Nostac Enterprises Pty Ltd & Anor v. New Concept Import Services Pty Ltd & Anor [1981] FCA 152

at all in relation to subject matter of proceedings - Principles for interlocutory relief - balance of convenience

NOSTAC ENTERPRISES PTY. LIMITED and BENSONS TRADING COMPANY PTY. LIMITED v. NEW CONCEPT IMPORT SERVICES PTY. LIMITED and JOHN VICTOR HUNTER

NOSTAC ENTERPRISES PTY. LIMITED and BENSONS TRADING COMPANY PTY. LIMITED

NEW CONCEPT IMPORT SERVICES PTY. LIMITED and JOHN VICTOR HUNTER

ORDERS JUDGE MAKING ORDERS: ELLICOTT J. WHERE MADE: SYDNEY DATE OF ORDER: TUESDAY, 1 SEPTEMBER 1981 ORDERS. (1) The court, upon the applicant giving to the court

the respondents by themselves, their servants and agents and the servants and agents of any of them be restrained until the hearing of the application in this matter or until further order of the court

A, B, © and H herein; and (ii) from procuring or authorising any of the above

activities without,in any such case, first having obtained the written consent thereto of Hanna-Barbera Pty. Limited and first having given to the applicants or their solicitor two days notice in writing of that consent and of the terms of that consent and in the case of selling gift packs or gift sets with such consent at venues where show bags are being sold by other traders without displaying in a prominent position a sign stating - "The gift packs sold at this stall are not show bags and are not sold by us as such."

(2) Liberty to any party to apply on two days notice to

the others. (3) The costs of all parties of these interlocutory

NOSTAC ENTERPRISES PTY. LIMITED and BENSONS TRADING COMPANY PTY. LIMITED

NEW CONCEPT IMPORT SERVICES PTY.LIMITED and JOHN VICTOR HUNTER

In this matter the applicants seek relief against the respondents under s.52 of the Trade Practices Act. That section provides that a corporation shall not in trade or commerce engage in conduct that is misleading or deceptive or is likely to mislead or deceive. ra?

restraining the respondents, New Concept Import Services

displaying, selling or offering for sale, show bags using the name "Mr Men" or characters associated with the name "Mr Men".

The matter arises in what are probably unusual circumstances in cases under s.52. Usually the applicant, if a trader seeking relief, has some claim to the proprietorship of the mark the subject of the proceedings and involved in the alleged misleading or deceptive conduct. In this case the particular mark is one the goodwill in which attaches elsewhere.

Nostac Enterprises Pty. Limited (Nostac) is a New South Wales company whose business is the import, distribution and retail of a large range of goods including novelty items. It is the licensee under two agreements dated 4 August 1980 and 10 February 1981 with Hanna-Barbera Pty. Limited. Those agreements are almost identical. Only the schedules are different in material

Under cl. 1 of each agreement Hanna-Barbera as licensor granted to Nostac as licensee the non-exclusive licence to use the name, character, likeness, design, trade mark and visual representation described in the first part of the schedule solely upon and in connection with the manufacture, 'distribution and sale of the article or articles described in the second part of the schedule.

Under both agreements the first part of the schedule refers to "All Mr Men characters." The

agreements are different as to the licence period and as

to the products in respect of which the licence is granted.

Under the agreement of 4 August 1980, whose initial term expires on 31 December 1981, the products referred to are stated as follows:-

Under the agreement of 10 February 1981, the products consist of some 72 types and classes of goods.

It 1s not relevant to the present proceedings for me to refer to them in greater detail.

In each agreement the licensee agrees to pay the stipulated royalties. By cl. 9 the licensee agrees that the articles covered by 1t shall be of high standard and quality and of a style and appearance suitable to protect and enhance the character and the goodwill thereof. Before manufacturing, selling or distributing any licensed product the licensee has to furnish to the licensor a prototype of the article together with its proposed packaging and a sample of the representation of the character which is to be reproduced from the art work and art guide supplied by the licensor and is not to proceed with the manufacture or sale without the approval of the licensor.

According to the evidence the author and developer of the "Mr Men" series of characters is a person known as Roger Hargreaves, an Englishman. From about 1972 he developed 39 male characters, each of whom is identifiable by a particular shape, expression, colour and name and

about whom a book has been written. The first character

developed was "Mr Tickle" and there are now 39 characters,

39 books and 39 television episodes - one for each character.

Each book tells the story of the character and about eight million of these have been sold throughout Australia since the release of "Mr Men" in Australia in 1978. The television episodes are 74 minutes each and have been released to the Australian Broadcasting Commission for their unlimited use throughout Australia until 1985. They are generally broadcast between 4:00 p.m. and 6:00 p.m. in the afternoon regularly each week, that being the time for children's programs.

Copyright Promotions Limited 1s a London company which has obtained the world licensing rights from Roger Hargreaves for all the "Mr Men" characters. Hanna~Barbera Pty. Limited, a New South Wales company, obtained from Copyright Promotions Limited the Australia and New Zealand licensing rights for the period from 1 January 1980 to 31 March 1981. This period has recently been extended beyond today.'s date.

The shares in Hanna-Barbera Pty. Limited are presently owned as to 49 percent by Hanna~Barbera Inc. of Hollywood and as to the remaining 51 percent by James Hardie

Limited through its subsidiary, the Paul Hamlyn Limited

group. As at August 1981 there were many licensees licensed to produce, manufacture and distribute the

"Mr Men" characters, and on a very large range of licensed

products. The respondent, New Concept Import Services Pty. Limited (New Concept), 1s not itself a licensee of the "Mr Men" characters but an associated company, Croner Trading Pty. Limited, is, and I shall refer to that lacence agreement later.

There are in all in excess of 250 different licensed products which are sold throughout Australia in all major department stores, in most of the retail chains and in smaller retail stores. Examples of the use of the characters have been produced to me in evidence. The name "Mr Men", and all of the characters have received a great deal of publicity through the education systems throughout the states and territories of Australia. The reputation of "Mr Men" is not restricted to Australia.

The characters are known in other parts of the world.

"Mr Men" licensed products include items such as belts, socks, toothbrushes, cups, plates, books, games, toys, comic strips, watches, purses, badges, lampshades, puzzles, chocolate confectionery, ice confectionery and many others. Comic strips featuring the characters,at the present time appear Australia-wide in newspapers owned by the News Limited group, Herald and Weekly Times Limited group, and in the Australian Women's Weekly.

From January 1981 Nostac has permitted the second respondent, Bensons Trading Company Pty. Limited, to distribute "Mr Men" show bags at exhibitions and shows at various venues throughout Australia including the

Royal Brisbane Exhibition, which has just concluded.

"Mr Men" characters it has marketed about 100,000 show bags, and an example of the show bags has been admitted in evidence. Sales have been made in various parts of Australia at shows. For instance, at the Sydney show, 39,500, and at the Melbourne show, 32,000 show bags have been sold.

Bensons Trading Company Pty. Limited had a stall at the Royal Brisbane Exhibition during the holding of that exhibition in August. Prior to the commencement of 1t, television advertising took place at its expense. I did not have available a copy of the script of that advertising, nor of the film clip itself.

It was described in evidence and so far as that evidence goes it appears that some 25 to 30 commercials, 60 seconds in length were shown on three commercial television stations in Brisbane for a week commencing from 4 August 1981. These advertisements took place in the- children's viewing tames (4:00 to 6:00 p.m. in the evening and 7:00 to 9:00 a.m. in the morning). The commercials showed the various items which bear the "Mr Men" name and characters and which were available in the show bag on sale at the stall conducted by Benson Trading Company Pty. Limited at the Brisbane Show. The commercials were produced so that they could be used for shows in other places. Details were given of intended T.V. advertising in connection with the Adelaide and

There was, in addition, an advertisement placed in the Brisbane "Daily Telegraph" apparently by those responsible for the Royal Brisbane Exhibition, which referred to the applicants' show bag and some 30 others apparently to give the public some idea of the contents of show bags available at the Exhibition. [It was not paid for by the applicants.

Croner Trading Pty. Lamited was added as a third respondent by leave in these proceedings. It entered into a licence agreement on 28 August 1980 in similar form to that to which I have already referred as having been entered into between Nostac and Hanna-Barbera Pty. Limited.

It applied to all "Mr Men" characters and it covered a number of products which could be described as toys and some of which were described in specific terms - e.g. "'Mr Men' Flappers ex Peter Pan Playthings Limited", "'Mr Men' Magnetic Board Games ex Peter Pan Playthings Limited".

The licence agreement contained a clause in identical terms to clause 9 of the agreement with Nostac and required the products to be produced for approval by the licensor before being manufactured or sold, together with the proposed packaging.

Counsel: for the respondent referred me to cl. 1 of the agreement and did so for the purpose of basing a submission that the respondent was entitled to sell

articles together - that is to say, collectively - within

a particular bag, whether described as a carry bag or whether it was put together as a gift set or simply goods wrapped together.

The evidence establishes that New Concept also had a stall at the Royal Brisbane Exhibition. Tendered in evidence were three photographs of that stall. The stall advertised the sale of a number of what would ordinarily be referred to as show bags; for instance a "Chips bag", a "Smurf bag" and a ""Pop-eye bag".

There was also displayed on the wall of that stall what was referred to as "Mr Men" gift sets. The display referred to the various items which for a price of $2.50 made up what was referred to as "a gift set". There was also a representation of a bag referred to as "a carry bag" with "Mr Men" on it in very large capitals and with "Mr Men" and, it turns out, "Little Miss" characters on it as well.

There is no doubt in my mind that the other bags referred to - e.g. the "Smurf bag" and the "Pop-eye bag"" - were what are normally referred to as "show" bags. They were not described as "show" bags but they appear to be show bags. On the board above the stall appeared a number of colourful representations, including one of "Mr Men" with "Mr Men" characters surrounding it.

There were at this stall, according to the evidence before me, carry bags already made up which contained the various novelty products shown in the display on the wall of the stall. When people asked for such bags

Evidence was given by Mr Hilton who stated he was a consultant of Hanna-Barbera Pty. Limited. It does appear that he was in large measure responsible for negotiating the licence arrangements on behalf of that company. His evidence was that he had had discussions with Mr Hunter, the second respondent and a director of the first respondent, regarding the sale of what he referred to as a gift packs under the "Mr Men" name and using the characters.

I am unable to say that on the evidence approval was given. On the other hand, I think it is reasonably clear that such approval would be favourably considered and would probably be forthcoming in writing if the actual carry bag which was produced in evidence was supplied to him, and on the basis that it was only to be used for what he referred to as "a gift pack".

He drew a distinction between "a gift pack" and "a show bag". On his evidence, I would find it difficult to hold that he would be likely to approve of the first respondent using the name "Mr Men" or the characters on what he described and on what are ordinarily known as "show bags". There 1s, therefore, on the evidence before me at present, no consent to the "Mr Men" name or characters being used on the gift set which was displayed

at the respondent's stall at the Brisbane Exhibition.

Counsel for the respondent submits that properly construed, the agreement between his client and Hanna-Barbera Pty. Limited was a sufficient consent.

I do not regard it as such. It is clear, I think, that show bags have a specific character about them and are a special form of merchandising. I do not think the parties intended in their agreement that consent be given in relation to show bags, nor to what might be described as gift sets.

The actual distinction between "gift sets" and "show bags" is not altogether clear from the evidence. I think it quite likely that members of the public would believe that the product produced at the New Concept stall in answer to a request for even a gift set, and certainly in answer to a request for a "Mr Men" bag, was a show bag as ordinarily understood.

The effect of placing the "Mr Men" name and characters on products so far as the public 1s concerned is not unlike the effect which, it has been said, it would have on the public to place well known Walt Disney characters on products.

(1937) 57 C.L.R. 448 at p. 457 Dixon J. (as he then was)

"I find it hard to believe that the use of the words ("Mickey Mouse") on or in connection with a radio receiving set would produce any other impression than in the case of most of the other almost innumerable classes of articles to which the name or the representation of Mickey Mouse has been applied. That impression does not, I think, primarily relate to the origin, selection or treatment of the goods. The reason for using

to the goods a name or means of description at once

reputation and fame of Disney's creations and it may be that in some vague way the buyer supposes that

Likewise here I think the use of the "Mr Men" words and characters represent to the public including parents and children that there is some likely association between the product and those responsible for the "Mr Men" books and T.V. series. It is unnecessary of course, to show that the public actually know who in fact are responsible.

In these proceedings the applicants allege that the corporate respondents were guilty of conduct in course of trade or commerce which is misleading or deceptive or is likely to mislead or deceive and that the individual respondent, Mr Hunter, has aided or abetted or been knowingly concerned with that conduct.

The respondents case is put on two bases. First, that the corporate respondents are selling their products in show bags under the name "Mr Men" and with "Mr Men" characters on them and in so doing the public are likely to be misled into purchasing theiv show bags expecting to receive the applicants show bag with different contents.

Secondly, the applicants allege that the respondents are selling their products in show bags and in

so doing they are representing to the public, contrary to

the truth, that their products are being so sold with the

authority of or endorsed by those responsible for the "Mr Men" characters in books and films.

I think it is important to bear in mind in dealing with this case that the sale of the goods in show bags is a popular and traditional form of merchandising at shows around Australia. Whether they do or not, members of the public like to bel1reve they are getting a bargain. Many attend a show with the purchase of show bags as a dominant purpose. They are particularly attractive to children though adults are capable of equal fervour in purchasing them.

Although New Concept advertised it was selling "gift sets" it does appear it was selling its "Mr Men" products already put up on what it called "carry bags". I think it likely that many members of the public would regard what it was selling as show bags. There is evidence that the employees at this New Concept stall were asked for a "Mr Men" bag or "Mr Men" show bag and in response supplied what was called a "gift set" already put up in a bag with "Mr Men" figures on it and looking like a show bag.

In this matter I am satisfied that the test for interlocutory relief adopted in this court has been satisfied. I refer, particularly, to the decision of

Bowen C.J. in World Cricket v. Parrish (1977) 16 ALR. 181

"A plaintiff 1s required to make out a prima facie case, 'in the sense that if the evidence remains as it 1s, there is a probability that at the trial of the action, the plaintiff will be held entitled to relief',"

If the evidence remains the same at the trial in this case then in my opinion it is probable that the applicants will establish that members of the public would be likely to be misled into believing as a result of the first respondent's conduct that the first respondent at its stall at the Royal Brisbzne Exhibition was selling show bags and that these were endorsed by those responsible for the books and T.V. shows featuring the "Mr Men" characters, and further, that they could buy at the stall show bags which were the same as those being advertised by the applicants on T.V. Such conduct would in my view constitute a breach of s.52 of the Act and if repeated, as is possible, would continue to be such a breach.

There is evidence from a Mrs Romanowski and a Mrs Czislowski of such deception and of the sale of products by the first respondent as show bags. Although it is a circumstance, this deception was not in my opinion caused by the fact there were two stalls where "Mr Men" products were available. It was caused by the fact that in answer to a request which could in my view only be construed as a request for a "Mr Men" show bag,

Mrs Czislowski was supplied with a gift set. This I regard as deceptive conduct within the meaning of s.52.

The matter is not affected in this case by any fa1rlure on the part of the applicants to obtain endorsement for their products. The fact is that any person can bring proceedings under s.52 and no applicant has to show that

it has any rights vis-a-vis the respondent or has any

rights at all in relation to the matter the subject of its application.

So far as it is relevant, however, I am satisfied that the applicants did have approval to sell the "Mr Men" show bag and, with the exception, I think, of a kite, all the other products which were placed in it and sold as part of the show bag. The approval to the show bag was given last year.

Having regard to possible further deception of the public and the commercial arrangements being made for the sale of "Mr Men" endorsed products, I believe that the balance of convenience will be met by the applicants having some form of relief. The evidence of Mr Hilton establishes a real likelihood that formal consent will be given to the sale of gift sets endorsed with "Mr Men" and "Mr Men" characters. There is a possibility of course of several "Mr Men" show bag stalls existing at the one show and of consequent confusion in the public mind. However, this may have to be accepted. I say "may" simply because I am not satisfied that even that is something which s.52 would not cover. That, however, may be conduct for which the licensor could be responsible. I make no finding whatsoever in relation to that matter.

fail important that Hanna-Barbera Pty. Limited bear this possibility of confusion in mind in granting endorsements and in fixing the conditions for the sale of "Mr Men"

endorsed products. From the public's viewpoint, it should

also bear in mind the likely confusion between "gift packs" and "show bags". In the context of a show unless some step is taken to distinguish them public confusion leading to complaints to them and to the traders involved would seem inevitable. There were numbers of complaints at the Royal Brisbane Exhibition which apparently increased over the period. One of those came from Mrs Romanowski. In determining interim relief I have borne all these factors in mind. The orders I propose to make will also take into account the course of commercial dealing which has been shown to exist in relation to "Mr Men" products. However, they do not purport to overcome the public confusion which, as I say, may be inevitable if there are several stalls selling "Mr Men" show bags or selling "show bags" and "gift packs" which are, in the public mind, indistinguishable. The orders I propose to make are as follows:- (1) The court, upon the applicant giving to the court the usual undertaking as to damages, orders that the respondents by themselves, their servants and agents and the servants and agents of any of them be restrained until the hearing of the,application in this matter or until further

(i) advertising, displaying, selling, offering for sale show bags, gift packs or gift sets under or in association with any representation of the words "Mr Men" or with any one or more of the likenesses of the drawings of the "Mr Men" characters appearing in exhibits A, B, C and H herein; and

(12) from procuring or authorising any of the above activities

writing of that consent and of the terms of thac consent and in the case of selling gift packs or gift sets with such consent at venues where show bags are being sold by other traders without displaying in a prominent position a sign stating - -

preceding pages are a true copy of the Reasons for Judgement herein of his Honour