The “Zip” Defence Comes Undone: High Court Tightens Honest Concurrent Use Defence
On 13 May 2026, the High Court of Australia issued a decision that is a must-know for all Australian trade mark owners and practitioners.
By unanimously dismissing the appeal in in Zip Co Ltd v Firstmac Ltd (S140-2025) [2026] HCA 16, the High Court of Australia has upheld a higher bar than has previously known for traders in Australia to use a trade mark “honestly”. The unanimous judgment provides important guidance on the “honest concurrent use” defence to trade mark infringement, and the Australian Trade Marks Office has already issued an official notice stating that the decision will likely cause changes for Australian trade mark prosecution too.
As the below article will show, the decision sends a clear warning to any businesses seeking to launch a trade mark in potentially crowded brand markets.
Background
The dispute arose between buy-now-pay-later provider Zip Co Limited (Zip Co) and non-bank lender Firstmac Limited (Firstmac). Firstmac owned an earlier registration for the trade mark “ZIP” in connection with financial services (Zip Registration). Zip Co later adopted and used trade marks including “ZIP”, “ZIP PAY” and “ZIP MONEY” (Zip Co Marks) for its own financial goods and services.
While Zip Co may not initially have been aware of Firstmac’s Zip Registration when considering possible trade mark options, the evidence showed that before the launch of its Zip Co Marks, Zip Co became aware of Firstmac’s earlier trade mark rights through adverse examination reports issued by IP Australia. Those reports warned that the parties’ trade marks were potentially conflicting and likely to cause confusion. Despite that knowledge, Zip Co proceeded to launch and to use its Zip Co Marks in Australia’s financial marketspace.
At first instance, Zip Co was successful in defending the infringement claims made by Firstmac. However, the Full Federal Court overturned that decision, finding that the Zip Co Marks were deceptively similar to the Zip Registration, and that the honest concurrent use defence was unavailable. The High Court has now affirmed that position by unanimously dismissing Zip Co’s appeal and confirming that the company could not rely on its honest concurrent use defence under the Trade Marks Act 1995 (Cth).
The High Court’s Decision
The central issue before the High Court concerned the operation of sections 122(1)(f) and 122(1)(fa) of the Trade Marks Act 1995 (Cth), which offer a possible defence to infringement where a party would have been entitled to obtain registration based on honest concurrent use.
Zip Co put forward two main grounds for appeal before the High Court:
- the Full Federal Court erred by treating the date for assessing honest concurrent use (i.e. the relevant date) as the date of the potential infringement; and
- that, at the relevant date, Zip Co acted honestly in its concurrent use of the Zip Co Marks.
In the decision issued 13 May 2026, the High Court upheld the Full Federal Court’s findings that Zip Co had not established that they had honestly used the Zip Co Marks, including because Zip Co did not prove that it genuinely believed there was no likelihood of confusion between the parties’ respective trade marks.
While knowledge of a competing mark will not preclude a finding of honesty, Zip Co did not prove honesty in circumstances where it was aware of “the likelihood of a material impediment” to using the Zip Co Marks and chose not to engage with the adverse report.
Zip Co’s inability to rely on the “honest concurrent use” defence led to a finding that Zip Co’s buy now, pay later business has been infringing Firstmac’s trade mark rights for many years and is now forced to cease using its Zip Co Marks in Australia and rebrand.
The Key Issue: What Is “Honest” Concurrent Use?
During the abovementioned proceedings, two critical questions arose:
- At what point in time should honesty be assessed; and
- What does “honesty” actually mean in this context?
The High Court confirmed that honesty must be assessed at the time of each allegedly infringing use of a trade mark, rather than at the earlier point when a business first coined or adopted a trade mark, or at a later point once infringement proceedings are underway. This distinction proved fatal for Zip Co. While its initial consideration of the Zip Co Marks may have been innocent, by the time it commenced commercially using the trade marks in Australia, it had already been alerted to the existence of Firstmac’s earlier Zip Registration and the potential risk of confusion. Initially honest use of a trade mark may later become dishonest in the course of trade, and any ‘honest concurrent use’ defence will need to be broken down for separate occasions rather than be assessed holistically at once.
The High Court also clarified that honesty is assessed objectively, by reference to the standards of ordinary and decent commercial conduct. It is not enough for a trade mark owner to subjectively believe they are entitled to proceed using a trade mark – rather, all the facts about the trade mark owner’s state of mind will need to be taken into account. This includes any honest development of a trade mark, but also any awareness of an earlier similar trade mark that is likely to cause confusion. In this case, Zip Co’s case failed on the latter as it received the adverse examination report citing the Zip Registration and chose not to engage with the adverse report. The High Court confirmed that the onus was on Zip Co to positively prove its honesty at first use, and it failed to discharge that onus.
Why This Decision Matters
The decision significantly narrows the practical availability of the honest concurrent use defence in Australian trade mark infringement proceedings as well as local trade mark prosecution.
For many years, some businesses have taken comfort from the idea that adopting a brand without initial knowledge of a conflicting registration may later support an honest concurrent use argument in prosecution and any subsequent defence of a trade mark. The High Court has now made clear that commencing use of, as well as continuing to use, a trade mark after becoming aware of an earlier conflicting right may undermine that argument entirely.
The judgment reinforces several practical lessons for brand owners:
- Clearance searches should be conducted as early as possible before launch;
- Adverse examination reports from IP Australia should be treated seriously when considering any ‘honest concurrent use’ strategy;
- Continuing to use a mark after receiving notice of a potential conflict may carry substantial legal risk; and
- Rebranding early may be significantly favourable than incurring the risk of defending prolonged and costly infringement proceedings later down the track.
Implications for trade mark prosecution
Although the case arose in the context of infringement proceedings, the reasoning will likely also influence Australian examination practices relating to “honest concurrent use” claims to seek to overcome citations objections under section 44 of the Trade Marks Act 1995 (Cth).
For example, caution is warranted when considering an approach of waiting several years before applying or re-applying for a trade mark to establish honest concurrent use in due course. Once a trade mark owner has been made aware of a citation under section 44, it may be difficult to establish a finding of honesty of the applicant’s use of a trade mark after it first received the adverse examination report. A trade mark owner should carefully consider whether it is appropriate to continue using a trade mark after a citation objection is raised – even if the applicant’s initial development of the trade mark was honest.
Commentary following the decision suggests that, in prosecution contexts the relevant assessment date for honest concurrent use remains the filing date of the application, however in infringement proceedings the focus is on the time of the allegedly infringing conduct. As such, continuing use of a trade mark after a citation objection is raised may still constitute infringement if that decision was not made with an ‘honest state of mind’, taking into account the standards of ordinary and decent commercial conduct.
IP Australia’s response
Following the decision, IP Australia issued an official notice confirming that the Registrar of Trade Marks is currently assessing the implications of the judgment and considering updates to the Trade Marks Manual of Practice and Procedure.
This suggests practitioners can likely expect future guidance from the Registrar on the relevant date for assessing honest concurrent use and the meaning of honesty, as well as potentially on the evidentiary requirements for any honest concurrent use claims during the prosecution of a trade mark application.
Final thoughts
The High Court’s decision in Zip Co Limited v Firstmac Limited constitutes an important development in Australian trade mark law. The judgment confirms that honest concurrent use is not a broad safety net for businesses that continue using a mark after learning of earlier conflicting rights.
The decision highlights that trade mark clearance searches are crucial to conduct as early as possible and are not merely an administrative formality. Early searches, careful risk assessment and timely legal advice remain critical steps in avoiding expensive disputes and potential rebranding exercises later down the track.
At MBIP, we are here to offer you legal advice throughout any stage of your trade mark use and related proceedings. Please reach out via our book a meeting form or by calling our office on 07 3369 2226 to be put in contact with one of our skilled Trade Marks Attorneys.
