The recent decision of Justices Stone, Gordon and McKerracher of the Full Federal Court in Nature's Blend Pty Ltd v Nestlé Australia Ltd (2010) 87 IPR 464 has clearly set out the factors relevant to determining whether use of a registered trade mark is for the purposes of infringement under section 120 of the Trade Marks Act 1995 (Cth) (Act).
The Facts
Allen’s is one of Australia’s largest and most widely recognised manufacturers of confectionery, a business it has conducted since 1891. In 1987, Allen’s was bought by Nestlé, a name which is equally recognisable within the food industry.
Nature’s Blend is a small business which sells medicinal and food products for both humans and animals. In January 2006, Nature’s Blend began manufacturing and selling lip shaped chocolates in a green wrapper embossed with the words ‘luscious Lips’ (Chocolates). Nature’s Blend applied to register the trade mark ‘luscious Lips’ on 12 March 2007, after which they began to sell the Chocolates. Their application for registration of the trade mark was accepted on 29 May 2007. At this time, only 10% of Nature’s Blend’s business consisted of the sale of products for human consumption.
In May 2007, after a lengthy development period, Nestlé began marketing an assortment of lollies collectively named the ‘Retro Party Mix’ (Lollies). On the front of the packet, amongst other images, was a large representation of the well-known Allens’ trade mark, while on the back was both a representation of the Nestlé trade mark and the following blurb:
That’s right! All your old favourites are back, so put on those flares & get ready to party! Up to 7 lolly varieties including … cool COLA Bottles, those radical Racing Cars, yummy Honey flavoured Bears, totally freeeekie Teeth, luscious Lips, partying Pineapples and outrageous Raspberries. [emphasis added]
Lacking knowledge of Nature’s Blend’s registered trade mark, Nestle continued to market the Lollies with this blurb until August 2008, at which point they apparently decided that their lips were not luscious, nor their racing cars radical. The blurb found on the back of the packet of Lollies was then amended so as to read:
Up to seven lolly varieties including pineapples, cola bottles, racing cars, honey bears, teeth, lips, ripe raspberries.
Shortly after the blurb was changed, Nature’s Blend applied to the Federal Court for relief for damage suffered between May 2007 and August 2008. Applying under the Act, the Trade Practices Act 1974 (Cth) and for the tort of passing off.
The decision at first instance
At first instance the case was brought before His Honour Justice Sundberg, who dismissed all three claims. The Trade Practices Act claims for misleading and deceptive conduct and those of passing off were dismissed quickly with reference to the fact that Nature’s Blend had not yet established much of a reputation in the industry and that words ‘luscious Lips’ were used in so minor a manner on the Lollies’ packaging.
The majority of His Honour’s reasons were devoted to an examination of whether Nestlé’s use of the term ‘luscious Lips’ in the blurb constituted an infringement of Nature’s Blend’s registered trade mark. In order to establish trade mark infringement, Nature’s Blend was required to satisfy the requirements of section 120(1) of the Act, which reads:
A person infringes a registered trade mark if the person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered.
The trial judge, after some deliberation and consideration of the authorities, held that Nestlé did not use the words ‘luscious Lips’ as a trade mark. His Honour understood this question to require a consideration of whether the words were used so as to indicate a connection in the course of trade between Nestlé and the confectionery. Upon consideration of the evidence it was found that the words were not used as a mark for two reasons:
The decision on appeal
Nature’s Blend soon appealed against the decision of the trial Judge on the grounds that His Honour wrongly decided the question of whether the words ‘luscious Lips’ were used as a trade mark. They did not appeal against the trial judge’s findings on their claims under the Trade Practices Act or in tort.
In reaching its decision, the court outlined six principles that govern when a party will be held to use words as a trade mark:
The Full Court, on applying these principles to Nestlé’s use of the words ‘luscious Lips’, upheld the decision of Justice Sundberg and dismissed the appeal.
Lavan Comment
The Full Court’s decision in this case is particularly notable for its direct approach to the question of when an entity uses a word or phrase as a trade mark. The decision does not tread new ground, nor does it change the existing law, yet the formulation of the above six principles has served to clarify an often obscure question of law. It is therefore important to advise clients to be careful when using common or catchy words and phrases to distinguish their goods without first ensuring that this language is not substantially identical with, or deceptively similar to registered trade marks.
This case also highlights the difficulty faced by lesser-known businesses when arguing claims of trade mark infringement against larger, better-known competitors. In reaching its decision the Full Court placed great weight upon the fact that Allen’s own trade mark was more recognisable and highly prominent. In the circumstances it seems that a claim brought against a less well-known competitor would have had greater prospects of success.
For more information please contact Senior Associate, Wayne Zappia on 08 9288 6931 / wayne.zappia@lavanlegal.com.au.
