Shape not misleading

Last week, we looked at Mortimer J’s reasons for dismissing Shape Shopfitters’ allegations of trade mark infringement against Shape Australia. Presumably, given the colour and stylistic constraints of the registered trade mark, Shape Shopfitters’ main attack was based on the prohibition against misleading or deceptive conduct under the Australian Consumer Law. It too was unsuccessful.

Shape Shopfitters’ contention was that, by changing its name from ISIS to Shape Australia, Shape Australia was misrepresenting to the public that the two businesses were affiliated in some way with Shape Shopfitters being the specialist shopfitting arm of the Shape Australia. The descriptive nature of the common term, Shape Shopfitters’ fairly confined reputation and the fact that most of its dealings were with well-established contacts combined to mean that there was no such misrepresentation.

In about October 2016 when Shape Australia changed its name, Shape Shopfitters had annual turnover of between $10 million to $13 million a year. Almost all of its business was in fitting out, or the maintenance of, retail food outlets; especially quick service restaurants. Two thirds of its jobs were for contracts under $5,000; over 90% was for jobs under $200,000. Most of its business was in Victoria. 88% of its business outside Victoria was for the same seven clients: Grill’d, Nando’s, Sumo Salad, San Churro, Mad Mex, Schnitz or Coco Cubano. All of whom were well-established customers. Most of its work came from invitations to participate in closed tenders requested by established clients or directly negotiated contracts, once again with established customers.

In contrast, Shape Australia had annual revenues of around $400 million and the average size of its contracts was $1.55 million. Its role was usually as head contractor and construction manager, contracting out the work to specialist sub-contractors. It did do, however, some shopfitting work.

Mortimer J rejected Shape Australia’s argument that the relevant public was restricted just to the purchasers of construction services. Section 18 is not limited just to consumers; it provides protection to all people dealing with the respondent. In this case, including suppliers such as architects and subbies.

Mortimer J also rejected Shape Australia’s argument that none of its customers would mistakenly think that there was a connection with Shape Shopfitters. That was irrelevant. The question was whether people aware of Shape Shopfitters’ reputation would be misled or deceived.

However, there was no real, practical risk that the public would be misled or deceived. The businesses were simply too different and those dealing with Shape Shopfitters were well aware of its identity: At [216] – [217]:

I am not satisfied that participants in the industry would be led into such an error [i.e. thinking that Shape Shopfitters was an arm of Shape Australia]. The parties’ business activities are too different, they operate in different areas, with the applicant being far more specialised and more geographically contained. The link the applicant posits is possible and not fanciful in a theoretical sense, but it is without any foundation in the reality of the way the parties’ business activities are conducted, and in the way the “participants in the commercial construction industry” encounter the two businesses. That is especially so when one considers evidence such as that from Mr Billings that the applicant secures a lot of its business through word-of-mouth referrals.

The most that can be said is that there is a likelihood that participants in the industry, on isolated occasions, may be led to confuse the two entities because they both have the word “Shape” in their name, and occasionally communications may be directed to one when meant for the other. That is what the evidence discloses has in fact occurred, from time to time, in relatively few instances.

While there was some evidence of confusion, confusion itself is not enough and they were isolated instances only. Quickly dispelled.

You might recall that her Honour excluded evidence of print outs of websites of various businesses as hearsay and prejudicial. Evidence of the registration of such businesses as companies or business names was admitted, however, because the evidence was official ASIC records. There were 12 such businesses.[1] While Mortimer J accepted that this evidence did not take the matter very far, nonetheless it showed that the public could well come across other “Shape” entities in circumstances which undermined the potential for Shape Shopfitters to be seen as an “arm” of Shape Australia:

I accept that evidence of the bare existence of these entities cannot take the matter very far. However, the number of such entities using the word “shape” in their corporate names, and (I am prepared to infer) trading activities, is not without significance. Even without more information about those entities, the relative prevalence of the word “shape” in corporate and trading names, frequently in conjunction with construction-related words such as “joinery” and “projects” suggests that “participants in the industry” (including potential clients, purchasers and subcontractors) might well come across other entities using the word “shape” in the provision, sale and promotion of their particular services. That possibility cannot be discounted, and it tends against the linear proposition on which the applicant’s case relies: namely, the likelihood that the applicant (and it would appear, only the applicant) will be perceived to be part of the respondent’s larger group, and perhaps as its specialist shopfitting arm. That linear proposition must depend, it seems to me, on the applicant occupying something of a unique place in the market so that such a representation by the respondent’s use of the word “SHAPE” could only be made in respect of the applicant, and not other entities. This evidence tends against such a conclusion.

There was also some evidence from a search engine optimisation expert. It showed that neither business had very active websites. Those people who searched for Shape Shopfitters, however, typically did so by reference to the term “shopfitters”. This reinforced her Honour’s impression that it was its shopfitting specialty that identified Shape Shopfitters. On the other hand, Shape Australia did not typically generate hits in searches on terms related to “shopfitting”. If it did come up, it was invariably placed below the result for Shape Shopfitters:

Because of this, people searching for the Shape Shopfitters Website through searches for these terms are very unlikely to be misdirected to the SHAPE Australia website.

The passing off allegations failed similarly for want of the necessary misreprensation.

Shape Shopfitters Pty Ltd v Shape Australia Pty Ltd (No 3) [2017] FCA 865


  1. Shape Building Pty Ltd; Shape Design; Shape Property Developments; Shape Consulting; Shape Constructions Pty Ltd; Shape Project Management Pty Ltd; Shape Builders Pty Ltd; Shape Joinery & Design Pty Ltd; Shape Fitouts Pty Ltd; Shape Projects Pty Ltd; Shape Construction; the 12th, Shape Developments Pty Ltd changed its name in the course of the litigation although the reasons for that were not known.  ?

Chemist Warehouse dismissed

While we are on the subject of misleading or deceptive conduct, the Full Court has dismissed “Chemist Warehouse”‘s appeal from Middleton J’s dismissal of its claim that stores like these:

Another view
Another view
Direct Chemist Outlet
Direct Chemist Outlet

misrepresented an association of some sort with stores looking something like this:

Some Chemist Warehouse storefronts
Some Chemist Warehouse storefronts

image022

 

 

 

 

 

 

 

There were some 19 grounds of appeal which the Full Court worked their way through in detail. The central problem for Chemist Warehouse was that Full Court said there was no error in Middleton J’s finding that the predominantly yellow colouring of the exterior of the Chemist Warehouse outlets was not distinctive – the distinctive feature was the “Chemist Warehouse” logo:

no error has been shown in his Honour’s findings that the primary colour palette used by Chemist Warehouse was not distinctive. First, there was considerable variability in the nature of the Chemist Warehouse get-up. The primary judge distinguished other authorities where secondary branding had been accepted on the basis of a consistent presentation of colours in a particular juxtaposition. Second, the colours had a functional aspect. Colour can be used for its practical or functional utility, for example, high visibility for a road sign. In the present case his Honour appears to have accepted that the colour yellow was used to take advantage of the attributes of visibility and its association with discount value; but such a function could apply to any type of discount goods, not just pharmacy goods. The use of yellow to create the so-called “yellow box” was also to draw the attention of potential consumers on the street; it cannot be said that the use of the colour yellow in that way denoted trade origin. His Honour accepted the functionality of yellow (see at [9], [10], [12], [14] and [100]). He also accepted that the yellow, blue and red combination served a functional purpose (see at [240]). No error is demonstrated in any of these findings.

Fourth, the dominant and distinctive “Chemist Warehouse” logo was the only consistent branding element across the appellants’ stores prior to May 2006 ….

The fact that other stores, like JB Hi-Fi and Ted’s Camera’s used a predominantly yellow background to attract attention was also not irrelevant to whether its use on pharmacies was distinctive.

Moreover, even if the get-up had been distinctive, there would have been no misrepresentation:

in any event, even if a colour-based reputation could have been shown, that would not have answered the question of whether there had been misleading or deceptive conduct or a misrepresentation.  The respondents had a different get-up with different distinguishing features.  Indeed the primary judge had distinguished the respondents’ stores by not only the “Direct Chemist Outlet” trade mark but also the different distinctive logo, cleaner appearance and lifestyle photographs.  None of these were part of the appellants’ pleaded get-up.  The respondents’ schedules two and three to its closing submissions, by reference to the primary evidence before his Honour consisting of the relevant photos, well summarise the variability in get-up used at the DCO stores and the Chemist Warehouse stores, and relevant differences.

The Full Court pointed out that proof DCO had copied elements of its get-up from Chemist Warehouse was not sufficient to invoke the principle from Australian Woollen Mills that someone who sets out to deceive will be presumed to have succeeded. For that principle to apply, it was necessary to show not just copying but also a subjective intention to mislead or deceive – to appropriate part of the trade or reputation of the competitor.

Finally (for the purposes of this note), the Full Court accepted Middleton J’s view that the appropriate time to assess whether DCO’s conduct was misleading or deceptive was when DCO first commenced use of its present get-up. Chemist Warehouse argued, in the alternative, that Middleton J should have made the assessment for each individual DCO store at the time it opened – the so-called geographical approach. Middleton J pointed to a number of problems with this approach. One problem was that there were some areas where the Chemist Warehouse store opened after the DCO store – who would be making the misrepresentation then. Further:

… if the Applicants and Respondents were concurrently trading and building independent reputations in separate areas, it may have been the case that it was not the Respondents’ conduct that was misleading or deceptive at that later time.

For example, the Lalor DCO store opened in 2014, well after 26 May 2006. Both parties had advanced their own reputations by that time. What is the Court to conclude is the position of the competing parties in that particular area and at that particular time? It is to be recalled that since 26 May 2006 both businesses involved in this proceeding have increased their respective exposure to the relevant consumers by opening many new stores. There has been co-existence in the market place for approximately eight years prior to litigation commencing. Further, stores have opened in numerous locations, and Chemist Warehouse stores have opened in close proximity to existing DCO stores (as in the case of the Warrnambool store, for example).

In any event, his Honour considered that the DCO get-up sufficiently distinguished its stores from Chemist Warehouse stores that no misrepresentation was likely to arise.

The Full Court considered Middleton J’s analysis was “unremarkable” and no error was identified.

Verrocchi v Direct Chemist Outlet Pty Ltd [2016] FCAFC 104

Selected links from the last week

I am going to try an experiment. With the rise of “week in review” style blogposts and your day job probably means you don’t have all day to watch Twitter streaming by, here is a selection of links to IP-related matters I found interesting this week:

Patents

Trade marks

  • MACCOFFEE? We’re not lovin’ it, says General Court here

    The “Mac” family of trade marks are too well known for someone esle to register MACCOFFEE in the EU

  • “Own Name” defence in Singapore–when “honest practices” does the heavy lifting here
  • CJEU says operators of physical marketplaces may be forced to stop trade mark infringements of market-traders

    although you could contrast that to Dowsett J’s decision

  • Book Review: The law and practice of trademark transactions – A global and local outlook

Not categorised

  • Employees Bound By Clickthrough Agreements–ADP v. Lynch (USA)

Bit of a slow week in the northern hemisphere, but I hope you find some interesting. If you did or have a question, leave a comment or send me an email

DGTEK v Digiteck I

Lander J has upheld the Registrar’s decision to allow Bitech to register DIGITEK for

“TV installation accessories including external TV antennas, none of the foregoing being set-top boxes” in class 9

in the face of Hills’ prior registration for DGTEC, DGTEK and DGTECH in respect of

“Digital and electronic products including televisions, video players, DVD players, CD players, decoders and cameras” also in class 9.

While the competing marks were deceptively similar, they were not in respect of the same goods or goods of the same description. At [110]:

…. The goods are fundamentally different. The brown goods which comprise the Hills products are goods which are digital and electronic and provide the display to the consumer visually or audibly. Bitek’s goods are as they have said; goods which allow the brown goods to function. They provide support of varying types to the brown goods.

At [114]:

It is right as Hills contend that the goods are interdependent and they rely on each other for their functionality. However, that does not take the matter far. Whilst the goods cannot operate on their own, they are not interchangeable. They are not “commonly used as alternatives or substitutes” for each other:… They each have their uses which are quite separate and distinct even though when they are put together they assist to perform the end function: ….

His Honour also rejected argument that the goods passed through the same trade channels, distinguishing the Gallo Full Court’s finding that beer and wine were similar goods because:

[126] …. the clear impression I have is that goods of the kind under the Hills’ mark are marketed at the retail level and by direct advertising to consumers. TV installation accessories are mainly sold to professional installers at the wholesale level. A retail store may have for sale some accessories but only as a side line.
[127] Where a retail store does have TV accessories for sale it does not display them in the same manner as brown goods. Brown goods are used as the bait for consumers. Consumers want to see the product which will at least from the consumers’ point of view deliver the visual image or audible sound. TV installation accessories do not have the attraction from a sales point of view that brown goods have.
Lander J agreed with Kenny J’ ruling in McCormick that the s 60 ground of opposition could defeat an application independently of the operation of s 44(3).
However, his Honour rejected Hills’ opposition on the basis of the old form of s 60: although Hills proved it had more than $20 million of sales under its DGTECH mark of set top boxes, there was simply no proof that it had a reputation in the mark, the sales might well have resulted from the fact that Hills had a marketable product (apparently it was the only set top box in the market at the time). His Honour noted Kenny J had recognised in McCormick that it was often common to infer reputation from sales and advertising figures. It was not appropriate, however, to do so in this case:
[195] The evidence by itself does not prove any reputation at all. It may tend to prove that the goods sold under the mark are very marketable goods. In this case the goods being marketed under the DGTEC mark were set-top boxes which having regard to changes in the industry were marketable to persons who wanted to upgrade their analogue equipment.
[196] I do not think the bald evidence supports a finding of a reputation in the mark.
[197] In my opinion, the Hills’ mark had not acquired a reputation in Australia of the kind that is contemplated in s 60. The mark had only been used on set-top boxes prior to the priority date and although Hills, and previously the company, had sold in excess of $20 million worth of set-top boxes, there is no evidence that the mark under which the set-top boxes had been sold had a reputation of the kind contemplated in this section.
[198] For that reason alone, I would have dismissed Hills’ objection under s 60.

Striclty obiter

Even if Hills had established a reputation, Bitek’s mark would not have been like to deceive or cause confusion as a result of that reputation, so the old form of s 60 still would not have applied.

[208] Assuming, contrary to my opinion, that the Hills’ mark had acquired a reputation, it had only acquired, at the priority date, a reputation in respect of set-top boxes. Hills did not contend for any other reputation. If that was the case, the use of the Bitek mark in respect of its goods was not likely to deceive or cause confusion because the goods were unrelated to a set-top box. Bitek’s goods specifically excluded set-top boxes. A consumer wishing to acquire a TV installation accessory or external antenna bearing the Bitek brand would not in my opinion be likely to be confused or deceived as to the origin or provenance of those products because of Hills’ mark’s reputation in set-top boxes. For that further reason, Hills could not rely upon s 60 to defeat Bitek’s application for registration.

In case it became necessary on appeal, Lander J would have rejected Bitek’s attempt to rely on s 44(3) honest concurrent user or “other circumstances”.

Bitech failed on “honest concurrent user”  and “other circumstances” because the use occurred after the priority date.

Under “other circumstances”, Bitek sought to rely on the inconvenience it would suffer through loss of the goodwill it had built up. If it had been permissible to take use after the priority date into account under “other circumstances”, Lander J would still have rejected this:

[187] However, I would not have exercised my discretion in favour of Bitek under s 44(3)(b) even if events after the priority date were relevant for two reasons. First, because Bitek had not used the mark prior to the priority date. It did not make any sales under the brand. Secondly, its case was that its goods are not sold by reference to its mark. As Hills contended, Bitek’s case was that the consumers of its goods are unlikely to be concerned with brands because brands are unimportant with TV installation accessories.

[188] If that is so, then it seems to me that little goodwill could have attached to the brand or the mark since it has been used and in those circumstances where there is a finding under s 44(1), there would be insufficient evidence to support the exercise of discretion in favour of the applicant for registration. If Bitek is right that its consumers do not depend upon brand or mark, then little would be lost to Bitek in arranging for a mark which is not deceptively similar to the Hills’ mark.

Hills Industries Limited v Bitek Pty Ltd [2011] FCA 94

ps The decision also addresses removal for non-use and infringement issues which, in view of the length of this post, will need to be the subject of a later post.

How much reputation is enough?

The Full Court has allowed Hansen’s appeal from the dismissal of its trade practices/passing off action against Bickford’s Monster Energy drinks.

Before the trial judge, it was conceded that Bickford’s get up would be confusingly similar to Hansen’s, but the trial judge found that Hansen did not have sufficient reputation with the public in Australia to found its claim.

Hansen had never traded here nor sold its energy drinks here.  However, there was evidence that it had “indirectly” promoted its brand name and get up here through activities such as sponsorships of sporting events and logos on clothing.

The Full Court reported the trial judge as finding that Hansen could not succeed unless it established a relevant reputation within its target market in Australia – males between the ages of 18 to 30.  His Honour went on to find the evidence was insufficient to support such a finding.  The indirect advertising was too fleeting and occasional to establish a reputation within the target youth market in Australia “other than perhaps some extreme sports enthusiasts”.

The Full Court allowed the appeal on the grounds that the “target market” was not the relevant section of the public to test Hansen’s reputation. It was necessary only for Hansen to show that it had a reputation in Australia with any relevant section of the public.

Tamberlin J (with whom Siopis J agreed) held:

[46] … In our view, the language of the section and its purpose do not require the Court to select any particular group as targeted by advertisers when assessing whether a breach has occurred. The fact that certain pieces or strategies of advertising may target a particular class of people as potential customers of the relevant product does not justify the conclusion that a significant number of persons in that class must be shown to be aware of the reputation before a claim under s 52 is made out. The question which must be answered can properly be framed as being whether a not insignificant number of persons in the Australian community, in fact or by inference, have been misled or are likely to be misled. (emphasis supplied)

Finkelstein J agreed in the result, but disagreed about the need for a reputation amongst more than an insignificant number of persons.  While his Honour accepted that passing off required the establishment of a reputation amongst a significant or substantial number of the Australian public, there was no warrant to import that requirement into an action for contravention of the Trade Practices Act.

Siopis J, as noted, agreed with Tamberlin J indicating also (?) that the earlier decisions requiring a not insignificant number were not “plainly wrong”.

The significance of the High Court’s reference in [103] of Campomar v Nike to isolating a representative of the class as the hypothetical individual to test “representations to the public”, therefore, bearing in mind the references in [102] to “ordinary” or “reasonable” members of that class, remains to be tested in some future High Court case.

As the trial judge did not explicitly find that Hansen did in fact have a reputation amongst Australian extreme sports enthusiasts, matter was remitted to him for further hearing.

Importantly for the future, Finkelstein J accepted that indirect marketing activities could be sufficient to establish the foundation for a s 52 claim:

63 There are a plethora of examples of indirect advertising and it is a key topic of discussion in advertising literature. Indirect advertising of the kind with which everyone is familiar is the sponsorship of sports. Many people in many countries place great value upon entertainment, competition and accomplishment, all of which are seen in the sporting arena. Brand names and logos appear around sporting arenas, on the clothing worn by sportsmen and women and on the equipment sportsmen and women use. This form of advertising is seen by many thousands of fans who attend sporting events and, in the case of popular sports, by hundreds of thousands of people if the event is broadcast on television. There are numerous studies that show that this type of indirect advertisement is far more effective at eliciting a consumer recall response than a direct television commercial.

64 In my opinion the judge was entitled to infer that the indirect brand advertising employed by Hansen (and, for that matter, Bickfords) can establish reputation as well as, if not better than, direct advertising. After all, everyone knows that James Bond drives an Aston Martin, Janis Joplin wanted to own a Mercedes Benz and Audrey Hepburn had breakfast at Tiffany’s.

Hansen Beverage Company v Bickfords (Australia) Pty Ltd [2008] FCAFC 181

Online Reputation

“The Dumb Little Man” has an overview of 6 ways to monitor what is being said about your client, or your client’s brands, in the virtual world here.