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.




Trade practices

“Baked today, sold today” found to be misleading or deceptive

The Federal Court has found today that Coles supermarkets’ use of the phrase “Baked today, sold today” in relation to some of its bread products was misleading or deceptive in circumstances where, in fact, the bread was par baked sometime before (in some cases a long time before and overseas) and finished off from frozen product at in-store bakeries.

More on this to follow.  The ACCC’s press release is here.

Case Notes, Trade practices

No news is not always good news: Full Court finds that ACCC’s lack of response to letter seeking settlement is not a reason to reduce penalty

The Full Court (Rares, Jessup and Flick JJ) has marginally increased a penalty imposed by Marshall J on a hire car company (which operated in Tasmania under the banner Europcar) and one of its directors.

The case was brought by the ACCC against the company and its director for allegedly misleading or deceptive conduct in relation to fees charged (or not refunded) for damaged vehicles.  By the time of the trial, the parties were agreed that the impugned conduct was misleading and only penalty and costs were in issue.

The prescribed maximum penalties for the relevant conduct were $1.1 million for a company and $220,000 for an individual.  On appeal, it was uncontroversial that there were two relevant courses of conduct and so the maximum penalties were $2.2 million and $440,000 respectively.  (At trial, it was contended by the Commission that there were five courses of conduct but counsel for the Commission conceded that “it is of no great significance whether the Court considers there are two or five courses of conduct when one has regard to the totality principle.”)

The Full Court accepted that in imposing penalties of $200,000 and $40,000, the primary judge erred by taking into account the ACCC’s failure to respond to a February 2011 letter from the respondents which articulated a defence to the allegations against it (which at that stage were in the form of a letter from the Commission), set out a course of proposed corrective action and sought to engage in a discussion with a view to settlement.   The respondents in fact heard nothing further from the Commission until the proceeding was issued in November 2011.

The Full Court said: “ the circumstances of the present case, we accept the Commission’s submission that it was not open to the primary judge to reduce the penalty that would otherwise be appropriate because the Commission did not, before commencing its proceeding, engage in a sufficiently conscientious conversation with the respondents in an attempt to head off proposed litigation.”

Other than the misapplication of this discount, however, the Full Court considered that Marshall J’s penalties were “of an appropriate order”.  It increased them by 10% to $220,000 and $44,000.

The Full Court considered, nevertheless, that the ACCC’s failure to respond to the February 2011 letter merited an adverse costs order.  It therefore ordered that the “costs of the proceeding at first instance to which the Commission would otherwise be entitled as the successful party should be reduced by 15%.”

The Full Court’s decision can be found here and the first instance decision is here.

Case Notes, Trade practices

Blogger found to have engaged in misleading or deceptive conduct: Nextra Australia Pty Limited v Fletcher [2014] FCA 399

The Federal Court has held that a blog published for reasons including the promotion of the blogger’s commercial interests could be “in trade or commerce”: Nextra Australia Pty Limited v Fletcher [2014] FCA 399.

After the Seafolly case, where it was held that representations made on a personal Facebook page might be “in trade or commerce” for the purposes of the trade practices legislation, this case further emphasises the need for traders to exercise caution in the way in which social media and other new publishing technologies are used.

Case Notes, Trade practices

FCAFC confirms posts on personal Facebook page can be “in trade or commerce”

The Full Court of the Federal Court yesterday confirmed that Facebook posts on a swimwear designer’s personal Facebook page, which wrongly asserted that a competitor had “ripped off” her designs were made “in trade or commerce” for the purposes of s 52 of the Trade Practices Act 1974 (Cth) – which, in its modern incarnation is, s 18 of the Australian Consumer Law.  The case reference is Madden v Seafolly Pty Ltd [2014] FCAFC 30.

The facts

A swimwear designer (Madden) was surprised to see one of her bikinis worn by a well-known model on the cover of a popular Gold Coast magazine. After turning to an inside page, she discovered that the featured garment was, in fact, the product of a competitor (Seafolly). For reasons that will not be fully set out here, Madden formed the mistaken view that Seafolly had copied several of her designs. It is sufficient to say that among these reasons was the fact that a buyer from a retail group part-owned by Seafolly had viewed and taken photographs of some of Madden’s designs several months earlier.

On her personal Facebook page, Madden posted an album of photos under the heading “The most sincere form of flattery?” The front page of this album featured seven photographs of Seafolly garments. (This use was the subject of a copyright claim by Seafolly which is not discussed in this note). Below these photographs was a caption: “Why allowing ‘buyers’ to photograph your collection … can be a bad idea.” This album elicited comments from several of Madden’s 518 Facebook “friends” which indicated they considered Seafolly had copied Madden’s designs. Below these comments were larger photographs of each of the Seafolly designs. The name of one of Madden’s designs, followed by a question mark, was inserted below each of these photographs.

Madden’s personal and business (White Sands) Facebook pages were subsequently updated to include photographs of her own designs next to each of the Seafolly designs. Madden also sent emails to several journalists, a fashion industry publication called “Ragtrader” and two newspapers which attached content in similar form to that described above.

After being alerted to the publication of Madden’s comments in an online fashion-related publication, Seafolly issued a press release in which it denied that it had copied Madden’s designs and accused her of “acting maliciously to injure Seafolly.”

Fashion media interest in the story continued for a few days and further postings were made by Madden on her personal Facebook page and her business’s Facebook page which had 3,535 “friends”.

Seafolly demanded, amongst other things, an apology. Madden’s response was to the effect that neither she nor her company had accused Seafolly of copying. She pointed out that the “comments made or questions posed” on her personal Facebook page were “personal, not for publication, and were removed yesterday.” She did not apologise.

Seafolly issued proceedings seeking injunctive relief, declarations and damages for:

(a)  misleading or deceptive conduct; and

(b)  injurious falsehood.

Madden cross-claimed for defamation and misleading or deceptive conduct on the basis of the content of the Seafolly press release.

Seafolly’s TPA Claim

Were the representations misleading, deceptive or false?

Seafolly alleged that the various statements appearing on Madden’s personal and company Facebook pages and in the email she had sent falsely represented that Seafolly:

(a)  had copied Madden’s swimwear designs;

(b)  was not the creator of the Seafolly swimwear designs in the photographs included on the Facebook pages and in the email; and

(c)  had used underhanded means to obtain pictures of the White Sands designs and copied those designs to create Seafolly garments.

At trial, Madden did not contend that any of these representations was true. Rather, she argued that the relevant statements could not be fairly understood to carry them. In finding that the language chosen by Madden was intended to and did convey the representations alleged, the judge relied on the responses by readers of the statements on the Facebook pages and on the online publications which indicated the way in which the statements were understood by the intended audience.

The Full Court agreed that the relevant representations were carried by the various statements.  It pointed out that “if the primary judge used the articles written by the journalists and the readers’ responses to ascertain what the Facebook postings and email conveyed, he would have been in error.  In the end, however, if his Honour made that error, it was of no consequence because he correctly identified the meanings that were conveyed.”

Were they mere expressions of opinion?

Madden contended that the reasonable reader of the Facebook postings and the e-mail would have understood that she was merely expressing her opinion about the similarity of the depicted garments. This contention was rejected for the same reasons as the finding that the statements were false and likely to mislead or deceive.

It was also found that even if readers of the impugned statements would have understood them to be mere statements of opinion, Madden was nevertheless reckless in forming those opinions and the statements were made without caring whether they were true or false. Thus, Madden could not rely on this defence because she had no adequate foundation for her publicly expressed expressed opinion.

On appeal, the Full Court considered that the representations were of fact, not opinion.  It considered that each statement “was made on the basis that its truth was known to its maker.”  Further, the Full Court said, the inclusion of incorrect dates next to the photographs of the garments, which carried the false impression that the White Sands garments had been designed or released before the respective corresponding Seafolly garments, was fatal to Madden’s reliance on a defence based on expressing an opinion.

Were the representation made in trade or commerce?

Madden was the principal of White Sands, a trade competitor of Seafolly. Her statements were related to the manner in which Seafolly conducted its business and, in particular, alleged that it had engaged in conduct which was improper and which damaged of her own business. By making her statements, the judge considered that Madden had sought to influence the attitudes of customers and potential customers of Seafolly. This was sufficient to conclude that the statements were made in trade or commerce.

The Full Court agreed.

Was there any damage?

Seafolly was unable to show any actual economic loss resulting from Madden’s conduct. It did, however, suffer damage to its reputation for which it was awarded $25,000. This damage was caused by Facebook postings that were accessible to a relatively small number of “friends” for less than two days and by publication of Madden’s assertions in online trade publications. There was no significant publicity in the mainstream press. The allegations were nonetheless regarded as “a serious assault on Seafolly’s business integrity.”

The Full Court reduced the award of damages to $20,000 on account of the primary judge’s erroneous inclusion in his considerations of an email which did not carry one of the relevant representations.

Seafolly’s claim for injurious falsehood

The elements of injurious falsehood are:

(1)  a false statement concerning the plaintiff’s goods or business;

(2)  publication of that statement by the defendant to a third person;

(3)  malice on the part of the defendant;

(4)  proof by the plaintiff of actual damage (which may include a general loss of business) suffered as a result of the statement.

The judge held that the first three elements of the tort had been established but that Seafolly had failed to establish actual damage (i.e. actual pecuniary loss) as a result of Madden’s statements. Indeed, the judge considered that Seafolly’s sales and profitability were “wholly unaffected by what occurred.” As a result this claim was dismissed.

This finding was not the subject of any cross-appeal.

Madden’s cross-claim

At trial, Madden’s cross-claims for defamation and misleading or deceptive conduct were dismissed. The judge considered that Seafolly’s claim in its press release that Madden’s statements were made maliciously was true. This was a defence to the defamation claim and meant that the TPA claim must fail.

On appeal, the Full Court took the view that the facts as found by the primary judge were insufficient to support his finding that Madden had acted maliciously. Therefore, it said, his Honour’s finding that the representations contained in the Seafolly press releases were true was in error. They were  therefore were apt to mislead or deceive.


The author was junior counsel for Seafolly at trial and on appeal.