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A Tale Of Two Beers: Passing Off And Misleading And Deceptive Conduct

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By Krisha Reddy, Law Clerk MST Lawyers and Alicia Hill, Principal, MST Lawyers

The recent Full Federal Court case of Stone & Wood Group Pty Ltd v Intellectual Property Development Corporation Pty Ltd [2018] FCAFC 29 serves as a reminder of the competitiveness of the marketplace. The decision handed down in March 2018 by Chief Justice Allsop, Justice Nicholas and Justice Katzmann follows a dispute between two producers of a similar beer product. The Court found that merely taking advantage of a market created by another trader was not enough for passing off. Misrepresentation and damage to goodwill are also required.

Background

Stone & Wood Brewing Pty Ltd (S&W) was a producer of craft beer – a type of beer where greater emphasis is placed on the flavours of the beer’s ingredients and brewing through a less industrialised process.

From 2010, S&W produced a beer called ‘Pacific Ale’, which was its best-selling product. Elixir Signature Pty Ltd (Elixir) was also a brewer of craft beer. In 2015, Elixir launched a similar beer called ‘Thunder Road Pacific Ale’ (which after demands from S&W, was renamed ‘Thunder Road Pacific’).

Trial

S&W started proceedings against Elixir in 2015 claiming the following:

  1. Misleading and deceptive conduct under s 18 of the Australian Consumer Law;
  2. False or misleading representations under s 29 of the Australian Consumer Law;
  3. Infringement of registered trade mark under s 120(1) of the Trade Marks Act 1995 (Cth).

Elixir cross-claimed that S&W had made groundless threats to bring action for trade mark infringement under s 129 of the Trade Marks Act 1995 (Cth) and had not pursued their claims with due diligence.

The trial judge rejected all of S&W’s claims and accepted Elixir’s cross-claim.

Appeal

On appeal, S&W asserted that its claims of passing off were made because the use of ‘Pacific Ale’ and ‘Pacific’ by Elixir would:

  1. Confuse consumers and lead them to accidentally buy the Thunder Road beer when they had intended to buy the S&W beer;
  2. Represent to consumers that the Thunder Road beer was promoted and/or sold with approval from S&W and in the absence of such affiliation this would damage S&W’s reputation and goodwill.

The Full Federal Court dismissed these appeals and upheld the decision of the trial judge.

The Law

The Court considered what conduct by one trader would amount to passing off the product of another trader under intellectual property law.

It was found that simply appropriating aspects of another trader’s product and taking advantage of the market developed by the trader is not enough.

There also needs to be misrepresentation and damage to goodwill. This will be a question of fact, determined by the particular circumstances of the product and the market in which it is sold.

On The Facts

S&W claimed that there was a close association between the terms ‘Stone & Wood’ and ‘Pacific Ale’. Customers referred to ‘Pacific Ale’ when they wanted to order its product. S&W stated that Elixir was aware of this connotation and had used ‘Pacific Ale’ to try and take advantage of their success.

However, the Court found that when looking at the actual labels, decals and get-up of the S&W product, ‘Pacific Ale’ was not used as a prominent branding reference. It was only included in small text underneath the S&W branding. Also, the colouring and get-up that Elixir used on its product differed from that of S&W and could be easily distinguished by consumers.

Further, the Court found that ‘Pacific Ale’ did not have a ‘descriptive quality’ that was strong enough to distinguish the product as one produced only by S&W. It was more of a reference to the place of manufacture, and the Australian and New Zealand hops used in production. In fact, S&W itself suggested that ‘Pacific Ale’ was a type of beer, describing it on their website as a ‘style of beer’ called a Pacific Ale.

Thus while Elixir may have taken advantage of the success of ‘Pacific Ale’ in producing its own range, it did not intend to associate with S&W’s product.

Implications

This Full Federal Court decision highlights how a business is entitled to be competitive in the market in which it operates. Merely taking advantage of a market created by another trader will not on its own amount to passing off or breach of the Australian Consumer Law.

However, traders will need to be mindful of misleading consumers, misrepresentation and infringing on trademarks already registered and that it can be a fine line between ‘healthy competition’ and ‘infringing conduct’.

Please contact Alicia Hill by email or call +61 3 8540 0200 if you have concerns about what constitutes misleading and deceptive conduct.