Posts Tagged ‘wine’

High Court allows appeal in Barefoot case

Thursday, May 20th, 2010

E & J Gallo owns TM No 787765, BAREFOOT, for “wines” in class 33. It had acquired ownership of the trade mark by assignment in 2005 from a Mr Houlihan.

Lion Nathan introduced a new beer into Australia under the trade mark BAREFOOT RADLER (with a barefoot device):

The Full Federal Court found that Lion’s beer infringed Gallo’s trade mark as goods of the same description, but ordered the trade mark removed because it had not been used for the 3 year statutory period prescribed by s 92(4) – in this case between 7 May 2004 and 7 May 2007.

Neither Gallo nor Mr Houlihan had ever sold, or specifically authorised the sale of, any wine under the BAREFOOT trade mark in Australia. If that were all, it would have been an end to the matter. However, there was a complication. Wine made by Mr Houlihan’s company, Barefoot Cellars, in California had actually found its way into Australia and been offered for sale.

Barefoot Cellars had sold a shipment of 60 cases of its wine to a distributor in Germany in 2001. Some of the consignment to the German distributor was imported into Australia by a liquor wholesaler, Beach Avenue. In the 3 years relevant to the non-use claim, Beach Avenue imported 144 bottles of the wine; at least 41 of which were actually sold during the period (and a further 18 were given away).

Lion Nathan argued, and the Full Federal Court had accepted, that there had been no use of the trade mark as a trade mark because neither of the trade mark owners had intended to project their goods into the Australian market.

There was use in the course of trade

The High Court rejected this argument.

51  The capacity of a trade mark to distinguish a registered owner’s goods from those of others, as required by s 17, does not depend on whether the owner knowingly projects the goods into the Australian market. It depends on the goods being in the course of trade in Australia. Each occasion of trade in Australia, whilst goods sold under the trade mark remain in the course of trade, is a use for the purposes of the Trade Marks Act. A registered owner who has registered a trade mark under the provisions of the Trade Marks Act can be taken, in general terms, to have an intention to use that trade mark on goods in Australia. It is a commonplace of contemporary international trade that prior to consumption goods may be in the course of trade across national boundaries.

52  An overseas manufacturer who has registered a trade mark in Australia and who himself (or through an authorised user) places the trade mark on goods which are then sold to a trader overseas can be said to be a user of the trade mark when those same goods, to which the trade mark is affixed, are in the course of trade, that is, are offered for sale and sold in Australia. This is because the trade mark remains the trade mark of the registered owner (through an authorised user if there is one) whilst the goods are in the course of trade before they are bought for consumption[29]. As affirmed by Gummow J in Wingate Marketing Pty Ltd v Levi Strauss & Co[30],
“whilst a trade mark remains on goods, it functions as an indicator of the person who attached or authorised the initial use of the mark”.
During the trading period, the trade mark functions as an indicator of the origin of the goods, irrespective of the location of the first sale.

That is, what is required is that (1) there be some sign which functions as a trade mark – a badge of origin – and (2) the sign be used in the course of trade in Australia.

The sale in England by the English manufacturer to retailers for resale in Estex was sufficient for this, but awareness that the retail markets in Australia was the intended destination was not necessary.

As the High Court’s references to Champagne Heidsieck v Buxton (a case, if not exactly dear to my heart, certainly engraved on it!) show, any other conclusion would be inconsistent with the cases establishing that parallel imports do not infringe trade marks and which have been enshrined in s 123.

In context, therefore, the last sentence of [50], noting that the goods had been sold to the German trader without any limitation on resale should not be determinative.

Was there enough use?

Lion’s first fall back position was to rely on the insubstantiality of the 144 bottles imported compared to the size of the market for wine in Australia. The High Court rejected this attack:

65  A commercial quantity of wine, some 144 bottles, was imported and offered for sale under the registered trade mark by Beach Avenue during the statutory period. Some 41 sales during that time were proven by reference to invoices and tax paid. There was no suggestion in the evidence that the offering for sale and selling either overseas or in Australia was for any purpose other than making profit and establishing goodwill in the registered trade mark. It was not contended that the use was fictitious or colourable. In all the circumstances the use was genuine and sufficient to establish use in good faith for the purposes of Lion Nathan’s application for removal.

That is, the High Court adopted a qualitative rather than quantitative approach. It is also worth noting the careful reservation that it was not called upon to decide whether or not a single use would suffice.

What trade mark was used?

Lion’s next attack argued that use of BAREFOOT with a representation of a bare footprint on the wine bottle label was not use of the trade mark as registered – BAREFOOT.

The High Court did not reject this argument on the grounds that there was use of BAREFOOT alone.

Rather, at [68] it distinguished the Colorado case (a case from which special leave was refused) on the grounds that the word COLORADO had no inherent capacity to distinguish because of its geographical significance and so the mountain peak device used with the word element was “not a mere descriptor but a distinguishing feature”. In this case, however, at [69] the device element was an addition which did not substantially affect the trade mark’s identity: consumers were likely to identify the mark by reference to the word, the device merely illustrated the word and, except in the case of honest concurrent use, the device alone would not be registrable in the face of the word mark.

An evidential issue about authorised use

Lion’s last attack, arguing that Barefoot Cellars was not an authorised user when it applied the trade mark to the wine, also failed. The potential problem for Gallo here was that neither Mr Houlihan nor anyone else involved in the production of the wine gave evidence about what quality control, if any, Mr Houlihan had exercised. There were 2 strands to this attack.

The first strand was to contend that some assertions of quality control recorded in a consultancy  agreement were not in fact statements of fact. This failed as a matter of interpretation of the document. In a separate concurring judgment, Heydon J explained that the consultancy agreement constituted a “business record” and the statements were therefore admissible as an exception to the hearsay rule.

The second argument that there was no quality control by Mr Houlihan because he was only a joint principal in Barefoot Cellars and in addition a third person was the winemaker. This was not, however, sufficient to preclude the exercise of quality control by Mr Houlihan.

E. & J. Gallo Winery v Lion Nathan Australia Pty Limited [2010] HCA 15 (19 May 2010)

Update: should have added links to report on Full Federal Court and first instance (here and here).

Some things the High Court didn’t deal with:

  1. The Full Federal Court’s finding that, notwithstanding the order to remove the trade mark for non-use, Lion still had to pay damages for infringement until the judgment.
  2. Whether or not Gallo’s negotiations with McWilliams Wines to introduce a BAREFOOT wine into Australia constituted use of the trade mark or warranted an exercise of discretion to leave the trade mark on the Register. The negotiations culminated in the grant of a licence to McWilliams and the sale of products under the trade mark in September 2007, some 4 months after the expiry of the relevant 3 year period.
  3. Whether beer and wine are goods of the same description.

The first question, of course, did not arise as a result of the High Court’s principal ruling. The third question was part of the “evaluative findings” which did not raise general questions of public importance. See [72]

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Beery barefeet on appeal

Friday, March 27th, 2009

Curiouser and Curiouser!

The Full Court has affirmed the trial judge’s finding that Gallo’s registration of the trade mark BAREFOOT for wine should be removed for non-use. However, the Full Court has overturned his Honour’s finding that Lion Nathan’s use of Barefoot Radler for beer did not infringe that registration (before it was removed). Consequently, the Full Court has found that Lion Nathan did infringe the registration up until the date the registration was removed from the Register.

Gallo acquired the trade mark by assignment. Neither it nor the assignor had ever consciously used it in Australia.  However, some wine bearing the trade mark had made their way into Australia for resale via, presumably, a parallel importer. (More detailed summary of the facts from the decision at 1st instance here and here – the internal links are broken I’m afraid.)

On the question of whether or not Gallo (or its predecessor) had used the trade mark as a trade mark, the Full Court said:

34 In our opinion, the conclusion of the primary judge was correct. The contention of Gallo that an owner of a registered trademark uses the mark in Australia simply because goods to which the owner (or an authorised user) has affixed the mark are traded in the ordinary course of trade in Australia should be rejected.

and

38 …. The essence of Gallo’s case in this matter is this is all that is necessary to establish use in Australia by the manufacturer or producer. However, that is not what the Full Court said. Projection by the manufacturer of goods bearing its mark into the course of trade in Australia was the other factor which, together with the display, sale or offering for sale, led to the conclusion that there had been use of the mark in Australia by the manufacturer and its owner. We think fairly plainly what the Full Court was saying was that for there to be use in Australia of the mark by the owner, the owner of the mark must have engaged in conduct of some type which the owner might reasonably contemplate would result in dealings with its goods marked with its mark in Australia while the goods were in the course of trade.

As a matter of interpretation, the Full Court concluded, contrary to Lion Nathan, that the trade mark could be expunged only from the date the Court made the order under s 101.

This was particularly significant because the Full Court, as noted above, found that Lion Nathan’s use infringed the trade mark while it was registered.

First, the Full Court rejected the trial judge’s finding that beer and wine were not goods of the same description:

72 The primary judge accepted that there were a number of factors which supported the view that Lion Nathan’s beer and wine were goods at the same description. They were both alcoholic beverages and generally distributed by this same major wholesale distributors. The beer was intended to be an appealing alternative to wine and in developing the product, Lion Nathan deliberately set out to attract people who did not drink beer. Indeed it was developed with the deliberate objective of enticing consumers who previously drank wine but not beer. Producers of alcoholic beverages are no longer confined to the production of beer, as opposed to wine, and large producers of alcoholic beverages now produce a range of products and market themselves as doing so. Companies which were once brewers now market and distribute a range of products including beer, wine, spirits, cider and non-alcoholic drinks. Wine and beer are now frequently distributed by the same retailers. We agree that these matters point, and in our opinion point convincingly, to Lion Nathan’s beer and wine being goods of the same description.

73 The considerations which led his Honour to reach the opposite conclusion are, in our opinion, of materially less significance. The first, which concerned the origin of the goods, focused on the manner of manufacture of beer on the one hand and wine on the other. While this clearly establishes that they are not the same goods, it is unlikely that this difference would be significant to the consuming public if, as his Honour found, large producers of alcoholic beverages produce a range of products. Additionally it is important to bear in mind that this issue is being considered in the more general context of whether consumers might see the goods as having the same trade origin: Southern Cross at 606. The same can be said of the next consideration relied on by his Honour, namely the specific manner of sale in restaurants on the one hand and retail outlets on the other. If large producers of alcoholic beverages are producing a range of products then the fact that the wine might be sold in a slightly different way would not be a difference of significance to the consuming public who may come to consider the trade origins of Lion Nathan’s beer. The next consideration was the manner in which beer is consumed, that is drunk for its refreshing qualities, and not, like wine, consumed in a “sipping fashion”. For our part, we doubt this is a relevant consideration. Nor do we think the last consideration, the detailed corporate structure of Lion Nathan, is of any real significance.

Then, the Full Court upheld the trial judge’s finding that Lion Nathan’s BAREFOOT RADLER trade mark was deceptively similar to Gallo’s trade mark.

Finally, the Full Court rejected Lion Nathan’s attempt to rely on the (rarely used) proviso to s 120(2)(b) which provides:

However, the person is not taken to have infringed the trade mark if the person establishes that using the sign as the person did is not likely to deceive or cause confusion.

The Full Court foreshadowed that this was a tough requirement to hurdle:

76 …. However, any conclusion about deceptive similarity would usually inform consideration of whether the actual use was likely to deceive or cause confusion. In a sense, an affirmative answer to the question of whether the alleged infringing mark was deceptively similar would be the starting point. If it was, then it would, in many instances, render it more likely (though not inevitable) that the actual use of the allegedly infringing mark was likely to deceive or cause confusion. Also relevant, in our opinion, would be the matters considered in determining whether the alleged infringer’s goods are of the same description as the goods in respect of which the registered mark is registered.

Lion Nathan had not satisfied this requirement here. The facts that the usage was on beer, the beer was packaged in six packs and in retail stores from the “beer” section did not help:

77 …. The use of the image of a bare foot with the words “BAREFOOT RADLER” would be more likely to reinforce the significance or prominence of the word “BAREFOOT”. The fact that the allegedly infringing mark was on beer packaged in the way described does not, in our opinion, tell against the likelihood that a person looking at beer packaged in this way would think that the beer originated from Gallo. If, in a retail liquor outlet, there was beer bearing the trade mark “BAREFOOT RADLER” where the word “RADLER” was the description of a type of beer and also wine with the trade mark “BAREFOOT” immediately followed by a description of the type of wine (by reference to grape type), then there is, in our opinion, little room to doubt that it is likely many would view the former as originating from the producer of the latter.

The matter will be remitted to the trial judge to deal with remedies. Wonder what the damages will be?

So, it would seem you should bring and conclude your non-use action before you launch the product. That will require a client with a very long term commitment to the brand!

E & J Gallo Winery v Lion Nathan Australia Pty Limited [2009] FCAFC 27 (Moore, Edmonds and Gilmour JJ)

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