Unilever Australia Limited v PB Foods Limited

REASONS FOR JUDGMENT 1 In April 1999 proceedings were commenced by Unilever Australia Limited ("Unilever") alleging PB Foods Limited ("PB Foods") had used trade marks (only for reasons of convenience, I will refer to them as "the infringing trade marks") which were deceptively similar to its registered trade marks. Unilever alleged contravention of s 120 of the Trade Marks Act 1995 (Cth) ("the 1995 Act"). 2 On 12 August 1999 I gave interlocutory judgment concerning whether certain paragraphs of PB Foods' defence should be struck out. I concluded they should not be. The paragraphs raised, in substance, a contention (amongst others) that the use complained of by Unilever was authorised use. That is, it was use authorised by Cadbury Limited ("Cadbury") which would be able to obtain registration of certain of the infringing trade marks in its name if it were to apply for registration under the 1995 Act. This was said to raise a defence founded on s 122(1)(f). 3 Following this judgment an application was made by Unilever to join Cadbury as a respondent. Cadbury is a UK corporation. An order was sought ex parte by Unilever under O 8 r 2 of the Federal Court Rules ("the Rules") to serve the originating process on Cadbury. An order was also sought under O 7 r 9 permitting service of the originating process on a firm of patent attorneys acting for Cadbury in an application to register certain trade marks under the 1995 Act. Orders to this effect were made and the originating process served in accordance with them. Cadbury has filed a conditional appearance and has moved the Court to set aside both orders. The application was first heard on 21 March 2000 and again on 23 May 2000. 4 As to the order authorising service outside Australia, it was submitted by counsel for Cadbury that when the order was made, and now, there was insufficient material before the Court to establish a prima facie case against Cadbury as required by O 8 r 2(2)(c) of the Rules. One aspect of this submission is that there was no evidence that any use of trade marks by PB Foods was use authorised by Cadbury. I am satisfied there is sufficient material to establish, prima facie, authorised use. First, an allegation has been made by the known user (at least in the sense that it is admitted), PB Foods, that its use of the infringing trade marks has been authorised by Cadbury. That asserted fact was contained both in its defence and in written submissions in opposition to the application to strike out parts of the defence. Unilever sought from PB Foods, by a notice to produce, copies of licence agreements authorising use of the infringing trade marks. The agreement produced in response to that notice is an agreement between Cadbury Schweppes Pty Limited ("CSPL") and Peters (WA) Limited (now known as PB Foods). It is a confidential exhibit. 5 Notwithstanding the terms of the notice to produce (I infer, from what was said by counsel for PB Foods on 21 March 2000, that the notice to PB Foods is in the same or substantially the same terms as a notice directed to Cadbury which has been tendered), the agreement does not, in express terms, deal directly with authorisation by Cadbury of the use of any of the infringing trade marks. It does, however, contain a term whereby CSPL agrees to procure each proprietor (relevantly, in a schedule to the agreement, Cadbury is identified as the proprietor of eight of the relevant trade marks [six are said to be registered marks]) to grant to PB Foods the right to use the marks to which the agreement relates by means of registered user agreements. While no such agreements are in evidence, and the agreement in evidence does not expressly relate to the infringing trade marks, what may be inferred from the agreement (for the purposes of a prima facie case of the type to which O 8 of the Rules is directed) is that commercial arrangements exist between Cadbury, CSPL and PB Foods whereby PB Foods uses trade marks owned by Cadbury in the sale of products, the manufacture of which is subject to quality control measures and other measures concerning manufacture, distribution and sale which involve scrutiny or assessment by CSPL. 6 In addition to the agreement, there is other evidence before the Court that goes some further way in resolving whether Cadbury has authorised use of any of the infringing trade marks. Cadbury has applied to register two of the infringing trade marks. Such an application can, by operation of s 27 of the 1995 Act, only be made by a person if that person claims to be the owner of the marks and that person is using or intends to use the marks or has authorised or intends to authorise use of the marks. Thus Cadbury is both holding itself out as the owner of two of the infringing trade marks and also holding out that there is or will be use of the requisite kind. In my opinion, this material is sufficient to establish, for present purposes, that the use of the two infringing trade marks by PB Foods is authorised use. I am satisfied that there is sufficient evidence of authorisation to sustain a conclusion of a prima facie case against Cadbury if the legal foundation for that case can otherwise be demonstrated. 7 The claim against Cadbury as initially framed involved a bare allegation of contravention of s 120 of the 1995 Act. Cadbury submitted that use by PB Foods did not constitute use by it for the purposes of s 120 even if it had authorised the use. Senior counsel for Unilever disavowed, at the hearing on 21 March 2000, any reliance on s 7 of the 1995 Act, notwithstanding that I had earlier accepted a submission of PB Foods (then contested by Unilever but unsuccessfully) that PB Foods' defence based on s 122(1)(f) was not unarguable because Cadbury, though not PB Foods, might secure registration of the alleged infringing marks. Rather, PB Foods submitted that the authorisation of the use of infringing marks was itself an infringement. Reference was made to s 20 though that plainly concerns authorisation by a registered proprietor which Cadbury is not at least for the purposes of the 1995 Act. I was not referred to any material that would suggest use, in fact, by Cadbury nor any provision of the 1995 Act (apart from s 7) or authority that would support the proposition that infringing use by an authorised user rendered the owner liable for contravention of s 120. Accordingly, I am not satisfied that the case against Cadbury as originally propounded, raised a prima facie case against Cadbury. 8 However since the hearing on 21 March 2000, Unilever has reformulated the case it seeks to make against Cadbury and it now alleges liability as a joint tortfeasor. The relevant parts of the proposed amended statement of claim read: "6B Further, Unilever pleads as follows as against the Second Respondent. 6C The conduct of the First Respondent in infringing the Unilever Marks in the manner set out in paragraphs 4(a), 4(b), 4(d), 5 and 6 above was and is a contravention of a statutory provision enacted to protect Unilever as proprietor of the Unilever Marks. Particulars (a) Unilever is the registered proprietor of each of the Unilever marks pursuant to the Trade Marks Act 1995: s.233. (b) The Trade Marks Act 1995 gives Unilever exclusive rights to use the Unilever Marks: s.20. (c) The Trade Marks Act 1995 imposes an obligation on persons other than Unilever not to use the Unilever marks: s.120. (d) The First Respondent has breached the said obligation by infringing in the manner set out in paragraphs 4(a), 4(b), 4(d), 5 and 6. 6D. The infringement of the Unilever Marks by the First Respondent was and is conduct undertaken by it with the concurrence of the Second Respondent and pursuant to their common design. Particulars (a) Unilever repeats paragraph 4A above. (b) By agreement dated 2 May 1995 the Second Respondent by its agent granted to the First Respondent a licence to use the infringing Cadbury marks and signs within them in Australia. Unilever relies on the whole of the terms of the agreement. (c) By registered user agreements made pursuant to the agreement the Second Respondent granted to the First Respondent a licence to use the infringing Cadbury marks and signs within them in Australia. (d) By the agreement and registered user agreements the First and Second Respondents agreed that as between them the Second Respondent was the owner of the infringing Cadbury marks and signs within them, and that use of them by the First Respondent pursuant to the agreement was to the benefit of the Second Respondent as proprietor. (e) By the agreement and registered user agreements the First Respondent covenanted with the Second Respondent that it would manufacture, advertise and sell Ice Confections pursuant to the agreement in Australia: (i) in accordance with specified criteria and requirements of the Second Respondent; (ii) bearing the infringing Cadbury marks and signs within them; (iii) bearing a statement that the infringing Cadbury marks and signs within them are owned by the Second Respondent; (iv) with the involvement and supervision of the Second Respondent. (f) The conduct of the First Respondent has been and continues to be pursuant to the agreement and registered user agreements and subject to the supervision and involvement of the Second Respondent and in accordance with its terms. Unilever repeats the particulars to paragraph 4B above. 7 By reason of the (a) infringements of the Unilever trade marks by each of the respondents referred to in paragraphs 6 and 6A above; and (b) tortious conduct of the First Respondent pursuant to its common design with the Second Respondent referred to in paragraphs 6C and 6D above, Unilever has suffered, and will suffer, loss and damage." 9 It can be seen that these amendments allege that Cadbury acted in concert with PB Foods pursuant to a common design such as to render Cadbury liable as a joint tortfeasor. Counsel for Unilever and counsel for Cadbury were not aware of any authority in which it had been argued or determined that a party was liable as a joint tortfeasor with another party who had infringed the rights of a registered owner or proprietor of a trade mark. While in the areas of both copyright and patent law it is accepted that a person may be liable as a joint tortfeasor: see e.g. as to patents the recent discussion of the Full Court in Ramset Fasteners (Aust) Pty Ltd v Advanced Building Systems Pty Ltd (1999) 44 IPR 481 and as to copyright King v Milpurrurru (1996) 66 FCR 474, it appears not to be a basis for liability that has taken root in the field of trade mark law. However there is no reason in principle why the considerations that have led to liability in the areas of copyright and patent law might not lead to liability on an analogous basis when trade marks are infringed: see for example comments in Cornish, Intellectual Property: Patents, Copyright, Trade Marks and Allied Rights (2nd edition) par 2-003 and Kerly's Law of Trade Marks and Trade Names (12th edition) page 297, par 16. Indeed counsel for Cadbury did not seek to argue that liability could not arise on this basis, at least in the abstract, but rather sought to argue that the material before the Court did not, even on a prima facie basis, establish that Cadbury and PB Foods were acting in concert pursuant to a common design. 10 I referred in par 5 to an agreement between CSPL and PB Foods which involves, indirectly, Cadbury as the proprietor of certain trade marks referred to in a schedule to the agreement. I have already indicated I am satisfied, on a prima facie basis, that the use by PB Foods of two of the infringing trade marks has been authorised by Cadbury. In that agreement, CSPL imposes a range of obligations on PB Foods concerning the manufacture of products which might be sold and promoted in association with the use of the marks to which the agreement expressly refers. As noted earlier, the agreement in evidence does not state expressly and directly that the manufacture of products which when sold or promoted involve use of any of the infringing trade marks, are subject to those obligations. However it can be inferred (on a prima facie basis) that such obligations exist. That is, it can be inferred (on a prima facie basis) that the products produced by PB Foods in relation to which two of the infringing trade marks are used, are products which are the subject of fairly stringent requirements concerning quality-control and obligations relating to the promotion and sale of the products. It is to be recalled that PB Foods asserts that its use of the two infringing trade marks is use authorised by Cadbury. Sub-clauses 23.5 and 23.6 of the agreement contemplate the extension of the agreement to trade marks not expressly referred to in it and amendment of the schedule to the agreement is contemplated by those clauses. It can be inferred, in my opinion, (on a prima facie basis) that these provisions have been relied on to extend the agreement so that it operates in relation to trade marks other than those specified in the schedule. Secondly, as counsel for Unilever points out, the two infringing trade marks contain the word "Cadbury" which is one of the marks the use of which is expressly authorised by the agreement. 11 It can also be inferred (on a prima facie basis) that Cadbury, as owner or proprietor of two of the infringing marks has an agreement with CSPL that permitted or authorised CSPL to enter the agreement with PB Foods imposing the requirements and obligations referred to in the preceding paragraph concerning products on which two of the infringing trade marks might be used. It can also be inferred, at least in the context of a prima facie case, that Cadbury would have been aware of the use of two of the infringing trade marks and that their use might contravene s 120. That flows from evidence that in 1998 Cadbury was informed of the rejection of an application by it to register two of the infringing marks, or similar marks, and was provided with a copy of the delegate's decision which referred to use of the Unilever marks to which these proceedings relate. In this way the manufacture of the products and the use of the infringing trade marks involve Cadbury and PB Foods acting in concert in furtherance of a common design. I am satisfied that the repleaded case raises a prima facie case against Cadbury. 12 It must be accepted that a prima facie case against Cadbury was not disclosed in the originating process by reference to which leave was earlier given. That may not matter but in any event, as I understood the approach adopted by counsel for Cadbury, it was accepted that it was desirable for these issues to be resolved without recourse to narrow technical questions such as whether it was necessary for a further order to be made granting leave to serve the amended pleading. Plainly enough, however, the fact that the case as initially pleaded did not raise a prima facie case has a bearing on how costs should be dealt with which is a matter I consider shortly. 13 The second issue raised by Cadbury was whether an order should have been made permitting service of the originating process by service on its patent attorneys in Sydney. The focus of the submissions of Cadbury was on whether it had been demonstrated that personal service on it was "impractical". Order 7 r 9(1) authorises the making of an order for substituted service if it "is impractical to serve a document in the manner set out in the Rules". In the present case it has been assumed that that would be personal service on Cadbury in the United Kingdom: see O 8 r 4. Counsel for Cadbury referred to several authorities indicating that a conclusion that service is impractical could ordinarily only be reached after service had been attempted but had been unsuccessful. There are, of course, instances where impracticability can arise without a prior attempt to serve: see Mercator Property Consultants Pty Ltd v Christmas Island Resorts Pty Ltd (R D Nicholson J, 14 July 1998, unreported. It seems to me that the question of impracticability must be considered in the factual context in which the issue arises. In Mercator Property Consultants Pty Ltd (supra) the impracticability was established by showing that service on a corporation in Singapore might take six months. 14 It was conceded by counsel for Cadbury that substituted service may be ordered to ensure quick service if, for example, there was the risk of the dissipation of property or the like. In the present case Cadbury is pursuing in Australia under Australian law, applications for the registration of two of the infringing trade marks. It has, for that purpose, retained the services of patent attorneys. The apparent need to join Cadbury only arose after PB Foods successfully maintained, as an element of its defence, that registration of the alleged infringing marks could be secured if applied for by Cadbury. In those circumstances the prompt service of Cadbury on its patent attorneys was both practical and consistent with good case management in that it permitted the addition of an arguably relevant party in a timely manner. Requiring service on Cadbury in the United Kingdom with the attendant costs and at least the potential for delay rendered it, in my opinion, impractical in these unusual circumstances. 15 In any event, for the reasons just given, I would not, as a matter of discretion, set aside the earlier order I made permitting substituted service even if service on Cadbury in the United Kingdom was not impractical. 16 I dismiss the application to set aside the orders made under O 8 r 2 and O 7 r 9. However Cadbury is entitled to its costs of the motion prior to the hearing on 23 May 2000 when the prima facie case was raised in an amended pleading. Unilever is entitled to its costs for the hearing on 23 May 2000. I so order. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.