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”

Case Notes, Federal Court procedure

Indemnity costs ordered in Goose fight

If a formal offer under the Federal Court Rules is made by an applicant and not accepted by a respondent, and the applicant obtains judgment in terms more favourable than the terms of the offer, the applicant is entitled to an order for indemnity costs from 11am on the second business day after the offer was served on the respondent: r 25.14, Federal Court Rules 2011.

Unlike the position at common law, there is no requirement for the applicant to show that the respondent’s rejection of the offer was unreasonable.

A respondent can only avoid the “rebuttable presumption” of indemnity costs if it can show “exceptional circumstances“: Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 40.

In the recent case of Skyy Spirts LLC v Lodestar Anstalt (No 2) [2015] FCA 575, Justice Perram rejected the unsuccessful party’s contentions that the other party “had won on a narrow point of law which was the subject of conflicting Full Court authority” and that the offer “did not reflect the basis upon which they were ultimately successful” constituted exceptional circumstances.

Indemnity costs were ordered.  The case is a good reminder of the strategic advantage of properly formulated offers of compromise that comply with the the requirements of Part 25 of the Federal Court Rules.

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?

Simple ≠ generic – Apple Inc [2015] ATMO 25

If you have more than two people living in your house you probably have multiple Apple devices half of which use the old plug and half the new.  Well, it’s the old plug we’re interested in here – it looks like this:

™ 1480025

Apple applied to register this as a trade mark in relation to electrical connectors and so forth in early 2012 (with a Convention priority date of 11 July 2011).

The examiner raised a ground of objection under s 41(5) as it stood at the relevant time.  After five adverse reports, Apple sought a hearing. You can find the decision here.

The hearing officer considered that the examiner had incorrectly relied, at least in part, on the view that “the more ‘simple’ a trade mark is, the more likely it is that another trader would, actuated only by proper motives, require to use that trade mark.”

He said:

I do not consider that this necessarily holds true and does not address the real issue which is enunciating why another trader, actuated only by proper motives, would need to use the Trade Mark. Simplicity is often the essence of a good trade mark. To drawn an analogy, the word trade mark OXO, used in relation to beef cubes or beef concentrate for cookery, is obviously an extremely simple, yet effective, trade mark – it contains oblique reference to the nature of the goods, it is a palindrome and may even be inverted or read in a reflection and yet it still reads OXO. Obviously, that trade mark is very simple but its simplicity does not prevent it acting as a very effective trade mark.

The hearing officer considered that it is not obvious why other traders would, without improper motive, need to use the Trade Mark on their similar goods and therefore took the view that s 41(5) was the appropriate sub-section to apply.  (Note the use of the word “need” here – consistent with the majority of the High Court in Cantarella and different from earlier authority that used “want” or desire”).

The use of the mark by the relevant date was very significant (as you can imagine) and there was survey evidence which showed that 32% of consumers identified the mark as being associated with Apple.  The hearing officer considered this to be sufficient to support registration pursuant to s 41(5).  The mark was accepted for possible registration.

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, Damages

Additional damages under s 126(2) TMA can be retrospective

Back in June, Perram J gave judgment against a kebab wholesaler for the infringement of a trade mark owned by Halal Certification Authority Pty Ltd, a company in the business of certifying food as being compliant with the Islamic rules relating to the preparation of food.

His Honour made various orders including that the parties agree on a form of corrective advertising.

He also awarded additional damages of $91,000 pursuant to s 126(2) of the TMA. This was the first time this provision had been successfully applied in the Federal Court.

Section 126(2) TMA came into effect on 15 April 2013.

After judgment, the respondent applied to vary the order for additional damages on the basis that some of the infringing activity had occurred before s 126(2) came into force.

Applications to vary orders are made pursuant to Division 39 of the Federal Court Rules 2011. Orders which have been entered (as these had) can only be varied if they fall into one of the categories set out in r 39.05 which includes slips, clerical mistakes, orders which do not reflect the intention of the Court and interlocutory orders.

The respondent contended that the order for additional damages was interlocutory because the form of the corrective advertising had not been agreed and therefore the rights of the parties had not been finally determined.

Perram J agreed and concluded that the orders were interlocutory for the purposes of r 39.05. That opened the possibility of varying the orders. His Honour, however, declined to exercise his discretion to do so.

First, the point was not argued at trial.

Secondly, s 126(2) permits an award of damages for conduct prior to its commencement because it is a procedural (as opposed to a substantive) provision. While, as a general rule, statutes are not construed to have retrospective operation, there is an exception for those having only procedural effects. That is, the nature of a procedural rule may be that it will often apply to the past.  Despite some conflicting authority, Perram J considered that the addition by statute of a new remedy to facts which were already actionable is “purely procedural.”

Accordingly, the additional damages of $91,000 was left unchanged.

See judgment here.

Case Notes, Passing Off, Trade practices

Phone book wars – Round 12 to PDC

The seemingly never-ending battle between Telstra and PDC over phone directories has been the subject of four published decisions of the Trade Marks Office, seven of the Federal Court (including one appeal to the Full Court) and one unsuccessful application for special leave to the High Court.  If only all litigants were this persistent!

Earlier fights have concerned whether copyright subsists in phone directories (it doesn’t) and whether certain trade marks of the parties were registrable in relation to directories including YELLOW and YOU’RE LOCAL, WE’RE LOCAL (they’re not).

The latest round concerned the use by PDC of certain trade indicia (in particular the colour yellow) on its print directories, its website and a mobile phone app which Telstra claimed amounted to passing off and breaches of the relevant trade practice legislation.

PDC, by cross-claim, alleged that Telstra had itself engaged in misleading or deceptive conduct in some comparative advertising in which it (Telstra) claimed that only 2% of consumers used the relevant PDC directory while 57% used the Yellow Pages.  That cross-claim was successful but is not discussed any further in this post.

Telstra’s claims were dismissed

Murphy J was not satisfied that the use of the relevant indicia gave rise to the impression that PDC was, or was associated with (etc – you know the usual claims), Telstra.

His Honour considered that while Telstra had some reputation in the colour yellow, the association in the minds of consumers was not strong.  He listed four primary reasons for this finding (at [15]):

“(a) yellow is not distinctive in itself, being a colour widely used on products and services;

(b)     yellow is internationally recognised as a standard colour of classified directories and to some extent was so recognised by Australian consumers;

(c)     Telstra only ever used the colour yellow coupled with its well-recognised Yellow Pages Trade Marks including the Walking Fingers, and never independently; and

(d)     Telstra’s use of yellow on its directory covers after 1996 was inconsistent and declined over time.”

His Honour did not accept that the adoption of a yellow cover for the PDC directories was a deliberate attempt to deceive consumers.  He considered PDC did “enough” to distinguish its directories from those of Telstra.

The initial judgment  omitted full consideration of the Telstra’s claims insofar as they related to the PDC website and mobile app.  This was addressed in a supplementary set of reasons at [2014] FCA 741.  Those claims were dismissed for essentially the same reasons.

A couple of interesting points arise from the judgment:

A significant proportion of the relevant class must be misled

In making these findings, Murphy J noted a difference in the authorities as to whether there was a requirement that “a significant number of the members of the target class were misled or deceived.”  He referred to Finkelstein J’s decision in .au Domain Administration Ltd v Domain Names Australia Pty Ltd (2004) ALR 521 where his Honour said, at [21]-[26], that this requirement had been wrongly imported from the law of passing off and is not relevant to s 52 of the TPA.  Murphy J, while attracted to Finkelstein J’s view, noted that there had been several Full Court decisions since then which “maintained the approach that it is necessary to establish that a ‘not insignificant’ proportion of the class are likely to have been misled or deceived.”  He considered this is consistent with the High Court’s decision in Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45.

Intention is relevant

It is now uncontroversial that the intention of respondents is relevant to the question of whether impugned conduct amounted to passing off or was likely to mislead or deceive.  Its relevance, however, is confined to an evidentiary role.  That is, the fact of an intention to deceive is evidence pointing to the fact (or likelihood) of deception – but its only the latter that matters.  Deception (or the likelihood of it) is enough, even without intention: see, for example, Google Inc v ACCC (2013) 294 ALR 404 at [9] per French CJ, Crennan and Kiefel JJ.

The respondents “took yellow from the get-up of Telstra’s directories” in an effort to attract legitimacy

In what is likely to be considered a controversial aspect of his decision, Murphy J found that PDC:

a. understood that using yellow covers on its directories would make them look more similar to Telstra’s directories;

b. considered that yellow was an essential part of Telstra’s get up and understood that Telstra had a substantial reputation in yellow (c.f. the judge’s own findings regarding that reputation set out above); and

c. after struggling to achieve credibility in the market for two years, decided to adopt to colour yellow to make their directories appear more orthodox and official.

His Honour considered that the evidence of PDC’s directors that they had no regard to Telstra’s use of yellow covers when they adopted yellow for their own directories was “implausible.”

He considered that the evidence supported three reasons for PDC’s adoption of yellow.  First, yellow was widely used by similar directories in the United States and in Australia and they considered yellow to be a “natural choice” for directories.  Secondly, PDC wanted to have a “more consistent and cleaner look” on their directory covers (though it is unclear from the judgment why this led to the adoption of yellow.  Thirdly, PDC wanted “to attract some of the legitimacy of yellow as an element of Telstra’s get up.”  He said: “In part the respondents took yellow from the get up of Telstra’s directories in an effort to attract the legitimacy that might bring to its directories.”

Adopting yellow covers for its directories in these circumstances did not, however, amount to an intention to deceive.  His Honour pointed out that the “authorities are replete with examples where traders ‘sail close to the wind’ by copying elements of a competitor’s get up, but maintain sufficient differences such that misleading or deceptive conduct or passing off cannot be made out.”

Indeed they are.  Telstra joins a long list of applicants who have failed in passing off/trade practices claims against respondents who have (sometimes deliberately) appropriated some elements of their trade indicia but have done enough to avoid confusion.  See, for example,  Nutrientwater Pty Ltd v Baco Pty Ltd (No 2) [2010] FCA 304; Yarra Valley Dairy Pty Ltd v Lemnos Foods Pty Ltd (2010) 191 FCR 297; Mars Australia Pty Ltd v Sweet Rewards Pty Ltd (2009) 81 IPR 354, and on appeal [2009] 84 IPR 12.

This case highlights, yet again, the significant hurdles faced by applicants in passing off / breach of ACL cases based on similar trade indicia.




Case Notes

Lift Shop appeal fails to get up

Use “as a trade mark” for the purposes of s 120 of the Trade Marks Act 1995 (Cth) is conceptually difficult but absolutely critical to an understanding of trade mark infringement. Unless the respondent’s use of the impugned mark is “as a trade mark” it does not infringe the registered mark.

Two recent decisions of the Full Court of the Federal Court have considered this issue,  most recently in a decision published today in the case of Lift Shop Pty Ltd v Easy Living Home Elevators Pty Ltd [2014] FCAFC 75.  The Full Court in Lift Shop upheld the primary judge’s finding that the respondent’s use of the phrase “LIFT SHOP” was not use “as a trade mark” in the relevant sense.

The Court (Besanko, Yates & Mortimer JJ) applied the classic authorities on this issue (The Shell Company of Australia Limited v Esso Standard Oil (Australia) Limited (1963) 109 CLR 407 and Coca Cola Company v All-Fect Distributors Ltd (1999) 96 FCR 107) as well as the other recent Full Court case (Nature’s Blend Pty Ltd v Nestlé Australia Ltd (2010) 272 ALR 487) before concluding:

“In the present case, the relevant question is whether the words “Lift Shop”, as used by the respondent in the title of its web page, functioned to distinguish its goods or services from those of others?  Objectively considered, the answer to that question is “no”. “

The following six principles for determining whether use was “as a trade mark” were set out by the Full Court in Nature’s Blend at [19] and affirmed by the Full Court in Lift Shop (citations omitted):

1. Use as a trade mark is use of the mark as a “badge of origin”, a sign used to distinguish goods dealt with in the course of trade by a person from goods so dealt with by someone else;

2.   A mark may contain descriptive elements but still be a “badge of origin”;

3. The appropriate question to ask is whether the impugned words would appear to consumers as possessing the character of the brand;

4.The purpose and nature of the impugned use is the relevant inquiry in answering the question whether the use complained of is use “as a trade mark”;

5.Consideration of the totality of the packaging, including the way in which the words are displayed in relation to the goods and the existence of a label of a clear and dominant brand, are relevant in determining the purpose and nature (or “context”) of the impugned words;

6.  In determining the nature and purpose of the impugned words, the Court must ask what a person looking at the label would see and take from it.

Case Notes, Damages

Use of halal trade mark not kosher: $91k additional damages for TM infringement awarded

The Federal Court has, for the first time, awarded additional damages for trade marks infringement.

$91,000 in additional damages was awarded against Quality Kebabs, a wholesale manufacturer of kebabs, for the infringement of a trade mark (depicted below) owned by Halal Certification Authority Pty Ltd, a company which, as its name suggests, is in the business of certifying food as being compliant with the relevant Islamic rules relating to the preparation of food.

Halal TM

The mark was used, without the applicant’s permission, on certificates provided by Quality Kebabs to various kebab restaurants for display to their customers.  Two such restaurants were also joined as respondents to the proceeding.

Quality Kebabs purported to be a supplier of halal meats.  Whether its meats were truly halal was not determined but it was uncontroversial that it had not been certified by the applicant.  Despite this, when asked by its customers (such as the respondent kebab shops) for a certificate of authenticity, it provided a false certificate bearing the applicant’s registered mark.

The claims

The applicant brought claims of trade mark infringement and breaches of the Australian Consumer Law against the restaurants and Quality Kebabs and individual directors of each.

The claims against the restaurants

The claims against the two restaurants were upheld but only nominal damages were awarded and there were no costs orders made against those businesses.  Claims against the principals of the restaurants were dismissed with costs.  The restaurants’ infringements were found to be innocent.  The evidence showed that the restaurants were not aware that the certificates provided by Quality Kebabs were false.

While it was clear that the two shops had infringed the applicant’s mark, the issue of quantum was more difficult.  The applicant claimed it was entitled to its usual retail licence fee of around $5,000 a year for two years.  It relied on Autodesk Australia Pty Ltd v Cheung Pty Ltd (1990) 94 ALR 472 as authority for this approach.  The problem in this case, however, was that there was no satisfactory evidence that the kebab shops would ever have paid the licence fee.

There was also no proof that the food served by the two shops was not halal or that any members of the public had become aware of this.  Without this evidence, the applicant could not show that it had suffered any reputational damage or “diminution in the capital value of the trade mark“.

Accordingly, on the trade marks claim, only nominal damages were payable.

The ACL claims were made out because the food sold by the restaurants had not been certified by the applicant as it suggested but in the absence of any proof of damage, no damages could be awarded under the Australian Consumer Law: s 236.

The claims against Quality Kebabs

The claim against Quality Kebabs was quite different.

Perram J found that Quality Kebab’s managing director made (or arranged the making of) the false certificates and provided those certificates to customers in the knowledge that his company had not been certified by the applicant.  His Honour was clearly unimpressed by much of the MD’s evidence describing parts of it as “ridiculous” and a “picaresque absurdity“.

In using the applicant’s mark on the false certificates, Quality Kebabs was found to have infringed the mark and to have breached s 18 of the ACL.  The managing director was found to be “knowing involved” in Quality Kebabs’ contraventions of the ACL.

On the issue of damages, the Court did not accept that Quality Kebabs would have paid the licence fee in order to use the applicant’s mark.  Perram J considered it more likely that it would have simply “misappropriated someone else’s“.  Again, therefore,  his Honour awarded only a nominal $10 for general damages.

Additional damages under the Trade Marks Act 1995 (Cth)

Additional damages have been available under the TMA since 15 April 2013: s 126(2), TMA.  Prior to the present case, however, they had not been awarded.

Sub-section (2) of s 126 provides:

             (2)  A court may include an additional amount in an assessment of damages for an infringement of a registered trade mark, if the court considers it appropriate to do so having regard to:

                     (a)  the flagrancy of the infringement; and

                     (b)  the need to deter similar infringements of registered trade marks; and

                     (c)  the conduct of the party that infringed the registered trade mark that occurred:

                              (i)  after the act constituting the infringement; or

                             (ii)  after that party was informed that it had allegedly infringed the registered trade mark; and

                     (d)  any benefit shown to have accrued to that party because of the infringement; and

                     (e)  all other relevant matters.

Perram J relied on the second reading speech and the explanatory memorandum to conclude that additional damages under s 126(2) TMA are intended to create a deterrent – i.e. “to make infringement unattractive.”

His Honour considered that Quality Kebab’s use of the applicant’s mark was “as flagrant as it could be” and “showed a complete lack of respect for the applicant’s property rights.”  He considered it was done “with the deliberate aim of peddling an untruth.” For these reasons, amongst others, the Court considered it appropriate to award additional damages in this case.  The quantum of those damages was assessed by calculating the expense Quality Kebabs avoided by falsely asserting it was halal certified by the applicant and then applying a 50% “uplift” to these amounts.  This figure was chosen to “serve the purpose of deterrence” and in recognition of the Court’s findings in respect of the criteria set out in ss (2)(a) to (e) of s 126 TMA.

This took the total figure for additional damages to $91,015 which, as Perram J said, is “a lot of kebab“.