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Nutrientwater Pty Ltd v Baco Pty Ltd [2010] FCA 2 (6 January 2010)
Last Updated: 19 January 2010
FEDERAL COURT OF AUSTRALIA
Nutrientwater Pty Ltd v Baco Pty Ltd
[2010] FCA 2
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Citation:
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Parties:
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NUTRIENTWATER PTY LTD (ACN 009 936 574) and
LMBB PTY LTD (ACN 130 333 845) v BACO PTY LTD (ACN 100 922 709)
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File number(s):
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VID 471 of 2009
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Judge:
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KENNY J
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Date of judgment:
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Catchwords:
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TORTS – Passing off –
Misleading and deceptive conduct – Adoption of similar get-up for enhanced
water products –
No liability where allegedly appropriated features were
in common use in enhanced water market – Adoption of features of
competitors’
get-up permissible where respondent’s products
sufficiently distinguished through branding and other means – No proof
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relevant reputation in features allegedly appropriated – No proof of
deception amongst ordinary reasonable consumers –
No proof of intent to
mislead – Application dismissed
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Legislation:
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Cases cited:
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Place:
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Melbourne
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Division:
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GENERAL DIVISION
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Category:
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Catchwords
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Number of paragraphs:
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Solicitor for the Applicant: |
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Counsel for the Applicant:
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Mr B Caine SC with Mr M Rivette
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Solicitor for the Respondent:
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Kliger Partners
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Counsel for the Respondent:
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Mr C Golvan SC with Mr E Heerey and Mr B Gardiner
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IN THE FEDERAL COURT OF AUSTRALIA
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VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
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NUTRIENTWATER PTY LTD ACN 009 936
574First Applicant
LMBB PTY LTD ACN 130 333 845
Second Applicant
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AND:
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BACO PTY LTD ACN 100 922
709Respondent
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DATE OF ORDER:
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WHERE MADE:
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THE COURT ORDERS THAT:
- The
application dated 25 June 2009 be dismissed.
- The
parties file and serve any submissions on costs that they desire to make on or
before 20 January 2010.
Note: Settlement and entry of orders is dealt with in Order 36 of
the Federal Court Rules.
The text of entered orders can be located using
eSearch on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
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VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
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VID 471 of 2009
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BETWEEN:
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NUTRIENTWATER PTY LTD ACN 009 936 574
First
Applicant
LMBB PTY LTD ACN 130 333 845
Second Applicant
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AND:
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BACO PTY LTD ACN 100 922 709
Respondent
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JUDGE:
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KENNY J
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DATE:
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6 JANUARY 2010
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PLACE:
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MELBOURNE
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REASONS FOR JUDGMENT
A: INTRODUCTION
- This
is a case about competitors and their products in the market for enhanced water
beverages. This is a comparatively new market
in Australia that has rapidly
increased over recent years.
- The
first applicant, NutrientWater Pty Ltd (‘NW’), manufactures,
promotes and sells a range of enhanced water beverages
in Australia (‘NW
Product Range’). The NW Product Range is a range of lightly flavoured,
non-alcoholic beverages containing
various vitamins, minerals and other
ingredients.
- The
second applicant, LMBB Pty Ltd (‘LMBB’), was incorporated on 27
March 2008 and is a corporate nominee for a partnership
that holds intellectual
property for NW. NW has promoted and sold the NW Product Range pursuant to a
licence granted to it by LMBB.
The applicants pleaded that NW, and further or
alternatively, LMBB had a reputation and goodwill in the distinctive appearance
of the NW Product Range. In what follows it is unnecessary to differentiate
between the applicants. For present purposes, it is
sufficient to refer merely
to NW. For reasons that appear below, it is unnecessary to decide whether NW or
LMBB would be the holder
of any relevant reputation or goodwill.
- The
respondent, Baco Pty Ltd (‘Baco’), competes with NW in making,
promoting and selling its own range of enhanced water
beverages in Australia
(‘Baco Product Range’).
- By
a fast track list application dated 25 June 2009, NW seeks declaratory,
injunctive and other relief, including damages, against
Baco. NW claims that,
by manufacturing, offering for sale and selling the Baco Product Range, Baco has
and continues to:
(a) pass off its range of enhanced water products
as and for the NW Product Range; and
(b) engage in misleading or deceptive conduct contrary to s 52 of the
Trade Practices Act 1974 (Cth) (‘TPA’) and make false
representations in breach of paragraphs 53(a), (c) and (d) of the TPA.
(Although the applicants
pleaded paragraph 53(a), they paid little attention to
it and, for practical purposes, it added nothing to their case, and I shall
not
refer to it again.)
- The
substance of NW’s case is that there is a striking similarity between the
appearance of the Baco Product Range and the
appearance of the NW Product Range.
NW argues that, even if Baco has acted honestly, it has failed to ensure that
its products are
adequately distinguished from those of NW. NW argues that the
overall appearance of the Baco Product Range so nearly resembles that
of NW as
to be misleading or deceptive or likely to mislead or deceive; and that the
Court should grant the relief that NW seeks.
- Baco
denies NW’s claims. Essentially, Baco maintains that its enhanced water
products do not convey any misrepresentation
to the effect that they are
NW’s product or have the same trade source, or that its products have any
relevant association
with NW or the NW Product Range; and that there is no
likelihood that the ordinary reasonable consumer would be relevantly misled
or
deceived by the appearance of its products.
- At
this stage, the only issues for determination are issues of liability, the Court
having previously ordered that issues of liability
be determined prior to and
separately from issues of quantum.
- For
the reasons explained in detail hereafter, I would dismiss the applicants’
claims against Baco. In summary, NW has failed
to make out its claims, first,
because it failed to establish a relevant reputation in the features that Baco
allegedly appropriated.
Secondly, the authorities establish that a trader is
entitled to adopt the features of competitors’ products, providing the
result is not likely to deceive or mislead the ordinary reasonable consumer into
mistaking the trader’s goods for the goods
of competitors. The design of
Baco’s ‘Grassroots’ enhanced water products took on various
features of the get-up
used by Baco’s market competitors, especially NW.
At the same time, Baco’s product design was, and was intended to be
distinctive. Apart from Baco’s products’ branding – name and
logo – many of the other significant design
features used by Baco were, by
May 2009 when Baco entered the market, being used by others in the enhanced
water market besides NW.
Furthermore, by its branding – name and logo
– and other features of its get-up or packaging, Baco clearly
differentiated
its products from its competitors’ products in the enhanced
water market. Accordingly, such similarities as exist between
Baco’s and
NW’s enhanced water products cannot ground an action in passing off, or
under ss 52 or 53 of the TPA.
B: FACTS
1. The NW Product Range
- NW
was known as Natureau Pty Ltd (‘Natureau’) between 2006 and 17
February 2008, after which it took its current name.
Mr Matthew Dennis, a
founder and director of the company, gave evidence, which I accept, that he
started the business of NW (formerly
Natureau) with his friends, Mr Luke Marget
and Mr Brad Wilson, in 2003. His evidence was that he, together with Mr Marget
and Mr
Wilson, developed the packaging for the NW Product Range. He also gave
evidence, which I accept, that there was no market category
for enhanced waters
in Australia until NW entered the market in November 2005. On this date, NW
marketed its first range of four
enhanced water products under the names
‘Antioxidant (Green Tea)’, ‘Energy (Passionfruit
Citrus)’, ‘Immunity
(Valencia Orange)’, and ‘Multi
Vitamin (Cranberry Grapefruit)’.
- Almost
a year later, in October 2006, NW relaunched its product range in the packaging
used by it at least until the time of trial.
Mr Dennis said that, for reasons
of cost and design improvement, NW wanted to adopt the new bottle shape and
get-up, for which he,
Mr Marget and Mr Wilson were responsible. Mr Dennis said
that NW relied on the spectrum of colours used across the NW Product Range,
the
colour horizontal bands, and the shape of the bottle to make the product stand
out on the shelves in retail stores. The relaunched
NW Product Range consisted
of the original themes and flavours, as well ‘Endurance
(Dragonfruit)’. ‘Rehab (Pomegranate
Berry)’ was launched in
February 2007.
- Each
product in the NW Product Range is presented in a cylindrical, clear plastic 575
ml bottle, with curved ‘shoulders’,
a tall, slim overall shape, and
a clear plastic lid. Each bottle has a comparatively wide mouth relative to the
bottle’s diameter.
A tall label wraps around the bottle. The label, with
a large surface area relative to the size of the bottle, has a central white
field with bright horizontal bands of colour at the top and bottom corresponding
to the bright colours of the variant beverage.
Each variant beverage is
described by a functional name such as ‘Antioxidant (Green Tea)’ and
is brightly coloured.
Seen together, the variant beverages form part of a
spectrum from green to purple. The central white field has nutritional
information
on one panel, a list of ingredients on another, and a light-hearted
comment about the beverage on a third. The black and white logo
– a large
stylized ‘NW’ in lower case with the word
‘NutrientWater’ – appears three times around
the top coloured
portion of the label. A photograph of the NW Product Range as at February 2007
appears below:
Almost all the NW Product Range has been promoted and sold in this form since
October 2006. ‘Rehab (Pomegranate Berry)’
has been sold in this
form since February 2007. A product in the NW Product Range is a relatively
low-cost item to consumers, selling
for $3.50 to $4.00.
(a) Geographical distribution
- From
October 2006 (and, in the case of ‘Rehab (Pomegranate Berry)’,
February 2007), NW marketed and sold the NW Product
Range in Melbourne, Sydney,
and Brisbane; and on the Queensland Gold Coast and the Victorian Mornington and
Bellarine Peninsulas.
NW began marketing its products in Perth in December
2006; Adelaide, in January 2007; Canberra, in May 2007; far north Queensland
and
Tasmania, in July 2007; and the Northern Territory, in August 2007. Mr Dennis
said that, by February 2008 (when its competitor,
‘vitaminwater’,
entered the market), NW’s enhanced water products were being sold in
approximately 10,000 retail
outlets.
(b) Advertising and
promotional activities
- Since
October 2006, NW has spent a large amount of money on marketing and promoting
the NW Product Range in various ways. For example,
NW has distributed to retail
stores various forms of in-store display material and equipment, including
refrigeration, refrigeration
branding, shelf trays, product display stands,
posters, counter displays, stickers and wall graphics.
- NW
has advertised its enhanced water products in mass-media publications, including
newspapers, retail and trade-based magazines
and journals. Since April 2007, NW
has participated in several trade shows. Since June 2008, NW has promoted its
products through
product sampling (which involves bottles of its products being
given free to the public). Between September and October 2008, NW
advertised
its products nationally in a radio campaign with the ‘Today’
network. NW has also advertised on television;
and has provided sponsorship and
endorsement to numerous events and organisations nationally. NW has used
merchandise and vehicle
signage to promote the NW Product Range; and has
maintained a dedicated website, which from July 2007 to October 2009 has had
approximately
50,000 recorded visits.
- NW
adduced very general evidence of sales, which showed that the NW Product Range
has been comparatively successful in the market.
Further, notwithstanding the
entry of competitors in the market (as to which, see below), its retail sales
increased in the financial
year ended 30 June 2009. The evidence as to sales,
marketing and promotional activities justifies the inference that, by May 2009,
NW had acquired a nationally-based reputation and goodwill in the NW Product
Range: compare McCormick & Co Inc v McCormick [2000] FCA 1335; (2000) 51 IPR 102 at
129.
- So
far as NW’s claim is concerned, however, there were some limitations with
this evidence, particularly bearing in mind that
expenditure after May 2009 was
not relevant to NW’s claim. For example, there were instances in which
the date of the marketing
or promotional activity in question was either not
established or post-dated May 2009.
- It
is, moreover, not enough for NW to show in general terms that it had a
reputation in the NW Product Range. In order to succeed,
NW must establish
that, as at May 2009 when Baco entered the market, NW had a reputation in the
features that it seeks to protect
and that it claims were appropriated by Baco.
I explain the legal basis for these propositions below.
- In
this regard, NW’s case is not straightforward because, before Baco entered
the Australian market, NW already had a number
of competitors, whose products
had significant similarities with its own. As a consequence, as explained
hereafter, NW has not established
that its reputation lay in the features it
seeks to protect as opposed to its overall get-up, including its distinctive
name and
logo.
2. History of vitaminwater in the USA
- At
the time NW put the NW Product Range on the market in Australia, a number of
enhanced water products were being marketed by other
traders in the United
States of America. These products included ‘vitaminwater’ (now owned
by Coca-Cola), PepsiCo’s
‘Aquafina Essentials’ and
Coca-Cola’s ‘Dansani NutriWater’. The history of vitaminwater
is central
to Baco’s defence.
- Energy
Brands, Inc, also known as Glaceau, launched the vitaminwater brand of enhanced
waters in the United States in 2000. Six
years later, the United States market
for enhanced waters was very large indeed and vitaminwater was very successful
in it. By early
2006, vitaminwater was reported as ranked in the top ten
bottled waters in the US market. According to Mr Mark Epstein, managing
director of Baco, whose evidence on this point I accept, the rise of
vitaminwater in the United States was widely publicised. Then,
in 2007,
Coca-Cola acquired Energy Brands (and vitaminwater).
3. NW’s adoption of features of vitaminwater
- Baco
argued that, in launching and relaunching the NW Product Range, NW had
substantially copied vitaminwater products. On the balance
of probabilities, I
find that NW did so copy.
- None
of the founders of NW had a background in product design and none was
unsophisticated in commercial matters. Mr Dennis qualified
as a solicitor
before becoming a sales trader in institutional broking at Macquarie Bank. He
ceased his employment there about September
2005, shortly before the NW Product
Range was originally launched. His partners, Mr Marget and Mr Wilson, were in
accounting and
finance before entering the business of NW. Mr Dennis
acknowledged that he spent a lot of time observing the market before he launched
the NW Product Range, and, notwithstanding his coyness about the matter, it
seems improbable that he did not take vitaminwater’s
US history and style
into account when developing the NW business. This and the clear similarities
between the US vitaminwater product
and the NW Product Range (both in its
original and relaunched forms) make it almost inconceivable that the founders of
NW were not
inspired by the get-up of the US vitaminwater.
- Counsel
for NW submitted that, although NW had referenced the vitaminwater products in
the United States in the design of the NW
Product Range, it had not directly
copied them; nor had NW taken any of the distinctive features that it relied on
in its case against
Baco.
- Of
the three founders of NW, only Mr Dennis gave evidence. In cross-examination,
Mr Dennis agreed that he had seen the vitaminwater
product in the United States
and that, by late 2005, he knew of the well-established US market for enhanced
water beverages. Counsel
for Baco specifically put to him that he had set out
to copy features of the US vitaminwater label in a number of key respects.
Mr
Dennis replied:
We didn’t copy the US Vitaminwater products. There were certain ideas
that we like[d] about the Vitaminwater products and
other products on the market
in the US at the time, and we set about developing our own enhanced water
product which we thought would
be better than their product.
In cross-examination, Mr Dennis conceded that he
took some discrete features from the US vitaminwater products, including the
light-hearted,
irreverent text appearing on one label panel, and the bright,
horizontal colour along the top of the label.
- Mr
Mark Epstein from Baco referred in evidence to other similarities between the
original NW and vitaminwater products, which were
plainly to be seen, including
a predominant focus on vitamins; running the brand name vertically up the full
length of the label,
in black text, with each word of the two-word name spanning
the length of a separate horizontal panel and all in lower case letters;
the use
of all black text on the rest of the label; the use of a clear plastic bottle
and clear plastic lid; a similar positioning
of label and label size relative to
the overall bottle size; a wrap-around label, with similar or identical variant
names (e.g.,
‘energy’); and labels that matched the colours of each
variant.
- This
is not to say that the NW and vitaminwater products were identical. As Mr
Epstein fairly noted, there were differences between
them, including, in the
original NW products, the use of a large panel of coloured dots on the label, as
well as a grey and white
horizontal banded label. Examples of the original NW
products and the US version of vitaminwater are shown
below:
- The
relaunched NW products continued to have many similarities with the US
vitaminwater product. Whilst the dot pattern was removed,
the relaunched
product retained many of the features of the original product, such as using the
colour and white horizontal banding
like vitaminwater. The relaunched product
continued to have a ‘medicinal’ look and a similarly structured name
(NutrientWater
as opposed to vitaminwater). Indeed, the label on the US version
of vitaminwater styled the beverage “nutrient enhanced water
beverage”. Further, as noted, NW was originally known as Natureau until
its name changed around the time vitaminwater entered
the Australian market.
Despite Mr Dennis’ denial, it is difficult to resist the conclusion urged
by Baco that ‘Natureau’
was derived from ‘Glaceau’, the
name of the owner at the time of vitaminwater, references to which appeared on
the vitaminwater
products. The relaunched NW product and the US version of
vitaminwater are shown below.
- In
all the circumstances, having regard to the evidence, I find, on the balance of
probabilities, that the founders of NW’s
business did not merely
‘reference’ the US vitaminwater products, but that NW directly
copied many of its distinctive
features in the NW Product Range (whilst at the
same time introducing some points of difference, chief amongst which were the
NutrientWater
name and logo).
- This
finding is fortified by the fact that, save for Mr Dennis’ testimony,
there was very little evidence about the development
of NW’s get-up either
in its original or relaunched form. This is to be contrasted with the more
extensive evidence about
Baco’s design process with respect to its
enhanced water products. Further, it follows from this finding that I consider
that
Mr Dennis significantly understated the influence of vitaminwater on the
development of the NW products. Although Mr Dennis testified
that he did not
copy the US vitaminwater, but merely adapted certain features of the get-up of
vitaminwater and other products, the
evidence before the court justifies the
inference that, in launching and relaunching its products, NW substantially
copied the US
vitaminwater products.
- Given
the derivative nature of the NW Product Range, it is unsurprising that there was
some consumer confusion when the vitaminwater
products entered the Australian
market in 2008. The significance of this is discussed
below.
4. Entry of vitaminwater into the Australian market in February 2008
- In
February 2008, Coca Cola Amatil launched ‘vitaminwater’ in the
Australian market. The vitaminwater products were
available in 500 ml bottles
under functional names such as ‘Power-C (Dragonfruit)’, ‘Focus
(Kiwi-Strawberry)’,
‘Essential (Orange-Orange)’, ‘Energy
(Citrus)’, ‘Revive (Fruit Punch)’ and ‘Triple X
(Acai-Blueberry-Pomegranate)’.
In the Australian market the NW and the
vitaminwater products continued to have many similarities. The following is a
photograph
of an Australian vitaminwater product.
As can be seen, there were also differences between the NW and vitaminwater
products, including brand names and logos.
- The
launch of vitaminwater in Australia was accompanied by advertising and other
promotional activities. For example, Mr Epstein
saw a
‘vitaminwater’ advertisement on a bus in the Melbourne suburb of
Richmond in November or early December 2008.
The details of the marketing and
promotional activities undertaken by vitaminwater are not in evidence, but these
activities were
clearly successful, because vitaminwater rapidly achieved
substantial sales, with the result that, by May 2009, when the Baco Product
Range was launched, vitaminwater was the clear market leader, followed by NW,
with Smart Water, an enhanced water product introduced
by Schweppes Beverages in
mid 2008, a fair way behind both its competitors.
- When
vitaminwater entered the Australian market, NW was on early notice of the
possibility for confusion between NW and vitaminwater
products. This was the
effect of the communications from some of its customers, who gave evidence in
this proceeding.
- Mr
Keith Bethlehem, who was a solicitor in Sydney, gave evidence that, prior to
February 2008, it had been usual for him to have
a bottle of NW’s
‘Endurance (Dragonfruit)’ with his daily lunch, which he purchased
at a food court near his workplace.
On the day in February 2008 that led him to
make contact with NW, he went to a Woolworth’s supermarket at lunch-time
instead
of the food court, because he needed some provisions. Before he reached
the check-out, he noticed a refrigerator containing bottles
of what he thought
were the NW products that he ordinarily bought. He picked one out and joined the
queue. While in line, he discovered
that he had a vitaminwater product, not the
NW product as he thought. He attributed his mistake to the fact that the colour
of the
label and beverage was almost identical to the product he ordinarily
bought. He purchased the product, but was sufficiently angered
by being misled
that he contacted NW almost immediately thereafter.
- Mr
David Loakes, who was a builder in Melbourne, gave evidence that he became
familiar with the NW products around October/November
2007, after which he
purchased the product about a couple of times a week all the way through to
March 2008. His evidence was that,
on a day in March 2008, he went to buy his
lunch in the same store as he usually did and took what he thought was a NW
product out
of the refrigerator while waiting for his sandwich. After opening
and starting to drink it, he read the label and discovered that
the product was
vitaminwater, not the NW product as he had first thought. He attributed his
mistake to the similarity in packaging
and that fact that he found it in a
similar place to where he was used to finding the NW product. Mr Loakes stated
that he had contacted
NW shortly thereafter because he was disappointed that a
large manufacturer such as Coca-Cola was “pulling [NW] out”
from
prime position on the shelf.
- Ms
Chrysanthe Diamond, who was a sales assistant, was familiar with the NW products
prior to April 2008 because she worked in an
organic market place where the
products were stocked. She said that she “drank [D]ragonfruit water
pretty much every day ...
for lunch, in about the year prior”. Her
evidence was that, in April 2008, she was shopping in Woolworth’s
supermarket
when she thought she saw the NW products in a refrigerator before
the check-out counter, and picked one up, paid for it, and took
it home. She
did not realise until she was unpacking her groceries at home that she had
purchased vitaminwater, not a NW product.
Ms Diamond immediately emailed both
companies stating her confusion. She said that she did so because she was
“upset that
I had purchased a Coca-Cola product when I thought it was an
Australian product that I had been buying through a specifically organic
and
natural market place”.
- Ms
Kelly Chapman, who was a legal resources manager at the firm of solicitors where
Mr Dennis and his partner, Ms Elizabeth Wright,
had worked, stated that she was
aware of the NW products as at March 2008 because of her knowledge of Mr Dennis
and because she had
purchased the products regularly. Her evidence was that, in
March 2008, she had come home from work and taken out a drink that she
had
bought earlier in the day and put it beside a bottle of NW product. She said
that she “took a double take” when she
realised that they were
different products – the most recent purchase being a vitaminwater
product. She attributed her mistake
to the similarity in colour and shape. Ms
Chapman told Mr Dennis’ partner, Ms Wright, of what had happened.
- Notwithstanding
this information about confusion, NW took no legal action against vitaminwater.
Counsel for Baco argued that NW
did not do so because it was aware that it had
copied many of its features from the US vitaminwater product. Perhaps so, but I
would
not treat the failure to sue as evidence of copying or consciousness of
copying. Counsel for NW submitted, and I accept, that there
may have been sound
commercial reasons why NW did not institute legal action against Coca-Cola when
it introduced vitaminwater into
the market in 2008. Nothing can be inferred
about NW’s motives in failing to sue.
5. Entry of other market competitors in 2007 and 2008
- Throughout
2007 and 2008, other brands of enhanced waters entered the Australian market,
including ‘Emma & Tom’s’
and Bickford’s
‘Vitamin H2O’.
- In
mid 2008, Schweppes Beverages launched its enhanced water product known as
‘Smart Water’. Like the NW and vitaminwater
products, the Smart
Water products also had a form of colour and white horizontal banding on their
labels; label colours that matched
the colours of the variants of the beverage,
visible through clear plastic bottles; quirky comments on the labels; and a
‘wellness’
theme. Like the Australian vitaminwater products, the
bottles had a capacity of 500 ml. Unlike their competitors, the original
Smart
Water bottles also had green lids. One of the original Smart Water products is
depicted in the photograph below.
The packaging of Smart Water was revised in October 2009, introducing,
amongst other things, a clear plastic lid.
6. Entry and development of the Baco Product Range
(a) Baco’s business
- The
original Baco business was the result of the work of the Epstein family. Mr
Mark Epstein said in evidence that his family’s
involvement in the food
and beverage industry in Australia commenced in 1940, when his grandfather and
great-grandfather began a
food manufacturing business, trading under the name
‘Baco Foods’. The name ‘Baco’ was, he said, an
amalgamation
of the words ‘Bakers’ and ‘Confectioners’.
Mr Epstein said that the original Baco business begun bottling
fruit juice in
1957 when it created the well-known ‘Spring Valley’ fruit juice
brand. In the early 1990’s, however,
the family sold the original Baco
business, which is now owned by Schweppes Australia Pty Ltd. In late 2003, Mark
Epstein and his
father, Robert Epstein, also a director of Baco, re-entered the
beverage industry and formed a new company, which is the respondent
in the
proceeding.
- Baco
is a small business, the operational needs of which are met by Mr Mark Epstein.
After launching a range of fruit juices under
the brand ‘Apple
Tree’, Baco expanded its beverage range by introducing a second brand
known as ‘Grassroots’,
with what Mr Epstein described as a
‘wellness’ theme. This brand too was first applied to fruit juices
and, only later,
to Baco’s enhanced water products the subject of the
proceeding.
(b) Baco’s first product
- Over
two years prior to the launch of Baco’s ‘Grassroots’ enhanced
water products, in February 2007, Mr Mark Epstein
contacted NW’s Mr
Dennis, expressing an interest in distributing NW’s enhanced water
products and investing in NW, but
Mr Epstein’s approach was rejected by
NW.
- About
a year later, on 18 January 2008, Mr Epstein briefed Marcus Lee of Marcus Lee
Design (‘MLD’) to create labels for
a range of enhanced water
products that Baco intended to produce and sell. In briefing Mr Lee, Mr Epstein
provided Mr Lee with samples
of the NW Product Range and the US version of
vitaminwater, as well as images of other brands such as Emma & Tom’s.
In
the initial design process, Baco and MLD referred to the NW Product Range as
illustrative of successful enhanced water products in
the Australian market.
Since the Australian version of vitaminwater and Schweppes’ Smart Water
were both launched into the
Australian market while Baco was designing its
products, Mr Epstein also provided samples or images of these products to Mr
Lee.
- In
an affidavit of 2 November 2009, Mr Epstein said that he “was of the view
that a new product in [a] new category should
have a distinctively different
design which reflects the category in which it competes and [he] said that to Mr
Lee at the time of
briefing him on the proposed design”. The unchallenged
affidavit of Mr Lee sworn on 4 November 2009 corroborates Mr Epstein’s
evidence on this point. Mr Lee said:
I do not recall the precise instructions I was given but, as best I can recall,
they were to the effect that Baco wanted:
- labelling
that would communicate that their new products were enhanced waters and, for
that purpose, adopted the ‘category signature’
of that product
category;
- labelling
that retained distinctive Grassroots branding so as to differentiate their
products from those of their competitors; and
- labelling
that made clear that the new products were different from the Grassroots fruit
juices that were already on the market and
clearly identified their products as
waters rather than as fruit juices.
- In
March 2008, Baco engaged Mr Rolf Grob of Troy White Engineering to design a
bottle. Mr Epstein instructed Mr Grob that Baco required
a label panel
approximately 130 mm high, with a diameter of 67 mm, for its bottle. In
cross-examination, Mr Epstein stated that
his preference was for a tall and
skinny bottle, rather than one that was short and squat. Mr Grob advised Mr
Epstein that such a
bottle would have similar characteristics to the bottle used
by NW for the NW Product Range. Mr Epstein checked that NW’s
bottle shape
was not the subject of a trade mark or design registration, and Baco maintained
its instructions to Mr Grob.
- Mr
Epstein gave evidence, which I accept, that he considered that a distinctive
label would clearly differentiate Baco’s products
from those of NW and
that, since both Baco and NW used the same contract packer (Planet Sales), it
was easy and efficient for the
packer and therefore less costly overall if
Baco’s bottles had a similar diameter to those of NW.
- In
May 2008, Baco engaged Visy Packaging Pty Ltd (‘Visy’) to
manufacture a bottle. Mr Daniel Martin of Visy expressed
concern to Mr Epstein
at the time that the initial bottle design was too close to the bottle design
for the NW Product Range and
that design changes were necessary if Visy were to
supply Baco. As a result of this and another issue, design changes were made
to
the Baco bottle, including changing the shape of the shoulder, introducing
embossing on the bottle, and changing the number of
label panels. As it
happened, however, owing to capacity problems on Visy’s part, another
company ultimately undertook bottle
production.
- In
October 2008, Baco undertook a trial run of its new product. In December 2008,
NW obtained samples of Baco’s trial production
from Planet Sales and
threatened the institution of a legal proceeding to prevent the launch of the
Baco product.
(c) Baco’s current product
- Baco
did not release its first production run onto the market and, without any
admission of liability, in December 2008 and early
2009, set about redesigning
its packaging and labelling. Mr Lee of MLD and Mr Grob of Troy White
Engineering were briefed to redesign
the label and bottle respectively.
- Mark
Epstein was overseas for the initial stage of the label redesign process, but he
gave instructions to his father, Mr Robert
Epstein, to pass on to MLD. Whilst
Mark was away, Mark and Robert Epstein communicated very largely by emails,
copies of which were
in evidence. These emails showed that Mark Epstein wanted
the redesigned label to be visually different and clearly to differentiate
Baco’s products from those of its competitors, especially NW. Mark also
wanted a label that would appeal to the typical consumer
of the product and be
clearly referenced as within the enhanced water category. MLD’s quotation
reflected this understanding,
stating that MLD’s brief was “to
clearly differentiate from the market competitors – specifically Nutrient
Water
[sic]”. Indeed, in his unchallenged affidavit, Mr Lee stated that
the objective of MLD’s brief was “to further
differentiate the
current labels from competitors, such as Nutrient Water [sic], whilst also
retaining a degree of visual connection
to the enhanced water
market”.
- In
May 2009, Baco launched its enhanced water products onto the market in their
redesigned packaging. The Baco Product Range, which
is the subject of this
proceeding, is depicted below.
- It
is clear that, in the course of the design process, Mr Lee put forward numerous
forms of label, which were considered by Robert
and Mark Epstein. As noted
below under the heading ‘category signature’, for the reasons Mr
Mark Epstein stated in cross-examination
(and I accept were in fact his
genuinely held reasons) he wanted to retain the colour and white horizontal
banding. In cross-examination,
Mr Epstein stated, and I accept, that the final
form of the current label was “stumbled upon”, when Mr Lee put some
of
the original labels in a box upside down. The result of the redesign was
that the label had a white band across the top; a distinctive
‘G’
logo in a colour complementing the colour of the contents of the bottle; and
changes to the themes or variant descriptors.
Baco’s labels predominantly
used white text reversed out of the colours in contrast with the NW Product
Range and vitaminwater
products, which also had a more medicinal look. There
was also a reduced use of pantone fluorescent colours from six to three
variants.
- The
changes to Baco’s enhanced water products as a result of the redesign
process included changes to the bottle shape involving
a larger bottle size (600
ml capacity rather than the 575 ml capacity of NW and the first Baco range);
substantially larger embossing
of the ‘Grassroots’ brand covering
the full circumference of the bottle; a 17% shorter label; and an overall
different
shape.
- The
varieties of Baco’s products became ‘Goji & Green Tea
De-stress’, ‘Mangosteen & Passionfruit
Ener-G’,
‘Acai & Mandarin Resilience’, ‘Yumberry & Cranberry
Vitamin Boost’, ‘Dragonfruit
& Grapefruit Power On’ and
‘Pomegranate & Blueberry Recovery’. These variant themes and
flavours were
the same or very similar to those in the NW Product Range and some
of the vitaminwater products. As Mr Epstein noted in cross-examination
(and I
accept), in the enhanced water market there were certain flavours that were
common to the category as a whole, such as the
red-coloured dragonfruit
beverage.
- Like
all the enhanced water products in evidence, when arranged appropriately, the
Baco Product Range produced an attractive ‘rainbow’
effect.
Baco’s colours were the same or very similar in number to those in the NW
Product Range and the vitaminwater products.
Baco’s colours were also
similar in shade to the colours in the NW Product Range and the vitaminwater
products, although there
were also differences between the shades.
- Mr
Epstein was extensively cross-examined on the similarities, particularly as to
colour, that Baco’s enhanced water products
continued to bear with the NW
Product Range. Counsel for NW submitted that Mr Epstein’s opinions on the
differences and similarities
between the parties’ products and their
competitors must be treated cautiously because he was very closely involved with
the
products and not in this sense an ordinary consumer. I accept the point
made by counsel for NW as valid and have borne it in mind
in evaluating Mr
Epstein’s opinions on these matters. I have not treated his opinions as in
any way dispositive of these issues.
- Nonetheless
I accept Mr Epstein’s evidence in cross-examination that the Baco Product
Range was more like the NW Product Range
than the vitaminwater products,
although the Baco Product Range took its inspiration not only from NW but also
from vitaminwater.
This is borne out by visual inspection. I would add here
that I was generally impressed by the frankness of Mr Epstein. I found
him a
credible witness.
- According
to Mr Epstein, Baco also sought to differentiate its product from that of NW in
ways other than those already mentioned,
including by adopting a different style
of light-hearted marketing comment on the label that more specifically addressed
the flavour
combinations of each variant and linked the beverage benefits to the
‘wellness’ additives particular to each variant.
In
cross-examination Mr Epstein also referred to various other features as
differentiating Baco’s enhanced water products
from its competitors, but
especially noted: (1) the label size; (2) the white band at the top of the
label; and, most importantly,
(3) the distinctive ‘G’ logo in
individual colours throughout the range predominantly against a white
background.
- The
evidence showed that Baco’s point of sale promotional material clearly
identified its enhanced water products by reference
to the brand
‘Grassroots’, which was the brand clearly carried by the products
themselves. Baco’s invoices, receipts,
business cards, and other
corporate stationery are clearly marked with both the ‘Apple Tree’
and ‘Grassroots’
logos. The ‘Grassroots’ cartons are
also clearly marked with the ‘Grassroots’ name and logo.
- At
this point, it is convenient to note that, in early May 2009, Mr Dennis of NW
became aware that Baco was selling the Baco Product
Range in Melbourne, when he
acquired some Baco products from a cafeteria complex in Queens Road, Melbourne.
NW issued these proceedings
in consequence, maintaining that the changes that
Baco has made to its products still failed to differentiate them from those of
NW. NW argued that the bottle shape was not materially different from its own,
and that Baco retained a clear plastic lid and tall
label that resembled its
own. NW noted that Baco’s labels wrapped around the bottle just as its
labels did, and that Baco
retained light-hearted label comments like NW. NW
asserted that both NW and Baco had prominent nutritional panels. Further,
according
to NW, the colours of the Baco beverages remained the same as its own;
and, like its own labels, the Baco labels continued to bear
bright horizontal
bands of colour corresponding to the beverage colours. Thus, NW remained
persuaded that the Baco Product Range
was deceptively similar to the NW Product
Range. As will be seen, at trial, NW relied most heavily on Baco’s choice
of colours,
rather than any other feature, as giving rise to the prohibitive
degree of similarity with its own products.
7. Category signature
- It
was part of Baco’s case that the ‘colour and white horizontal
banding’ used on the relaunched NW Product Range
and on the vitaminwater
products had become a category signature of the enhanced water market by May
2009, when Baco launched its
own enhanced water products onto the Australian
market. At trial, Mark Epstein gave evidence that this was his opinion; and his
statement of opinion was entirely consistent with his earlier expressions of
opinion and conduct during the redesign of the Baco
products in late 2008 and
early 2009. In late December 2008, Mark, at that date overseas, was discussing
the preferred design with
his father, Robert, by email. His (but not his
father’s) attachment to the colour and white horizontal banding was
evident
in these emails in mid to late December 2008. The emails show that Mark
Epstein wanted to retain this feature because he saw it
as affording
“automatic recognition” that Baco’s products were within the
enhanced water category. In cross-examination,
he explained that he
“wanted to more closely align [Baco’s] product as immediately
recognisable as being a competitor
in the enhanced water category”.
- I
accept entirely that Mark Epstein genuinely held the opinion (in December 2008
and at trial) that the colour and white horizontal
banding had become a category
signature by the time Baco was engaged in redesigning the packaging for its
product. Further, by May
2009, the use of the colour and white horizontal
banding for enhanced waters was a feature of the US and Australian versions of
vitaminwater
(launched in 2000 and 2008 respectively), as well as the original
and relaunched versions of the NW products, and the original version
of Smart
Water (launched in 2008). The feature was not, however, carried by Emma and
Tom’s, another enhanced water product.
- Ultimately,
however, whether or not the feature of colour and white horizontal banding is
appropriately described as a category signature
as at May 2009 is immaterial.
This is because I accept that this banding, together with bright labels that
correspond to the colour
of the variant of the beverage as viewed through a
clear plastic bottle, the quirky comment, plus a health-driven
‘wellness’
or medicinal look, had become indicative of an enhanced
water product in general, rather than any particular brand or source, by
May
2009.
- The
evidence shows that, by May 2009, there were a number of enhanced water products
in the market, most of which had some common
features in their packaging or
get-up. The critical question is whether or not Baco adopted features that,
alone or in combination,
were distinctive of the NW Product Range. In closing,
counsel for NW argued that it was the precise choice of colours that gave
rise
to the prohibitive degree of similarity between the Baco Product Range and that
of NW, with the result that Baco’s products
were closer to those of NW
than any others in the market. I discuss this critical question below, under
the heading “Consideration”.
8. Consumer confusion
- A
curious feature of this case was that evidence of consumer confusion focussed on
the alleged confusion engendered by the entry
of vitaminwater into the
Australian market, rather than on the entry of Baco’s
‘Grassroots’ enhanced water products.
I have already described the
evidence of Mr Bethlehem, Mr Loakes, Ms Diamond and Ms Chapman. NW relied on
this evidence of consumer
confusion to support the proposition that the names
and logos of the products were not operating on the minds of consumers to
indicate
that the products came from different trade sources. NW invited the
court to infer that there would be confusion as between the
NW and the Baco
enhanced water products. Counsel for NW submitted that, in this regard, the
evidence of Mr Richard Partridge (to
which I am about to refer) was especially
damaging to Baco’s case, because Mr Partridge had noted the
‘Grassroots’
branding and thought that NW had rebranded its
products.
- Mr
Partridge, a solicitor at the same firm as Ms Chapman (and Mr Dennis’
partner, Ms Wright) swore an affidavit in which he
said that, about 16 September
2009, he was at a café that he knew well when he noticed a product in a
refrigerator behind
the counter that he thought was a NW product “with
some minor changes to the packaging”. Mr Partridge first said that
he had
subsequently learned the product was Baco’s ‘Grassroots’
enhanced water product. Later, in cross-examination,
he said that he did not
handle the product or purchase it, but that he saw “the only marketable
difference being the G instead
of the NW logo”. When counsel for Baco put
to him that he had failed to mention this in his earlier affidavit, Mr
Partridge’s
evidence became confused; he stated amongst other things that
at the time he observed that the product had been renamed
‘Grassroots’.
This testimony was inconsistent with his earlier
account of learning about the ‘Grassroots’ name and was omitted from
his affidavit. Overall, I regret to say that I did not find Mr
Partridge’s evidence at all helpful. To the extent that it
assisted at
all, it tended to show that the ‘Grassroots’ name and logo were
clearly visible to a consumer and apt to
mark out Baco’s enhanced water
products.
- The
consumer confusion evidence was not probative of NW’s claim. First, save
for the evidence of Mr Partridge, the consumer
evidence related to the period
February to April 2008, when vitaminwater entered the market, and concerned
confusion with vitaminwater.
At the time of the vitaminwater confusion, there
was only one participant in the market. This had altered by May 2009 when Baco
launched its products, because the market contained not only NW and
vitaminwater, but also a number of other traders. In these
circumstances, the
vitaminwater confusion does not justify an inference that the NW and Baco
‘Grassroots’ products would
likely be confused.
- In
any event, the evidence of vitaminwater confusion was comparatively slight and
unconvincing. By reason of her association with
Mr Dennis or his partner, Ms
Chapman was not truly within the class of ordinary consumers. The same can also
be said of Mr Partridge.
- Leaving
aside Mr Partridge’s evidence, which, for the reasons stated, I found
unpersuasive, there was no evidence of actual
consumer confusion as between
NW’s products and the Baco enhanced water products. Nor was there
anything in NW’s limited
evidence of marketing and sales to indicate that
there might have been any material confusion amongst consumers as to the trade
source
of the enhanced waters on the market.
- Most
importantly, save for Mr Partridge, in each case, the consumers recognised their
mistake by noting the name and logo on the
product. Mr Loakes and Mr Bethlehem
apparently recognised their mistakes before they paid for their purchases
(although Mr Loakes
had consumed the product before payment). Having regard to
this evidence (as well as to evidence of traders’ marketing and
promotional activities, such as those of NW itself and vitaminwater), and
evidence of the sales being made by vitaminwater and NW,
I accept that, as Baco
submitted, by May 2009, consumers can be taken to have become aware of multiple
participants in the enhanced
water market and their different
branding.
9. Distribution and conduct
- Until
the relaunch of the NW Product Range in October 2006, NW was a relatively small
business, with product distribution personally
undertaken by the three founders.
After the relaunch, NW staff progressively grew and NW increasingly used
independent distributors
to distribute the NW Product Range to its retail
outlets. These distributors were typically small privately owned businesses
that
distributed a range of food, beverage and consumable products that they did
not own or control. Baco operated through the same type
of distributors and
similar retail outlets.
- Mr
Dennis gave evidence, which I accept, that two distributors had ceased
distributing the NW Product Range and replaced it with
the Baco Product Range.
According to Mr Dennis, each sold into at least 200 retail stores.
- Baco’s
enhanced water products have not been sold in supermarkets. Until recently the
NW Product Range has not been sold in
supermarkets either, although Mr Dennis
gave evidence that the NW Product Range was about to enter Coles supermarkets.
There was
evidence that both Baco and NW offered discounts and other incentives
to retailers to stock their products. There was also evidence
that there were
instances in which Baco’s products replaced NW’s enhanced water
products in some stores.
- Both
Baco’s and NW’s enhanced water products were sold in convenience
stores (Caltex and Mobil, and 7-Eleven in the case
of NW) as well as cafes and
other small independent outlets. Small outlets might stock only one brand of
enhanced water, although
convenience stores tended to stock more than one brand.
Only about 20% of NW’s sales were made through convenience stores.
Where
a retailer stocked more than one brand of enhanced water and displayed them
together (as in a Caltex store), the photographic
evidence showed that it was
not difficult to distinguish the brands from one another. The evidence
indicated, however, that this
side by side display was not prevalent and that,
even where a retailer stocked more than one brand, the different brands might be
displayed in different parts of the store.
- The
questions again is, bearing in mind that the Baco products were not infrequently
sold alone, did the packaging, including the
branding, sufficiently
differentiate them from the NW Product Range? As already indicated, this is
explored further below.
C: CONSIDERATION: LEGAL PRINCIPLES AND THE FACTS AS FOUND
- The
principles governing passing off are generally well settled. The tort gives
effect to the notion that a trader must not pass
off the trader’s goods or
services as the goods or services of another. That is, a trader is not
permitted to use names, marks,
get-up, or other characteristics of another
trader’s goods so as to induce purchasers to believe that the goods that
the trader
is selling are the goods of the other. The tort is designed to
protect a trader’s intangible property rights in the trader’s
business, goodwill or reputation, which is likely to be injured by the
misrepresentation involved in a passing-off: see Hornsby Building Information
Centre Pty Ltd v Sydney Building Information Centre Ltd [1978] HCA 11; (1978) 140 CLR 216
(‘Hornsby Building Information Centre’) at 226-227.
- In
ConAgra Inc v McCain Foods (Aust) Pty Ltd [1992] FCA 159; (1992) 33 FCR 302
(‘ConAgra’) at 356, Gummow J remarked that “the law of
passing off contains sufficient nooks and crannies to make it difficult
to
formulate any satisfactory definition in short form”. This remains true.
For present purposes, it suffices to say that,
in order to establish the tort of
passing-off, NW must establish that:
(1) a goodwill or reputation
attaches to the NW Product Range in the minds of relevant purchasers by
association with the get-up under
which the NW Product Range is supplied to the
public, such that the get-up is recognised by the purchasers as distinctive of
the
NW Product Range;
(2) Baco has misrepresented to the public (whether intentionally or
unintentionally) that the products in the Baco Product Range are
products in the
NW Product Range or that they come from the same source as products in the NW
Product Range; and therefore that a
significant proportion of potential
purchasers is likely to believe that the products in the Baco Product Range are
the products
of NW or that they come from the same source as products in the NW
Product Range; and
(3) NW has suffered or is likely to suffer damage by reason of the erroneous
belief engendered by Baco’s misrepresentation.
See Reckitt and Colman Products Ltd v Borden Inc [1990] RPC 341
(‘Reckitt and Colman’) at 406-7 per Lord Oliver of Aylmerton;
Cadbury Schweppes Pty Ltd v Pub Squash Co Pty Ltd (‘Pub
Squash’) [1980] 2 NSWLR 851 at 857 per Lord Scarman; Morgan &
Banks Pty Ltd v Select Personnel Pty Ltd (1991) 20 IPR 289 at 294 per Clarke
JA (with whom Priestley JA and Hope AJA agreed); ConAgra at 355-356 per
Gummow J; and Sydneywide Distributors Pty Ltd v Red Bull Australia Pty
Ltd [2002] FCAFC 157; (2002) 55 IPR 354 (‘Red Bull’) at 371-2 per
Weinberg and Dowsett JJ (with whom Branson J agreed). Lord Diplock’s
more detailed statement of the
elements of the tort in Erven Warnink BV v J
Townend & Sons (Hull) Ltd [1979] AC 731 at 742 has also been regularly
cited and relied on in Australian courts: see, e.g., Betta Foods Australia
Pty Ltd v Betta Fruit Bars Pty Ltd [1998] ATPR 441–624 at 40, 839 per
Goldberg J and Red Bull at 370. Nothing here turns on the differences in
the formulations. If a case of passing off is made out, a court will presume
damage,
but, as to the measure of damage, the court will consider all the
circumstances of the case: see Childrens Television Workshop Inc v Woolworths
(NSW) Ltd [1981] 1 NSWLR 273 at 281-2 per Helsham CJ in Eq and Draper v
Trist (1939) 56 RPC 429 at 442 per Goddard LJ.
- The
relevant date for determining whether NW had the necessary reputation in the
elements of packaging and get-up in question was
the date upon which Baco
launched the Baco Product Range in the Australian market, that is, in May 2009:
see Pub Squash at 861; Ricegrowers Ltd v Real Foods Pty Ltd [2008] FCA 639; (2008)
77 IPR 32 (‘Ricegrowers’) at 43 per Rares J; Health World
Ltd v Shin-Sun Australia Pty Ltd [2008] FCA 100; (2008) 75 IPR 478 at 489 per Jacobson J;
and Hansen Beverage Company v Bickfords (Australia) Pty Ltd (2008) 79 IPR
174 at 181 per Tamberlin J.
- The
tort of passing off can be made out without proof of actual deception and
without proof of any “actual, subjective intention
to mislead” on
the tortfeasor’s part: see Red Bull at 372. It is sufficient that
there be a misrepresentation that is likely to lead the public to believe that
the tortfeasor’s
goods are those of the claimant. This is a question of
fact that the court must decide, having regard to the relevant circumstances.
In this case, these circumstances include the marketing, branding and get-up of
NW’s products and those of its competitors
and the likely knowledge of
potential purchasers in the market into which the parties’ products are
sold: compare Reckitt and Colman at 415.
- Proof
that the alleged tortfeasor deliberately sought to take the get-up (or other
distinguishing feature) of the other trader’s
product is of evidentiary
value in the sense explained by Dixon and McTiernan JJ in Australian Woollen
Mills Ltd v FS Walton & Co Ltd [1937] HCA 51; (1937) 58 CLR 641 (‘Australian
Woollen Mills’) at 657 and, more recently, in Red Bull
at 388 per Weinberg and Dowsett JJ. That is, if a get-up for goods is
adopted for the purpose of appropriating part of the trade
or reputation of a
rival, it can be presumed that the appropriated get-up is fitted for the purpose
and therefore likely to deceive
or confuse. It remains, however, for the court
to decide whether in fact there is a misrepresentation likely to lead the public
astray as to the source of the goods. See also Telmak Teleproducts (Aust)
Pty Ltd v Coles Myer Ltd [1989] FCA 272; (1989) 15 IPR 362 at 383 per Wilcox and Einfeld JJ;
The Kettle Chip Company Pty Ltd v Apand Pty Ltd [1993] FCA 546; (1993) 46 FCR 152
(‘Kettle Chip’) at 162-163 per Burchett J; and WD & HO
Wills (Australia) Ltd v Philip Morris Ltd (1997) 39 IPR 356 at 367 per
Davies J. Further, as Pub Squash (discussed below) shows, passing off is
not established merely because the alleged tortfeasor is found to have copied
features of
a competitor’s product. The copying of elements of
another’s products “may indicate nothing more than realisation
that
the plaintiff has a useful idea which the defendant can turn to his own
advantage, though not intending to pass off his goods
as those of the
plaintiff”: see ConAgra at 345 per Lockhart J.
- Sometimes
the proven circumstances may support causes of action under Pt V of the TPA
(which includes ss 52 and 53) as well as in common law passing off. As the
Court said in Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd
[2007] FCAFC 70; (2007) 159 FCR 397 (‘Cadbury’) at 418-419, despite their
different origins and purposes, there is an overlap between these causes of
action. A misrepresentation
as to the source of a trader’s goods is not
only an element in the tort of passing off, it can also be conduct that is
misleading
or deceptive or likely to mislead or deceive for the purposes of s 52
of the TPA: see Mars Australia Pty Ltd v Sweet Rewards Pty Ltd (‘Sweet
Rewards’) (2009) 81 IPR 354 at 360 per Perram J and Ricegrowers
at 48 per Rares J. Equally, such a misrepresentation can amount to a
relevant misrepresentation for the purposes of s 53(c) and (d). As the Full
Court said in Cadbury at 418:
[T]rade indicia other than names and logos can become associated with a
particular trader, such that a use by another trader could
give rise to
misleading and deceptive conduct or passing off. If particular branding
elements used by a trader have been identified
in a special way with that trader
in the minds of members of the public, there may be misleading or deceptive
conduct by reason of
the appropriation of those particular branding elements by
another trader.
- Section
52 of the TPA provides that a corporation shall not, in trade or commerce,
engage in conduct that is misleading or deceptive or is likely
to mislead or
deceive. Relevantly for present purposes, s 53 provides that a corporation
shall not, in connection with the supply of goods represent that goods have
sponsorship or approval that
they do not have (para 53(c)); or represent that
the corporation itself has sponsorship, approval or affiliation it does not have
(para 53(d)). In substance, NW’s case under the TPA is that, Baco, by
using features of the packaging or get-up of the NW
Product Range in the
presentation of the Baco Product Range, misrepresented to consumers that: (1)
Baco’s products are the
enhanced water products of NW; (2) Baco’s
products have the sponsorship or approval of NW; or (3) Baco has the sponsorship
and approval of NW or is affiliated with NW.
- As
in the case of passing off, under the TPA, whether or not a representation is
misleading or deceptive or likely to mislead or
deceive is a question of fact,
which must be determined by the court, having regard to all the relevant
circumstances, including
the history of the claimant’s product, the
circumstances in which the respondent’s get-up was adopted, and the
circumstances
prevailing in the market at the relevant time. Further, in
considering the statutory question, there are a number of well recognised
principles to be borne in mind: see S & I Publishing Pty Ltd v Australian
Surf Life Saver Pty Ltd [1999] FCA 316; (1998) 88 FCR 354 at 361-3 per Hill, RD Nicholson
and Emmett JJ citing Equity Access Pty Ltd v Westpac Banking Corporation
[1989] FCA 506; (1989) 16 IPR 431 at 440-441 per Hill J. Chief amongst these is the principle
that conduct may be found misleading or deceptive or likely to mislead
or
deceive notwithstanding that the respondent acted honestly and reasonably and
did not intend to mislead or deceive. Should the
court find that the respondent
had such an intention, as in the case of passing off, the court may the more
readily find that the
conduct was in fact misleading and deceptive.
- The
latter proposition is, however, subject to much the same qualification as for
passing off. As with passing off, the mere fact
that one trader may have copied
the design or get-up of another trader’s product is not sufficient of
itself to establish a
contravention of ss 52 or 53 of the TPA, so long as
the copyist has sufficiently distinguished its products and made it clear that
they are not the goods of the
trader whose design or get-up is copied: see Dr
Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (1999) 44 IPR
281 (‘Dr Martens’) at 367-369 (affirmed on appeal: see [1999] FCA 1655; (1999)
95 FCR 136), citing Parkdale Custom Built Furniture Pty Ltd v Puxu Pty
Ltd [1982] HCA 44; (1982) 149 CLR 191 (‘Puxu’) at 196, 199-200 per Gibbs
CJ, 209-210 per Mason J, 225-226 per Brennan J. In Dr Martens at
369-370, Goldberg J referred to a number of decisions, including Reckitt
& Colman, in which the labelling of a product had been insufficient to
prevent passing off, but held that the decisions were distinguishable
on their
facts.
- As
with passing off, whether or not impugned conduct is misleading or deceptive, or
likely to mislead or deceive, is to be determined
at the time the impugned
conduct commenced, that is, in May 2009: see Taco Company of Australia Inc v
Taco Bell Pty Ltd [1982] FCA 136; (1982) 42 ALR 177 (‘Taco Bell’) at
195-196 and 203-204 per Deane and Fitzgerald JJ; Thai Wood Import &
Export Co Ltd v Shuey Shing Pty Ltd (1989) 17 IPR 289 at 302 per Gummow J;
Anheuser-Busch Inc v Budejovicky Budvar [2002] FCA 390; (2002) 56 IPR 182 at 237 per
Allsop J; Dr Martens at 363 per Goldberg J; and Natural Waters of Viti
Ltd v Dayals (Fiji) Artesian Waters Ltd [2007] FCA 200; (2007) 71 IPR 571 (‘Natural
Waters’) at 585 per Bennett J.
- For
the purposes of the statutory claims, in determining whether a misrepresentation
has been made, the court must consider the effect
of the impugned conduct on the
“ordinary” or “reasonable” member of the class to whom
the conduct is directed,
rejecting reactions which are extreme, fanciful or
capricious. As the Court in Campomar Sociedad, Limitada v Nike International
Ltd [2000] HCA 12; (2000) 202 CLR 45 (‘Campomar’) at 87 said,
“[t]he initial question which must be determined is whether the
misconceptions, or deceptions, alleged
to arise or to be likely to arise are
properly attributed to the ordinary or reasonable members of the classes of
prospective purchasers”.
Much the same standard is applied in a claimed
case of passing off in assessing whether a representation of the relevant kind
was
made and its likely effect on the potential purchaser: see Ricegrowers
at 46. The ordinary or reasonable member of the class need not be
particularly intelligent or well informed; equally he or she is
not to be
considered as if careless or indifferent to the matter in question: compare
Australian Woollen Mills at 658.
- The
place of reputation in a claim under s 52 (and therefore s 53(c) and (d)) was
explained by the Full Court in Cadbury at 418-419, where the Court
said:
Whether or not there is a requirement for some exclusive reputation as an
element in the common law tort of passing off, there is
no such requirement in
relation to Pt V of the Trade Practices Act. The question is not whether
an applicant has shown a sufficient reputation in a particular get-up or name.
The question is whether
the use of the particular get-up or name by an alleged
wrongdoer in relation to his product is likely to mislead or deceive persons
familiar with the claimant’s product to believe that the two products are
associated, having regard to the state of the knowledge
of consumers in
Australia of the claimant’s product.
- As
this passage shows, in considering the TPA claims in this case, one must focus
on the statutory questions to which ss 52 and 53(c) and (d) give rise. When
addressing these questions, the fact, if it be proven, that NW had a reputation
in the feature or features
allegedly appropriated by Baco such that the feature
or features had become distinctive of its business or products is relevant to
the answer the court gives. Unless NW had a reputation in May 2009 in the
features of its packaging or get-up that it sought to
protect, the use of those
features by Baco is unlikely to convey the misrepresentations referred to in s
52 or s 53(c) and (d). In Sweet Rewards at 360, Perram J said much the
same thing in a similar sort of case, when his Honour noted that reputation in a
get-up or other features
is not only essential for passing off, but important
for a corresponding claim under s 52 of the TPA, because, in the case of s 52,
“it is the reputation in those features which is the springboard for the
argument that consumers are deceived by a particular
imitation”.
- Thus,
in order to establish passing off, or breach of ss 52 or 53 of the TPA, NW had
to show that it had, as at May 2009, the requisite reputation in the feature or
features of packaging or get-up
that Baco had allegedly appropriated: compare
Natural Waters at 585 per Bennett J. As to this, Baco argued that
NW’s claim failed because NW had not established any discrete reputation
in those features as opposed to its overall get-up or packaging. This was
because NW had not shown that Baco had appropriated any
features that were
distinctive of the NW Product Range within the enhanced water market. Absent
the requisite reputation in these
specific features, then, so Baco said,
NW’s passing off claim must fail. Further, without a showing of
reputation, so Baco
said, there could be no finding of relevant
misrepresentation in breach of ss 52 or 53 of the TPA.
- Natural
Waters is illustrative of the difficulty of establishing reputation in
get-up alone. The case concerned competitors in the bottled water market
and, like this case, involved claims in passing off and under ss 52 and 53 of
the TPA. The claimant argued that the respondent’s bottled water shared
the following features with its product: (1) use
of a clear bottle with a
recessed central body portion defined by protruding shoulders and base portions,
with the label positioned
in the recessed body portion; (2) use of a blue cap;
(3) use of a colourful, tropical motif featuring tropical plants and other
vegetation;
(4) a three-dimensional effect created by having a partially
transparent label on the front panel of the bottle revealing the inner
side of
the back label; and (5) prominent use of the word “Fiji”: see
Natural Waters at 575.
- In
dismissing the claims, Bennett J found that the claimant had failed to establish
that these features had become individually distinctive
of its product, or had
come to be associated by consumers with it or its product: see Natural Waters
at 579, 586. Her Honour explained (at
583):
The fact that Natural Waters may establish reputation in the Fiji Water get-up
does not mean that it has a monopoly over each aspect
of that get-up. The goods
are ordinary articles of consumption. By their nature, goods of different
manufacturers will bear some
resemblance to each other. Water is sold in
bottles, frequently in transparent bottles and commonly with blue caps. The
marks,
brands and labels play an important part in distinguishing the goods of
one manufacturer from those of another: Parkdale Custom Built Furniture Pty
Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191 at 200; [1982] HCA 44; 42 ALR 1 at 7-8; [1982] HCA 44; 1A IPR 684 at
689-90 per Gibbs CJ. Whether the reason for the distinctiveness of Fiji Water
is one or more particular aspects of its packaging
or the totality of its
get-up, the offending product will only mislead or deceive consumers where it
has taken the distinctive aspect(s)
or so much of the totality of the get-up
that the overall impression or the ‘gestalt’ of the Fiji Water brand
... is
adopted.
- Her
Honour added (at 585):
The reputation which must be proved in a case such as this is that the get-up,
packaging, shape, or trade dress relied upon is associated
by consumers with the
applicant’s product. It takes a strong case to establish a reputation of
this nature (Interlego [AG v Croner Trading Pty Ltd
(1992) 22 IPR 65] at 103–4) as consumers will not necessarily
associate a get-up with the applicant’s product: Collins Debden
Pty Ltd v Cumberland Stationery Co Pty Ltd (No 2) [2005] FCA 1398
at [33]–[34] per Lindgren J. The requisite reputation will more
readily be found where the get-up is unique or striking
rather than descriptive,
mundane, merely functional, or in common use. (Emphasis
added.)
- In
Natural Waters Bennett J accepted (at 590) that the applicant had
sufficient reputation in the overall effect of its get-up to found an action in
passing off or under s 52 (or s 53) of the TPA, but her Honour considered that,
despite the similarities between the claimant’s and the respondent’s
products,
no reasonable consumer would be mislead or deceived into believing
they were from the same manufacturer.
- As
stated above, I accept that, as at May 2009, NW had a reputation in the NW
Product Range, but NW has not established that its
reputation lay in the
features it seeks to protect as opposed to its overall packaging or get-up,
including its distinctive name
and logo, which Baco has not sought to
appropriate. NW has relied on a combination of features, which are said to be
distinctive
of the NW Product Range. Most of these features are shared with
other competitors in the enhanced water market, particularly with
vitaminwater,
and, to a lesser extent, Smart Water. Most of the brands of the enhanced water
products in evidence produced a rainbow-like
effect of brightly coloured
beverages when arranged appropriately. Most, if not all, enhanced water
products presented their beverages
in similarly bright colours. The numbers of
variants in most brand ranges were similar. All enhanced water products were
presented
in clear plastic bottles and the principal traders used comparatively
large wrap-around labels, with colour and white horizontal
banding – the
bright colour on the label complementing the colour of the beverage variety.
The three principal traders each
used light-hearted quirky comments on their
labels too. All the enhanced water products in evidence had a
‘wellness’
theme. I am unable to accept that NW established such a
degree of distinctiveness in the colours of the NW Product Range or any
other
feature, alone or together, that might have justified the proposition that it
had a discrete reputation in those colours or
some other feature.
-
As stated above, in the design of its own products, NW had copied many of the
distinctive features of the US version of vitaminwater.
By May 2009, a similar
Australian version of vitaminwater had been on the market for well over a year
and had become the market
leader in terms of sales volume. It is, therefore,
unsurprising that the features that might have been seen as distinctive of the
NW Product Range in the Australian market before vitaminwater entered the market
were no longer distinctive after vitaminwater had
established itself there. This
had clearly happened by May 2009. Other traders, such as Smart Water, had,
moreover, by then entered
the market and adopted many of the features that might
previously have been thought characteristic of vitaminwater and NW.
- In
the circumstances of this case, the sales and marketing evidence adduced by NW
cannot justify the conclusion that the features
that Baco allegedly appropriated
were, as at May 2009, associated by consumers with NW in particular as opposed
to competitors in
the enhanced water market generally. There is no room in such
a case as this for a finding that NW has the requisite reputation
in the
features of the get-up on which it relies, because, when it first entered the
market, NW substantially adopted the ‘look
and feel’ or the
‘gestalt’ of the US version of the vitaminwater product and a local
version of vitaminwater has
since entered the Australian market.
- On
this analysis, NW’s case fails from the outset, because it has not
established the reputation, which is the first element
in the tort of passing
off; nor has it established the foundation upon which the misrepresentations
referred to in ss 52 and 53 might be proved.
- Even
if NW had established a discrete reputation in a feature or features copied by
Baco in designing its enhanced water products,
for the purposes of the passing
off claim, I would not be disposed to find that, on the balance of
probabilities, Baco misrepresented
to the public that its enhanced water
products were products in the NW Product Range or came from the same source as
the NW Product
Range. Further, I would not be disposed to find that, on the
balance of probabilities, a significant proportion of potential purchasers
is
likely to believe that Baco’s products are the products of NW or that they
come from the same source as the NW Product Range.
Nor, for the purposes of the
claims under ss 52 and 53 of the TPA, would I be disposed to find that, on the
balance of probabilities, Baco, by using features of the packaging or get-up
of
the NW Product Range in the presentation of its products, misrepresented to
consumers that: (1) Baco’s products are the
enhanced water products of NW;
(2) Baco’s products have the sponsorship or approval of NW; or (3) Baco
has the sponsorship
or approval of NW or is affiliated with NW.
- The
court must determine whether or not Baco has made any relevant
misrepresentations to the public by launching its enhanced water
products into
the market “on a combination of visual impression and judicial estimation
of the effect likely to be produced
in the course of the ordinary conduct of
affairs”: see Australian Woollen Mills at 659 per Dixon and
McTiernan JJ. In this case, the court compares the effect of NW’s
enhanced water products, including
their packaging, bearing in mind any
reputation that NW has with respect to these products, and the impression likely
to be made
on the ordinary reasonable consumer when he or she has it in mind to
purchase one of Baco’s enhanced water products: see
10th Cantanae Pty Ltd v Shoshana Pty Ltd (1987)
10 IPR 289 at 306 per Gummow J.
- Bearing
in mind that the NW and Baco enhanced water products are not typically sold side
by side, it is inappropriate to decide the
matter of misrepresentation,
including the likelihood of deceptive or misleading conduct, by putting the NW
and Baco products side
by side and comparing them. Further, these matters are
not to be settled by close inspection and detailed argument. As Bennett J
said
in Natural Waters at 580 “[t]he determination of passing off and of
contravention of the Act ... is assessed as a matter of impression based
on
recollection”, in this case of the get-up of the NW Product Range and the
get-up of Baco’s ‘Grassroots’
enhanced water products.
- The
fact that the goods are inexpensive is also relevant to the nature of the
consideration that an ordinary reasonable consumer
will give to the purchase.
This case concerns the potential purchase of an inexpensive beverage, where an
ordinary reasonable consumer
is unlikely to engage in lengthy or detailed
comparison of respective get-ups: see Natural Waters at 579 and Kettle
Chip at 161. As the evidence of consumer confusion (such as it is)
indicates, in choosing an enhanced water product, an ordinary reasonable
consumer would probably choose fairly rapidly by reference to his or her
preferred brand as indicated by packaging, name and logo.
Indeed, products such
as these, which appeal to a healthy life-style, may attract a higher degree of
brand awareness and loyalty
than that which attaches to less life-style
orientated, but no less inexpensive, products.
- In
the context of the passing off claim made against it, Baco also relied on the
proposition that the use of get-up that is common
to the trade does not attract
any liability. This proposition is accepted in this branch of the law: compare
Ford v Foster (1872) LR 7 Ch App 611 at 628 per Mellish LJ, cited with
approval by Lindley LJ in Reddaway v Bentham Hemp-Spinning Co [1892] 2 QB
639 at 643 and by Weinberg and Dowsett JJ in Red Bull at 371; Payton
& Co Ltd v Snelling, Lampard & Co Ltd (1900) 17 RPC 48
(‘Payton’); and W H Burford & Sons Ltd v G Mowling
& Son [1908] HCA 99; (1909) 8 CLR 212 (‘Burford’). The first use in
a market of a particular get-up in a market does not confer monopoly or
proprietary rights so long as
any subsequent use by another trader is not likely
to deceive the ordinary reasonable consumer into mistaking that trader’s
goods for the goods of another.
- For
a claim of passing off to succeed in a case where products generally resemble
each other because of features common in the trade,
the claimant must establish
that the likeness between the claimant’s goods and the alleged
tortfeasor’s extends to those
features that otherwise distinguish the
claimant’s goods from others in the market: see Payton at 52 per
Lindley MR. The decisions in Burford and Pub Squash are
illustrative of the application of this principle.
- In
Burford, a soap manufacturer had been selling its laundry soap under the
name “Signal Soap” in strawboard cartons about the size
of a brick
for twenty years. For four or five years, the defendants, also manufacturing
soap, had packaged laundry soap, under the
name “Tulip Soap”, in
long bars wrapped in strong paper, but, prior to the institution of the
proceeding, had changed
their packaging to cartons of exactly the same size,
shape and material (although of a slightly different colour) to those used by
the plaintiffs. There was evidence that the defendants had done so because they
had seen the success of the plaintiffs and considered
that using similar
packaging would be advantageous to them too. The plaintiffs brought a
proceeding for passing off, seeking injunctive
and other relief. The defendants
argued that they had a right to use the packaging, and that there was no
similarity likely to deceive.
O’Connor J said at
216:
There is no doubt about the law in such a case. Every trader has prima
facie a right to put up his goods in any packages which he may think
attractive and convenient, and in any method which he may consider
suitable for
the carrying on of his trade. But that right is subject to limitations. He must
not use the registered trade mark of
another, and he must not put up his goods
in such a form as to be likely to deceive ordinarily intelligent persons into
mistaking
his goods for goods known in the market as manufactured, put up, or
sold, by another. Subject to these limitations every trader has
a right to use
any material or any shape he may think fit for packing of his goods and for
putting them on the market. The plaintiffs
have no monopoly in the particular
kind of packing which they have adopted. ... It is a material of very common
use for packages
and is becoming of more common use for that purpose every day.
The use of strawboard for packages is therefore open to the trade,
and no one
trader can acquire a monopoly of it. ... But that which distinguishes the
plaintiffs’ packages from what is common
to the trade is the large and
distinctive lettering on the package ‘Signal
Soap’.
At 217, his Honour added that:
[W]here, as in this case, a certain method of get up, though open to all
traders, has been for many years solely identified with
the plaintiffs’
goods in a particular market, it is incumbent on a trader, who adopts the same
method of get up for the purpose
of pushing his trade in a similar article in
the same market, that he shall clearly differentiate his goods on the face of
the package
from those of the plaintiffs.
- In
Burford at 218-219, O’Connor J held that the special characteristic
that distinguished the plaintiffs’ soap from what was common
to the trade
was the description “Signal Soap” appearing in large letters on its
face; and that while the defendants’
packaging was of the same material,
shape, size and colour and “general get up” as that of the
plaintiffs’ soap,
the distinguishing characteristics of the two products
– the names of the products printed on the cartons – were sufficient
to make it “impossible for anyone who can see to mistake the
defendants’ package for the plaintiffs’”; and
that this was so
despite similarities in the “general shape and form of the lettering on
the other sides of the packages.”
Accordingly, his Honour granted the
defendants’ motion for nonsuit. On appeal, Griffith CJ, Isaacs and
Higgins JJ expressed
their agreement with the decision and reasoning of
O’Connor J and dismissed the appeal: see Burford at 222-224.
- In
Pub Squash the trial judge held that the defendant had sought to take
advantage of the plaintiff’s success in developing its ‘Solo’
lemon squash soft drink by seeking to copy or approximate the formula for
‘Solo’ and by choosing a product name and get-up
derived from and
intended to gain the benefit of the plaintiff’s advertising and get-up.
Notwithstanding these findings, the
trial judge found that there had been no
relevant misrepresentation on the defendant’s part because the defendant
had sufficiently
distinguished its product from the plaintiff’s product
and, accordingly, the plaintiff had not made out a case of passing off.
Delivering the judgment of the Privy Council dismissing the appeal, Lord Scarman
noted (at 861) that:
The [respondent’s] intention was, not to pass off the respondent's goods
as those of the appellants, but to take advantage
of the market developed by the
advertising campaign for ‘Solo’. Unless it can be shown that in so
doing the respondent
infringed ‘the plaintiffs’ intangible property
rights’ in the goodwill attaching to their product, there is no
tort: for
such infringement is the foundation of the tort’ [citing Hornsby
Building Information Centre].
The law was
designed, so Lord Scarman explained (at 858), to strike a balance between the
protection of a trader’s reputation
and the need to keep competition
free.
- As
Pub Squash and Burford show, the adoption by a trader of elements
of get-up that appear to have been successfully used by a competitor is not new.
Baco
admitted that it had adopted certain design elements in its Baco Product
Range that were shared with NW, but Baco argued that, as
at May 2009, these
elements were common to the enhanced water category in Australia.
- I
accept Baco’s submission on this point. The features of NW’s get-up
that NW relied upon as distinctive were, as at
May 2009, also used by
vitaminwater and, to a lesser extent, by Smart Water. Moreover, a number of
these features had been used
by vitaminwater in the United States for some years
before NW entered the market in Australia; and provided a design model that NW
adopted for its own products when they entered the Australian market. Further,
vitaminwater, with its similar get-up to NW (and
to a lesser extent to Baco),
had taken over from NW as the market leader in the Australian market.
- As
already stated, whether or not the colour and horizontal banding was
appropriately described as a category signature is not the
important point. The
important point is that the banding, together with the use of bright wrap-around
comparatively large labels
corresponding to the colour of the beverage as viewed
through a clear plastic bottle, and the use of a quirky comment, associated
with
a health-driven look, had become indicative of an enhanced water product by May
2009. By May 2009, there were a number of enhanced
water products in the market
having these features in common.
- As
noted earlier, most of the brands of enhanced water products in evidence
produced a rainbow-like effect of brightly coloured beverages
when placed
appropriately together; and the colour of each variant was emphasized by the use
of bright colours on the labels. I
am unable to accept that, by using similarly
bright colours in a similar way, or by using any of the other features to which
NW pointed,
Baco misrepresented to the public that its enhanced water products
were products in the NW Product Range or came from the same source
as the NW
Product Range. Further, I do not accept that an ordinary reasonable consumer
would be likely to believe that Baco’s
products were the products of NW or
that they came from the same source as the NW Product Range.
- Seen
from the perspective of the ordinary reasonable purchaser, in a retail
environment, the enhanced water products of NW and Baco
would look different in
a number of material respects, especially having regard to the branding, name
and logo. In the case of the
Baco ‘Grassroots’ products the
prominent ‘G’ logo, coloured the same shade as the beverage variant,
would
stand out against a mainly white background constituting the top border of
the label. The distinctiveness of ‘Grassroots’
enhanced water
products, as compared with their competitors, is reinforced by a moderately
large green grass band running through
the centre of the label. The registered
mark ‘grassroots’, which runs vertically down the top white band is
clearly
visible. The name and logo appear on each of three panels on the bottle
label and would therefore be visible to the consumer no
matter how the bottle
was placed on a retailer’s shelf, whether in or out of a
refrigerator.
- In
the same way, the distinctive black and white ‘NW’ logo can be seen
no matter how the bottle is placed on the shelf.
This was, moreover, the effect
of Mr Dennis’ evidence because Mr Dennis agreed that, since the NW logo
appears on all three
panels of the label, it is almost impossible to have a NW
enhanced water product located in a store without the name and logo being
visible to the potential purchaser.
- The
evidence in this case shows that the branding of products in the enhanced water
market is significant because potential purchasers
are likely to understand and
accept a brand as denoting a trade source. There was sufficient evidence to show
that potential purchasers
were likely to have relevant brand awareness.
- In
the period leading up to May 2009, NW regularly marketed and promoted its
enhanced water products by reference to the ‘NutrientWater’
name and
logo. In so far as Mr Dennis gave evidence to the contrary, I do not accept it.
As Mr Dennis ultimately conceded, “if
you were buying the NutrientWater
product you would expect to see the name ‘NutrientWater’ or the logo
on the product”.
- Especially
following the entry of vitaminwater and other brands of enhanced water products
into the Australian market, advertising
and other promotional activities have
been designed to make consumers brand-aware. The rapid and significant success
of vitaminwater,
as well as the growth in NW’s sales, is indicative of the
success of these activities. In such a market, it may reasonably
be assumed
that the ordinary reasonable purchaser would be alive to the differences between
the branding, name and logo of the NW
Product Range and Baco’s enhanced
water products, as well as those of their competitors. Given that the
branding clearly
differentiates the Baco Product Range from the NW Product
Range, it is not probable that the ordinary reasonable consumer would be
mislead
or deceived into believing they were all NW’s products or from the same
trade source; or that Baco has the sponsorship
or approval of NW or is
affiliated with NW. It is worth noting that, in a case of this kind, before
likely misleading or deceptive
conduct can be established under s 52 of the TPA,
it is not enough that “particular conduct causes confusion or
wonderment”; rather there must be conduct that
is misleading or deceptive
or likely to mislead or deceive: see Campomar at 87, quoting Taco
Bell at 137. NW has failed to establish that this is a case of the latter
kind.
- I
find that, as at May 2009, the NW Product Range was distinguished from other
products in the enhanced water market by its branding
(including its name and
logo), and not by the other features of get-up on which it relied. In this
circumstance, Baco’s ‘Grassroots’
enhanced water products did
not convey any representation of association with or sponsorship by NW. This
conclusion is entirely
consistent with the evidence of Mr Mark Epstein and Mr
Lee that Mr Epstein provided samples of competitors’ products, including
the NW and vitaminwater products, with the express instruction that Baco’s
labels were clearly to distinguish Baco’s
products from those of its
competitors.
- The
evidence as to intention in this case contrasts with the findings made in Cat
Media Pty Ltd v Opti-Healthcare Pty Ltd [2003] FCA 133 (‘Cat
Media’) and Red Bull. The Court in both cases expressly found
that the respondent had designed its product with the intention of misleading
consumers.
- In
Cat Media, Branson J considered two products sold in very similar packaging
under the names ‘Fat Blaster’ and ‘Fat Terminator’.
Her
Honour found that the Fat Blaster packaging “was highly distinctive in the
weight loss supplement market when the product
was launched” and that
“the applicant ha[d] acquired a substantial goodwill and reputation in the
name Fat Blaster and
in the Fat Blaster get-up in connection with the
distribution, sale and offering for sale of weight loss supplement products in
Australia”:
see Cat Media at [13], [17]
and [43]. Further, her Honour considered that the respondent’s product
presented as “having many similarities
with the Fat Blaster box and as
sharing few features with the packaging of the other products of the respondent
or ... other products
competing in the same market”: see Cat
Media at [36]. Accordingly, her Honour held that
the applicant had established its claims in passing off and under s 52 of the
TPA. In doing so, Branson J emphasised (at [51]) that this conclusion was based
on the significant similarities between the
competing products; “the
dissimilarity between the Fat Terminator box and the packaging of other rival
products”; and
“the absence from the Fat Terminator box of a
significant feature capable of unambiguously distinguishing it from the Fat
Blaster
product”. In both Red Bull and Cat Media there were
findings of deliberate copying by the respondent with intention to deceive: see
Cat Media at [33] and Red Bull at 365.
- The
evidence of Mr Mark Epstein, corroborated by Mr Lee, was that the design of
Baco’s ‘Grassroots’ enhanced water
products was intended to be
distinctive, and differentiate the products from Baco’s competitors,
whilst being referable to
the enhanced water market. I accept this evidence,
which was fully supported by the documentary record. Further, Baco’s use
of the ‘Grassrooots’ name and logo to differentiate its enhanced
water products from others was consistent with its use
of this name and logo on
its corporate stationery and the cartons in which the Grassroots products were
packed for delivery to distributors
and retailers.
- I
find that there was no intention on Mr Epstein’s (or Baco’s) part to
deceive or mislead consumers into believing that
Baco’s goods were, or
were relevantly associated with, NW’s products. On the contrary, by its
product branding, Baco
sought to distinguish its products from its competitors
in the enhanced water market.
- Plainly
enough, Baco sought to benefit from the success of the NW Product Range and the
vitaminwater products in the Australian market.
It was for this reason that
Baco selected a get-up that emulated various characteristic features of other
enhanced water products.
Having regard to the circumstances prevailing in the
enhanced water market by May 2009 (including its history and development,
marketing
and advertising, NW’s branding, get-up or packaging and the
branding, get-up or packaging of other traders), the likely knowledge
of
potential purchasers in the enhanced water market and likely impression on them
of the get-up of the NW Product Range and the
Baco enhanced water products, the
circumstances in which Baco adopted its product get-up, and such other relevant
considerations
as have been mentioned, I find that Baco’s enhanced water
products were sufficiently differentiated from the NW Product Range
as not to be
likely to deceive or mislead potential purchasers or consumers as to the
products’ trade source or trade association.
D. DISPOSITION
- In
summary, NW has failed to make out its claims, first, because it failed to
establish a relevant reputation in the features that
Baco allegedly
appropriated; secondly, because it failed to establish that, by adopting
features common in the enhanced water market,
it misrepresented the trade source
of its enhanced water products or misrepresented its association with NW, so as
to mislead or
deceive potential purchasers of its products; and thirdly,
because, by its branding and packaging, Baco clearly differentiated its
product
from its competitors’ products. Accordingly, such similarities as exist
between the Baco’s and NW’s enhanced
water products do not amount to
passing off or a breach of ss 52 or 53 of the TPA.
- Accordingly,
I would dismiss NW’s application dated 25 June 2009. For the reasons
discussed at the hearing, the applicants’
objection to paragraph 40 of Mr
Epstein’s affidavit of 2 November 2009 should be upheld. My tentative
opinion is that the
applicants should pay the respondent’s costs but I
would afford the parties an opportunity to make written submissions if they
consider another costs order more appropriate in the circumstances of the
case.
I certify that the preceding one hundred and
twenty-five (125) numbered paragraphs are a true copy of the Reasons for
Judgment herein
of the Honourable Justice Kenny. |
Associate:
Dated: 6 January 2010
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URL: http://www.austlii.edu.au/au/cases/cth/FCA/2010/2.html
