E & J Gallo failed in its action against Lion Nathan alleging that BAREFOOT RADLER for beer infringed Gallo’s registration of BAREFOOT for wine. Worse news for Gallo, its trade mark was ordered to be removed for non-use …

The case is a relatively rare consideration by the Court of “goods of the same description” and even rarer consideration of the s 120(2) defence. It also repays close attention to why the Gallo’s trade mark was removed for non-use even though there had been sales of the product in Australia in the relevant period. In this post, I am only going to look briefly at the infringement question.

On the infringement issue, Flick J found that the mark BAREFOOT RADLER was deceptively similar to Gallo’s trade mark, but beer and wine were not goods of the same description. The claim under s 120(2) failed as there was no likelihood of confusion in the circumstances.

The deceptive similarity analysis is, with respect, fairly conventional. The main twist was whether or not Lion Nathan’s trade mark was BAREFOOT RADLER or BAREFOOT RADLER with footprint device.

One might have thought that Gallo had to show what mark Lion Nathan was in fact using, but Lion Nathan was precluded from relying on its composite mark because its pleadings did not properly disclose its contention that the trade mark in use was the composite mark, not just the word mark itself. The point had the potential to be significant as Flick J would not have found the composite mark deceptively similar to Gallo’s trade mark.

(As an aside, one wonders what fun there could have been if the evidence showed that, in addition to the composite mark, Lion Nathan also used the word mark as a trade mark. One often sees composite marks or logos displayed prominently on materials, but just the words being used in a trade mark sense in the advertising and promotional text.)

Flick J analysed the issue of goods of the same description very carefully. His Honour acknowledge that there were factors which could lead to a finding that beer and wine were goods of the same description [74]:

(i) both products were alcoholic beverages for human consumption;

(ii) both products were generally distributed by the same major wholesalers;

(iii) Barefoot Radler beer was intended to appeal to both “core” and “marginal” beer drinkers and, in the latter category, particularly intended to appeal to wine drinkers;

(iv) both brands were intended primarily for consumption in the summer months; and

(v) wine and beer were both frequently sold by the same retailers.

Looked at from a business point of view, however, these factors were overriden by other considerations:

(a) they were made in different manufacturies, using different processes and ingredients – water, a fermentable source such as starch (often malting barley) and yeast and a flavouring such as hops for beer; crushed grapes and yeast for wine [77 – 78]

(b) the manner in which beer and wine were sold may be different [80 – 82]: in restaurants, beer was sold by strength and brand and, apparently, beer drinkers usually limited themselves to 3 or 4 brands; wine was sold by reference to the wine list

in retail outlets, wine was usually sold be categories further divided into wine type and country of origin, with 80% of product being on the shelves; the main selling area for beer was the coolroom, in which beer accounted for 80% of products, and it was not usually displayed in any particular order or categories;

apparently, beer producers also rely heavily on brand signage.

(c) the way in which the products were consumed was different [83] – beer is apparently consumed for its thirst quenching properties, but wines and spirits are for sipping; beer also has an important role in, er, male bonding

(d) although both Lion Nathan and Foster’s both produced both wine and beer, wine and beer production, marketing and sales were separate from each other [84 – 85]. This included evidence that Foster’s had originally tried marketing both beer and wine through the same sales force, but had subsequently resorted to separate, specialised sales forces. The other main brewers in Australia did not carry wine.

The fact that Lion Nathan deliberately sought to entice wine drinkers with its Barefoot Radler product did not lead to any different conclusion as beer and wines are not commonly used as substitutes or alternatives.

Flick J also found that Lion Nathan had successfully established the defence under s 120(2) [94 – 95] having regard to the way both products were displayed for sale.

E & J Gallo Winery v Lion Nathan Australia Pty Ltd [2008] FCA 934, final orders [2008] FCA 1005.

You know how James Bond stopped driving Aston Martins (notwithstanding Top Gear) for BMWs and always wears an Omega watch and the computer monitors on everyone’s desks are …

Well, Marty Schwimmer has a link on the US FCC’s request for comments on its proposed Sponsorship Identification Rules and Embedded Advertising.

According to one of the Commissioners:

The fundamental premise of our sponsorship identification rules is that the American public is entitled to know who is trying to persuade them. That premise applies to a wide range of conduct, from payola to political advertising to product placement. This rulemaking is intended to determine whether our sponsorship identification rules need updating in order to provide adequate notice of certain types of “embedded” advertising practices that have proliferated in recent years.

According to another:

“Reality TV” should mean informing viewers about who is secretly pitching to them in the TV shows they are watching. The true reality is that news and entertainment alike are practically being turned into undisclosed commercials. Many current practices fly in the face of viewers’ legal right to know who is pitching to them.

What would they think if they watched commercial TV downUnder?

2 Washington DC professors (with an impressive line up of contributors) have released a Code of Best Practices in Fair Use for Online Video …

How they describe their Code:

This document is a code of best practices that helps creators, online providers, copyright holders, and others interested in the making of online video interpret the copyright doctrine of fair use. Fair use is the right to use copyrighted material without permission or payment under some circumstances.

This is a guide to current acceptable practices, drawing on the actual activities of creators, as discussed among other places in the study Recut, Reframe, Recycle: Quoting Copyrighted Material in User-Generated Video and backed by the judgment of a national panel of experts. It also draws, by way of analogy, upon the professional judgment and experience of documentary filmmakers, whose own code of best practices has been recognized throughout the film and television businesses.

WHAT THIS ISN’T

This code of best practices does not tell you the limits of fair use rights.

It’s not a guide to using material people give permission to use, such as works using Creative Commons licenses. Anyone can use those works the way the owners say that you can.

It’s not a guide to material that is already free to use without considering copyright. For instance, all federal government works are in the public domain, as are many older works. In most cases, trademarks are not an issue. For more information on “free use,” consult the document “Yes, You Can!” and copyright.cornell.edu.

It’s not a guide to using material that someone wants to license but cannot trace back to an owner-the so-called “orphan works” problem. However, orphan works are also eligible for fair use consideration, according to the principles detailed below.

3 things:

The Code is not the law, even in the USA; it is trying to identify best practices.

The Code has attracted the ire of some commentators and Prof. Patry has a go at setting at least one of them to rights here.

Australia, of course, doesn’t have fair use; we have fair dealing and various other defences and no first amendment. So it won’t all follow. Nonetheless, you may find some useful ideas and things to think about here.

The Australian Copyright Council reports that the recent Council of Australian Governments (COAG) meeting has identified the problem of parallel importation of books as a priority area for reform and referred the issue to the Productivity Commission …

Presumably, this means that the Productivity Commission is supposed to come up with reasons why the current convoluted stepped regime (somebody somewhere must have written a book on how it works!) should be repealed and replaced with a regime permitting parallel imports of any book at any time as applies for sound recordings, computer programs, “accessories”, electronic literary or music items (in short, just about anything except feature films and books).

It will be “interesting” to see the competition analysis given that anyone who wants to buy a book can jump on the internet and order it from overseas anyway. (My personal favourite is www.addall.com.)

That said, it would not be hard to come up with a conclusion that a legislative regime that has six (yes! count them) – seven if you count the regime applying for copyright materials not covered by the exceptions – different parallel import regimes doesn’t make sense.

Of course, the other schemes in the Act creating open markets have been a resounding success as the onus of proving that the things imported are “parallel” (or gray) rather than counterfeit (or black?) invariably falls on the importer.

Yesterday’s Age reported on a former GSK executive’s victory in a court action brought by GSK alleging he had started up a competing business using GSK’s confidential information – Pain relief for scientist who took on tall poppy.

The case itself is GlaxoSmithKline Australia Pty Ltd v Ritchie & Anor [2008] VSC 164 …

GSK and another company were the two main manufacturers and suppliers of legal opiate extracts from Tasmanian poppies.

Over a 7 year career with the relevant part of GSK, Mr Ritchie rose to the position of Research & Process Development Manager in the Chemicals Division responsible for this production. He saw a market opening and left to set up a third competitor.

There are 368 paragraphs in Harper J’s judgment, so I’m not going to try and deal with it in any detail.

A couple of big picture points do emerge: the importance of properly identifying what it is claimed is (a) confidential and (b) being misused; secondly, restraining what an ex-employee can do with what they learn during their employment. No doubt Mr Ritchie’s position was also helped by the lead time involved in setting up his factory to get into the business too.

You can get some idea of the problems GSK ran into from:

20 At the outset I should say something about Dr Ross’ approach. It is incumbent on GSK to establish that the information it seeks to protect is indeed confidential to it. The scope of GSK’s case in respect of confidential information is defined by the FACS. Consistently with the rigorous approach taken by the courts to claims for misuse of confidential information, the subject matter must be identified with precision. Ambit claims covering vague and wide-ranging subject matter cannot be sustained. It seems to me that the simple comparison between one set of documents and another, with the similarities being seized upon and displayed as proof of misappropriation, falls foul of the general approach which the authorities have indicated must be taken. We are concerned, after all, not with a claim for breach of copyright, but with alleged breaches of confidence. Similarities between processes, or particular parts of them, will of course be relevant; but, in my opinion, the exercise of simply comparing the two is inappropriate. The first task is to identify that which is confidential, not that which is similar; and here the touchstone must be the information as identified by the FACS. It is to that document that first recourse must be made. Unfortunately, Dr Ross did not have that opportunity. To the extent, then, that Dr Ross has sought to comment on aspects of the two processes that have not been identified in the FACS as items of allegedly confidential information, or on documents not referred to as repositories of alleged confidential information,[7] I put his opinion aside.

21 Dr Ross’ opinion should also be viewed having regard to the legitimate use that Mr Ritchie may make of his knowledge of chemistry, and of the production of opiate alkaloids – his know-how. Mr Ritchie is not the subject of a restraint of trade clause, and GSK does not seek to prevent him and TPI from establishing a competing business. It is the case that particular parameters or elements or sequences of GSK’s production regime are not in the public domain, and would only have been incorporated into it after significant trials and laboratory work, together with an extensive review of the literature. Another reality, however, is that Mr Ritchie is an experienced, qualified chemist who held a senior position in GSK’s R&D department and who worked, on a daily basis, to improve GSK’s alkaloid extraction processes and his own knowledge and skill. During the course of his work he had cause to, and I accept did in fact, review the literature about the extraction of alkaloids from papaver somniferium with an eye to addressing problems being experienced by GSK. His general body of knowledge covered, of necessity, much of that which GSK did at Port Fairy, as well as his own academic and other professional training.

22 The role of information in the public domain also needs to be mentioned. It is of course true that an item of GSK information cannot be excluded from the defendants use simply because it does not appear anywhere in the public domain. Whether or not it appears in that domain is a factor to be considered when determining the validity of any claim for confidentiality. But it may be so trite as not to be worthy of publication. In any event, once Mr Ritchie’s employment with GSK came to an end, he became free “to use his full skill and knowledge for his own benefit in competition with his former master”.[8]

Harper J did accept, however, that there could well be something there to protect:

25 ….The ultimate result may be either very adverse, or very beneficial. Or somewhere in between. Determining the best possible combination is a matter of trial and error, of adjustment and experimentation, of skill and experience. So both the result and the means by which it was obtained may properly be the subject of the protection of the law.

The problem GSK repeatedly ran into was identifying what it was that (1) it claimed was confidential and (2) it claimed Mr Ritchie or his new company had misused. Thus, at [38] Harper J adopted the views of Laddie J in Oracular Sciences imposing a heavy burden on the plaintiff in a confidential information action to identify both issues properly.

The next problem that GSK ran into was the public interest in allowing ex-employees to freely use the knowledge, experience and talent they had gained during the course of their employment. In the absence of a properly drawn post-employment restraint, the (former) employee would be free to use confidential information, even if it was confidential unless it rose to the level of a trade secret:

46 It is in the public interest that, in general, employees be free to work where, and with whom, they will. They may have, as part of their stock of knowledge (sometimes called their “know-how”) information which is not a trade secret, but which their employer may for proper commercial reasons wish to remain confidential. If so, the employees must respect that confidentiality so long as they remain employed by the same employer, or that employer’s successor in title. But it is in the public interest that they and employers and potential employers be free to bargain over the best means of exploiting the employees’ knowledge, experience and talent. The latter may not, in that bargaining process and while they remain with their current employer, disclose any information that is properly confidential to that employer. Subject to that proviso, however, the law will not – in the absence of a suitably confined and otherwise binding restrictive covenant – seek to prevent those who wish to practice their profession or trade from doing so simply because their work for someone other than their former employer may put that former employer at a financial or competitive disadvantage. And this is true even if the exploitation by the former employees for the benefit of their new employer of the employees’ stock of knowledge results in information once confidential to the former employer being used to the advantage of the new. …

and

47 It follows that, if the employee were forbidden from using his or her skill, experience and retained memory concerning general principles or items of information for the benefit of a new employer, the choice would be either to remain in the former employment, or not use that skill, experience and knowledge at all. For this reason, and putting trade secrets to one side, non-trivial information which would otherwise be protected will not be so if, by reason of the nature of the information and the employee’s or ex-employee’s exposure to it, that information has become part of his or her general background knowledge; has become, in other words, inseparably incorporated in the form of his or her skill and experience.

His Honour did acknowledge, however, that there is no settled meaning to the term “trade secret”. He adopted the following:

50 …. I take a trade secret to be information which “can fairly be regarded as a separate part of an employee’s stock of knowledge which a man of ordinary honesty and intelligence would recognise to be the property of his old employer, and not his own to do as he likes with”.[21] For the purposes of this case, I therefore take a trade secret to be an item of confidential information, learnt during employment, the confidentiality of which, as an employee of ordinary honesty and intelligence would acknowledge, must be maintained even after that employment has come to an end. In other words, a trade secret has an inherent quality that takes it above and beyond more general knowledge, albeit that the general knowledge may to a lay person be very specialised. Whether information amounts to a trade secret is a question of fact, to be determined in the particular circumstances. A trade secret is to be distinguished from knowledge of no special significance such as that which an employee with familiarity with the relevant art might acquire (without employing any more skill than that of an ordinary practitioner of the art) simply by building upon the information necessarily made available to him in the ordinary course of his employment.

Of course, this does carry with it, shall we say, a degree of fuzziness.Which is rather less alarming than things at the level of the secret formula for Coke, or the Colonel’s special recipe and, perhaps, has much more in common with the long standing approach in Ansell Rubber rather than the much more controversial Faccenda Chicken.

Now, 18 months before he left (having already been there 6 years) GSK did sign Mr Ritchie up to a form of confidentiality agreement. Harper J [53] found that it only operated during the term of his employment and not afterwards. Further, his Honour was not very happy with the drafting and considered that if it were interpreted to operate as a post-term restraint it would have been unreasonable and therefore unenforceable.

On the question of how to treat employees, Duncan Bucknell timely draws attention to a short article by Deepak Somaya and Ian O. Williamson (teaser only) and adds a few thoughts of his own. If they’re working with the Crown jewels, pay them accordingly and think carefully about those post-employment restraints.