Coca-Cola Company v Pepsico Inc

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 876 of 2010

PEPSICO AUSTRALIA HOLDINGS PTY LIMITED (ACN 079 719 743)

JUDGE: DODDS-STREETON J DATE: 15 september 2011 PLACE: MELBOURNE

REASONS FOR JUDGMENT 1 On 15 September 2011, I made the orders above. My reasons for making those orders are as follows.

Background 2 By an affidavit sworn on 10 June 2011, Gregory Chambers, of the solicitors for the applicant, deposed to the parties' objections to proposed categories of documents for discovery and exhibited relevant correspondence. 3 The objections narrowed in the course of negotiation and discussion between the parties. The parties filed and served written submissions in relation to the remaining disputed categories. 4 In this proceeding, the applicant, The Coca-Cola Company ("Coca-Cola"), which is incorporated in the United States and (with its licensees) is the worldwide manufacturer of Coca-Cola beverages, by an application and statement of claim dated 14 October 2010, seeks relief including declarations, injunctions and damages against the first respondent, Pepsico Inc, the second respondent, Pepsico Australia Holdings Pty Ltd, and the third respondent, Schweppes Australia Pty Ltd, for infringement of Coca-Cola's trade marks and for misleading and deceptive conduct and passing off. 5 Coca-Cola's trade marks are various signs depicting a bottle or the representation of a shape of a bottle, which were registered on and from various dates in class 32 in respect of various non-alcoholic beverages. 6 Coca-Cola alleges that its various registered trade marks comprise a depiction of "the Contour Bottle" which has a characteristic shape and contour (a pinch in the bottom portion, a relatively wide portion of the bottle above the pinch and a tapering of the bottle from the wider portion up to the neck) in which, since 1916 in the United States and at least 1938 in Australia, it has sold the Coca-Cola beverage. 7 By paragraph 15 of the statement of claim, Coca-Cola alleges that it has advertised and marketed its Coca-Cola beverage making extensive and repeated use of the Contour Bottle or its silhouette, and that the bottle is a distinctive identifier of Coca-Cola products. 8 The particulars are as follows: i. In Australia the COCA-COLA beverage has been sold in glass Contour Bottles since 1938 and plastic Contour Bottles since 1994. ii. The Contour Bottle is a mark or sign which is readily recognised by its shape alone as the "Coca-Cola" or "Coke" bottle. iii. A significant proportion of the marketing of the COCA-COLA beverage in Australia has used or promoted the image of the Contour Bottle, including as follows: a. COCA-COLA advertisements have regularly featured the Contour Bottle as a distinctive identifier of COCA-COLA products, including certain advertising which has used the Contour Bottle alone without the words "Coca-Cola" or "Coke"; b. packaging of COCA-COLA beverages has regularly included a two dimensional pictorial representation of the Contour Bottle; c. the Applicant has a comprehensive merchandising program for a wide range of products including clothing, bags, bottle openers, drinking mugs, fridge magnets and key chains, in relation to which the Contour Bottle is used as a trade mark. 9 The first respondent, Pepsico Inc, a company incorporated in the United States, is the ultimate holding company of the second respondent, Pepsico Australia Holdings Pty Ltd, a company incorporated according to the laws of Australia. The third respondent, Schweppes Australia Pty Ltd, is a company incorporated according to the laws of Australia. 10 By paragraph 16 of the statement of claim, Coca-Cola alleges that the respondents have, from a date unknown to it until after discovery and inspection, but prior to the commencement of this proceeding, in the course of trade in Australia, dealt with or provided cola beverage products in a bottle shaped like the Contour Bottle (collectively, the "Infringing Products"). 11 The particulars are as follows: i. The Infringing Products have been offered for sale and sold at a retail level throughout Australia including, on or before 4 May 2010 and 24 September 2010 at a "7-Eleven" retail store at 43-45 Elizabeth Street, Melbourne. ii. The labelling of the Infringing Products identifies the First Respondent as the owner of the trade marks "Pepsi" and "Pepsi Max". iii. As the owner of the trade marks "Pepsi" and "Pepsi Max", the First Respondent ultimately controls the sale and distribution of the Infringing Products bearing those trade marks. iv. The First Respondent is the ultimate holding company of the Second Respondent which acts on behalf of the First Respondent in Australia. v. Under the authority of the First Respondent, the Second Respondent conducts and/or supervises the business of selling "Pepsi" and "Pepsi Max" products in Australia. vi. The labelling of the Infringing Products identifies the Third Respondent as the bottler of those products. vii. The webpage of the Third Respondent located at http://www.schweppesaustralia.com.au/Our-Brands/Pepsi-max.aspx includes an image of one of the Infringing Products and states that the Third Respondent manufactures and distributes "Pepsi" and "Pepsi Max" products within Australia and that those trade marks are registered trade marks of the First Respondent used under licence in Australia by the Third Respondent. 12 By a defence dated 14 January 2011, the respondents admit that Coca-Cola is registered as owner of the relevant trade marks. 13 The respondents admit that Coca-Cola and its licensees are the worldwide manufacturer of Coca-Cola beverages, but do not admit that the Coca-Cola beverage is one of the most extensively advertised products in Australia. 14 The respondents admit that Coca-Cola sells the Coca-Cola beverage in the Contour Bottle. 15 The respondents do not admit that the signs the subject of the relevant trade marks comprise a depiction of the Contour Bottle. 16 The respondents do not admit that Coca-Cola's advertising and marketing of its Coca-Cola beverage has made extensive and repeated use of the Contour Bottle or its silhouette. 17 The respondents admit that they have, since August 2007, in the course of trade in Australia, dealt with or provided PEPSI® and PEPSI MAX® cola beverage products in the glass bottle alleged, but deny that the Pepsi products are infringing in any sense. They admit that they are not licensed or authorised by Coca-Cola, but say that no licence or authorisation is required. 18 The respondents admit that the Pepsi products are non-alcoholic beverages falling within class 32, but deny infringement of Coca-Cola's trade marks. 19 The respondents deny that consumers in Australia would perceive the bottle shape and its silhouette used for the Pepsi products as "possessing the character of a brand for distinguishing the Infringing Products from other beverage products" and that they have thus used the bottle shape and its silhouette as a trade mark within the meaning of ss 17 and 120(1) of the Trade Marks Act 1995 (Cth). They deny that the bottle shape and silhouette are substantially identical with, or deceptively similar, to the signs the subject of Coca-Cola's trade marks. 20 The respondents do not admit that Coca-Cola has developed in Australia substantial goodwill and a valuable reputation in the Contour Bottle, do not admit that Coca-Cola's goods have become widely and favourably known and identified in the minds of consumers throughout Australia by reference to the Contour Bottle and the signs the subject of the Australian trade marks, and deny that the Australian public expect to be dealing with Coca-Cola (or persons authorised or approved by it) when they are offered the Infringing Products for sale in Australia. 21 The respondents deny that by offering for sale and selling the Pepsi products, they have engaged in misleading or deceptive conduct, falsely represented authorisation or approval by, or association with, Coca-Cola, or engaged in passing off.

DisPUTED CATEGORY OF DISCOVERY 22 Before me, the dispute over the scope of discovery, which was originally extensive, narrowed further to a single category of documents of which Coca-Cola sought discovery. 23 Category 5 sought by Coca-Cola was as follows: Documents which record, constitute, evidence or relate to: (a) any request by the Third Respondent for an indemnity in relation to the adoption of the Infringing Bottle as the packaging of a beverage product to be sold in Australia or in relation to the sale of the Infringing Products in Australia; or (b) any indemnity provided to the Third Respondent in relation to the adoption of the Infringing Bottle as the packaging of a beverage product to be sold in Australia or in relation to the sale of the Infringing Products in Australia. 24 The respondents instead offered discovery of: Documents which record, constitute, evidence or relate to: (a) any request by the Third Respondent, prior to the commencement of this proceeding, for an indemnity specifically concerning: (i) the adoption of the Infringing Bottle as the packaging of a beverage product to be sold in Australia; or (ii) the sale of the Infringing Products in Australia; or (b) any indemnity provided to the Third Respondent, prior to the commencement of this proceeding, specifically concerning: (i) the adoption of the Infringing Bottle as the packaging of a beverage product to be sold in Australia; or (ii) the sale of the infringing Products in Australia. 25 Coca-Cola thus sought discovery of documents in relation to a wider time span (indemnities requested by or provided to the third respondent both before or after the commencement of the proceeding), while the respondents sought to limit discovery in this category to documents relating to indemnities requested or provided prior to the commencement of the proceeding. 26 Further, while Coca-Cola sought discovery of indemnities "in relation" to the adoption of the "Infringing Bottle", the respondents sought to limit discovery to documents relating to requests for, or provision of, indemnities "specifically concerning" the adoption of the Infringing Bottle, or the sale of the Infringing Products in Australia. 27 It was not disputed that the third respondent is not a member of the Pepsi Group and is engaged as the bottler of the Infringing Products in the Infringing Bottles in Australia. Coca-Cola submitted that category 5 documents relating to a request for or provision of indemnities by or to the unrelated third respondent (whether before or after the commencement of this proceeding on 14 October 2010) were relevant to the respondents' state of mind in engaging in the impugned conduct. 28 Coca-Cola relied, in that context, on Australian Woollen Mills Ltd v FS Walton & Co Ltd (1937) 58 CLR 641 ("Australian Woollen Mills"), where the majority (Dixon and McTiernan JJ) upheld the dismissal below of the appellant's claims of trade mark infringement and passing off. In the course of their reasons, the majority acknowledged that if it were established that a mark or get up were adopted to appropriate a rival's reputation or trade, it would fortify claims that the mark or get up was likely to deceive or confuse. Their Honours stated at 657: The rule that if a mark or get-up for goods is adopted for the purpose of appropriating part of the trade or reputation of a rival, it should be presumed to be fitted for the purpose and therefore likely to deceive or confuse, no doubt, is as just in principle as it is wholesome in tendency… when a dishonest trader fashions an implement or weapon for the purposes of misleading potential customers, he at least provides a reliable and expert opinion on the question whether what he has done is in fact likely to deceive. 29 While conceding the relevance of intention, the High Court majority pointed out the pitfalls associated with an examination of a respondent's motives and good faith which, in the case before them, had contributed little to the determination of the case. Their Honours recognised that: [I]n the end, it becomes a question of fact for the court to decide whether in fact there is such a reasonable probability of deception or confusion that the use of the new mark and title should be restrained. 30 In the present case, Coca-Cola also submitted that there was no apparent basis on which to deny it discovery of documents in relation to requests for or provision of indemnities "in relation to", as opposed to "specifically concerning", the relevant conduct. 31 The respondents submitted that the discovery sought by Coca-Cola was unnecessarily broad, as any request by the third respondent for an indemnity after the commencement of the proceeding could not be relevant to its state of mind concerning the alleged infringing conduct. A request for an indemnity was, the respondents submitted, merely normal commercial practice where, as in this case, the impugned conduct was procured by the other respondents. Further, in passing off, and ordinarily in s 52 actions, the impugned conduct is to be assessed at the time when it commenced, and the relevance of the third respondent's state of mind when the proceeding commenced (over three years after the impugned conduct commenced) was not evident. Rather, relevance, if at all, would lie in the third respondent's state of mind at the time the bottle was adopted. 32 The respondents also sought to confine discovery in the relevant category to requests "specifically concerning" the Infringing Bottle in issue, because discovery could otherwise pick up documents evidencing the general bottling arrangements between the respondents (that is, indemnities applicable to all products sold by the third respondent under licence from the first respondent), which would not be relevant to an issue in dispute.

DISCUSSION 33 The present proceeding was commenced prior to the coming into operation of the Federal Court Rules 2011 ("the Rules"), which were introduced partly to promote the obligations and purposes of s 37M of the Federal Court of Australia Act 1976 (Cth) ("Federal Court Act"). 34 It is unnecessary to determine whether the Rules apply to the determination of the present dispute, as the objectives of an order for discovery recognised in Rule 20.11 of the Rules are of general significance. Rule 20.11 provides that "A party must not apply for an order for discovery unless the making of the order sought will facilitate the just resolution of the proceeding as quickly, inexpensively and efficiently as possible", and, in turn, reflects the overarching purpose referred to in s 37M of the Federal Court Act (see Rule 20.14). 35 The court has a broad discretion in relation to discovery. Its legitimate scope is determined by reference to the pleadings and the issues they raise. Standard discovery is predicated on direct relevance to the issues raised by the pleadings or in the affidavits. 36 In exercising its discretion, the court will balance the costs, time and possible oppression to the producer against the importance and likely benefits to the applying party: see United Salvage Pty Ltd v Louis Dreyfus Amateurs SNC [2006] FCA 116 (at [3]). 37 While inquiry into intention and state of mind in this context is supplementary to the fundamental question of fact for the court whether there is a reasonable probability of deception or confusion, it was conceded that the respondents' state of mind was, arguably, at least, relevant to whether they had infringed the applicant's trade marks or were liable for passing off or misleading and deceptive conduct, as recognised in Australian Woollen Mills. 38 In my opinion, as Coca-Cola submitted, once the relevance of state of mind were conceded, the imposition of a temporal cut-off point of the commencement of this proceeding for documents within category 5 was unduly arbitrary and artificial, as a retrospective reference to earlier conduct in a later document could be probative of an earlier state of mind. Further, while the adoption of the Infringing Products (as defined) clearly predated the commencement of the proceeding, the sale of the Infringing Products was ongoing rather than temporally limited. Nor were documents relating to requests for or provision of indemnities after the commencement of the proceeding necessarily irrelevant because, in passing off and s 52 actions, the applicant's reputation is to be assessed at the date of the conduct complained of. As Gummow J explained in Thai World Import & Export Co Ltd & Anor v Shuey Shing Pty Ltd & Ors (1989) 17 IPR 289 at 302, that principle reflects that the reputation is not to be taken to be eroded by infringing activities which occurred before proceedings are instituted. 39 As there was no suggestion that discovery encompassing any documents relating to requests for or provision of indemnities after the commencement of the proceeding would be oppressive, I was satisfied that Coca-Cola's proposed wider formulation was appropriate. 40 On the other hand, the third respondent may have requested or been provided with generalised indemnities which, on analysis, potentially applied or related to, inter alia, the adoption and sale of the Infringing Bottles. The formulation of "relating to" advocated by Coca-Cola therefore appeared unnecessarily broad. In conformity with the governing principles, the respondents' alternative formulation of "specifically concerning" was, in my view, more apt effectively yet economically to catch the documents which are directly relevant to issues in dispute. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dodds-Streeton.