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In-N-Out make mincemeat of Hashtag Burgers

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  • Jan 25, 2021
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In Hashtag Burgers Pty Ltd v In-N-Out Burgers, Inc, [2020] FCA 235 the Full Federal Court of Australia considered appeals against the In-N-Out Burgers, Inc v Hashtag Burgers Pty Ltd [2020] FCA 193 decision, which involved proceedings by In-N-Out Burgers, Inc (“INO”) against the use of DOWN-N-OUT by Hashtag Burgers Pty Ltd (“Hashtag”), in relation to (inter alia) hamburgers and restaurant services.  A summary of the primary judge’s decision was previously reported by our firm – CLICK HERE.

Background

In the primary decision, Katzman J held that use of Down-NOut infringed a registration for In-N-Out and that the Hashtag directors, Benjamin Kagan and Andrew Saliba, were jointly and severally liable for trade mark infringement, passing off and misleading and deceptive conduct in breach of s18 of the Australian Consumer Law (“ACL”) for conduct prior to 23 June 2017, being the date on which Hashtag was incorporated. 

Hashtag appealed this decision by challenging the finding of deceptive similarity.  Further, Hashtag challenged Katzman’s conclusion that Kagan and Saliba adopted the marks for the deliberate purpose of appropriating INO’s marks, branding or reputation.  Hashtag also challenged the primary judge’s findings concerning misleading or deceptive conduct and passing off.

INO filed a cross-appeal regarding the liability of Kagan and Saliba after the date on which Hashtag was incorporated.

TM Infringement by Hashtag

In support of this appeal, Hashtag alleged the following errors were made by the primary judge when assessing deceptive similarity:

  1. failing to give weight to the presence of the word BURGER in the INO trade marks;
  2. failing to assess the effect of the arrows in the composite INO trade marks;
  3. placing undue emphasis on the “N-OUT” aspect of the INO trade marks and attributing insufficient significance to the difference between “DOWN” / “D#WN” and “IN”;
  4. failing to give sufficient weight to the difference in meaning between the respective marks, and the ideas conveyed by those marks;
  5. placing significant or dispositive weight on aural similarity and setting aside material visual differences between the marks;
  6. framing the central question as one focussed on imperfect recollection; and
  7. placing apparent weight on evidence of confusion from social media posts and no weight on the absence of evidence of actual confusion.

The Full Federal Court unanimously dismissed Hashtag’s appeal in relation to trade mark infringement.  Nicolas, Yates and Burley JJ did not accept any of Hashtag’s criticisms concluding they paid insufficient regard to the rigour with which the primary judge approached her judgment. While their Honours confirmed that the “idea” or “meaning” of a mark has a role to play in determining deceptive similarity, this only forms a part of the overall analysis.

Separately, Hashtag challenged the primary judge’s conclusion that Kagan and Saliba acted dishonestly in adopting their trade marks.  

In relation to this, the Court found that her Honour erred in her findings of dishonesty but that did not vitiate the primary judge’s conclusions as to intention or deceptive similarity because:

  • a finding of dishonesty is not a necessary part of the assessment; and
  • her Honour separately found the requisite intention to cause confusion on the part of Messrs Kagan and Saliba.

Consequently, the appeal failed.

ACL and Passing Off

Hashtag also appealed the primary judge’s decision in relation to allegations of misleading or deceptive conduct arising under s18 of the ACL and the tort of passing off on the bases that:

  1. the impugned marks are not deceptively similar to the names or logos used in INO Burgers’ registered marks;
  2. the different trade dress, get-up, uniforms, décor, menus and other trade indicia adopted by the respective businesses, when combined with the parties’ different trading names, dispelled any real danger of deception occurring;
  3. the primary judge wrongly applied the measure of “imperfect recollection” when considering the response of the notional consumer.

The Full Federal Court rejected Hashtag’s first claim for the same reasons as the trade mark infringement ground outlined above.  While the Court acknowledged that the primary judge used the phrase “imperfect recollection”, their Honours were satisfied that Katzman J applied the applicable test correctly.  In this regard, Hashtag did not challenge Katzman’s finding that a not insignificant number of members of the relevant class of consumer would have been led to consider that there was an association of some kind between INO and the people behind DOWN-N-OUT.

Hashtag also submitted that in order to uphold a claim of passing off, there must be goodwill in the relevant mark (in the sense of a business with customers in the jurisdiction).  However, their Honours confirmed the longstanding principle in Australia that it is not necessary to have a place of business in Australia in order to maintain a passing off action. It is sufficient that the goods have a reputation in Australia to a sufficient degree to establish that there is a likelihood of deception among consumers, and potential consumers, and of damage to its reputation – see ConAgra Inc v McCain Foods (Aust) Pty Ltd [1992] FCA 176.

On this basis, Hashtag’s appeal was dismissed.

Cross-Appeal by INO

INO cross-appealed Katzman’s decision on the basis that Kagan and Saliba were liable as joint tortfeasors for infringing conduct which took place after Hashtag was incorporated, namely 23 June 2017.  Contrary to the primary judge’s finding, their Honours concluded that Kagan and Saliba’s conduct as individuals went beyond the threshold of performing their proper roles as directors to that of joint tortfeasers on the basis that:

  • Kagan and Saliba were the sole directors of Hashtag;
  • Kagan and Saliba made decisions as to Hashtag’s management;
  • Kagan and Saliba alone received the profits derived from Hashtag;
  • There was no significant difference between the way that Kagan and Saliba operated the business before incorporation and the way in which they operated it through the corporate vehicle after it was formed;
  • Kagan and Saliba were knowingly involved in Hashtag’s wrongdoing;

On this basis, the Full Federal Court allowed INO’s cross-appeal and ordered (i) costs for the appeal against Hashtag, and (ii) cost for the cross-appeal against Kagan and Saliba.

Related Article: Hashtag Burgers Down-N-Out – Trade Mark Infringement, Misleading Conduct and Passing Off  – April 2020

Authored by Nathan Sinclair and Sean McManis