground has been applied to consider whether a trade mark is likely to mislead or deceive according to consumer law.Footnote 122 Consumer law construes misleading and deceptive behaviour broadly. One cannot do anything in trade that would mislead or deceive.Footnote 123 That is, the misleading or deceptive behaviour need not result from similarity with another mark or an indication of the goods or services with which a mark is used. The provision would apply where the relevant consumer is misled or deceived into believing that a normal trade mark is a certification trade mark.

4.2 Inquiry Into Whether Use Will Be as a Certification Trade Mark

The Australian and New Zealand Rainbow Ticks are both registered for certification services.Footnote 124 The second measure proposed here is that, when an applicant files for certification services (or similar services), an intellectual property office should inquire as to whether the applicant means to: (a) use the mark as a badge of origin for its services as a certifier or accreditor; or (b) to use the mark like a certification trade mark. If the applicant answers “b”, the applicant should be advised that they must apply for a certification trade mark.

Indeed, New Zealand requires that applicants indicate whether an application is for a certification trade mark. This is deemed “information that must be supplied before acceptance” of the application.Footnote 125 This requirement suggests that, if a trade mark is going to be used like a certification mark, it should be registered as such. Otherwise, this provision would not be necessary.

If an applicant were to refuse to change its application to be for a certification trade mark, the application should be declined on the basis of bad faith.Footnote 126 The concept of bad faith is not well-developed in Australian or New Zealand trade mark law. One Australian case stated that the test is whether “persons adopting proper standards would regard the decision to register as in bad faith, or that reasonable and experienced persons in the field would view such conduct as falling short of acceptable commercial behaviour”.Footnote 127 Similarly, a New Zealand court has stated that “bad faith is not confined to dishonesty. It may be demonstrated by evidence of conduct falling short of reasonable standards of commercial behaviour”.Footnote 128

Arguably, applying for a normal trade mark (whether for certification services or not), when the intention is to use the mark as a certification trade mark, is contrary to reasonable standards of commercial behaviour. For consistency, if an applicant fails to declare the intention to use the mark as a certification trade mark, but subsequently uses the mark this way, this would be an application made in bad faith and a ground for revocation.

4.3 Indication of Certification Trade Mark

The third measure relates to how certification trade marks are presented to the public. They should have to have “Cert. TM” (or something similar) on them, or otherwise indicate their nature.Footnote 129 Because of the functional differences between normal and certification trade marks, trade mark offices should be concerned when there is confusion between the two. Normal trade marks should be able to function as a badge of origin, which they may not be able to do if they look like certification trade marks. A certification trade mark cannot signify certification against a standard if one cannot tell that it is a certification trade mark. If all registered certification trade marks have “Cert. TM”, this would clearly delineate between certification trade marks and normal trade marks.

Article 5.D. of the Paris Convention states that “No indication or mention … of the registration of the trademark … shall be required upon the goods as a condition of recognition of the right to protection”.Footnote 130 It is arguable that to require “Cert. TM” on the trade mark would be to require an indication that the mark is registered on goods. However, the author would posit that the “Cert. TM” indication does not pertain to whether or not the mark is registered, but rather to the nature of the mark itself. This is in contrast to®, which indicates registration, but not the nature of the mark by which it is placed.

If this is not the case, then New Zealand law is arguably already inconsistent with this Paris Convention obligation, as the New Zealand Trade Marks Act 2002 states that the Commissioner must consider “whether or not the certification trade mark should indicate that it is such a trade mark”.Footnote 131 Current IPONZ policy is that, if it is not clear from the mark itself, “certification mark” or an abbreviation must be added, or the mark will only be registered with the condition that it “will always be used in conjunction with a clear indication that it is a certification mark”.Footnote 132 The New Zealand Commissioner of Trade Marks should always deem that it is necessary. Whether a certification trade mark should indicate its nature is not a specific factor that either IP Australia or the ACCC must examine. However, IP Australia could refuse to register a certification trade mark without “Cert. TM”, or could require that the mark be used with “Cert. TM”, on the ground that the registration would otherwise be likely to deceive or cause confusion.Footnote 133

Note that, even if the foregoing interpretation of Art. 5.D. of the Paris Convention is incorrect, the Article only prohibits making the right to protection contingent upon an indication of registration. Article 5.D. does not proscribe Member States from legislating penalties for failing to make such an indication.Footnote 134 For example, Members States could legislate that:

  • certification trade marks must be used together with “Cert. TM”;

  • though their protection (registration and proceedings on infringement) is not contingent upon this;

  • however, the omission to use a certification mark with “Cert. TM” could result in a criminal fine.

As well as creating a clear distinction between certification trade marks and normal trade marks, the “Cert. TM” designation could also serve to differentiate certification trade marks from unregistered trade marks. To illustrate, let us pretend an entity creates a logo or mark that appears to indicate some kind of certification. The entity is not competent to do the certification it purports to do, and it does not have a robust standard. As a result, it could not get a certification trade mark. Furthermore, the first recommended measure above means that an application for a normal trade mark would also fail. The entity could still use the mark, as one does not need to register a mark to use it in trade. However, the absence of “Cert. TM” on the logo should be telling. This presumes that consumers know that “Cert. TM” is a possibility, notice its absence and understand what this absence signifies.Footnote 135 This leads us to the final proposed measure.

4.4 Education Programmes

There need to be education programmes around what exactly a certification trade mark is, particularly in light of the recommendations made above. As noted by Chon, “[l]abels and marks stand for ‘something’ but it is not always clear what that ‘something’ is”.Footnote 136 Consumers likely have an idea that certification trade marks indicate there was some kind of certification, against a standard.Footnote 137 They also need to be made aware that only marks with “Cert. TM” are certification marks. Furthermore, consumers need to understand what exactly it means to see “Cert. TM”. This, of course, would depend on the jurisdiction at hand and what is required to get a certification trade mark. To illustrate, in New Zealand, seeing “Cert. TM” should signal to consumers that the Government has checked that the certifier is competent to do the certification, that the standards are satisfactory, and that the standards are considered to be in the public interest.

Education around the location of the standards being certified would also be ideal.Footnote 138 Access to the database and its interface should be user-friendly.Footnote 139 Many standards are technical and complex, meaning that consumers have to invest a significant amount of time and research to locate, understand (and possibly compare) them. This implicates the trust function of certification trade marks.Footnote 140 To reduce information clutter, it should be mandatory that these standards are accompanied by a summary written for the layperson.Footnote 141

In light of the close relationship between intellectual property and consumer law (and indeed IP Australia and the ACCC), consumer law regulators could assist with the education programme around certification trade marks. In New Zealand, the Commerce Commission creates resources to inform both traders and consumers about their legal obligations and rights.Footnote 142 This is one of the Commerce Commission’s statutorily dictated functions.Footnote 143 Towards this, the Commerce Commission produces a range of easy-to-understand videos and information sheets.Footnote 144 For example, there is a video on green-washing and its consumer law implications.Footnote 145 The ACCC is likewise statutorily obliged to provide information and guidance to the public about the laws that protect consumer interests.Footnote 146 Its website also has resources to educate consumers about misleading and deceptive claims,Footnote 147 such as information sheets on environmental claims and on indigenous arts and crafts.Footnote 148 The Commerce Commission and ACCC could create information sheets on “Cert. TM”.

The implementation of these four suggestions would incentivise companies that claim to “certify” to actually register certification trade marks and go through the regulatory scrutiny that this entails. If they did not, they would have marks that do not look like certification trade marks, could be rejected or revoked for bad faith, are missing “Cert. TM”, and consumers would be wiser about what that absence signifies. The education programmes around “Cert. TM” could also increase the likelihood that claiming to have a certification mark when you do not is misleading or deceptive conduct. Overall, implementing these suggestions would rebuild trust in the trust system of certification trade marks.

5 Concluding Remarks

It is easy to register normal trade marks (or use unregistered labels) as quality assurance labels, and consumers are none the wiser that they are not real certification trade marks. The proliferation of such labels, which consumers often cannot look behind, lowers consumer trust in all quality assurance labels, including genuine certification trade marks. Such conduct, thereby, negatively affects consumers from being able to trust in the trust system.

It is potentially misleading or deceptive to use a normal or unregistered trade mark that looks like a certification mark for accreditation or “certification” services. Moreover, it hijacks and dilutes the signal effect of certification trade marks. Yet, trade mark law does little to regulate how trade mark owners use their property. Consumer law must step in. While consumer law is a powerful means to check against misleading or deceptive conduct, it is reactive. This raises the question of how we could “clean up” trade mark law to modern concerns about how trade marks are used to mislead or deceive.

This article proposes four proactive measures that would incentivise the registration of certification trade marks. This includes rejecting applications for normal trade marks if they might mislead or deceive one into believing that they are certification trade marks. Closely tied to this, failure to apply for a certification trade mark when the intention is to use the mark as a certification trade mark should be deemed to be an application made in bad faith. At the same time, registered certification trade marks should be designated as such, with something like “Cert. TM”. Finally, this should be complemented with programmes to educate the public about what “Cert. TM” means.

In concert, these measures would help to inhibit misleading/deceptive conduct and would allow consumers to trust in the trust system of certification trade marks. The failure to ensure this will lead to a society in which consumers cannot trust in marks and labels. This will be a cynical society that is indiscriminately wary of all marketing claims. The repercussions of this are that consumers might be less willing to spend and they may punish businesses that genuinely share their social and environmental concerns and try to address these. More broadly, the marketplace cannot function properly without consumer trust. Amongst other things, having strong consumer trust requires that, when consumers see marks and labels that look like certification trade marks, they can trust the signal that this means something and they can verify this through publicly available information. Put another way, consumer trust requires that certification trade marks can have an uninterrupted and unsullied signal to transform credence qualities into search qualities.