Hansen Beverage Company v Bickfords

Federal Court of Australia (Full Court)|2008-11-14|Before: Siopis JJ, Tamberlin J

REASONS FOR JUDGMENT TAMBERLIN J 1 This is an appeal from a Judge of the Court dismissing an application by the appellant ("Hansen") for declarations and consequential relief against the respondents ("Bickfords") on the ground that it had engaged in passing off or contravention of the Trade Practices Act 1974 (Cth) ("TPA"): see Hansen Beverage Company v Bickfords (Australia) Pty Ltd [2008] FCA 406; (2008) 75 IPR 505. 2 The main issue in the proceeding is whether Hansen has shown a sufficient reputation in Australia in the mark MONSTER ENERGY, at the relevant date of April/May 2006, in relation to energy drinks, such that the use by Bickfords of the mark (or its contraction, MONSTER) conveyed a misrepresentation that Bickfords' product was actually that Hansen's or was in some way associated with Hansen. If Hansen can show that is has the requisite representation in Australia, then the conduct of Bickfords is agreed to be misleading or deceptive, or passing off. In other words, there is no dispute that the similarities between Bickfords' and Hansen's products could relevantly deceive or mislead for the purpose of the TPA and the tort of passing off.

BACKGROUND 3 The underlying facts alleged in relation to the background are not in dispute, and consequently we substantially set out the background as recounted in the judgment of the primary Judge.

Hansen and MONSTER ENERGY 4 Hansen has, since 1992, developed, marketed, sold and distributed non-alcoholic beverages, including carbonated drinks, energy drinks, fruit juice smoothies, lemonades and juice cocktails in the United States of America. As at November 2006, Hansen had over 700 employees, with the annual revenue for the 2005 financial year being US$415,417,282. 5 In 1996, in response to the success of energy drinks in the United Kingdom, Hansen began consumer testing of its own energy drink, Hansen's Energy Smoothie. The primary demographic for Hansen's energy drinks was, and remains, 18 to 30 year old males. This is to be contrasted with the primary demographic for its natural soft drinks and juice products, being 25 to 40 year old affluent college educated females. In 2002, Hansen's management decided to launch a new energy drink which would be targeted to the 18 to 30 year old male demographic, to compete with Red Bull, the leading energy drink in the world at the time. Hansen created, in conjunction with an independent design firm, the MONSTER ENERGY brand name, and decided to sell the drink in 16 oz (473 mL) cans. Hansen's intention was to create, by using MONSTER ENERGY, a completely separate "identity" and "personality" from the Hansen brand, thus enabling it to focus on the young male target market. To this end, Hansen developed a website (www.monsterenergy.com), which was separate from, and contained no reference to, Hansen. 6 The official launch of MONSTER ENERGY drinks in the United States of America was in April 2002. In 2003, Hansen introduced a low carbohydrate version of the energy drink, and in 2004 it began selling MONSTER ENERGY in 4-packs. During 2005, other variations of the MONSTER ENERGY drink and packing were introduced, which includeddrinks called "Khaos" (with 70% juice) and "Assault". 7 Hansen attempts to distinguish its MONSTER ENERGY drinks by, among other things, using ingredients such as taurine, L-carnitine, panax ginseng root extract, guarana seed extract, B vitamins, inositol, glucuronolactone, sodium, glucose and caffeine. All varieties of the MONSTER ENERGY drinks contain these ingredients and are carbonated. Further, all varieties of the drinks are sold in 16 oz (473 mL) cans which: · are predominantly black, with an 'M' claw design; · refer to the www.monsterenergy.com website; · include the MONSTER ENERGY slogan "Unleash the Beast!", which is a registered trademark of Hansen; · list certain of the ingredients around the top of the can; and · emphasise with a stylised design the "O" in MONSTER and MONSTER ENERGY. 8 In addition, there are variations between the cans for the different varieties of MONSTER ENERGY drink as follows: · the low carbohydrate version is sold in a predominantly black can with a blue "M" claw design; · the Khaos version is sold in a predominantly black and grey can with an orange "M" claw design; and · the Assault version is sold in a predominantly black and grey can with a camouflage design and a red "M" claw design. 9 The MONSTER ENERGY mark, along with the "M" claw design, is shown below: 10 Hansen sells its MONSTER ENERGY drinks throughout the United States of America, Canada, Mexico, Uruguay, Suriname, Peru, Paraguay, Ecuador, Chile, Brazil, Bolivia, Argentina, Panama, Honduras, Guatemala, El Salvador, Costa Rica, Belize, Virgin Islands, St Maarten, Puerto Rico, Haiti, the Dominican Republic, Curacao, Barbados, The Bahamas, Antigua and Hong Kong. MONSTER ENERGY is sold in all 50 states of the United States of America in more than 100,000 retail stores, and is sold in thousands of stores internationally, including in convenience stores, gas stations and grocery stores. MONSTER ENERGY is sold in these stores because they are the "natural habitat" of Hansen's target demographic, namely 18 to 30 year old males. MONSTER ENERGY is the second biggest selling energy drink in the world, behind Red Bull. 11 In keeping with its aim of promoting MONSTER ENERGY to the 18 to 30 year old male market, Hansen has adopted the strategy of marketing the brand, inter alia, through the sponsorship of athletes and athletic competitions (which receive media and internet coverage), clothing and merchandise bearing the MONSTER ENERGY marks, in magazines, on the internet, and through sponsoring music festivals and musicians. The athletes and athletic competitions which MONSTER ENERGY sponsors are generally in the extreme sports fields and are, according to Hansen's Chief Executive Officer, "edgy and aggressive". By being associated with these athletes and events, Hansen attempts to make MONSTER ENERGY attractive, and "cool" to its target market. 12 Between 2002 and 2006, Hansen spent over US$150 million in advertising, marketing and promoting its MONSTER ENERGY brand. 13 The MONSTER ENERGY brand product has not been sold in Australia (although it has been obtained on eBay in Australia), and Hansen does not rely upon sales or direct promotions in Australia of its product. Rather, Hansen relies upon a strategy which is designed to make the target demographic in a country (like Australia) familiar with MONSTER ENERGY before it is "launched in the country", and which "helps lay a foundation" before the product is launched.

Bickfords 14 Bickfords is a manufacturer and distributor of beverages based in Adelaide, with a history dating back to the mid-nineteenth century when William Bickford was a major manufacturer and supplier of pharmaceutical and chemical products. Bickfords' range of products has grown significantly since 1991, and it now sells beverages throughout Australia, New Zealand and some Asian countries. Bickfords' products are distributed nationally through retailers Coles, Woolworths, Metcash/Foodland, Franklins and other supermarkets, as well as through convenience stores, petrol stations, cafes, restaurants and delicatessens. 15 Bickfords has recently built a "state of the art" manufacturing plant in Salisbury South, South Australia. The plant has four bottling lines in operation, and currently produces, among others, the following ranges of beverages: · "Apple Maid" juices, sold in 750 mL glass bottles; · "Aqua Pura", water sold in 600 mL, 1.25 litre and 5 litre plastic and PET containers; · "Classic Juice" fruit drinks in five flavours, packaged in 300 mL glass bottles; · "Bickfords Cordial" in 750 mL bottles, which includes the "Bickfords Lime Juice" product; · "Esprit", a premium adult soft drink with natural ingredients, and Bickfords widest-ranging exported product; · "Iced Coffee Mix" packaged in 1 litre plastic bottles and 300 mL and 600 mL glass bottles; and · "Old Style Soda" drinks, including creamy soda, lemon lime and bitters, ginger beer, original kola and sarsaparilla flavours, in 275 mL glass bottles. 16 We note that the role of the second respondent is primarily to meet the respondents' export requirements but also to distribute certain products locally, including the MONSTER ENERGY drinks the subject of this proceeding. 17 The Managing Director of Bickfords, Angelo Kotses, deposed an affidavit which was before the primary judge stating that he noticed in late 2004 and early 2005 that the energy drink market in Australia was expanding. Mr Kotses stated that he felt Bickfords was in a good position to launch its own energy drink. He deposed that there were no super-sized energy drinks in Australia "readily available", with most canned energy drinks being sold in a 250 mL to 300 mL can size, and that he thought a larger sized can would be well supported in Australia. 18 During a trip to the United States of America in February 2005, Mr Kotses became aware that the MONSTER brand was selling well and that the super-sized energy drink market was growing in that country. Mr Kotses said that one of the reasons for wanting to use the larger sized can was that it would distinguish the Bickfords product from the energy drinks already available in the Australian market. 19 Mr Kotses deposed that Bickfords owns a trademark called "Hi NRG" which it used in connection with an energy drink in about 1998. The drink was sold in 330 mL glass bottles, but did poorly. Mr Kotses said that he was, between 1998 and 2005, considering resurrecting the "Hi NRG" brand given that competitors were doing well with a 250 mL canned energy drink but that he ultimately decided that the brand had become outdated. 20 In the summer of 2004/2005, Mr Kotses asked Bickfords' Marketing Manager, Andrew Bell, to consider a brand for a new energy drink, and mentioned the possibility of introducing a super-sized can. After receiving a marketing brief from Mr Bell containing various possible names for Bickfords new energy drink, Mr Kotses discussed the possibilities with Evie Kotses, his daughter. Mr Kotses also mentioned to his daughter that he had seen Hansen's MONSTER brand while in the United States of America. 21 At this time Mr Kotses was aware that Hansen's MONSTER drinks were not available in Australia, but thought that Bickfords may be able to negotiate with Hansen for a license to manufacture the MONSTER product, using the super-sized can, in Australia. Bickfords conducted trademark searches for MONSTER and MONSTER ENERGY, and found that there were no actual or pending registrations for those names in the drinks category. Bickfords then lodged the first application for MONSTER on 5 September 2005. 22 Bickfords used some of Hansen's MONSTER cans in a focus group for its new product. The focus group indicated that the MONSTER brand and super-sized can had been well received, and Bickfords then made contact with Hansen in the United States of America to discuss a possible license agreement. No such agreement was made. 23 Mr Kotses deposed that Bickfords proceeded to use the MONSTER mark for its energy drinks because there was "no indication" that Hansen was promoting its product or the MONSTER ENERGY brand in Australia, and because members of the public in Australia seemed to have no knowledge of Hansen's product. Mr Kotses deposed that the graphics for the can and the recipe for the drink were devised by Bickfords independently of Hansen's product. The graphics and recipe were left to Bickfords' marketing department, Mr Kotses himself keen to use the MONSTER mark. In addition, as set out above, Bickfords was aware that that the applicant had not applied for registration of the MONSTER or MONSTER ENERGY marks in Australia. 24 Bickfords, from about January 2006, then began developing its MONSTER energy drink concept, targeting it towards young male consumers. The first production of Bickfords' MONSTER ENERGY drink took place on 10 April 2006 and it was distributed from 18 April 2006. 25 The similarities between the two products, which Hansen alleges will mislead or deceive a consumer for the purposes of s 52 of the TPA and the tort of passing off, are as follows: Hansen product Bickfords product Name is MONSTER ENERGY Name is MONSTER ENERGY Super-size can Super-size can Black can with green 'M' claw for the original version Black can with green MONSTER mark for the sugar-free version Black can with blue 'M' claw for the lo-carb version Black can with blue MONSTER mark for the original version Black can with orange 'M' for the Khaos (juice) version Black can with orange MONSTER mark for the juice version 'Unleash the Beast' slogan tilted diagonally 'Find the Monster within' slogan tilted diagonally Website stated: monsterenergy.com Website stated: monsterenergy.com.au Ingredients prominently identified on the can: Ingredients prominently identified on the can:

Taurine * Taurine
Ginseng * Ginseng
B vitamins * B vitamins

26 In 2004, Hansen launched a new carbonated energy drink in 473 mL cans under the brand name "Lost". Hansen notes the following similarities in phrases used on the packaging of the Lost product and Bickfords' product: Lost product Bickfords product "Top 10 reasons why…Lost made an energy drink" "5 good reasons to make a MONSTER energy drink" "We tried to make a relaxation drink but everyone got tired and gave up on it" "We tried to make a relaxation drink but everyone just fell asleep" "Cans only come in one size" "Because size really does count" "It makes you piss cool colours" "It makes your urine go really cool colours" "There was a background check to make liquor" "Unlike liquor, there's no background check" "Makes you feel as good as the pro athletes 'cus they can't drink it any better than you" "It doesn't claim to be good for you"

27 There is no dispute that the similarities between the products could relevantly mislead or deceive for the purposes of the TPA and the tort of passing off.

REASONING BELOW 28 The primary Judge considered the reputation of the names MONSTER and MONSTER ENERGY in Australia, and their association with Hansen's products as at the date when Bickfords' products became available to consumer in April/May 2006. This was the date which his Honour found was the appropriate date at which to assess Hansen's reputation in Australia. 29 His Honour proceeded on the basis that: (i) the target market for Bickfords' products was males between the ages of 18 to 24; (ii) the target market for Hansen's products was males between the ages of 18 to 30; and (iii) unless Hansen establishes the required reputation among this target market it could not succeed. 30 His Honour referred to marketing evidence from Mr Sacks of Hansen in relation to its success in the United States of America market, but concluded that he was unable to form a view about whether that strategy was successful in Australia, or assuming it was, the extent of that success in creating the necessary reputation. His Honour considered that isolated or fleeting references to the terms MONSTER ENERGY and MONSTER (to which some extreme sports enthusiasts were exposed) were not sufficient to enable him to reach a conclusion as to the impact which those terms had on those people exposed to the marketing. 31 The primary Judge also considered Hansen's indirect advertising strategies, which exposed people to its products through the means of logos on clothing, signage and other incidental depictions of the terms MONSTER ENERGY and MONSTER. His Honour observed that, on the evidence, there were at the relevant time approximately 1 million males in Australia aged between 18 and 24. 32 His Honour also referred to a series of perceived shortcomings in the evidence, stressing that the target demographic was not "just the extreme sports follower", but rather the young male adult more generally. Importantly, his Honour considered that even if a number of extreme sports followers, having seen the material relied on by Hansen, were aware of the Hansen products, this was not a sufficient basis from which to draw in inference that young male adults, which constitute a wider group of consumers, would have the same awareness. His Honour did not accept that the impression conveyed by exposure to incidental or indirect advertising, which contained fleeting references to the terms MONSTER ENERGY and MONSTER, was sufficient without other circumstances, such as substantial direct sales or direct advertising in Australia, to support Hansen's argument. His Honour gave an example of one type of exposure through indirect advertising which was not regarded as sufficient to establish reputation. His Honour stated that even if extreme sports enthusiasts were exposed to such advertising on television, it was not possible to extrapolate how many young male adults would recognise some association between Bickfords' product marketed in Australia and the Hansen product to they had been exposed. 33 His Honour described the references in the indirect advertising to the presence and size of the terms MONSTER ENERGY and MONSTER as "occasional fleeting and background reference". His Honour's evaluation of such indirect advertising was that the potential consumer (other than perhaps some extreme sports enthusiasts) would not have been impacted to an extent that would cause these references to create an association with Hansen's product. Rather, his assessment was that most viewers would be likely to focus on the sporting activities in respect of which the indirect advertising was being conducted, rather than to focus on the indirect advertising itself. His Honour concluded that the quality of exposure in Australia would not, without any other exposure, give rise to a sufficient level of awareness as to generate the necessary reputation.

Legal principles 34 In order to succeed in a passing off action, an applicant must establish, as one element of tort existing as at the date when the conduct commenced, that the applicant had the requisite reputation in the name or goods in the jurisdiction of the respondent and that there is a likelihood of deception among consumers or potential consumers resulting from the respondent's actions. An applicant must prove that there are, within the relevant jurisdiction, a substantial number of persons who were aware of the applicant's name or product and are possible consumers. It is necessary to show in a practical and business sense a sufficient reputation in the forum and this requires an evaluation of the size and distribution of the population of prospective consumers likely to be affected: see ConAgra Inc v McCain Foods (Aust) Pty Ltd (1992) 33 FCR 302 at 342, 343, 346 (per Lockhart J), and 380 (per French J). 35 The tort of passing off is designed to protect the property and goodwill of a business. It is only available where an applicant can show goodwill or reputation in relation to the name or get-up of his or her goods or services because they have become distinctive of his goods or services in a particular market. An applicant will succeed where he or she can show that a potential customer is likely to be misled into believing that the respondents' goods are goods of the applicant or are somehow associated with the applicant: see Cadbury-Schweppes Pty Limited v Pub Squash Co Pty Limited (1980) 32 ALR 387 at 393. 36 In Conagra 33 FCR at 381, in relation to a claim under the TPA, French J referred to the expression "a not insignificant number" of persons who would be potential customers as being an appropriate criterion. His Honour went on to observe that if the similarity complained of is "commercially irrelevant", having regard to the number of people who know of that similarity, then the name or get-up is not misleading or deceptive. 37 In considering the question of reputation, although s 52 of the TPA makes no reference to "reputation, decisions under that provision have referred to the need to prove a "significant" or "substantial" proportion of persons within the relevant market who would be likely to be misled: see 10th Cantanae Pty Ltd v Shoshana Pty Limited (1987) 79 ALR 299 at 301; National Exchange Pty Ltd v Australian Securities & Investments Commission (2004) 61 IPR 420 at 440; cf .au Domain Administration Ltd v Domain Names Australia Pty Limited (2004) 207 ALR 521 at 529-530. 38 In the present case, the primary judge approached the question of the reputation in Australia of the terms MONSTER ENERGY and MONSTER and Hansen's products on the basis that the difference between "insignificant" and "significant" or "substantial proportion" of persons was only a matter of expression, and not of any substantive distinction. 39 In Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Limited (2007) 159 FCR 359, the Full Federal Court considered whether the use by the respondent of a shade of the colour purple in connection with chocolate confectionery might mislead consumers to mistakenly conclude that there was some connection between the respondent's and the appellant's businesses, and in the course of doing so referred to the distinction between the elements of a passing off action and proceedings under the TPA. The Full Court at 418-419 said: There is an overlap between causes of action arising under Pt V of the Trade Practices Act and the common law tort of passing off. However, the causes of action have distinct origins and the purposes and interests that both bodies of law primarily protect are contrasting. Passing off protects a right of property in business or goodwill whereas Pt V is concerned with consumer protection. Part V is not restricted by common law principles relating to passing off and provides wider protection than passing off. Whether or not there is the requirement of some exclusive reputation as an element in the common law tort of passing off, there is no such requirement in relation to Pt V of the Trade Practices Act. The question is not whether an applicant has shown a sufficient reputation in a particular get-up or name. The question is whether the use of the particular get-up or name by an alleged wrongdoer in relation to his product is likely to mislead or deceive persons familiar with the claimant's product to believe that the two products are associated, having regard to the state of knowledge of consumers in Australia of the claimant's product. 40 A central issue in the present case is whether the use of the terms or get-up of MONSTER ENERGY and MONSTER by Bickfords in relation to its products is likely to mislead or deceive persons who have become familiar with the product. In turn, this raises questions as to whether any persons are likely to be familiar with the product and as to whether that number of persons is not insignificant. 41 In considering whether sufficient reputation has been established, it is helpful to bear in mind the observations of Lockhart J in Lumley Life Ltd v IOOF of Victoria Friendly Society (1989) 16 IPR 316 at 323-324, where his Honour observed that there might be in the minds of some people a temporary and commercially irrelevant confusion, which is distinct from a confusion arising from misleading or deceptive conduct. Also, a transitory or ephemeral impression, if misleading, but which is immediately dispelled, may, depending on the circumstances, be of no commercial significance and therefore will not constitute misleading conduct: see Knight v Beyond Properties Pty Ltd (2007) 242 ALR 586 at 597-598.

Reasoning on appeal 42 The appellants submit that the reasoning of the primary Judge is based on an error of law because his Honour approached the case on the premise that, even if there was a sufficient reputation among potential customers in Australia who were extreme sports enthusiasts, this reputation could not be relied on because the target audience for the marketing of the products was the more widely described group of young Australian males. 43 His Honour accepted that many followers of extreme sports would be young adult males. While his Honour's judgment at times indicates that young adult males who engaged in extreme sports may know of the MONSTER ENERGY and MONSTER names as they are used by Hansen's products and that they may have drawn an association or connection between Bickfords' and Hansen's respective products, his Honour made no express finding to that effect: see, for example, Hansen [2008] FCA 406 at [87]. 44 It should be noted that s 52 of the TPA imposes no requirement that any particular reputation must be established before a breach of s 52 can be made out. In speaking of the relationship between s 52 and the tort of passing off, Stephen J observed in Hornsby Building Information Centre Pty Limited v Sydney Building Information Centre Limited (1978) 140 CLR 216 at 226 that the remedy under the TPA: … will not, as in passing off, be founded upon any protection of the trader's goodwill but, being directed to preventing that very deception of the public which is injuring his goodwill, it will nevertheless be an effective remedy for that of which he complains. Referring to the misleading conduct in that case, his Honour continued at 226: The Sydney Centre will, however, only be entitled to relief if what is in question is truly a contravention of s 52(1); that is to say, is conduct which is misleading or deceptive. It is only this with which s 52(1) is at all concerned. It is not concerned, as such, with any unfairness of competition in trade as between two traders. Accordingly, the sufficiency of the reputation which is required to be shown may be less in proceedings under the TPA than in proceedings alleging passing off. 45 The appellant submits that the primary Judge erred in wrongly selecting the class of persons in respect of which the reputation of Hansen's product, and their possibility of being misled, should be assessed. His Honour, it is said, addressed the wrong question, and should have asked simply whether there was a sufficient number of the Australian public who would be likely to be misled. The selection of a class of persons by reference to advertising goals is said to be unwarranted and unduly restrictive. The evidence indicates, so the appellant submits, that it was open to his Honour to infer that a substantial number of extreme sports enthusiasts in Australia who would be potential customers exposed to Hansen's overseas and local indirect advertising had formed the view that there was an association or connection between Bickfords' and Hansen's respective products. However, due to the restrictive approach adopted by his Honour, consideration of whether such an inference was open on the evidence was foreclosed. The result of such an approach was that his Honour concluded it not possible to draw an inference as to reputation in respect of any particular sub-class, and he thought it was necessary to infer that there was a reputation among a substantial proportion or number of persons within the broader class of young adult males. In our view, such an approach and its outcome are in error. 46 There is no foundation in the language of s 52 of the TPA to require that a reputation exist among any particular class or group of persons (particularly as defined by advertising objectives) before a breach of that provision can be made out. The provision is designed to regulate conduct which can be characterised as misleading and to protect consumers. In our view, the language of the section and its purpose do not require the Court to select any particular group as targeted by advertisers when assessing whether a breach has occurred. The fact that certain pieces or strategies of advertising may target a particular class of people as potential customers of the relevant product does not justify the conclusion that a significant number of persons in that class must be shown to be aware of the reputation before a claim under s 52 is made out. The question which must be answered can properly be framed as being whether a not insignificant number of persons in the Australian community, in fact or by inference, have been misled or are likely to be misled. 47 In the present case, the primary Judge made no general finding as to the size of the class of persons identified as extreme sports enthusiasts. His Honour proceeded on the erroneous basis that, even if the number of members in that class of persons was significant, it could not be relied on to establish reputation because the group of extreme sports followers was not the group targeted for advertising. There is no sound basis in this case for a conclusion that the class targeted for advertising purposes is, of itself, a determinative criterion. We therefore consider that his Honour erred in law in approaching the question of reputation in this case and did not make the appropriate findings as to whether there was a significant number of persons in the Australian community to give rise to, or to allow an inference of, reputation in Hansen's products, such that the conduct, which was conceded to be misleading in nature, contravened the norm proscribed by s 52 of the TPA. 48 As a consequence of the above conclusion, the question arises whether the matter should be remitted to the primary Judge for reconsideration. In our view, it should be. His Honour can then consider whether a not insignificant number of persons in the Australian community, in fact or by inference, have been misled or are likely to be misled, even if those persons are mostly or exclusively extreme sports enthusiasts. 49 The orders of the Court shall therefore be: (i) the appeal is allowed; (ii) the orders of the primary Judge made on 31 March 2008 are set aside; (iii) the matter be remitted to the primary Judge for orders to be made in accordance with these reasons; (iv) the respondents pay the appellant's costs of the appeal. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

AND: BICKFORDS (AUSTRALIA) PTY LTD (ACN 053 240 261)

REASONS FOR JUDGMENT FINKELSTEIN J 50 I agree that the appeal should be allowed and wish to add some reasons of my own. It is not necessary for me to repeat the facts. 51 The principal question identified by the judge as requiring resolution was whether the appellant, Hansen, had a sufficient reputation in the trade marks "MONSTER" and "MONSTER ENERGY" to sustain a passing off action or a claim for misleading and deceptive conduct under s 52 of the Trade Practices Act 1974 (Cth). In its statement of claim Hansen alleged that it manufactured and sold large quantities of energy drinks by reference to the trade marks. It was alleged that, although the energy drinks were not sold in Australia, the trade marks had received wide exposure to the Australian public as a result of Hansen's sponsorship of numerous athletes and sporting events, particularly in the extreme sports field. Accordingly, it was alleged that Hansen had "substantial goodwill and reputation in Australia in the MONSTER and MONSTER ENERGY trade marks in relation to energy drinks". 52 The judge decided that Hansen had not established "the reputation required by law to succeed in … [its] claims." He went on to say that "this may admit of the risk of confusion or [the] possibility of blunders by some members of the public in their choice of energy drinks … but such risk or possibility the law accepts." The judge said that Hansen had "only just commenced the development of a reputation in Australia, and … [had not] reached the stage of development such that the court should make the orders sought in this proceeding." 53 According to the evidence Hansen's target market is males between the ages of 18 and 30. No direct evidence was led as to the number of persons who fell within this demographic, however there was some evidence that there were 1.01 million males in Australia aged between 18 and 24 (Bickfords' target market) over the relevant period. In considering the principal question the judge said he would proceed on the basis that: [U]nless Hansen [established] the required reputation amongst the target market, it [could] … not demonstrate [that] sufficient persons outside the target market (being other potential customers) [had] been sufficiently exposed to or [were] sufficiently aware of the mark MONSTER ENERGY or MONSTER. 54 Hansen called evidence from Mr Sacks, its Chief Executive Officer, about its marketing strategy. Mr Sacks said that most of Hansen's marketing budget was directed to "athletic endorsements and sponsoring events". He said that Hansen's advertising, marketing and promotions are "all about image". Mr Sacks said that the desired "image of the MONSTER ENERGY beverages is … edgy and aggressive. The athletes and events MONSTER ENERGY sponsors [therefore] tend to be edgy and aggressive, or extreme. By having this image, the product is attractive to our target demographic". Mr Sacks explained that the target market is not typically the targeted market of mainstream print media. "Rather it is the in-direct and non-traditional forms of advertising, such as sponsorships, and product placement, which are instrumental in reaching this demographic." 55 On the question of the reputation required to succeed in a passing off action the judge referred to ConAgra Inc v McCain Foods (Aust) Pty Ltd (1992) 33 FCR 302 as authority for the proposition that it is necessary to show that a substantial number of persons are aware of the plaintiff's product. In relation to the s 52 claim he referred to 10th Cantanae Pty Ltd v Shoshana Pty Ltd (1987) 79 ALR 299 (a representation to the public case) for the proposition that the plaintiff must prove a "significant" or "substantial" proportion of persons within the relevant market would likely be misled or deceived. He also referred to my decision in .au Domain Administration Ltd v Domain Names Australia Pty Ltd (2004) 207 ALR 521, for a different view. In .au Domain I said (207 ALR at 529) there is: [N]o warrant for imposing a requirement that in a "representation to the public" case significant members of the public must be misled by the impugned conduct before there can be a contravention of s 52. First, s 52 does not prescribe this requirement. Second, there is no reason in principle why the requirement should exist. Third, it would be strange if a court were to determine that certain conduct had the capacity to mislead (and did in fact mislead a handful of people) but nevertheless held that the conduct was not actionable because an insufficient number of people were misled. I expressed a similar view in Australian Securities and Investments Commission v National Exchange Pty Ltd (2003) 47 ACSR 128. On the appeal in that case the Full Court (per Jacobson and Bennett JJ) did not agree: National Exchange Pty Ltd v Australian Securities and Investments Commission (2004) 61 IPR 420 at 439 - 440. The Full Court said that even in a s 52 case it was necessary for the plaintiff to show that a significant proportion of the persons to whom the misleading conduct was directed were misled. Regrettably the Full Court did not explain why (and I have yet to work out how) a representation that misleads, say, 70 people is not misleading but is misleading if it misleads, say, 7,000 people. The answer does not seem to be found in s 52. 56 At all events, after referring to the cases, the judge described the issue for determination to be: [W]hether the evidence [established] that the necessary proportion of potential customers in Australia had become aware of Hansen's product so that Hansen [had] a sufficient reputation in the mark MONSTER ENERGY or MONSTER. On this issue the judge went on to say that: [I]t is not (without more) sufficient to point to extreme sports enthusiasts or participants exposed to Hansen's product or merely to show isolated or fleeting references to MONSTER, MONSTER ENERGY or some other indicium that may be associated with the product without showing, or it being appropriate to infer, the impact such references may have on those exposed to such indicia. 57 This is an important passage in the judgment. It indicates that the judge had in mind measuring the number of people likely to be misled by reference to (or as a proportion of) the target market of approximately 1.01 million young males. He did not think it was sufficient that a substantial or significant number of (a) extreme sports enthusiasts or participants; or (b) sporting enthusiasts or participants exposed to Hansen's products; or (c) a combination of (a) and (b), were aware of Hansen's products and might be confused when they saw a similarly marked product sold by the respondent, Bickfords. 58 That this was the judge's approach is made clear in several passages in his reasons. I will refer only to a few to make the point: "[T]he court needs to … determine to what extent that witness is part of the target demographic, which is not just the extreme sports follower, but the young male adult. It may well be that extreme sports followers, having seen the material relied upon by Hansen, were aware of the Hansen energy drink and mark, but, even then, this does not necessarily mean that the potential young male adult customer, a wider group of consumers than the extreme sports follower, would have the same awareness or knowledge as the extreme sports followers." [para 84] … "Undoubtedly, I could conclude that a certain number of persons would immediately know of and recognise the get up and product of the Hansen product by reference to the words MONSTER or MONSTER ENERGY. This may be because they had seen it elsewhere, possibly in other countries or in magazines, and knew of its existence. … I do not know and cannot infer how many of the target demographic … becamesufficiently familiar with the product. … If I assumed that mainly extreme sports enthusiasts watched [a particular] program, I could not extrapolate how many young adult males may have come to know or recognise the product, yet alone how many of the wider number of potential customers." [para 87] … "I must be persuaded that the relevant Australian young male market did the perceiving, or at least came to know later of the brand through word of mouth, and that the extent of the reputation amongst potential customers in Australia is at such a level to justify the Court's intervention." [para 100] … "[W]hilst in this proceeding Hansen has tendered much material to show references to the MONSTER or MONSTER ENERGY marks, via many media, this should not beguile one into thinking the marks are necessarily, on this basis alone, known to the required proportion of potential customers." [para 104] 59 According to the cases, in a passing-off claim, the plaintiff must show that a significant or substantial proportion of persons within the relevant market were misled. In my view the judge fell into error by imposing upon Hansen the requirement to establish that a significant or substantial number of persons in the target market were misled. This is because in this case the relevant market is narrower than the target market. If, according to the evidence, a substantial number of extreme sports enthusiasts (clearly a relevant market), which comprises only a segment of the target market, were misled then a claim for passing-off would be established. The relevant market may be even narrower, comprising only extreme sports participants. 60 When the case is reheard I think the judge is also required to give greater weight than he was prepared to give to the indirect marketing campaign undertaken by Hansen to establish its reputation. It is quite clear that the judge was wary of indirect advertising. He made this point several times. For instance he said: "The evidence necessary or sufficient to establish reputation to found a case for passing off and contravention of the TPA will depend upon various factors. … Reputation may be inferred from a high volume of sales and extensive advertising, without any other direct evidence. … In this proceeding, there are no sales or direct advertising or promotion of Hansen's product in Australia. Rather, the evidence relied upon is that of exposure to persons in Australia through the marketing strategy adopted by Hansen to reach its target demographic primarily in other countries." [para 78] … "Where, as in this proceeding, the get-up is striking and distinct, a reputation may be more readily and quickly obtained, but the court cannot assume this has occurred in the market where the product has not been sold or directly advertised." [para 81] … "In a case where there is no direct advertising, where there are no sales in Australia, and where the marketing strategy is for laying the foundation for a subsequent launch, the context of the exposure is all important in the evaluation task to be undertaken by the Court." [para 104] … "In this case there is no direct advertising and a careful evaluation of the impact of the references to MONSTER ENERGY or MONSTER is required." [para 108] 61 The judge's caution is, I think, misplaced. Billions of dollars are spent on advertising. The object is to obtain brand recognition. The purpose is to influence consumer decision-making. Advertising does this by attempting direct persuasion, providing information to influence a choice between alternatives and making known what the alternatives are. 62 The most obvious form of advertising, and the easiest form of advertising to understand, is the direct message. But the advertising industry has now moved away from primarily relying on direct advertising. The belief is, and the belief is likely to be correct, that indirect communication sometimes expresses a point with more impact. The idea is that an advertisement should not be a lecture; it achieves its object sufficiently if it imports the desired information. Advertisements can do this by providing information verbally or visually. And an advertisement will have effect although the consumer is not aware someone is trying to communicate a message. 63 There are a plethora of examples of indirect advertising and it is a key topic of discussion in advertising literature. Indirect advertising of the kind with which everyone is familiar is the sponsorship of sports. Many people in many countries place great value upon entertainment, competition and accomplishment, all of which are seen in the sporting arena. Brand names and logos appear around sporting arenas, on the clothing worn by sportsmen and women and on the equipment sportsmen and women use. This form of advertising is seen by many thousands of fans who attend sporting events and, in the case of popular sports, by hundreds of thousands of people if the event is broadcast on television. There are numerous studies that show that this type of indirect advertisement is far more effective at eliciting a consumer recall response than a direct television commercial. 64 In my opinion the judge was entitled to infer that the indirect brand advertising employed by Hansen (and, for that matter, Bickfords) can establish reputation as well as, if not better than, direct advertising. After all, everyone knows that James Bond drives an Aston Martin, Janis Joplin wanted to own a Mercedes Benz and Audrey Hepburn had breakfast at Tiffany's. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

AND: BICKFORDS (AUSTRALIA) PTY LTD (ACN 053 240 261)

REASONS FOR JUDGMENT SIOPIS J 65 I have had the benefit of reading the reasons of each of Tamberlin J and Finkelstein J. 66 As to the appropriate test to be applied in determining whether the impugned conduct contravened s 52 of the Trade Practices Act 1974 (Cth) (the TPA), I agree with Tamberlin J that the question should be, whether a not insignificant number of persons in the Australian community, in fact, or by inference, have been misled, or are likely to be misled. 67 There are a number of Full Court decisions which have applied this test, or a similar test, in the context of determining whether, in relation to representations to the public, the impugned conduct contravened s 52 of the TPA. ConAgra Inc v McCain Foods (Aust) Pty Ltd (1992) 33 FCR 302 was one such case. In that case, French J observed at 380‑381: On the Trade Practices Act claim, his Honour adopted what may be in some circumstances a different test for the extent of ConAgra's product reputation necessary to show misleading or deceptive conduct on the part of McCain. Provided ConAgra could show on the balance of probabilities that "a not insignificant number" of persons knew of the ConAgra product, then it should be entitled to succeed. His Honour said: If the number of persons with the necessary knowledge is insignificant, then a fortiori the conduct complained of will not be able to be characterised as conduct that is misleading or deceptive. Once it passes, however, the threshold of insignificance, then there is much to be said for the view that the conduct in question has become misleading. But accepting the possibility that the threshold of requisite reputation under the Act is lower than that required to support a claim in passing off, he did not think that ConAgra had satisfied the onus of showing that the number of persons for whom the name "Healthy Choice" and the package design would have the necessary secondary meaning was other than insignificant. … The word "insignificant" was used by his Honour to identify the threshold of public awareness below which such conduct is not misleading for the purposes of the section. That word is normative but not for that reason inappropriate. Attention must be paid to the policy of the relevant provision which, as the heading to Pt V and many of its provisions indicate, is one of consumer protection. If the similarity complained of is commercially irrelevant having regard to the number of people who know of it, then it can be concluded that the use of the name and/or get up complained of is not misleading or deceptive. That is essentially the kind of evaluation which underpinned his Honour's finding in this case and on the primary facts that he found I am not persuaded that he erred in his approach. 68 In au.Domain Administration Ltd v Domain Names (Australia) Pty Ltd (2004) 207 ALR 521 at 530, at [26] (Domain Names), Finkelstein J referred to a number of other Full Court decisions which have also held that, in cases of representations to the public, it is necessary to have regard to whether a "significant", or "not significant" number of persons have been misled, or are likely to be misled, as an element in determining whether there has been a contravention of s 52. Among the cases referred to was 10th Cantanae Pty Ltd v Shoshana Pty Ltd (1987) 79 ALR 299. 69 Finkelstein J went on to say in Domain Names that the test adopted in those cases was inconsistent with the test espoused by the High Court in Campomar Sociedad Limitada v Nike International Limited (2000) 202 CLR 45 (Nike), namely, that, in cases of representations to the public, the question of whether the impugned conduct contravened s 52 was to be assessed by reference to a reasonable member of the relevant class. 70 The majority of the Full Court (Jacobson and Bennett JJ) in National Exchange Pty Ltd v Australian Securities and Investments Commission (2004) 61 IPR 420 (National Exchange) disagreed with Finkelstein J's view. Their Honours said at 440: Nor in our opinion is there any distinction between the words used by Wilcox J [in 10th Cantanae] and the approach stated by the High Court in Nike. In determining the effect of conduct on the reasonable members of the class, it is necessary for the court to consider objectively, as a question of fact, whether those persons have been, or would be likely to be, misled. A finding that reasonable members of the class would be likely to be misled carries with it the determination that a significant proportion of shareholders would be misled. In any event, 10th Cantanae was a decision of a Full Court. Pincus J observed (at ALR 308; IPR 298‑9) that it was not sufficient that "some readers" were affected. Gummow J (in dissent, but not as to the test) referred (at ALR 314‑15; IPR 304‑6) to the need to prove that a substantial proportion of persons was misled, in contrast to a need to establish that almost all purchasers were of a particular view. Gummow J also referred (at ALR 315; IPR 305‑6) to "the usual manner in which ordinary people behave". Accordingly, it is apparent that the test stated in 10th Cantanae is not inconsistent with Nike. We disagree with a suggestion to the contrary by Finkelstein J in Domain Names at IPR 89‑90, [25]‑[26]. 71 As Finkelstein J observes in his reasons, it is the case that the language of s 52 does not prescribe that any minimum number of persons be misled, or be likely to be misled, for there to be a contravention. In this case it was accepted that the similarity between the get up of the appellant's and respondents' product was such that it could mislead, or deceive, those with knowledge of the appellant's product ([28] of the judgment below). It may be that in cases of representations to the public like this, it would be more consistent with the language of s 52, if the question of whether a not insignificant number of persons was misled, or likely to be misled, was considered by reference to whether, and if so, what relief is to be granted under Pt VI of the TPA. This may also be the more appropriate context in which to assess whether the misleading conduct was of sufficient commercial relevance to warrant relief being granted in respect thereof, and if so, the nature and extent of that relief. The importance of the surrounding circumstances and the remedy sought, to the success of a claim under the TPA, is recognised in Nike. At 83‑84, at [98]‑[99] of the joint judgment of Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ, the High Court observed: The appellants submitted that there was no nexus in the present case sufficient to support the relief against them for contravention of s 52. The matter should not be considered in the abstract. Regard must be had to the circumstances of the particular case and the remedy sought in respect of the contravention alleged either to have occurred or to be threatened…To say this is to emphasise the point made by Toohey J in Wardley Australia Ltd v Western Australia: Although it is customary to speak of a claim for damages for misleading or deceptive conduct, s 52 of the [TP Act] does not of itself give rise to any liability. The consequences of a contravention of the terms of s 52 are to be found in various sections of the [TP Act]. (Footnotes omitted.) 72 However, in my view, it cannot be said that the Full Court decisions that have considered the question of the numbers of persons misled, or likely to be misled, in the context of whether the impugned conduct contravened s 52, are plainly wrong, and for that reason should not be followed. 73 In any event, in this case, the primary relief sought is an injunction under s 80 of the TPA prohibiting the marketing and selling of products under the mark "MONSTER ENERGY" or the mark "MONSTER" throughout Australia. Thus, even if the observations of Finkelstein J as to s 52 were to be accepted, it would still, in my view, be necessary for the appellant to succeed on its claim for this relief, to show that a not insignificant number of persons within the Australian community were misled, or would be likely to be misled. 74 I agree for the reasons given by Tamberlin J that the appeal should be allowed. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.

Counsel for the Appellant: Mr D. Catterns QC and Mr A Ryan

Solicitor for the Appellant: Davies Collison Cave Solicitors

Counsel for the Respondents: Mr D. Yates SC and Mr E. Heerey

Solicitor for the Respondents: Piper Alderman Lawyers

Judge Trade Practices Act 1974(Cth)s 52

Trade Practices Act 1974(Cth)

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