Trade Practices - s.52 - PASSING OFF - use of name, symbol and get-up resembling those of rival trader - whether word "kettle" was descriptive or had obtained a secondary meaning distinctive of one product - whether sufficient steps taken to distinguish rival's product - whether licensing others to use "kettle" resulted in loss of any exclusive right to word - whether fraudulent intent to mislead or deceive - whether Jones v. Dunkel inference could be made - damages or account of profits.

Trade Practices Act 1974, ss 52, 53, 82, 87

Kerly's "Law of Trade Marks and Trade Names", 9th ed., 1966, 755; 10th ed., 1972, 16-46

Australian Woollen Mills Limited v. F.S. Walton and Company Limited [1937] HCA 51; (1937) 58 CLR 641

BM Auto Sales Pty. Ltd. v. Budget Rent A Car System Pty. Ltd. (1976) 51 ALJR 254

Bowden Wire Ltd. v. Bowden Brake Co. Ltd. (1913) 30 RPC 45

J.H. Coles Proprietary Limited v. Need [1933] UKPCHCA 1; (1933) 49 CLR 499

Cadbury-Schweppes Pty. Ltd. v. Pub Squash Co. Pty. Ltd. (1981) RPC 429

Colbeam Palmer Ltd. v. Stock Affiliates Pty. Ltd. [1968] HCA 50; (1968) 122 CLR 25

Conagra Inc. v. McCain Foods (Aust.) Pty. Ltd. [1992] FCA 159; (1992) 33 FCR 302

Parkdale Custom Built Furniture Pty. Ltd. v. Puxu Pty. Ltd. (1982) 149 CLR

Dart Industries Inc. v. The Decor Corporation Pty. Ltd. [1993] HCA 54; (1993) 179 CLR 101

Interlego A.G. v. Croner Trading Pty. Limited [1992] FCA 624; (1992) 39 FCR 348

Johnson and Johnson Australia Pty. Ltd. v. Sterling Pharmaceuticals Pty.

Ltd. [1991] FCA 310; (1991) 30 FCR 326

Kettle Chip Company Pty. Ltd. v. Apand Pty. Ltd. (formerly C.C.A. Snack Foods Pty. Ltd.) [1993] FCA 546; (1993) 46 FCR 152

Levi Strauss and Co. v. Kimbyr Investments Limited (1994) 28 IPR 149

Munchies Management Pty. Ltd. v. Belperio [1988] FCA 413; (1988) 84 ALR 700

My Kinda Town Ltd. v. Soll (1983) RPC 15

Pioneer Kabushiki Kaisha v. Registrar of Trade Marks [1977] HCA 56; (1977) 137 CLR 670

United States Surgical Corporation v. Hospital Products International Pty.

Ltd. (1983) 2 NSWLR 157

Wardley Australia Ltd. v. The State of Western Australia [1992] HCA 55; (1992) 175 CLR 514

In re Wood's Trade Mark; Wood v. Lambert and Butler (1886) 32 Ch D 247

Counsel for the Appellant: Mr R.J. Ellicott QC and

Mr M.R. Ellicott

Solicitors for the Appellant: Minter Ellison Morris Fletcher

Counsel for the Respondent: Mr D.K. Catterns Q.C. and

Miss S.J. Goddard.

Solicitors for the Respondent: Mallesons Stephen Jaques.

1. Declaration number 3 made by Burchett J on 26 November 1993 be

set aside.

2. Othewise the appeal from the declarations and orders made by

Burchett J on 26 November 1993 be dismissed.

3. The appellant pay the respondent's costs of the appeal.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

This is an appeal by leave from orders of a Judge of this Court

(Burchett J) in which declarations were made that the appellant had engaged in passing off and in conduct that was misleading or deceptive in contravention of s. 52 of the Trade Practices Act 1974 ("the Act"). The claim for damages or an account of profits was stood over until further order. His Honour's reasons are now reported as Kettle Chip Company Pty Ltd v Apand Pty Ltd (formerly C.C.A. Snack Foods Pty Ltd) [1993] FCA 546; (1993) 46 FCR 152.

2. The appellant manufactures potato chips which it markets under the brand "Smith's". "Smith's" is a longstanding and well-known brand name in the Australian market and the appellant is the largest manufacturer of potato chips in Australia.

3. On 21 July 1989, the respondent, which had been incorporated under another style, changed its name to The Kettle Cooked Chip Company Pty Limited. On 3 August 1992, there was a further change of name, to The Kettle Chip Company Pty Limited.

4. In 1989 the respondent began to manufacture and market potato chips in packets labelled "The Kettle Chip". In December 1991 the packet label was changed to "The Kettle Chip Co.". From December 1990 and July 1991 respectively, two other companies, "Hawker" and "Frito-Lay", began to market potato chips manufactured and packaged for them by the respondent. The Hawker and Frito-Lay packets were labelled as "Kettle Chips" and "Kettle Crisps" respectively.

5. The respondent marketed its product in 100 gram packets of 4 types: Lightly Salted, Chilli Flavour, Thai Spice Flavours, and Herb and Spice Flavour. Hawker potato chips were marketed in 75 gram and later 150 gram packets of three types: Lightly Salted, Chilli Flavour, and Herb and Spice Flavour. Frito-Lay crisps were marketed in 75 gram packets as Lightly Salted, and Jalapino Chilli Flavour, and later in 50 gram, 100 gram and 200 gram packets.

6. Potato chips manufactured by the respondent were made by the batch-cooking method. The respondent obtained equipment and advice for the batch-cooking of potato chips from a corporation carrying on that business in the United States of America. It was said that chips cooked by that method were known in the United States as "kettle cooked chips" or "kettle chips". His Honour found that consumers in Australia had not heard of a commodity "kettle chips" before the respondent commenced manufacturing and marketing its product.

7. The batch-cooking of potato chips requires an operator to stir the chips in a vat of hot oil and to determine when the cooking process has been completed. The process produces a chip of distinctive flavour and texture.

8. The appellant manufactured its chips by mass production methods. It used a conveyor belt which took a continuous flow of potato slices through an oil-filled cooker.

9. At the time the respondent commenced manufacturing and marketing its chips it was a single enterprise corporation formed to obtain and utilise American know-how and to introduce a new product to the Australian market. The batch-cooking method of manufacture used by the respondent restricted the volume of chips that could be produced and caused the respondent to incur higher production costs than the method used by the appellant. The respondent's chips were sold at a "premium price" at garages, greengrocers, delicatessens, bottle shops, newsagencies, cinemas and chemist shops, outlets described as the "route market". The route market does not include the major supermarket chains.

10. In the period between December 1989 and March 1992 the respondent sold over 12 million packages of its product. Sales commenced in New South Wales in December 1989 and expanded to Queensland in February 1990, Victoria in the following month, to Western Australia in June 1990, to South Australia in August 1990, and to Tasmania in November of that year. By May 1992 the respondent's product was sold at approximately 10,000 outlets.

11. Sales of the Hawker and Frito-Lay packets were more modest. Up to September 1992 over 2 million packages of each had been sold.

12. In this period the respondent did not use television advertising. There was some promotion by radio but the principal emphasis was upon what were described in evidence as point of sale display techniques. These included the use of a 1.2 metre free standing display stand with four shelves to hold packets of the respondent's product. The stand prominently featured the name of the company and a number of cauldron devices. It had two types of removable header board with further promotional material displayed. By May 1992, approximately 17,000 stands and over 15,000 header boards had been distributed to outlets stocking the product of the respondent. In addition, 11,400 counter stands had been distributed for use in bottle shops and smaller retail outlets where space was at a premium.

13. By the latter part of 1991 the respondent had secured about 5 per cent of the potato chip market in Australia. At about that time the appellant decided to launch a product to compete for that segment of the market. The appellant had become aware, through research it had carried out, that the respondent's product had been accepted as a potato chip of different flavour and texture and that the uniqueness of the product, and the packaging of it, had led to substantial consumer awareness of the product.

14. The appellant installed American-designed computer-controlled continuous fryers, described as multi-zone fryers, to produce a chip which resembled, in texture and flavour, the potato chip produced by the batch-cooking method.

15. In May 1992 the appellant introduced to the market potato chips produced by the multi-zone fryers. The chips were marketed in packets labelled "Country Kettle". The size of the lettering used for the label gave those words dominance in the get-up of the packaging. The diamond-shaped brand and logo "Smith's", usually a prominent feature in the appellant's packaging of its potato chip products, was present but of lesser size than usual. The launch was supported by extensive television advertising using a raucous commercial identified in the evidence as "Chippie Chippie Shake".

16. In the week commencing 5 April 1992 the respondent had become aware that the appellant was proposing to launch a potato chip product under the "Country Kettle" brand. The respondent acted promptly and on 10 April 1992 its solicitors wrote to Mr J.C. Ballard, the Managing Director of the appellant, seeking an undertaking that it would not sell any potato chips or snack foods under the name "Country Kettle" or any name which included the word "Kettle". The letter asserted that the respondent had manufactured and sold in Australia over 11 million packets of hand cooked potato chips under the name "The Kettle Chip", this being the first hand cooked style potato chip manufactured in the country. Further details were given of the business which the respondent asserted it had built up in Australia. It was said that the respondent's product was distributed through approximately 10,000 outlets in all States and mainland Territories of Australia, and that by virtue of the efforts of the respondent the "Kettle" name had become distinctive in Australia of potato chips manufactured by it, so that the respondent had developed considerable goodwill and an extensive reputation in the "Kettle" name. Correspondence between solicitors followed through the remainder of April 1992 and the present action was instituted on 1 May 1992.

17. In the action, the respondent contended that by using the word "Kettle" in the label "Country Kettle" the appellant had appropriated a word which was distinctive of the product of the respondent. The respondent asserted that the appellant, in marketing "Country Kettle" chips, had engaged in passing off its product as a product of the respondent or in conduct that amounted to misleading or deceptive conduct in contravention of s. 52 of the Act. The respondent also contended that the form of packaging used by the appellant amounted to passing off the appellant's product as the respondent's in the use of a combination of the word "Kettle" with other elements of the get-up of the respondent's packaging.

18. Two-dimensional colour representations of the packaging used by the respondent, Hawker and Frito-Lay, when each commenced marketing batch-cooked potato chips, are shown in Schedules 1, 2 and 3 to these reasons. The packaging used by the appellant when it launched its product in May 1992 is represented in Schedule 4. The packaging used by the respondent, Hawker, Frito-Lay and the appellant at the time of the trial are represented in Schedules 5, 6, 7 and 8 respectively.

19. In the case of the representation of Hawker's original packaging of its 75 gram packet the exhibited representation (Exhibit 7R p.29) appears to be an enlargement of the actual size of the 75 gram packet and Schedules 2 and 6 repeat that enlargement.

20. The appellant made changes to its "Country Kettle" packets in about August 1992. The principal changes made to the appellant's packets were to alter the bucolic setting depicted on the packets from a scene of a potato-field to a scene of cattle grazing in pasture and to remove from the illustration symbols of piled potatoes and of a cauldron in which chips were being cooked. In addition, the size of the appellant's logo was increased by approximately 50 per cent.

21. At the trial, the respondent contended that the combination of the words "The Kettle Chip" and the get-up used in the packaging of the respondent's product distinguished the respondent's goods to a significant number of consumers and that the original and revised forms of packaging used by the appellant appropriated the respondent's reputation and constituted passing off and contravention of s. 52 of the Act.

22. The learned primary Judge concluded that when the appellant launched its product in May 1992, the packaging of the respondent's product had acquired a considerable reputation. His Honour found (46 FCR at 164-165):

"Even if (as the (appellant) contended) the word 'Kettle'

and the symbol of a cauldron, although each was marked 'TM'

for trade mark, did not in themselves exclusively identify

the (respondent's) goods for 'a significant number of

consumers in the relevant market' (Johnson and Johnson

Australia Pty Ltd v Sterling Pharma-ceuticals Pty Ltd (1991)

[1991] FCA 310; 30 FCR 326 at 336, per Lockhart J), there can be no

doubt on the evidence that its packet, including that word

and symbol together with all the other features I have

mentioned, did identify its potato chips for a great many

people. It had sold millions of packets so marked. The

(appellant's) choice of a packet design so closely

resembling the (respondent's) is eloquent and expert

testimony to the attractive power of its combination of

features. Once the (appellant) made that choice, even if it

acted honestly in doing so (and in all the circumstances I

do not think it did), it came under an obligation to take

particular care to ensure that its product was adequately

distinguished from that of the (respondent). Lord Oliver of

Aylmerton put the matter strongly, with reference to a not

dissimilar context, in Reckitt and Colman Products Ltd v

Borden Inc. (1991) 1 W.L.R. 419 at 507-508; (1990) 1 All

ER 873 at 887 (a passage cited by Davies J in R. and C.

Products Pty Ltd v S.C. Johnson and Sons Pty Ltd (1993) 42

FCR 188 at 194):

'In the end the question comes down not to whether the

respondents are entitled to a monopoly in the sale of

lemon juice in natural size lemon-shaped containers

but whether the appellants, in deliberately adopting,

out of all the many possible shapes of container, a

container having the most immediately striking feature

of the respondent's get-up, have taken sufficient

steps to distinguish their product from that of the

respondents. As Roma LJ observed in Payton and Co.

Ltd v Snelling, Lampard and Co. Ltd (1900) 17 RPC 48

at 56:

"when one person has used certain leading

features, though common to the trade, if another

person is going to put goods on the market,

having the same leading features, he should take

extra care by the distinguishing features he is

going to put on his goods, to see that the goods

can be really distinguished . . .."

I stress the words "to see the goods can be really

distinguished" . . .'

I have reached the clear conclusion that the (appellant) was

guilty of passing-off, as well as contravention of s. 52 of

the Trade Practices Act."

It will be necessary to refer later, and in some detail, to the finding, presaged by the passage in brackets to which we have given emphasis, that in the view of his Honour the appellant in all the circumstances had not acted honestly. It is sufficient for present purposes to note that this was so expressed in the above passage as to indicate that it was not essential to the ultimate findings that were made.

23. The primary Judge had given close consideration to the differences between the relevant packaging. He said (at 161):

"Of course, a person who places the packets before him, side

by side, can also see differences. But that is not how

passing-off by imitation of another trader's mark or get-up

is to be tested. In general, and more particularly in the

case of an item likely to be purchased for a small price

without long consideration, the comparison which must be

made is between the impression of the (respondent's) goods

retained in a customer's mind and the impression made by the

sort of consideration he is likely to give to the

(appellant's) product before purchasing it. Only a rare

potato chip consumer, who has previously studied the

(respondent's) packets, is likely to go through that

exercise again upon seeing a packet, some time later, on

display in a service station or a corner shop. If, as he

passes it, it appears to him to be the same 'Kettle' product

he liked before, or another flavour put out by the same

people, he is very likely to purchase it without further

examination."

In reaching what he described as a "clear conclusion" that the case for passing off and contravention of s.52 of the Act had been made out, his Honour said "The packets speak for themselves". (at 165)

24. The appellant had submitted that the word "Kettle" was a descriptive word which the appellant was entitled to use in its packaging. The primary Judge said (at 166):

"I have already expressed the conclusion that, taking all

these features together, the (appellant's) packet

deceptively reflects the (respondent's). It would not

affect this conclusion if I were to hold that the word

'Kettle', considered alone, would be a descriptive word.

Nor would the conclusion be affected even if I were to hold

that the word would have, considered alone, no secondary

meaning distinguishing the (respondent's) product."

25. His Honour went on to say that in any case he would have great difficulty with the proposition that the word "Kettle" was relevantly descriptive. He pointed out that since a descriptive word may be distinctive, the context and circumstances of its use must be considered.

26. His Honour found that the word had little descriptive connection with the product manufactured and marketed by the respondent and, furthermore, that the manner in which it was used by the respondent, namely as an apparent brand name in conjunction with the display of a conventional cauldron in stylised form with other elements of get-up, gave the word a secondary meaning. As stated earlier, his Honour accepted that at the time the appellant introduced its batch-cooked product to the Australian market, the word "kettle" was not a generic term descriptive of a type of potato chip sold in that market. His Honour appeared to be prepared to infer that the word "Kettle" as used in the respondent's labelling of its packets, with the strong symbols used on those packets, reinforced by the distinctiveness of the respondent's product, had caused the word "Kettle" to be part of a matrix of "memory hooks" which identified the respondent's potato chips for "a significant number of consumers in the relevant market" particularly the casual consumers who represented many of the purchasers of the in the "route market". (See Johnson and Johnson Australia Pty Ltd v Sterling Pharmaceuticals Pty Ltd [1991] FCA 310; (1991) 30 FCR 326 at 336.)

27. The primary Judge was satisfied that the manner in which the word "Kettle" was used by the respondent had resulted in the word acquiring a secondary meaning, namely, that of a brand name distinguishing the respondent's products. His Honour reached that conclusion by finding that the word "Kettle" neither naturally nor readily described a potato chip and the prominence of "Kettle" in the labelling of the respondent's packets associated with striking symbols was unlikely to convey a meaning other than that of a brand name. His Honour was left in no doubt by the evidence relating to get-up that the word "Kettle", supported by those symbols identified the respondent's product for a great many people.

28. The primary Judge also (46 FCR at 165) referred to a body of evidence which attempted to show instances of actual deception. He said that whilst much of it was in inadmissible form, it did include examples of actual deception which was not challenged. He referred, in particular, to the evidence of a marketing assistant of the respondent, that customers had complained to her on a number of occasions about "Country Kettle" potato chips, obviously on the assumption that these were the product of the respondent's manufacture.

29. Mr Ballard has been the Managing Director of the appellant since 1986. He agreed, in cross-examination, that he had much experience in reading the results of market research and in using it for the making of marketing decisions. Mr Ballard gave evidence that, in the present case, he considered the final packaging and at that time the packaging of all the known competitors.

30. Mr Ballard agreed that the respondent manufactured a distinctive style of potato chip, and attributed that distinctiveness to several features, including a crunchier texture and an irregular shape. He stated that the respondent's product represented a discrete segment of the potato chip market. Mr Ballard said that the word "Kettle" described that product and that consumers associated that word with a different process of manufacture without consumers having detailed knowledge of the elements of that difference. He also said that the use of a stylised cauldron on the packaging led to the creation of an image which the public associated with that distinctive product.

31. In the brief for preparation of a design for the packaging ("the Pack Design Brief") the appellant's Group Product Manager, Mr Guthrie, acknowledged that consumers held a "sound awareness" of the respondent's product and that the respondent had established "a rich image base" for that product. Mr Guthrie stated therein that the image had been established by the respondent through, inter alia, "product uniqueness" and "packaging", and that consumers attributed particular values to the product marketed by the respondent, namely a homemade style and the absence of mass production. According to Mr Guthrie a key attribute of the term "kettle chips" was the sense of care and hand-cooked attention that the term evoked.

32. The primary Judge held that the appellant had selected and employed sufficient indicia of the respondent's packaging, including the use of the word "Kettle", to make the appellant's packets a deceptive reflection of the packets sold by the respondent. As we have explained, the primary Judge held that his conclusion would have been the same if the word "Kettle" had been treated as a descriptive word with no secondary meaning distinctive of the respondent's product. At that point in his Honour's reasons (46 FCR at 166) his Honour was dealing with the appellant's packaging in its original form.

33. Although the amended form of the appellant's packets continued to have some similarities with those used by the respondent, confusion with the respondent's product to the point of likely deception depended in some degree on the combination of the appropriation by the appellant of the symbolic depiction of piled potatoes and a cauldron of cooking chips, the use of some of the strong colours chosen by the respondent, and use of the word "Kettle". The removal of the symbols referred to and the substantial increase in the size of the appellant's logo rendered the prospect of confusion with the respondent's packaging less likely unless it could be said there was an "overhang" from the effect of the previous packaging, or there was a secondary meaning to the word "Kettle" which the appellant had continued to use in its packaging in a prominent manner.

34. We are of the opinion that before it could be decided that the appellant's revised packaging continued passing-off or a contravention of s. 52 of the Act it would be necessary to conclude that the word "Kettle" had a secondary meaning distinctive of the respondent's product. His Honour (at 174) found that the word "Kettle" had a secondary meaning which distinguished the respondent's potato chips and that because of that secondary meaning, distribution of the revised or modified packaging passed off the appellant's goods as goods of the respondent thereby infringing the respondent's rights and s.52 of the Act.

35. For more than a year the respondent's name and style "The Kettle Chip" had been associated with a distinctive product for many consumers. At the time the appellant launched its product the respondent, Hawker and Frito-Lay had been selling the respondent's product in packaging which used common symbols of loose potatoes, a cauldron emitting steam, and a wood fire heating the cauldron, and used the word "Kettle". At that time each packet (100 gram for the respondent and 75 gram for Hawker and Frito-Lay) used the words "Hand-Cooked Potato Chips" placed within a circular or elliptical border.

36. There was sufficient evidence for his Honour to find that the entry of the Hawker and Frito-Lay packets on the market would have been treated by consumers as variations in the respondent's packaging with no derogation from the secondary meaning applied by consumers to the word "Kettle" to denote the respondent's product.

37. The respondent's product was the only potato chip associated with the word "Kettle" distributed for marketing in Australia for at least the year which passed between late 1989 and December 1990. The potato chips manufactured and packaged by the respondent for Hawker came on the market in December 1990. It was a further seven months before the potato chips manufactured and packaged by the respondent for Frito-Lay were introduced to the market. The respondent had used packets marked "The Kettle Chip" for a period of two years and packets marked "The Kettle Chip Co." for a further seven months before the appellants began to market their potato chip product under the name "Country Kettle".

38. The primary Judge found, and it was not really in issue, that the appellant sought to duplicate the characteristics of the respondent's product by use of an automatic process.

39. His Honour went on to find that the appellant made a sophisticated analysis of the "image" established by the respondent's product in the marketplace and sought to give its own product the same "image". There was no serious dispute with that finding.

40. His Honour further found that the appellant intentionally subordinated the usual use of its logo to give greater emphasis to the label under which the appellant sold its competing product. The appellant did take issue with that finding; but as we will discuss later in these reasons there was ample material to support the conclusion his Honour formed.

41. The central point of the appellant's appeal, however, was whether the primary Judge erred in treating the word "Kettle" as a "key" word and one which had obtained a secondary meaning distinctive of the respondent's product at the time the appellant commenced to market potato chips under the name "Country Kettle".

42. As we have said, his Honour was satisfied that the combination of the use of strong symbols, the get-up and the use of the word "Kettle" in the appellant's packaging had appropriated sufficient elements of the distinctive labelling and get-up of the respondent's product to constitute the tort of passing-off and an infringement of s. 52 of the Act. His Honour stated that he was aided in reaching that conclusion by the absence of evidence from certain managerial staff employed by the appellant. However, it is apparent that the foundation for his Honour's findings rested upon a comparative assessment of the packaging and the inferences of reputation in the respondent's product made available by the evidence before him, and that his Honour's willingness to make those findings did not depend in any degree upon the absence of evidence from executives involved in the design or selection of the label "Country Kettle" or the packaging of that product.

43. In dealing with the appellant's contention that the word "Kettle" was a descriptive word, his Honour noted that the appellant relied upon opinions expressed in qualitative market survey reports and upon evidence of Mr Ballard that "Kettle" signified a particular style of potato chip and not a name used by the respondent for its product.

44. Although the primary Judge found that Mr Ballard's evidence was not reliable, his Honour's opinion on Mr Ballard's credit was inessential to his Honour's conclusion that the word "Kettle" had a secondary meaning. We will deal with the adverse finding on Mr Ballard's credit later in these reasons.

45. The appellant further submitted that marketing, under licence, of potato chips under the name of "Kettle Chips" and "Kettle Crisps" by Hawker and Frito-Lay was destructive of any reputation the respondent had in the word "Kettle". The appellant contended that the respondent had lost any exclusive right it may have had to the use of the word "Kettle" by licensing Hawker and Frito-Lay to market products using that name.

46. On the appeal, as at the trial, the appellant relied upon the decision of the English Court of Appeal in In re Wood's Trade Mark; Wood v Lambert and Butler (1886) 32 Ch D 247, as providing what, in effect, was a proposition of law which in the present case would require the above result. Wood was a case of trade mark infringement when the British legislation was the Trade Marks Registration Act 1875 (U.K.). An English tobacconist had represented that its own English manufactured cigarettes, sold under the name "Eton", had been made, in some cases, in St Petersburg, and in others in Constantinople, by a different, and fictitious manufacturer. The Court of Appeal held that the tobacconist could not establish infringement of the trade mark "Eton" and, moreover, that the cross-application for expungement should succeed. The case has been treated as authority for the proposition that names which once carried a distinctive reference to a particular trader, may as a result of use by the trader himself on goods which are put forward as the goods of others, lose that distinctive character and fall into common use so that they become publici juris; see, for example, Kerly's "Law of Trade Marks and Trade Names", 9th ed., 1966, 755; 10th ed., 1972, 16-46.

47. Even on the assumption that what was said by the Court of Appeal is applicable to unregistered trade marks, there is force in the distinction drawn by the primary Judge between Wood and the present case. His Honour said (at 179):

"By contrast, here there was never a representation directly

inconsistent with the connection in trade between (the

respondent) and the potato chips manufactured by it - Hawker

and Frito-Lay were never represented as the manufacturers.

Nor, on my findings, was the distinctiveness of 'Kettle' or

the cauldron device in fact destroyed for a significant

section of the relevant public."

48. Further, Wood was a case arising from blatant deception by the registered proprietor, and rather more complex issues have arisen in the law of registered trade marks when dealing with the consequences of contractual licensing of registered marks. In Pioneer Kabushiki Kaisha v Registrar of Trade Marks [1977] HCA 56; (1977) 137 CLR 670 at 680-681, Aickin J, in discussing the registered user provisions of the Trade Marks Act 1955, said:

"It is no doubt true that at one time, and in particular

after the decision of the House of Lords in Bowden Wire Ltd

v Bowden Brake Co. Ltd (1913) 30 RPC 45, it was thought

that any licensing of a mark placed its validity in jeopardy

or indeed automatically made it incapable of remaining

validly on the register. Subsequent cases, however, have

demonstrated that all that that case decided was that if a

registered trade mark is licensed it may become invalid if

it ceases to show a connexion in the course of trade between

the registered proprietor or otherwise becomes deceptive."

Wood had been cited in the Bowden Wire litigation, both to the Court of Appeal (30 RPC 580 at 588) and House of Lords (31 RPC 385 at 388).

49. The effect of the approach taken by Aickin J has been, broadly, to bring the position as to registered marks into line with that established, for common law marks, by the Privy Council in J. H. Coles Proprietary Limited v Need [1933] UKPCHCA 1; (1933) 49 CLR 499. Their Lordships upheld the dissenting judgments in the High Court of Starke J and Dixon J [1931] HCA 55; (46 CLR 470). This litigation was analysed in depth in some detail by the primary Judge (46 FCR at 177-179) and, with respect, we agree with what his Honour said on the subject.

50. Accordingly, the issues presented by the licensing of Hawker and Frito-Lay involved matters of fact. The primary Judge held that (a) the volume of potato chips sold by the respondent over a period of twelve months under the label "The Kettle Chip" far outweighed any possible derogation in reputation caused by use of the word "Kettle" by Hawker and Frito-Lay when they entered the relevant market some time before the launch of the appellant's product, and (b) the get-up of the respondent's packaging had been repeated in significant elements of the packaging used by Hawker and Frito-Lay and provided links with the respondent's packaging sufficient to raise an impression of association between the three products. His Honour was satisfied by these factors that the reputation the respondent had established was in no relevant sense dissipated by the introduction of Hawker and Frito-Lay products using the word "Kettle".

51. In our opinion the finding of fact by the primary Judge that the use of the word "Kettle" on packets of its potato chips prior to May 1992 remained distinctive of the respondent's product, was a finding available on the evidence and the reliance he placed upon the principles expressed in J.H. Coles Pty Ltd v Need supra was soundly based. "Hand Cooked"

52. His Honour further found (46 FCR at 180) that if the word "Kettle", as applied to potato chips, referred to potato chips of the type made by the respondent, an integral part of that description was a representation that they were hand-cooked. His Honour found, therefore, that even if the respondent had no exclusive right to the use of the word "Kettle" or to the use of the cauldron symbol in conjunction with the word "Kettle", representation by the appellant on its packets that its potato chips were "Kettle Style" amounted to either passing off the appellant as a member of a group of producers of a distinctive product, namely, a potato chip that was hand-cooked, when it was not a member of that group or to engaging in conduct that contravened the provisions of s. 52 of the Act.

53. It was not in dispute that the appellant accepted that if its contention that the word "Kettle" was descriptive of a type of potato chip, the description carried with it a significant public awareness that this type of chip received more care and "hand-cooked attention" than "mass produced" chips.

54. In those circumstances it was open to his Honour to conclude that either the use of the word "Kettle" or the term "Kettle Style" was not designed to alert a potential consumer to the distinctive taste of the appellant's product, but to appropriate an attribute of the respondent's product likely to encourage a consumer to switch from the respondent's product, or make a purchase of the appellant's product that may otherwise have been a sale made by the respondent in reliance upon a product attribute which belonged to the respondent alone.

55. Again, this was a finding of fact available on the evidence and nothing raised in the course of the appeal indicated that his Honour had erred in arriving at such a finding.

56. We turn now to his Honour's findings on the honesty of the appellant's conduct and the credit of Mr Ballard.

57. Certain propositions were not in dispute before us. They are discussed in authorities such as Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191; Cadbury-Schweppes Pty Ltd v Pub Squash Co Pty Ltd (1981) RPC 429; Conagra Inc. v McCain Foods (Aust.) Pty Ltd [1992] FCA 159; (1992) 33 FCR 302; and Levi Strauss and Co. v Kimbyr Investments Limited (1994) 28 IPR' 149. First, merely to imitate the trade mark or get-up of another trader does not establish a case of fraudulent intent to attract custom by misleading purchasers of the goods of the defendant into the belief that they are acquiring those of the plaintiff, or goods with which the plaintiff is connected in the course of trade. The plaintiff must always show the necessary reputation in its name or get-up and if it fails to do so, then the existence of a fraudulent intent itself cannot supply that deficiency. Here, his Honour found, and we agree, that the necessary reputation was established. Further, the finding which followed as to passing off and contravention of s. 52 was not dependent upon the supplementary finding as to dishonesty.

58. His Honour concluded that the appellant did not act honestly in choosing the name "Country Kettle" for its product and the design for the packaging in which the product was marked (46 FCR at 164, 170-174). 174). He held that:

. the appellant set out to duplicate the characteristics of the

respondent's product;

. it made a sophisticated analysis of the image which the respondent

had created for its product in the market;

. it then set out to give its own product the same image in order to

win back the customers who were buying the respondent's potato chips

and thus regain lost market share;

. the appellant deliberately subordinated its name of "Smith's" in

favour of adopting and emphasising a name that used the key word in

the name under which the respondent had sold the same product and

placed on its packets the pictures of potato chips, potatoes and a

cauldron previously described, together with other details which

fostered the impression of strikingly similar packaging;

. a considerable risk was taken by the appellant of an adverse court

decision and that there was express evidence that the legal

implications were "discussed";

. in these circumstances the inference was strong that the appellant's

own executives considered there was much to gain from the use of so

close an imitation of the name, symbol and get-up of the respondent's

increasingly popular product.

59. His Honour's conclusion that the appellant did not act honestly was based on a number of findings which we shall state and consider in turn. Before doing so, however, we observe that his Honour's findings about the appellant's conduct and of Mr Ballard's lack of credibility were intertwined. His adverse findings about Mr Ballard led him to find dishonest conduct by the appellant more readily.

60. The findings relating to Mr Ballard's credit were not necessary in order to decide the critical issues in the case, in view of the opinion of his Honour that there had been passing off and contravention of s. 52, determined in accordance with the customary objective tests applicable to each cause of action. But fraudulent intention was plainly an issue raised by the pleadings; and specific allegations were made against Mr Ballard and Mr Guthrie, and against Mr Reeves and Ms Heys, Sales and Marketing Director and Product Manager respectively.

61. When this issue was canvassed in the opening address of respondent's counsel, further particulars were sought and given, but no adjournment of the hearing was requested. There can be no suggestion of any element of surprise in these assertions by the respondent. The appellant itself raised the question of its market research as an issue in the case as "information contributing to the decision-making process in respect of entry into the 'kettle chip' segment and how and in what way that would occur". The appellant put forward Mr Ballard as the person who was responsible for its relevant decisions in launching "Country Kettle" and in the adoption of the design of its packaging, albeit that Mr Ballard was not involved in the details of the design. Also, the issue of fraudulent intention was squarely put to both Mr Ballard and Mr Reeves in cross examination.

62. We turn first to the primary Judge's findings of dishonest conduct by the appellant, which, for convenience, we will consider under the following sub-paragraphs (a)-(e).

(a) The appellant set out to duplicate the characteristics of

the respondent's product. It made a sophisticated

analysis of both the image which the respondent had

created for its product in the market and the product

itself. The appellant then sought to give its own

product that same image in order to regain lost market

share (46 FCR at 162).

63. There is ample evidence to support his Honour's findings that the appellant sought to win back its lost market share from the respondent and that this was its primary objective. His Honour also correctly found that the appellant engaged in a sophisticated analysis of the image which the respondent had created for its product as well as of the product itself. He was entitled on the evidence before him to conclude, and we accept, that the appellant set out to duplicate the characteristics of the respondent's product in the sense that it sought to market a product with the same general characteristics as were to be found in the respondent's product.

64. It is the next finding which was severely criticised by counsel for the appellant and to which we now turn.

(b) The appellant deliberately subordinated its logo and

brand "Smith's" in favour of adopting and emphasising the

word "Kettle", the key word in the name "The Kettle Chip

Co." under which the respondent sold a similar product

(at 162). The well known brand "Smith's" had been

suppressed as far as possible and deliberately suppressed

in favour of what could be nothing else but a sub-brand

"Country Kettle". The appellant acknowledged in evidence

that the expression "Country Kettle" was used by the

appellant as a sub-brand. (at 167)

65. The appellant's logo appears in much smaller size on the "Country Kettle" packets than it does on packets of other products of the appellant. Also, the letters "Country Kettle" appear on the packet in substantially greater size than the letters S, M, H and S of "Smith's on the same pack. His Honour said they were more than five times as large. (at 159) In our view, the evidence supports the finding that the appellant's packaging deliberately emphasised the words "Country Kettle" as the predominant words on the pack. Evidence was led by the appellant explaining why it took this course, to which reference will be made later.

(c) The appellant took the considerable risk of an adverse

court decision after the legal implications were

"discussed". (at 162)

66. The appellant sought advice from its solicitors in relation to the proposed launch of its new product, the design of the package and issues to which they may give rise. Advice was also sought from patent attorneys. The respondent had applied for registration of trade marks with respect to the word "Kettle" and use of a cauldron, but the application had not succeeded.

67. The appellant was aware that the respondent was sensitive about what it perceived as its entitlement to use the word "Kettle" in association with the depiction of a cauldron together with other elements in what constituted the package design of the respondent. The advice from the appellant's lawyers was that the word "Kettle" and the cauldron device were descriptive and that the term "Kettle Style" might be used on the packaging of the appellant for the purpose of avoiding any implication that the appellant's product was produced by a mass production process, a suggestion which he conveyed by the use of the word "Kettle" alone. The advice also was that the use of "Kettle Style" would assist in avoiding any possible contravention of s. 52 of the Act. There is evidence that this was the reason for the change by the appellant to the term "Kettle Style" and that the change did not relate to the use of the word "Kettle" and the right to use the word itself. The change in the proposed packaging of the appellant's product followed so that the term "Kettle Style" was included following the giving of advice. It was Mr Ballard who made the decision to adopt the pack of the appellant's product which was in fact adopted.

68. Mr Reeves had overall responsibility for policy and strategy formulation for all sales and marketing activities of the appellant's business. Mr Reeves gave evidence that legal advice was obtained because the appellant sought to ensure that its proposed launch and packaging design was correct, or, as he put it in evidence "appropriate and proper".

69. It is plain that the solicitors and patent attorneys acting for the appellant did give it this advice; the contrary was not suggested in evidence. These matters must be weighed together with all the other evidence in the case in determining whether or not there was intention on the part of the appellant to engage in commercially dishonest conduct.

(d) Ms Heys and Mr Guthrie, the officers of the appellant

responsible for the design of the "Country Kettle"

packaging were not called as witnesses for the appellant,

thus enabling the inference to be more readily drawn that

the appellant decided to appropriate as much of the

respondent's valuable business connection in respect of

the name "The Kettle Chip Co." as was possible and

deliberately undertook a risk so great that, taking it,

could only be justified by the practical certainty of

gain at the respondent's expense.

His Honour relied (at 162-163) upon a passage to that effect in the judgment of Evatt J in Australian Woollen Mills Limited v F.S. Walton and Company Limited [1937] HCA 51; (1937) 58 CLR 641 at 688.

70. His Honour held (at 164) that the principle of Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 was plainly applicable. He found also (at 171) that failure of the appellant to call Ms Heys and Mr Guthrie enabled him to draw inferences with greater confidence concerning the appellant's treatment of an important market research report to which reference will be made later.

71. Mr Ballard gave evidence that he considered the proposed packaging for the "Country Kettle" launch, and the packaging of all the known competitors. He said that he gave final approval to the product prior to the launch of the product and that it was he who approved the launch plan. It was not suggested that this evidence was false. The primary Judge said, in essence, that Mr Ballard was obviously concerned "to distance" himself from the market research and the Pack Design Brief. He professed unfamiliarity with the market research reports that were critical to his evidence.

72. As stated earlier Mr Reeves had overall responsibility for marketing strategy with respect to the appellant's potato chip products. Ms Heys and Mr Guthrie were associated with the appellant's choice of the name "Country Kettle" and its packet design. Mr Reeves, when asked about important research commissioned for the purpose of the planning of the launch of "Country Kettle" on the market, said "Oh, that would have been used by the marketing people, the people working on the project" and referred to Ms Heys and Mr Guthrie. Nevertheless, Mr Ballard and Mr Reeves were the two senior officers of the appellant responsible for the making of the relevant decisions with which this case is concerned. They were the two senior officers responsible for the final decision in relation to "Country Kettle" and both of them gave evidence.

73. In our opinion the principle of Jones v Dunkel would not be of assistance in these circumstances where, although the opinions and conduct of lesser officers of the appellant contributed to the decision making process carried out by Mr Ballard and Mr Reeves on behalf of the corporation, the latter gave evidence of the decisions they made and their reasons for doing so.

(e) The appellant ignored statements made in market research

reports obtained by the appellant.

74. A great volume of market research material used by the appellant in preparing for the launch of "Country Kettle" was introduced into evidence. One report referred to by his Honour is a report dated October 1991 prepared for the appellant by Yann Campbell Hoare Wheeler (YCHandW) titled "A Qualitative Investigation of Kettle Chips and the Potential for Smith's to Enter This Market Segment". His Honour noted that the heading of the report seemed to assume that "Kettle Chips" was a descriptive expression. His Honour said that it was a fundamental assumption of the entire report that "Kettle Chips" was a descriptive expression, not a brand; but he derived from other language in the report the view that the expert researchers themselves saw "Kettle" as a brand. His Honour said that the research which led to the report was watched by representatives of the appellant who were probably Ms Heys and Mr Guthrie. He said (at 171) that accordingly he could draw with greater confidence the inferences concerning the report which he drew, since those inferences, if they had been incorrect, could have been dealt with by witnesses of expertise who saw how this survey was conducted.

75. The primary Judge then referred to later reports from a different market research organisation which his Honour interpreted as reflecting the view of the researchers that consumers regarded "Kettle" as a brand of chip rather than as a style of chip or a descriptor.

76. His Honour made adverse findings with respect to the credit of Mr Ballard, based to a substantial degree on these reports. Mr Ballard gave evidence to support a descriptive meaning of the word "Kettle" as signifying "a particular style" of potato chip and not as a brand of chip. He said in cross-examination that some of the market research reports indicated that "The Kettle Chip" had achieved the status of a brand or a product name, but he said that some of the later research indicated that it was a descriptor and not a brand. His Honour said that he did not believe this evidence and he relied upon the market research commissioned by or otherwise available to the appellant to support his finding that it was misleading to suggest that later research had shown a change in the market place from an understanding of the "Kettle Chip" as a brand to an understanding of those words as conveying a description. He said that he did not find Mr Ballard an impressive witness, that he formed the view that some of his answers were disingenuous and that his evidence was not reliable (at 170).

77. His Honour referred to certain evidence put in cross examination to Mr Ballard concerning the report of market research consultants in February 1992 and a later report in April 1992. Mr Ballard suggested that there had been only one piece of research, reported upon three times, which said that the groups of people interviewed thought of the word "Kettle" as a brand. It was suggested to him by counsel for the respondent in cross-examination that he was being deliberately dishonest when he said in evidence that his understanding was that market researchers were not referring in the reports to "Kettle" as a brand. His Honour said it was plain to him that the market research consultants were referring in the relevant passages in their reports to a perception of the word "Kettle" as a brand. His Honour said he did not accept Mr Ballard's answer.

78. There were many market research reports in evidence, most of which were confidential exhibits. In view of the significance attached to these reports by his Honour, it is necessary to examine them in detail.

79. The first report is by Leading Edge Market Research Consultants (Leading Edge) dated September 1990. It says that one of the "marketing issues" is whether the concept can "at least trade the market up (premium) without unacceptable cannibalisation of current portfolio". It refers to one of the "weaknesses" in a heading "Concept Reaction": "Weak in comparison to the Kettle Chip company position". This particular report mainly goes to the chip itself rather than to the packaging and has nothing to say on the issues in the case.

80. The next report is also from Leading Edge dated November 1990 and it stated, in its introductory pages, that the client is looking at the opportunity of launching a "kettle fried" type potato chip. It is an interesting report because it states that:

"We cannot divorce branding from this discussion.

Certainly, the optimal positioning can fit with the Smith's

name. Smith's captures for many a 'traditional' set of

values. The problem is simply that Smith's already holds

the traditional positioning, so positioning a Smith's kettle

chip on a traditional positioning without the benefit of a

'new process' differentiation will: (1) cannibalize the

current Smith's franchise; and (2) undermine the 'original'

chips positioning."

The Leading Edge report said that the way to "sidestep this pitfall" was for the appellant to offer a different process (as opposed to a different style) chip: the "Kettle" process. The report stresses that this must not be seen as part of the "Smith's" tradition, rather that it is a different but traditional process, adopted now by the appellant. The report argues against the "mass produced look" and says that "Smith's" as a brand could not "credibly be positioned as small scale". The report speaks of the need for a "new wholesome and natural" chip. The report refers, under the heading "Conclusions and Recommendations", to:

"All of the ideas need to learn from the Kettle Chip Co

positioning and concept 'contents'. They have successfully

combined a feeling of 'difference' (via a new pairing

process) to modernity and tradition (in the sense that no

cholesterol is a pertinent topic and benefit). ... The key

issue would seem to be, can we add a new care dimension to

the Kettle Chip Co's positioning? Can we position ourselves

in a very similar way to them but avoiding the pitfalls

associated with an overt traditional positioning, given the

current equities of Smiths? Smith's, as a brand name, can

support a Kettle Chip, but only in a support role.

Dominance should be placed on the process differentiator."

81. This report, like the previous report (and others), is not readily comprehensible.

82. The third report is from YCHandW, dated August 1991. Its "research aim" is "to gain the understanding of that which has hampered the sale take-off of Smith's Lites/Extra Lites since launch". The researchers compared "Kettle Chips" with "Classic Chips" and other varieties of chips. The report was mainly concerned with an analysis of consumer reaction. Again, the word "brand" is used, in particular in the summary of results. But otherwise, the report has no relevance.

83. The next report dated 10 September 1991 and headed "Project Gold" was prepared by Mr Guthrie. It appears to be a report internal to the appellant. It stated as part of the background that the appellant was currently developing products designed to capitalize on the growing appeal of the "Kettle Chip" style of product. The report shed little light on any issues.

84. A report of September 1991 prepared by Sensory Market Analysis and Research Technology Pty Limited is much the same in content as the report prepared by Mr Guthrie.

85. A report of 17 September 1991 on the Pack Design Brief of "Project Gold" was prepared by Mr Guthrie and presented to "Stan Davies Design Edmonds and Molloy". It says that the project covers a new range of "Kettle Style" potato chips to be marketed under the "Smith's" brand umbrella. It refers to the "Kettle Chips" segment of the snack food market as enjoying strong growth, both in Australia and overseas. It refers to "Kettle style" potato chips more than once and says that "Kettle Chips" were introduced to Australia by the respondent in early 1990. It referred to the advent of "Hawker Kettle Chips" and "Kettle Crisps"; but in the marketing strategy section it referred to the fact that "Kettle Chips" had sound awareness and trial levels, and, in the case of "The Kettle Chip Co.", in particular, a "rich image base". This rather suggests that the report generally is referring to "Kettle Chips" in the sense of a kind of chip, not as a brand, although occasionally it seems to be used in the sense of a brand.

86. The next report is the October 1991 YCHandW report, on which his Honour placed reliance. It is described as a "qualitative investigation of Kettle Chips and the potential for Smith's to enter this market segment". It talks about the "image" of "Kettle Chips", their taste and appeal. The research objective is to uncover what the descriptor "Kettle" means to consumers, and hence determine the equity inherent in this variant name. Much space is devoted to the image of "Kettle Chips". Having studied the report carefully, although in one or two parts it may support the notion of the brand being the brand of the respondent, generally speaking it does not. It talks of "Kettle Chips" as a descriptive term. It says that "Kettle" is a "variant descriptor", not a brand, "and that this is a 'key finding'". It says that consumers note that other "Kettle Chips" are available. It talks of a "kettle chip market". In talking of the ability of the appellant to enter this market segment it does say that the appellant "will be stealing the name Kettle". The report is a confused mixture of acceptance of "Kettle" or "Kettle Chip" as a brand or descriptor.

87. His Honour found that YCHandW, in conducting the research, approached it with the central assumption that "Kettle" was a descriptive expression, but that this was not a conclusion of the research. This is a key finding of his Honour with respect to this report. We respectfully disagree. Upon reading the report as a whole, it seems that what the researchers were saying is that their research revealed that consumers regarded "Kettle" as a descriptive expression and not a brand. They say "a key finding to emerge here is that no surprise or resistance is registered when consumers note that other Kettle Chips are available. 'Kettle' is a variant descriptor, not a brand". The report referred to the finding by the researchers that "Kettle" was a variant descriptor, not a brand. The instructions given to YCHandW by the appellant, and recorded in the report, make it clear that no fundamental assumption was made by the appellant of the descriptiveness of the term as part of the brief.

88. A report was prepared by George Patterson Advertising, dated 18 December 1991. Again, this seems to talk basically of "Kettle Chips" as a kind of chip.

89. A report dated February 1992 was prepared by Leading Edge. It said in part that existing "Kettle" consumers widely imagined "Kettle" to be a brand and responded to "Smith's Kettle" lukewarmly as "followers rather than innovators", "reinforced by copycat flavours" and "jumping on bandwagons".

90. A March 1992 report entitled "Project Gold - Smith's Country Kettle Potato Chips Sales Details Document" refers to the fact that the earlier research showed that consumers saw the "Kettle" name as a "product/variant descriptor", not a brand name and expected that "Smith's" would enter this market segment.

91. The next report is April 1992 by Leading Edge. It says that general awareness of "Kettle" is relatively low, but with those to whom the brand is familiar there is some confusion as to whether "Kettle" is a brand or a process. It asks the question whether "Country Kettle" communicates the "right brand imagery" - "Smith's Country Kettle potato chips are the best tasting Kettle chips because Smith's are the potato chip experts". Then it makes the statement that, in accordance with the YCHandW October 1991 report, existing "Kettle" consumers widely imagined "Kettle" to be a brand, and that most were familiar with the big white bag with the kettle on the front seen at video stores and food shops. It said that when presented with "Smith's Kettle" consumers tended to respond lukewarmly. The appellant was seen by current "Kettle" consumers as followers rather than innovators, and, given their assumption that "Kettle" was a brand, "Smith's Kettle" was perceived, therefore, as "jumping on the bandwagon". It was said that the appellant had the potential to differentiate its product.

92. Another report of April 1992 by Leading Edge used the same sort of expressions, sometimes referring to consumers thinking of "Kettle" as a brand rather than a style of chip, and said that many of the "Kettle" "trialists" tended to think of "Kettle" as a brand rather than product descriptor. This particular report, like the report referred to above, suggests that consumers conceived of "Kettle" as a brand rather than descriptor.

93. A report of May 1992 refers to "Kettle chips" in different contexts, at least one of which is as a descriptor. This report was prepared at the time the appellant entered the market.

94. The last report is from YCHandW, dated August 1992, and was the last piece of research undertaken for the appellant. As noted earlier, the present litigation was commenced in May 1992. The purpose of the report was to provide what it described as a quantitative evaluation of the launch in May of the new product of the appellant. This was identified as "Smith's Country Kettle". One of the stated specific objectives was to determine the performance of "Smith's Country Kettle" and "competing brands". One of these is identified throughout the report as "Kettle Chip Company" or "Kettle Chip Company kettle chips". There was some unhappiness with the effect of the television commercial with which the new product had been launched. It was said:

"The current television commercial, 'Chippie Chippie Shake',

while achieving solid levels of recognition (43%), is not

enhancing the image of the brand. Given that awareness of

Country Kettle needs to be value laden in order to promote

trial, advertising must communicate in a more product

focused manner."

"The extent of the achievement of Smith's Country Kettle

begins to emerge when we note that more than one half (56%)

of potato chip consumers aged 18 to 50, are aware of the

brand. This places it on the same level, in awareness

terms, as the Kettle Chip Company kettle chips which have

been available for a considerably longer period of time. .

. .

(O)ne third (33%) of potato chip consumers have at least

tried Country Kettle, again reinforcing the rapid progress

the brand has made. The brand already has greater levels of

trial than the Kettle Chip Company, the other major kettle

chip competitor."

The tenor of this report displays some care in using the phrase "kettle chip" in a generic sense. On the other hand, like various of the other reports, there is an obvious awareness of the impact in the market which the respondent's product had had.

95. Mr Guthrie authorized a "Pack Design Brief" in respect of the design for the appellant's packets, before the latest surveys were carried out. No change was made to the brief thereafter. His Honour described the Pack Design Brief and referred to certain evidence of Mr Davies, a representative of the packaging designer, and noted that it was Mr Ballard who made the final decision to accept the design of the packet. The precise use which his Honour made of this evidence is not clear; but counsel for the appellant relied strongly upon the Pack Design Brief and certain other evidence relating to it. He submitted that the Pack Design Brief is of fundamental importance in the case as were any other instructions given by the appellant to the designers. The submission was used to aid the argument that there was no room for the conclusion that the appellant dishonestly intended to adopt each and every feature of the respondent's get-up and reputation. It was said there can be no room for a finding that there was a fraudulent intent arising out of the circumstances of the actual design of the packaging.

96. We have referred earlier in these reasons to the recognition in the Pack Design Brief of the "rich image base" established for the respondent's product. However, instructions contained in the written brief and those given orally by Mr Guthrie to Stone Davies, the designers of the packaging, did not suggest to them that they should design a pack which was substantially similar to the respondent's pack. Mr Stone said in evidence that the appellant did not request him to imitate the respondent's pack or to adopt specific characteristics of it. Mr Davies said that he was given a copy of the respondent's packaging but that he was not instructed to, nor did he, copy elements of the design from the respondent's pack. Mr Davies was not cross examined to suggest otherwise. Once he had received the Pack Design Brief and the verbal instructions, Mr Stone outlined the key objectives of the Pack Design Brief to Mr Davies. Mr Davies was the designer of the packaging. Mr Davies had available to him various examples of relevant packets, including the packet of the respondent. Mr Ballard made the ultimate decision on the packaging design in February 1992 after discussions in January and February when the designs were ready for recommendation. In his view, the pack design met the criteria that the appellant required.

97. The actual brief to the designers did not contain any instructions to them to copy, imitate or have any recourse to the design on the respondent's packaging. In fact, the appellant required the designers to produce a design "capable of being the 'stand-out' brand in this newly developing category, effectively representing a 'move on' preferred choice rather than merely a 'me too' entrant". It is apparent from the Pack Design Brief that the appellant was concerned to "play down" the appellant's logo on the basis that the logo would brand the new product as mass produced.

98. In our opinion, the Pack Design Brief does not indicate that the appellant intended to appropriate the principal features of the packaging of the respondent's product. That is not to deny that the appellant, with knowledge of the success of the respondent's product, set out, as we have said, to market a product with the same general characteristics and image of the first product. But the Pack Design Brief is inconsistent with the view that the actual design of the packaging might properly assist a finding of fraudulent intent on the part of the appellant to mislead or deceive consumers.

99. The early reports, especially the YCHandW October 1991 report, support the view that "Kettle Chips" was initially a descriptor, not a brand name; and this was repeated in later reports, but probably as part of the history of the matter as stated by the writers. Later reports leave one in a state of some confusion. The researchers, whilst saying that in later months consumers treated "Kettle Chips" as a brand rather than as a product descriptor, say in other parts of the reports that the term "Kettle Chips" is used more as a descriptor. As noted earlier, his Honour did not rely upon material in those reports for his conclusion as to the deceptive nature of the appellant's packaging (at 165), therefore, it is unnecessary to deal with the point made by the appellant that this material was not properly admissible on any issue of likelihood of consumer confusion (but cf. Interlego A.G. v Croner Trading Pty Limited [1992] FCA 624; (1992) 39 FCR 348 at 387-390).

100. Intent to mislead or deceive or to pass off is not an essential element in the proof of a contravention of s. 52 of the Act or passing off although proof of intention to mislead or deceive may lead the Court to infer more readily that there has in fact been conduct which is misleading or deceptive or that passing off has occurred.

101. With respect to the primary Judge's decision, in our opinion the evidence does not support the finding that the appellant intended to mislead or deceive consumers into believing that its "Country Kettle" product was the product of the respondent, or emanated from it or was in some way associated with it.

102. There is, as the primary Judge found, a definite similarity between the name and get-up of the package of the two products. But, as we have said earlier in these reasons, mere proof of the fact that a person has deliberately copied the name or get-up of a trade rival does not of itself establish a contravention of s. 52 or a passing off of goods or services.

103. The evidence supports the finding that the intention of the appellant was rather to promote an awareness in the mind of the consumer of "Country Kettle" as a new brand of chip to gain the benefit of the favourable impression shared by consumers that a "Kettle Chip" was a better chip produced by a different process than most mass produced chips; but not to lead people to believe that the appellant's product was linked or associated with the respondent's product.

104. That finding negates so much of the case for the respondent as sought to support the finding of passing off and misleading or deceptive conduct by the existence of an intent on the part of the appellant to adopt a marketing strategy designed to achieve that very end.

105. However, certainly after receipt of the solicitor's letter dated 10 April 1992, several weeks before the launch of "Country Kettle", the appellant acted with notice of the claims put forward by the respondent to the effect that if the launch proceeded there would be an invasion of the rights of the respondent and contravention of s. 52 of the Act.

106. As mentioned earlier, his Honour did not believe certain evidence given by of Mr Ballard. He said that some of his answers to questions in the witness box were disingenuous and that his evidence was not reliable. Counsel for the respondent suggested at the trial in cross examining Mr Ballard that an answer he had given was deliberately dishonest, yet it was not suggested by the respondent's counsel that Mr Ballard was a generally unacceptable witness. Indeed, counsel for the respondent relied upon and adopted certain parts of his evidence.

107. Mr Ballard was cross-examined on the Pack Design Brief, and his evidence was that he had not seen it before it went to the pack designers, that he did not see it until the night before his cross-examination and that he had not met the designers themselves until shortly before he gave evidence. Mr Reeves was not cross-examined on the document.

108. Mr Ballard was a key witness for the appellant. As its Managing Director he was responsible for the making of a number of the main decisions which led to the marketing of the "Country Kettle" product. He said that he did not familiarise himself with the very reports which were the foundation of the primary Judge's criticisms of him. The reports are extensive as our earlier discussion of them reveals. The particular evidence of Mr Ballard, which led to his Honour's rejecting him on critical matters, were his answers in cross-examination to suggestions of the respondent's counsel:

"I want to suggest in general terms that some of your market

research indicated that the KETTLE CHIP had achieved the

status of a brand or a product name?"

Answer, "Yes, and some of the later research indicated that

it was a descriptor and not a brand. ..."

Later when he was asked about the report of April 1992, Mr Ballard said that there had only been one piece of research, which had been reported upon three times, an answer which his Honour said plainly misunderstood or misrepresented the reports. When then asked by counsel for the respondent if he agreed that the researchers in the April 1992 report were referring to the word "Kettle" as a brand, he said he did not agree. It was suggested he was being deliberately dishonest and he denied this. He said that perhaps if he went away and studied the reports for some hours quietly he might come to a different conclusion. His Honour said that it must have been plain to him that the market research consultants were referring in relevant passages in their reports to a perception of the word "Kettle" as a brand.

109. We have dealt in some detail with the many market research reports in evidence. They vary as to whether the researchers are reporting that "Kettle" is a descriptor or a brand name. There is a fair degree of ambiguity and lack of clarity in the statements made in the reports. It seems to us to be quite understandable that Mr Ballard gained the impression that at least certain of the later reports referred to "Kettle" as a descriptor rather than a brand name. The suggestion that there had been one piece of research reported upon three times is consistent with the research reports. Throughout the Leading Edge reports there is continual reference to the finding of the October 1991 YCHandW report, which is consistent with the evidence of Mr Ballard that there had been one piece of research reported upon three times.

110. We have taken into account the fact that his Honour was not impressed with the manner in which Mr Ballard gave his evidence. Nevertheless, in our view, the evidence of Mr Ballard with respect to the market research reports is too fragile a base to support a conclusion that he was an untruthful and unreliable witness.

111. It remains for the respondent to elect between a remedy in damages or an account of profits. We have referred to the objective considerations which establish a finding of contravention of s. 52 of the Act and leads to damages under s. 82. It has not yet clearly been settled whether the width of s. 87 of the Act includes a restitutionary remedy in the nature of an account of profits; see Munchies Management Pty Ltd v Belperio [1988] FCA 413; (1988) 84 ALR 700 at 713; Wardley Australia Ltd v The State of Western Australia [1992] HCA 55; (1992) 175 CLR 514 at 525-527; Dart Industries Inc. v The Decor Corporation Pty Ltd [1993] HCA 54; (1993) 179 CLR 101. We say nothing further upon that issue.

112. There remains for consideration the election between damages and an account of profits in aid of the passing off action. The relevance of fraud to recovery of damages in passing off is discussed in Conagra Inc. v McCain Foods (Aust.) Pty Ltd [1992] FCA 159; (1992) 33 FCR 302. As to the remedy of an account, in Dart Industries, supra at 110-111, Mason CJ, Deane, Dawson and Toohey JJ said (omitting footnotes):

"Damages and an account of profits are alternative remedies.

An account of profits was a form of relief granted by equity

whereas damages were originally a purely common law remedy.

As Windeyer J pointed out in Colbeam Palmer Ltd v Stock

Affiliates Pty Ltd [1968] HCA 50; (1968) 122 CLR 25 at 34, even now an

account of profits retains its equitable characteristics in

that a defendant is made to account for, and is then

stripped of, profits which it has dishonestly made by the

infringement and which it would be unconscionable for it to

retain. An account of profits is confined to profits

actually made, its purpose being not to punish the defendant

but to prevent its unjust enrichment. The ordinary

requirement of the principles of unjust enrichment that

regard be paid to matters of substance rather than technical

form is applicable."

113. The reference to profits which have been "dishonestly made" requires further comment. It is not to be understood as requiring fraud sufficient for the purposes of an action in deceit. In Colbeam Palmer, supra at 34, Windeyer J spoke of profits made by the defendant "during the period he knew of the plaintiff's rights". In such a context what is involved is persistence after notice of the claims of the plaintiff which, when made good, found the successful action against the defendant; see BM Auto Sales Pty Ltd v Budget Rent A Car System Pty Ltd (1976) 51 ALJR 254 at 258; United States Surgical Corporation v Hospital Products International Pty Ltd (1983) 2 NSWLR 157 at 248-249 (revd. on other grounds [1984] HCA 64; 156 CLR 41); Conagra Inc. v McCain Foods (Aust) Pty Ltd supra at 362-364. Thus, in My Kinda Town Ltd v Soll (1983) RPC 15 at 47, Slade J accepted that in principle the plaintiffs were entitled to an account of profits to run from the date of receipt by the defendants of the plaintiffs' solicitors' letter before action. Conclusions

114. The primary Judge granted declaratory relief. Three declaratory orders were made. It follows from what we have said that orders 1 and 2 made 26 November 1993 should stand. Order 3 was a declaration in somewhat general terms. It stated:

"3. The sale, offering for sale and advertising and promoting in

Australia of potato chips in the packaging examples of which

are Exhibits 7R pages 1-7 and 7R pages 8-16, amounts to:

(a) passing-off the potato chips as and for the

Applicant's potato chips; and

(b) engaging in conduct that is misleading or deceptive or

is likely to mislead or deceive and thereby contravene

section 52 of the Trade Practices Act 1974."

A declaration expressed in this form is of little utility if it does no more than traverse the ground already covered by the first two orders. If it goes further, it may be embarrassing in the technical sense because it is not linked to the activities of any particular person, is not supported by an injunctive order, and is apparently unconfined in time. We would set aside order 3.

115. Otherwise the appeal should be dismissed, with costs.

116. We note order 8 which obliges the respondent to re-list the proceeding within 14 days of judgment on this appeal.

SCHEDULE 1

(Exhibit 7R p.18)

(SCHEDULE 1 HAS BEEN OMITTED)

SCHEDULE 2

(Exhibit 7R p.29)

(SCHEDULE 2 HAS BEEN OMITTED)

SCHEDULE 3

(Exhibit 7R p.38)

(SCHEDULE 3 HAS BEEN OMITTED)

SCHEDULE 4

(Exhibit 7R p.3)

(SCHEDULE 4 HAS BEEN OMITTED)

SCHEDULE 5

(Exhibit 7R p.22)

(SCHEDULE 5 HAS BEEN OMITTED)

SCHEDULE 6

(Exhibit 7R p.31)

(SCHEDULE 6 HAS BEEN OMITTED)

SCHEDULE 7

(Exhibit 7R p.43)

(SCHEDULE 7 HAS BEEN OMITTED)

SCHEDULE 8

(Exhibit 7R p.10)

(SCHEDULE 8 HAS BEEN OMITTED)