In the recent decision of the Intellectual Property Office of New Zealand, Frucor Suntory New Zealand Limited v. Energy Beverages LLC [2020] NZIPOTM 5 (11 May 2020), Energy Beverages LLC (Energy Beverages) was unsuccessful in its application for revocation of the green colour mark (V Green mark) owned by Frucor Suntory New Zealand Limited (Frucor).

The full decision can be found here.

Background

The parties are competitors in the energy drink market. Energy Beverages produces the “MOTHER” branded energy drink and Frucor the “V” branded product.

In June 2017, Energy Beverages filed an application for non-use revocation of Frucor’s registration 795206 in class 32 for “Energy drinks; none of the aforementioned being cocoa – based beverages”.

Below is a representation of the V Green mark and endorsement that appears on the NZ Trade Marks Office database:

V Green mark

“The mark consists of the colour green (Pantone 376c), as shown in the representation attached to the application, applied as the predominant colour to the goods, their packaging or labels., Section 18(2) of the Trade Marks Act 2002 applies.”

The relevant non-use period is 21 May 2014 to 21 May 2017.

Energy Beverages filed the revocation application following a threat of infringement from Frucor arising from its use of an ink mix equivalent to Pantone 376c in its “KICKED APPLE get-up” for its MOTHER energy drink.

Energy Beverages claimed that Pantone 376c looks like:

Pantone 376c

which is different to the registered mark. It consequently claimed that Frucor had not made genuine use of the V Green mark in New Zealand during the relevant period, applied as the predominant colour to its goods, their packaging or labels.

Both parties gave evidence regarding the Pantone Colour Matching System (PCMS), which is an internationally recognised system of standardising colour tones.

Frucor established that it had submitted an original square sample cut from a roll of labels coated with PMS 376 with metallic finish with the application for registration of the V Green mark. PMS 376 is a base formula for a green colour.

Energy Beverages argued the Frucor could not have used Pantone 376c on its V cans because the “c” suffix indicates it is a colour that can only be applied to coated paper stock and not metallic substrates.

Frucor admitted that the colour swatch supplied with the application was not Pantone 376c, but only “the PMS reference which best reflects the colour of 376 when printed on a metallic substrate” such as a can or metallic foil label. This view was consistent with Energy Beverages’ own evidence – “Frucor has mixed up a colour – the “V” green – to match or mirror Pantone 376C as closely as possible”.

Frucor submitted that the difference in colour between the sample provided at filing and the representation appearing on the register was due to the degradation in colour from the copying and scanning processes undertaken during the digitisation of IPONZ IP records in 2009. Energy Beverage’s own evidence demonstrated how printed colour degrades through such repeated processes.

Issues for determination

  • What is the appropriate representation of the trade mark for the purposes of assessing use?

In the High Court decision in Levi Strauss & Co v Kimbyr Investments [1994] 1 NZLR 332, Williams J held that the written explanation of the mark defines the trade mark and not the image of the mark on the register:

the opening words of the written description state that “the mark consists of”. In the absence of any other words explicitly stating that the pictorial representation is to govern, those words are decisive”.

While noting that the colour swatch attached to the trade mark application was a considerably different shade of green to that appearing on the register, the Assistant Commissioner applied Levi Strauss and found that the relevant representation is that attached to the application for the trade mark, as specified in the written explanation. Accordingly, she did not consider that the different representation of the colour on the register was relevant to the assessment of use of the trade mark.

Although not strictly necessary for the Assistant Commissioner to reach a conclusion as to the reason for the difference between the colour chip as shown on the register and the colour as described in the application, she accepted Frucor’s explanation that the difference appears to have arisen from the process of uploading the colour swatch to the register during the digitisation process in 2009.

  • Was there genuine use of the V Green trade mark in the course of trade during the relevant period?

Having found that the written explanation of the trade mark overrides the representation provided, the issue for determination is whether the evidence of use relied upon by Frucor constitutes qualifying genuine use of “the colour green (Pantone 376c) as shown in the colour swatch attached to the application, applied to the goods, their packaging and labels”.

Energy Beverages claimed that Frucor’s evidence of use was insufficient to establish genuine use of the mark in the course of trade in New Zealand. It argued that the representation of the mark as attached to the application and the reference to “the colour green (Pantone 376c)” are inconsistent, or otherwise incapable of together describing a trade mark, or being used as such. The Assistant Commissioner rejected this argument as an attempt by Energy Beverages to challenge the validity of the mark itself (which is not permitted under s66).

The Assistant Commissioner agreed with Energy Beverages’ contention that the goods referred to in the written explanation of the trade mark are the beverages themselves (Frucor did not contend that the trade mark is applied to the liquid drink), but accepted Frucor’s submission that the use of the trade mark on cans or bottles is use “in relation to” the goods. She said this conclusion is of little significance to the revocation application, because if use of the trade mark on cans or bottles does not constitute use in relation to the goods, it will certainly constitute use in relation to packaging.

After reviewing the different categories of use, the Assistant Commissioner was satisfied that there was sufficient evidence of use of the V Green trade mark by Frucor in New Zealand during the relevant period, on V cans, can multipack shrink wrap and paperboard packaging for multipack bottles, as well as related promotional and advertising materials.

Consequently, the application for revocation failed and the V Green trade mark was permitted to remain on the register.

Takeaway

This decision is informative in clarifying how to interpret depictions of non-traditional marks that appear on the Register of Trade Marks in New Zealand, and indicates the importance of accurately describing such trade marks in the application for registration.

Authored by Kathy Mytton and Sean McManis

The relatively new “bad faith” (section 62A) ground of opposition can be a strong basis for action against misappropriation of a trade mark owners’ goodwill, where the more commonly used grounds of deceptive similarity with an earlier mark (section 44) and likelihood of confusion due to reputation in an earlier mark (section 60) would fail.

Recent Trade Marks Office decisions illustrate some types of exploitative conduct that can give rise to a finding of “bad faith”.

The issue

The key issue in all cases was whether Southcorp Brands Pty Ltd (SCB) met its onus of demonstrating that the applicant had acted in “bad faith” in filing its trade mark application.

Bad faith has been described in the following way:

“… mere negligence, incompetence or a lack of prudence to reasonable and experienced standards would not, in themselves, suffice, as the concept of bad faith imports conduct which, irrespective of the form it takes, is of an unscrupulous, underhand or unconscientious character

(Fry Consulting Pty Ltd v Sports Warehouse (No 2) (2012) 201 FCR 565)

The Cases

SCB’s well known Penfolds” mark

SCB is a subsidiary of Treasury Wines Estate (TWE) Limited and produces wines under various well known marks, including “Penfolds”.

SCB filed evidence of the extensive reputation and promotion of its “Penfolds” wines, which have been in existence since 1844, and are labelled with the trade mark “Penfolds” in plain script or in red cursive script.

In each opposition case below, the applicant had applied to register its mark/s in relation to wines and other alcoholic beverages.

Facts in each case

Oppositions to “Barry Ford and “Ben Ford”
(Southcorp Brands Pty Limited v Li Li Shen [2019] ATMO 42 (26 March 2019)

SCB’s “Penfolds” Label

SCB filed evidence of use of the Chinese Characters  in relation to its “Penfolds” wines sold in China. Those characters are transliterated to “Ben Fu” – the Chinese phonetic approximation of “Penfolds”.  SCB also owns Australian registrations for its  and “Ben Fu” trade marks.

The applicant had repeatedly used its mark “Barry Ford” in red cursive font (similar to SCB’s font) combined with SCB’s  mark on its wine labels.  SCB also submitted evidence that the applicant had used trade dress similar to SCB’s, such as a red capsule attached to the bottle neck, red cursive font against a white label and the use of “BIN” to indicate wine vintages.

Prior to the date of filing, the Beijing High People’s Court had issued a decision regarding an application by SCB to remove one of the applicant’s Chinese trade mark registrations for non-use.  In that decision the Court recognised that the Chinese Characters   would be seen as identifying SCB’s wines.  The applicant was therefore clearly aware of SCB and its trade mark rights and reputation at the date of filing its application.

Opposition to “MAISON RICH”
(Southcorp Brands Pty Limited v BIN-VIN (Shanghai) Trading Co. Ltd [2020] ATMO 27 (24 February 2020)

The English translation of SCB’s Chinese Character version of the “Penfolds” mark is “Rush Rich”.  SCB was the owner of the trade mark MAISON DE GRAND ESPRIT.

The applicant’s mark combined the word “MAISON” with the word “RICH” – being the second word in the English translation of SCB’s Chinese Character version of “Penfolds”.

The applicant was part of a corporate group, with shared ownership and directors, which had applied to register various marks similar to SCB’s marks in the names of different, but related, entities.  SCB had opposed numerous applications filed by entities within the group and rather than defending those oppositions, new applications had been filed for additional marks similar to SCB’s in the name of different related entities.

Entities within the group had also been the subject of judgements in the Federal Court in Australia and the Shanghai Pudong District People’s Court for infringement of SCB’s marks or engaging in unfair competition through the making of false allegations. See for example Southcorp Brands Pty Ltd v Australia Rush Rich Winery Pty Ltd [2019] FCA 720 (3 May 2019) for the finding of infringement by some of the entities within the applicant’s group.

Again, the applicant was therefore clearly aware of SCB and its trade mark rights and reputation at the date it applied for “MAISON RICH”.

Opposition to mark


(Southcorp Brands Pty Ltd v Shanghai Benka Wines Co., Ltd [2020] ATMO 9 (29 January 2020)

The applicant had sought registration of various marks identical or similar to SCB’s marks in China and Australia, and one application in China had been opposed by the Opponent well before the filing date.

It had also produced wine labelling copying SCB’s trade dress by using similar script stylisation and colour schemes.

The applicant had also used a different company name for filing the Australian application to the name it had used to file the earlier Chinese applications which had been opposed by SCB. SCB argued (successfully) that this was intended “to obscure its true identity in order to prevent detection of its activity in Australia”.

Findings

In all three cases the Hearing Officer decided that each applicant was aware of the reputation in SCB’s “Penfolds” marks at the time of filing their application.  The pattern of behaviour in each case, such as adopting similar trade dress and trade mark stylisation to that used by SCB and applying for identical or similar marks to SCB’s in Australia and China in related company names, was found indicative of a desire to exploit SCB’s trade marks and reputation and to convey an association, affiliation or endorsement by SCB that did not exist.

The Hearing Officer found that the behaviour in each case fell short of the standards of acceptable commercial behaviour observed by reasonable and experienced persons and constituted “bad faith”.\

Authored by Michelle Howe and Sean McManis

In the case of In-N-Out Burgers, Inc v Hashtag Burgers Pty Ltd, in considering whether use of Down-N-Out infringed a registration for In-N-Out, and amounted to misleading conduct and passing off, the Federal Court considered questions of:

– whether the alleged infringer’s intentions are relevant to assessing whether two trade marks are deceptively similar

– whether, despite the fact that a business has no permanent business operations in Australia, it may nevertheless have sufficient reputation to establish misleading and deceptive conduct in breach of Australian Consumer Law and passing off

Short answers are below, while information about the case and reasons for the decision can be found in the subsequent report:

– Intention will not always be relevant but in circumstances where, as in the present case, the party adopts a name with the intention of benefiting from an association, it will be relevant

– Use outside Australia, in combination with some local use, can be sufficient, particularly where there is evidence of a strong overseas reputation and the name is distinctive

In-N-Out Burgers, Inc v Hashtag Burgers Pty Ltd [2020] FCA 193 (26 February 2020)

In-N-Out Burgers, Inc (“INOB”) is an American company that has, for many years, operated a chain of burger restaurants in the United States. The business was founded in 1948 and the company was incorporated on 1 March 1963. It is a family owned private company, which operates a chain of restaurants in California, Arizona, Oregon, Nevada, Texas and Utah. As at May 2016, there were over 300 In-N-Out restaurants in the United States. They include restaurants in locations such as Fisherman’s Wharf in San Francisco, Sunset Boulevard in Hollywood and South Sepulveda Boulevard in Westchester, Los Angeles, which is within a mile of LAX airport.

As well as owning registrations for a IN-N-OUT BURGER logo, depicted below as registered in black and white and as used in colour, INOB also owns a registration for the word mark IN-N-OUT BURGER, along with ANIMAL STYLE and PROTEIN STYLE.

INOB established its website around June 1999 and an online store was established in May 2004, allowing promotional merchandise to be purchased around the world, including from Australia. In 2013 there were 37,631 visitors to the website from Australia. In 2014 there were 50,108, in 2015 61,988 and in 2016 there were 78,098 visitors.

Over the years 2012 to 2017, INOB hosted one pop-up event each year in Australia and in 2018 it hosted two. At the 2017 event, 400 burgers and 420 T-shirts were sold, prior to that sales were below 300 burgers.

Prior to incorporation of Hashtag Burgers Pty Ltd (“HB”) on 23 June 2017, the directors conducted their own pop-up event in June 2015 using the logo depicted below:

In May 2016, they had the following logos designed:

They then advertised an event to be held on 7 June 2016 with a media release titled “Sydney’s Answer to In-N-Out Burgers has finally arrived” in which they referred to “the cheekily named Down-N-Out” and advertised “secret menu hacks such as Animal Style and Protein Style”

When it opened, the pop-up used the first Down-N-Out logo shown above, and outside the premises the following sign was displayed:

Following this, the business received a letter of demand from INOB, in response to which there were denials concerning use of Animal Style and Protein Style. It also denied that use of Down-N-Out infringed any registrations claiming that the business had received legal advice and asserting that:

This expression has its own separate and distinct meaning in the English language which is unlikely to conflict with the meaning of “In-N-Out”. Further, the word Down also relates to “Down Under” which relates to the fact that we are an Australian business.

It was, however, indicated that use of the Arrow designs would cease.

Subsequently, there was use of the following designs:

The inclusion of the word BURGERS in the registered word mark was acknowledged by the parties as not significant. Further, in determining the infringement issue Justice Katzmann did not attribute any significance to the use of the hashtag in D#WN-N-OUT, noting that any verbal references would still be to Down N’ Out.

HB argued sufficient differences based on:

  • Differing ideas and impressions between DOWN N’ OUT and IN-N-OUT with “down and out” referring typically to a person who has fallen on hard times
  • That use of the word DOWN was also a deliberate allusion to Australia, which is colloquially referred to “the land down under”
  • Visual and phonetic differences
  • Differences in essential features, claiming that the essential feature of the registered mark is IN-N-OUT not just N-OUT.
  • The absence of any evidence of actual confusion.

Justice Katzmann recognised authority indicating that the first part of a trade mark is often the most important for the purposes of distinction. However, she also referenced cases where similarities in suffixes have been sufficient.

She found that:

  • N-OUT is a distinctive and significant feature and an essential ingredient of all the [INOB] trade marks
  • notwithstanding differences in meanings, imperfect recollection is sufficient to give rise to a likelihood of confusion, noting also that the word “down” can be used in a directional sense, like “in”, and that this was the more likely context of recollection

As regards the evidence presented, she noted:

  • Social media posts raising questions concerning whether these is some association with INOB. While not decisive, and noting that their meaning and intent was debatable, they were of some probative value
  • The intentions of HB and the failure of the directors to give evidence in the proceedings

On the issue of intention, Justice Katzmann quoted authoritative precedent, which states:

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

In relation to this, she made the points:

  • Cases where intention is relevant ae not restricted to cases of “deliberate” dishonesty;
  • An imitation of another person’s product does not necessarily signify an intention to deceive;
  • The selection of the name was not coincidental, with HB’s own media release referring to the adoption of the name as “cheeky”;
  • There was no evidence of use in association with get up or imagery consistent with the claimed meaning of “down and out”;
  • There were initial advertising references to Animal Style and Protein Style products;
  • Initial logo designs incorporating arrows indicated an intention to reflect similarity;
  • No steps were taken to dispel any potential for confusion;
  • No evidence was presented to indicate that N-Out or N Out had been used in the brand names of anyone other than INOB, before HB decided to use it in DOWN-N-OUT;
  • HB failed to comply properly and fully with their discovery obligations

Consequently, there was a finding of infringement and a likelihood of confusion.

Australian Consumer Law and Passing Off

While reputation is not a factor in determining infringement of a trade mark registration, it is relevant in misleading conduct (Australian Consumer Law) and passing off cases.

Notwithstanding no established business in Australia, Justice Katzmann found sufficient reputation in Australia arising from:

  • International trade and notoriety in the United States, resulting in spill over reputation in Australia
  • Media references, and the success of pop-up events conducted in Australia

Having found relevant reputation in Australia, Justice Katzmann found a likelihood of HB’s conduct misleading or deceiving consumers, for reasons similar to those mentioned in respect of the infringement action.

In relation to changes made to get up used, it was noted this that there was a failure on the part of HB to address the “potential hangover effect” arising from the previous activities using designs similar to those of INOB.

Personal liability

Australian Consumer Law legislation includes fairly broad provisions for recovering damages against persons “involved in” contraventions. Consequently, the directors were liable for breaches of the Act even subsequent incorporation of HB.

However, in respect of trademark infringement and passing off, it was necessary to establish that the directors were joint tortfeasors. Notwithstanding the close involvement of the directors of the business with the activities of HB, there was insufficient evidence that the company was merely an instrument for the perpetration of infringement so that the directors could hide behind the corporate veil. Consequently, there was no finding of personal liability for actions amounting to infringement or passing off that occurred after the incorporation of the company.

Conclusion

There can be a fine line between inspiration and association. In trying to be clever and ‘cheeky’, HB crossed the line in this case.

Authored by Sean McManis