the Kettle Chip Company Pty Limited v Apand Pty Ltd

the Kettle Chip Company Pty Limited v Apand Pty Ltd - [1993] FCA 546 - FCA 1993 case summary — Zoe

[8]

Trade Practices Act, Section 52 - Passing Off - use of name, symbol and get-up resembling those of rival trader - names "The Kettle Chip" and "Country Kettle" - test for comparison - likely effect upon ordinary person of respondent's packaging by virtue of possible imperfect recollection of applicant's packaging - inference to be drawn from risk deliberately undertaken by the respondent in choosing packaging very similar to that of the applicant - whether the respondent had taken sufficient steps to distinguish its product - whether "Kettle" is a descriptive word - whether in any case it has become distinctive of the applicant's product - relevance of association of the word with a stylized symbol and the absence of any other brand name - whether the respondent's use of the word conveyed a falsehood - use of survey evidence - whether modified packaging continued to pass off and to contravene s. 52 because it was sustained by and continued the impression created by the earlier packaging - whether the sale of product made by the applicant on behalf of other traders and marked with a similar brand and logo, but without acknowledgment of the applicant's manufacture destroyed the distinctiveness of the brand name and logo - effect of a significant section of the public understanding the name and logo as marks of the applicant - whether all the goods manufactured by the applicant appeared to come from the same source, some being marketed by separate companies - whether the existence in a section of the public of a belief that an applicant's name is also used by others destroys the basis of a claim in passing off or under s. 52 although another section of the public regards the name as distinctive of the applicant's goods - whether the applicant by its own conduct had destroyed the distinctiveness of its name and device - whether a passing off action can be based upon a shared reputation - whether a s. 52 action may be based on a shared reputation - whether on the taking of an account of profits a respondent is entitled to rely on indirect benefits alleged to have been conferred on the applicant by its entry into the market served by the applicant.

[49]

13. The letters were edged in red. Above the words "COUNTRY KETTLE", which took up about two thirds of the square, as it appears to the eye, was a picture the most prominent feature of which was the upper part of a cauldron very similar to the applicant's cauldron, with some potatoes piled up to its left, where the applicant also had potatoes piled up. From the top of the cauldron are two licks of steam in white. In the left background is a stylized representation of a house, with trees and indistinct fields extending from it, but the house is very much smaller and less conspicuous than the cauldron, and than even the pile of potatoes. Also quite inconspicuous by comparison with the block letters in white, edged with red, and the cauldron and potatoes, speaking of the visual impact of the packet, is a representation of the Smith's diamond, intersecting the upper border of the square, within which are the words "POTATO CRISPS" in black on yellow, surrounding the word "SMITH'S" in white upon a small piece of red background. It will be remembered that the words "COUNTRY KETTLE" are edged in red, and their dominance over the word "SMITH'S" is indicated by the fact that each of them is over five times as high as the letters S, M, H and S of "SMITH'S" (the letters I and T have been enlarged, but are still not at all prominent). The marking of the packet with the information "100g NET" is virtually identical, in size as well as in letter and figure type, with the same statement appearing on the applicant's packet, except that the respondent has put it in red letters and placed it at the top of its packet, and not at the bottom, where it appears on the applicant's packet. Below the square, in a position closely corresponding to that in which the same words are written in white block letters on the applicant's packet, the respondent has in red block letters, but without any banderol, the words "CHOLESTEROL FREE". The edge of the square in the centre of the respondent's packet is outlined by thin silver lines so as to create a border. As the square itself is in a deep blue very similar to the deep blue used by the applicant, so this border is in a light blue closely resembling the light blue used on the applicant's packet of lightly salted chips. Picked out in white block letters at the top of this border are the words "SLOW COOKED", at the bottom "POTATO CHIPS", at the right side "SEA SALT", and at the left side "KETTLE STYLE".

[53]

16. Of course, a person who places the packets before him, side by side, can also see differences. But that is not how passing off by the imitation of another trader's mark or get-up is to be tested. In general, and more particularly in the case of an item likely to be purchased for a small price without long consideration, the comparison which must be made is between the impression of the applicant's goods retained in a customer's mind and the impression made by the sort of consideration he is likely to give to the respondent's product before purchasing it. Only a rare potato chip consumer, who has previously studied the applicant's packet, is likely to go through that exercise again upon seeing a packet, some time later, on display in a service station or a corner shop. If, as he passes it, it appears to him to be the "Kettle" product he liked before, or another flavour put out by the same people, he is very likely to purchase it without further examination. (Cf. Lockhart J's reference in Bridge Stockbrokers Ltd v. Bridges [1984] FCA 391; (1984) 4 FCR 460 at 474 to "the mere seconds which are frequently involved in making decisions to buy many products"; and see the similar remark of Gonthier J in Ciba-Geigy Canada Ltd v. Apotex Inc (supra) at 661. See also LSK Microwave Advance Technology Pty Ltd v. Rylead Pty Ltd (1989) 16 IPR 107 at 115.) If he retains a memory of a round cauldron, with two licks of steam, against a rich background texture of two-toned golden potato chips, a pile of potatoes to the left, and some potatoes within a circle, he will need to have a very accurate visual recall, and to be very observant or attentive, to notice the differences - that the bottom of the respondent's cauldron is not visible, the addition of the little house, and the matter of the bagged potatoes. The virtual identity of the strong colour impact of the two shades of gold, the strong dark, and the contrasting light, blue, the strong white, and the touches of red and silver - with no sign at all of a different colour, except a tiny amount of green near the respondent's little house and some relatively inconspicuous black (which it will be recalled the applicant also used on its later packet) - could only drive the impression firmly into the casual consumer's mind. Strong symbols, strong colours, and the striking word "kettle", taken together with other language links, had the capacity, in my opinion, to overwhelm, for many customers, any latent or imperfect memory associating these things with the applicant's ring, as a feature different from the respondent's square, as well as other smaller differences. As Lord Radcliffe said in de Cordova v. Vick Chemical Coy. (1951) 68 RPC 103 at 106: "(I)n most persons the eye is not an accurate recorder of visual detail, and ... marks are remembered rather by general impressions or by some significant detail than by any photographic recollection of the whole". Very many purchasers in the route trade will be casual consumers. It is to be expected that, quite often, the much less noticeable reference to Smith's will be overlooked, as indeed, the evidence shows, was the express intention of those who commissioned the design of the respondent's packet.

[59]

20. This reasoning is applicable to the present case. The respondent, although not producing a hand cooked chip, set out to duplicate the characteristics of the applicant's product. It went further. The evidence shows plainly that a sophisticated analysis was attempted of the image which the applicant had created for its product in the market, as well as of the product. The respondent then set out to give its own product that same image, in order to win back the customers who were buying the applicant's potato chips - to regain lost market share from the applicant was, according to the respondent's Sales and Marketing Director, "the primary objective" of "COUNTRY KETTLE". In doing so, the respondent deliberately subordinated its name of Smith's in favour of adopting and emphasizing a name that used the key word in the name under which the applicant had sold the same product. As well, the respondent placed on its packets the pictures of potato chips, potatoes and a cauldron that I have described. These had not previously been used in this way by the respondent, but they plainly evoked strikingly similar representations used by the applicant. I have already mentioned other details which greatly reinforced the impression. It is obvious a considerable risk was taken of an adverse court decision, and there is express evidence that the legal implications were discussed. In these circumstances, the inference is strong that persons expert in the trade (the respondent's own executives) considered there was much to gain from the use of so close an imitation of the name, symbol and get-up of the applicant's increasingly popular product. The expert expectation of that gain tends to confirm that the situation was one in which there was a likelihood of such a degree of confusion of the products as to provide a fertile soil for deception. Cf. Kolotex Glo Australia Pty Limited v. Sara Lee Personal Products (Australia) Pty Limited (Wilcox J, unreported, 3 June 1993) at 11-12. As Gonthier J said in Ciba-Geigy Canada Ltd v. Apotex Inc (supra) at 660:

[70]

27. In so finding, I have not needed to go to the quite voluminous evidence ("such a volume", the respondent's counsel termed it, in the course of objecting to its admissibility) tendered to show instances of actual deception. The packets speak for themselves. And what they say is supported by much of the respondent's own evidence, which attests to the drawing power of the applicant's name and get-up, and to the respondent's desire and intention to place itself before consumers, so far as it could, in the same guise. But, while there was much evidence in an inadmissible form, whether as hearsay or for other reasons, there was also admissible evidence of actual deception, which was not challenged, and I accept that evidence, the tender of which was not in my opinion unfair to the respondent, as confirming the conclusion I have reached on the deceptive nature of the "COUNTRY KETTLE" packaging. For example, the affidavit of Sabine Danelon, a marketing assistant with the applicant, provided evidence of her own deception for some time (before she took up employment with the applicant), and of customers' complaints made to her, on a number of occasions, about "COUNTRY KETTLE" potato chips, obviously on the assumption that they were a product of the applicant's manufacture. Another example is the affidavit of Joseph Curmi, the applicant's purchasing manager, which shows that the President of a soccer club sponsored by the applicant and provided with free potato chips was, according to his spontaneous protest to the deponent "They're your chips", completely deceived by "COUNTRY KETTLE". The evidence of the complaints and protest was, I think, admissible on the principle discussed in Italiano v. Barbaro [1993] FCA 241; (1993) 40 FCR 303 at 320, which applies to states of mind generally. See also Interlego A.G. v. Croner Trading Pty Limited [1992] FCA 624; (1992) 39 FCR 348 at 389-390. Indeed, the respondent's own documents included confirmation that it had created the impression of being the company that dealt in "Kettle" chips in reality sold by the applicant.

[74]

30. In any case, I have great difficulty with the proposition that the word "Kettle" is relevantly descriptive. It was not used as an adjective to describe potato chips in Australia before the advent of the applicant. Although the word "Kettle", as an ordinary English word, is derived from the Latin catillus, a small bowl, dish or plate (Gepp and Haigh, Latin-English Dictionary (1918); Lewis and Short, A Latin Dictionary (1896); Chambers Murray Latin-English Dictionary (1976)), in English it almost always, apart from some specialized meanings, refers to a particular kind of vessel for boiling water, and that is certainly what it ordinarily means in Australia. Indeed, so specific is the idea of a kettle, as generally understood, that when kettles became electric, those which departed too far from the familiar shape were called electric jugs. The odd expression "a pretty kettle of fish" may be thought to have retained its currency partly because of the suggestion of humour inherent in its incongruity, and its most frequent use is comical. A celebrated instance is to be found in the chorus of peers in Act II of Iolanthe. But at least that expression, as the Shorter Oxford English Dictionary makes clear, has a basis in local tradition in a part of England where "a kettle of fish" refers to a kind of al fresco cooking. There is no such basis in Australia for kettle chips. And when the applicant's packet and displays first brought the expression before the Australian public, the words "The Kettle Chip" appeared as the only words which could possibly have been a brand name for a packet of potato chips otherwise unbranded, and appeared in close and invariable association with a stylized image of a cauldron. The cauldron, as pictured, is certainly not an actual kettle. Nor, according to the applicant's managing director, had he ever heard the applicant's batch cookers called kettles by anyone, despite what I think most people would regard as some advertising puffery on the back of the applicant's packet, and some straining of language in a few documents consumers would never see. When this word which does not naturally and readily describe a potato chip is associated with a striking device suggestive, not of reality, but of make-believe or symbolism, it is not likely to convey any clear meaning, except that of a brand name - particularly as "Kettle" is used on the applicant's packets, where it is written prominently in a place appropriate for the brand name of the chips to appear. (Cf. Mark Foy's Limited v. Davies Coop and Company Limited [1956] HCA 41; (1956) 95 CLR 190 at 194-195, per Dixon CJ) The respondent's managing director, Mr Ballard, conceded in cross-examination that consumers "may" read the words "The Kettle Chip" on the applicant's packet as a brand, and that "(i)f they perceive any brand at all, it will be 'The Kettle Chip' or some part of that".

[82]

"You used the word 'kettle' in an attempt to tap into the

category established by the Kettle Chip Company?---We used the

word 'kettle' because that clearly was the best descriptor, the

most recognised descriptor, in regard to chips with the

characteristics that we're talking about.

So it described the chips in the category established by the

Kettle Chip Company?---Established in this country by the

Kettle Chip Company, yes and their other two associates.

And you chose the cauldron to tap into the type of chips or

category of chips established by the Kettle Chip Company?---

Yes. The indication from research was that the cauldron was an

important - let us say a communicating symbol that communicated

that they were chips of this style.

You chose those two things with your eyes wide open as to the

risk that the Kettle Chip Company might bring legal proceedings

against you?---Yes, and that's precisely why we took very

careful advice before going into the market place.

. . .

I want to suggest in general terms that some of your market

research indicated that the Kettle Chip had achieved the status

of a brand or a product name?---Yes, and some of the later

research indicated that it was a descriptor and not a brand.

Now, whether the change between those two views was brought

about by the fact that there were then two other brands on the

market which appeared to be independent offers, using the same

word, I suspect that's what occurred.

And you think it is important, in what you just said, that the

research that came up, using the term generally, that it was a

brand, was before that which came up with it being called a

descriptor?---Sorry, I think it's important - I am just

reflecting on what I understand research showed at different

periods.

If it is the case that the descriptor research was before brand

research - I mean, the research that resulted in those two

findings - that would be contrary to what you just said?---It

would depend on - I'm not sure how precise - how precisely one

can read into those research results in that sense, certainly,

our very clear belief and research is, as I said, is one of the

guides to decision-making, as is talking to the trade and many

other inputs in terms of information, but it was (our) very

clear belief at the time of launch that Kettle was a descriptor

and that it was relevant in regard to this style of product and

that therefore it was important to us to use it and that after

very careful checking we had the right to use it and that it

was important that we should use it in a way that we could

build a brand franchise of our own under the Smith's umbrella

to produce a distinctive product that, in the long term, would

give us a consumer franchise that was ours and that is what we

have always set out to do with this product and every other

product that we launch.

If it were perceived as a brand rather than a descriptor then

there would be a risk that people would - - -

MR ELLICOTT: If what was, do you mind just - - -

MR CATTERNS: If the word Kettle or the Kettle chip - if the

word Kettle, in the context of the Kettle chip were perceived

as a brand rather than a descriptor, then there would be a risk

that people might be confused as between your product and

theirs?---Frankly, I think the chance of people being confused

between our product and theirs - and if one puts the two

products side by side - the chance of confusion is minimal. If

one also puts to that the circumstances of the level of

awareness of the products and the category at the time we

launched, if one puts with that the amount of advertising we

have put behind our brand, if one puts with that the work we

have done in terms of product display - particularly large

displays in supermarkets - I think we have done a sound job in

establishing that that product is a brand - is a product that

is distinctive is of our manufacture and no one else's.

If you could just go back to the day before you launched and so

subtract from that answer the notion of your promotion since

launch, work in stores, advertising and so on, if it be the

case that some consumers treat the word kettle in this context

as a brand name, and then they saw something called Country

Kettle, there is a possibility, is there not, that they would

be confused?---Mr Catterns, your question said if it doesn't

address how many consumers it is quite clear - - -

HIS HONOUR: No, no, that is not the question you were asked?---

Sorry?

Could you put the question again?

Look, you are asked a particular question and counsel is

entitled to an answer to his question, not a little essay about

what you thought about things.

MR CATTERNS: If it be the case - and just accept that as an

assumption - that a significant number of consumers did

perceive 'kettle' in this context as a brand name, then the day

before your launch there would be a risk that some of those

consumers would be confused when they saw your product?---For

those consumers who held that view, I guess the answer would be

yes; whether they were a significant number I think is probably

very debatable."

[83]

37. I did not find Mr Ballard an impressive witness. I formed the view that some of his answers were disingenuous, and that his evidence was not reliable. There are some examples in this passage. The suggestion that later research had shown a change in the market-place from an understanding of "the Kettle Chip" as a brand to an understanding of these words as conveying a description was quite misleading. A great volume of market research material utilized by the respondent in preparing for its launch of "COUNTRY KETTLE" was introduced into evidence. It does not show what Mr Ballard suggested, and I am satisfied that Mr Ballard, who at other points in his evidence professed unfamiliarity with it, apparently on the basis that it concerned an area for which Mr Guthrie was responsible, had no proper basis for his suggestion. Indeed, the source of the idea that market research had indicated that "Kettle" was a "descriptor", and not a brand, is a comment, not in "some of the later research", but in a report dated October 1991 prepared by Yann Campbell Hoare Wheeler, a firm involved in market research. But this report is headed "A QUALITATIVE INVESTIGATION OF KETTLE CHIPS AND THE POTENTIAL FOR SMITH'S TO ENTER THIS MARKET SEGMENT", a heading which would seem to assume that "kettle chips" is a descriptive expression. That this was indeed a fundamental assumption of the entire report is made crystal clear by the second of a series of "research objectives" set out at its beginning: "To uncover what the descriptor, 'Kettle' means to consumers, and hence determine the equity inherent in this variant name." (In market research, the evidence indicates, the word "equity" refers to value or reputation.) This objective makes it plain that the comment in the course of the report, "'Kettle' is a variant descriptor, not a brand", is not a conclusion of the research, but a central assumption upon which it was undertaken. It is therefore all the more significant that the same report includes references, in relation to "Kettle Chips", to "this brand" and "other brands". Actually, the comment about "kettle" as a variant descriptor, not a brand, was made in relation to the findings of that part of the survey in which the applicant's products were compared with the Frito-Lay product (of which the report says "few had heard about" them) and overseas products which appear to have been referred to as "Kettle Chips". That the expression "kettle chips" may have been understood, in that special context, and in a survey conducted upon the fundamental assumption which governed this survey, to convey a generic meaning, is hardly surprising. But, as the other language I have quoted indicates, the expert researchers themselves saw "Kettle" as a brand, and they also reported on the particular packaging in which the applicant sells its potato chips, reaching the conclusion: "'Hand-Cooked' plays a supportive role in the development of a 'cotagey' (sic) not mass-produced image, and contributes to the acceptance of the product's premium price." They considered:

[89]

42. It is impossible not to see this statement as a clear indication to the respondent, from consultants chosen as expert by its Product Manager (and presumably by the Group Product Manager with whom she worked), warning the respondent that the word under which the applicant sold its potato chips was widely seen as a brand, so that explicit differentiation, "a blatant product announcement with overt branding", would be required in the respondent's advertising. Later in the report, there is a comment about the failure of the respondent's advertisement in question to make the Smith's name "salient" (of those surveyed who had previously tried "Kettle Chips", and were shown the respondent's advertisement for "COUNTRY KETTLE", "many (emphasis added) failed to identify the product as Smith's brand" - a finding one would have expected the respondent to have found alarming), which is said to indicate "a need for more overt brand communication". Yet, the respondent went down precisely the opposite path, using the word identified as its rival's brand and deliberately minimizing its own well known brand and logo. And by way of defence, Messrs Ballard and Reeves disclaimed knowledge, apparently on the basis that these matters were left to Mr Guthrie. But if "COUNTRY KETTLE" was largely left to him, he was relevantly the mind of the company. In any case, it is very unlikely that, on so important a matter, neither Mr Ballard nor Mr Reeves was aware of the substance of the survey results. I should add that the weight of those results is not to be discounted simply because the methodology of the surveys was not settled in advance pursuant to the procedure suggested in Arnotts Limited v. Trade Practices Commission (1990) 24 FCR 313. These were surveys selected as appropriate by the respondent's own executives, presumably having expertise in the area, and by specialists engaged by them. Considerations of the kind I discussed and to which effect was given in Shoshana Pty Ltd v. 10th Cantanae Pty Ltd (1987) 18 FCR 285 at 301, and other considerations different from those involved in surveys obtained for the purpose of litigation, are likely to be applicable to surveys obtained in such circumstances.

At a glance

Court

Decision date

Before

Source

Judgment (139 paragraphs)

the Kettle Chip Company Pty Limited v Apand Pty Ltd (Formerly Cca Snack Foods Pty Limited) [1993] FCA 546; (1994) Atpr 41-287 (1993) 119 ALR 156 (1993) 46 FCR 152 (16 November 1993)

Parties

Legislation Cited (2)

Cases Cited (26)