The Lanham Act
127 Kraft contends that because its arbitral claim involves a claim under the Lanham Act, and Australian courts have no jurisdiction to hear such a claim, it cannot be afforded "complete relief" in this proceeding. It says that is a ground which alone means that Bega's claim for injunctive relief on the vexatious or oppressive ground cannot succeed.
128 Kraft relies on the following passages from the judgment of the plurality in CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345, 393-394, for the proposition that it is not sufficient that the subject matter of the arbitration be part of the same "matter" for constitutional purposes as the subject matter of this proceeding because, as Kraft's counsel put it, "[w]hat's needed is complete correspondence. It's only if there's nothing which can be gained by the other proceedings over and above what may be gained in the local proceeding that there could be relief":
… Thus, it was said in Carron Iron Company v Maclaren (1855) 5 HLC 416 at 437 [10 ER 961 at 970] that "[w]here [there is] ... pending a litigation here, in which complete relief may be had, [and] a party to the suit institutes proceedings abroad, the Court of Chancery in general considers that act as a vexatious harassing of the opposite party, and restrains the foreign proceedings."
In Société Aerospatiale [Industrielle Aerospatiale v Lee Kui Jak] [1987] AC 871 at 893-894], the Privy Council emphasised that the various cases decided in the nineteenth century with respect to vexation and oppression, including Peruvian Guano Company v Bockwoldt (1883) 23 Ch D 225, have continuing significance for the grant of anti-suit injunctions. Those cases establish that the mere co-existence of proceedings in different countries does not constitute vexation or oppression. In particular, Peruvian Guano establishes that "double litigation [which] has no other element of oppression than this, that an action is going on simultaneously abroad, which will give other or additional remedies beyond those attainable in [the domestic forum]" does not amount to vexation or oppression.
More recently, in Bank of Tokyo Ltd v Karoon [1987] AC 45 at 60, Robert Goff LJ pointed out, correctly, in our view, although without specific reference to underlying equitable principle, that foreign proceedings are to be viewed as vexatious or oppressive only if there is nothing which can be gained by them over and above what may be gained in local proceedings. On the other hand, they are vexatious or oppressive if there is a complete correspondence between the proceedings or, in terms used in Carron Iron Company, if "complete relief" is available in the local proceedings.
(Footnotes omitted, emphasis added).
129 Bega submits that there can be a complete correspondence between this proceeding and the arbitration. It says that this court would have jurisdiction to hear the claim for relief brought under the Lanham Act in the arbitration pursuant to its pendent or accrued jurisdiction, because it arises out of the same sub-stratum of facts pleaded in this proceeding.
130 It is not sufficiently clear how it is that this court would, by operation of Australian choice-of-law rules, or otherwise, have jurisdiction to hear a claim brought under the Lanham Act (a United States Federal statute) in respect of a wrong alleged to have occurred in Australia, in circumstances where the governing law of the master agreement is "the internal Laws of the State of New York". (It will be recalled that the governing law provision in the master agreement provides that "all disputes or controversies arising out of or relating to this Agreement … shall be governed by, and construed in accordance with, the internal laws of the State of New York…"). That question was not the subject of any submission of substance. I therefore proceed on the basis that Kraft's Lanham Act claim could not be brought in this court.
131 Bega also says that the substantive relief that may be obtained under the Lanham Act may be obtained under the Australian Consumer Law, or through a passing off claim, or both. According to Bega, this duplication is "unjustified" where a party has "started in a place where complete relief is available" and proceeds to "start seeking in another place … some other relief which is available in the first place." That, it submits, is a "classic category of vexatious conduct".
132 It has been said in other contexts that there is some affinity between s 43(a) of the Lanham Act (one of the two provisions relied upon by Kraft) and s 53(eb) of the Trade Practices Act 1974 (Cth) (now s 29(1)(k) of the Australian Consumer Law). In Netcomm (Australia) Pty Ltd v Dataplex Pty Ltd (1988) 81 ALR 101, 106, for example, Gummow J said:
[…Section] 53 (eb) of the [Trade Practices] Act proscribes the making by a corporation, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services, of a false or misleading representation concerning the place of origin of goods.
Para. (eb) has some affinity with s.43 (a) of the Lanham Act 1946 … This prohibits, inter alia, persons using in connexion with any goods or services "a false designation of origin". The latter expression has been judicially interpreted as including designation not only of place of manufacture, but also of the identity of the manufacturer, supplier or franchisor of goods or services. This expansive interpretation has attracted criticism (e.g. by Professor Germain in the ebulliently titled article "Unfair Trade Practices Under Section 43(a) of the Lanham Act: You've Come a Long Way, Baby - Too Far, Maybe", (1974) 64 Trade Mark Reporter 193 at 206, 218-221). The terms of the Australian para. (eb) perhaps reflect the United States experience by making it plain that "origin" has a purely geographic denotation.
133 In Hogan v Pacific Dunlop Ltd (1988) 83 ALR 403, 418-19 Gummow J made these observations about the degree of similarity between s 43(a) of the Lanham Act and s 52 of the Trade Practices Act (now s 18 of the Australian Consumer Law):
I have referred elsewhere [in Netcomm] to the affinity between [s 43(a) of the Lanham Act] and para. 53(eb) of the [Trade Practices] Act. As the Lanham Act has been interpreted, it will be apparent that it is a fairly broadly based provision with some resemblances to s. 52 itself. The United States authorities indicate that s. 43(a) creates a distinct federal statutory tort designed to afford broad protection against various forms of unfair competition and false advertising, including deceptive and misleading advertising. The section is directed not only at acts which would qualify as trade mark infringement, but also at unfair competitive practices involving potential deception; standing to sue extends to "competitors" injured by the false advertising, but not to consumers at large. The authorities supporting these propositions are collected in Colligan v Activities Club of New York Ltd 442 F. 2d 686 (1971) at 692; Alfred Dunhill Ltd. v Interstate Cigar Co Inc [1974] USCA2 507; 499 F 2d 232 (1974) at 236; Estate of Elvis Presley v Russen 513 F. Supp 1339 (1981) at 1376.
An interlocutory injunction will issue in respect of apprehended contravention of s. 43(a) where an advertisement creates a reasonable likelihood of confusion by consumers regarding the origin or sponsorship of a product or services. In Dallas Cowboys Cheerleaders Inc. v Pussycat Cinema Ltd (1979) 604 F 2d 200, such an injunction issued and the Court of Appeals (Second Circuit) held that the district court had not erred in finding that the plaintiff had established the likelihood of confusion within the meaning of the statute; the Court of Appeals noted that the "plaintiff expect(ed) to establish on trial that the public may associate it with the defendants' movie and be confused into believing that plaintiff sponsored the movie, provided some of the actors, licensed defendants to use the uniform [of the Cheerleaders], or was in some other way connected with the production".
134 Gummow J also went on to say (Hogan v Pacific Dunlop Ltd (1988) 83 ALR 403, 422):
… the decisions applying s. 43(a) of the Lanham Act are not concerned with "unfair competition" in some global sense, but with a particular form thereof namely that arising through misrepresentation. In that respect, they respond to the same concerns as do ss. 52 and 53 of the [Trade Practices] Act, and the tort of passing off. Whilst it is erroneous to approach s. 52 on the assumption that its application is confined exclusively to circumstances which constitute some form of representation, misleading or deceptive conduct generally consists of representations, whether express or by silence; this is so particularly where the allegedly misleading or deceptive conduct arises in the type of factual setting with which passing off actions often have been concerned …
(Citations omitted)
135 Although the observations of Gummow J are useful in describing, by way of background, some of the circumstances in which s 43(a) of the Lanham Act may provide a remedy similar to that available under the Australian Consumer Law in certain circumstances, they do not found any sufficient support for Bega's assertion in this case (and it was, with respect, no more than an assertion) that the Australian Consumer Law could provide equivalent relief. Accordingly, I do not accept the assertion.
136 Bega's principal submission is that Kraft's Lanham Act claim is untenable. It says that its un-contradicted expert evidence establishes that the Lanham Act claim is untenable because:
(1) the relevant conduct alleged about misuse of the "Peanut Butter Trade Dress" occurred only in Australia;
(2) that conduct has no, or no substantial, connection with United States commerce;
(3) Bega is not a United States company;
(4) Bega has no presence in the United States; and
(5) accordingly, as a matter of law, the provisions of the Lanham Act relied upon cannot operate extra-territorially.
137 In aid of that submission, Bega relied on the unchallenged expert opinion evidence of Professor Barton Beebe. Professor Beebe is the John M Desmarais Professor of Intellectual Property Law at the New York University School of Law, and specialises in trademark and copyright law.
138 Professor Beebe was asked to make, and did make, ten factual assumptions, as follows:
(1) Bega's alleged conduct occurred wholly within Australia and New Zealand.
(2) Bega is an Australian company.
(3) Bega has no office, employees, or other presence in the United States.
(4) Bega has no related companies or affiliates in the United States.
(5) Bega makes no sales of peanut butter into the United States.
(6) Bega has no plan or intention of making sales of peanut butter into the United States.
(7) Bega does not advertise or market in the United States.
(8) Kraft Foods [being the first applicant in this proceeding, referred to in these reasons as "Kraft"] currently does not export peanut butter into Australia or New Zealand.
(9) Kraft Foods alleges that it owns all rights in the unregistered trade dress used by Bega for the peanut butter products that Bega sells in Australia and that Bega's use of that trade dress in Australia is an infringement pursuant to section 43 of the Lanham Act.
(10) The relevant trade dress has been used only in the Australian market, and has not been used by Kraft Foods, Bega, or anyone else in respect of sales of peanut butter in the United States.
139 Mr Batt made two main criticisms of Professor Beebe's evidence, which he said meant that the Professor's evidence should be entirely discounted. First, he submitted that Professor Beebe was not given a copy of the master agreement and, in particular, the choice of law provision. He submitted that "documents reviewed [by Professor Beebe] do not include the [master agreement], and therefore, don't include the dispute resolution clause, which is where one finds the parties' bargain that American law is to be applied to determine any dispute between the parties … It's not equipped with that feature, and we submit … that that of itself is … the end of it, because you don't even get to the enquiry that the Professor has traversed, because the parties have already said 'apply the Lanham Act'. That's it … And all the cases that are annexed [to Professor Beebe's evidence], that deal with whether, in different curial circumstances, where there is no such agreement, the Lanham Act is to have extraterritorial application are just not to the point".
140 There was, as I have already noted, no evidence before the court about the meaning of the expression "the internal laws of the State of New York". There is no evidence, therefore, about whether that expression, as a matter of New York law, includes Federal laws. In the absence of any evidence that the internal laws of the State of New York include the provisions in the Lanham Act upon which Kraft relies, I am unable to accept that the fact that Professor Beebe's attention apparently was not drawn to the governing law provision in the master agreement has any significance, let alone that renders his evidence irrelevant, as Kraft submits. Kraft had an opportunity to adduce expert opinion evidence about the meaning and effect of the governing law clause, or for that matter any other expert evidence on the question about which Professor Beebe was asked to opine. But it did not adduce any expert evidence.
141 In those circumstances, it is not for this court to speculate about whether "the internal laws of the State of New York" includes United States Federal laws - speculation which Kraft's submission necessarily entails.
142 Kraft also submitted that factual assumption number 10 - "the relevant trade dress has been used only in the Australian market, and has not been used by Kraft Foods, Bega, or anyone else in respect of sales of peanut butter in the United States" - is an unreliable assumption because there is no evidence to show that Kraft had not used the trade dress outside Australia. In particular, Kraft submitted that a provision of the master agreement about sales made into other countries from Australia as a result of online activity (clause 2.8), so called "spillover" sales, contemplated the possibility that sales of peanut butter using the Kraft Trade Dress might conceivably have occurred outside the Australian market. In my view, that submission is, with respect, speculative and I reject it. (Otherwise, Kraft did not challenge any of the factual assumptions made by Professor Beebe).
143 I return to deal with the substance of Professor Beebe's evidence.
144 Professor Beebe was asked this question: "[w]ould a United States court find that United States trademark law could be applied extraterritorially in relation to Bega's alleged conduct in respect of Kraft Foods' infringement allegation?"
145 Professor Beebe proffered this summary of his answer by way of expert opinion: "based on the assumptions listed above, there is no likelihood that a United States court would apply United States trademark law extraterritorially to Bega's alleged conduct in this matter".
146 Professor Beebe explained his opinion as follows:
In Vanity Fair Mills, Inc v T Eaton Co, 234 F.2d 633 (2d Cir. 1956), the United States Court of Appeals for the Second Circuit established three factors that courts should balance to determine if extraterritorial application of federal trademark law is appropriate. These factors are: (1) whether the defendant's conduct has a "substantial effect on United States commerce"; (2) whether the defendant is a United States citizen; and (3) whether there exists a conflict between the defendant's trademark rights under foreign law and the plaintiff's trademark rights under domestic law …
The "substantial effect on United States commerce" factor is by far the most important factor that courts consider, and the lack of a "substantial effect on United States commerce" is arguably dispositive. See Atl. Richfield Co v Arco Globus Int'l Co, 150 F.3d 189, 192 (2d Cir. 1998) ("[W]e have never applied the Lanham Act to extraterritorial conduct absent a substantial effect on United States commerce.") …
…
Because of the importance of the "substantial effect on United States commerce" factor, a United States court would decline to apply United States trademark law extraterritorially in this matter given that Bega's alleged conduct occurred wholly within Australia and New Zealand, Bega has no presence of any kind in the United States, Bega does not sell or advertise its products in the United States, Bega has no intention to enter the United States market, the relevant trade dress has been used only in the Australian market, and [Kraft Foods] does not itself export peanut butter to Australia or New Zealand. All of these considerations taken together indicate that Bega's alleged conduct does not have any significant, let alone "substantial" effect on United States commerce.
…
Also greatly relevant to the analysis of the extraterritorial application of United States trademark law is that Bega is not a United States company and has no presence in the United States. It is generally held that when the defendant fails to satisfy two of the three Vanity Fair Mills factors, this is "fatal" to the extraterritorial application of United States trademark law. Vanity Fair Mills 234 F.2d at 643.
(Emphasis added)
147 Counsel for Kraft submitted that Professor Beebe's opinion that "there is no likelihood" that a United States court would apply United States trademark law extraterritorially in this case was in some sense equivocal. I do not accept that submission. It is clear from those parts of Professor Beebe's opinion which are emphasised in bold type in the immediately preceding paragraph of these reasons that he was expressing the (unchallenged) opinion that because Kraft's Lanham Act claim concerned conduct that occurred other than in the United States, it could only succeed if Kraft established that Bega's conduct had a "substantial effect on United States commerce"; that Bega's alleged conduct did not have any significant, let alone "substantial" effect on United States commerce; and that, combined with the fact that Bega is not a United States company and has no presence in the United States, those considerations would be "fatal" to the extraterritorial application of the Lanham Act. Professor Beebe's expert opinion is, therefore, that Kraft's Lanham Act claim has no apparent aspect of validity.
148 In circumstances where that opinion went unchallenged, in my view, the proposition that there must be a "complete correspondence" between the relief available in the two relevant jurisdictions is of no assistance to Kraft in this case.