Frito-Lay Trading Company GmbH v Aldi Stores Limited Partnership [2001] FCA 969 (23 July 2001)

Last Updated: 27 July 2001

FEDERAL COURT OF AUSTRALIA

Frito-Lay Trading Company GmbH v Aldi Stores Limited Partnership

[2001] FCA 969

TRADE MARKS - alleged infringement of registered word mark "Twisties" - whether sign used as trade mark or merely descriptive of goods - use of "twists" as descripter - whether "cheezy" also used as descripter - where infringing mark deceptively similar to registered trade mark - aural representation in breach of rights of owner of registered mark - defence of good faith - where not made out - defence of honest concurrent user not made out

Trade Marks Act 1995 (Cth) ss 6, 7, 10, 17, 120(1), 122(1)(b), 122(1)(f)

Wingate Marketing Pty Ltd v Levi Strauss & Co (1994) 49 FCR 89 referred to

CA Henschke & Co v Rosemount Estates Pty Ltd (1999) 47 IPR 63 referred to

CA Henschke & Co v Rosemount Estates Pty Ltd (2000) AIPC 91-640 applied

Coca Cola Company v Al-Fect Distributors Ltd [1999] FCA 1721; (1999) 96 FCR 107 referred to

Australian Woollen Mills Ltd v FS Walton & Co Ltd [1937] HCA 51; (1937) 58 CLR 641 applied

Cooper Engineering Co Pty Ltd v Sigmund Pumps Ltd [1952] HCA 15; (1952) 86 CLR 536 applied

The Shell Company of Australia Ltd v Esso Standard Oil (Australia) Ltd [1961] HCA 75; (1963) 109 CLR 407 applied

Southern Cross Refrigerating Company v Toowoomba Foundry Pty Ltd [1953] HCA 73; (1954) 91 CLR 592 applied

Unilever Australia Ltd v PB Foods Ltd (1999) 47 IPR 358 referred to

FRITO-LAY TRADING COMPANY GmbH v ALDI STORES LIMITED PARTNERSHIP

N 180 OF 2001

GYLES J

SYDNEY

23 JULY 2001

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 180 OF 2001

BETWEEN:	FRITO-LAY TRADING COMPANY GmbH APPLICANT
AND:	ALDI STORES LIMITED PARTNERSHIP RESPONDENT
JUDGE:	GYLES J
DATE OF ORDER:	23 JULY 2001
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

The proceeding be stood over to enable the parties to bring in short minutes to give effect to the reasons for judgment.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 180 OF 2001

BETWEEN:	FRITO-LAY TRADING COMPANY GmbH APPLICANT
AND:	ALDI STORES LIMITED PARTNERSHIP RESPONDENT

JUDGE:	GYLES J
DATE:	23 JULY 2001
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1 The applicant is the registered owner of Australian Trade Mark number A166590 "Twisties". The mark is registered in respect of goods in Class 30, namely, "tasty preparations made from cereals, primarily for use as a snack and not being bread or cake".

2 Since at least January 2001 the respondent has sold, and intends to continue to sell, a corn and rice based cheese-flavoured snack food in packaging which prominently includes the words "Cheezy Twists". I find that this product falls within the goods in respect of which the trade mark "Twisties" is registered. The applicant alleges that this use of "Cheezy Twists" is an infringement of its registered mark. The issues for determination are questions of fact which depend, to a large extent, upon impression and have been aptly described as jury questions. Resolution of the issues is unlikely to be assisted by prolonged study and, having had the benefit of comprehensive submissions on both sides, it is best that I give a decision without delay, conscious that doing so will lead to imperfections in expression. I will deal with the submissions, facts and authorities only insofar as it is necessary to explain my reasoning.

3 Section 120(1) of the Trade Marks Act 1995 ("the Act") provides as follows:

"A person infringes a registered trade mark if the person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered."

4 The first question is whether the words "Cheezy Twists" are a sign used by the respondent as a trade mark. Section 17 of the Act defines a trade mark as:

"... a sign used ... to distinguish goods ... dealt with or provided in the course of trade by a person from goods ... so dealt with or provided by another person."

5 "Sign" includes "word" (s 6 of the Act). "Use of a trade mark in relation to goods" means use of the trade mark upon, or in physical or other relation to, the goods (s 7(4) of the Act).

6 The respondent operates a chain of grocery stores along the same lines developed overseas. Goods are displayed in cartons or boxes on pallets, under generic names or its own brands, at prices cheaper than those for branded goods at other stores.

7 The respondent has engaged a manufacturer to supply an extruded, cereal-based snack with shape, colour, texture and taste as close as possible to the product marketed under the name "Twisties" by the applicant. With the assistance of others, the respondent has designed a pack in which to offer its goods for sale. A copy sample of the front and back of the package is annexed to this judgment. The words "Cheezy Twists" are prominently displayed on the front of the packet, at an angle and in an irregular font which is evocative of the shape of the product. The letters of the word "twists" are larger than the letters of the word "cheezy". The words are white against a red background. Above those words, and separated by an irregular silver band at an angle, is a blue logo including the word "Chazoos", with a smiling face incorporated at the position of "oo" against a gold background, with some white and yellow balls depicted on that background. Below the words "Cheezy Twists" and separated by an irregular silver band at an angle, is the same gold background as above with similar white and yellow balls and the words "cheese flavoured snacks" in white against a red background. The font of those words is regular and symmetrical and they are in a horizontal plane. There is a smaller version of this layout on the back, but there is no equivalent of the words "cheese flavoured snacks". "Chazoos" is stated on the back of the packaging to be a trade mark of "Aldi Stores".

8 The display of the goods in the store is such that the bottom part of the front of the pack cannot be seen as the potential purchasers walk down the aisle. Thus, potential purchasers would see part of the front of a number of packs displayed in an opened carton, including the words "Cheezy Twists" as described. Some would pick up the packet and look at it more closely. Some would examine both the front and back of the packet. The potential purchaser would see no competing products in the store. The cartons have the words "Cheezy Twists" on the front and sides in a position which can be readily seen. The font of those words is regular and the words are on a horizontal plane. On the side, the logo including the word "Chazoos" appears above the words "Cheezy Twists". These goods are displayed in close proximity to other goods offered for sale by the respondent described as "Cheese Rings" and "Cheese Balls" as well as other products described as "Chicken Snacks" and "Barbecue Snacks". Each has a different coloured background for use on the display cartons. Red is used for "Cheezy Twists", yellow for "Cheese Rings", blue for "Cheese Balls", green for "Chicken Snacks" and a different colour red is used for "Barbecue Snacks". The position, font and lettering of the description on the carton is similar in each case.

9 The respondent argues that there is no trade mark use of the words "Cheezy Twists" on the packet. It argues that "Chazoos" is the only trade mark which appears on the packet and that "Cheezy Twists" is merely the description of the product. It is pointed out on behalf of the respondent that there is no complaint made about the words used on the carton and the mere fact that a fancy font is used on the packet is not sufficient to transform a description into a trade mark use. It is submitted that within the relevant class of extruded cereal-based snacks, "twists" is a fair description of the shape of the product which the respondent markets under this name, as compared with cheese flavoured products of other shapes, including rings and balls. Furthermore, the goods do have a cheese taste and are thus properly described as "cheezy", the substitution of a "z" for "s" not changing the substance of the matter. It is further submitted that the product is manufactured by what can properly be described as a "twist" process. The respondent also relies upon evidence of the use of "twists" as a description of the product in the trade.

10 It is submitted on behalf of the applicant that dictionary definitions of "twist" do not support the respondent's contention that it is an apt description of the respondent's product and denies that the process of manufacture of that product involves twisting. The applicant contrasts the manner in which the words appear in their context on the front of the package with other conventional forms of use of the words and with the description "cheese flavoured snacks" on the front of the respondent's packet itself. It is submitted that, even if there are descriptive aspects of the sign, this does not prevent the sign having distinctive characteristics which serve as a badge of trade origin. The use of the word "twists" by the respondent and by others in the trade does not take the distinctive form of the sign in question here when account is taken of the way in which it is perceived by the consumer. The word "cheezy" is an invented word which does not find its way into the dictionary. The applicant also relies upon admissions in the evidence of witnesses called for the respondent. It is also submitted that the respondent was seeking to take advantage of the reputation of the applicant's product and that it is appropriate to assume that the respondent has succeeded in doing so. It is submitted that the fact that "Chazoos" is also used on the same packaging does not derogate from the use of "Cheezy Twists" as a trade mark. The two marks serve complementary functions as explained in evidence.

11 In my opinion, the words "Cheezy Twists" as they appear on the packaging are a sign used as a trade mark within the meaning of s 120(1) of the Act. They are presented in a distinctive form for which there is no counterpart in the evidence. Mr Joyce, the buying director of the respondent, agreed that the use of the expression "Cheezy Twists" on the package was employed by the respondent in seeking to distinguish its goods in the eyes of the consumer from the products of other traders. This amounts to a direct admission of the relevant fact. The evidence of Ms O'Regan as to the process by which the name was chosen is consistent with that conclusion. Other uses of the words in other forms does not, in my opinion, derogate from this conclusion. I do not agree that the method of manufacture involves twisting, but, as will appear later, I agree that the product is aptly described as a "twist" and is so described in the trade. In my opinion, the words in issue are used separately and distinctly from the logo including the word "Chazoos". I accept the submission of the applicant that there are, in effect, two trade marks, complementary with each other which appear on the respondent's packet. I do not take into account on this issue any intention that the respondent may have had to appropriate any part of the applicant's reputation. It should be clear that this finding as to trade mark use relates to the particular distinctive form of the words on this packet and not to use of the words in any other form.

12 The remaining question, therefore, is whether use of the distinctive form of "Cheezy Twists" in issue is "deceptively similar" to the registered trade mark "Twisties".

13 Section 10 of the Act provides that:

"... a trade mark is taken to be deceptively similar to another trade mark if it so nearly resembles that other trade mark that it is likely to deceive or cause confusion."

14 The applicant led a good deal of evidence to establish the use which has been made of the mark "Twisties" by it and its predecessors. The respondent has objected to the relevance of that evidence, pointing out that the test provided by s 10 depends upon comparison of the marks (see Wingate Marketing Pty Ltd v Levi Strauss & Co (1994) 49 FCR 89 per Gummow J at 128 and 135; also in CA Henschke & Co v Rosemount Estates Pty Ltd (1999) 47 IPR 63 per Finn J at [36]). It is submitted for the applicant that the decision of the Full Court of this Court in CA Henschke & Co v Rosemount Estates Pty Ltd (2000) AIPC 91-640 (particularly at [52]) supports admission of that evidence. In that decision, the Full Court sought to analyse earlier decisions, including Coca Cola Company v Al-Fect Distributors Ltd [1999] FCA 1721; (1999) 96 FCR 107, which are not altogether easy to reconcile.

15 In my opinion, it is relevant to know that the trade mark "Twisties" has been widely used over a long period of time, throughout Australia, and that goods bearing the mark reach the consumer by the various channels which have been generally described in evidence. It is also relevant to know that the mark is one of the best-known of marks in the tasty or savoury snack food market and that goods sold under the mark are the market leader in relation to the extruded form of those goods. These facts assist in judging the motives and purpose of the actions of the respondent in devising and using the sign "Cheezy Twists" on its packet. They also have some marginal relevance in assisting to understand the kind of comparison between marks which is involved, by illustrating the course of trade. As a judge of fact, I have gained little assistance from the evidence as to the course of the trade of the applicant and its predecessors as to deception and, in my view, the detail of it is simply not relevant. It should be noted in this connection, and generally, that the respondent agrees that if infringement is proved injunctive relief is appropriate.

16 One aspect of the evidence about the use of the mark "Twisties" which should be noted is that, for some years at least, the trade mark has only been used in relation to a particular shape of cereal-based tasty snack which is manufactured by an extrusion process which results in portions of an irregular and knarled or knobbled appearance. The respondent submits that they have a twisted appearance and are fairly described as "twists". I agree. One of the meanings of "twist" in the Macquarie Dictionary, to which I was referred by counsel for the applicant, is "to wring out of shape or place; contort or distort", and another is "an irregular bend; a crook or kink". Whilst I agree that the manufacturing process cannot properly be described as a twisting process, I agree that the end result does have a twisted appearance. The trade mark "Twisties" has not been applied to similar products that use different shapes, such as rings or balls.

17 Indeed, there is ample evidence that goods of the kind in relation to which "Twisties" has been used as a mark are widely referred to in the trade as "twists" and are so distinguished from other shapes made from the same kind of material. It is in relation to the "twists" product that "Twisties" is the market leader. The evidence includes the use by a number of other competitive traders in the relevant market, a description of the product produced by a machine (illustrated in a brochure for that machine) and acceptance as to the use of the word by witnesses.

18 In assessing the question of deceptive similarity, I agree that it is not appropriate to regard the applicant as having a right to the trade mark "twists". Firstly, that is not the registered mark and secondly, as I have said, that is a descriptive word (cf s 24 of the Act). I agree that the applicant is not entitled to a de facto monopoly in the kind of goods described as "twists". I also agree that there should be no inhibition upon using the word "cheese" to describe a cheese flavoured product. However, "cheese twists" is not the sign used about which complaint is made by the applicant. In considering the comparison, I must bear in mind s 7(2) of the Act, which provides that in relation to a word mark "any aural representation of the trade mark is ... a use of the trade mark".

19 Guiding myself by reference to the well-known High Court authorities including Australian Woollen Mills Ltd v FS Walton & Co Ltd [1937] HCA 51; (1937) 58 CLR 641 ("Australian Woollen Mills") (particularly at 658-659) , Cooper Engineering Co Pty Ltd v Sigmund Pumps Ltd [1952] HCA 15; (1952) 86 CLR 536, The Shell Company of Australia Ltd v Esso Standard Oil (Australia) Ltd [1961] HCA 75; (1963) 109 CLR 407 (per WindeyerJ at 415-417), and Southern Cross Refrigerating Company v Toowoomba Foundry Pty Ltd [1953] HCA 73; (1954) 91 CLR 592 (per Kitto J at 595-596; per Dixon CJ, McTiernan, Webb, Fullager and Taylor JJ at 607-608), and bearing in mind the different context in which the statements of principles appear, I regard the sound of the words "Cheezy Twists" as having a resemblance to "Twisties" in that the sound represented by "y" in the respondent's mark is similar to "ie" in the applicant's mark and they are both, ultimately, in the plural.

20 As a judge of fact, I am persuaded that the resemblance is sufficient to make it likely to deceive or cause confusion within the meaning of s 10 of the Act because of the operation of a principle also referred to in Australian Woollen Mills (at 657):

"The rule that if a mark or get-up for goods is adopted for the purpose of appropriating part of the trade or reputation of a rival, it should be presumed to be fitted for the purpose and therefore likely to deceive or confuse, no doubt, is as just in principle as it is wholesome in tendency. In a question how possible or prospective buyers will be impressed by a given picture, word or appearance, the instinct and judgment of traders is not to be lightly rejected, and when a dishonest trader fashions an implement or weapon for the purpose of misleading potential customers he at least provides a reliable and expert opinion on the question whether what he has done is in fact likely to deceive. Moreover, he can blame no one but himself, even if the conclusion be mistaken that his trade mark or the get-up of his goods will confuse and mislead the public."

21 I am satisfied that the respondent, by its own servants and those agents to which it delegated responsibility for devising the packaging, chose the word "Cheezy" in conjunction with "Twists" in order to take advantage of the aural resemblance with the trade mark of the market leader in the particular category of goods.

22 "Cheese rings" and "cheese balls" were so described by the respondent. They were not described as "cheezy rings" or "cheezy balls", and chicken snacks and barbecue snacks were so described. They too were not described as "chickeny snacks" or "barbecuey snacks". The manufacturing instructions given by the respondent were to reproduce, so far as is possible, the precise product marketed under the trade mark "Twisties". The evidence shows that those involved in devisisng the respondent's current packaging were very conscious of the applicant's trade mark and, indeed, one version of the respondent's proposed packaging was rejected because it was too close to "Twisties". Whether or not this consideration was limited to passing off rather than trade mark issues does not matter. The respondent had its eye firmly upon the market leader. No decision-maker from the respondent in relation to the adoption of the sign was called by the respondent and it is not at all clear when and in what circumstances the word "cheezy" was chosen. Although the decision-makers may no longer be employed by the respondent, this does not amount to a proper explanation for failure to call them. The absence of evidence from these witnesses at least leaves the other inferences unanswered.

23 I should say that, in my opinion, the choice of "z" rather than "s" in the word "Cheezy" is irrelevant as the sound is relevantly the same. The same may be said for the choice of font, layout and the like.

24 Section 122 of the Act relevantly provides:

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

...

(b) the person uses a sign in good faith to indicate:

(i) the kind, quality, quantity, intended purpose, value, geographical origin, or some other characteristic, of goods or services; or ...

...

(f) the court is of the opinion that the person would obtain registration of the trade mark in his or her name if the person were to apply for it; or ..."

25 In my opinion, although "Cheezy Twists" can be regarded as descriptive of the goods, it follows from my finding concerning the motive and purposes of the applicant in using the word "Cheezy" that the sign is not used in good faith to indicate any characteristic of the goods. That function is performed on the packet by the description "cheese flavoured snacks" and would have been played by a description such as "cheese twists". The respondent relies upon obtaining advice but did not tender that advice. It is apparent from what I have found that the applicant was "sailing as close to the wind" as it could and the fact that it followed advice which turns out to be incorrect is no demonstration of bona fides. The defence pursuant to s 122(1)(b) of the Act is not established.

26 The content of the defence provided by s 122(1)(f) of the Act is currently in doubt. It is unclear whether "the trade mark" referred to in that section is the trade mark of the applicant or the impugned trade mark of the respondent. The construction of that section for which the respondent contends is that the relevant trade mark is the impugned trade mark. I tend to the view that that is correct. Whilst accepting that there are aspects of the form of s 122 which support the view that "the trade mark" referred to in s 122(1)(f) refers to the registered trade mark (cf Moore J in Unilever Australia Ltd v PB Foods Ltd (1999) 47 IPR 358), it seems to me most likely that the parliamentary intention was to pick up the circumstances referred to in s 44(3) of the Act. This construction receives some support from par 22D(7) and (8) of the Recommendations of the Working Party to Review the Trade Marks Legislation (Recommended Changes to the Australian Trade Marks Legislation, AGPS, Canberra, July 1992). It is unnecessary to pursue that issue further as, even if this be correct, it seems to me that any application now made by the respondent for registration of the mark "Cheezy Twists" would be doomed to failure because the words are entirely descriptive, because the words are, in any event, deceptively similar to the registered mark "Twisties", and on no view could a defence of honest concurrent user be established. This defence is not established in the circumstances.

27 The applicant is therefore entitled to relief in relation to use of the sign "Cheezy Twists" by the respondent. I will hear the parties on the form of order. The respondent will be ordered to pay the costs of the applicant.

ADDENDUM

28 As I recall it, it was not contended in the course of the case, including submissions, that the use of the words "Cheezy Twists" on the carton or box was an infringement. If I be wrong in that, and that issue is open, I should indicate that I am not satisfied that the use of the words on the carton or box of the respondent is a trademark use of the sign, having in mind the form of the words, the position where they appear and the evidence as to the form of display in the store.

I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.

Associate:

Dated: 25 July 2001

Counsel for the Applicant:	JT Gleeson SC
Solicitor for the Applicant:	Allens Arthur Robinson
Counsel for the Respondent:	TK Tobin QC with M Green
Solicitor for the Respondent:	Bridge, Brophy & Mirow
Date of Hearing:	17, 18, 19 and 20 July 2001
Date of Judgment:	23 July 2001

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