Simplot Australia Pty Limited v McCain Foods

REASONS FOR JUDGMENT 1 By notice of motion dated 24 April 2001, the applicant, Simplot Australia Pty Limited ("Birds Eye") seeks the following interlocutory relief against the respondent McCain Foods (Aust) Pty Ltd ("McCain"): "An injunction restraining the Respondent until the trial of the proceeding or further order, whether by itself, its directors, officers, servants or agents or otherwise from manufacturing, supplying, selling or offering for sale or supplying or promoting any hash brown product in the packaging referred to in paragraph 10 of the statement of claim;" 2 The packaging referred to in par 10 of the statement of claim is a polythene envelope bearing on its face one larger and one smaller representation of the McCain trade mark, being the name "McCain" in white cursive script on an oblong black background surrounded by a yellow border. The largest legend on the front of the wrapping is the word "triangles" in lower case black lettering surmounted by the words "Hash Brown" in a smaller different script, also in black. The three words just described are displayed against a yellow background and below them and slightly to their left there is quite prominently displayed in white lettering against a purple background the legend "750g NET". In the bottom front of the envelope is a red disk about the size of a 10 cent coin, bearing the words in white uppercase fonts "OVEN HEAT", accompanied by a stylised representation of yellow flames. Surrounding the written material are pictorial depictions in various sizes of golden-brown triangles, apparently of cooked potatoes. The uniform background of the whole envelope has been variously described but can be designated, not inaccurately, as cherry-coloured. 3 On the reverse of the envelope appear two small reproductions of each of the insignia "Hash Brown triangles" and the "750g NET" "flag" described above. There are also two smaller reproductions of the McCain trade mark, one of which appears as the word "McCain" in the legend "Deliciously crisp & Golden McCain Has Brown Triangles are made from real potato." The remaining text on the reverse of the envelope is in white, save for two gold sub-headings and comprises a table of "Nutritional Information", cooking instructions, a note of the ingredients, directions for refrigerated storage, the statement "PRODUCT OF AUSTRALIA" and addresses for the Australian and New Zealand distributors of the product. 4 Birds Eye contends that McCain's marketing of its "Hash Brown triangles" in the packaging just described is misleading and deceptive in contravention of ss 52 and 53 of the Trade Practices Act 1974 ("the Act") and further or alternatively constitutes the tort of passing off. Those consequences are said to flow from the fact that Birds Eye has, since September 2000, manufactured and marketed its own "Hash Brown Triangles" also in a polythene envelope, somewhat smaller than the McCain version. The Birds Eye wrapping has on its front, in the middle towards the top, the Birds Eye trade mark consisting of the words "BIRDS EYE" in red uppercase lettering on a white background in the form of a stylised representation of a bird with wings spread. The bird in turn, is mounted on a royal blue oblong base with a white frame and indented or "scalloped" lower edge. Below the trade mark in large royal blue block letters are the words "HASH", each letter of which is descending in size so that the letter "A" is replaced by a representation of golden-brown hash potatoes in the form of a roughly isosceles triangle, and the word "BROWNS", each letter of which is in ascending size. The legend "HASH BROWNS" has been reproduced on a yellow background and has been given a "three dimensional" blocking effect by picking out the whole in a lighter, lavender, shade of blue. Below and slightly to the left of that legend in much smaller script are the words "Crunchy Triangles" and in still smaller black text is the expression "660g NET". Clustered around the text in what is represented by a convention of white streaks as a "jet-propelled" motion, are depictions of golden-brown hash brown triangles, including that which forms the "A" in the legend "HASH BROWNS" described above. 5 The uniform background colour of the Birds Eye envelope has variously been described as "pillar-box" or "fire-truck" red and could, again without undue inaccuracy, be called "scarlet" or "cardinal". 6 On the reverse of the Birds Eye envelope are three small reproductions of the Birds Eye trade mark and two smaller versions of the "HASH BROWNS" legend described above. Three panels of black text on a yellow background contain respectively "Nutrition Information", instructions for preparation by various heating methods and an encomium of the "big Australian grown potatoes" used by Birds Eye "to make their perfect Hash Browns". Ingredients, refrigerated storage instructions, the applicant's address and a telephone number to which complaints may be addressed are noted in small white text in the lower right corner of the reverse side of the envelope. At the top centre of that side, in fairly prominent gold text is this promotional narrative; "Craig walked in, starving. He needed something tasty, quick. In a jiffy, the Birds Eye* Hash Browns were out of the oven and being hoed into. Once he started on the golden crunchy triangle snacks he couldn't stop. With a mouth full of shredded potato delight, the only thing he could get out was .... ...YUM!" 7 Birds Eye has adduced evidence from a marketing consultant, Mr Beaton, who has expressed the opinion that; "It is important to recognise that consumers buy brands rather than the products per se. A brand comprises a combination of elements in the mind of the consumer which may include the physical properties of the product, the brand name, brand symbols and designs or logos, colour, personalities associated with the brand, and brand packaging. These elements conjure up certain thoughts and feelings on the part of consumers that can become strongly associated with the brand. The gestalt or overall image of a brand as it relates to consumers includes not only these physical elements, brand name and packaging, but also associations with the brand and branding devices used to create associations, especially its advertising. Consumers develop an image in their mind of the brand, made up of a combination of these elements. It is this overall image to which the consumer relates and what they look for when in the supermarket." 8 Mr Beaton has also expressed the view that consumers of supermarket items like hash brown potatoes are "looking for the product (or more accurately the product get-up) that most closely resembles the brand image they associate with the brand they seek." As well, Mr Beaton propounded a theory about the making and effect of television commercials promoting consumer goods like frozen hash browns. He then drew a distinction between a "unifying brand name" under which goods within a product category are sold, eg Birds Eye, which Mr Beaton calls "the family brand". He next suggested that "Individual products within the range are referred to as sub-brands (eg, Hash Brown Triangles)" and in the same context drew this conclusion; "In my experience, it is not unusual for sub-brand names to be more important in terms of consumer recognition of a particular product that than the family brand name or corporate brand name. For example, the chocolate bar brands CRUNCHIE, VIOLET CRUMBLE and PEPPERMINT CRISP are sub-brands where, in my opinion, the sub-brand is significantly more dominant than either their family brands or corporate brands. Indeed, many loyal consumers of these brands would not be able to recall with certainty the correct family brand name or corporate brand name for each of these brands, despite these names being marked on the packaging." 9 Mr Beaton next analysed Birds Eye's television commercial ("TVC") promoting its Hash Brown Triangles and suggested that it has the effect of "strongly reinforcing the sub-brand Hash Brown Triangles rather than the family brand, Birds Eye". From that premise, he concluded that many consumers "prompted by the Applicant's TVC and seeking out the Hash Brown Triangles brand, are very likely to come across the Respondent's Hash Brown Triangles in the freezer section of their local supermarket" and "are likely to recognise the Respondent's product as one and the same as the brand they are seeking." Mr Beaton also attributed similar thought processes to consumers who had previously purchased Birds Eye's product without having seen its TVC. He contended; "The brand image, as I have said in the paragraphs above, centres around the name Hash Brown Triangles. The same image is portrayed in the Respondent's product. So again consumers who see the Respondent's product are likely to recognise it (incorrectly) as the product they have previously purchased. Again the absence of any major differentiating element such as an obviously different sub-brand name or a radically different colour scheme or a radically different package shape or fabric or different pricing structure means that for many of these consumers they would have few if any signals that this product was not the one they previously purchased and meant to purchase again. What might make a different would be if such consumers were presented with the Respondent's product immediately side-by-side with the Applicant's product. This might prompt some buyers to question which of the two is the brand they seek. At this stage, some consumers may realise they are dealing with two separate products from two separate family brands. Yet, for many of these consumers, without further information about the brand they seek, they would become confused as to the similarities between the two products and may still chose the Respondent's Hash Brown Triangles in the belief that they are the Applicant's Hash Brown Triangles. Yet other consumers may only see the Respondent's product and not the Applicant's product." 10 There is evidence from Ms Robb, Birds Eye's Group Marketing Manager, that Birds Eye spent $255,000 in producing in September 2000 its thirty second TVC for Hash Brown Triangles which has been screened every week night in November and December 2000 at a cost of $1.751 million. The promotion was so successful that screening was discontinued to allow production to catch up with demand. Screening was resumed on 15 April 2001 and an expensive schedule of future screening has been arranged. Ms Robb has further deposed; "I believe that McCain has been able to emphasises the word 'Triangle' in its packaging for hash brown triangles due to the fact that our Bermuda Triangles commercial has educated the consumer to understand that here is a new hash brown product on the market which is in a triangular shape. The emphasis by McCain on the word 'triangles' on their packaging causes me to believe that consumers will purchase McCain's hash brown triangle when they intend to purchase the product in the Bermuda Triangles commercial. Based on my experience, a consumer making a quick purchase decision does not concentrate on the particular shade of colour of a product but between colours. As our Hash Brown Triangles and the McCain Hash Brown Triangles have packaging of a similar colour I consider that many consumers are likely to confuse the two, especially when other aspects of McCain's packaging are considered." 11 The evidence of Ms Robb directed to the balance of convenience included these passages; "If we had to cancel the promotion of our Hash Brown Triangles again the consumer awareness of the product and actual sales would drop. We planned this television advertising schedule as we considered it to be the most efficient strategy for retaining a high level of consumer awareness over our initial 12 month launch. The Bermuda Triangles commercial is shown in concentrated blocks so as to maintain consumer awareness over the complete launch period. Each block of advertising builds on the previous block and the advertising we undertook in November and December 2000. The first 12 months after a product's launch is critical for establishing consumer adoption. If McCain's Hash Brown Triangles remains on the market I consider that any further advertising for our product would advertise McCain's Hash Brown Triangles as well as our own product. ....... If an injunction were not to be granted, Simplot would have to choose between conducting no further television advertising until the final hearing in this proceeding or producing an entirely new television commercial. Before we could run a new television commercial, the commercial would have to be produced. I consider that it would be impossible to change or amend the Bermuda Triangles commercial and we would have to reshoot a completely new commercial which would have to be developed from scratch. This in itself would take several months and the budget for such a new commercial would be very similar to that of our previous commercials, namely $255,000. Simplot increased its recommended retail price for our Hash Brown Triangles on 2 April 2001 from $2.19 to $2.29 on the assumption that our advertising would start on Easter Sunday and our campaign would continue as planned. The recommended retail price is the price that we suggest a retailer sells our product. I considered that the screening of our Bermuda Triangles commercial would effectively support the increased price of our product. However, if our Hash Brown Triangles were not supported by our scheduled advertising I consider that sales would reduce as consumers would be less prepared to pay this price premium. I consider that it would be ineffective for us to reduce our recommended retail price if we cancelled our advertising campaign for our Hash Brown Triangles as retailers usually fail to pass on such a reduction to consumers and retain the original price thereby retaining the extra profit. I am concerned that if an injunction is not granted Simplot will also suffer loss of the benefit of the investment in the advertising already made and consumer attraction already established. I consider that we will also lose sales from other frozen potato products in that a consumer who has tried and is satisfied with McCain's Hash Brown Triangles, may well decide to try other products within the 'family brand'. In this regard, Simplot could lose sales across a broad range of its potato products. It is quite possible that we may not produce new advertising because some sales would still go to McCain. Without such support, sales of our Hash Brown Triangles would very likely reduce and this could even lead to deletion of our product from supermarkets in the medium term. We would have to put our efforts into creating a new product with its associated costs and time." 12 The evidence also discloses that McCain, in August 1999, completed the construction of a new processing plant which incorporated a special forming machine for the manufacture of triangular shaped product. McCain had previously imported from Canada Hash Brown Wedges which were triangular in shape. That product was distributed through McCain's food services division to hotels, canteens and similar customers. After the successful launch of a product called "Shredded Hash Browns" which has been extensively advertised, McCain decided, in September 2000, after learning of the launch of Birds Eye's Hash Brown Crunchy Triangles, to go into production for the retail market of its own Hash Brown Triangles. 13 According to McCain's Vice-President of Marketing for Asia-Pacific, Mr Boyle, the design, concept and background colour for the packaging of the new product were agreed on early in November 2000 and the final form of the package was determined before Christmas of that year. It was intended that the packaging should be consistent with that for other products in the McCain specialty potato range, "Potato Nuggets" and "Shredded Hash Browns". Mr Boyle believed that examples of the packaging of Birds Eye Hash Brown Triangles came to the notice of McCain in mid to late October 2000, but he rejects the suggestion that the McCain packaging was designed to appear similar to that for the Birds Eye product, or was designed to benefit from the Birds Eye TVC, which, he points out, did not go to air until the design of the McCain packaging was well-advanced.