The Return of Duff Beer – Only This Time it’s ‘Legendary’

November 4, 2011

By Amanda Scardamaglia

Fifteen years after South Australian Brewing and Lion Nathan Australia had their plans to sell Duff beer thwarted by the Federal Court, German brewer Eschweger Klosterbrauerei is selling its ‘Legendary Duff Beer’ in Australia.

Available at a most independent bottle shops and online, the German Pilsner, was first launched in Europe, where it has been sold for a number of years. The brewer’s website boasts its Duff Beer was awarded the DLG Medal in 2011 (an award given by Germany’s independent drinks and food testing society). It was also recognised as a bestseller in 2010 and one of Germany’s most successful new products.

Although the German brewer has registered its red label bearing the word ‘Duff’ as a trade mark in the EU, the application has been opposed, presumably by Twentieth Century Fox, Matt Groening and his production company, as the product is not licensed or authorised by the producers of The Simpsons television series, in which the beer featured. A search of ATMOSS indicates that the company has not sought to register the trade mark in Australia.

So how, if at all, is this Duff beer different from the product marketed by South Australian Brewing and Lion Nathan Australia in the 1990s? And more importantly, will the Legendary Duff Beer suffer the same fate as its predecessor, at least in Australia?

The Nature of the Potential Claim

Trade mark lawyers and students will recall the proceedings brought by Twentieth Century Fox and Matt Groening Productions against two local Australian brewers who had marketed its own brand of ‘Duff’ beer. In a claim for passing off and a breach of section 52 and 53 of the Trade Practices Act 1974 (Cth) (now section 18 and section 29 of Schedule 2 of the Competition and Consumer Act 2010 (Cth), the producers of The Simpsons sought to prevent the breweries from promoting or dealing with any product using the same or similar get-up and incorporating the name Duff Beer, as depicted in the television series. The producers also asked that the breweries be restrained from using the name Duff or any deceptively similar name in relation to beverages, and from representing that their Duff beer was the product of the producers, or that it had the sponsorship or approval of the producers.

The producers succeeded on all grounds of their claim, with the Court granting an injunction preventing the breweries from continuing to sell their Duff branded products, while all existing stock was pulled from store shelves and destroyed. The rest is part of The Simpsons’ folklore, with the already sold Duff beer becoming prized collector items. Indeed since the product was pulled from sale, some cases of the beer have fetched thousands of dollars in online auctions.

It is likely the producers would have the same claim against the German brewer Eschweger Klosterbrauerei and/or its local distributor/s. That is, a claim in passing off in the nature of character merchandising and also for a breach of section 18 (and section 29) of Schedule 2 of the Competition and Consumer Act 2010 (Cth).

Drawing on the Court’s interpretation and application of the law with respect to character merchandising in the 1996 proceeding, it is hard to see how a court, if faced with making a determination with respect to Legendary Duff Beer, could come to a different result.

 (a) Reputation and Secondary Meaning

The word ‘Duff’ was conceived by Matt Groening in 1989 for use as the name of a fictionalised beer to feature in The Simpsons. As Homer’s drink of choice, Duff Beer is commonly depicted and referenced in the television series. Indeed, one whole episode of The Simpsons was devoted to the theme of Duff Beer, which was titled ‘Duffless’.

While Duff Beer is occasionally depicted as bottled beer in the television series, it is most prominently depicted as canned beer. The basic colours used are red, black, white and yellow, with the name Duff featured on the front of the can, in haphazard cartoon font.

In Groening’s affidavit evidence in the 1996 proceeding, he said that Duff Beer was intended to be one of several secondary characters and products that would play a continuing and essential part of the program. Interestingly, Groening said that he came up with the name Duff as a parody of the other one syllable American beers, like ‘Budd’ and Blitz.’

In light of this evidence, the Court in the South Australian Brewing case determined that the word ‘Duff’ had acquired a powerful secondary meaning, which the tort of passing off would protect. The fact that the case did not concern a fictional character but a make believe product was irrelevant. So in finding that Duff Beer had derived a distinctive character, the Court famously extended the principles which apply to character images or titles to the name of a fictional product. Clearly, the producers can rely on this finding as the basis upon which to make a claim against the use of the word Duff by the German brewer.

(b) Misrepresentation or Association

In the 1996 decision, the Court held that the use of the word Duff by the Australian brewers would induce customers into believing that the product had a connection or association with The Simpsons program. The Court came to this conclusion having regard to the fact that the respondents’ ‘… intention was to “sail as close as possible to the wind” in order to “cash in” on the reputation of “The Simpsons” without stepping over the line of passing off or deceit.’ So, rather than require evidence of consumer confusion, Tamberlin J found that mere association, which would arouse and recall connotations of fun, irreverence and parody which surrounded The Simpsons, was enough to satisfy the cause of action. In particular he stated:

‘The name “Duff” will induce customers into believing that the product has a connection or association with “The Simpsons” program, when in fact it has no connection whatsoever. The fact is there is not and never has been any association between the applicants and the respondents.  The implicit representation, in my view, is that the name “Duff Beer” produced by the breweries, is an embodiment of the fictional beer which features in the series. In reality, the product is a beer, which is manufactured in Australia by companies without any commercial or other association with the producers of the series.

…the deliberate creation by the breweries of an association by use of the name “Duff” between the breweries’ beer can with “The Simpsons” program, in circumstances where there is no association and indeed, where such an association is contrary to the express policy of the producers, amounts to misleading and deceptive conduct. There is no necessity to demonstrate that the viewer or consumer must think in specific terms of permission or allowance in order to constitute deceptive conduct. The intentional use of the name “Duff Beer” which produces the false association is sufficient …’

Whether a court would find the same in a claim involving the Legendary Duff Beer is slightly more contentious, given there are a number of differences between the Legendary Duff Beer and the beer produced by the local Australian breweries, and in turn, the Duff Beer featured in The Simpsons.

Firstly and most obviously, the Legendary Duff Beer is sold in bottles and not cans, whereas previously noted, Duff Beer is normally depicted as canned beer in the television program. Whether this detracts from the possibility that consumers would think there is some association is questionable – the word Duff remains the most prominent aspect of the packaging on the German beer.

The prominent use of red, black and white on the Legendary Duff Beer is somewhat different to the get-up of the can featured in the television series, as it does not feature the colour yellow.  Even so, the German brewer has used a similar haphazard cartoon font for the words ‘Duff Beer’.

The other significant difference here is the German Brewer’s use of the word ‘Legendary’. Does this sufficiently distinguish the German beer from any association with The Simpsons or does the term further embolden the association with the television program?

It is more probably the latter case. This is because it seems unlikely that the addition of the word ‘Legendary’ would sufficiently distinguish the goods from The Simpsons or that it would operate as a disclaimer so as to dispel any perceived association with The Simpsons and the German brewer.  Consider here what the Court had to say about whether the use of a disclaimer bearing the words ‘unauthorised’ would be sufficient in the later proceeding, when Tamberlin J was considering the scope of relief:

‘It is too simplistic an approach to suggest that the word “unauthorised”, coupled with the other forms of proposed disclaimer, must dispel any association with “The Simpsons”. … Moreover, given the evidence that “The Simpsons” program makes a point of “sending up” in a comic manner, other advertisers and advertisements, and given the irreverent nature of the content of the series, it is by no means beyond reasonable argument that the disclaimers would reinforce, rather than negate or diminish, any association with the series.’

Another important factor relates to the question of merchandising. The Simpson’s television series is highly merchandised. Much of this licensed merchandise relates specifically to Duff Beer, with the range including t-shirts and caps depicting the fictional beer. Tamberlin J took this into account in ultimately holding that the extent of existing merchandising would make it more likely that the public would think that The Simpsons had sanctioned the beer produced by the Australian breweries. The consequence of this was significant from the producers’ perspective in terms of the potential damage to The Simpsons brand – particularly as the producers had consistently refused to licence merchandise with respect to alcohol and tobacco products because of the series’ popularity with children. This is a policy the producers have maintained to this day. Thus, one would expect that, for this reason, the Legendary Duff Beer is of particular concern to Twentieth Century Fox and Matt Groening Productions.

Conclusion

It seems remarkable that, notwithstanding Australia’s recent history with Duff beer and the well publicised Federal Court decision, another company would enter the Australian market with an unauthorised Duff labelled beer. Expect to see more on this in the near future, particularly once the EU trade mark opposition claim is resolved. In the meantime, it might be worth grabbing a case of the Legendary Duff Beer and secure your potential collector’s item now.

Amanda Scardamaglia is a Lecturer in Law and Swinburne University and a PhD candidate at the Melbourne Law School.

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Could plain tobacco packaging laws ground a non-violation complaint under the Australia-US FTA?

July 29, 2011

By David Brennan

In the debate surrounding the Commonwealth’s proposed plain tobacco packaging laws an aspect of Australia’s international intellectual property obligations, aside from those set out in World Trade Organization (WTO) rules, has not been addressed. That aspect is the possibility of a non‐violation complaint by the US against Australia under the Australia-US Free Trade Agreement (FTA).

A non‐violation complaint occurs when, because of the application of a measure which in itself does not violate a minimum standard set by a trade agreement, the measure nevertheless causes the nullification or impairment of a benefit that a party reasonably expects should arise from the agreement.

In this instance a minimum standard article found in Chapter Seventeen of the FTA – Intellectual Property Rights – requires that parties confer upon trade mark owners certain exclusive rights in relation to their marks. The article reads in part that ‘[e]ach Party shall provide that the owner of a registered mark shall have the exclusive right to prevent all third parties not having the owner’s consent from using in the course of trade identical or similar signs.’

This minimum standard is not violated by plain packaging laws if one accepts the logic that the standard merely requires the creation of a negative right (a right to exclude), and that plain packaging laws are not inconsistent with that requirement. This is because, under that logic, the laws simply deny affected trade mark owners a positive entitlement to themselves use certain of their registered trade marks in typical ways, but does not remove their right to prevent third parties from using those trade marks. This is a key point made by Mark Davison, a plain packaging enthusiast, in arguing that such laws do not violate WTO rules.

However a dispute settlement article in Chapter 21 of the FTA raises the minimum standard in an important way, by creating the possibility of a non-violation complaint. It states that ‘except as otherwise provided in this Agreement or as the Parties otherwise agree’ the dispute settlement regime of the FTA applies when a Party considers that ‘a benefit the Party could reasonably have expected to accrue to it under … [Chapter Seventeen – Intellectual Property Rights] is being nullified or impaired as a result of a measure that is not inconsistent with this Agreement.’

This creates the possibility of a non‐violation complaint by the US against Australia on the basis that plain packaging laws deny a reasonably expected benefit to US trade mark owners. In this respect the US might also argue the plain packaging measure should be considered in conjunction with another measure: State and Territory law banning of the display of tobacco products at point of retail sale. Together, the measures might be argued to cause heightened impairment or nullification of a reasonably expected benefit to US tobacco trade mark owners.

How would the US identify a reasonably expected benefit, arising from the FTA minimum standard of requiring a right in owners to prevent others from using their marks in trade? It might be identified as the benefit described by Frank Schechter in his 1927 Harvard Law Review article, “The Rational Basis of Trademark Protection”. Schechter there explained: ‘The fact that through his trademark the manufacturer or importer may reach over the shoulder of the retailer and across the latter’s counter straight to the consumer cannot be over-emphasized, for therein lies the key to any effective scheme of trademark protection. To describe a trademark merely as a symbol of good will, without recognizing in it an agency for the actual creation and perpetuation of good will, ignores the most potent aspect of the nature of a trademark and that phase most in need of protection.’

Importantly, a non-violation complaint assumes that the measure in issue is not inconsistent with the FTA. That is to say such a complaint could be made even with the US accepting the argument that a measure denying an owner use of its mark does not violate a FTA minimum standard guaranteeing the trade mark owner a right to exclude others from using its mark.

In relation to ‘except as otherwise provided in this Agreement’ in the FTA dispute settlement article, it should be pointed out that exceptions for measures such as those ‘necessary to protect human, animal or plant life or health’ are not expressly incorporated to apply to Chapter Seventeen – Intellectual Property Rights. However, the FTA dispute settlement article recognizes that the parties may ‘otherwise agree’ in relation to a measure such as the plain packaging mandate. Unlike the position under bilateral investment treaties, private parties cannot bring a complaint under the FTA, only the countries party to the agreement are competent to take action. Would the US bring a non-violation FTA complaint against Australia about the plain packaging laws? Of course I do not know. Recently the US Food and Drug Administration (FDA) has prescribed (commencing in September 2012) the types of graphic health warnings on tobacco packaging that Australia adopted long ago. These must appear on the top 50 percent of both the front and rear panels of each cigarette package distributed in the US, however the FDA regulations do not mandate plain labelling for the remaining branded portion of the package. At the same time seven US peak commerce bodies – including the US Chamber of Commerce – have expressed joint opposition to Australia’s proposed plain packaging laws, while at the same time recognizing Australia’s right to regulate more fundamental control over the supply of tobacco products.

I conclude with a couple of riders.

Non‐violation complaints are regarded by many (albeit not the US) as being ill‐suited to intellectual property minimum trade standards; this controversy has been responsible for the moratorium on such complaints under WTO rules.

While I am an intellectual property enthusiast, I am personally opposed to the tobacco trade.  I favour the suggestion made last year to ban the supply of tobacco to individuals born in or after the year 2000.

David Brennan in an Associate Professor at the Melbourne Law School

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Patent, Trade Mark, Enforcement – the whole kit and caboodle, all in one exciting Bill…

April 7, 2011

By Kimberlee Weatherall

At an IP Academics’ conference in early February, I remember Professor Di Nicol asking, rhetorically, ‘where has all the patent reform gone?’ Di pointed out that we’d had any number of ACIP Reports, ALRC Reports (like that on Gene Patenting), and IP Australia Discussion Papers, all with no actual legislation resulting.

No more.

No doubt many are already aware of the Intellectual Property Laws Amendment (Raising the Bar) Bill. An exposure draft for this Bill was released by IP Australia on 3 March, with comments due last Monday, 4 April. The provisions of the Bill have been discussed at some length elsewhere, too, including some very interesting, thorough discussion of Schedule 1 on the Patentology blog.

In summary, the Bill has 6 Schedules, and mostly deals with patent, although it has some important Trade Mark bits too.

  • Schedule 1 is meant to be about ‘raising the quality of granted patents’, but, in short, it’s about standards for granting a valid patent. It covers everything from changing the way prior art is considered in assessing whether a patent has an inventive step, making the requirement of usefulness a bit more real by requiring a ‘specific, substantial, and credible use’ for the invention; to the effective abolition of ‘fair basis’ and its replacement with a concept of ‘support’ drawn from European law.
  • Schedule 2 proposes a new research exemption in patent, something that has been discussed for years now and is long overdue, to be honest.
  • Schedule 3 is meant to be about ‘reducing delays in resolution of patent and trade mark applications’, which seems to be mostly about finding ways to speed up patent and trade mark oppositions. I’m not entirely convinced the proposals will work, not least because I can’t see anything there that really deals with extensions of time in opposition proceedings that can really extend the time of an opposition. In any event, the proposed changes mostly create a framework within which more detailed regulations will be made. It is hard, therefore, to predict the ultimate outcome of these reforms.  Perhaps more important (and likely more effective) are the proposed amendments to divisional patent applications. ‘Divisionals’ happen (in general) when a patent application is ‘split’ into more than one application. The basic idea is fine, of course, but it can be used in all kinds of interesting strategic ways, including, at the moment, splitting an application off into a divisional when the main application is opposed by someone else – thus getting a patent through faster without the opposition applying to it. Under the proposed changes, applicants will only be able to file divisionals up to the date by which oppositions have to be filed. So, at least if an opposition is filed at the very end of the opposition period, it won’t be possible to split off a divisional patent to avoid the impact of a patent opposition. There are a few other strategic moves that are discussed in the Explanatory Memoranda which will be precluded by this change. The change seems fair to me.
  • Schedule 4 is about ‘assisting the operation of the IP profession’ – and deal with patent attorney privilege (like legal privilege, but for patent and Trade Mark attorneys) as well as some disciplinary stuff, and material about registering attorney firms. Potentially interesting stuff in there that tries to define what counts as giving ‘intellectual property advice’ – raises interesting questions about what bits of what attorneys do, don’t count as giving legal advice.
  • Schedule 5 is about enforcement. It makes some substantial changes to enforcement at the border, mostly by introducing a requirement that people whose goods are seized on the insistence of a trade mark or copyright owner will now have to positively claim their goods (rather than having them returned as a matter of course if legal proceedings aren’t commenced within 10 days by the IP owner). We also have a full re-write of the trade mark criminal offences (creating two levels, summary and indictable, like in the Copyright Act), and the addition of additional damages for ‘flagrancy’ in civil proceedings.
  • Schedule 6 is (allegedly) about ‘Simplifying the IP system’. It covers a miscellaneous collection of stuff, including (a) giving jurisdiction over design matters to the Federal Magistrates’ Court, (b) amending secret use in patent law, (c) ‘fixing up’ aspects of the grace period in patent; (d) a new system to allow the Commissioner to revoke acceptance of a patent prior to grant; and (e) repealing the requirement in s 45 for a patent applicant to inform the Commissioner of the results of certain searches,

With such a smorgasbord of issues, it’s hard to know what to comment on. Much of what I might otherwise have said about the patent stuff has already been said by Patentology: that attempting to raise the bar in inventive step is a good idea but the amendments probably don’t go far enough; that the change in the usefulness requirement is good for biological type inventions where patents have been granted for fairly speculative ‘uses’. (I disagree with Patentology about experimental use I have to say – I think we need the exception in there, although I dread it’s going to end up being narrowly read by our courts).

But here’s a couple of things that haven’t been discussed in the Patentology comments or by Warwick Rothnie:

First, we have a pretty complete re-write of the trade mark criminal offences here, using that awful, awful style of criminal drafting that seems to prevail at a Federal level these days (if you remember the new copyright criminal offences, introduced in 2006, you’ll get the picture – pages and pages of text and none of us any the wiser about what it means because you have to go to the Criminal Code to even begin making any sense of it). I suppose we should be grateful that there’s no proposal here to introduce Infringement Notices, as we had in copyright back in 2006 (then again, it would be hard to justify introducing infringement notices in trade mark when they haven’t even been used in copyright for years after coming into the legislation, wouldn’t it?). But two things are really interesting about the trade mark criminal offences. First, some of the offences apply a standard of ‘negligence’ to the mental element. Thus it will be a summary offence to apply a mark to goods, being negligent as to whether the mark is, or is substantially identical to, a registered trade mark. The first problem is – why would negligence be an appropriate standard here at all? Well, so I thought the Explanatory Memorandum might help here. So I went to look, and it says this:

‘It is appropriate to have a lower fault element of ‘negligence’ for the circumstance elements of the offences because of the unique nature of intellectual property rights. Despite the clear legal position that intellectual property is a form of personal property, evidence has shown that some people see the violation of intellectual property rights as trivial and a ‘victimless crime’. Such attitudes may extend to an unacceptable failure to ascertain the factual circumstances in which their conduct would be criminal. However, consistent with the general approach taken to other forms of personal property, and to copyright goods, a person who uses a registered Trade Mark (what could be another person’s property) should be under an objective obligation to check that the mark is not registered. Otherwise, the effectiveness of the deterrent is undermined, with the risk that intellectual property rights are less protected than tangible property rights. The introduction of an objective negligence standard will assist the effective administration of justice and perform an important educative role in ensuring that people take intellectual property crime seriously.’

OK – what? So hang on, failing to check the trade marks register when you’re applying a mark to goods could be a criminal offence, because one ought to check the register? And we want it to be criminal because that will ‘perform an important educative role’? Last theory on this kind of thing I read suggests over-criminalising behaviour that the average person does not think as criminal is not likely to increase respect for either trade mark law or criminal law.

And I still don’t even know what it means to be [criminally] ‘negligent’ about whether your mark is identical to a registered mark. Doesn’t ‘negligence’ import some kind of understanding of what would be considered appropriate standards of behaviour (you know, reasonable man/woman and all that?) And if that’s true, what is the standard of vigilance about branding activity that is considered socially acceptable these days? Is Woolworths criminally negligent for using ‘honest to goodness’, that being the trade mark of some organic supplier or other? Honestly, I wonder whether they really think these things through sometimes.

Something else that hasn’t got a lot of comment is this new customs scheme for requiring people whose goods are seized to actively claim their goods. I don’t know, and I’ve not thought it through sufficiently, but I wonder whether that is consistent with Article 55 of TRIPS, that says goods shall be returned if the IP owner doesn’t commence proceedings to continue the suspension. I mean, I know that you can have further customs procedures without breaching TRIPS (you can have payable duties and the like), but can you impose a further element (this claim scheme) that is clearly geared entirely towards assisting IP owners in enforcement and that leads to forfeiture, effectively on the grounds of claimed infringement, without legal proceedings? I’m not at all sure about that.

Here’s another interesting little beastie in the Bill. Proposed s 50A of the Patents Act. This would give the Patent Commissioner power to revoke an acceptance any time before grant. The explanatory memorandum says it will help with admin type problems, but it seems to me that it might be used like the equivalent Trade Mark Act provisions are being used – as a kind of opposition-lite, where a prospective opponent writes to the Commissioner asking them to exercise their discretion to revoke – without going through the full opposition process. I see the potential for more strategic game playing, even as the Bill has tried to remove other parts of the Act that have facilitated various interesting patenting and patent dispute strategies.

Overall, too, I wonder about some of the moves in patent. It feels like IP Australia has deliberately sought to shift Australian law closer to European patent law – for example, using European language in relation to support and other documentary requirements. Why Europe? Why European law in particular? Aren’t we meant, under our Free Trade Agreement with the US, to be ‘endeavour[ing] to reduce differences in law and practice between [Australia and the US], including in respect of differences in determining the rights to an invention, the prior art effect of applications for patents, and the division of an application containing multiple inventions’? (AUSFTA Article 17.9.14). I mean, I’m not a big AUSFTA fan, as you may know, but this does look quite a lurch in a different direction, which makes you wonder whether Article 17.9.14 has any relevance at all…

One more thing worthy of comment – Item 86 in Schedule 6 amends, and broadens, another copyright exception. This is the one found in the Patents Act s 226, and allows reproduction and other uses of documents open to public inspection. I’ve said it before, I’ll say it again. Every time the government decides it is going to create a new little copyright exception so it can do something it needs to do, it really ought to be asking itself: why do I have to do this? And wouldn’t it make more sense to introduce a general, fair-use type exception? Honestly???

Kimberlee Weatherall is a senior lecturer at the University of Queensland

This article was cross-posted here at LawFont

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High Court round up – IP cases in the first half of 2010

August 12, 2010

By Janice Luck and Peiwen Chen

The High Court handed down two decisions on trade mark issues in the first half of 2010:

  • E. & J. Gallo Winery v Lion Nathan Australia Pty Limited [2010] HCA 15.
  • Health World Limited v Shin-Sun Australia Pty Ltd [2010] HCA 13; and

Case 1: E. & J. Gallo Winery v Lion Nathan Australia Pty Limited [2010] HCA 15

On 19 May 2010 the High Court upheld an appeal by California-based wine producer E & J Gallo Winery (Gallo) against the removal of its BAREFOOT trade mark from the Trade Marks Register for non-use. French CJ, Gummow, Crennan and Bell JJ (the joint judges) delivered a joint judgment. Heydon J delivered a separate judgment on the evidence adduced to establish authorised use, holding the evidence was sufficient. On the remaining issues, Heydon J stated that he agreed with the substance of the joint judges’ reasoning.

Background

Gallos’ BAREFOOT trade mark had been registered in Australia since 9 March 1999 in class 33 in respect of wines (the BAREFOOT registered trade mark).

During 2006 and 2007, Lion Nathan Australia Pty Limited (Lion Nathan) developed what was referred to as a concept beer containing lemon and lime flavours. This concept beer was intended to be less bitter than traditional beers and was targeted at non-beer drinkers.  In January 2008 Lion Nathan began selling this beer under a trade mark treated for the purposes of the litigation as being BAREFOOT RADLER.

Gallo commenced proceedings against Lion Nathan in the Federal Court alleging that Lion Nathan’s use of the BAREFOOT RADLER trade mark infringed its BAREFOOT registered trade mark pursuant to section 120(2) of the Trade Marks Act 1995 (Cth) (the Act). Lion Nathan counter-claimed against Gallo arguing that Gallo’s BAREFOOT trade mark had not been used during the three year period from 7 May 2004 to 8 May 2007 (the statutory period) and should therefore be removed from the Register in accordance with section 92(4)(b) of the Act.

The trial judge decided against Gallo on both matters holding that Lion Nathan had not infringed Gallo’s registered trade mark and that Gallo’s registered trade mark should be removed from the Register for non-use.

Gallo appealed to the Full Federal Court which held that Lion Nathan had infringed Gallo’s registered trade mark but also agreed with the trial judge that Gallo’s registered trade mark should be removed from the Register for non-use. Gallo appealed the Full Federal Court’s decision on non-use to the High Court.

The High Court refused Lion Nathan’s application for special leave to cross-appeal the Full Federal Court’s finding that Lion Nathan had infringed the BAREFOOT registered trade mark pursuant to section 120(2) of the Act and the finding that the effective date of removal from the Register of Gallo’s BAREFOOT registered trade mark should be the date of judgment.

What was the use of the BAREFOOT mark?

Between 9 March 1999 and 17 January 2005 the registered owner of the BAREFOOT registered trade mark was Michael Houlihan (Houlihan) who had licensed the mark to Grape Links Inc trading as Barefoot Cellars (Barefoot Cellars). Grape Links Inc was sold to Gallo and pursuant to this sale the BAREFOOT registered trade mark was assigned to Gallo in January 2005.

On 14 February 2001, 60 cases of wine bearing the BAREFOOT trade mark were shipped by Barefoot Cellars to a German distributor who had purchased the wine. Some of this wine was subsequently sold to a Victorian liquor wholesaler, Beach Avenue Wholesalers Pty Ltd (Beach Avenue), who imported the wine into Australia in July 2002. Beach Avenue offered 144 bottles of this wine for sale in Australia during the statutory period. Fifteen bottles were sold after 7 May 2004 but prior to the transfer of the BAREFOOT registered trade mark to Gallo and another 26 were sold after that transfer but before 8 May 2007. Some 18 bottles were given away.

However, there was no evidence that Gallo, Barefoot Cellars or Houlihan knew that the wine was being offered for sale or sold in Australia under the BAREFOOT trade mark.

The High Court Decision – the principal issue

In order to defeat Lion Nathan’s counter claim to remove the BAREFOOT trade mark registration for non-use, sections 92 and 100 of the Act required Gallo to establish use in good faith in Australia during the statutory period of the BAREFOOT trade mark by the registered owner of the trade mark or an authorised user, that is, a person using the trade mark under the control of the owner of the trade mark in accordance with section 8 of the Act.

By virtue of section 7(3) of the Act, an authorised use of a trade mark by an authorised user is taken to be a use of the trade mark by the owner of the trade mark. The only acts considered by the joint judges were the offer for sale and selling by Beach Avenue of the bottles of wine bearing the BAREFOOT trade mark. The joint judges recognised that these acts constituted a use of the BAREFOOT trade mark in Australia.

Was there “use” by the registered owner or an authorised user?

The issue thus became whether that use was use by the registered owner or an authorised user. This in turn led to a consideration of the ambit of the High Court decision in Estex Clothing Manufacturers Pty Ltd v Ellis and Goldstein Ltd (1967) 116 CLR 254 (the Estex Case) where it was held on page 271

“[W]hen an overseas manufacturer projects into the course of trade in this country, by means of sales to Australian retail houses, goods bearing his mark and the goods, bearing his mark, are displayed or offered for sale or sold in this country, the use of the mark is that of the manufacturer.”

However, neither Gallo nor Houlihan nor Barefoot Cellars had knowingly projected the BAREFOOT wine into the course of trade in Australia because none of them had been involved in the BAREFOOT wine being imported into and sold in Australia.

The joint judges held that there was no suggestion in the Estex Case that what was sufficient in that case was necessary in every case. Earlier in their judgment in the Gallo Case the joint judges had stated that “use” for the purpose of the non-use removal provisions of the Act must be understood in the context of the definition of a trade mark as a sign used to distinguish the goods of one person from the goods of others and that this definition encompassed the orthodox understanding that one function of a trade mark is to indicate the origin of the goods to which it is applied.

Thus the joint judges went on to hold that the capacity of a trade mark to distinguish the registered owner’s goods does not depend on whether the owner knowingly projects the goods into the Australian market but rather depends on the goods being in the course of trade in Australia. In paragraph 52 the joint judges enunciated the following principle:

“An overseas manufacturer who has registered a trade mark in Australia and who himself (or through an authorised user) places the trade mark on goods which are then sold to a trader overseas can be said to be a user of the trade mark when those same goods, to which the trade mark is affixed, are in the course of trade, that is, are offered for sale and sold in Australia.  This is because the trade mark remains the trade mark of the registered owner (through an authorised user if there is one) whilst the goods are in the course of trade before they are bought for consumption.”

Thus, provided Barefoot Cellars was an authorised user, use of the BAREFOOT trade mark by the registered owner was established. The joint judges went on to hold that on the evidence Gallo had established that Barefoot Cellars used the BAREFOOT registered trade mark under the control of Houlihan whilst he was the registered owner of the trade mark.  If followed that Barefoot Cellars was an authorised user pursuant to section 8 of the Act.

The High Court Decision – the subsidiary issues

Use in good faith

Lion Nathan’s contention that the use of the BAREFOOT trade mark was not “in good faith” as required by the non-use removal provisions of the Act was rejected.  The joint judges held that in all the circumstances the use of the BAREFOOT trade mark was genuine and sufficient to establish the requisite use in good faith. However, the joint judges expressly said in paragraph 64,

“On the facts here, it is not necessary to decide whether a single use of a registered trade mark in good faith would have been sufficient to resist removal.” (citation omitted)

What trade mark was used?

The front label on the bottles of the BAREFOOT wine sold in Australia is reproduced below.

Lion Nathan argued that this was use of a trade mark consisting of the word BAREFOOT in combination with the device of a foot and not use of the registered trade mark. The joint judges referred to section 7(1) of the Act which provides that the Registrar or a court may decide that a person has used a trade mark if it is established that the person has used the trade mark with additions or alterations that do not substantially affect the identity of the trade mark.

The joint judges held that the device is an addition to the registered trade mark that does not substantially affect its identity.  This view appears to be based on the fact that the device is an illustration of the word. It accordingly followed the joint judges held that the use of the BAREFOOT registered trade mark with the device constitutes use of the registered trade mark in accordance with section 7(1).

The High Court Decision – the conclusion

The joint judges thus considered that Gallo had established the requisite use of the BAREFOOT registered trade mark during the statutory period with the consequence that Lion Nathan’s counter claim for removal of the BAREFOOT registered trade mark for non-use failed.

Implications

The decision of the joint judges on the principal issue is a welcome one. The bottles of the BAREFOOT wine had been sold to the German distributor without any limitation as to their destination. As the joint judges said in paragraph 51:

“A registered owner who has registered a trade mark under the provisions of the Trade Marks Act can be taken, in general terms, to have an intention to use the trade mark on goods in Australia. It is a commonplace of contemporary international trade that prior to consumption goods may be in the course of trade across national boundaries.”

It will be interesting to see how the reasoning of the joint judges is applied in determining use of a trade mark for the purposes of determining ownership of a trade mark in Australia for the purposes of sections 27 and 58 of the Act.

It is important, however, to note that the joint judges declined to decide the vexed question of whether a person in the position of Beach Avenue also uses the registered trade mark. In paragraph 53 the joint judges said:

“It is not necessary to decide whether by importation and sale Beach Avenue has also used the mark (as was found by the Full Court) because the only relevant question is whether the registered owner used the mark.” (citations omitted)

In relation to the subsidiary issue of “What trade mark was used?” it is interesting that the joint judges referred to section 7(1) of the Act rather than the almost identical provisions in section 100(3)(a) of the Act dealing specifically with non-use removal proceedings. It is also interesting that the joint judges treated the word BAREFOOT and the device of the foot as constituting a single combination mark and not two separate trade marks.  But perhaps most interesting are the following statements made by the joint judges on this issue in paragraph 69 without any express reference to substantially identical or deceptively similar trade marks:

“The monopoly given by a registration of the word BAREFOOT alone is wide enough to include the word together with a device which does not substantially affect the identity of the trade mark in the word alone. So much is recognised by the terms of s 7(1), which speak of additions or alterations which “do not substantially affect the identity of the trade mark”. Except for a situation of honest concurrent use, another trader is likely to be precluded from registering the device alone while the registered trade mark remains on the Register.”

CASE 2: Health World Limited v Shin-Sun Australia Pty Ltd [2010] HCA 13

On 21 April 2010, Health World Limited (Health World) succeeded to establish that it was ‘aggrieved’ within the meaning of sections 88(1) and 92(1) of the Trade Marks Act 1995 (Cth) (the Act). The High Court found that Health World had the requisite standing to challenge Shin-Sun Australian Pty Ltd’s (Shin-Sun) HEALTHPLUS trade mark given that the two companies were rivals in relation to the goods to which the mark applied.

The matter was remitted to the Full Federal Court for determination of the remaining issues.

It should be noted that the 2006 amendments to the Act have removed the requirement in section 92 that the applicant for removal of a mark be a person aggrieved.

Background

Both Health World and Shin-Sun were involved in the manufacture and supply of health products.  Health World began selling a probiotic powder called ‘Inner Health’ in 1991. Another similar line of product in tablet form called ‘Inner Health Plus’ was subsequently launched in 2001. In September 2001, Health World applied to register INNER HEALTHPLUS as a trade mark.

Shin-sun marketed and sold a range for products derived from bees, their wax and shark cartilage under the name of ‘HealthPlus’. On 7 May 2001, Shin-Sun applied for registration of HEALTHPLUS. Health World opposed that application, but following an earlier decision of the Federal Court , Shin-Sun’s application for HEALTHPLUS was registered.

Health World sought rectification of the HEALTHPLUS trade mark pursuant to section 88 on the basis Shin-Sun had no intention of using the mark in Australia and that it had allowed the trade mark to become deceptive or confusing.  It also contended rectification pursuant to section 92(1).

The High Court Decision

The High Court found the Full Federal Court erred in adopting the exhaustive test for standing from the case of Kraft v Gaines (1996) 65 FCR 104, which included the requirement that a rival have a desire, or intention to use the mark to qualify as a ‘person aggrieved’.

Instead, the majority of the court preferred a liberal construction of ‘aggrieved’ adopted in “Daiquiri Rum” Trade Mark [1969] RPC 600 (“Daiquiri Rum”) where Lord Pearce stipulated no requirement that the application for revocation desire or intends to use or could use the mark.

French CJ, Gummow, Heydon and Bell JJ emphasised that the Register of Trade Marks must have ‘integrity’ and should be maintained as ‘an accurate record of marks’.  However, this function must be balanced with the need to prevent ‘busybodies’ from making invalid applications for rectification and thus eroding the security of the Register. In this light the High Court concluded that the authorities favoured a liberal construction of ‘aggrieved’.

Hence the test for a ‘person aggrieved’ depended on whether the parties were trade rivals in respect of the goods with registered marks.

As Health World and Shin-Sun were rivals in selling health supplements, Health World was therefore a ‘person aggrieved’ for the purposes of sections 88 and 92(1) of the Act.

Crennan J concurred with the majority but differed in opinion with respect to the test enunciated by Lord Pearce in “Daiquiri Rum”.  Her Honour held that an ‘aggrieved person’ must be ‘affected’ by the erroneously registered trade mark.

Implications

Trade mark owners have improved standing and therefore better opportunities to challenge intellectual property registrations that are hindering their businesses.

On the flip side, owners of marks may now be at greater risk of having their intellectual property registrations and possibly administrative decisions favourable to them, being challenged.

Janice Luck is Senior Lecturer at the University of Melbourne Law School

Peiwen Chen is recent LLB graduate of the University of Melbourne Law School

(return to the top of this edition)


Girls in Miniskirts follow the Men in Leeuwenhosen

July 1, 2010

By Dr Owen Morgan

A story recently came out of the FIFA World Cup in South Africa with an IP flavour to it. It involved the arrest of two young Dutch women for allegedly breaching South Africa’s strict ambush marketing laws by wearing dresses produced by a Dutch brewing company, Bavaria, to a World Cup match.  The dresses had been launched in April and, according to one report, some 5,000 had already been sold over the Internet.

The young women’s alleged offence was to provide another 30+ young women (South African locals), who were not charged, with short orange dresses. The group wore the dresses to the game between Denmark and the Netherlands.  Orange is the national colour of the Netherlands and is well recognised as such.  The inevitable YouTube video of the event has already surfaced under the name ‘Nederland Denemarken Bavarian Babes’  It shows the young women arriving in red outfits that seem to be in the Danish colours; then stripping off those outfits to reveal the orange dresses underneath and then dancing as a group. (There is another YouTube video entitled ‘Greatest Threat to the World Cup So Far’.) In the second half, the young women were removed from the stadium, questioned by FIFA and then by the police before being released.

This is an example of classic ambush marketing.  The official beer of the World Cup is Budweiser which is brewed by Anheuser-Busch and FIFA is seeking to protect Anheuser-Busch’s interests.  FIFA regards such promotional activity as a means of using fans to advertise products that compete with official sponsors’ products.  Preventing the use of fans as ‘walking advertisements’ is one of the primary objectives of FIFA’s rights protection programme.

The ambush replicates a similar ambush which Bavaria staged at the 2006 FIFA World Cup. At that event, Bavaria distributed orange Leeuwenhosen (Lion pants in the style of lederhosen) to hundreds of fans.  At the match between the Netherlands and the Ivory Coast, fans wearing the Bavaria-branded Leeuwenhosen were ordered to take them off and many of them watched the game in their underpants.  This option was not offered to the young women in the most recent ambush.

The two women have apparently been charged with an offence under section 15A of the Merchandise Marks Act 17 of 1941 and associated regulations.  Section 15A enables the Minister of Trade and Industry to designate an event as a protected event.  Subsection (2) provides that: ‘no person may use a trade mark in relation to such event in a manner which is calculated to achieve publicity for that trade mark and thereby to derive special promotional benefit from the event, without the prior authority of the organiser of such event.’ Contravention of subsection (2) means that a person is guilty of an offence (see subsection (4)).  The penalty for conviction of a first offence is liability to a fine not exceeding R5,000 (AU$ 778, NZ$ 954) for each article to which the offence relates, or imprisonment for up to three years or both.

If the prosecution proceeds under these provisions, it will be interesting to see how it establishes that the orange dresses which bear a small purple logo and/or the colour orange is a trade mark and that the young women ‘used’ the trade mark in a manner calculated to achieve publicity and promotional benefit.  A quick review of the Bavaria beer website (http://www.bavaria.com/ ) didn’t reveal any particular use of the colour orange in association with Bavaria beer or its corporate personality.

Over-reaction?

The swift reaction of the South African authorities and the draconian penalties to which the two young Dutch women could be subject led the Dutch Foreign Minister Maxime Verhagen to phone the South African ambassador in The Hague, Peter Goosen. ‘He indicated to the ambassador that the charges and the arrest of these two woman were disproportionate and not correct,’ said the spokesman for the Netherlands embassy to South Africa, Christoph Prommersberger.

One wonders whether the whole issue will be quietly shelved once the World Cup is over.

The New Zealand connection

The Rugby World Cup to be staged in New Zealand in 2011 is a major event that will involve a truly global audience.  New Zealand has had ambush marketing legislation in place since 2007 and it includes a provision that is designed to cover what occurred in South Africa.

Section 18 of the Major Events Management Act 2007 provides that: ‘No person may advertise in a clean zone during a clean period without the written authorisation of the major event organiser.’ (In brief, a clean zone defines the venue for a major event and the area around it; a clean period covers the time period of a major event.)  In the Act, advertising is defined as including ‘any form of communication (including selling or giving away goods)’. Section 22(b)(i) provides a gloss in that section 18 does not apply to clothing worn by ‘a member of the public, unless that item is being worn, carried, or used in co-ordination with other persons with the intention that the advertising intrude on a major event activity or the attention of the associated audience;’.

If the ambush had occurred in New Zealand, and if the two young Dutch women had sold or given away the orange dresses, they and Bavaria would be in breach of section 18 of the Major Events Management Act 2007.  However, if the dresses were lent to the other women, there might well be a defence.

It seems likely that a hard-nose attitude will be adopted in New Zealand. The general manager of Rugby World Cup Ltd in New Zealand was recently quoted as saying, ‘Be aware we’ve got specific rights protection teams.’

Perhaps it’s just as well that the Netherlands haven’t qualified to compete in the Rugby World Cup in New Zealand – or maybe it’s a pity that they haven’t! We could do with a bit of fun!


In this edition (#8)…

June 3, 2010

In this edition we report from across the pond.  Dr Owen Morgan sheds light on a David and Goliath battle between a Kiwi businessman and Coca-Cola. This fascinating article highlights the bullying tactics of the drinks giant and the possible impact on the Rugby World Cup and the future of… “carbonated milk”!

The “Boycott Facebook” day last month sparked headlines around the world as Facebook incited mutiny amongst its users by changing its privacy settings.  Elisabeth K. Cooke outlines Facebook’s privacy labyrinth.  She also discusses how she is using the new settings to avoid “frenemies” and annoying 3rd party advertisers.

Finally, Peiwen Chen reflects on the recent IPRIA seminar given by Dr Dev Gangjee on the ECJ’s L’Oreal “knock off” imitation perfumes case .  Chen outlines the case and discusses Gangjee’s views on the “depressing” expansion of trade mark law into unfair competition.


World Famous in New Zealand – a ‘battle between a Paeroa businessman and international drinks giant Coca-Cola’

June 3, 2010

By Dr Owen Morgan

The New Zealand media recently reported that the Assistant Commissioner of Trade Marks had directed Coca-Cola’s application for the phrase ‘WORLD FAMOUS IN NEW ZEALAND’ (in respect of aerated waters etc) to proceed to registration.  For the decision click here.

The phrase was coined by an advertising agency for use with ‘Lemon and Paeroa’, a popular aerated drink and one that has lifted awareness of Paeroa, a small rural town (population around 4,000) in the North Island of New Zealand which is known for its mineral springs. The drink was originally made from Paeroa mineral water and lemon. The phrase was used for sometime by Coca-Cola Amatil (NZ) Limited before it filed the application and Coca-Cola already held a number of registrations for labels incorporating the name of the drink and the phrase.

The application was filed on 30 September 2004 and it was accepted on 29 January 2007. It would probably have proceeded to registration without much interest from anybody if Coca-Cola hadn’t upset a small businessman. But it wasn’t until 12 April 2010 that the Assistant Commissioner handed down his decision in respect of the opposition by a Paeroa businessman, Mr Tony Coombe.

Why bother opposing Coca-Cola’s application?

Coombe is a small businessman apparently prepared to spend his own money to protect a ‘Kiwi-ism’ that belongs to all New Zealanders. There is some truth in this assertion as can be seen by the wide range of material that is returned when the phrase is searched on Google.

What hasn’t been reported is that the dispute arose because Coombe had incorporated a company in September 2000 named World Famous in New Zealand Limited. It is currently an inactive land-holding company. Coombe was later contacted by Coca-Cola’s lawyers who asked him to change the name of the company. He refused and his attempts to reach an agreement with Coca-Cola’s lawyers were unsuccessful and led to what he described as ‘nasty phone calls’ and ‘nasty letters’. Coombe hit back by opposing Coca-Cola’s application and the dispute dragged on.

Why would Coca-Cola try and get Coombe to change the name of his company?

The answer, presumably, is that Coca-Cola wants a monopoly on the use of the phrase over and above the monopoly it will obtain by way of its trade mark registration and the related goodwill that it has built up in the phrase.

Who won?

Coombe has spent a reasonable sum of money (approximately NZ$30,000 in legal fees over a period of about two and one half years) and he has nothing to show for it, other than the right to battle on. He hasn’t changed the name of his company but he admits that if he had known how much the dispute was going to cost him, he might well have done so.

However, he has also said that he felt that he might as well go ahead with the next stage which was to file an appeal in the High Court against the decision of the Assistant Commissioner. There is lesson here: put a price on how far you are prepared to go to fight for a principle when you’re confronted by a multi-national with very deep pockets. A second lesson, and one for the Coca-Cola’s of this world, is: some people value their principles and are prepared to fight for them.

Coca-Cola’s mark has been registered, but does this mean that Coca-Cola won? The Assistant Commissioner noted that Coca-Cola faced a difficulty:

‘While the applicant may be able to produce evidence of a connection in the minds of the public between its L&P trade mark (and goods) and the use of the phrase “World Famous in New Zealand”, that does not mean that others should not be free to use the same phrase in relation to their goods and nor does it mean that the public will not expect that to be a phrase that others ought to be free to use. On the evidence it appears that the public do in fact have such an expectation.’  (para 32(g))

Coca-Cola may have won the battle, have they won the war? The media reports were not complimentary of ‘the international drinks giant’ and all Coca-Cola has secured is confirmation of its existing monopoly. The exclusive right to use the phrase in question had surely been established by the years of use on the label and the many bottles and cans of drink that have been sold.  And Coca-Cola may yet face another day in court.

Isn’t this just another example of a multi-national bullying a small businessman.

Postscript – the future of carbonated milk!!

More recently, Coca-Cola has again been in the news for its aggressive behaviour in protecting its marketing position. It appears that Coca-Cola has a supplier contract with the organisers of the National Agricultural Fielday.  The NZ “Fielday” is the largest agribusiness exhibition in the Southern Hemisphere.

It is reported that Coca-Cola have used this agreement to prevent an innovator (Mr Revell) from selling his newly developed product – a carbonated milk drink (cola and lemonade flavours) – from a stand at the Fielday. The organisers declined his application for a stand, although, he was later told he could exhibit but not sell his product. As Revell couldn’t afford the cost of the stand, he declined.

Post – postscript – anything but the football!!

There is another lesson in the Revell example for small businessmen. New Zealand hosts the Rugby World Cup in 2011. Under New Zealand’s draconian ambush marketing laws, the right to sell products in the vicinity of World Cup venues will be strictly controlled and will require a licence from the organiser.

If Coca-Cola is the soft drinks supplier to the Rugby World Cup, it is reasonable to assume that it will use its commercial ‘clout’ to ensure that no other licences are issued to sell soft drinks. This would mean that no other traders (including children selling home-made lemonade from their front gardens) in certain designated streets around the venues will be able to sell drinks to passers-by.


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