Authorised Use, Case Notes

Close but no cigar: s 123 provides parallel-importer with defence to trade mark infringement despite repackaging

A Danish cigar manufacturer (STG) brought proceedings against an Australian parallel-importer (Trojan) for infringement of its registered Australian trade marks HENRI WINTERMANS, CAFE CREME and LA PAZ.  It also alleged misleading or deceptive conduct and passing off.

The essence of the alleged TM infringement was that, after purchasing and importing STG’s cigars, Trojan had repackaged them in order to comply with Australia’s plain packaging legislation.  As part of that repackaging process, STG’s registered marks were placed on the new packaging.  This was done without STG’s consent.  The cigars were then sold to retailers in the new packaging.

It was accepted by STG that the cigars imported into Australia by Trojan were genuine in the sense that they were manufactured by STG.  There was no contention that the Trojan cigars were in any material way different from the “authorised products” that were brought into Australia and sold by STG’s Australian subsidiary.

Is this a prima facie infringement?

Trojan accepted that the use of the STG trade marks on the new packaging was use of those marks “as a trade mark” for the purposes of s 120 of the Trade Marks Act 1995 (Cth) but contended that this was STG’s use, not Trojan’s, because “the connection in trade was between the goods and the manufacturer, not between the goods and Trojan.”

While it may be slightly counter-intuitive (and Allsop CJ considered it was) to conclude that there is prima facie infringement in circumstances where a third party sells goods emanating from the registered owner and bearing that registered owner’s mark, that is the plain wording of s 120 of the TMA.  Allsop CJ pointed out that this conclusion had been reached by at least four Full Courts and was supported by several obiter comments from the High Court.

His Honour therefore concluded that Trojan’s use of STG’s marks on its repackaging was a prima facie infringement.

Does s 123 apply?

Section 123 of the TMA provides:

Goods etc. to which registered trade mark has been applied by or with consent of registered owner

(1)  In spite of section 120, a person who uses a registered trade mark in relation to goods that are similar to goods in respect of which the trade mark is registered does not infringe the trade mark if the trade mark has been applied to, or in relation to, the goods by, or with the consent of, the registered owner of the trade mark.

Note:          For similar goods see subsection 14(1).

             (2)  In spite of section 120, a person who uses a registered trade mark in relation to services that are similar to services in respect of which the trade mark is registered does not infringe the trade mark if the trade mark has been applied in relation to the services by, or with the consent of, the registered owner of the trade mark.

Note:          For similar services see subsection 14(2).

Allsop CJ considered that this provision “applies naturally to parallel importing and second hand goods.”

This case differed from the usual parallel importing cases because of the repackaging: the STG marks had not been applied to Trojan’s repackaging with STG’s consent.

This opened s 123 to alternative readings.

STG contended that since Trojan’s application of the STG marks to the repackaging was without STG’s consent, it’s use of those marks fell outside the protection of s 123.

Trojan argued however that the STG marks had been applied to the the relevant goods with STG’s consent.  They were then removed from the goods and reapplied in the form of the new packaging – but the statutory test was whether the marks had been applied with the owner’s consent.

Allsop CJ considered that Trojan’s construction “more naturally conforms with a purpose in s 123 of protecting as non-infringing use that which does no more than draw a connection between the goods and the registered owner...”  His Honour therefore concluded that s 123 was engaged and Trojan’s use of STG’s marks was non-infringing.

As STG argued in its submissions, this does seem to muddy the waters on the issue of authorised use under s 8 of the TMA – as to which we will learn much more when the Full Court gives its decision in the appeal from Skyy Spirits LLC v Lodestar Anstalt [2015] FCA 509 which is listed for hearing on 10 November 2015 before a bench of five judges.

The passing off and misrepresentation claims were also dismissed.

The decision can be found here.

Case Notes, Deceptively similar?

MALTITOS not deceptively similar to MALTESERS

After a six year hiatus, the Chocolate Malt Balls War resumed last year, with Mars (maker of Maltesers) seeking to prevent Delfi (a competitor) from registering the word MALTITOS as a trade mark: Delfi Chocolate Manufacturing SA v Mars Australia Pty Ltd [2015] FCA 1065.  Back in 2009, Delfi successfully defended a passing off/trade marks infringement claim (first instance, Full Court) brought by Mars in relation to its Delfi Malt Balls product (depicted below).

In this new matter, Mars was successful in blocking Delfi’s registration of MALTITOS in the Trade Marks Office on s 60 but not on s 44 of the Trade Marks Act 1995 (Cth) (TMA).  Delfi appealed to the Federal Court.  Mars cross-appealed on the s 44 issue.

Jessup J held that MALTITOS is not deceptively similar to MALTESERS.  Further, his Honour held that the Delfi’s use of MALTITOS was unlikely to cause confusion in the market as a result of the reputation vesting in the mark MALTESERS.  He therefore concluded that neither s 44 nor s 60 of TMA presented an obstacle to the registration of Delfi’s mark and set aside the decision of the Trade Marks Office that had found otherwise (on s 60 only).

Delfi had sought registration of MALTITOS in respect of confectionery, biscuits, chocolate, cocoa, and products made from or including chocolate and/or cocoa.  Mars, however, limited its attack to confectionery alone.  To succeed under s 44(1)(a) of the TMA, it had to show that “there is a real likelihood that some people will wonder or be left in doubt about whether confectionery sold or offered for sale under the applicant’s mark comes from the same source as confectionery sold or offered for sale under the respondent’s mark”: at [7].

His Honour considered the environment in which confectionery is typically sold and the nature of the “commercial landscape” which attends such sales – including the facts that confectionery is relatively inexpensive and often bought on impulse.

Consideration was given to both the appearance of the two marks and to their sound as spoken.  His Honour noted that some caution should be exercised when converting word marks to sounds for the purpose of comparison and set out at some length the expert evidence which supported the conclusion that the sounds of the two marks were sufficiently different as to pose little risk of confusion.

His Honour did not accept Mars’s submission that he might take into account the possibility of an error being made by a sales assistant who had misheard a customers request for MALTESERS.

Taking these things into account, his Honour was not persuaded that the relevant marks are deceptively similar.

In relation to s 60 TMA, Delfi accepted that the mark MALTESERS had acquired a relevant reputation in Australia.  Indeed, his Honour accepted that the mark as “a very widespread, solid, reputation in the area of packaged confectionery.” The question, therefore, was whether, as a result of that reputation, Delfi’s use of its mark MALTITOS would be likely to cause confusion.

Delfi contended that the purpose of s 60 “must have been the protection of unregistered marks which had acquired a reputation in Australia, including marks which were not actually used in Australia, and marks which might be registered in relation to good or services other than those in respect of which a particular claim for protection in made.”  His Honour did not accept that the section is so limited.  He held that the “only respect in which s 60 requires an exercise different from that arising under so much of s 44 as relates to deceptive similarity is that the reputation in Australia of the “other” mark must be the reason why the use of the mark proposed to be registered is likely to deceive or cause confusion.  What this means in practice is that the notional consumer of average intelligence thinking of making a purchase by reference to goods in association with which the latter mark is used, or intended to be used, is no longer someone who has had no more than some exposure to the “other” mark: he or she is someone who is assumed to have that level of awareness of that mark as is consistent with the content and extent of the reputation of it.”

So that clears up the relationship between s 44 and s 60.

In any event, while his Honour accepted that MALTESERS was very well known in Australia, the strength of this reputation was not such that Delfi’s use of MALTITOS in respect of confectionery was likely to cause confusion.  Indeed, his Honour considered that the strength of Mars’s reputation vesting in MALTESERS would reduce the likelihood of confusion: at [29].

The ground of opposition based on s 60 TMA was also rejected.  His Honour ordered that the applicant’s mark proceed to registration.

Case Notes, Deceptively similar?

Two yachts, one Anchorage

ANCHORAGE seems like a good name for a funds management business.  Sounds safe and secure.  It also reminds me of Michelle Shocked and Northern Exposure – but that’s just showing my age.  We can also thank Anchorage for Sarah Palin.

No doubt for these reasons, amongst others, the parties in Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd [2015] FCA 882 independently chose the name of that fine town for their unrelated funds management businesses.

The applicant was an Australian company which had operated here since 2007, while the respondents were a US firm called Anchorage Capital Group LLC and its wholly-owned Australian subsidiary, ACPA Pty Ltd.  The respondents’ business started in the United States in 2003 and established a presence in Australia in 2011.

On 26 May 2011, the applicant applied for registration of the marks ANCHORAGE, ANCHORAGE CAPITAL and ANCHORAGE CAPITAL PARTNERS in respect of various financial services.  Those applications proceeded to registration.

Things became complicated when, in 2013, the applicant moved into the Suncorp building in Sydney’s CBD – the same building that the respondent subsidiary company occupied.  Although the subsidiary company traded under its own name, ACPA Pty Ltd, it described itself on signage in the lobby of the Suncorp building as “ACPA a subsidiary of Anchorage Capital Group LLC“.  After some discussion and debate between the parties, the reference to Anchorage Capital was removed after a few months.

This, however, did not resolve matters.

In the proceeding before Justice Perram, the applicant contended that the respondents’ use of the words ANCHORAGE CAPITAL in the building’s lobby, the use of email addresses in the form and, and other uses of ANCHORAGE, ANCHORAGE CAPITAL and ANCHORAGE CAPITAL GROUP, in relation to the provision of financial services in Australia amounted to trade mark infringment pursuant to s 120(1) of the Trade Marks Act 1995 (Cth).

The applicant also alleged passing off and breach of the Australian Consumer Law.

The respondents cross-claimed to have the applicant’s trade marks removed from the register on the grounds that it was not the owner of those marks at the time of its application.

His Honour accepted that the words ANCHORAGE, ANCHORAGE CAPITAL and ANCHORAGE CAPITAL GROUP were substantially identical or deceptively similar to the applicant’s registered marks;  as were email addresses in the form  Addresses in the form, however, were not deceptively similar and nor was the phrase “ACPA Pty Ltd a subsidiary of Anchorage Capital Group LLC.”

These findings, however, were not sufficient to make out the applicant’s case.  Whilst the marks used by the respondents were deceptively similar to the applicant’s registered marks,  those marks had not been used by the respondents as trade marks in Australia since the priority date.

His Honour said:

There is simply no evidence that either respondent provided any of their funds management services to anyone in Australia after the priority date.  What they have done is trade in their own names.  This is not trade mark use.

Of course, it is both possible and common to use one’s own name as a trade mark.  There is a defence expressly provided for such use when it is in good faith.  Indeed, his Honour went on, in obiter, to say that had he concluded that the respondent parent company infringed the applicant’s marks, he would have considered that s 122(1)(a)(i) of the TMA (the own name defence) would have applied.

His Honour’s finding, however, was that no services had actually been provided by either of the respondents by reference to ANCHORAGE or its variants since the priority date.

His Honour had already found that the first respondent (ACPA Pty Ltd) used the names ANCHORAGE and ANCHORAGE CAPITAL after June 2011 (i.e. after the priority date).  This plainly was not use of its own name.  His Honour considered, however, that this use was to indicate the subsidiary’s connection with its parent and was not use as a trade mark.  It appears that his Honour considered that the subsidiary company was not actually providing any services to anyone in Australia.  The respondents’ contention that the subsidiary was doing nothing but providing advice to its parent was expressly rejected but his Honour noted that “the reality is that [the subsidiary] assisted [the parent] in its transactional work in AustraliaIn the course of doing so it used [ANCHORAGE, ANCHORAGE CAPITAL and ANCHORAGE CAPITAL GROUP]

In obiter, Perram J said that if he had concluded that the respondent subsidiary company infringed the applicant’s marks, he would have considered that s 122(1)(b)(i) would have applied in relation to the use the phrase “ACPA a subsidiary of Anchorage Capital Group LLC” because that use was in good faith to indicate a characteristic of the first respondent’s services, namely, the relationship between those services and the second respondent.  That is, his Honour accepted that “being a subsidiary of another company can be correctly described as a characteristic” for the purposes of s 122(1)(b)(i) of the TMA.

The passing off and ACL claims were dismissed.

The cross-claim appears likely to succeed but is not finalised.  On the basis of a small amount of use of the marks ANCHORAGE and ANCHORAGE CAPITAL by the respondent parent company in Australia in 2007, his Honour accepted that the applicant was not the owner of its marks at the time it applied for registration and that the discretion to remove them from the register was enlivened.  His Honour considered himself bound by earlier Full Court authority to conclude that the power to remove was discretionary – although he preferred the view of an earlier single judge decision that it was not.  Submissions are to be filed on whether that discretion should be exercised and an decision on that issue will follow in due course.

It appears that no party raised the issue of whether ANCHORAGE being a geographic location presented a barrier to registration in the first place.

“…you know you’re in the largest state in the union
When you’re anchored down in Anchorage”

Authorised Use, Case Notes, Non-use

Wild Goose chase might go all the way: Skyy Spirits LLC v Lodestar Anstalt [2015] FCA 509.

The ongoing battle between the owners of Wild Turkey Bourbon and Wild Geese Rare Irish Whiskey (which has been running for nearly 15 years) continues rolling on. Justice Perram delivered judgment last week in an “appeal” from an ATMO decision in which the delegate ordered removal of the marks WILD GEESE and WILD GEESE WINES from the Register for non-use.

The facts are a little unusual and slightly complicated.

The owners of Wild Geese Rare Irish Whiskey first registered the word mark WILD GEESE in Australia in 2000 in classes 32 and 33. Subsequently, in 2005, a small South Australian wine maker applied to register the marks WILD GEESE and WILD GEESE WINES. The wine maker (which was run – or owned – by Adelaide silk Patrick O’Sullivan QC) was immediately confronted by the earlier registration. It sought to overcome this problem by having the earlier mark removed for non-use.

Readers will know that a trade mark can be removed from the Register if it has not been used for a continuous period of three years: s 92 TMA.

Mr O’Sullivan soon discovered that there was already another application to remove the earlier mark from the Register – it came from the Wild Turkey interests. After some correspondence between Mr O’Sullivan and Wild Turkey, they came to an agreement: he agreed to assign his company’s interests in its marks to Wild Turkey and they, in turn, agreed to license those marks back to his company in perpetuity for $1. Wild Turkey also took an assignment of Mr O’Sullivan’s company’s application to remove the Irish Whiskey WILD GEESE mark from the Register.

That application ultimately succeeded – but not before going the Full Court of the Federal Court: Austin, Nichols & Co Inc v Lodestar Anstalt (2012) 287 ALR 221.

Wild Turkey then secured registration of the word marks WILD GEESE and WILD GEESE WINES and it is these marks that were licensed to Mr O’Sullivan.

The Wild Geese interests meanwhile had started selling their whiskey in Australia and wished to use the WILD GEESE mark here. Wild Turkey, on the other hand, despite selling Wild Turkey bourbon here, did not sell anything under their registered WILD GEESE and WILD GEESE WINES marks. Once the statutory three years had passed since registration of those marks, Wild Geese made its move. It sought removal of the WILD GEESE and WILD GEESE WINES marks from the Register on the grounds of non-use. (What’s good for the goose, right?)

But the Wild Turkey interests pointed to the continued use throughout the relevant period by Mr O’Sullivan QC. Although his sales were relatively small (around $3,000-$5,000 per year), Perram J accepted that Mr O’Sullivan’s company had used the marks during the non-use period in the relevant sense.

But did this use constitute “authorised use” within the meaning of s 8 of the TMA?

Section 8 provides that use will only be “authorised use” to the extent that it is “under the control of the owner of the trade mark”. This required some attention to be given to the detail of the licence agreement between Mr O’Sullivan and Wild Turkey. The agreement required Mr O’Sullivan’s company to observe certain quality control measures and, if requested, to provided several bottles of his wine to Wild Turkey to allow it to conduct its own analysis. If the wine did not meet a certain defined standard, the licence agreement could be terminated by Wild Turkey.

The agreement also placed restrictions on Mr O’Sullivan’s company in respect of where he could sell his wine and the manner in which he could use the marks.

Despite these provisions, Justice Perram found that, in fact, Wild Turkey exercised no actual control over Mr O’Sullivan’s company’s use of the marks – except that he would have needed Wild Turkey’s permission for any export trade. His Honour considered that the licence agreement was “not intended to deliver anything but the appearance of control to the Wild Turkey interests.”

Wild Turkey contended that the use of the marks was nevertheless under their control within the meaning of s 8. The issue for the Court was whether something less than actual control was sufficient.

Justice Perram reviewed the statutory history of s 8 (which came into effect with the 1995 Act and replaced a provision in the 1955 Act which referred to a “connexion in trade” between the licensee and licensor rather than “control”) and the authorities under both the 1995 and 1955 legislation. On the basis of this analysis, he concluded that s 8 unambiguously requires “actual control” and that this is consistent with the position under the 1955 Act.

However, his Honour was confronted with the Full Court’s decision in Yau’s Entertainment Pty Ltd v Asia Television Ltd (2002) 54 IPR 1. In that case, the Full Court upheld the primary judge’s decision that actual control is not required. Although Perram J respectfully dissented from the conclusions of the primary judge and the Full Court in Yau, he considered himself bound to follow it. Accordingly, he concluded (clearly reluctantly) that “for the purpose of s 8(1) a mere theoretical possibility of contractual control is sufficient to constitute authorised use”.

For this reason, the appeal was allowed. It is rare for the primary judge’s decision to form the basis of the appellant’s submissions on appeal but this will surely be such a case.

An interesting final point – alluded to by Justice Perram at the end of his judgment – is where Mr O’Sullivan stands in all of this. If the marks are ultimately removed for non-use, the licence agreement is worthless. Despite using the marks since 2005, and having the protection of trade mark registration through Wild Turkey since 2007, Mr O’Sullivan’s right to continued use of the mark will be in jeopardy (if not entirely lost).

Case Notes, s 41 TMA - adapted to distinguish?

AUSTRALIA’S CHEAPEST CHEMIST Trade Mark invalid – first FCA application of Cantarella

In the first application of the High Court’s decision in Cantarella Bros v Modena Trading [2014] HCA 48 (Cantarella) by the Federal Court, Justice Middleton has found that the trade mark depicted below, which was registered in respect of “Retailing, online retailing and mail ordering services; all relating to pharmacies” in class 35 and “Medical, hygienic, beauty care services all relating to pharmacies; all of the foregoing being pharmacy advisory and pharmacy dispensary services” in class 44 is invalid.

Australia's Cheapest Chemist TMThe trade mark was registered without limitation as to colour and was therefore registered for all colours: s 70 TMA.

The owners of the mark accepted that it was only to some extent adapted to distinguish the relevant services.  Sub-sections (5) and (6) of the former s 41 of the TMA were therefore applicable.

On the question of inherent adaptation, Middleton J cited the question posed by Stone J in Kenman Kandy:

[161]…the question is whether if the [appellant’s mark] were to be registered as a trade mark, other persons trading in [the same market] and ‘being actuated only by proper motives’ would think of this [mark, or a sign that is substantially identical with, or deceptively similar to, the mark] and want to use it in connection with their goods in any manner that would infringe the appellant’s trade mark.

His Honour pointed out that Justice Stone then articulated a “subsidiary and difficult question” when the mark “has associations that deprive it of the inherent capacity to distinguish.”

In this case, the three dominant words AUSTRALIA’S CHEAPEST CHEMIST signify geographic location, price and nature of the business, respectively.  His Honour considered that these words, considered either separately or combined, did not have the required distinctiveness.  The addition of the prefix “Is this?” did not assist.  His Honour concluded therefore that the trade mark was not at all inherently adapted to distinguish.  This conclusion sits comfortably with the High Court’s view, expressed in Cantarella, that words having a “direct reference” to the relevant goods or services are “prima facie not registrable”.

Section 41(6) was therefore applicable and his Honour found that the mark was not distinctive in fact as at the filing date.

The registration of the mark was therefore invalid.

Although Cantarella was referred to by his Honour in setting out the principles relevant to the question of inherent adaptation to distinguish, he did not refer to it again in the context of application to the facts in the case.  This is unusual but is perhaps explicable on the basis that Cantarella was decided after Middleton J had reserved and, in any event, his Honour was of the view that “the proper test for assessing the inherent capacity of the registered trade mark … still remains that articulated by Kitto J in Clark Equipment Co v Registrar of Trade Marks (1964) 111 CLR 511″ and that the High Court in Cantarella had “recently endorsed this test.”

Case Notes, Deceptively similar?

Case note: Bob Jane Corporation Pty Ltd v ACN 149 801 141 Pty Ltd [2013] FCA 1255

Bob Jane was a well-known racing car driver who established a successful tyre retailing business.  From 1981, that business was conducted by the applicant (BJC).

BJC is the registered owner of several trade marks including the word mark BOB JANE and the device mark depicted below both of which are registered in relation to various goods and services relating to tyres and their sale.

Bob Jane

There was evidence that these trade marks had been extensively used through a variety of media to promote BJC’s business (which included franchised stores) over many years.  The Court accepted that BJC had generated a substantial reputation vesting in the Bob Jane trade marks by 2011.

It was also accepted that BJC had established a substantial reputation in other marks described in the judgment as the “Jane Fleet” marks.

Following a family dispute, Bob Jane ceased to be a director and shareholder of BJC in 2011. He subsequently commenced a new business selling tyres by reference to the name BOB JANE via the respondent corporations.  Some of the corporate respondents included the words BOB JANE in their corporate name.  Others did not.

Some of the respondent corporations used the following device and variations of it in the promotion of car and truck tyres for sale.  The respondents also commenced operation from a website located at

Bob Jane 2

There was evidence of actual confusion: customers had contacted BJC seeking to purchase products they had seen on the respondents’ website.  Sometime later in 2011, the device depicted above was removed from the respondents’ website and replaced with the following:

Bob Jane 3

Following the grant of interlocutory relief, the respondents’ website was moved to a new address at and a new device was adopted as shown below:

Bob Jane 4

In the “About Us” section of the respondents’ website there was a disclaimer  which stated that

Mr. Bob Jane founder of the ‘Bob Jane T-Marts’ is not in any way associated with the ‘Bob Jane T-Mart’ organization.  Furthermore, ‘’ and Bob jane Tyre Corporation (Australia) Pty Ltd is also not in any way associated with Bob Jane T-Marts or the Bob Jane Corporation Pty Ltd

Despite these changes, the name BOB JANE was still used prominently on the respondents’ website, on its stationery and business paraphernalia and on the products it sold.

BJC alleged trade mark infringement, sought injunctive relief (including interlocutory injunctive relief which was granted) and other remedies including declarations and delivery up.

Use as a trade mark?

In relation to whether the impugned marks had been used “as a trade mark”, the Court found:

  1. Insofar as the corporate respondents were using their own names, or parts of their names, they were doing so “as trade marks”;
  2. The use of the Bob Jane Global domain name and the Jane Tyres domain name are uses of marks “as trade marks”.
  3. The use of marks in advertising on internet search engines can involve use as a trade mark.

The Court applied the usual authorities on the question of whether the impugned marks were substantially identical with or deceptively similar to the registered marks and concluded that each of the marks used by the respondents was at least deceptively similar to one or more of BJC’s registered marks.

The respondents raised, by way of defence, s 122 TMA which relevantly provides:

122 When is a trade mark not infringed?

(1) In spite of section 120, a person does not infringe a registered trade mark when:

(a) the person uses in good faith:

(i) the person’s name or the name of the person’s place of business; or

(ii) the name of a predecessor in business of the person or the name of the predecessor’s place of business;…

In relation to this, the Court noted:

  1. While the defence extends to corporations, the whole of the corporate name must be used (not just part of it) – though the abbreviations “Pty” and “Ltd” may be omitted;
  2. The requirement of good faith involves consideration of the respondent’s subjective belief.  Mere knowledge of the of the registered mark is insufficient to negate good faith but the authorities suggest there must be an honest belief that no confusion would arise and there must be no intention of wrongfully diverting business; and
  3. The onus of establishing the defence lies on the respondent.

The respondents did not lead any evidence to support their reliance on s 122 TMA (indeed they did not appear at the trial at all).  The Court accepted BJC’s contention that the “respondents’ marks were used with the intention that consumers would associate the respondents’ business with” BJC.

Accordingly, the s 122 defence was rejected.

Passing off / Australian Consumer Law

The Court also considered BJC’s claims of passing off and contravention of the Australian Consumer Law.  These claims were said by the Applicant to be subsumed within the claim for trade marks infringement but they were nevertheless considered separately by the Court.  They are not separately considered in this case note.  It is sufficient to say that they were successful.

Joint tortfeasorship

The Court also held that Bob Jane and another director of the respondent companies, Mr Rigon, were liable as joint tortfeasors with the corporate respondents.


In addition to the usual order for costs, BJC also obtained indemnity costs in relation to the proceeding from the date upon which an earlier judgment for final relief had been set aside.  The Court explained that the earlier judgment had been set aside on the basis that the respondents would defend the proceeding and had arguable grounds to do so.  Since that time, however, they had “done very little to defend the proceeding.”