Applicable principles - misleading or deceptive conduct and related claims
174 Stone & Wood relies on ss 18, 29(1)(g) and 29(1)(h) of the Australian Consumer Law, which relevantly provided as follows:
18 Misleading or deceptive conduct
(1) A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
…
29 False or misleading representations about goods or services
(1) A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:
…
(g) make a false or misleading representation that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits; or
(h) make a false or misleading representation that the person making the representation has a sponsorship, approval or affiliation; …
175 As the Full Court of this Court observed in Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 159 FCR 397 at [98], there is an overlap between causes of action arising under Pt V of the Trade Practices Act 1974 (Cth) (see now, Pt 2-1 of the Australian Consumer Law) 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": Cadbury (2007) 159 FCR 397 at [98] per Black CJ, Emmett and Middleton JJ. The Full Court also said (at [99]):
Whether or not there is a requirement for 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 the knowledge of consumers in Australia of the claimant's product.
176 As Kenny J said in Nutrientwater Pty Ltd v BACO Pty Ltd (2010) 84 IPR 452 at [85], under the statutory misleading or deceptive conduct provisions, whether or not a representation is misleading or deceptive or likely to mislead or deceive is a question of fact, which must be determined by the court having regard to all the relevant circumstances, including the history of the claimant's product, the circumstances in which the respondent's get-up was adopted, and the circumstances prevailing in the market at the relevant time. Her Honour also noted that, in considering the statutory question, there are a number of well-recognised principles to be borne in mind. "Chief among these is the principle that conduct may be found misleading or deceptive or likely to mislead or deceive notwithstanding that the respondent acted honestly and reasonably and did not intend to mislead or deceive. Should the court find that the respondent had such an intention, as in the case of passing off, the court may more readily find that the conduct was in fact misleading and deceptive": Nutrientwater at [85]. Her Honour then said (at [86]-[88]):
86 The latter proposition is, however, subject to much the same qualification as for passing off. As with passing off, the mere fact that one trader may have copied the design or get-up of another trader's product is not sufficient of itself to establish a contravention of ss 52 or 53 of the [Trade Practices Act], so long as the copyist has sufficiently distinguished its products and made it clear that they are not the goods of the trader whose design or get-up is copied: see Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (1999) 44 IPR 281; [1999] FCA 461 at [336]-[337] (Dr Martens) (affirmed on appeal: see (1999) 95 FCR 136); 47 APR 499; [1999] FCA 1655), citing Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 196, 199-200; 42 ALR 1 at 4, 6-7; 1A IPR 684 at 686, 688-9 (Puxu) per Gibbs CJ, CLR 209-210; ALR 16; IPR 686 per Mason J, CLR 225-226; ALR 27; IPR 706 per Brennan J. In Dr Martens at [339]-[347], Goldberg J referred to a number of decisions, including Reckitt & Colman, in which the labelling of a product had been insufficient to prevent passing off, but held that the decisions were distinguishable on their facts.
87 As with passing off, whether or not impugned conduct is misleading or deceptive, or likely to mislead or deceive, is to be determined at the time the impugned conduct commenced …: see Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 195-196 and 203-204 (Taco Bell) per Deane and Fitzgerald JJ; Thai Wood Import & Export Co Ltd v Shuey Shing Pty Ltd (1989) 17 IPR 289 at 302 per Gummow J; Anheuser-Busch Inc v Budejovicky Budvar (2002) 56 IPR 182; [2002] FCA 390 at [230]-[236] per Allsop J; Dr Martens at [322]-[337] per Goldberg J; and Natural Waters of Viti Ltd v Dayals (Fiji) Artesian Waters Ltd (2007) 71 IPR 571; [2007] FCA 200 at [56]-[60] (Natural Waters) per Bennett J.
88 For the purposes of the statutory claims, in determining whether a misrepresentation has been made, the court must consider the effect of the impugned conduct on the "ordinary" or "reasonable" member of the class to whom the conduct is directed, rejecting reactions which are extreme, fanciful or capricious. As the court in Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45; 169 ALR 677; 46 IPR 481; [2000] HCA 12 at [105] (Campomar) said, "[t]he initial question which must be determined is whether the misconceptions, or deceptions, alleged to arise or to be likely to arise are properly attributed to the ordinary or reasonable members of the classes of prospective purchasers". Much the same standard is applied in a claimed case of passing off in assessing whether a representation of the relevant kind was made and its likely effect on the potential purchaser: see Ricegrowers at [63]-[66]. The ordinary or reasonable member of the class need not be particularly intelligent or well informed; equally he or she is not to be considered as if careless or indifferent to the matter in question: compare Australian Woollen Mills at 658.
177 Although not expressed in the context of statutory misleading or deceptive conduct provisions, the following passage from the judgment of Dixon and McTiernan JJ in Australian Woollen Mills Ltd v FS Walton & Co Ltd (1937) 58 CLR 641 is potentially relevant. Their Honours said (at 657-658):
The rule that if a mark or get-up for goods is adopted for the purpose of appropriating part of the trade or reputation of a rival, it should be presumed to be fitted for the purpose and therefore likely to deceive or confuse, no doubt, is as just in principle as it is wholesome in tendency. In a question how possible or prospective buyers will be impressed by a given picture, word or appearance, the instinct and judgment of traders is not to be lightly rejected, and when a dishonest trader fashions an implement or weapon for the purpose of misleading potential customers he at least provides a reliable and expert opinion on the question whether what he has done is in fact likely to deceive. Moreover, he can blame no one but himself, even if the conclusion be mistaken that his trade mark or the get-up of his goods will confuse and mislead the public. But the practical application of the principle may sometimes be attended with difficulty. …
178 The approach discussed in the above passage may have application where, for example, it can be shown that a trader, by its labelling or packaging, intended to mislead or deceive consumers into thinking that its product was the product of its competitor. But, as the Full Court (Sundberg, Emmett and Hely JJ) said in Windsor Smith Pty Ltd v Dr Martens Australia Pty Ltd (2000) 49 IPR 286, the "potency of the admission inherent in a finding of intention to deceive may depend upon the extent of the evidence as to the practical operation of the marketplace in question. The more complete the picture portrayed by that evidence, the less likely that an admission constituted by intended effect will carry the day, if it is inconsistent with the picture otherwise established" (at [34]).
179 The mere fact that a trader has copied elements of a competitor's get-up or marketing, or has taken advantage of a market a competitor has created, does not establish that the trader has engaged in misleading or deceptive conduct. In Cadbury Schweppes Pty Ltd v Pub Squash Co Pty Ltd [1980] 2 NSWLR 851 (Privy Council), a passing off case, the plaintiffs/appellants were a group of companies that manufactured and sold a soft drink called 'Solo'. They commenced a proceeding against a company (the defendant/respondent) which manufactured and sold a soft drink called 'Pub Squash' alleging that, in promoting its product, the defendant had so confused and deceived the market that it had passed off its product as that of the plaintiffs. The trial judge concluded that that there was no "relevant misrepresentation" and no deception or probability of deception; he found that the "competition developed by the respondent and its officers took advantage of the appellants' promotion of their own product, but never went so far as to suggest that 'Pub Squash' was the product of the appellants, or merely another name for 'Solo'" (see 861). The Privy Council upheld the decision of the trial judge to dismiss the passing off claim. Lord Scarman, delivering the judgment of the Privy Council, said (at 861):
Once it is accepted that the judge was not unmindful of the respondent's deliberate purpose (as he found) to take advantage of the appellant's efforts to develop "Solo", the finding of "no deception" can be seen to be very weighty: for he has reached it notwithstanding his view of the respondent's purpose. But it is also necessary to bear in mind the nature of the purpose found by the judge. He found that the respondent did sufficiently distinguish its goods from those of the appellants. The intention was, not to pass off the respondent's goods as those of the appellants, but to take advantage of the market developed by the advertising campaign for "Solo". Unless it can be shown that in so doing the respondent infringed "the plaintiffs' intangible property rights" in the goodwill attaching to their product, there is no tort: for such infringement is the foundation of the tort: see Stephen J, in Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Pty Ltd.
(Emphasis added.)
180 The judgment of the Privy Council in the Pub Squash case was referred to by Lockhart J in ConAgra Inc v McCain Foods (Aust) Pty Ltd (1992) 33 FCR 302 at 345 and by Kenny J in Nutrientwater Pty Ltd v BACO Pty Ltd (2010) 84 IPR 452 at [82] and[108]. In ConAgra, Lockhart J said that "deliberate copying of the plaintiff's goods does not always evidence an intention to deceive; it may indicate nothing more than realisation that the plaintiff has a useful idea which the defendant can turn to his own advantage, though not intending to pass off his goods as those of the plaintiff" (at 345). In Telstra Corp Ltd v Phone Directories Co Pty Ltd (2014) 316 ALR 590, Murphy J said (at [540]):
It is also necessary to keep in mind that it is no part of the Court's task to be critical of the respondents for taking an element of Telstra's get up unless they have engaged in misleading or deceptive conduct or passing off: Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (1999) 44 IPR 281 at [306]-[307] per Goldberg J. The authorities are replete with examples where traders "sail close to the wind" by copying elements of a competitor's get up, but maintain sufficient differences such that misleading or deceptive conduct or passing off cannot be made out. The question is whether the trader goes too far and steps over the line into misrepresentation.
(Emphasis added.)
181 A number of cases have considered the application of the statutory misleading or deceptive conduct provisions in the context of the use of descriptive words. In Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216, which concerned a claim by the Sydney Building Information Centre that the use of the name Hornsby Building Information Centre was misleading or deceptive, or likely to mislead or deceive, Stephen J (with whom Barwick CJ and Jacobs J agreed) said (at 229-230):
There is a price to be paid for the advantages flowing from the possession of an eloquently descriptive trade name. Because it is descriptive it is equally applicable to any business of a like kind, its very descriptiveness ensures that it is not distinctive of any particular business and hence its application to other like businesses will not ordinarily mislead the public. In cases of passing off, where it is the wrongful appropriation of the reputation of another or that of his goods that is in question, a plaintiff which uses descriptive words in its trade name will find that quite small differences in a competitor's trade name will render the latter immune from action (Office Cleaning Services Ltd. v. Westminster Window and General Cleaners Ltd. [(1946) 63 RPC 39, at p 42], per Lord Simonds). As his Lordship said [(1946) 63 RPC 39, at p 43], the possibility of blunders by members of the public will always be present when names consist of descriptive words - "So long as descriptive words are used by two traders as part of their respective trade names, it is possible that some members of the public will be confused whatever the differentiating words may be." The risk of confusion must be accepted, to do otherwise is to give to one who appropriates to himself descriptive words an unfair monopoly in those words and might even deter others from pursuing the occupation which the words describe.
If this be so in the case of passing off actions the case of s. 52(1), concerned only with the interests of third parties, is a fortiori. To allow this section of the Trade Practices Act to be used as an instrument for the creation of any monopoly in descriptive names would be to mock the manifest intent of the legislation. Given that a name is no more than merely descriptive of a particular type of business, its use by others who carry on that same type of business does not deceive or mislead as to the nature of the business described.
182 In the context of passing off, in Burberrys v JC Cording & Co Ltd (1909) 26 RPC 693, Parker J (as his Lordship then was) said (at 704):
Though I do not agree with the argument that a word cannot be at the same time both descriptive and distinctive, I think the fact that it retains its primâ facie descriptive signification increases the difficulty of providing that it is distinctive of the goods of any particular manufacturer. If a word is primâ facie the name of or description of an article, evidence that it is also generally associated with the name of a particular manufacturer is, in my opinion, by no means conclusive that it has become a distinctive word which cannot be used of the same article when made by others without risk of deception. If the article in question is made exclusively or mainly by a particular manufacturer, it is almost bound to be associated with the name of that manufacturer by the trade and the public, for each trader and each member of the public will naturally associate the article with the name of the manufacturer who supplies it to him and who may possibly be, in his opinion, the only person who supplies it at all. When a witness says that he knows the word "Slip-on" as meaning, not only a particular kind of coat, but the coat of a particularly manufacturer, it is material to know whether he is acquainted with the article as made by any one else. If he is not, the word, however it may be associated in his mind with the particular manufacturer, is not really to him a distinctive word.
(Emphasis added.)
183 This passage was quoted with approval by Isaacs ACJ in Angelides v James Stedman Hendersons Sweets Limited (1927) 40 CLR 43 at 61-62. (Although Isaacs J dissented in the result, this did not affect his statements of principle. The judgment of Isaacs ACJ was cited by the High Court in Campomar Sociedad, Limitada v Nike International Limited (2002) 202 CLR 45 at [108].) Consistently with the above passage, it has been held in a number of cases that the fact that a word is descriptive does not mean that it cannot also be distinctive: see Kettle Chip Company Pty Ltd v Apand Pty Ltd (1993) 46 FCR 152 at 165-166 per Burchett J; Workwear Industries Pty Ltd v Pacific Brands Workwear Group Pty Ltd (2013) 104 IPR 1 at [150] per Siopis J; REA Group Ltd v Real Estate 1 Ltd (2013) 217 FCR 327 at [105]-[108] per Bromberg J. In the context of considering the notion of trade mark use, in Anheuser-Busch Inc v Budejovický, Národní Podnik (2002) 56 IPR 182, Allsop J (as his Honour then was) said (at [189]): "The usage of a word may fulfil more than one purpose on a label. For example a word may have a descriptive element, but also an element of trade mark or branding or distinguishing role: Johnson v Johnson v Sterling Pharmaceuticals [(1991) 30 FCR 326] at 335. Equally, a word may have a role in identifying a geographical location, but also a trade mark or branding or distinguishing role. It depends on context."
184 The parties referred to two cases, in particular, as providing useful illustrations of the application of the principles relating to misleading or deceptive conduct in circumstances which may bear some similarity with the facts of the present case. The first case is Anheuser-Busch Inc v Budejovický, Národní Podnik (2002) 56 IPR 182; the second case is Yarra Valley Dairy Pty Ltd v Lemnos Foods Pty Ltd (2010) 90 IPR 117.
185 In Anheuser-Busch Inc v Budejovický, Národní Podnik, the applicant was a company incorporated in the United States of America which made and sold beer in the United States and sold beer in various countries around the world. The applicant had at all relevant times been the registered proprietor of the marks BUDWEISER, BUD and BUDWEISER KING OF BEERS. It sold its beer in Australia and elsewhere under the brand 'Budweiser'. The beer was also labelled with the word 'Bud', and the phrase 'King of Beers'. The applicant's beer was well known in Australia; at least among English speakers in Australia, the only meaning of the word 'Budweiser' was the applicant's beer (at [8]-[9], [26]). The first respondent was a Czech company, wholly owned by the Czech Republic, which manufactured and sold beer. Its principal European brewery was located in a town in the Czech Republic called Ceské Budejovice (in the Czech language) or Budweis (in the German language). The town names had adjectival or possessive forms in Czech and German, being Budejovický and Budweiser respectively. The first respondent exported beer to Australia. The applicant contended that the first respondent had infringed, or threatened to infringe, its registered trade marks. The applicant also claimed relief on the basis of contravention of ss 52, 53(c) and (d) of the Trade Practices Act 1974 (Cth) and passing off. Although the focus for present purposes is on the part of the judgment dealing with the Trade Practices Act and passing off, it is necessary to say something briefly about the trade mark infringement issues in order to provide context.
186 The applicant contended that the first respondent had infringed the registered trade marks in several ways: by using the phrase 'Budejovický Budvar' on the seal on the neck, or on the large white front label, or on the smaller white back label; or by using the word 'Budejovický' in those places, or the word 'Budvar' in those places; or by using the phrase 'Budweiser Budvar' on the lower red strip on the front of the label, or the word 'Budweiser' there, or the word 'Budvar' there (see at [132]). Allsop J concluded that the use of Budejovický Budvar on the front white label, rear white label and seal on the neck label was not an infringement of the marks BUDWEISER, BUD and BUDWEISER KING OF BEERS under s 120 of the Trade Marks Act (at [181], [220]-[228]). Further, until May 1998 there was an orange strip with the phrase 'Budweiser Budvar' above 'National Enterprise'; after May 1998 there was (and the intention was that there would be in the future) a red strip with the phrase 'Budweiser Budvar' on the same line as 'National Corporation' (at [181]). Two issues arose. The first was whether the use of the word 'Budweiser' or the phrase 'Budweiser Budvar' in the corporate name was use as a trade mark. If it was, and if characterised as trade mark use of the word 'Budweiser', there was no dispute that it was substantially identical with the trade mark BUDWEISER or, if characterised as trade mark use of the phrase 'Budweiser Budvar', it was one identical with, or deceptively similar to, the trade mark BUDWEISER (at [183]). The second issue was whether the first respondent was entitled to the protection of s 122 of the Trade Marks Act. In the course of discussing the first of these issues, his Honour said, "BUDWEISER is a well-known mark. It is a word which has a brand reputation. It is not a descriptive word to Australian English speakers" (at [187]). His Honour concluded that "Budweiser" and "Budweiser Budvar" were being used as trade marks (at [190], [192]) and that use was not saved by s 122 (at [216]-[218], [222]).
187 In relation to the Trade Practices Act and passing off claims, his Honour held that, apart from the use of 'Budweiser Budvar' on the coloured strip of the first respondent's product, there was no misleading or deceptive conduct or passing off; for the same reasons as had been given in relation to the trade mark infringement part of the case, his Honour did not think the mark BUDEJOVICKý BUDVAR (on the first respondent's product) evoked Budweiser or Bud as it appeared on the labels and neck seal (of the applicant's product); further, the get-up of the first respondent's product, its colour, style and Europeanness, all created and reinforced a product distinct from that of the applicant (at [245]). His Honour then said (at [246]), in relation to the front label of the first respondent's product:
However, on the front label appears the word "Budweiser". It is visible. It can be plainly seen from a number of feet. In Exhibits GRB 11 and TH 10, of course, the word "Budweiser" could be seen from a greater distance than could the word appearing on Exhibits GRB 12, TH 11 and TH 101. In Exhibits GRB 11 and TH 10 "Budweiser" is in clear white letters against a strong contrasting colour. Ms Strachan's view was that the totality of the effect of the label, its Gestalt, was sufficiently strong as to overwhelm any effect of "Budweiser" on the strip, or that people would not read or look at this part of the label. I do not agree. The word is tolerably well-known. It means or evokes the applicant's beer. It is used on the front label. It tells the reader of an association with "Budweiser". That the brewery is in the Czech Republic (as the smaller writing says) does not deny the association brought about by the word. The bottle may well be placed adjacent or near to the applicant's beer in the specialty beer section of shops. I accept that perhaps not everyone looking at the bottle will take in this part of the label, but a significant number, I think, will. For them, this is the hook which associates the first respondent's beer with the applicant's. I do not think that the balance of the get-up or information on the bottle would prevent the assumption being created in a consumer that this was a European version of the applicant's beer. Whilst this would be contrary to the applicant's promotion of the values referred to at [25], it would be a result, I think, of the usage of "Budweiser" with its clear associations with the applicant, and could be perceived as a product or brand extension.
(Emphasis added.)
Accordingly, his Honour concluded that, in this respect, the misleading or deceptive conduct and passing off cases were made out.
188 In Yarra Valley Dairy Pty Ltd v Lemnos Foods Pty Ltd (2010) 90 IPR 117, the applicant (Yarra Valley) had for many years produced and marketed a marinated cheese as PERSIAN FETTA. Its product was sold in a distinctive 'paint tin'. Yarra Valley applied to register, and registered, PERSIAN FETTA as a trade mark in relation to "dairy products including cheese". The first respondent (Lemnos) began using the PERSIAN FETTA mark on its website, then on its marinated cheese product, which was sold in a 'paint tin' similar in size and shape to that used by Yarra Valley. Both Yarra Valley's and Lemnos's products were sold through Coles supermarkets. Yarra Valley brought a proceeding alleging trade mark infringement. In response, Lemnos submitted that Yarra Valley's trade mark registration should be cancelled. Yarra Valley also claimed relief on the basis of the tort of passing off and the statutory misleading or deceptive conduct provisions. Yarra Valley's claims were unsuccessful. In relation to the passing off and misleading or deceptive conduct claims, Middleton J held (at [268]-[270]) that Yarra Valley's case could not succeed because there was an insufficient likelihood that consumers would have been misled by the packaging of Lemnos's product to think that Lemnos or its product were associated with Yarra Valley. The distinctiveness of Lemnos's product was reinforced by a number of contextual matters (at [271)]. Thus, notwithstanding the use of similar tins, Lemnos had clearly distinguished its product from that of the applicant (at [272]). Middleton J said (at [274]-[277]):
274 I have reached the above conclusions, even though the evidence establishes a clear intention on the part of Lemnos to adopt the key indicia of the PERSIAN FETTA product. It is apparent from Lemnos' contemporaneous documents and the oral evidence of Mr Raman and Mr Karamoshos that the Lemnos Persian Fetta/Persian Marinated Cheese product was consciously modelled on the Yarra Valley Persian Fetta product.
275 The three key indicia of Yarra Valley's PERSIAN FETTA product were:
(i) The product itself, being a cow's cheese marinated in extra virgin olive oil, garlic, thyme, black peppercorn and bay leaf;
(ii) The term "Persian"; and
(iii) The distinctive paint tin.
276 Undoubtedly, these are the indicia that a consumer recalls. In addition to these key indicia, the use of similar wording "in the finest blend of herbs and oil", and the use of the same recipe and ingredients could increase the risk of persons being misled and deceived.
277 However, I do not accept that the composition of the product, the prominent use of the word "Persian" and the characteristic paint tin, when used in marketing Lemnos' product, individually or cumulatively form a representation that Lemnos' product is Yarra Valley's PERSIAN FETTA or that it is associated with the maker of the PERSIAN FETTA product. I do not accept that consumers would be likely to be misled or deceived.