FEDERAL COURT OF AUSTRALIA
Telstra Corporation Limited v Phone Directories Company Pty Ltd [2014] FCA 568
| VICTORIA DISTRICT REGISTRY | |
| GENERAL DIVISION | VID 276 of 2007 |
| BETWEEN: | TELSTRA CORPORATION LIMITED (ACN 051 775 556) First Applicant SENSIS PTY LTD (ACN 007 423 912) Second Applicant |
| AND: | PHONE DIRECTORIES COMPANY PTY LTD (ACN 059 776 091) First Respondent AUSTRALIAN LOCAL DIRECTORIES PTY LTD (ACN 078 856 318) Second Respondent ADAM HARGRAVES Third Respondent GLENN HARGRAVES Fourth Respondent DANIEL STOTEN Fifth Respondent LOCAL DIRECTORIES COMPANY PTY LTD (ACN 130 550 971) Sixth Respondent |
| JUDGE: | MURPHY J |
| DATE: | 30 may 2014 |
| PLACE: | MELBOURNE |
REASONS FOR JUDGMENT
A. INTRODUCTION
The primary claim
1 In this matter the first and second applicants, Telstra Corporation Limited and its wholly owned subsidiary Sensis Pty Ltd (“Sensis”) (collectively “Telstra”) bring claims of misleading or deceptive conduct and passing off against the first, second and sixth respondents, Phone Directories Company Pty Ltd (“PDC”), Australian Local Directories Pty Ltd (“ALD”) and Local Directories Company Pty Ltd (“LD”) (collectively the “PDC Respondents”). The conduct is alleged to be in breach of ss 52 and 53(c) and (d) of the Trade Practices Act 1974 (Cth) (“TPA”) and the successor provisions of the Australian Consumer Law (“ACL”) in Sch 2 to the Competition and Consumer Act 2010 (Cth) (“CCA”).
2 The third, fourth and fifth respondents, Adam Hargraves, Glenn Hargraves and Daniel Stoten, are alleged to have been accessories to the conduct. Each was at a relevant time an officer of one or more of the PDC Respondents and involved in company operations through an executive role. Given my decision it is usually unnecessary to refer separately to the corporate and personal respondents and I will refer to them collectively as “the respondents”.
3 It is uncontentious that in 1994 PDC commenced publishing directories (“PDC directories”) under the names “Phone Directories”, “PDC” or a PDC logo (“the PDC Name and Logo”) in some cities and regions in Queensland and Northern Territory. It used yellow pages for the business classified section of its directories and, from 1996, these directories also featured yellow covers. The PDC directories have used yellow covers since then. From approximately June 2005:
(a) PDC continued to publish the PDC directories in Queensland and Northern Territory, but did so under the “Local Directories” name and logo (“LD Name and Logo”); and
(b) ALD expanded the coverage of the respondents’ business and commenced publishing the PDC directories in New South Wales under the LD Name and Logo.
From 1 July 2008 LD commenced publishing all PDC directories in Queensland, Northern Territory and New South Wales under the LD Name and Logo. It has done so ever since.
4 The proceeding centres around the PDC Respondents’ conduct from approximately June 2005 in publishing:
(a) print directories that featured yellow covers, under the LD Name and Logo, and using some other indicia inside the directories (“Other Trade Indicia”);
(b) a website which came to include an online directory, that used yellow icons, yellow as a background and as a highlight, as well as some other indicia including images of the yellow pages and covers of the print directories; and
(c) a mobile telephone application (“mobile app”) with an electronic directory which also featured yellow on its screens.
5 Telstra’s claims arise in the circumstances that it has, either itself or by its predecessors in title or through Sensis published print telephone directories in Australia since 1880. It has used yellow coloured pages and featured the colour yellow on the covers of its business classified directories since 1975. It registered the composite “Yellow Pages” trade mark including the walking fingers logo (“Walking Fingers”) in 1977, and in the ensuing years registered various other related marks all exhibiting, either alone or in combination, the words Yellow Pages and the Walking Fingers (collectively the “Yellow Pages Trade Marks”).
6 Since 1975 Telstra has annually distributed to businesses and households around Australia a huge number of print business classified directories with yellow coloured pages, yellow covers and under the Yellow Pages Trade Marks. Since 1994 it has published the Yellow Pages online directory which features the colour yellow, and since 2008 it has published a mobile app that contains a directory which features the colour yellow. Telstra has had a strong yellow theme in its marketing from an early date, and it has spent a great deal of money in promoting its directories under the Yellow Pages Trade Marks.
7 As a result, Telstra contends that by 1996 it had achieved a secondary reputation in the colour yellow, which became associated in the minds of consumers with Telstra as the producer of the Yellow Pages directories and associated products.
8 Telstra alleges that, by reason of its secondary reputation in the colour yellow, the respondents’ conduct in publishing their print directories, website and mobile app was such as to create the impression with, or convey the representation to, consumers (including directory users and advertisers) that their products were published by, originated from and were otherwise associated with Telstra.
9 Telstra contends that the respondents’ conduct represented to consumers that:
(a) their print directories were Telstra’s directories, Yellow Pages directories or local or regional versions of them; or
(b) their print directories were produced by, connected, associated, sponsored, approved, licensed, endorsed and/or affiliated with Telstra or its directories; and/or
(c) the respondents had a connection, association, affiliation, commercial and/or other arrangement with Telstra.
Telstra makes similar allegations in relation to the respondents’ websites over the period and the mobile app.
10 If the respondents’ conduct created the impression or conveyed the representations alleged, there is no doubt that it was and is misleading or deceptive and constitutes passing off. Since 1994 the respondents have been in direct competition with Telstra in the telephone directory market. Their directories have no connection, association, sponsorship, approval, licence, endorsement or affiliation whatsoever with Telstra or its directories.
11 Telstra seeks injunctions which largely aim to restrain the respondents’ use of the colour yellow on their print directories, webpages and mobile app screens. It also claims loss of profits and damages.
12 I consider Telstra’s claims must be dismissed. I am not satisfied that the respondents’ conduct:
(a) created the impression or conveyed the representations alleged;
(b) was misleading or deceptive or likely to mislead or deceive as alleged; or
(c) amounts to passing off.
13 The evidence shows that the colour yellow is internationally recognised as a standard colour used in respect of classified directories. Around the world classified directories commonly have yellow pages and covers, and when Telstra adopted yellow coloured pages and yellow covers in 1975 it was following an international trend to do so.
14 From an early date classified directories throughout Australia have used yellow, and a few have used yellow covers too. From 1996 the respondents used yellow pages and yellow covers on their directories. They published approximately eight million such directories in cities and regions in Queensland, Northern Territory and New South Wales up to July 2006, when Telstra first complained about their use of yellow covers. Telstra made no complaint until 2006 although it was earlier aware of the respondents’ conduct and concerned by their emergence as competitors. A number of other small directory providers in discrete markets in Australia also published classified directories with yellow pages and covers from about the mid-1980s, without complaint by Telstra.
15 Viewed in isolation, I accept that Telstra had a secondary reputation in the colour yellow but I do not consider that the claimed association in the minds of consumers between yellow and Telstra or its products is a strong one. I say this because:
(a) yellow is not distinctive in itself, being a colour widely used on products and services;
(b) yellow is internationally recognised as a standard colour of classified directories and to some extent was so recognised by Australian consumers;
(c) Telstra only ever used the colour yellow coupled with its well-recognised Yellow Pages Trade Marks including the Walking Fingers, and never independently; and
(d) Telstra’s use of yellow on its directory covers after 1996 was inconsistent and declined over time.
16 Telstra contends that the respondents set out to deceive consumers when they adopted yellow covers in 1996, and also when they maintained their use of yellow covers and commenced to publish their directories under the LD Name and Logo in June 2005. I am not satisfied this was so. Nor am I satisfied that there was any widespread practice amongst the respondents’ sales representatives to describe themselves as being from or associated with Telstra or the Yellow Pages directories.
17 Although the PDC directories had a yellow cover I have no difficulty in finding that the respondents did enough to distinguish their directories from June 2005. I do not accept that the PDC directories created or imparted the impression, or conveyed the representation, to consumers that they were published by, originated from, or were in any way associated or affiliated with Telstra or its directories.
18 Given Telstra’s delay in complaining about the respondents’ use of yellow covers, the respondents also rely on the equitable of defences of estoppel, laches and acquiescence. As I have dismissed Telstra’s claims it is unnecessary to decide whether or to what extent these defences would have been available to the respondents.
The cross-claim of misleading or deceptive conduct
19 The PDC Respondents filed a cross-claim alleging misleading or deceptive conduct by Telstra in publishing advertisements in its directories between 2004 and 2007 which purported to set out the comparative consumer usage of Telstra’s and PDC’s directories.
20 In 2003, 2004 and 2006 Telstra had, via a market research company, surveyed consumer usage and awareness of directories and related services in certain regional markets. It published results from these surveys in the impugned advertisements. As an example, one advertisement stated that 57% of the consumers surveyed in that regional market said that the Yellow Pages directory was their most used source of buying information, and that only 2% of consumers surveyed used the relevant PDC directory. A footnote to the advertisement indicated that the source of the data was “independent research” of people aged between 18 and 64 in certain “regional directory markets” or groups of such markets.
21 In my view the advertisements were misleading because the advertisements did not provide a fair or accurate picture of the comparative usage of the rival directories. In many cases the consumers surveyed did not have available a PDC directory as an alternative reference to the Yellow Pages directory because the respondents’ directories did not cover that area. Further, in many cases the regional market surveyed was much greater than the area served by the relevant PDC directory, and in other cases the surveys reported on “PDC” directories when the only directories distributed by the cross claimants in some of the areas surveyed were published under the “Local Directories” name. I consider that Telstra’s conduct in publishing the advertisements was misleading or deceptive or likely to mislead or deceive directory advertisers.
The cross-claim of unjustifiable threats of copyright infringement
22 The PDC respondents also cross-claim pursuant to s 202 of the Copyright Act 1968 (Cth) (“Copyright Act”) that Telstra made unjustifiable threats of proceedings for copyright infringement. The respondents seek declaratory relief and damages.
23 It is uncontentious that:
(a) on 10 June 2006 Telstra threatened proceedings for breach of copyright; and
(b) Telstra brought a claim of breach of copyright in the present proceeding which failed.
24 Telstra contends that its threat of proceedings, and the proceedings themselves, were soundly made on the law as it then stood, and were made in good faith in the honest belief that copyright had been infringed. I accept Telstra’s contentions. I do not consider that its threats were unjustifiable within the meaning of s 202.
B. The Evidence and objections to Evidence
25 The evidence in the proceeding is voluminous. The Court Book totalled 19 lever arch binders, with further documentary evidence adduced during trial. A total of 81 witness affidavits were filed although the evidence of many witnesses was not challenged. The parties were requested to prepare and file a Statement of Agreed Facts, and also prepared detailed chronologies. As a result, much of the factual history is not contentious, but there remains a contest between the parties on various important issues and numerous objections to evidence.
26 Given the volume of the evidence it is not practical to fully recount it and I will set out only the salient facts to the disposition of the claims. Inevitably this will involve some loss of nuance but that is unavoidable. I separately deal with my view of the evidence of the numerous witnesses. For ease of understanding I will separately deal with the facts in the cross-claims.
27 There were numerous objections by the parties to various parts of the affidavit evidence sometimes at the level of parts of sentences and parts of paragraphs. Where I have considered the evidence significant to my decision I have set out my view on the objection in dealing with the relevant issue. It is unnecessary to deal with each small objection where it relates to evidence which has had no bearing on my decision.
28 I thank the parties for the lengthy Statement of Agreed Facts, their chronologies and for the care and quality of their detailed written submissions. I have been greatly assisted by them and have drawn directly on them at various points. Sometimes I will directly record my view of a particular aspect of evidence. On other occasions, given the great volume of evidence, I have taken the more convenient path of simply setting out the facts as I see them. In doing so I set out my view of the evidence.
The parties
29 Telstra and Sensis are together the applicants in this proceeding. Their identities have already been detailed above at [1].
30 PDC, the first respondent, was incorporated in April 1993 and carried on the business of publishing and distributing telephone directories. It began marketing and selling advertising space for print directories in 1993 and in 1994 commenced publishing and distributing its print directories under the name “PDC Directories” and “PDC” in some cities and regions in Queensland and the Northern Territory, and expanded from there. In 2001 it launched its website.
31 In June 2005 PDC commenced publishing its directories in Queensland and the Northern Territory under the name “Local Directories”, and it changed the domain name of its website accordingly. Until mid-2008 PDC continued to produce and distribute the impugned directories in cities and regions in Queensland and the Northern Territory. From that date LD assumed these operations.
32 ALD, the second respondent, was incorporated in June 1997 and commenced trading on 20 October 2004. It began marketing and selling advertising space for its directories and from about June 2005 it commenced to publish the impugned directories and website in cities and regions in New South Wales. It continued until mid-2008 and from that date LD also assumed its operations.
33 LD, the sixth respondent, was incorporated in April 2008. From mid-2008 it commenced to publish all of the impugned directories and website in Queensland, Northern Territory and New South Wales.
34 Adam Hargraves, the third respondent, is one of the two founders of PDC. He was a member of PDC from its incorporation until April 2008, and was actively involved in its day-to-day operations. He held various positions within the company, including as a director from incorporation until June 2010 and as Company Secretary from April 1997 to July 2001. He was also a member of ALD from June 1997 until October 2004 and a director from June 1997 to September 2004.
35 Glenn Hargraves, the fourth respondent, is the other founder of PDC. He was a member of PDC from its incorporation until April 2008. He too was actively involved in the day-to-day operations of PDC. He held positions as a director and as Company Secretary from incorporation until April 1997. He was also a member of ALD from June 1997 until October 2004, and has been a director of LD since March 2010.
36 Daniel Stoten, the fifth respondent, was a director of PDC from February 1998 until June 2010, and was Company Secretary from July 2001 until June 2010. He held the position of Operations Manager and was actively involved in day-to-day operations. He became Managing Director in 1999. He was also a director and secretary of ALD from September 2004 to June 2005 and he managed ALD’s business in the period in which it published the impugned directories.
The evidence of the respondents’ senior officers
37 Much of the evidence in the case is documentary, much of the evidence has found its way into the Statement of Agreed Facts, and my decision in large part turns on the view that I take of the appearance of the PDC directory. In many respects the evidence of the respondents’ senior officers is not central. Insofar as their evidence is contentious, I deal with it in setting out my view of the facts.
38 It must be noted though that Telstra vigorously attacked the credibility of the respondents’ senior officers particularly Glenn Hargraves, Adam Hargraves and Mr Stoten. The attack surrounded Telstra’s contention that they set out to deceive when they adopted yellow covers in 1996, and when they maintained the use of yellow covers and adopted the name Local Directories in 2005. The attack included references to the fact that Adam Hargraves and Mr Stoten were convicted of taxation fraud in 2010. As I explain at [489]-[555] I am not satisfied that they set out to deceive. I do not propose to rehearse each of the attacks.
39 It suffices to note that I found Mr Stoten’s evidence to be consistent with contemporaneous documents, consistent with my view of the other evidence, and largely reliable. He made concessions against interest and gave a plausible account.
40 As I later explain at [528]-[532], I was concerned by aspects of the evidence of Glenn and Adam Hargraves but in the finish I concluded that, in the main, they gave reliable evidence. Their evidence was consistent with contemporaneous documents, consistent with my view of other evidence, they gave their evidence thoughtfully, made concessions against interest, accepted that it was possible that some consumers were confused or misled by their directories, and gave a plausible account. While a vigorous attack was made upon their credibility, I largely accept their evidence.
41 Richard Wilkin, a director of ALD, involved in selling advertising space and training sales representatives, also gave evidence. It was largely unchallenged and I accept it.
The market for telephone directories
42 It is uncontentious that the market for telephone directories in Australia encompasses both print and online directories, and (more recently) mobile telephone applications. The parties agree that directories are used by two categories of consumers:
(a) consumers who use the directories to search for contact details, products and services (“directory users”); and
(b) businesses who are typically small to medium sized enterprises, and who use the directories to promote their products and services, paying a fee to the directory producer for doing so (“advertisers”).
Telstra’s directories
43 When Telstra first began publishing its directories the business classified section of its directories was published using pink paper. In 1975 Telstra started using yellow coloured paper instead and renamed its directories as “Yellow Pages”. As I have said, in 1977 Telstra first registered a composite trade mark featuring the words Yellow Pages and the Walking Fingers, and then registered a series of related trade marks over the ensuing years.
44 Telstra’s print directories were initially only produced for major capital cities, but in 1986 their coverage was extended to regional cities and areas, and in 1994 to local areas within major capital cities.
45 In addition to its print directories, since 1994 Telstra has published an online directory at its website at the domain name www.yellowpages.com.au. Since 2006 Telstra has published a mobile phone app which contains an electronic directory.
46 Since launching the Yellow Pages directories, Telstra has engaged sales representatives who directly canvass businesses in the relevant geographical area seeking that they advertise in them. From an early date Telstra’s marketing has also targeted directory users through extensive advertising campaigns in a range of mediums.
47 The evidence is that between 1975 and 1996 Telstra distributed approximately 231 million Yellow Pages directories to Australian business and households, and between 1978 and 1996 it spent approximately $200 million on advertising the Yellow Pages brand. During this period the circulation averaged approximately 9.5 to 12 million copies annually. From 1997 onwards the distribution increased to roughly 14 to 15 million copies annually, with an annual advertising spend of between about $13 to $33 million. The evidence shows that the Yellow Pages website has been popular since its launch. For example, it consistently recorded approximately 2.2 million to 2.6 million visitors each month in the period September 2006 to June 2007.
48 Much of the Statement of Agreed Facts is devoted to recounting Telstra’s various Yellow Pages advertising campaigns. That these campaigns occurred is uncontentious and I do not propose to set them out in detail. I will summarise their salient features insofar as they show the extent and reach of the campaigns, and their use of the Yellow Pages Trade Marks and the colour yellow. Telstra sought that I treat some of its marketing evidence as confidential, but I have not done so where I saw it as necessary to properly explain my decision.
49 Among the first of Telstra’s major promotions of its Yellow Pages directories was the “Hello Yellow” campaign which began in 1982, and which included television and radio advertisements, a direct mail campaign and the distribution of stickers. There were over 450 television commercials screened between November 1982 and June 1983, 1,200 short radio advertisements in Sydney alone, and a large volume of letters and brochures were mailed to prospective advertisers and directory users.
50 Beyond the Hello Yellow campaign, Telstra’s marketing continued with a strong yellow theme. For example, Telstra distributed about 19,000 letters and yellow stickers as part of the 1993 “Find us in the Yellow Pages” campaign in eastern New South Wales and regional Australia. Advertisers were encouraged to place these stickers in the windows of their business premises. Similarly, in 1996, Telstra conducted a mail out of 27,000 yellow coloured letters and brochures to advertisers in the Australian Capital Territory and New South Wales.
51 Between March and July 1990, Telstra conducted a direct mail campaign in which 100,000 brochures were sent out in regional and metropolitan areas of Australia. These had the same appearance as the cover of a Yellow Pages directory, featuring the colour yellow and a Yellow Pages Trade Mark including the Walking Fingers..
52 Other than in radio advertisements Telstra’s marketing campaigns always involved use of the Yellow Pages Trade Marks, and featured the colour yellow. For example, Stephen Harvy, Group Marketing Manager for the Yellow Pages, gave evidence of the “Goggomobil” television advertisement between 1992 and 1996. This advertisement concludes with a still picture of a composite Yellow Pages Trade Mark including the Walking Fingers which is depicted in yellow in contrast with a black background. I have reviewed the other television advertisements of which Mr Harvy gave evidence, including those titled “Train Set”, “Lamp” and “Leak”, and they used similar indicia.
53 In February 1998, Telstra ran a Valentine’s Day campaign involving an advertisement featuring a yellow coloured Yellow Pages directory folded into a shape of a heart which was published in national circulation newspapers such as the Sydney Morning Herald, Daily Telegraph, Herald Sun, The Age, Courier Mail, Advertiser and West Australian.
54 Between March and April 1998, Telstra published further newspaper advertisements as part of its “Paint the Town Yellow” campaign in these same national circulation newspapers. Many of these featured a Yellow Pages directory with its yellow cover and pages, against a yellow background with a composite Yellow Pages Trade Mark. Mr Harvy gave evidence that, from 2000, these and similar advertisements extended to local and regional newspapers.
55 In 1999, the Paint the Town Yellow campaign was extended to include television commercials in high rating television programs and times in each capital city. By way of example, in Melbourne it screened 350 such commercials at a cost of almost $1 million. One commercial titled “Party aftermath” opens to a scene of a messy house after a party. Two men then look for the Yellow Pages directory with the viewer assuming they are looking for a cleaner. Instead the men use the directory to order a pizza. The yellow cover of the directory is featured throughout the commercial.
56 In 2000, Telstra launched its “Not Happy Jan” commercial at a cost of $3.2 million. This campaign was centred on the story of an employee forgetting to place an advertisement in the Yellow Pages directory on behalf of her employer. The employer is depicted thumbing through a Yellow Pages directory, noticing that the advertisement is missing, and shouting at the employee through a window. The advertisement concludes with yellow writing against a black background saying “Closing soon. Call 13 23 78” together with a composite Yellow Pages Trade Mark including the Walking Fingers.
57 Between April and May of 2002 Telstra conducted an extensive outdoor advertising campaign at a cost of $1.2 million. This included yellow painted buses and trams in Melbourne and Sydney, large billboards in high traffic areas and advertising panels on trains, trams and buses, each of which depicted a Yellow Pages Trade Mark including the Walking Fingers.
58 In early 2005 Telstra began to promote its directories through television, print and online media with the phrase “Find it in Yellow”, which it registered as a trade mark. The Find it in Yellow campaign ran until June 2006 at a cost of approximately $9 million, and consisted of five separate phases:
(a) Phase 1 primarily involved press advertisements in high circulation newspapers and magazines in capital cities and some regional centres. All of these advertisements featured a composite Yellow Pages Trade Mark including the Walking Fingers, and some also featured the Yellow Pages website at www.yellowpages.com.au. Campaign materials, including leaflets, bookmarks and note pads with the phrase Find it in Yellow and featuring the colour yellow were also placed into residential letter boxes and distributed at CBD train stations and shopping malls. This was a high volume campaign and Telstra distributed approximately 1.6 million note pads alone by June 2005.
(b) Phase 2 ran from August 2005 to January 2006 using similar media but with the addition of an extensive outdoor campaign on billboards in prominent locations in major cities and on public transport. Once again these advertisements made extensive use of the colour yellow. For instance, a large yellow coloured billboard showed an online Yellow Pages website search screen with the words “Not only did they find me a business, they showed me how to get there”.
(c) Phase 3 ran from January to March 2006, and returned to the Paint the Town Yellow slogan in a range of advertising media. The evidence is that Telstra’s press advertising in this phase reached a consumer audience of one million, its billboard advertising reached 1.67 million and its online advertising reached 40 million.
(d) Phase 4 ran from April to May of 2006 as a competition in which consumers were encouraged to visit the Yellow Pages website for a chance to win one of three yellow Volkswagen Beetles and cash prizes. This phase focused on online advertising, and the evidence is that pop-up advertisements on high volume websites which featured the Find it in Yellow trade mark on a yellow background made 143.4 million impressions during this two-month period.
(e) Phase 5 ran from May to June of 2006 at a cost of $1.07 million. It used a combination of advertisements in newspapers, television, outdoors, online and printed directories. For example, 17 yellow-themed billboards were placed in high traffic areas in Melbourne and Sydney and online pop-up advertisements made 30 million impressions.
59 The evidence shows that until September 2006 Telstra’s directories, website and marketing always used a Yellow Pages Trade Mark with the Walking Fingers. It extensively used the colour yellow on its directories or website. I was not taken to a single example of independent use of yellow on its directories. But if there was ever any such use, it was isolated and rare. For all practical purposes Telstra only used the colour yellow together with a Yellow Pages Trade Mark.
60 In September 2006, Telstra ceased using the Yellow Pages Trade Marks as the umbrella or overarching brand for its print and online directories and commenced to use “Yellow” in that capacity. Telstra spent approximately $20 million on marketing to launch the Yellow brand, and its marketing used that brand together with the Walking Fingers, and strongly featured the colour yellow. From this date Telstra published its directories and websites under the Yellow brand and, for all practical purposes, it only ever used the colour yellow together with the Yellow brand and the Walking Fingers. It continued to strongly promote its directories, spending approximately $33 million on marketing in 2007 and 2008.
61 In 2009, Telstra returned to using Yellow Pages as the overarching brand. Since then Telstra has continued to promote its directories in extensive and broad reaching campaigns using various advertising media. It has continued to use the Yellow Pages Trade Marks and continued to feature the colour yellow on its directories and its marketing.
The respondents’ directories
The commencement of PDC
62 Glenn and Adam Hargraves gave evidence as to the commencement of PDC. It is uncontentious that in 1992 and 1993 Glenn Hargraves worked for a USA telephone directory provider named Phone Directories Company Inc (“PDC-USA”) which specialised in producing telephone directories for USA local markets. He worked as a sales consultant which involved him telephoning and visiting prospective advertisers to sell advertising space in the directories.
63 I accept his evidence that there were over 100 companies publishing telephone directories in different USA markets at that time and they commonly used yellow pages, had yellow covers and used the name Yellow Pages.
64 Adam Hargraves worked for the same USA company for a three-month period and he and Glenn Hargraves returned to Australia together in 1993. They decided to build on the experience they had acquired and start their own business in Australia producing and distributing telephone directories. They incorporated PDC for this venture on 14 April 1993. It is also uncontentious that Glenn and Adam Hargraves initially found it difficult to become established in the marketplace.
The distribution of the respondents’ directories
The print directories
65 PDC commenced publishing print telephone directories in Queensland and Northern Territory in 1994. It published its first directories in Rockhampton & Gladstone, and Mackay in Queensland, and Darwin and Alice Springs in the Northern Territory. In the years that followed it expanded the coverage of its directories in Queensland and the Northern Territory to include Townsville and the Sunshine Coast in 1995, the Gold Coast in 1996, Cairns in 1997, Tweed Heads in 1999, Southern Gold Coast in 2000, Mount Isa in 2001, Tweed Coast in 2008, Bundaberg, Tablelands and Gold Coast South in 2010, and Gympie, Hervey Bay and Cassowary Coast in 2011.
66 As I have said, in about June 2005 there was a change in the respondents’ operations in that:
(a) PDC continued to publish the PDC directories in Queensland and Northern Territory but commenced to do so under the LD Name and Logo; and
(b) ALD commenced publishing directories in New South Wales under the LD Name and Logo.
67 ALD was incorporated in June 1997 under the name Adcom Enterprises Pty Ltd, with Glenn and Adam Hargraves as two of its directors, but it did not trade. In October 2004 the company’s name was changed to Australian Local Directories Pty Ltd and it commenced selling advertising space in its pending directories in New South Wales. Adam Hargraves ceased to be a director in September 2004 and the directors were then Glenn Hargraves, Mr Stoten and Mr Wilkin.
68 It appears that ALD was to operate for the benefit of Glenn Hargraves, Mr Stoten and Mr Wilkin and not for the benefit of Adam Hargraves, who had ceased actively working in the business. Glenn Hargraves, Mr Stoten and Mr Wilkin were actively involved in the day to day activities of ALD even though in June 2005 Glenn Hargraves and Mr Stoten ceased as directors.
69 ALD published directories for the Coffs Harbour & Grafton region in 2005 and then expanded to Port Macquarie and Taree & Forster-Tuncurry in 2006, Northern Rivers in 2007 and Port Stephens in 2008.
70 Telstra attributes some significance to the fact that ALD published the PDC directories in New South Wales from June 2005. However I do not see it as having any great significance in the proceeding. In this period, PDC continued to publish the Queensland and Northern Territory directories and did so under the LD Name and Logo. I accept Mr Stoten’s evidence that PDC also conducted the back office tasks for ALD’s operations in return for a fee, including the actual production of the ALD directories. From June 2005 all of the PDC directories in Queensland, Northern Territory and New South Wales were published under the LD Name and Logo. While it appears that Adam Hargraves was not to share in ALD’s profits and there was a split in the ownership and control of PDC and ALD, Glenn Hargraves and Mr Stoten were actively running both businesses, and the operations of the two businesses remained closely connected.
71 In any event, from 1 July 2008 LD took over production and publication of the PDC directories throughout Queensland, Northern Territory and New South Wales and there was no longer any split in the ownership and control of the businesses. It has continued to publish and distribute the PDC directories since that date. The respondents continued to expand the coverage of their directories into regional New South Wales. They commenced publishing directories for Maitland in 2009 and Newcastle in 2011, and their expansion continues. Commercially, the commencement of ALD as the publisher of the PDC directories in New South Wales was little more than a continuation of the expansion of the respondents’ existing business.
72 Each PDC directory has a distribution commensurate with the size of the relevant region, ranging from approximately 21,000 for the Mount Isa directory to approximately 150,000 for the Rockhampton & Gladstone directory.
73 Before directories are delivered to the public the respondents deliver directories to each business that advertised in it. They guarantee that every advertiser will get the number of directories they have requested, and that they will deliver a directory to every single address in the territory covered.
74 David McCurdy, the respondents’ Sales Manager, said and I accept that when the directories are delivered to each business that advertised, they are delivered by a PDC employee wearing a company branded shirt and cap. A week or two later a sales representative other than the person who made that sale again attends the business wearing a company branded shirt, cap and lanyard. If the relevant business agrees the representative will affix a sticker to the business premises which features the LD Name and Logo and a slogan such as “You’re local, We’re local” or “Local Directories - we’re in it”.
75 The respondents print and distribute over one million directories each year. Once the distribution to each business and household in the territory is complete, additional copies of the directories are made available for the public to collect from local IGA supermarkets.
The website and online directory
76 In 2001 the respondents commenced operating a website containing information about their directories and their business which was located at the domain name www.pdc-group.com.au. In 2004 the respondents commenced publishing their website at the domain name www.yourlocalphonebook.com.au. In 2006 the respondents commenced publishing their website at the domain name www.localdirectories.com.au which included an online directory.
77 The PDC Respondents have registered a number of trade marks to support their directory products, starting with a “PDC” logo in 1998 before moving to several composite trade marks including the word “Local Directories” and a stylised “LD” in around 2006.
The respondents’ use of yellow and other trade indicia
Features of the respondents’ print directories
78 It is uncontentious that the PDC directories have had the following features:
(a) since 1994 the classified listings sections have been printed on yellow coloured pages;
(b) since 1996 the covers and spine of the directories have featured the colour yellow;
(c) from 1994 until about June 2005 the directories were published under the PDC Name and Logo. This can be seen in the name “Phone Directories Company” along with the acronym “PDC” on the spine of the directories, and the acronym “PDC” on the front cover, together with the use of the name “Phone Directories Company” on every second page of the A-Z listings section of the directories. I reproduce below an image of the PDC Name and Logo inside a map of Australia which is displayed on the front cover of the PDC directories and an image of the PDC Name and Logo on the spine of the PDC directories:
(d) from June 2005 the directories were published under the LD Name and Logo. Initially the LD Name and Logo appeared with the tag-line “Your Local Phone Book” in stylized font as I reproduce below:
(e) from 2006 the LD Name and Logo was changed to appear as follows:
(f) from 1994 to March 2007 the term “Yellow Section” was used to describe the classified listings section;
(g) from 1994 to March 2007 the term “White Section” was used to describe the alphabetical listings section;
(h) from 2003/2004 to 2007 the “General Telephone Information Page” contained a “General Enquiries” section in which Sensis was listed first and Telstra was listed second, out of alphabetical order;
(i) from 2000 to 2005, one of the pages contained a Yellow Pages Publishers Association (“YPPA”) symbol which included a depiction of walking fingers as follows;
(j) from February 2006 to September 2006 one of the pages included a Yellow Pages Association (“YPA”) symbol which included depiction of walking fingers as follows;
(k) from 1994 to 2007, the directories included a “Quick Find Index” with a red coloured strip and red capitalised letters in red rectangles as a heading structure within the index.
79 The YPPA is the predecessor of the YPA. I accept Mr Stoten’s evidence that PDC became a member of this organisation in about May 1999. The evidence shows that the YPA is an association based in the USA and its members include:
(a) publishers of Yellow Pages directories;
(b) certified marketing representatives who are involved in selling advertising in Yellow Pages directories; and
(c) associate members who include industry stakeholders such as Yellow Pages advertisers, vendors and suppliers to the industry.
The evidence shows that the YPA has members in 29 countries and has used a logo which includes a walking fingers device since the 1980s. The evidence indicates that its members often display this logo on the directories they publish.
The disclaimers in the print directories
80 From 1994 the respondents published the following disclaimers in their print directories:
(a) in 1994 and 1995 the preface of the directories contained the following statement:
Phone Directories Company Pty Ltd (PDC) was developed in response to a need in the market place for a viable alternative to Yellow Pages … Phone Directories Company is not associated in any way with Yellow Pages, or any other subsidiary of Telstra Corporation. Phone Directories Company is not a directory of subscribers to or persons with any telecommunications service by Telecom.
(b) in addition to this express disclaimer, the 1994 and 1995 directories featured the following indicia which identified PDC as the producer:
(i) the name “Phone Directories Company” printed on every second page of the A-Z listings section of the directories;
(ii) the name “Phone Directories Company” along with the acronym “PDC” on the spine of the directories; and
(iii) the acronym “PDC” on the front cover.
(c) from 1999, in addition to the name “Phone Directories Company” being printed on every second page of the A-Z listings section, disclaimers were included on the first page of the A-Z listings section of the directories. In the earlier directories the disclaimer stated:
PDC Directories was developed in response to a need in the marketplace for a viable alternative to Yellow Pages…
PDC Directories is not associated in any way with Yellow Pages, or any other subsidiary of Telstra Corporation. PDC is not a directory of telephone number subscribers.
(d) then after June 2005, the disclaimer (located on the first page of the A-Z listings section) stated:
Australian Local Directories was developed in response to a need in the marketplace for a viable alternative to Yellow Pages.
Australian Local Directories is not associated in any way with Yellow Pages, or any other subsidiary of Telstra Corporation. Australian Local Directories is not a directory of telephone number subscribers.
(e) then after April 2008 the disclaimer (located on the first page of the A-Z listings section) stated:
Local Directories was developed in response to a need in the marketplace for a VIABLE ALTERNATIVE to Telstra’s Yellow Pages & White Pages.
LOCAL DIRECTORIES IS IN NO WAY ASSOCIATED WITH TELSTRA CORPORATION LIMITED OR ANY PART OF ITS PUBLICATIONS INCLUDING YELLOW PAGES & WHITE PAGES. Local Directories is not a directory of telephone number subscribers. (Emphasis in original.)
(f) from 2006, the extent of the disclaimer was expanded so that each reference to Telstra, such as in the General Enquiries section was accompanied by an asterisk and an explanation that “this directory is in no way associated with, sponsored, or authorised by Telstra Corporation Limited, Yellow Pages, White Pages or Sensis Pty Ltd.” In addition, from September 2006, the following statement appeared on the front inside page of the directory:
Proudly and independently Australian owned and operated, Local Directories is in no way associated with, sponsored, or authorised by Telstra Corporation Limited, Yellow Pages, White Pages or Sensis Pty Ltd.
(g) from about May 2007, the extent of the disclaimer was increased by including the following statement on the bottom of each alternate page in both the A-Z listings and classified sections:
Local Directories is in NO WAY associated with Telstra Corporation Limited or Sensis Pty Ltd.
As a result, since May 2007 each of the PDC directories included over 500 disclaimers stating that the respondents’ directories were not associated with Telstra in any way.
(h) from 2008, the disclaimer in the preface of the directories stated:
Local Directories is a 100% Australian owned wholly independent phone book publisher. Local Directories has absolutely no association whatsoever with Telstra Corporation Limited or Sensis Pty Ltd.
Since 1993, Local Directories, as a competitor and real alternative to Sensis White Pages and Yellow Pages regional directories, has published over 130 annual editions of its local phone books throughout Australia. (Emphasis in original.)
A similar disclaimer was published on a flyer included in each directory’s wrapping.
81 Although there was some slight variation in the disclaimers between different regions their thrust was the same and they were printed with similar prominence.
Features of the respondents’ websites and online directories
82 It is uncontentious that the respondents’ websites had the following features:
(a) from 2000, the respondents’ website published at the domain name www.pdc-group.com.au contained general information about the corporate respondents and the directories;
(b) from 2001 to 2007, the directories were described on the respondents’ website as “white and yellow page directories” and “white and yellow page phone books”. This practice ceased in response to a complaint from Telstra;
(c) from about 2004, the respondents’ website was published at the domain name www.yourlocalphonebook.com.au. It referred to “yellow page listings” and “Yellow Section” in the print directories and displayed images of the yellow covers of the print directories.
(d) from 2005, the respondents used the colour yellow as a highlight and background colour on the website, and displayed the yellow covers and pages of the directories throughout the website. The website began to refer to PDC as a fully accredited member of the YPPA;
(e) from September 2006, the respondents’ website was published at the domain name www.localdirectories.com.au, and it contained an online directory. Each of the directories were progressively made available online. The online directory included images of the yellow covers and pages of the directories; and
(f) from 2006, the website featured a map of Australia shaded in yellow indicating the regions where the directories are published.
The disclaimers on the respondents’ websites
83 The respondents’ websites contained disclaimers and other statements which indicated that they were not published by or associated with Telstra:
(a) from 2001, in the “Frequently Asked Questions” under the question “Is PDC a part of Yellow Pages or Telstra?” the website stated:
No, PDC is an independently wholly Australian owned company which began in 1992.
(b) Under the question “Where do the listings come from?” the website stated:
A number of different sources are used to compile the listings published in our directories, including public domain databases. PDC also has a business listings supply licence agreement with Pacific Access Pty Ltd, Telstra’s publisher of White Pages and Yellow Pages. PDC is also a committee member of the Integrated Public Number Database (IPND) – Australian Communications Industry Forum. The IPND contains every individual phone listing (with daily updates) and is used for national security, emergency services and directory publishing. PDC also receives hundreds of listing information updates from individual members of the public.
(c) from 2006, under the heading “About Us” the website stated:
Local Directories is a privately owned, wholly independent Australian business. The company is a member of Communications Alliance Ltd, an international member of the Yellow Pages Association (YPA), the Association of Directory Publishers (ADP) and an associate member of the European Association of Directory Publishers (EADP). Local Directories has no association whatsoever with Telstra Corporation Limited, Sensis Pty Ltd, White Pages or Yellow Pages. One of Local Directories major sources of telephone data information is the Integrated Public Number Database (IPND). This database is regulated by the Australian Communications and Media Authority. (Emphasis in original.)
(d) from 2008, the wording of the disclaimer in the “About Us” section was changed slightly and it stated:
Local Directories is a privately owned, wholly independent Australian business. The company is a member of the Communications Alliance Ltd, an international member of the US Yellow Pages Association (YPA), the Association of Directory Publishers (ADP) and an associate member of the European Association of Directory Publishers (EADP). Local Directories HAS NO ASSOCIATION whatsoever with Telstra Corporation Limited, Sensis Pty Ltd, White Pages or Yellow Pages.
Since 1993, Local Directories, as a REAL ALTERNATIVE, has brought a refreshing new image to advertising. Compact and complete, Local Directories combines traditional, time-tested features with exciting new innovations. (Emphasis in original.)
(e) in 2009, the wording of the disclaimer was again changed slightly but its thrust was unchanged.
Features of the respondents’ mobile application
84 The respondents’ mobile app which contained an electronic directory become available in June 2011. It is uncontentious that it features yellow as a background, has a yellow icon on the loading screen and rows of yellow icons on the home screen. It contains no disclaimers.
The respondents’ use of yellow in its marketing
85 Together with their use of yellow pages in their directories since 1994 and their use of yellow covers since 1996, the respondents also featured the colour yellow in their marketing since 1993.
86 Mr Stoten deposed, and I accept, that the respondents’ marketing strategy had clearly defined pre-publication and post-publication phases. The pre-publication marketing campaign was conducted during the period that the “sales canvass” is performed. In this period the respondents’ sales representatives directly approach businesses within the area covered by the directory and attempt to sell advertising space to them. The pre-publication marketing campaign is aimed at the respective advertisers and was commonly made up of testimonials from the respondents’ existing advertisers.
87 The post-publication marketing campaign occurs at the time the relevant directory is being published. This campaign is primarily aimed at directory users in the relevant region to advise them that the directories are being distributed, and that extra copies can be collected at the local IGA supermarket.
88 Catherine McGarry, General Manager of Local Directories, deposed that the respondents conducted various types of television advertisements in the pre and post- publication marketing campaigns, including:
(a) “Coming soon advertisements” which advertised the commencement of a PDC directory in a new region;
(b) “Client Testimonials” which included testimonials from the respondents’ existing advertisers;
(c) “Closing Now advertisements” which advised that the deadline for advertisers to place advertisements was approaching;
(d) “Distribution advertisements” which informed directory users that directories could be collected from local IGA supermarkets;
(e) “Online advertisements” which announced the launch of the online directory from 2006; and
(f) “In the Street advertisements” which included testimonials from directory users.
89 Ms McGarry deposed, and I accept, that the respondents’ television advertisements since 1994 have featured the colour yellow. I accept too Mr Stoten’s evidence to similar effect.
90 Ms McGarry gave examples of the respondents’ advertisements from 1994 to 2012 which consistently featured the colour yellow. Firstly, the advertisements typically used a yellow ribbon which appeared on the bottom of the screen, particularly in the testimonial style advertisements. Such advertisements showed an individual explaining the success of his or her advertisements in the respondents’ directories while a yellow coloured ribbon featuring the LD Name and Logo appeared at the bottom of the screen. The image below is a screenshot from a 2004 advertisement screened in Rockhampton and Gladstone.
91 The image below is a screenshot from a 2008 advertisement screened in Darwin. This advertisement commenced with a large LD Name and Logo before cutting to the ribbon layout shown.
92 Secondly, the advertisements typically used an image of the front cover of one of the respondents’ directories. In some instances this was in addition to a yellow coloured ribbon which appeared later in the advertisement. By way of example, the image below is a screenshot from a 2005 advertisement shown on the Sunshine Coast.
93 A further example is the following image, which is a screenshot from a 2007 advertisement screened in Coffs Harbour.
94 This image of the directory was the central visual point in the advertisement. After a close up shot of its cover, the book opens and its yellow coloured pages become visible as can be seen below.
95 These images are accompanied by a voiceover with the following words:
It’s here. On your doorstep and at your fingertips. Your new Local Directories phone book is being delivered free to every single household and business. It’s packed full of updated maps, local businesses, residential listings and community information. You can even pick up extra copies from these local outlets. Access it online at localdirectories.com.au. It’s your local phone book. Local Directories: proudly independent and Australian owned.
96 I accept Ms McGarry’s evidence that television advertisements of these general types were screened in the various regional areas in which the respondents published their directories, and she provided schedules which set out the time periods during which the advertisements were screened and the stations on which they were aired. She said that the respondents have not retained the schedules for the 1994-2004 period, but that period is not central in any event. Ms McGarry produced schedules for the 2005-2010 and 2011-2012 periods.
97 I infer that the advertising schedules for the 2005-2010 and 2011-2012 periods are roughly representative of the schedule for the missing period. I am satisfied that the advertisements were aired widely across the relevant regions often for many months. Using the period of the 2008 sales canvass as an example, the respondents published television advertisements including on Southern Cross 10, Prime 7, Nine Broadcasting Network, and Win during the following periods and covering the locations listed:
(a) Port Stephens: from 28 May 2007 to 30 November 2007;
(b) Port Macquarie: from 25 May 2007 to 21 December 2007;
(c) Taree: from 16 July 2007 to 21 March 2008;
(d) Cairns: from 7 August 2007 to 30 March 2008;
(e) Darwin: from 3 September 2007 to 30 March 2008;
(f) Townsville: from 18 September 2007 to 1 June 2008;
(g) Tweed Coast: from 1 January 2008 to 8 August 2008; and
(h) Rockhampton: from 14 January 2008 to 29 August 2008.
98 While there was little documentary evidence of the frequency and placement of these advertisements, I accept Ms McGarry’s evidence that the television advertisements were “broadcast widely in the particular region in which the respondents’ directories are distributed.” I am satisfied that the advertisements informed many prospective advertisers and directory users in the regions covered that the respondents intended shortly to publish, or had published, a telephone directory in that region.
99 The respondents also promoted their directories through newspaper advertisements. There was little evidence of the frequency and placement of these advertisements but I infer that they were published with reasonable frequency in local newspapers in an endeavour to reach the target audience of prospective advertisers and directory users. The evidence is that the advertisements typically used yellow as a background, and also used images of the yellow covered directories. I reproduce below an example of an advertisement placed in the Port Macquarie News on 28 November 2008.
100 Ms McGarry said, and I accept, that the respondents also used yellow in materials distributed widely by their sales representatives and made available on their website. These materials included advertising guides aimed at assisting prospective advertisers to select the appropriate advertisement for their business. She said that the respondents’ sales representatives have distributed approximately 125,000 such guides since 1994. The guides are not all the same but I am satisfied that they extensively and consistently used yellow as the dominant colour. As an example I reproduce below the 2007 “B2 Directory Advertising Guide”.
101 The evidence also shows a strong yellow-related theme in the respondents’ other marketing materials and merchandise. As an example I reproduce below:
(a) a June 2004 photograph of the stand at a local supermarket from which the respondents’ directories were made available to directory users. The respondents used such stands at supermarkets, local banks and other distribution points from 1994 to the present; and
(b) an image of the magnetic sign placed on the sides of employee motor vehicles from 2002 to the present.
102 The respondents also led extensive evidence of other yellow-themed marketing material, including balloons, t-shirts worn by sales representatives, stickers, calendars, lanyards, pens, stubby holders, drink bottles and mouse pads. I will not detail this evidence.
103 I am satisfied on the evidence that the respondents had a strong yellow-related theme in the marketing of their directories from 1994. In my view the respondents’ marketing was sufficient to inform many advertisers and directory users in the relevant regions that:
(a) a directory under the LD Name and Logo with a strong local focus was shortly to be published, or had recently been published, in that region; and
(b) that the directory had yellow covers and pages.
104 The respondents do not contend that they have acquired a secondary reputation in the colour yellow through their extensive use of it since 1994, and I make no such finding. I am though satisfied that many advertisers and directory users would have come to see the yellow covers on the respondents’ directories as an important part of the respondents’ branding.
The use of yellow in classified directories in Australia
105 It is uncontentious that there have been and are a large number of directory providers in the Australian market. The directories they have produced and distributed vary greatly in terms of layout and the extent of their distribution. The parties are at issue over the extent to which other directory providers have used the colour yellow in respect of their directories.
106 In my view the evidence shows that classified directories in Australia commonly used yellow coloured pages from an early date, and some also used yellow covers. Yellow covers were used by:
(a) the respondents who distributed more than eight million yellow covered directories in various regions of Queensland, Northern Territory and New South Wales from 1996 to 2006; and
(b) a handful of other small directory providers in discrete markets from about the mid-1980s.
The evidence also shows that respondents used yellow covers for 10 years without complaint by Telstra.
107 Telstra seeks to draw a firm line between the use of yellow pages and the use of yellow covers but I do not consider that is appropriate. The relevance of the use of yellow in the present context is its likely effect on the minds of consumers and, while I accept they are different, I do not draw a sharp distinction between the use of yellow coloured directory pages and yellow coloured directory covers. The evidence shows that the use of the colour yellow generally in respect of classified directories in Australia is widespread.
108 I now set out the evidence showing the use of the colour yellow in respect of classified directories.
The BIG Directory
109 Geoffrey Moule, a former senior employee of Business Marketing Australia Pty Ltd (“BMA”) gave evidence about the Big Colour Pages Directory (“the BIG Directory”) published by that company.
110 He said that BMA published “The Melbourne BIG directory” annually in Melbourne from 1987 undergoing a name change to “BIG Colour Pages” in about 1991. Over the period 1991 to 1997, BMA expanded the geographical coverage and distribution of the BIG Directory until it was published in Melbourne, Sydney, Perth, Brisbane, Gold Coast, Sunshine Coast, Northern Territory, Adelaide, Hobart, Northern NSW, Cairns, Townsville, Wollongong and Canberra. During the period 1997 until 2002 (when the BIG Directory ceased) BMA distributed approximately 3.5 million BIG Directories nationwide each year.
111 Mr Moule’s evidence is that since its inception BMA used yellow pages in the classified directory section of the BIG directory. It is significant to my decision that he testified that BMA’s 1986 decision to use yellow pages was made because yellow was used worldwide as the standard colour for classified directories. Mr Moule was not cross-examined and I accept his evidence.
Regional community directories in WA
112 Darren Lee, Managing Director of Market Creations Pty Ltd (“Market Creations”), gave evidence about Market Creations’ publication of regional community directories in Western Australia from 1997. It published the following directories:
(a) Shire of Broome Directory;
(b) Karratha & Districts Chamber of Commerce & Industry Business and Community Directory;
(c) Port Headland Information Directory;
(d) Mid West Business & Community Directory;
(e) Carnarvon Business & Community Directory & Coral Bay;
(f) Newman Business & Community Directory;
(g) Narrogin Business & Community Directory;
(h) Esperance Business & Community Directory; and
(i) Jurien Bay & Surrounding Districts Business & Community Directory.
113 Mr Lee’s evidence is that these directories did not use yellow pages, but used yellow or yellow/orange colour coding on the edge of the pages to identify the classified directory section. The Karratha & Districts directory referred to that section as the “Yellow Pages” in at least the editions published in 2002-2003, 2005-2006, 2006-2007 and 2007-2008.
114 Mr Lee was not cross-examined and I accept his evidence.
The Yellow Envelope
115 Thomas Greene, Chairman of Horizon Media Pty Ltd (“Horizon”), gave evidence about an advertising product distributed by his company called “The Yellow Envelope” since 1997. The evidence is that Horizon direct mailed to households throughout Australia a yellow coloured envelope which prominently featured the words The Yellow Envelope. It was distributed to its recipients up to five times per year, and on average about 17 million copies were distributed each year between 1999 and 2003.
116 Mr Greene was not cross-examined and I accept his evidence. However Horizon did not produce and distribute telephone directories and this evidence is of little relevance. While his evidence confirms that yellow is a bright primary colour that traders commonly use to attract the eye of consumers that question is not central in the dispute.
Other directories
117 Ms McGarry also gave evidence about third-party use of the colour yellow. I found her a careful and reliable witness and in the main I accept her evidence. In particular I accept her evidence as to the use of yellow in the following directories:
(a) Rockingham, Mandurah, Kwinana: from 1985 RMK published directories in the Rockingham, Mandurah and Kwinana region of Western Australia featuring various yellow indicia including yellow covers and yellow pages. Later editions used a yellow coloured background in the maps section. From 2001 to 2003, these directories were named “Yellow Directories”. Ms McGarry’s evidence is that from 2004 to the present their circulation averaged approximately 64,000 copies annually.
She also gave evidence of the corresponding website which has operated from at least June 2004 to December 2011 at the domain name www.rmkdirectories.com.au. The website used a yellow background and side bar as well as yellow in the headings;
(b) Chinese Business Directory: from 1991 the “Chinese Business Directory” was published in Brisbane. This used yellow coloured front and back covers as well as a yellow spine and yellow pages for the classified listings section;
(c) Australian Business Directory – Your Multicultural Guide: from 1993 to 2007 this directory was published in Sydney. They had yellow pages for the classified section, yellow borders for the introductory pages, as well as the information pages and a yellow background in the index. Most editions used yellow on the front cover;
(d) Whitsundays Telephone Guide: from at least 2007 to 2009 and 2011 to 2012 this directory was circulated within the Whitsundays, Queensland. It had a yellow background on the front and back covers, yellow pages in the classified section and yellow coloured text on the front cover. It referred to the classified section as “Business Directory (yellow pages)”; and
(e) Yellow Duck: this online directory operated from at least 2006 to March 2011 at the domain name www.yellowduck.com.au. It used yellow as a background and highlight colour and, evidently, the word yellow in the name.
118 Ms McGarry also adduced evidence of a number of other third-party print directories which used yellow pages including local directories such as the Port Hedland Information Directory, the Hastings Community Quick Find Directory, Lower Hunter Street and Telephone Directory 1996, The Directory – National Mobile Directory, The Localink 2004, Agnes Water – Town of 1770 – Captain Creek Telephone Guide 2007/2008, Capricorn Coast Telephone Guide and the Central Coast Street and Telephone Directory. Many of these also adopted yellow as a feature of the cover or spine.
119 Additional online directories referred to by the respondents include www.chineseyellowpagesaustralia.com.au, www.shmellow.com.au, www.yellowbiz.com.au, www.yellowmagnet.com.au, www.christianyellowpages.com.au, and www.jewishyellowpages.net.au. On my view of the evidence, these directories used the word yellow in their name and in their domain name and made at least some use of the colour yellow.
120 I am satisfied that yellow pages were ubiquitous in classified directories around Australia. The use of yellow covers in such directories was not as widespread but in my view it was still common. Other than the respondents, most of the directory providers who used yellow covers did so in small or discrete markets.
The use of yellow in international classified directories
121 There is an abundance of evidence that the colour yellow was widely used in respect of classified directories from an early date. I will now deal with that evidence.
122 Mr Harvy’s evidence is important on this issue. He annexed to his affidavit a 2006 Sensis document titled “Yellow – a timeline” which stated:
1975 The Yellow Pages directory is born. The pink pages of the classified directory are changed to yellow, which is the internationally recognised colour for classified directories….
123 This statement was put to Mr Harvy in cross-examination and he made no attempt to distance himself from it. He conceded that the colour yellow and the name Yellow Pages were widely used by classified directory providers around the world before Telstra adopted them, and he acknowledged that in adopting those indicia Telstra was following an international trend to do so. His evidence is confirmed by a great deal of other evidence that overseas directories commonly used yellow pages and yellow covers. Mr Harvy accepted that Yellow Pages directories have been published in Canada, France, Ireland, Israel, New Zealand, the Netherlands, the United Kingdom and the USA, and that for the most part they had yellow pages and yellow covers.
124 It is significant that, in accepting that yellow was internationally recognised as the colour of classified directories in 1975, Mr Harvy did not suggest that its recognition in Australia was any different to the rest of the world.
125 Secondly, Mr Moule said that in 1986 BMA decided to use yellow pages in the BIG Directories in Australia because yellow was used worldwide as the standard colour for classified directories.
126 Thirdly, as already described above, the evidence is that in 1992-1993 Glenn and Adam Hargraves worked in the USA for a directory provider, PDC-USA Inc. Glen Hargraves said, and I accept, that at that time there were over 100 companies publishing telephone directories in different USA markets and they commonly used yellow pages, yellow covers and the name Yellow Pages.
127 Fourthly, Ms McGarry tendered examples of numerous print classified directories from other countries that used a yellow get up. These included the following:
(a) 1993 Jackson Hole Phone Directory in Wyoming, USA, which used yellow pages for the classified section and named that section the Yellow Pages;
(b) 2000 Pacific Bell SMART Yellow Pages in California, USA, which used a yellow cover, yellow pages in the classified section, and had the word yellow in its title;
(c) 2003 Yellow Pages in Papua New Guinea, which used a yellow cover and the word yellow in its title and I infer that it also used yellow pages;
(d) 2006 Dublin Golden Pages in Ireland, which used a yellow front cover;
(e) 2008-2009 Yellow Book in the USA, which used yellow pages, yellow front and back covers, the word “yellow” in its name and in the name of the classified section. The front cover stated “Complete Yellow and Business White Pages Residential White Pages & yellowbook.com”; and
(f) 2011 Go to Guide Telephone Directory in the USA, which used yellow pages and named the classified section the Yellow Pages.
I infer that many of these directories commenced to use the colour yellow as they did earlier than the dates on the examples tendered.
128 Ms McGarry also tendered examples of numerous international directory websites which used the colour yellow, including websites for directories in Fiji, South Africa, Thailand, Singapore, Hong Kong, Peru, France, Italy, Indonesia, Ireland, Papua New Guinea, Egypt, Malaysia, China, Eritrea, Bahrain, Cyprus, Germany, Israel, USA, Suriname, Macau, Thailand, Vietnam, Bermuda, Malta, Turkey, Brazil and the UK. Many used the name Yellow Pages for the directory and in the domain name, for example, Vietnamese website www.yellowpages.vn, Canadian website www.yellowpages.ca, South African website www.sayellow.co.za, Singapore website www.yellowpages.com.sg and the Thai website www.yellowpages.co.th. While little information was provided in relation to the dates when these websites commenced, the abundance of the sites leads me to infer that at least some were active in the late 1990s and early 2000s.
129 I am well satisfied that prior to the respondents commencing to use yellow pages and covers on their directories the use of these indicia on international directories was widespread.
Telstra’s awareness of the PDC respondents as a competitor
130 The evidence shows that Telstra became aware of the respondents’ business in 1993 and has engaged in extensive monitoring of their business and directories since that time. There is no doubt that Telstra was aware from shortly after its commencement that the respondents’ directories had yellow pages and yellow covers. This can be seen in contemporaneous consumer surveys adduced through Mr Harvy and Michelle Sherwood, Executive General Manager of Strategic Marketing of Sensis. The respondents objected to this evidence primarily on the basis that the surveys constituted inadmissible hearsay. As I later explain, I consider they are admissible.
131 In 1995 Telstra commissioned a consumer survey by Reark Research (“1995 Reark Research Survey”). Amongst other things, the survey was aimed at ascertaining the awareness of directory users of the PDC directories and Yellow Pages directories, and their reasons for choosing to use one or other of the directories. The salient findings of this survey included that:
(a) 92% of participants were aware of the PDC directories, including 16% who recalled it without prompting;
(b) 80% had a PDC directory and 99% had a Telstra directory;
(c) 63% stored the PDC directory together with Telstra’s directory;
(d) 33% thought that Telstra’s directories were more comprehensive or complete, 20% considered them more familiar, and 19% thought they covered a wider area;
(e) 40% thought that the PDC directories were smaller in size, 25% thought them to be handier and more convenient, and 12% considered their local focus was desirable; and
(f) 57% said they would prefer to receive both directories.
132 In 1996 Telstra commissioned market research in the Rockhampton and Mackay area by Yann Campbell Hoare & Wheeler (“1996 Yann Campbell Hoare Wheeler Survey”) which tended to confirm the results of the Reark Research Survey. Telstra concluded in a document titled “Long Term Strategic Outlook” that PDC was a “new major player” in the directories market. The significant findings of this survey of directory users included that:
(a) 70% of participants were aware of the PDC directory, while 99% were aware of Telstra’s directory;
(b) 43% preferred the PDC directory due to its size as opposed to 41% for Telstra’s directory;
(c) 39% preferred the overall design of Telstra’s directory as opposed to 21% for the PDC directory; and
(d) in Mackay, 43% used the PDC directory while 99% used Telstra’s directory.
133 Over the ensuing years Telstra continued to closely monitor the changes made to the PDC directories, the expansion of their market share within the cities and regions in which they were published, and their expansion into new cities and regions. This can be seen in a series of other consumer surveys and market research reports, including:
(a) a January 1997 discussion paper titled “Competitive Strategy for 1998 canvass - January 1997” (“1997 Competitive Strategy Report”);
(b) a June 1999 report titled “Rockhampton/Mackay Directory (Q02Y) Business Case” (“1999 Rockhampton/Mackay Report”);
(c) a May 2004 consumer survey conducted in Darwin and Alice Springs by market research company TNS (“May 2004 TNS Report”); and
(d) a June 2006 Competition Monitoring Report (“2006 Competitive Strategy Report”).
134 I deal with these reports in detail (at [272]-[290]) when dealing with the survey evidence that consumers were confused as to the origin of the PDC directories. For the present, it suffices to note that they show Telstra’s detailed knowledge of the respondents’ directories and their business, and they reveal that it closely analysed the reasons why many directory users and advertisers chose to use the PDC directories as well as, or instead of, Telstra’s directories.
135 In internal correspondence on 13 May 2007, Telstra noted that “PDC are making large inroads in to the marketplace as they enter… advertisers are choosing to take additional elements such as size and colour out of their Yellow Pages spend and put it in to PDC.”
136 Mr Stoten and Ms McGarry gave evidence in relation to pre-July 2006 meetings and correspondence between the parties (including legal threats) in which Telstra made no complaint about the respondents’ use of yellow pages and covers. These discussions also show Telstra’s awareness of the appearance of the respondents’ directories.
The appearances of the respective directories
137 It is uncontentious that in the regions in which the respondents published directories (except Newcastle and the Gold Coast) the corresponding Telstra directories were co-bound directories containing both Yellow Pages and White Pages directories in the same volume.
138 From 1975 to 1996 the front covers of Telstra’s directories were almost entirely yellow covered and usually carried a large Yellow Pages Trade Mark including the Walking Fingers. The directories used a “flip” cover with Yellow Pages branding on a yellow front cover and White Pages on a predominantly blue back cover. As an illustration I reproduce images of the front covers of Telstra’s co-bound directories for Kempsey District in 1986, Ballina, Casino, Coffs Harbour, Grafton, Lismore and Murwillumbah in 1989, and Rockhampton, Mackay, Gladstone, Emerald Districts and Longreach District in 1990.
139 When the respondents launched their directories in 1994 they were quite different in appearance to Telstra’s corresponding co-bound regional directories. The respondents’ directories:
(a) featured a large photograph of a local landmark on the front cover, whereas the front cover of Telstra’s Yellow Pages directory had no photograph and was coloured almost entirely yellow;
(b) carried a small PDC logo whereas Telstra’s directories carried a prominent Yellow Pages Trade Mark including the Walking Fingers;
(c) were focused on a local area, whereas Telstra’s directories covered much larger geographical areas. For example, the respondents published separate directories for each of Alice Springs and Darwin whereas Telstra’s directory covered the whole of Northern Territory;
(d) featured an advertisement on the back cover whereas Telstra’s Yellow Pages and White Pages directories were co-bound into the same volume. The co-bound directories had a “flip” back cover which was the cover of the White Pages; and
(e) were typically smaller in size because Telstra’s directories covered a larger geographical area.
The “flip” White Pages cover used local photographs but those covers were clothed in blue, not yellow.
140 It must be kept in mind that side by side comparison is not appropriate, because the question is one of the impression left with or conveyed to consumers when they are confronted with a PDC directory. Even so it is possible to get some assistance from the images I set out below. As the proceedings largely revolve around the respondents’ use of the colour yellow it is necessary to see the images in colour to properly understand the differences. The judgment has been published to the parties in colour.
141 By way of illustration I reproduce below images of the front and back covers of the PDC 1994 Alice Springs and 1994 Darwin directories.
(front cover) (back cover)
(front cover) (back cover)
142 These are quite different to the front and back covers of Telstra’s corresponding 1994 Northern Territory co-bound Yellow Pages and White Pages directory as I set out below.
(front cover) (back cover)
143 When the respondents moved to using yellow covers on their directories in 1996 the design of their directories was otherwise unchanged. They maintained the use of a large photograph of a local landmark on the front covers, and an advertisement on the back covers. By way of illustration I reproduce the front and back covers of the PDC 1996/97 Rockhampton & Gladstone directory, and the PDC 1996/97 Mackay directory.
(front cover) (back cover)
(front cover) (back cover)
144 Telstra’s directories had a quite different appearance to the PDC directories as their front covers continued to be almost entirely yellow with Yellow Pages branding, and their “flip” back covers were predominantly blue with White Pages branding. Because Telstra’s directories covered a greater geographical area than the PDC directories they were typically larger. I reproduce images of the front and back covers of the corresponding 1996 Telstra co-bound directory for Rockhampton, Gladstone, Mackay, Whitsundays, Emerald and Longreach Districts.
(front cover) (back cover)
145 In 2000, Telstra added a jumble of small pictures to the left side bottom corner of its co-bound directories. The front covers remained predominantly yellow with Yellow Pages branding with a smaller Walking Fingers, and the predominantly blue White Pages “flip” back cover remained. I reproduce below the front cover of Telstra’s co-bound 2000/2001 Ballina, Casino, Coffs Harbour, Grafton, Lismore and Murwillumbah directory.
146 In 2001, Telstra moved the pictures on the front covers of its co-bound directories so that they appeared under the Yellow Pages branding, and commenced to use a large landscape picture at the bottom of the front cover. The Walking Fingers logo was repositioned to the bottom right of the front cover. The predominantly blue White Pages “flip” back cover remained. I reproduce below an image of the front cover of Telstra’s co-bound 2001/2002 Rockhampton, Emerald, Gladstone & Longreach Districts directory.
147 In 2002, Telstra moved to using cartoon characters on the front cover of its co-bound directories, and the Walking Fingers logo was moved to the bottom left corner. The predominantly blue White Pages “flip” back cover remained. I reproduce below an image of the front cover of Telstra’s co-bound 2002/2003 Northern Territory directory.
148 In 2003 Telstra moved to using a large stock photograph on the front cover of its co-bound directories. The Walking Fingers logo stayed in the same position and the flip cover remained. I reproduce below an image of the front cover of Telstra’s co-bound 2003 Cairns directory.
149 In 2004 Telstra dramatically altered the appearance of the front and back covers of its co-bound directories. The front cover was split in half vertically with both Yellow Pages and White Pages branding. The left half was largely yellow with Yellow Pages branding above a large stock photograph, and the right half was largely blue with White Pages branding above another photograph. The back cover contained an advertisement. By way of illustration I reproduce below an image of the front cover of Telstra’s co-bound 2004-05 Townsville, Mount Isa, Cloncurry and Hughenden Districts directory.
150 The design and get up of the PDC directories remained unchanged, except that from June 2005 they were published under the LD Name and Logo. I reproduce below images of the front cover of the PDC 2005/2006 Alice Springs directory alongside Telstra’s co-bound 2005-06 Northern Territory directory utilising the vertical split cover design.
151 Telstra’s directories also had a split design on the spines which were half yellow with Yellow Pages branding and half blue with White Pages branding. The spine of the respondents’ directories remained entirely yellow and featured the LD Name and Logo. Another real difference in the appearance of the directories was that Telstra’s directories were, as has already been noted, often materially thicker than the PDC directories. I also reproduce below images of the spines of the PDC 2005/2006 Alice Springs and Darwin directories, alongside Telstra’s co-bound 2005-06 Northern Territory directory.
152 In 2006, Telstra again significantly changed the appearance of its co-bound directories, this time moving to a cover design which split the cover horizontally. The front covers were split into quarters and coloured yellow in the top quarter with Yellow Pages branding. They had a series of photographs in the centre spanning the width of the directories, and were coloured blue in the bottom quarter with White Pages branding. The spines were half blue and half yellow. By way of illustration I reproduce below an image of the front cover of Telstra’s co-bound 2006/2007 Rockhampton, Emerald, Gladstone & Longreach Districts directory.
153 At the same time, the design and get up of the PDC directories remained unchanged. Because the front covers of both directories were split horizontally, and because they both had photographs in the centre, in my view the rival directories looked slightly more similar in this period. I reproduce below images of the front covers of the PDC 2006/2007 Alice Springs directory alongside Telstra’s corresponding co-bound 2006/07 Northern Territory directory.
154 The size difference typically remained, as can be seen in the images below of the spines of the PDC 2006-2007 Alice Springs and Darwin directories alongside Telstra’s 2006/07 Northern Territory directory.
155 In 2007, Telstra altered the appearance of its co-bound directories again. It moved to dividing the front cover horizontally into thirds. The top third was coloured yellow and had Yellow Pages branding including the Walking Fingers, the central third featured a photograph from the local region, and the bottom third was coloured blue and had White Pages branding. At the same time, the design and get up of the PDC directories was unchanged although it moved to using a larger and more distinctive LD Name and Logo. I reproduce below images of the PDC 2007/2008 Coffs Harbour & Grafton directory alongside Telstra’s corresponding 2007/08 directory for Ballina, Casino, Coffs Harbour, Grafton, Lismore and Murwillumbah. The images are not to scale and Telstra’s directory is not as comparatively large as it appears.
156 In 2010, Telstra again changed the appearance of the front covers of its co-bound directories so that the central photograph took up about three-fifths of the centre of the front cover. It used the top one fifth with a yellow coloured strip together with Yellow Pages branding, and the bottom one fifth with a blue coloured strip with White Pages branding. I reproduce below an image of the front cover of Telstra’s co-bound 2010 Port Macquarie, Forster, Gloucester, Kempsey, Lord Howe Island, Nambucca, Taree and Wauchope directory. The respondents’ directories remained unchanged.
157 In 2012, Telstra changed the appearance of its co-bound directories again and further reduced the use of yellow on their covers by reducing the width of the yellow strip. I reproduce below an image of the front cover of Telstra’s co-bound 2012/13 Lismore, Ballina, Byron Bay, Casino and Murwillumbah directory. The respondents’ directories remained unchanged.
The reasons for the changes to Telstra’s directories
158 In changing the appearance of its co-bound regional directories as it did from 1996 to 2012 Telstra significantly departed from its long-standing practice of using almost entirely yellow covers on its Yellow Pages directories. This is important because Telstra’s conduct in changing the covers of its directories gradually made them somewhat more similar in appearance to the respondents’ product.
159 The thrust of Telstra’s claim is that by the respondents’ conduct in publishing directories which were not properly differentiated from Telstra’s directories they conveyed the false impression or representation that the PDC directories were published by or otherwise associated with Telstra. It is axiomatic that Telstra cannot base its claims of misleading or deceptive conduct and passing off on similarities between the rival directories which arise from its own conduct.
160 In this regard it is not strictly necessary to understand the reasons that underpinned Telstra’s decisions to change the appearances of its directories. Whatever its motivations, its claims can only be founded on the respondents’ conduct and not on its own.
161 Even so, the evidence tends to show that Telstra made changes to the appearance of its directories at least in part to meet the competitive challenge which the PDC directories posed in the marketplace. As I later explain, Telstra regularly commissioned consumer surveys and market research reports which tend to show that, amongst other things, many consumers preferred the local focus of the PDC directories which was enhanced by the large local photograph and the fact that they were smaller in size. Sometimes the reports suggested remedial steps, other times the appropriate steps were self-evident.
162 Telstra’s concerns about the growth in PDC’s market share became increasingly strident. For example, the 2006 Competitive Strategy Report, a report focused entirely on the competitive position of Telstra and PDC, stated:
The new owners have re-invigorated [PDC] and appear to be aggressively focused on growing revenue by entering new markets. If Sensis does not start trying to defend against PDC it is highly likely that it will face direct and aggressive competition in more markets next year. In addition the larger and more serious player PDC becomes the bigger the threat becomes if someone else with significant resources and capital acquires them and continues expanding and transforming the company.
163 Amongst other things, over time the proposed remedial steps included putting additional local images on the covers of Telstra’s regional directories, reducing the geographical area covered by each Telstra regional directories so that they became more local and smaller, and providing directories which were convenient for using in the car. Over time Telstra gradually made those changes to the appearance and features of its regional directories.
164 Mr Harvy and Ms Brook denied that the changes in the appearance of Telstra’s regional directories were at all related to the growth of PDC as a competitor. While it is likely that there were many considerations taken into account, I do not accept that Telstra’s decisions to alter the appearance of their directories were wholly uninfluenced by the PDC directories.
The objection to the contemporaneous consumer surveys
165 As I have said, Telstra sought to tender through Mr Harvy and Ms Sherwood numerous contemporaneous consumer surveys reports which it had commissioned. It sought to rely on this evidence in numerous ways including to establish:
(a) consumer recognition of the Yellow Pages brand;
(b) a connection or association between yellow and Telstra and the Yellow Pages brand; and
(c) that consumers were misled by the yellow appearance of the PDC directories.
166 The respondents objected to this evidence on the basis that it was inadmissible hearsay, being evidence of the responses given by the consumer participants surveyed. I do not accept this contention. The surveys and market research were undertaken on Telstra’s behalf in the ordinary course of its business for the purpose of evaluating the effectiveness of its advertising campaigns. I am satisfied that the evidence is admissible as a business record under the exception to the hearsay rule in s 69 of the Evidence Act 1995 (Cth) (“Evidence Act”).
167 The respondents argue that s 69 is inapplicable because the survey evidence was compiled by independent market research companies rather than by Telstra itself. They rely on the remarks of Giles J in R W Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd (1991) 32 NSWLR 152 at 159 where his Honour said:
…I do not think that the report of a third person obtained by a businessman in the course of and for the purposes of the conduct of his business is necessarily part of a record of the business: for example, an insurer which engages a loss assessor to report upon a loss and places the report in its files can not prove the facts stated in the report by tendering it as part of a record of the insurer’s business. The loss assessor’s file copy would probably be part of a record of the loss assessor’s business… (Emphasis added.)
168 However I respectfully prefer the approach taken in Ringrow Pty Ltd v BP Australia Ltd (2003) 130 FCR 569 (“Ringrow”) at [12] where Hely J held that a statement prepared for a bank by a third-party valuer was admissible as a record of the bank:
The fact that the statements in question were made by the valuers, rather than by an officer of the Bank, does not necessarily lead to the conclusion that the statements were not made for the purposes of the business of the Bank: neither Karmot Auto Spares Pty Ltd v Dominelli Ford (Hurtsville) Pty Ltd (1992) 35 FCR 560 at 565, nor Prentice v Cummins [2002] FCA 1172 decides to the contrary.
169 The question is whether consumer surveys and market research reports commissioned by Telstra – and reported to Telstra in order for it to understand the effectiveness of its recent campaigns and to assist it in making future marketing decisions – are Telstra’s business records. In my view they are. I respectfully agree with Hely J’s remark in Ringrow at [17] that s 69 is intended to have a facilitative effect and should be construed broadly.
170 It is relevant too that, in part, the consumer surveys record representations made by the participants to the authors of the reports concerning their understandings and perceptions about Telstra’s products, and the participants are people who had or might reasonably be supposed to have had personal knowledge of the asserted facts. To that extent the surveys and research fall within s 69(2) of the Evidence Act.
171 The respondents then contend that the surveys and market research reports should be excluded pursuant to s 135 of the Evidence Act as misleading and unfairly prejudicial to them. They argue that the evidence goes to one of the central questions in the case – the association in consumers’ minds between the colour yellow and Telstra or its directories – yet Telstra did not call the authors to give evidence and they were not available for cross-examination. No explanation was offered as to why they did not give evidence.
172 Telstra did not call any of the consumers who participated in the surveys to give evidence. As a result, the respondents were unable to attempt to elicit from the participants matters such as:
(a) that they were not misled as to the origin of the PDC directories; or
(b) that they thought that yellow was a standard colour for classified directories (as other evidence indicates may have been likely).
173 Without evidence from the survey takers or authors the respondents could not properly explore other possible deficiencies in the survey evidence. For example:
(a) the surveys did not appear to go to the reputation of yellow, considered independently, as they were aimed at ascertaining whether Telstra’s branding overall was working;
(b) the surveys sometimes involved very small numbers of participants with discussions occurring in focus groups;
(c) the questions asked of the participants were sometimes leading;
(d) the circumstances in which the participants were asked the questions were not clear; and
(e) the surveys sometimes did not identify whether the participants were directory users or advertisers.
174 It is significant that Telstra advances the evidence as going to a central issue in the proceeding. The extent of the flaws in the surveys cannot be properly understood without the benefit of more detailed information about them and evidence from, at least, the survey-takers and authors of the reports. As I explain at [291]-[332], even a carefully prepared survey like the Bartley Survey may have serious methodological flaws which can render the results unreliable. The fact that cross-examination is precluded is sufficient in some circumstances to justify exclusion of evidence: Roach v Page (No 11) [2003] NSWSC 907 (“Roach v Page”) at [34] per Sperling J; Longhurst v Hunt [2004] NSWCA 91 (“Longhurst v Hunt”) at [46] per Stein AJA.
175 However I will admit the evidence and treat the matters which the respondents raise as going to weight. Accordingly, care must be taken before attributing significance to this evidence when it is put to showing an association in the minds of consumers between yellow and Telstra.
Consumer recognition and usage of the Yellow Pages directories
176 Mr Harvy, Ms Sherwood and Amanda Brook, General Manager, Strategic Marketing and Mobiles at Sensis, gave evidence which, amongst other things, went to Telstra’s:
(a) publication of Yellow Pages directories around Australia since 1975 and of the later publication of its online directory and mobile app;
(b) marketing of its directories;
(c) use of the colour yellow on directory covers, webpages, mobile app screens and in its marketing; and
(d) the publication of directories by the respondents and other directory providers.
177 Each of these senior Telstra executives gave thoughtful and careful evidence. Their evidence as to the publication and distribution of Telstra’s directories, the extent and reach of Telstra’s marketing, the extent of Telstra’s use of the colour yellow, and their awareness of competing directories was essentially consistent with contemporaneous documents and often uncontentious. I largely accept that evidence and I deal with it in relation to the question of Telstra’s secondary reputation in the colour yellow.
178 I take a different view of their opinion evidence as to whether and to what extent yellow, viewed in isolation, was associated in the minds of consumers with Telstra or its directories. For example, Mr Harvy said that:
…the key indicia of the Yellow Pages brand are the name “Yellow Pages”, the ‘walking fingers’ logo, and the colour yellow. Each of these indicia has come to signify the brand in the minds of consumers, and to immediately evoke the rich set of tangible and intangible associations that consumers hold with the brand as a result of the extensive advertising and marketing undertaken by Telstra over the years.
179 In giving such evidence Mr Harvy was offering his opinion on a central question in the proceeding. Although I have no difficulty in accepting that each of these witnesses was an experienced and competent marketer, they did not bring an independent perspective to the question as to whether Telstra’s marketing had given it a secondary reputation in yellow, considered alone, on its directories. I found their evidence in that regard was often self-serving, and I give little weight to their opinion as to whether (or to what extent) the colour yellow, standing alone, had come through use to signify Telstra’s products.
180 The evidence shows that the Yellow Pages Trade Marks including the Walking Fingers were well recognised by directory users and advertisers. This was so in 1996 when the respondents first commenced to publish their directories using yellow covers, and remained true in 2005 when Telstra alleges the respondents’ misleading or deceptive conduct commenced. It could hardly be otherwise given that Telstra annually distributed a Yellow Pages branded directory to almost every house and business in Australia from 1975, that its online directory at www.yellowpages.com enjoyed high levels of consumer usage, and that it expended huge sums in marketing its directories.
181 The contemporaneous consumer surveys show this recognition. For example, in 1995 Telstra commissioned a survey by Yann Campbell Hoare Wheeler. Based on a study of 980 people in Sydney, Melbourne, Brisbane, Perth and Adelaide in the three months to March 1995 the survey reported that a high percentage of consumers had regularly used the Yellow Pages directories and considered it a valuable source of information. Forty-seven percent of participants had used a Yellow Pages directory as a source of information in the week prior to the study, and 98% had used it in the year prior to the study.
182 Telstra also commissioned the “Consumer Monitor Yellow Pages - Rolled Monthly KIP Report: February 2004” from market research company TNS. This contained figures relating to the usage of Yellow Pages products for the period between mid-1998 and February 2004. It reported that between December 2003 and February 2004, 100% of the 1511 survey participants were aware of the Yellow Pages directories, 98% had used a Yellow Pages product, and 89% had used the print directory at some time.
183 A further survey conducted by TNS between July 2006 and June 2007 (“June 2007 TNS Report”) tell a similar story. This report found that in July 2006 50% of 744 participants were spontaneously aware of the Yellow Pages brand, and 97% were aware after prompting. The report found that in June 2007 48% of 989 participants were spontaneously aware of the Yellow Pages brand and 93% were aware after prompting. The report found that in July 2006 79% and in June 2007 77% of the participants would consider using a Yellow Pages product.
184 The research commissioned by Telstra consistently concluded that Australian consumers held the Yellow Pages brand in high regard. It is uncontentious that in 2003 the Superbrands Council, an independent body of marketing, communications and business experts, described the Yellow Pages as “one of Australia’s most loved and memorable brands”.
The viva voce evidence of directory user confusion
185 John Carlyle and Erin Robertson gave evidence that they confused a PDC directory with the corresponding Telstra directory. Gary Mays gave evidence that many directory users confused the PDC directories with Telstra’s directories. Tammy Parsons gave evidence that an unidentified directory user was confused as to the origin of the PDC directories. Brendan Lyon gave evidence that a friend was confused as to the origin of the PDC directories. I now deal with their evidence.
Dr John Carlyle
186 Dr Carlyle, a medical doctor based in Elanora, Queensland, gave evidence that while working at his rooms in November 1996 he confused a PDC directory with Telstra’s directory.
187 He said that the confusion arose when he went to look up some information in the Yellow Pages directory and he found a small yellow covered directory. It appeared to him to be a new version of the local Yellow Pages, but on inspecting it more closely he ascertained that it was not. It did not contain the relevant listing so he then attended on the neighbouring dental practice to borrow a copy of their Yellow Pages. He stated that the dentist informed him that he suffered from the same misconception. Dr Carlyle also said that his staff told him that they thought the respondents’ directory was a replacement for the Yellow Pages, and that they had accordingly disposed of the Yellow Pages. He was sufficiently moved by the misconception at the time to set out his concern in writing to Telstra’s Queensland Marketing Manager.
188 Insofar as Dr Carlyle sets out his conversations with third parties who were not themselves called as witnesses, the respondents object to his evidence pursuant to ss 59 and 135 of the Evidence Act. I accept that those parts of Dr Carlyle’s evidence are hearsay but I will receive them in exception to the hearsay rule under s 64, waiving the notice requirement under s 67(4). But I give limited weight to his evidence when:
(a) the dentist and staff members with whom he conversed were not called to give evidence.
(b) Telstra offered no explanation for its failure to adduce direct evidence of any misconception they suffered;
(c) as Dr Carlyle conceded in cross-examination, the confusion he suffered was momentary and was dispelled when he quickly flicked through some pages of the directory;
(d) he said that when he considered the respondents’ directory more closely he realised that it had a “completely different” appearance to the Yellow Pages; and
(e) his evidence relates to events in November 1996 yet Telstra had amended its pleading so that it only makes a claim in respect of the respondents’ conduct from June 2005.
Gary Mays
189 Mr Mays, manager of Whywait Plumbing Pty Ltd, Gold Coast, Queensland, gave evidence that he had a practice of asking his customers how they obtained the company’s telephone number. In that context some customers who obtained the number from a telephone directory identified the relevant PDC directory as “yellow pages”.
190 He was moved by this circumstance to write a letter to Telstra in January 1997 alerting it to the presence of the PDC directories in the market place and to the fact that his customers were confused as to its source. He wrote that the PDC directory looked “exactly like” the Yellow Pages and that consumers had thrown out the Yellow Pages and were using the PDC directory. He also wrote that in “all cases without exception” people assumed that the PDC directory is a new copy of the Yellow Pages.
191 But in cross-examination Mr Mays provided a somewhat less clear picture of widespread confusion amongst directory users. He accepted that the term “yellow pages” had become a generic term in respect of telephone directories. Telstra’s 2006 Competitive Strategy Report also said that the term “yellow pages” was often used by people as a generic term referring to classified directories and was often not used as a direct reference to the Yellow Pages directories. Without evidence from the directory users who allegedly suffered the misconception to which Mr Mays referred, it is impossible to know whether their mention of that term was a reference to Telstra’s directory or use of it as generic term.
192 I also note that:
(a) he had no personal difficulty in understanding the source of the PDC directory. At that time the Yellow Pages, the Big Directory and the PDC directory were all available in his area and he said that he understood that they were “three very different directories” from three different sources; and
(b) he said that one thing “the public loved about PDC was the fact that it was White Pages and Yellow Pages all in one directory”. This tends to show that consumers understood the different features of the PDC directory.
193 Mr Mays gave an apparently truthful account, although there was a slight hint of animus towards the respondents as he had been sued by them for an unpaid advertising account. I accept that he personally held the views he expressed on the similarity of the PDC and Telstra directories, but that is really a matter for the Court. In the circumstances I give little weight to his evidence that other directory users were confused. I reject as implausible his evidence that “without exception” all directory users suffered from the misconception that the PDC directories were published by or associated with Telstra. I give no weight to his evidence that many directory users had mistakenly disposed of their Yellow Pages directory. He provided no proper basis for that view and the directory users were not called to give evidence.
194 I also see Mr Mays’ evidence of widespread confusion amongst directory users as implausible when the contemporaneous consumer surveys tend to show that they understood the differences between the directories.
Erin Robertson
195 Ms Robertson, a Marketing Consultant at Robertson & Co in Gladstone, Queensland, gave evidence that she mistakenly identified a PDC directory as a Yellow Pages directory. Her evidence is that in May 2006 she was alerted by a customer that Robertson & Co’s fax number was incorrectly listed as the telephone number in the White Pages directory. She says that she picked up a copy of what she thought was Telstra’s White Pages directory and confirmed the existence of that error. She said that she then turned to the “General Enquiries” section of the directory and because Sensis was the first company listed under that heading she telephoned Sensis to report the error.
196 Ms Robertson said that during her telephone conversation with the Sensis representative she realised that the directory she had thought was Telstra’s White Pages was actually a different directory. The Sensis representative told her that it was a PDC directory and advised her to telephone the respondents to correct the error. Ms Robertson then telephoned ALD. In the course of that conversation she also enquired how Robertson & Co came to be listed in the PDC directory when they had not sought to be listed, and said that she was told that ALD obtained its listing information from Sensis. Ms Robertson then requested that the listing be deleted from the next edition of the PDC directory.
197 I consider that Ms Robertson gave a truthful account and I accept her evidence that she made a mistake in picking up the PDC directory when she intended to pick up Telstra’s White Pages. But there were some aspects to her evidence which reduced its weight.
198 In my view her statement that she confused the PDC directory with Telstra’s White Pages was strange when it is plain that the yellow appearance of the PDC directory had little in common with the blue appearance of Telstra’s White Pages. Her evidence is not in alignment with the thrust of Telstra’s case that the yellow covered PDC directories were too similar to Telstra’s yellow covered Yellow Pages directories. Telstra does not allege that the yellow covered PDC directories are too similar to Telstra’s blue coloured White Pages directories. Finally, it is significant that in cross-examination Ms Robertson accepted that the confusion she experienced was quickly dispelled just by looking more closely at the cover of the directory. In my view Ms Robertson’s evidence has little probative weight.
Tammy Parsons
199 Ms Parsons, a Sensis account executive, gave evidence of an incident at Telstra’s Cairns office in July 2008 when a woman walked in off the street and asked for “a copy of the phone book”. Ms Parsons gave evidence that when she provided her with a copy of the Yellow Pages the unidentified person refused and said “No, not that one I just want the smaller one. The local directory you produce.” I accept Ms Parsons’ evidence but it has little probative value. In the absence of evidence from the unidentified woman it is impossible to explore the nature and extent of her confusion, or most importantly how it arose. There are many possible explanations for such an error and I am not prepared to infer that it arose because of the get up of the respondents’ directories.
Brendan Lyon
200 Mr Lyon, a Sensis account executive, deposed to a conversation he had in March 2007 with a friend, Yasmine Green. He had a copy of the Telstra’s Yellow In the Car directory and while Ms Green was waiting for him she looked at it and said that it looked like a Port Macquarie directory she had seen. Mr Lyon said he told Ms Green that she was wrong because Telstra’s Yellow Pages directory covering that area was the much larger co-bound Kempsey directory. He said that it became clear that Ms Green was confusing Telstra’s Yellow In the Car directory with the PDC directory for Port Macquarie, which she said she thought was “a smaller Yellow Pages”.
201 The evidence is not completely clear as to whether Ms Green was using the term “yellow pages” in the generic sense or referring to Telstra’s brand. As a friend of Mr Lyon it should have been simple to locate Ms Green and Telstra gave no explanation for its failure to call her. The respondents were denied the opportunity of exploring whether she used the term “yellow pages” in the generic sense.
202 More importantly, if Ms Green confused Telstra’s Yellow in the Car directory with the PDC Port Macquarie directory then I see that as a quite unlikely reaction. The two directories were not similar. The Yellow in the Car directory was relatively new, having been first been published in Sydney and Melbourne in 2006 and later expanding to some regional areas. It was much smaller than the PDC directories, the size of which remained unchanged. To show the size differential I reproduce below images of the front covers and spines of Telstra’s 2008 Yellow in the Car directory for the Port Macquarie region and the PDC 2009/2010 directory for Port Macquarie and Kempsey.
203 Mr Lyon’s evidence in this regard has little probative value.
The viva voce evidence of directory advertiser confusion
204 The Sensis account executives, Trevor Owen, Ms Parsons, Stephen Hodgson, Paul Brown, Mr Lyon and Tony Millroy made witness affidavits and each of them gave evidence except for Mr Millroy. In general terms each of them recounted statements made to them by directory advertisers about the confusion they had suffered in relation to the PDC directories.
205 The respondents object to this evidence on the basis that it is hearsay and inadmissible under s 59 of the Evidence Act or that it should be excluded pursuant to s 135. I do not agree. In my view the evidence is admissible. The evidence was not adduced for the hearsay purpose of proving that the consumers held an incorrect opinion about the origin of the directories, but rather for the non-hearsay purpose of showing that the consumers were confused. Section 60 of the Evidence Act allows evidence admitted for one purpose to be used for all purposes, and is intended to avoid the artificiality which formerly existed at common law whereby evidence admitted for a non-hearsay purpose could only be used for that limited purpose (see: Australian Law Reform Commission, Evidence (Interim), Report No 26 (1985) vol 1, [685]).
206 In SMA Solar Technology AG v Beyond Building Systems Pty Ltd (No 5) [2012] FCA 1483 (“SMA Solar”) Perram J dealt with the admissibility of the evidence of call centre staff about telephone calls from consumers that tended to show their confusion regarding the origin of particular products. His Honour held that the impugned evidence was not hearsay because it had a relevant non-hearsay use, and that in any event such evidence would fall within the scope of the s 66A exception. I agree with his Honour’s explanation at [33] where he said:
I do not think my direction prevents the calls being used as evidence that customers were confused about the origins of SUNNY ROO products. That evidence was not a hearsay use of the material because the point was that what the customers thought was wrong. In any event, the important part of the evidence was the mental states of the customers – i.e. confusion – and not whether the customers were correct (which they were not). (Emphasis added.)
207 Section 66A creates a broad exception to the hearsay rule in respect of firsthand contemporaneous representations about a person’s “health, feelings, sensations, intention, knowledge or state of mind”. The evidence about the confusion alleged to be suffered by consumers in the present case falls within the ambit of s 66A.
208 I turn now to the respondents’ separate objection to the evidence of Mr Millroy who was not made available for cross-examination due to illness. The respondents object to the receipt of his affidavit relying on s 27 of the Evidence Act and r 29.09(3) of the Federal Court Rules 2011 (“the Rules”). They submit that the conversation with a directory advertiser to which Mr Millroy deposed is contentious and that they would have sought to fully explore that conversation through cross-examination. They argue that it is contrary to the interests of justice to admit his evidence when they are unable to test it.
209 These contentions have substance, but I have decided to admit his affidavit. In large part I do so because Mr Millroy’s evidence is analogous to the second-hand accounts of consumer confusion given by the other Sensis account executives. The respondents did not suggest to the other executives that their evidence was false and I doubt that suggestion would have been made to Mr Millroy. But, as I explain, I have given little weight to the second-hand accounts of the other executives. Because Mr Millroy could not be cross-examined on his second-hand account it must be given even less weight.
210 In general terms the accounts given by Mr Owen, Ms Parsons, Mr Hodgson, Mr Brown, Mr Lyon and Mr Millroy of their conversations with directory users and advertisers typically lacked detail, did not explain the reason for any misconception suffered, and did not usually explain how the alleged misconception arose. It is significant that the consumers said to have suffered the misconception did not give evidence and Telstra offered no explanation in that regard. While I am not prepared to exercise my discretion to exclude the evidence under s 135 I consider the evidence should be given little weight: see Ordukaya v Hicks [2000] NSWCA 180 at [35]-[40] per Sheller JA with Meagher JA agreeing; Vivo International Corporation Pty Ltd v Tivo Inc [2012] FCAFC 159 at [151] per Nicholas J; Longhurst v Hunt [50] per Stein AJA; Roach v Page at [77] per Sperling J.
211 This evidence was primarily directed at establishing that directory advertisers were confused as to the origin of the PDC directories, and it did not directly go to any confusion suffered by directory users. As I later explain, I consider that:
(a) the process by which prospective advertisers were canvassed by PDC and Telstra sales representatives;
(b) the largely unchallenged evidence of the PDC sales representatives as to their training and conduct in the sales canvassing process;
(c) the significant expense involved in advertising in a directory; and
(d) the heightened interest that advertisers were likely to have in the appearance and content of the directories in which they were considering placing an advertisement;
meant that prospective advertisers were likely to pay close attention to the appearance of the PDC directories. In general terms I see it as implausible that the PDC directories’ use of yellow covers and the LD Name and Logo would create the impression or convey the representation to directory advertisers that they were published by or otherwise associated with Telstra or its directories.
212 I now deal with the evidence of these witnesses in detail.
Trevor Owen
213 Mr Owen is employed by Sensis as an account executive selling advertising space in the Yellow Pages directories for Forster, Gloucester, Kempsey, Lord Howe Island, Nambucca, Port Macquarie, Taree and Wauchope.
214 Firstly, he deposed to a conversation he had in June 2006 with Mark Saville of Coppernook Floor Standing and Polishing of Coppernook, New South Wales. He said that when he approached Mr Saville to take advertising space in the Yellow Pages Mr Saville informed him that he had already done so. Mr Saville informed him that he had placed advertising in the “Taree & Forster-Tuncurry Local Phone Book (“Local Directory”)”. When he informed Mr Saville that directory was a PDC directory he recounts that Mr Saville said that he “assumed that the Local Directory was the Yellow Pages because of its yellow cover”.
215 But Mr Owen conceded in cross-examination that Mr Saville had not used the name Local Directory and had instead referred to “the Taree and Forster local phone book”. Mr Owen added that description and, in my view, it is likely that those words were Mr Owen’s when they appeared later in his account of the conversation.
216 Mr Owen’s account of Mr Saville’s statements is inconsistent with the evidence of Bartholomew Moonen, the relevant respondents’ sales representative. Mr Moonen gave evidence that he had previously been employed as a Sensis account executive selling advertising space in the Yellow Pages and had previously sold advertising space to Mr Saville in that capacity. Because of that he said that in the course of his meeting with Mr Owen he made it completely clear that he was now representing Local Directories and that there was no connection between it and the Yellow Pages. No explanation was offered as to why Mr Saville was not available to give evidence, and I prefer Mr Moonen’s direct evidence to Mr Owen’s second-hand account.
217 I also see Mr Owen’s account of Mr Saville’s statement as implausible having regard to the evidence of Mr McCurdy. He gave evidence of the process undertaken in relation to that advertisement and said that on 23 March 2006, 31 March 2006, 5 April 2006 and 6 April 2006 Mr Saville and LD’s staff exchanged and corrected proofs of the advertisement. I consider it quite unlikely that in placing an advertisement Mr Saville did not understand that he was not dealing with Telstra.
218 Secondly, Mr Owen deposed to a conversation he had in July 2005 with David Bourne of Coastal Computing Solutions of Taree, New South Wales. Mr Owen said that Mr Bourne described receiving a telephone call from someone describing himself as a Yellow Pages representative seeking to arrange a meeting. Mr Owen was the Sensis account executive for that area and, having reviewed the Sensis records, he said that no-one from Sensis made that call. The suggestion in his evidence is that the call must have come from the respondents’ sales representative.
219 But Mr McCurdy said that the first edition of the Local Directories directory for Taree was the 2006/2007 edition of the Taree & Forster-Tuncurry directory. He said, and I accept, that Local Directories did not commence to canvass businesses for advertising sales in that area until January 2006. His evidence in that regard was confirmed by Mr Moonen who was the relevant sales representative. He said that that he did not commence employment with the respondents until November 2005 and did not commence the sales canvass until January 2006. He gave evidence that he did not approach Mr Bourne in July 2005, and that he believed that no other employee of LD did so. His account is buttressed by the fact that in January 2006 he made a sale of advertising space to Mr Bourne.
220 No explanation was offered as to why Mr Bourne was not available to give evidence himself, and I prefer the direct evidence of Mr Moonen and Mr McCurdy.
221 Thirdly, Mr Owen deposed to a telephone message he received, and a conversation he had in March 2007 with Rhonda Hook of Clever Kids in Taree. The telephone message recorded that Ms Hook telephoned him seeking to place an advertisement in the LD following what she described as “your recent visit”. There is no question as to the content of the telephone message as Mr Owen kept that recording and took it to Telstra’s solicitors.
222 Mr Owen deposed to the following exchange when he telephoned Ms Hook in response to her message:
Mr Owen: As a matter of interest, why did you call me regarding advertising in the Local Directory? What made you think I could help you?
Ms Hook: I had your business card from last time you came around. I knew that the closing date was coming up in October. I thought that I could speak to you regarding the Local Directory.
Mr Owen: You weren’t sure which was which?
Ms Hook: I was probably just a bit confused.
223 Telstra advances the evidence as showing consumer confusion about the origin of the PDC directory for that region, and perhaps also as to misleading conduct by a PDC sales representative. But Mr McCurdy and Mr Moonen gave evidence, which I accept, that there was nothing in their conduct which could have caused her confusion.
224 It is significant too that Mr Owen’s business card clearly stated that he was from Sensis, and that his personalised greeting on the telephone on which Ms Hook left her message clearly said that he was from Sensis. If I accept Mr Owen’s account of his conversation with Ms Hook, she mistook both Mr Owen’s business card and his personalised greeting, and I do not accept that an ordinary or reasonable directory advertiser would have been confused in those circumstances.
225 But, without Ms Hook giving evidence it is impossible to explore the nature or extent of her confusion, or most importantly how it arose. Again, Telstra gave no explanation for its failure to adduce evidence from Ms Hook. I attach little weight to Mr Owen’s evidence in this regard.
Tammy Parsons and Stephen Hodgson
226 As I have said, Ms Parsons is a Sensis account executive as is Mr Hodgson. Both sell advertising space in the Yellow Pages and White Pages directories in Cairns, Queensland, and their evidence concerned conversations they had in June 2006 with two employees of Trinity Auto Group (“TAG”), namely Leonie Costello and “Justin”, the General Manager.
227 It is uncontentious that TAG had placed a classified advertisement in the respondents’ directory but on the account of Ms Parsons and Mr Hodgson it seemed that Leonie Costello and Justin were confused about where TAG’s advertisement was placed, because Ms Costello complained about the absence of that advertisement from the Yellow Pages.
228 I have no difficulty in accepting the account of Ms Parsons and Mr Hodgson as to their telephone conversations with the two TAG employees. However, the evidence is of little probative value. There is nothing in their evidence to indicate how that confusion apparently suffered by Ms Costello and Justin arose, and particularly whether it was related to the respondents’ use of yellow covers or the conduct of their sales representatives.
229 In fact, the evidence tends to show that TAG’s management did not suffer any confusion about where it had placed its advertisement. Donna de Maria, one of the respondents’ sales representatives, gave evidence that:
(a) the respondents’ record showed that TAG had purchased advertising in the respondents’ Cairns directory each year since 2004; and
(b) she had personally sold advertising space to Richard Jasker, TAG’s City Sales Manager, each year from 2005 until 2008.
230 She deposed to a conversation she had with Mr Jasker in September 2008 in which he said that TAG had deliberately decided not to advertise in Telstra’s directory in 2005 and had not done so since then. He also said that Ms Costello only worked with TAG for three months.
231 Telstra did not explain why Ms Costello or Justin were not called to give evidence. I am not satisfied that TAG was under any misconception that when it advertised in the Cairns PDC directory it had in fact advertised in the Yellow Pages.
232 I accept Ms De Maria’s evidence and I see it as unlikely that TAG would have renewed its advertisement in the respondents’ directories in the following years if its 2005 advertisement was only mistakenly placed there. In any event there is no evidence as to whether and to what extent any misconception under which TAG laboured arose from the respondents’ conduct. I give little or no weight to the evidence of Ms Parsons and Mr Hodgson.
Paul Brown
233 Mr Brown is employed by Sensis selling advertising space in the Yellow Pages directories for Forster, Gloucester, Kempsey, Lord Howe Island, Nambucca, Port Macquarie, Taree and Wauchope.
234 He deposed to a meeting he had in May 2006 with Robert Richardson of Harvest Screen Printing of Port Macquarie, New South Wales. He said that Mr Richardson pointed to the PDC directory and said words to the effect “Have you guys put out another directory? Is that another Yellow Pages directory?” When told it was not a Telstra directory Mr Richardson said “Oh, okay. I thought it might have been another one of yours?”
235 He also deposed to a conversation he had in May 2007 with Loraine Hockey of Audrey’s Curtains and Decor of Forster, New South Wales. He said that Ms Hockey complained to him about incorrect listing details in the advertisement that Audrey’s Curtains and Decor had placed in what she described as “your book, the local yellow pages.” In fact, Ms Hockey had advertised in the PDC Taree & Forster-Tuncurry directory.
236 I have no reason to consider that Mr Brown gave anything other than a truthful account of these conversations. However, Telstra gave no explanation for its failure to call Mr Richardson or Ms Hockey and the respondents had no opportunity to explore whether and to what extent these advertisers suffered from any misconception, or how it arose. Nor does the evidence establish that any misconception arose from the respondents’ pleaded conduct.
237 In my view his evidence has little probative value.
Brendan Lyon
238 As I have said, Mr Lyon is a Sensis account executive selling advertising space in the Yellow Pages for Newcastle, Kempsey and Muswellbrook. He said, and I accept, that in February 2007 he telephoned PDC and spoke to a person named “Amadie”, and had the following exchange:
Mr Lyon: Are you like the Yellow Pages?
Amadie : We are the small Yellow Pages.
Mr Lyon: So you are like the Yellow Pages?
Amadie : We are smaller version of the Yellow Pages.
239 Again, as many people see the words “yellow pages” as a generic description of a classified directory, it cannot be known whether Amadie thought that Mr Lyon was referring to “yellow pages” in the generic sense. Further, Mr McCurdy gave evidence that Amadie was a junior telephonist who was only employed with PDC for a short time. I do not accept that this evidence shows any practice on the part of the respondents which might affect a significant proportion of the class. I prefer the detailed and unchallenged of the many PDC sales representatives who gave evidence that in dealing with prospective advertisers they did not describe themselves as being from one or other version of the Yellow Pages.
240 I attach little probative value to this evidence.
Tony Millroy
241 Mr Millroy is employed by Sensis as an account executive, selling advertising space in the Yellow Pages directories for the Sunshine Coast, Gympie and Caboolture Districts.
242 He deposed to a telephone conversation he had in around October 2006 with an unidentified man at The Olive Tree Ristorante in Pacific Paradise, Queensland. He deposed that he introduced himself as “Tony from the Yellow Pages” and enquired whether the restaurant was interested in placing an advertisement in the Yellow Pages. He said the unidentified person indicated that the restaurant had already taken out its Yellow Pages advertising. Mr Millroy was the relevant Yellow Pages account executive and Sensis’ records showed that the restaurant had not taken out an advertisement. When he informed the unidentified man of this he responded: “Yes we have, we’re in your local yellow pages.” It is uncontentious that the restaurant in fact advertised in the PDC directory.
243 The unidentified man apparently managed the restaurant and Telstra gave no explanation for its failure to call him to give evidence. It is unknown whether he was referring to yellow pages generically, or to Telstra’s directories. Again, the respondents have had no opportunity to explore whether or to what extent any misconception he suffered arose from the respondents’ pleaded conduct. I give little weight to this evidence.
The viva voce evidence of misleading conduct to directory advertisers through PDC sales representatives
244 Telstra adduced evidence from directory advertisers, Lisa Lock, Trevor Swinbourne and Jenny Bolewski to the effect that they were misled by the respondents’ sales representatives as to the origin of the PDC directories. Mr Brown gave a second-hand account that numerous advertisers told him that PDC sales representatives had said that they were from Yellow Pages. I now deal with their evidence.
Lisa Lock
245 Ms Lock, a business manager at Coastal Decks and Pergolas, on the Central Coast in New South Wales gave evidence of a May 2012 meeting at Coastal Decks’ offices with Daniel Hargraves. The thrust of her evidence was that Daniel Hargraves encouraged her to advertise in the respondents’ directories on the basis that consumers would not notice the difference between the PDC directories and Telstra’s directories.
246 She said that at the meeting Mr Hargraves showed her copies of both the Yellow Pages directory and the respondents’ directory and said words to the effect:
You should advertise in Local Directories too and not just the Yellow Pages. Local Directories’ book is the same colour, so customers won’t be able to tell the difference between them, so if you’re not in both, you’ll miss customers.
Ms Lock said that on at least two occasions Daniel Hargraves said that consumers would pick up the PDC directory because it looks like the Yellow Pages.
247 Daniel Hargraves denied Ms Lock’s account. He was cross-examined about the extent of his recollection but I accept his evidence that he had a good recollection of the meeting for several reasons. He gave evidence that he informed Ms Lock of the advantages of the PDC directory including that it offered larger advertisements, was in a convenient size to keep in the car, and used better quality paper which gave advertisements more impact. He also said that he advised Ms Lock that since Telstra’s Yellow Pages directory for that region had reduced in size it was now much smaller book and therefore looked more like the corresponding PDC directory. I do not lightly conclude that Daniel Hargraves set out to deliberately mislead consumers and I consider it more likely that Ms Lock misconstrued Daniel Hargraves’ statement. Telstra objects to paragraph 26 of Daniel Hargraves’ affidavit and I do not admit that paragraph. I give Ms Lock’s testimony little weight.
Trevor Swinbourne
248 Mr Swinbourne, General Manager of Lifestyle Granite, South Mackay, Queensland, gave evidence that in January 2007 he had a telephone conversation with an unidentified PDC sales representative. He said that the sales representative identified himself as being from the Yellow Pages Association and invited him to advertise in the YPA directory. Mr Swinbourne said that he asked the sales representative “Are you the proper Yellow Pages that covers the whole area? Or are you a different directory?” to which the representative responded: “We are the Yellow Pages. We cover the whole area. I can organise your Yellow Pages advertising.” Mr Swinbourne says the sales representative did not refer at any point to PDC or ALD. Importantly, he deposed that he therefore arranged to place an advertisement in what he believed to be the Yellow Pages.
249 Mr Swinbourne says he subsequently received a telephone call from a Sensis account executive inviting him to advertise in the Yellow Pages. It was not until then that he realised that he had in fact advertised in the PDC directory.
250 He said that he was annoyed that he had placed an advertisement in a PDC directory. Approximately a few weeks later he said that he received a quote for the advertisement that he had mistakenly arranged to place, and because he had not intended to advertise in the PDC directory he cancelled the advertisement.
251 But Mr McCurdy gave evidence as to several significant deficiencies in Mr Swinbourne’s account, namely that:
(a) the respondents did not at that time employ any male sales representatives in the sales team for the Mackay directory;
(b) Mr Swinbourne did not in fact enter into an agreement to purchase advertising space in the telephone conversation to which he referred. The respondents’ records showed that he signed an advertising contract in a face-to-face meeting with a PDC sales representative named Katherine Cumings on 19 February 2007; and
(c) the respondents’ records showed that Mr Swinbourne did not in fact cancel the advertising contract and he later approved the content of the advertisement and paid for it.
252 Mr Swinbourne then made a further affidavit in which he acknowledged the shortcomings of his first affidavit but maintained that if he signed an advertising contract with Ms Cumings in a meeting he did so under the mistaken belief that he was arranging to advertise in the Yellow Pages. He also deposed:
I find it extremely confusing to organise advertising for my business … because I find it very difficult to distinguish between the directories published in the region. I would find it much easier to distinguish the Local Directory (ie the book published by Local Directories) from the Yellow Pages if the cover and pages of the Local Directory were a colour other than yellow (for example, purple or green), and if it was called the “Purple Pages” or “Green Pages” to clarify that it is not the Yellow Pages or connected to Telstra.
253 I have little confidence as to Mr Swinbourne’s recall of the impugned conversation. The respondents’ contemporaneous business records revealed it to be wrong in several important ways, and I prefer the records to his dubious recall. Without further descending into his evidence I am also satisfied that he was easily confused. I am not persuaded that the hypothetical ordinary or reasonable advertiser would have been confused in the same circumstances.
Jenny Bolewski
254 Ms Bolewski is a secretary employed by a chiropractor in Lismore, New South Wales. She deposed that in mid to late November 2007 she was telephoned by a person called “Coby” and formed the impression that he was calling from the Yellow Pages. She did not state why or how she came to hold that impression. She asked Coby to renew the company’s advertising in the directory.
255 Ms Bolewski said that she was subsequently telephoned by a Telstra sales representative and discovered that she had not renewed her employer’s Yellow Pages listing, and that Coby was not employed by Telstra. Ms Bolewski then renewed the company’s advertising in Yellow Pages. She did not hear from Coby again.
256 The respondents did not require Ms Bolewski’s attendance for cross-examination. It is critical that she did not explain how she came to hold the mistaken impression that Coby was calling from the Yellow Pages. I give little weight to Ms Bolewski’s evidence.
Paul Brown
257 Mr Brown, a Sensis account executive, deposed that in 2005 to 2007, and particularly between May and August 2006 when he canvassed businesses in Port Macquarie, that at least one prospective advertiser each week would complain about the respondents’ conduct by saying words to the effect “I wasted time speaking to someone from the Local Directory recently. I thought they were from Sensis at first because they said that they were calling regarding the Yellow Pages.”
258 This evidence goes to Telstra’s allegation that the respondents’ sales representatives had a practice of introducing themselves as being from one or other version of the Yellow Pages. But despite the central importance of that evidence Telstra called none of the allegedly numerous consumers to give evidence. The respondents were therefore denied the opportunity to test whether and to what extent these advertisers suffered from any misconception, or how it arose.
259 Even if Mr Brown’s account is accepted it is not clear how or in what context any reference to “yellow pages” was raised in the alleged conversation with the prospective advertiser. As I have said, the evidence tends to show that the use of the term “yellow pages” has become generic with many consumers.
260 Mr Brown’s second-hand account of widespread confusion is vague and it is inconsistent with detailed unchallenged evidence of the numerous PDC sales representatives as to their training and their conduct when conducting a sales canvass. I prefer that evidence. In any event, it is clear that these prospective advertisers were not misled. They said that they had “wasted time” speaking to the respondents’ sales representatives which indicates that any confusion was transient and did not lead to any commercial consequence.
Survey evidence of consumer recognition of yellow as an element of Telstra’s brand
261 The consumer surveys also indicated the significance of the colour yellow to the recognition of Telstra’s directories.
262 In 1995 Telstra commissioned a consumer survey by Research International Australia Pty Ltd (“1995 Research International Survey”). Research International concluded, based on a study of 68 participants in Sydney in 1995, that:
(a) The Yellow Pages is a Highly Regarded Brand;
(b) The equity of the [Yellow Pages] brand rests with two visual symbols: [t]he colour yellow, which is the brand identity; and [t]he fingers which are synonymous with the benefit of using the brand (saving time and effort); and
(c) In essence, the [Yellow Pages] brand is seen as an invaluable guide to anyone who seeks information. It is clearly seen as vastly superior to other competitive products which currently exist.
263 Later in 1995 Telstra engaged advertising agency, Clemenger Melbourne and brand consultant, Interbrand Pacific to undertake an analysis of the Yellow Pages brand, its attributes and its future direction. A report was provided for Telstra, based on six research studies (including the 1995 Research International Survey) conducted over the period 1993 to early 1996 (“1995 Clemenger/Interbrand Pacific Review”). The review concluded that Yellow Pages was a “potent brand” and emphasised that the goodwill in the brand lay in a combination of the Yellow Pages name, the Walking Fingers and the colour yellow.
264 Mr Harvy deposed, and I accept, that following the 1995 Clemenger/Interbrand Pacific Review Telstra implemented “Brand Guidelines” in relation to the Yellow Pages which set the direction for its marketing, to be used by all marketing staff when creating advertising and promotional material for the Yellow Pages directories. Relevantly, these guidelines directed staff to be “bold and confident in the use of yellow”, to “use it wherever possible” as the colour “encapsulates who we are and demands instant recognition of the Yellow brand”.
265 In August 1997 Telstra commissioned a report from AC Nielsen McNair regarding consumer perceptions of Yellow Pages (“1997 AC Nielsen Report”). Following a survey of 1,000 participants the report stated:
When asked which aspect of a given cover design identified it as being a Yellow Pages directory, the majority mentioned either the ‘walking fingers’ or the yellow colour of the directory. No more than 10% actually mentioned the brand name itself… They simply have not needed to use the brand name to help them identify the book.
Twenty-six percent of the participants said that the yellow cover of the existing Telstra directory best identified it as a Yellow Pages directory.
266 But the value of that conclusion is somewhat reduced by the fact it was achieved by asking participants the very leading question: “What is it about the cover that best identifies it as being a Yellow Pages directory?” In that circumstance it is not particularly surprising that a significant number of participants said the colour yellow. It is significant that 83% of the 1,000 participants saw the Walking Fingers as either “somewhat important” or “very important” in identifying Yellow Pages products and services. This points away from the colour yellow, in isolation, being seen to signify Telstra’s directories.
267 The survey result must also be seen in the context that, at that time, the covers of Telstra’s directories had been almost entirely yellow for many years. As the report stated:
For as long as anyone can seem to remember, Yellow Pages directories has have always looked the same - a plain yellow cover black ‘walking fingers’ logo taking pride of place on the front.
This may be compared to the situation pertaining for much of the period between 1996 and 2012.
268 In 1998, Telstra commissioned a study by the Open Mind Research group (“1998 Open Mind Survey”) which used focus group discussions with consumers to determine the most effective cover design for the 1999 edition of the Yellow Pages. The results were summarised as follows:
All respondents could nominate the constants about the Yellow Pages: it is yellow, it is bright and stands out from the shelf, and it features the walking fingers – symbol of its practicality and ease of use.
Some of the verbatim responses reported included “[a] yellow cover… it doesn’t change. I wouldn’t like it to change, it stands out at work”, “[i]ts [sic] bright. Recognisable” and “[i]t’s easy to grab”.
269 But those remarks identify aesthetic and utilitarian benefits of using the colour yellow rather than show that it signifies Telstra and its directories. The 1998 Open Mind Survey did not state that the colour yellow independently signified the Yellow Pages directories. In fact, the report stated that:
Few people really take notice of the Yellow Pages, until they need to use it, and then the interest is narrowly focused on finding whatever it is that they are looking for.
This is consistent with other evidence that branding is relatively unimportant where consumers have a low emotional attachment or involvement with a product. In those circumstances, functionality becomes more important. It is significant too that the report concluded that the 1998 cover design (which was almost entirely in yellow with a Walking Fingers logo) looked “generic”. This is consistent with the respondents’ contention that the colour yellow is a standard colour in respect of classified telephone directories.
270 In 2000, Telstra commissioned AC Nielsen Research Pty Ltd to conduct a survey aimed at determining the degree of association between the colour yellow and the Yellow Pages brand. AC Nielsen provided a report to Telstra based on an Australia-wide survey involving 790 participants (“2000 AC Nielsen Report”). Survey participants were shown a card featuring the colour yellow and were asked what they identified with that colour, without being prompted. Yellow Pages and/or the Yellow Pages directory was the third highest response, following “the sun” and “flowers”. Yellow Pages even rated ahead of everyday items such as butter, margarine and lemons. But although this was the third ranked response, it was given by only 6% of participants. Participants were then prompted by being asked if they identified the colour yellow with any particular product or service in connection with telephone directories, and 81% of participants identified the Yellow Pages directories exclusively.
271 It is significant that the participants were not asked whether they would associate any classified directory with the colour yellow. The survey result may to some extent just indicate that consumers understood this rather than point to Telstra’s directories.
Survey evidence of consumer confusion
272 Telstra also relies on the contemporaneous consumer surveys to show that consumers have been misled and deceived by the respondents’ use of yellow covers, and in particular the 1997 Competitive Strategy Report, the 1999 Rockhampton/Mackay Report, the May 2004 TNS Report and the 2006 Competitive Strategy Report.
1997 Competitive Strategy Report
273 Telstra relies on a statement in this report under the heading “Users confuse the PDC with the Yellow Pages directory”. It refers to a statement in the report that:
…the PDC directory has a yellow cover which is very close to the PMS colour of our directory. Consumers confuse it with the Yellow Pages as we have received reports of consumers throwing out the Yellow Pages when the PDC book comes out.
But this was a selective quotation. The relevant paragraph continued as follows:
They may be doing this subconsciously and do not realise it or because they feel they do not need two directories in their home. The PDC usually comes out when our directory has been in the market for a few months and therefore it may look more current in the eyes of the consumer.
274 Contrary to Telstra’s contention the evidence does not show that a significant proportion of directory users disposed of their copy of the Yellow Pages because they were confused as to the origin of the PDC directories. The consumer surveys show that a significant proportion of consumers found the PDC directories more convenient, less cumbersome and less time-consuming to use than the corresponding Telstra directory. I infer that directory users that chose to dispose of Telstra’s directory upon receipt of the PDC directory were most likely to have done so because it was more recent or because they preferred it.
275 The 1997 Competitive Strategy Report indicates that consumers understood the differences between the directories. This can be seen in the report’s conclusion about the differences between the rival directories, including that:
(a) the PDC directory covers are appealing to users as they have a local photograph which gave them a “more local feel”. Directory users tended to accept the PDC directories more readily as they had a “parochial feel”;
(b) the Yellow Pages directories were seen as bulky in comparison to the PDC directories. PDC used its more compact size as a major part of its selling strategy, and its marketing to advertisers stressed that directory users prefer the more compact size. The smaller single volume PDC directory was preferred in many tourist resorts on the Gold Coast where Telstra’s directory took up two volumes;
(c) PDC had a good quality product. Some advertisers had advised that the PDC directories were of superior quality, and that they used better paper, had better process colour, and had pages that did not fall out so readily; and
(d) PDC offered advertisers cheaper prices and contra deals. On average the PDC directories offered advertising rates 30% cheaper than the Yellow Pages rates, which meant that price conscious advertisers could be tempted to move to them.
276 The report recommended that Telstra take a series of remedial steps to address the advantages that consumers identified with the PDC directories. These steps were not directed at any problem of consumer confusion but rather at competitive shortcomings in Telstra’s directories. The remedial steps included:
(a) increasing promotional activity to highlight the benefits of Telstra’s directories;
(b) keeping a consistent cover design with only slight variations so that directory users became accustomed to the look and feel of the Yellow Pages directory;
(c) separating the Yellow Pages and White Pages co-bound directories so that their size could be reduced;
(d) improving the paper quality; and
(e) offering process colour advertisements to prospective advertisers.
1999 Rockhampton/Mackay Report
277 Telstra relies on a statement in the 1999 Rockhampton/Mackay Report that said “…whilst there is a strength of belief in the brand in the region, there is also some confusion. PDC is seen as a Yellow Pages/White Pages publication.” The report said that sales consultants had reported customer perceptions that “…the PDC and YP products are the same, and in some cases the PDC is seen as a smaller version of the YP product and is a Telstra product.” It reported that some advertisers had reduced or cancelled their advertising in the 1999 sales canvass because of confusion over which book was the Yellow Pages publication.
278 But in my view the report indicates that the level of consumer confusion was not significant. The report tends to show that any consumer confusion about the origin of the PDC directories was a long way from the top of Telstra’s list of difficulties in meeting their challenge in the marketplace. This can be seen in the report’s conclusions about how consumers perceived the rival directories, including that:
(a) the PDC directories were seen as a truly competitive information source;
(b) anecdotal information from both customers and consultants suggested that:
..the YP/WP product is not meeting the needs of the market and that the strengths of PDC far outweigh those of the YP/WP product. In summary, this suggests that the [Telstra] Rockhampton/Mackay directory is not seen as the best option any more.
(c) many consumers perceived PDC as the first choice directory, and the report said that if it were not for the strength of the Yellow Pages brand the situation for Telstra would have been much worse; and
(d) the Yellow Pages sales consultants were seen as “non local” and pushy whereas the PDC sales representatives were seen as local and appeared to be more trusted.
279 Rather than consumers being confused as to the origin of the rival directories the report concluded that:
Consumers tend to retain both the YP and PDC directories, where they have the option, and often use both directories. The use will depend on the type of search ie known or unknown supplier, the requirements for supplier options and the perceptions of comprehensiveness.
That is, consumers were more interested in functionality than branding.
May 2004 TNS Report
280 Telstra relies on the statement in the May 2004 TNS Report which provided that:
…many consumers perceive the PDC and Yellow Pages directory as being distributed by the same organisation” with one consumer quoted as saying “I don’t differentiate between the two, I see them both as the Yellow Pages”.
But in my view Telstra is incorrect in proceeding on the assumption that consumers who use the name Yellow Pages are referring to Telstra’s directories. As I later set out, the 2006 Competitive Strategy Report advised that the term “yellow pages” was often used by consumers generically to refer to classified directories in general rather than to Telstra’s Yellow Pages products. This is also confirmed by other evidence.
281 This report indicates that consumers understood that the PDC directories were a rival directory to Telstra’s directories and not from the same or a related source. That consumers saw the PDC directories as different can be seen in the advantages that they perceived including that many Alice Springs consumers considered that the PDC directories:
(a) were more local and therefore more relevant;
(b) were smaller and more convenient to use;
(c) had larger and easier to read print;
(d) were suitable for use in a car; and
(e) had a more eye-pleasing layout.
The report stated that Alice Springs consumers tended to rely more heavily on the PDC directory than the corresponding Yellow Pages directory. This was thought to be because the Yellow Pages directory included both Darwin and Alice Springs which meant that it contained more irrelevant information and was more time-consuming to use.
282 The report did not set out remedial steps aimed at addressing any concern about the widespread consumer confusion as to the origin of the PDC directories. The proposed remedial steps largely related to splitting the Darwin and Alice Springs Yellow Pages directories so that they would be separate, more local and more relevant.
2006 Competitive Strategy Report
283 Telstra’s 2006 Competitive Strategy Report is of particular importance as it was prepared for the stated purpose of providing an in-depth analysis of the PDC directories as at June 2006 and comparing them with Telstra’s directories. Telstra undertook a comparison both as at June 2006 and five years prior in order to provide information as to the growth in PDC’s business.
284 Telstra relies on the statement in the report that PDC’s “…strategy of mimicking the Sensis directory gives consumers an instant level of comfort, familiarity and confidence to use the PDC directory.” It also relies on the statement that:
…the strength of the Sensis directory brands is somewhat diluted by PDC’s ‘copycat’ look and feel and local positioning, but the size, history and iconic nature of the Yellow Pages and White Pages brands still provide a competitive advantage in this area.
285 But the report recognised that the PDC directories were different in appearance. It stated:
PDC’s directories feature local landmarks from the areas that they cover which makes them instantly recognisable to users and gives them some instant affiliation with the directory. This helps to reinforce the local aspect and positioning of their directories... (Emphasis added)
The report went on to make this remark as to the appearance of the Yellow Pages directory:
The Yellow Pages half of the cover is currently limited to only 3 versions across the 47 co-bound directories which featured generic stock shots that are not from the local area and at best may have some affiliation with it eg a coastal shot for a coastal area.
286 To similar effect, under the heading “Branding and Positioning” the report stated that 2004 consumer research showed that:
…PDC’s directories are viewed as local an attribute consumers did not assign to Yellow Pages directories. PDC have recently taken steps to strengthen this position by rebranding both the company and their directories. Their new name is Australian Local Directories and they are now positioning themselves as the local directory using the tagline “Your Local Phone Book”.
The report noted that the “local” tagline was bound to resonate with consumers due to PDC’s smaller boundaries and that their local positioning was reinforced through the cover of the directories which featured photos of instantly recognisable local landmarks.
287 In order to remediate the advantages that consumers saw in the appearance of the PDC directories the report recommended that Telstra’s directory covers be enhanced “with additional local images that are instantly recognisable by the majority of people located within the boundary.”
288 As I have already said, the report also noted that consumers often use the term “yellow pages” as a generic term referring to business classified information rather than as a direct reference to the Yellow Pages directories. It cautioned that this fact should be taken into account in consumer research noting that it would be difficult to isolate this effect from the results. In my view Telstra’s contentions have taken little account of this fact.
289 The report also set out other significant differences between the rival directories including that:
(a) while the regional boundaries in the Telstra regional directories had generally served advertisers and directory users well:
…there were, and clearly still are, weaknesses in these boundaries which PDC exploits. Where there is only one clear major area of population concentration PDC will hone on this with a smaller boundary than the Sensis directory. Where there are two major population centres within a Sensis boundary PDC will deploy two directories. These tactics differentiate PDC’s directories for advertisers; make them more local for consumers and helps to lower their production costs.
It noted that the PDC directories were stronger in markets like Mackay and Alice Springs where “Sensis had large boundaries that did not meet advertisers and consumers needs.”
(b) PDC used high-quality paper and a simplified and more spacious page layout which significantly improved the appearance of the advertisements and made the entries significantly easier to read. The report concluded that PDC was “firmly ahead of Sensis in the publication quality stakes”.
(c) PDC used maps as a key differentiator which they promoted on the covers of their directories, which were printed on heatset paper which increased the way they stood out. The report noted that:
PDC’s Street directory is significantly better than the maps in the Sensis directories and in particular the integration of the maps and display advertising can lead to a superior customer experience.
(d) the PDC directories were smaller in size. The report did not conclude that this was a key advantage. It noted that the PDC directories’ more compact size made it more portable but that the larger Telstra directory conveyed the impression of being more comprehensive (perhaps with the perception that it was slower to use). But the report proceeded on the basis that size was a potential differentiator.
(e) PDC directories had a price advantage for advertisers as they offered significantly lower priced half and full page advertisements, and for a similar price their entry-level advertisement was about twice the size of the corresponding Telstra advertisement.
290 There is little in the report to indicate that Telstra considered that a significant proportion of consumers suffered from the misconception that the PDC directories originated from or were associated with Telstra. In fact the report concluded that PDC had:
…a proven directory model that is working, gaining traction in the marketplace and is being viewed by many consumers and advertisers as a credible option/alternative to the Sensis directory. (Emphasis added.)
The Bartley Survey evidence
291 Helen Bartley, a statistician and research consultant at her own consulting company, Bartley Consulting, offered an independent expert opinion on behalf of Telstra in relation to a consumer survey conducted in May 2008 by I-view Pty Ltd (“I-view”) for the purposes of the litigation (“Bartley Survey”).
292 Ms Bartley presented as a diligent and competent expert with experience and relevant qualifications in survey sampling. She gave her evidence carefully and in a considered way, including by acknowledging some of the information that was not gathered in the survey, and some of its potential errors and limitations.
293 Aaron Morris, Project Manager at I-view, gave evidence as to market research fieldwork he undertook at the direction of Ms Bartley in 2008 and in relation to the Bartley Survey. My view of the Bartley Survey evidence applies to his evidence too.
The survey methodology
294 The Bartley Survey was conducted in 2008 in accordance with Federal Court Practice Note 11, as it then was, for the purposes of the litigation. The survey was conducted by surveying 664 consumers in three regions, Cairns, Coffs Harbour and Darwin. By the date of the survey the respondents had been producing directories with yellow covers in Cairns and Darwin for about 12 years, and in Coffs Harbour for about three years.
295 The participants in the survey were shown the front cover of the current version of the respondents’ directory for that region, which was held inside a flip top box. These directories featured the LD Name and Logo and I reproduce below images of the front covers of the relevant directories.
296 After being shown a copy of the respondents’ directory for that region, and without the participants being able to handle the directory, look inside it, or ask any questions about it, they were asked questions including:
(a) “I’d now like you to look at this book, who do you think produces it?” (Question 5);
If a producer was named in answer to Question 5, then the next question was asked;
(b) “Do you associate [insert name of producer mentioned in Q5] with any other organisation, company or brand?” (Question 6A)
If a producer was not named in answer to Question 5;
(c) “Do you associate the producer with any other organisation, company or brand?” (Question 6B) -- The respondent was to advise “Yes”, “No” or “Don’t know/Unsure”;
If the answer to question 6A or 6B was “yes”, then the next question was asked;
(d) “Which other organisation, company or brand name are you thinking of?”
The survey results
297 The survey recorded that that 46% of consumers surveyed (including 57% of participants in Cairns) said “don’t know” when asked who produced the respondents’ directory. Telstra contends that result is unsurprising because, on its argument, the respondents’ business model depends not on creating brand recognition but depends on a failure to distinguish their directories from Telstra’s directories.
298 Importantly for Telstra’s case, a total of 16%, of the participants identified Telstra as either the producer of the directory or associated with the producer of the directory. Only about 11% of participants identified the respondents as the organisation which produced the directory or was associated with it. In Coffs Harbour 19% of the respondents identified Telstra as the producer of or associated with the producer of the directory, in Cairns 16%, and in Darwin and 13%.
299 Telstra contends this is clear and unequivocal evidence of actual consumer error both:
(a) in regions where the respondents had been producing their directories to some years (Cairns and Darwin); and
(b) in a new region where they had only recently commenced publishing their directories (Coffs Harbour).
It argues that the survey reveals that a “not insignificant” number of ordinary or reasonable consumers were likely to have been misled or deceived when confronted with the respondents’ directories.
300 In fact, Telstra contends that the survey results were likely to have understated the risk of consumers being misled since it was conducted in an environment where the intention of the consumer was directed specifically to the appearance of the directory, and where the consumer was asked directly to try and identify a producer. It argues that this is different to when a consumer would use the directory, because on those occasions directory users are unlikely to pay close attention and will rely more on visual cues such as colour.
301 It also contends that the survey results were likely to have overstated the number of consumers who identified the respondents as being the source of the directories. They argue this because 40 participants identified the producer of the directory as “local directories”, and this was coded as an identification of the respondents. It contends that such participants may have been merely reading the words on the cover of the directory that they were shown.
The objections to the Bartley Survey
302 The respondents strenuously contend that the Bartley Survey suffered from serious deficiencies and that the evidence of Ms Bartley and of the survey should be excluded pursuant to s 135 of the Evidence Act. Amongst other things, the respondents argue that the Bartley Survey:
(a) was conducted in 2008 after the major Yellow rebranding campaign which is likely to have had an effect on the minds of the participants;
(b) failed to take into account that a significant number of participants are likely to have thought that any telephone directory was associated with Telstra;
(c) did not enquire why participants held the view that they expressed, which meant that it is difficult to know whether, or to what extent, the use of a yellow cover was relevant;
(d) was conducted on the basis that the participants could not look inside the directory to see its differences, or see its comparative size;
(e) was not properly randomised and therefore not representative of the target class; and
(f) contained some terms that were open to interpretation and participants were invited to guess their answers.
The respondents also point to the fact that, at best for Telstra, the survey result was only slightly higher than the proportion of consumers (as revealed in an earlier, less extensive survey) who thought that any telephone directory was produced by Telstra.
303 Although there is real force to the respondents’ contentions I am not prepared to exclude the survey evidence pursuant to s 135 of the Evidence Act. As I have already observed, the survey was conducted in accordance with what was then Practice Note 11, the precursor to current Practice Note CM 13. Notice was given to the respondents of the proposed methodology and the comments of the respondents were taken into account in the survey design. While the respondents criticised the proposed survey at that time, they now advance criticisms which, in large part, were not previously raised. The clear intent of Practice Note 11, together with the respondents’ overarching obligations under ss 37M and 37N of the Federal Court Act, means that they were required raise their objections before the survey was conducted. In my view the Bartley Survey evidence should be admitted.
304 But having allowed the survey evidence to be admitted I consider that the respondents must be entitled to raise the criticisms which they do. I consider the criticisms raised by the respondents point to some significant deficiencies in the Bartley Survey evidence and I give little weight to it. I will now deal with each of those criticisms.
The evidence of Patrick Weissenberg
305 Mr Weissenberg, an independent research and marketing consultant, gave expert evidence on the Bartley Survey and to an extent the respondents’ attack on the survey is based on his evidence.
306 In response Telstra argues that Mr Weissenberg has only general qualifications in relation to market surveys and that his evidence should not be accepted. I do not agree. In my view his education, training and experience is appropriate to allow him to proffer the opinions that he did. He holds a Bachelor of Commerce and Post Graduate Diploma in Marketing Research and Advertising and he has regularly used and applied statistics in a marketing context over a 30 year career. His relevant experience spans work within corporations, advertising and market research agencies since 1970. It includes university lecturing in Johannesburg and Vancouver, 5 years at advertising agency James Walter Thompson in Montreal, 10 years as Senior Research Director at Research International in Australia, 8 years as a Senior Researcher at Q2 Strategic Market Research in Australia and more than 5 years as an independent research and marketing consultant. He deposed, and I accept, that he had developed numerous questionnaires for market research studies, had written countless sets of interview instructions and had briefed coders on how to interpret open-ended questions.
307 In these various capacities, Mr Weissenberg has provided market research services to a large range of companies within Australia and overseas since 1996 including Cadbury Schweppes, Price Waterhouse Cooper, AGL Gas Networks, Coca Cola Amatil and the Commonwealth Bank of Australia. His work has also included many market research studies for Telstra including customer satisfaction surveys for the Mobile Division, international studies of awareness and usage in overseas markets in which it competed, and research on how to evolve Yellow Pages from the print medium to a broader based medium embracing electronic technology.
308 Telstra also objects to paragraph [22] of Mr Weissenberg’s affidavit in which he offers his opinion that “the typical user of a directory” is unlikely to contemplate who its producer is. The rationale for this objection is that Mr Weissenberg’s expertise in marketing does not extend to the attitudes and behaviour of “the typical user of a directory”. Telstra submits that Mr Weissenberg is not qualified to give the opinion proffered.
309 I do not accept this objection. I am satisfied that Mr Weissenberg’s opinion in this regard is within the scope of his specialised knowledge. He has education and experience in marketing, statistical methods, consumer psychology and market research methodologies. His opinion as to the likely behaviour of “the typical user of a directory” draws directly upon this specialised knowledge. It is not, to use the language of Gleeson CJ in HG v The Queen (1999) 197 CLR 414 (“HG”) at [39]-[44], based on speculation, inference, personal or second-hand views, nor a process of reasoning which strays beyond the field of expertise.
310 Finally, Telstra contends that (in contrast to Ms Bartley) Mr Weissenberg was not careful or considered in his evidence, and was willing to volunteer opinions on contentious issues without having done anything to establish an appropriate factual foundations for those opinions. In particular, Telstra points to his evidence that the colour yellow “has become, over time, generic in terms of being a colour that people have come to associate with directories.”
311 I accept that Mr Weissenberg was not requested to provide an opinion on that topic and he did not establish an appropriate factual foundation for it. But it was offered in response to a question from the Court, which flowed from earlier cross examination. I take a cautious approach to Mr Weissenberg’s evidence in this instance and I attribute little weight to it standing alone. But standing alongside other evidence which points in the same direction it has some probative value.
312 In my view Mr Weissenberg gave thoughtful and rational evidence which I found of real assistance. In the main I accept it.
The Yellow campaign
313 The Bartley Survey was conducted at the end of Telstra’s two year campaign around the new Yellow trade mark, which ran from September 2006 to early 2009. I dealt with this campaign in detail in Phone Directories Company Australia Pty Ltd v Telstra Corporation Limited [2014] FCA 373 (“PDCA v Telstra”) at [290]-[296]. This broad-reaching campaign was launched with significant publicity, involved the expenditure of just under $20 million in 2006-2007, promoted the entire range of Telstra’s classified directory products under the new Yellow trade mark, and was aimed at rebranding the Yellow Pages print and online directories as Yellow, making that the overarching or umbrella brand.
314 Amongst other things, during this campaign Telstra distributed about 16 million printed metropolitan, local, regional, and Yellow in the Car directories featuring the Yellow trade mark, it rebadged its online directory under the Yellow trade mark, and it upgraded and introduced other print and electronic products and services and branded them under the Yellow Trade Mark, such as Home at Yellow, Yellow Mobile, Yellow Offers, Yellow Featured Offers and Yellow in the Car.
315 This meant that the survey was conducted in a period during which Telstra sought to greatly enhance and develop the association between yellow and its directories. It occurred in a period where the brand-name used on its directories was simply Yellow and the marketing had an even greater yellow-related theme.
316 Yet, the survey did not attempt to elucidate whether the Yellow campaign had any effect on the answers of the participants. More importantly, there was no attempt to exclude the effect of that rebranding campaign from the minds of the participants. This significantly reduces the evidentiary value of the survey in relation to the impugned conduct commencing in June 2005.
Many consumers see any directory as associated with Telstra
317 In 1995, Telstra conducted a survey of consumers in Rockhampton, Mackay and Gladstone regarding the PDC directory which the respondents had recently commenced to publish in that area (“1995 Survey”). The PDC directory was named by the region covered, namely Rockhampton and Gladstone, carried a PDC logo and had multi-coloured covers.
318 I reproduce below images of the front cover of the PDC 1995 Rockhampton/Gladstone directory, and the front and back covers of Telstra’s 1994 co-bound Yellow Pages and White Pages directory for Rockhampton, Mackay, Gladstone, Emerald District and Longreach District.
(Not to scale.)
319 Despite the obvious differences between the competing directories, 11% of the participants in the 1995 Survey identified Telecom (as Telstra was then known) as the party who “put out” the directory. I accept the respondents’ contention that this tends to show that a certain proportion of consumers associate any telephone directory with Telstra or its predecessors. I infer that these consumers held that view because for many decades Telstra’s predecessors were government agencies and the sole producers of official telephone directories.
320 In cross-examination Ms Bartley accepted that it would have been of assistance to understand whether, or what proportion of, consumers thought that all telephone directories came from Telstra, no matter what colour they were. She also accepted that it was possible to construct the survey so that it would have identified the extent of any such problem. But no such question was asked. In my view it would have been straightforward for the survey to take account of this issue by asking the participants appropriate questions, or by asking a random selection of consumers to consider a telephone directory which did not have a yellow cover.
321 The failure of the Bartley Survey to address the fact (or even the possibility) that a significant proportion of consumers think that any telephone directory is associated with Telstra is a real flaw. In my view it significantly reduces its evidentiary value. If, for example, it is correct that 11% of consumers thought that any telephone directory is associated with Telstra, then the 16% result in the Bartley Survey may be statistically insignificant.
No enquiry as to the reasons for the consumers view
322 The survey did not enquire why participants held the view that they expressed in the survey. Although Ms Bartley gave some different answers on this point she accepted in cross-examination that “we don’t have any reasons indicated as to why people answer the way that they did.”
323 This would also have been straightforward to address as the participants who identified the PDC directory as being produced by Telstra could have been asked why they thought that. As the respondents contend, such questions would have been likely to reveal whether participants held that view because, amongst other things:
(a) Telstra was the only telephone directory company they were aware of;
(b) Telstra was the largest telephone directory company in Australia; or
(c) they guessed, because Telstra was the most well-known directory provider.
Any answer provided would also have assisted in understanding whether, and to what extent, the PDC directory’s yellow cover was relevant to their view.
324 In my view the failure of the survey to enquire as to the reason or reasons why participants held the view that the PDC directory was produced by or associated with Telstra significantly reduces its evidentiary value. Mr Weissenberg deposed, and I accept:
If the survey were to prove that Telstra was mentioned as a consequence of one or more of the symbols or cues used by the local directory being directly associated with Telstra or one of its directories as opposed to other directory publishers then a case could potentially be made to suggest they have been misled. If on the other hand the association is due to the dominance of the Telstra brands and the “inspired” guess that all business directories must in one form or another be linked to Telstra; then, I do not believe that it can reasonably be concluded that a respondent believed that the Local Directories was published by Telstra or Sensis because of the appearance of the directory they were shown. In this survey no attempt has been made to understand the response patterns or to analyse the reason they made the association.
Participants could not look inside the directory or see its comparative size
325 The survey was conducted by allowing participants to look at, but not handle, a PDC directory housed in a black box, with a lid which could be flipped open and closed. This was a quite artificial setting, and it was not in accordance with Ms Bartley’s suggestion to Telstra’s solicitors when the survey was designed. It meant that the survey results could only relate to the appearance of the front cover, rather than to the whole cover and the contents of the directory. This also reduces the evidentiary value of the survey as the respondents rely in part on the contents of their directories, particularly the high quality street maps, as differentiating them from Telstra’s directories. The contemporaneous consumer surveys tend to show that consumers saw the street maps in the PDC directories as a significant point of difference.
326 This approach also meant that the participants could not view the PDC directory alongside the Telstra directory. While side-by-side comparisons are inappropriate, there was a point to allowing participants in the survey to see both directories. The contemporaneous consumer surveys indicate that many consumers:
(a) store the rival directories next to each other near their telephone; and
(b) saw the more compact size of the PDC directories as a real advantage.
But the size difference between the rival directories would not have been as apparent to participants in the Bartley Survey because the PDC directory was housed in a black box and no size comparison with a Yellow Pages directory was possible. This also reduces the evidentiary value of the Bartley Survey.
The survey was not properly randomised and therefore not representative of the target class
327 The survey was not properly randomised, and was conducted at one shopping centre in each of Cairns, Coffs Harbour and Darwin. Ms Bartley accepted that the survey could not be taken as anything more than a survey of people at a particular location, at particular times, rather than a survey which had a representative force in relation to the target class.
328 Further, the potential participants were screened before the survey was undertaken so that they had a spread of ages broadly matching the demographic of the relevant area. In Coffs Harbour this meant that a much higher proportion of persons aged 55 or more were interviewed than in Darwin and Cairns. Because older consumers lived through the period when Telstra had a monopoly in telephone directories it is likely that any erroneous assumption that Telstra is associated with all telephone directories is more likely to be widespread with them. That is, the survey results for Coffs Harbour are likely to include a higher number of people who consider that any telephone directory is a Telstra directory. This too highlights the difficulty in treating the survey as having a representative force in relation to the target class.
Some of the survey terms were open to interpretation, and participants were invited to guess
329 Without further descending into the minutiae of the Bartley Survey, the term “associate” used in the survey was open to interpretation by the participants, as Ms Bartley accepted. This could have been clarified by later questions but it was not. Because the survey did not enquire why participants held the view that the PDC directory was “associated” with Telstra’s directories, it is impossible to know what they thought this term meant.
330 To an extent I also accept Mr Weissenberg’s opinion that the questions encouraged participants to guess. I am troubled by the fact that a significant percentage of participants changed their answers from “I don’t have a clue”/“I don’t know”/“the council or government” in Question 5 to “probably Yellow Pages”/”probably yellow pages or white pages” or “Telstra” in Question 7.
Conclusion regarding the Bartley Survey
331 Even if the Bartley Survey is treated as reliable it shows that an average of 16% of the participants thought that the PDC directories were produced by or associated with Telstra. This is not significantly greater than the proportion of consumers revealed in Telstra’s 1995 Survey as thinking that any telephone directory was “put out” by Telstra. At the very least, the matters I have set out above are likely to have skewed the Bartley Survey results so that the difference between the two surveys is insignificant.
332 In my view the Bartley Survey would never have been a good substitute for the Court answering the key question in the proceeding itself, but had it been properly conducted it may have been of some assistance. In light of the matters set out above I have no confidence in the results of the survey and I give little or no weight to it.
Evidence as to Telstra’s acquiescence in the respondents’ conduct and delay
333 As I have said, Mr Stoten and Ms McGarry gave evidence in relation to pre-July 2006 meetings and correspondence between the parties (including legal threats) in which Telstra made no complaint about the respondents’ use of yellow pages and covers. The gist of Mr Stoten’s evidence in this regard was that Telstra was aware of the respondents’ publication of directories with yellow pages, yellow covers and containing the Other Trade Indicia and yet made no complaint. He deposed that not only did Ms Towsey not indicate Telstra’s concern with the PDC directories, she had made encouraging comments to him regarding their appearance.
334 The respondents advanced this evidence in support of the defences of acquiescence, delay and laches. Given my decision it is unnecessary to decide whether those defences are available and I make no finding as to whether Telstra’s conduct was such as to properly ground such defences. Although I shall determine the various objections to evidence I will not detail the evidence.
335 Telstra objects to paragraph [99] of Ms McGarry’s second affidavit where she deposed that the respondents’ conduct had led her to assume that Telstra had no difficulty with any aspects of the features of the respondents’ directories. Telstra contends that as some of that evidence predated Ms McGarry’s appointment to an executive position in the PDC group, those matters were beyond her personal knowledge. I do not agree. Although Ms McGarry commenced in a junior position in April 1998 she was rapidly promoted and was closely involved in the respondents’ operations from an early date. I am satisfied that she acquired a close knowledge of the respondents’ business and that her evidence on those matters has some probative value.
336 Ms Towsey, who held various senior executive roles at Telstra, made an affidavit in response to the evidence of Mr Stoten in which she broadly deposed that she did not recall some of the conversations and contact which Mr Stoten alleged, rejected his characterisation of some of the conversations or contact, and rejected the suggestion that by her conduct Telstra could be taken to have acquiesced in the respondents’ conduct. Ms Towsey was not made available for cross-examination due to ill health. The respondents object to her affidavit being read in those circumstances.
337 Telstra argues that the justice of the case requires the admission of Ms Towsey’s affidavit: see Curley v Duff (1985) 2 NSWLR 716 at 718 per Young J. It contends that there is no prejudice to the respondents in receiving her affidavit because there is little factual conflict between it and Mr Stoten’s evidence, and argues that it merely explains the context in which those dealings occurred. It submits that any residual concerns the Court has with Ms Towsey’s affidavit can be appropriately considered as matters of weight.
338 In my view there is a contest between the evidence of Mr Stoten and Ms Towsey and the respondents point to various contentious aspects of Ms Towsey’s evidence. I accept their submission that those aspects would have been the subject of cross-examination had she been available. In these circumstances I do not accept that there is no prejudice to the respondents through their inability to cross-examine her. In my view it would be contrary to the interests of justice to admit her evidence: see Fexuto Pty Limited v Bosnjak Holdings Pty Limited & Ors [1998] NSWSC 293 per Young J; Ghosn v Principle Focus Pty Ltd & Ors (Ruling) [2008] VSC 454 at [24] per Forrest J.
The training and conduct of the PDC sales representatives
David McCurdy
339 As well as being the respondents’ Sales Manager, Mr McCurdy also worked as a trainer for newly hired PDC sales representatives. He gave evidence as to the role of the PDC sales representatives and their training. Mr McCurdy was a former Detective in the Metropolitan Police in the United Kingdom. He gave considered and careful testimony. I found him an impressive witness and I treat his evidence as reliable.
340 Mr McCurdy joined the respondent companies in early 2000 but did not enter a sales role until 2004. He did not offer evidence about the respondents’ sales practices prior to his commencing in a sales role. When he commenced in sales he was provided a copy of the “PDC Directories Sales Policy and Procedure Manual” and he exhibited a sales manual dated 1999 (“1999 Sales Manual”). The 1999 Sales Manual is different to the 1996 Sales Manual written by Adam Hargraves which I deal with when dealing with the question of intention to deceive. He also exhibited a Sales Training Manual dated February 2008 (“2008 Sales Manual”). In my view there is little noteworthy about the 1999 or 2008 Sales Manuals.
The induction and training
341 Mr McCurdy’s evidence as to the training of PDC sales representatives is consistent with that of Mr Wilkin, Mr Stoten and Glenn and Adam Hargraves who were also involved in training. While Mr McCurdy’s approach seems likely to have been more organised and systematic, I am satisfied that the important themes of the training each provided were similar regardless of which of them provided it. It is unnecessary to set out in detail the evidence of Mr Wilkin, Mr Stoten and Glenn and Adam Hargraves in regard to training because of this similarity.
342 Mr McCurdy first deposed to the head office orientation and induction program for the sales representatives that he conducted. He said that at an early point the sales representatives were provided with a copy of the operative Sales Manual which detailed the sales process and procedures and emphasised many of the major selling features of the respondents’ directories. His evidence and the Sales Manuals indicate that the sales representatives were taught a detailed sales pitch and trained to stress the benefits of the PDC directories so as to set them apart from the rival Telstra directories. There is some contention surrounding the 1996 Sales Manual and I deal with that when dealing with the question of intention to deceive.
343 The sales representatives were trained to emphasise features including that the PDC directories:
(a) were developed in response to the need for a viable alternative to Telstra’s regional Yellow Pages and White Pages;
(b) are specific to a local region and therefore more relevant to their potential customers, as opposed to Telstra’s directories which cover much bigger areas;
(c) are physically smaller than Telstra’s regional directories and are often kept by people in their cars, desks and bench tops for that reason. Because they are smaller, if they are placed together with Telstra’s directories they are likely to be placed on top. Directory users will therefore naturally reach for the PDC directory first;
(d) are more user-friendly than Telstra’s regional directories in terms of the size of the directory, the size of the print and the column layout;
(e) have up-to-date and comprehensive street maps;
(f) are published on higher quality paper than Telstra’s regional directories; and
(g) offer advertising rates for a comparable advertisement at a significantly lower cost than Telstra’s regional directories.
344 His evidence showed that the sales representatives were trained to strongly focus their sales pitch on the ways in which the PDC directories are said to be superior to Telstra’s corresponding directories, and to endeavour to set the PDC directory apart from the rival directory. I accept this evidence.
345 The training also emphasised that advertising sales are made through a relationship between the sales representative and directory advertisers, and that it was important to obtain the trust of prospective advertisers. The respondents’ business model was strongly based upon renewals of advertising each year. The sales representatives were trained to resist efforts to reduce or cancel advertising, and were also trained to “up-sell” on the previous year’s advertising.
346 The training process about which Mr McCurdy gave evidence shows that the respondents had a good understanding of the strengths of their directories as they taught their sales representatives to accent the same features which Telstra’s surveys show consumers found attractive.
347 The evidence shows that sales representatives who completed the initial training then underwent practical training in a three to four week “qualifying period”. During this period they accompanied an experienced sales representative for three to four days and shadowed them as they contacted prospective advertisers. Then for two weeks they worked on their own but were closely supported by Mr McCurdy who was in daily contact by telephone and email.
The respondents’ sales canvass
348 After a successful qualifying period the sales representative worked autonomously but was visited twice per month by an experienced trainer until both the trainer and the sales representative were comfortable that the representative was able to work unsupervised.
349 Mr McCurdy deposed that the respondents allocated sales representatives to particular territories which are generally divided up into categories of business for each representative. For example, one representative may have the category of “plumbers” in that territory.
350 The evidence is that the sales canvass period for a PDC directory is usually about eight and a half months. At the start of each sales canvass Mr McCurdy conducted a two day “Bootcamp” for all sales representatives which included going through the Sales Manual again.
351 During the sales canvass the sales representatives are active in their territory, making telephone calls to set up appointments to try to sell classified advertising, both by obtaining renewals from existing advertisers and by obtaining new advertisers. Approximately six to eight weeks before the directories were due to be printed the selling period closed and in that period the directory was finalised for printing.
352 Where the territory is a new region for the respondents’ directories, new advertisers are sourced from local newspapers and other local publications, Telstra’s and other directories, real estate agents, radio and television advertisements, local business groups, referrals, online searches and by sales representatives in the field identifying businesses. Often the sales representatives would telephone a business to try and obtain an appointment or would “cold call” the business by attending and knocking on the door.
353 The respondents’ business model is that advertising space in their directories is not to be sold by telephone, and the sales representatives are trained to meet with prospective advertisers. The sales representatives are required to wear a white or blue polo top or blouse which has the LD Logo and representative’s first name, a badge with the LD Logo, and are required to carry Local Directories business cards. These clearly indicate that the representatives are from Local Directories. If no advertising is booked in the first meeting the sales representative is trained to make a follow-up appointment.
354 Once the advertising contract is signed, the advertiser then has a number of contacts with the respondents’ head office. The head office provides a proof of the advertisement to the advertiser and emails are often passed back and forth until the advertiser finally approves it.
Mr McCurdy’s knowledge of sales practices
355 I am satisfied that Mr McCurdy had a close knowledge of the practices of the respondents’ sales representatives. He had personally acted as a sales representative, he trained the representatives at the head office and out in the field, he regularly attended the sales canvass for various territories, he visited the representatives to see how they were going, and he had day-to-day contact with many of them. At least twice per year he attended each area in which a PDC directory was distributed to support the sales representative, attend to specific issues, and to observe the representative’s work. He said, and I accept, that he spends most of each day on the telephone to sales representatives, managing their performance and responding to their queries.
356 Further, once a new advertising contract is received by head office one of the customer service staff would telephone that business to introduce themselves to the client. Each member of the customer service team is assigned a specific territory and that person is responsible for any client queries. As a result, the customer service staff under Mr McCurdy’s control would also have contact with directory advertisers and would be aware of any complaints made.
357 I am satisfied that, through his position and his role in the business, Mr McCurdy would have become aware of any complaint by a business that felt it was misled into placing an advertisement in a PDC directory because:
(a) the PDC sales representative introduced him or herself as being from Yellow Pages, Local Yellow Pages, Community Yellow Pages or Sensis; or
(b) he or she was under the impression that the PDC directory was distributed by or associated with Telstra.
Mr McCurdy said, and I accept, that he had never received a complaint or heard of any complaint by a client who placed an advertisement in a PDC directory believing they were placing it in the Yellow Pages or any other of Telstra’s directories. Telstra objects to Mr McCurdy’s evidence in this regard on the basis that it is not relevant. I do not agree. I accept his evidence in this regard.
358 The thrust of Mr McCurdy’s evidence is that to the best of his knowledge the respondents’ sales representatives acted appropriately, and consistently with their training. He denied that the sales representatives sought to pass themselves off as being associated with the Yellow Pages or Telstra and he denied the suggestion that because the sales representatives were paid on commission they would say or do anything to make a sale.
359 In my view, the respondents’ focus on relationship-based selling, renewals, and up selling also tends to show that their sales methods were not based around misleading or “sharp” practices. Most advertisers were small to medium sized businesses and if the sales representatives acted in that way they could hardly expect the advertisement to be renewed or even increased the following year.
The evidence of PDC sales representatives
360 Thirty five PDC sales representatives made affidavits in the proceeding, namely Lynette Birch, Ms Cumings, Selby Downing, Ms De Maria, Mark Elrick, Gail Gething, David Griffith, Jeffrey Hargraves, Rhonda Hargraves, Alexandra Higginson, John Hills, Kathryn Jackson, Mark Lesmond, David Lynn, Mr Moonen, Kobi Rieher, Kim Trembath, Cordelia Watson, Roy Baker, Alan Cove, Dawn Deakin, Janice Douglas, Jenny Fox, Vicky Habraken, Julie Kemp, Christine Klemens, Garry McKinlay, Ann Millar, Steven Richardson, David Rook, Margaret Roskvist, Warren Schmitt, Julie Sechi, Gina Solano, and Tony Zonca. They were not cross examined.
361 In addition, Glenn and Adam Hargraves, Mr Wilkin and Mr Stoten also acted as sales representatives at different times. Their evidence as to their sales practices is the same as the sales representatives.
362 Telstra objects to that part of the evidence of Mr Baker in which he deposed:
I have not had a client at the end of this sale process or at any time say to me that they thought they were advertising in the Yellow Pages.
Telstra argues that the evidence is not relevant, is inadmissible hearsay, and is not evidence that would be admitted if given viva voce. The parties agreed that my finding on that objection shall also apply to similar evidence in the affidavits of Ms Cumings, Mr Downing, Mr Elrick, Adam Hargraves, Glenn Hargraves, Ms Higginson, Mr Stoten and Mr Zonca.
363 I do not agree. In my view the evidence of absence of complaint by directory advertisers is plainly relevant to whether they were misled by:
(a) the alleged conduct of the respondents’ sales representatives introducing themselves to prospective advertisers as being from Yellow Pages, Local Yellow Pages, Community Yellow Pages or Sensis; and/or
(b) the conduct of the respondents in publishing their directories with yellow covers under the LD Name and Logo;
such that they suffered from the misconception that the directories were published by or associated with Telstra. If a significant number of business people were tricked or misled into advertising in a PDC directory when they intended to advertise in the Yellow Pages I would expect some to have complained. The evidence is admissible pursuant to s 56 of the Evidence Act.
364 I do not consider the evidence is inadmissible as hearsay pursuant to s 59. But if it attracts the exclusion in s 59 then I would receive it under s 64. In my view there would be undue expense and it would quite impracticable for the respondents to be required to call each of the business people who advertised in their directories from June 2005 in order to establish that they did not complain. I would waive the notice requirement under s 67(4). The evidence was served well prior to the trial and I can see no prejudice to Telstra in waiving the notice requirement. I note that Telstra sought that the notice requirement be waived in relation to other evidence that it sought to adduce. I will treat Telstra’s objection as going to weight.
365 The volume of the sales representatives’ evidence is such that it is impractical to set it out in detail. The period over which they were trained covered more than a decade and some of them were trained before Mr McCurdy commenced in a sales role. In PDC’s early days other executives often performed the training.
366 Mr Downing, who was trained in 1993 by Glenn Hargraves, said that he did not recall being provided with a written training manual or instructions on selling. But the sales representatives who were trained later typically said that they were provided with a copy of the operative Sales Manual.
367 They deposed that once they were through the initial training they were engaged in telephoning and attending on businesses within a particular territory. They sourced new advertisers by various methods including telephoning businesses who advertised in the local newspaper, word of mouth referrals from other clients, reviewing Telstra’s Yellow Pages, contacting businesses whose signs they had seen, and following up specific sales leads advised by the head office. They also sought renewals from existing advertisers where the area was not a new territory.
368 In the relevant period each of the sales representatives said that when they telephoned or attended a business they introduced themselves as working for “Local Directories” or “Local Directories [name of region]”. For instance, Ms Gething deposed:
I present myself to a “cold call” potential client or a client who is renewing their advertising by walking in, shaking hands and saying “Hi I’m Gail from Local Directories (or previously I said “PDC Directories”), I would just like to take a few minutes of your time to explain our phone book”.
Similarly, Ms Klemens deposed:
When I am conducting renewals, I will contact the client and identify who I am by saying “Hi it’s Christine Klemens from Local Directories”.
Ms Cumings said that she introduced herself by saying:
I’m Kate from the Mackay Local Directories, the little phone book.
369 None of the sales representatives said that they were taught to represent themselves as in any way associated with Telstra, and none said that he or she had a practice of introducing themselves as being from Yellow Pages, Local Yellow Pages, Community Yellow Pages or Sensis. Ms Cumings said she made a practice of not even making any reference to the Yellow Pages directory for the Mackay region as she believed the PDC Mackay directory sold itself.
370 Many sales representatives said that when they attended on prospective advertisers they wore company branded attire. For example, Ms Cumings said:
Since 2002, I have always worn my Local Directories branded shirts to appointments, and I continue to wear the branded shirts to all my appointments today. I have always taken, and continue to take, my sales compendium branded Local Directories, to these sales appointments. The compendium contains product information that I show to customers during the appointment.
This made it even less likely that prospective advertisers might be led to think that they were dealing with a Telstra representative. It is also noteworthy that the respondents had a practice of hiring local people as sales representatives. This was not always the case but it appears that many of the respondents’ sales representatives were well-known within their sales territory.
371 Whenever they were trained, each of the sales representatives said that they were trained to deliver the respondents’ sales pitch to prospective advertisers and that the sales pitch focused on the differences between the PDC directories and Telstra’s directories. They were trained to accentuate the benefits of the PDC directories and to distinguish them from Telstra’s directories by reference to their purported advantages. This is consistent with the evidence of Mr McCurdy, who facilitated the training process.
372 In that sense there appears to have been no great difference in the main focus of the training over the years. It is significant that many sales representatives deposed to receiving continued training well after they began to operate autonomously, and also said they received further training when they attended the respondents’ sales conferences each year. For example, Ms Cumings said:
During the training I was never encouraged to represent myself to be in any way associated with Yellow Pages, Pacific Access, Sensis or Telstra. To the contrary, I can specifically recall Kurt Stoten teaching me during my training to refer to the Yellow Pages book and to point out the differences between the 2 books, including that the Local Directories book was a more local directory, that was smaller and covered a smaller geographical region.
373 Each of the sales representatives said that their practice in dealing with prospective advertisers was to strongly differentiate the PDC directory from Telstra’s directory. They sought to do this by pointing to asserted advantages of the PDC directories which typically included that they:
(a) are a viable alternative to Telstra’s regional Yellow Pages and White Pages;
(b) are more local in focus and therefore more relevant to potential advertisers and directory users;
(c) are physically smaller and more convenient to use;
(d) have a better print and the layout;
(e) have up-to-date comprehensive street maps which means they are convenient to use in a car; and
(f) offer cheaper advertising rates.
While some sales representatives put their own slant on the sales pitch, the evidence shows that none deviated from strongly seeking to distinguish the PDC directory.
374 Each of the sales representatives corroborated each other in terms of their training and their practices. Their evidence is also corroborated by that of Mr McCurdy. I accept their evidence.
C. The pleaded conduct
375 Telstra’s use of the colour yellow on its directories and in its marketing was, long-running and far reaching. It alleges in its Fifth Further Amended Statement of Claim that by 1994 it had achieved a secondary reputation in the colour yellow, associated in the minds of consumers with Telstra as the producer of the Yellow Pages directories and associated products. In submissions it altered its position to claim a secondary reputation by 1996. It says that this reputation is separate from and distinct to its reputation in its trade marks.
376 It is uncontentious that from June 2005 the PDC Respondents published:
(a) print telephone directories:
(i) with yellow as the dominant colour on the covers;
(ii) under (as Telstra describes it) the non-distinctive or descriptive LD Name and Logo; and
(iii) from time to time with some or each of the following features (which I have described as the “Other Trade Indicia”):
(a) a “Yellow Section” to describe the classified listings section printed on yellow pages;
(b) a “White Section” to describe the unclassified listings section printed on white pages;
(c) a General Enquiries section at the front of the directories in which the contact details for Sensis are listed as the first entry, and Telstra as the second;
(d) a depiction of two walking fingers within its pages;
(e) the statement that the first or second respondent is “An international member of the ‘Yellow Pages Association’” or “An international member of the ‘Yellow Pages Publishers Association’”; and
(f) a “Quick Find Index” for listings in the Yellow Section featuring a red coloured strip with the words Quick Find Index on the side of all pages contained in the index and the use of capitalised letters in red rectangles as a heading structure within the index; and
(b) a website and mobile app that used the colour yellow from time to time on icons and as a background and highlight colour, and from time to time one or more of the following:
(i) images of the complete PDC directories, including their yellow covers;
(ii) images of the yellow pages contained in the directories;
(iii) a map of Australia shaded in yellow in those places where the respondents’ directories are published; and
(iv) the statement that “We are also a fully accredited international member of both the Yellow Pages Association (YPA) and the Association of Directory Publishers (ADP)”;
377 Telstra alleges that, by reason of its secondary reputation in the colour yellow, the PDC Respondents’ conduct in publishing their print directories, website and mobile app in such a manner imparts the impression to consumers (including users and advertisers), or creates the overall impression among consumers, that the print directories, website and mobile app were and continue to be published by, originate from or are otherwise associated with Telstra. It further alleges that the PDC Respondents engaged in this conduct with the intention of achieving amongst consumers an inability to readily distinguish or understand that the respondents’ print directories, website and mobile app did not originate from and were not associated with Telstra.
378 Telstra also claims that from time to time representatives of the first and second respondents introduced themselves to consumers (including users and advertisers) as being from Yellow Pages, Local Yellow Pages, Community Yellow Pages or Sensis. It alleges that this conduct also caused consumers to more readily assume that the respondents’ directories and digital products were those of, or were associated with, Telstra.
379 It contends that by reason of this conduct the PDC Respondents engaged in conduct that misled or deceived consumers or was likely to mislead or deceive them into believing in respect of their print directories that:
(a) the respondents’ directories are Telstra products;
(b) the respondents’ directories are connected, associated, sponsored, approved, licensed and/or affiliated with Telstra;
(c) the respondents’ directories are produced by the PDC Respondents with the licence, endorsement, sponsorship and/or approval of Telstra;
(d) the respondents’ directories are the Yellow Pages directories;
(e) the respondents’ directories are local or regional versions of the Yellow Pages directories;
(f) the respondents’ directories are connected, associated, sponsored, approved, and/or affiliated with the Yellow Pages directories; and/or
(g) the PDC Respondents enjoy a connection, association, affiliation, commercial and/or other arrangement with Telstra;
(collectively the “Representations”.)
380 To similar effect Telstra alleges that by the PDC Respondents’ publication of their website and mobile app in the manner that they did, through their intention to deceive, and by the conduct of their sales representatives, the respondents engaged in conduct that misled or deceived or was likely to mislead or deceive consumers into believing that their websites and/or mobile app were those of, or were otherwise associated with, Telstra.
381 Telstra alleges that by the same conduct the PDC Respondents passed off their print directories, website and mobile app as being Telstra products or as being connected, associated, sponsored, approved, licensed and/or affiliated with Telstra or its directories.
382 As I have said, if the respondents’ conduct created the impression with consumers alleged , or if it conveyed the Representations, I would have no difficulty in concluding that it constitutes misleading or deceptive conduct or that the Representations were false and misleading in contravention of ss 52 and 53 of the TPA, nor that it amounts to passing off. It is uncontentious that throughout the relevant period the PDC Respondents were in direct competition with Telstra in the telephone directory market and had no connection, association or affiliation whatsoever with Telstra or its directories.
D. The Statutory framework
383 Telstra alleges that the respondents have engaged in misleading or deceptive conduct in contravention of s 52 of the TPA which provided that:
A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
384 It also alleges that the respondents contravened ss 53(c) and (d) of the TPA which relevantly provided:
A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services:
…
(c) represent that goods or services have sponsorship [or] approval … they do not have;
(d) represent that the corporation has a sponsorship, approval or affiliation that it does not have;
…
385 The TPA was amended by the Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth) with the result that the TPA applies in relation to conduct before 1 January 2011, and the ACL, being Sch 2 to the CCA, applies in relation to conduct on or after that date. Sections 52 and 53(c) and (d) of the TPA are in effectively the same terms as ss 18 and 29(1)(f) and (g) of the ACL, and I will usually only refer to the provisions in the TPA.
386 While the focus in s 52 is on conduct rather than on representations, for the respondents to have engaged in misleading or deceptive conduct they must necessarily have made a representation, either expressly or implicitly: Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 (“Taco Bell”) at 202 per Deane and Fitzgerald JJ.
387 Telstra alleges that the PDC Respondents’ conduct gave rise to the Representations set out at [379]. In the present case, Telstra’s allegations under ss 52 and 53(c) and (d) overlap to such a degree that they effectively cover the same ground. The claim under s 53 simply confirms that the misleading or deceptive conduct that Telstra alleges is composed of or informed by the false representation it alleges the respondents made about their directories being published by, originating from, or otherwise associated with Telstra.
388 In the present case a finding that the PDC Respondents represented that the PDC directories had a connection, association, sponsorship, approval, licence and/or affiliation with Telstra’s directories, Yellow Pages directories, or Telstra itself must mean that the respondents contravened s 52, as they had no such relationship. Such a representation would also contravene s 53(c) and (d).
389 My finding under s 52 will therefore determine my finding under s 53. This is not an uncommon course: see Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682 at [15] in relation to ss 53(e) and 52; and Australian Competition and Consumer Commission v Yellow Page Marketing BV (No 2) [2011] FCA 352 at [27] in relation to ss 53(c) and (d); Australian Competition and Consumer Commission v SMS Global Pty Ltd [2011] FCA 855 at [12]. I describe the claims under ss 52 and 53 as the “misleading or deceptive conduct claim”.
E. Relevant Legal principles
The passing off claim
390 Telstra alleges that the respondents have engaged in passing off. The High Court in Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45 (“Campomar”) at [109] endorsed the remarks of Deane J in Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) (1984) 156 CLR 414 at 445 where his Honour approved:
… the adaptation of the traditional doctrine of passing off to meet new circumstances involving the deceptive or confusing use of names, descriptive terms or other indicia to persuade purchasers or customers to believe that goods or services have an association, quality, or endorsement which belongs or would belong to goods or services of, or associated with another or others. (Citations omitted.)
391 The elements of the action for passing off are often expressed in the three propositions set out by Lord Oliver in Reckitt and Colman Products Ltd v Borden Inc (1990) 17 IPR 1 at 7:
The law of passing off can be summarised in one short general proposition - no man may pass off his goods as those of another. More specifically, it may be expressed in terms of the elements which the plaintiff in such an action has to prove in order to succeed. These are three in number.
First, he must establish a goodwill or reputation attached to the goods or services which he supplies in the mind of the purchasing public by association with the identifying get-up (whether it consists simply of a brand name or a trade description, or the individual features of labelling or packaging) under which his particular goods or services are offered to the public, such that the get-up is recognised by the public as distinctive specifically of the plaintiff’s goods or services.
Secondly, he must demonstrate a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe that goods or services offered by him are the goods or services of the plaintiff. Whether the public is aware of the plaintiff’s identity as the manufacturer or supplier of the goods or services is immaterial, as long as they are identified with a particular source which is in fact the plaintiff. For example, if the public is accustomed to rely upon a particular brand name in purchasing goods of a particular description, it matters not at all that there is little or no public awareness of the identity of the proprietor of the brand name.
Thirdly, he must demonstrate that he suffers, or, in a quia timet action, that he is likely to suffer damage by reason of the erroneous belief engendered by the defendant’s misrepresentation that the source of the defendant’s goods or services is the same as the source of those offered by the plaintiff.
This expression of the test was recently endorsed by the Full Court in Peter Bodum A/S v DKSH Australia Pty Ltd (2011) 280 ALR 639 at [212] (“Bodum”) per Greenwood J with Tracey J approving.
392 But there is no requirement for me to go further in setting out the principles relevant to passing off. The central allegation in both the passing off and misleading or deceptive conduct claims is that by their conduct from June 2005 in publishing their print directories with yellow covers and their website and mobile app with prominent use of yellow, under the LD Name and Logo, the respondents imparted the impression to consumers or represented to them that their products were published by, originated from or were otherwise associated or affiliated with Telstra or its Yellow Pages directories.
393 Neither side sought to draw any significant distinction between the misleading or deceptive conduct and the passing off causes of action. The overlap between the two claims is such that there is no necessity to separately deal with them. Realistically, if Telstra cannot succeed in its claims under ss 52 and 53 of the TPA it cannot succeed in its passing off claim, or vice versa. Accordingly, I deal with only the misleading or deceptive conduct claim.
The misleading or deceptive conduct claim
394 The principles underpinning s 52 are well-established. There is no real disagreement as to the principles, only as to their application.
395 In Australian Competition and Consumer Commission v Telstra Corporation Limited (2007) 244 ALR 470 Gordon J usefully set out the analysis that is required. Her Honour also summarised and adopted Finkelstein J’s approach to representations made to a class in .au Domain Administration Ltd v Domain Names Australia Pty Ltd (2004) 207 ALR 521 (“.au Domain”) at [12]-[26], explaining at [14]-[17] and [19]:
14 The relevant legal principles have been well traversed by Australian courts. A two-step analysis is required. First, it is necessary to ask whether each or any of the pleaded representations is conveyed by the particular events complained of: Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45 at [105]; National Exchange Pty Ltd v Australian Securities and Investments Commission [2004] ATPR 42-000 at [18] per Dowsett J (with whom Jacobson and Bennett JJ agreed) and Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd [2006] ATPR 42-106 at [37] …
15 Secondly, it is necessary to ask whether the representations conveyed are false, misleading or deceptive or likely to mislead or deceive. This is a “quintessential question of fact”: Australian Competition and Consumer Commission v Telstra (2004) 208 ALR 459 at [49].
16 Because the conduct complained of in the present matter was not directed at a specific individual both questions that have been identified must be considered by reference to the class or classes of consumers likely to be affected by the conduct: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199 per Gibbs CJ; Nike at [102], [103], [105] and [106]; Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [36] per Gleeson CJ, Hayne and Heydon JJ.
17 In .au Domain Administration Ltd v Domain Names Australia Pty Ltd (2004) 207 ALR 521 at [12]-[26] Finkelstein J provided a useful summary of the approach that might be taken where a court is required to assess conduct by reference to a specific class or classes of consumers and did that by particular reference to Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202-203 per Deane and Fitzgerald JJ and Nike at [100]-[103]. The approach may be summarised in six points, as follows:
(1) first, identify the relevant section or sections of the public by reference to which the issue is to be tested. The target section or sections of the public would, of course, vary according to the facts of each case: Parkdale at 209 per Mason J; Finucane v New South Wales Egg Corp (1988) 80 ALR 486 at 516. The relevant section or sections of the public may be confined by factors such as the time period over which the alleged representations were made and the geographical circulation of the advertisements containing the alleged representations (for an example of geographical circulation defining the relevant test section, see Talmax Pty Ltd v Telstra Corporation Ltd [1997] 2 Qd R 444 at 446);
(2) second, having identified the relevant section or sections of the public, consider who comes within that section or those sections. This may include the astute and the gullible, the intelligent and the not so intelligent, the well educated and the poorly educated: see also Parkdale at 199 per Gibbs CJ;
(3) third, it is permissible, but not essential, to have regard to evidence that some person has in fact been misled, though this evidence will not be conclusive;
(4) fourth, it is necessary to enquire whether any proven misconception has arisen because of the misleading or deceptive conduct;
(5) fifth, where the persons alleged to have been misled are members of a class, it is necessary to isolate a representative member of the class and inquire whether that hypothetical person is likely to be deceived;
(6) sixth, when considering the likely effect of the misrepresentation on this hypothetical person, he or she should be judged as an “ordinary” or “reasonable” member of the class, excluding reactions to the representation that are “extreme” or “fanciful”.
…
19 As noted, under the two-step analysis that has been described, the court cannot consider each event in isolation. Each event must be considered within the context of the advertising campaign of which it formed part…
The requirement that a significant proportion of the class be misled
396 In Campomar at [103], the High Court per Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ explained that where representations are made to the public:
…it is necessary to isolate by some criterion a representative member of that class. The inquiry thus is to be made with respect to this hypothetical individual why the misconception complained has arisen or is likely to arise if no injunctive relief be granted.
At [105] their Honours described the task as being to assess the reactions or likely reactions of the “ordinary” or “reasonable” members of the class, excluding reactions which were extreme or fanciful.
397 In .au Domain at [21]-[26] Finkelstein J criticised the authorities which set out a requirement that for a contravention of s 52 to be established it must also be shown that a significant number of the members of the target class were misled or deceived or were likely to have been so. In his Honour’s view that requirement was wrongly imported from the law of passing off, is not relevant in relation to s 52, and is inconsistent with Campomar.
398 I am attracted by Finkelstein J’s approach in .au Domain but, since that case several Full Courts have maintained the approach that it is necessary to establish that a “not insignificant” proportion of the class are likely to have been misled or deceived: see National Exchange Pty Ltd v Australian Securities and Investments Commission (2004) 61 IPR 420 (“National Exchange”) per Jacobson and Bennett JJ at [70]-[71], per Dowsett J at [23]; Hansen Beverage Co v Bickfords (Aust) Pty Ltd (2008) 171 FCR 579 at [46] per Tamberlin J and at [66] per Siopis J; Bodum at [206]-[210] per Greenwood J with Tracey J approving.
399 In most cases whichever of the tests is applied the result is likely to be the same. An assessment that the hypothetical ordinary and reasonable member of the target class is likely to have been misled or deceived will usually exclude the insignificant number of class members whose reaction is extreme or fanciful. I agree with Dowsett J in National Exchange at [23] in which he described the “significant proportion” test as simply an alternative way of expressing the test in Campomar. But, out of an abundance of caution, having assessed the likely effect of the conduct on the hypothetical ordinary or reasonable member of the target class, excluding reactions to it that are “extreme” or “fanciful, I will also assess whether a not “insignificant number” of that class are likely to have been misled or deceived.
Misleading or deceptive conduct in the context of the taking of trade indicia
400 In S & I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd (1998) 43 IPR 581 (“S & I Publishing”) at 587-588 the Full Court per Hill, RD Nicholson and Emmett JJ (adopting with approval what Hill J said in Equity Access Pty Ltd v Westpac Banking Corporation (1989) 16 IPR 431 at 440-441) set out the applicable principles relevant to a case regarding the alleged taking of the name or trade indicia of a trade rival. These principles were recently accepted as correct in Bodum at [216]. The Full Court held:
1. There will be no contravention of s 52 unless the error or misconception which occurs results from the conduct of the corporation and not from other circumstances for which the corporation is not responsible: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199-200 per Gibbs CJ and at 209-211 per Mason J; Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 at 91; Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Ltd (1993) 38 FCR 1; and cf Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 at 132.
2. Conduct will be misleading and deceptive if it leads into error: Parkdale at 198.
3. Conduct will be likely to mislead or deceive if there is a “real or not remote chance or possibility” of misleading or deceiving regardless of whether it is less or more than 50 per cent: Global Sportsman at 87.
4. Conduct causing confusion or uncertainty in the sense that members of the public might have cause to wonder whether the two products or services might have come from the same source is not necessarily misleading and deceptive conduct: Parkdale at 200; Bridge Stockbrokers Ltd v Bridges (1984) 4 FCR 460 at 472-473 per Lockhart J; Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177.
5. In a case such as the present an applicant must establish that it has acquired the relevant reputation in the name or get-up such that the name or get-up has become distinctive of the applicant’s business or products: Sheraton Corporation of America v Sheraton Motels Ltd [1964] RPC 202; BM Auto Sales Pty Ltd v Budget Rent A Car System Pty Ltd (1976) 12 ALR 363.
6. Conduct may be misleading or deceptive or likely to mislead or deceive notwithstanding that the corporation said to engage in that conduct acted honestly and reasonably and did not intend to mislead or deceive: Parkdale at 197 per Gibbs CJ; Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 223 per Stephen J; Global Sportsman at 88. Logically, a finding that conduct had been intentionally engaged upon will be irrelevant in determining whether that conduct is misleading or deceptive. It may perhaps be imagined that conduct engaged upon with the intent to mislead or deceive may fail in its purpose and not be found misleading or deceptive. Nevertheless, where the intention to mislead or deceive is found, it logically would be likely that a court would more easily find that the conduct was misleading or deceptive: cf Australian Home Loans Ltd (t/as Aussie Home Loans) v Phillips (1998) 40 IPR 392 and New South Wales Dairy Corporation v Murray Goulburn Co-operative Co Ltd (No 1) (1989) 86 ALR 549 at 558. It is unnecessary in the present case to consider the question whether a finding of intention to mislead or deceive can have relevance in other ways to issues such as remedies.
7. In many cases it will be necessary to consider the class of persons to whom the representation was directed: Parkdale at 199 and Taco Bell at 202. To the extent that it is here necessary so to do that must be the class of persons interested in purchasing magazines concerned with triathlon sport.
8. There is no proposition of law to the effect that intervention from erroneous assumption between conduct and misconception destroys the necessary chain of causation with the consequence that the conduct cannot be regarded as likely to mislead or deceive: Taco Bell at 200; Campomar Sociedad Limitada v Nike International Ltd (1998) 85 FCR 331 at 361-362.
9. The test of whether conduct is misleading or deceptive or likely to mislead or deceive is an objective one for the Court to determine. It is ultimately a question of fact. (Emphasis added.)
401 As their Honours said at [216(5)] in cases which relate to the taking of get up or trade indicia by a trade rival, a key surrounding circumstance that must be considered is the extent and nature of the relevant reputation in the alleged trade indicia that the applicant has established with the relevant class of the public.
402 The question will be whether the trade indicia in question have acquired a secondary meaning, namely “do they indicate to the appropriate class of purchasers that the goods have come from a particular source, whether the name of that source is known or not”: Weitmann v Katies Ltd (1977) 29 FLR 366 at 339-340 per Franki J (approved by the Full Court in Paula Brock & Ors v The Terrace Times Pty Ltd (1982) 56 FLR 464). The question then is whether the respondents’ use of that trade indicia means to the relevant class of consumers that the applicant is the trade source of the respondents’ goods and services.
Mere confusion or being caused to wonder is insufficient
403 It is well-established in the context of section 52 that mere confusion in the sense that consumers are caused to wonder is insufficient. Unlike in relation to trade mark infringement, breach of s 52 is not found simply because the use of certain trade indicia causes consumers to wonder whether goods and services have the same source: Heydon, J D Heydon’s Trade Practices Law (Lawbook Co, 2010) at [11.300].
Erroneous assumptions by consumers
404 No breach of s 52 arises if the misconception arises from an erroneous assumption held by the classes of consumers, in which case the error is attributable to that mistaken assumption rather than the respondents’ conduct. As the Full Court said in McWilliam’s Wines Pty Ltd v McDonald’s System of Australia Pty Ltd (1980) 33 ALR 394 at 402 per Smithers J, Northrop and Fisher JJ agreeing:
It is a question therefore whether any misapprehension which has arisen is a consequence of McWilliam’s conduct or of other factors, namely that the advertisement was read and interpreted by reference to erroneous concepts and assumptions. And the further and critical question is whether conduct otherwise neither misleading nor deceptive acquires deceptive quality because persons under the influence of erroneous ideas draw erroneous inferences concerning it.
See also Campomar at [98]-[107].
405 This is relevant in the present case because I infer that it is likely that many consumers think that all telephone directories originate from or are associated in some way with Telstra. I infer that they do so because for many decades Telstra’s predecessors were government agencies and the sole producers of official telephone directories. I return to this below.
Consideration
F. Identifying the target section or sections of the public
406 The conduct about which Telstra complains was not directed at any specific individual and it is necessary to identify the target section or sections of the public.
407 The relevant conduct is the PDC Respondents’ publication since June 2005 of print classified directories, and a website and mobile app containing directories, that featured the colour yellow and were published under the LD Name and Logo, to consumers in identified various cities and regions of Queensland, Northern Territory and New South Wales (“Identified Regions”).
Two classes
408 There are two relevant classes of consumers. The first class is made up of people who use or will use directories to find information about products and services available in the Identified Regions that are listed in the directories. Most of these people are likely to live or work in the Identified Regions as that is where the print directories are published, and where the information listed will have the most utility.
409 The second class is made up of people who are advertisers or prospective advertisers in classified directories who pay or may be prepared to pay to list their products and services in a directory. These will be people who own or manage businesses in the Identified Regions. I infer that most of them also live in those areas.
The classes are not limited just to people living or working in the Identified Regions
410 The class of directory users is not limited only to those consumers living or working in those areas.
411 I say this, first, because the population of the Identified Regions is not static. The evidence shows that over the period from 1996 to the present a substantial number of new residents moved into those regions to live, work and operate businesses (and a substantial number of people have left those areas to live and work elsewhere). These new residents largely do not come from other regions covered by the PDC directories.
412 Secondly, some of the Identified Regions are tourist centres (eg Alice Springs, Darwin, Coffs Harbour, Gold Coast and Sunshine Coast amongst others) and the directories are likely to be available to people holidaying there. The evidence indicates that tourists come from metropolitan centres more than from other regions covered by the PDC directories. The print directories are likely to be made available to tourists in hotel and motel rooms, guesthouses, bed and breakfast accommodation, caravan parks and the like. The same is true for business travellers to the larger centres in the identified areas.
413 Thirdly, although the directory information relates only to the Identified Regions, people can access the PDC website and mobile app wherever they live in Australia. Those directories are available to people travelling or intending to travel to the Identified Regions who are likely to seek information online or by mobile app, for example in relation to accommodation, car hire, restaurants, holiday activities, car and caravan repair and the like. This is true of both tourists and business travellers.
414 The two broad classes are therefore:
(a) Persons who use or may use print, online and mobile app directories to find information about suppliers of goods or services who live or work in (or who will shortly live or work in) or who visit or intend to visit the Identified Regions of Queensland, Northern Territory and New South Wales (“directory users”); and
(b) persons who own or manage a business in the Identified Regions and who may be prepared to pay to list their goods or services in print, online and mobile app directories (“directory advertisers” or “advertisers”).
G. The characteristics of the Hypothetical ordinary or reasonable class member
415 In determining the characteristics of the hypothetical ordinary or reasonable class member it is necessary to keep in mind that not all members of the class are likely to respond to the PDC directories in the same way.
416 A range of reasonable responses are possible because the two classes are broad and diverse and will include a broad range of ordinary consumers and business people both shrewd and ingenuous, educated and uneducated, commercially experienced and inexperienced and informed and less well informed, of various ages and a variety of vocations.
417 A range of responses may also be expected because some sections of the class will interact with the directories differently, and other sections of the class will have different levels of knowledge and experience of the PDC directories.
The likely approach of prospective directory advertisers
418 In my view the interaction of prospective advertisers with PDC directories is likely to involve some careful thought. Directory advertisers are people who run or manage a business in the Identified Regions, and the evidence shows that most are small business people. Persuading prospective advertisers to purchase advertising in a PDC directory (rather than or as well as in the Yellow Pages) required the PDC sales representatives to explain that they represented an alternative directory and to explain the differences and purported benefits of advertising in a PDC directory rather than in the well-established Yellow Pages.
419 The classified advertisements offered in the PDC directories are expensive. While not necessarily sophisticated, such business people are unlikely to be lacking in discernment and unlikely to be in any hurry to make such a purchase, or in a hurry to make a choice to move away from the well-established Yellow Pages directory: see Cooper Engineering Co-Pty Ltd v Sigmund Pumps Ltd (1952) 86 CLR 536 at 539 per Dixon, Williams and Kitto JJ. As a result, advertisers are likely to have closely focused on the appearance of the PDC directory because it was necessary to assess the likely effectiveness of advertising in it.
420 The circumstances in which advertisers were first made aware of the PDC directories are also relevant. The evidence is that the respondents embarked on an extensive sales canvass seeking to contact every business within each Identified Region before publishing their directories. Sales of advertising space were rarely, if ever, made over the telephone as the respondents’ business model required face-to-face meetings between sales representatives and prospective advertisers. Telephone calls were made by sales representatives to set up meetings only, rather than to make sales.
421 At the face-to-face meetings the evidence is that PDC sales representatives introduced themselves as being from Local Directories, and not as being from the Yellow Pages, or some version of it. They were clearly identified by use of company branded attire, a company badge or cap, and company business cards carrying the LD Name or Logo. In the meeting prospective advertisers were shown examples of the yellow covered PDC directories and various other pieces of yellow themed marketing information.
422 The evidence shows that in their sales pitch during the face-to-face meetings, PDC sales representatives focused heavily on the purported advantages of the PDC directories compared to Telstra’s regional Yellow Pages directories. The thrust of the sales pitch was to accentuate the differences in the rival directories. Telstra’s consumer surveys tend to show that advertisers understood that the PDC directories were in competition with the Yellow Pages and from a different trade source.
423 At the same time as the sales canvass was on foot the respondents undertook extensive pre-publication television marketing including the “Coming Soon”, “Client Testimonials”, and “Closing Now” advertisements referred to by Ms McGarry, along with newspaper and radio advertisements. Aside from the radio advertisements, these also displayed the yellow covered PDC directories.
424 Commencing in 1994, advertisers in the Identified Regions in Queensland and Northern Territory were contacted each year by PDC sales representatives seeking that they advertise in the PDC directories. Many of them would have been advertising in the yellow covered PDC directories for many years and meeting with PDC and Telstra sales representatives annually. Their knowledge and experience of the PDC directories makes it highly unlikely that any significant proportion of them suffered the relevant misconception.
425 Advertisers in the Identified Regions of New South Wales were in a different position in that the great majority of them would have had no previous exposure to the PDC directories. But I am satisfied that:
(a) the respondents’ sales canvass process;
(b) the respondents’ marketing;
(c) the fact that the respondents’ sales representatives wore company-branded attire and introduced themselves as being from Local Directories;
(d) the focus in their sales pitch on differentiating the PDC directories; and
(e) the heightened interest that advertisers are likely to have had in the appearance and content of the PDC directories because they were contemplating an expensive purchase, and contemplating moving away from the well-established Yellow Pages directory;
meant that they are likely to have viewed the PDC directories with a starting assumption that it was a rival directory to Telstra’s Yellow Pages. In my view they are quite unlikely to have suffered a misconception that the PDC directories were published by or otherwise associated with Telstra.
426 Telstra accepts that in assessing the likelihood of advertisers being misled, different considerations apply than those applying to directory users, and that these differences make it less likely that advertisers would have been misled or deceived in relation to the source of the PDC directories. Nevertheless, it seeks to rely on the evidence of Ms Lock, Mr Swinbourne and Ms Bolewski, the evidence of the Sensis account executives as to the misleading conduct of the PDC sales representatives and as to advertisers being confused, and the consumer surveys, as indicating a likelihood that a significant proportion of the class of advertisers suffered the misconception that the PDC directories originated from or were associated with Telstra.
427 I take a different view. I give little weight to the evidence of the Sensis account executives, and the other viva voce evidence does not go far. In my view the consumer survey evidence tends to show that directory advertisers understood that the PDC directories were from a different trade source to Telstra’s directories.
The likely approach of directory users
428 Directory users are likely to interact differently with the PDC directories than advertisers. Telephone directories are not purchased. They are free of charge and were delivered on an unsolicited basis. It is common ground that directory users are likely to have a low emotional attachment with them. It is uncontentious that directory users are unlikely to pick up a directory until they need to look for information, and at that point the user is narrowly focused on finding whatever it is that he or she is looking for. It follows that users are unlikely to closely scrutinise a directory, and subtle differences in branding between a PDC directory and a Telstra directory are less likely to be noticed.
429 I accept Mr Weissenberg’s evidence that branding is less important in this type of product, and in my view it is the functionality that consumers will rely on more than branding. This indicates that directory users are less likely to care about or pay close attention to the branding of the directories.
430 This is borne out by consumer surveys undertaken by Telstra using focus groups in relation to the cover of its 1999 Yellow Pages directories. It found that few directory users could recall the differences between it and the preceding editions. It indicated that few took great notice of the cover of the directory until they needed to use it, and that they were in a businesslike frame of mind and tended to be in a hurry.
431 Users of the online and mobile app directories are even less likely to pay close attention to directory branding. As I said in PDCA v Telstra at [406]-[407], such users are simply accessing a free service to get information. Users will usually access an online or mobile app directory at the time they need the information and will want the answer speedily. Often they will access it while involved in other activities, including while in transit, through smart phones, tablets and similar devices. They will pay little more than fleeting attention to branding: see also YPG IP Limited and Anor v Yellow Book.com.au Pty Ltd and Ors [2007] NZHC 1947 at [111] per Allan J.
432 The evidence, and common sense, indicates that many directory users store their PDC directory alongside Telstra’s directory near the telephone. If both PDC and Telstra’s directories are available to the directory user a decision about which one to use when the occasion arises will again be made speedily. It is unlikely that the user will make a detailed side-by-side comparison of the two directories at that time and the choice will be largely be based on impression.
433 However, as I explain, I consider the impression that a directory user will have is not restricted to just the cover and the appearance of the directory. I see some of the obvious differences between the competing directories as being that the PDC directories were more local in focus, smaller and less cumbersome. As a matter of impression, I consider that those factors were important in choice of directory. Faced with two directories which contained the same local information sitting alongside each other, a directory user is likely to choose the smaller and easier to use directory over the more cumbersome.
The different levels of knowledge and experience of directory users
434 While I expect that most adult Australians would be aware of Telstra’s directories given the duration and extent of its marketing and distribution of Yellow Pages directories, directory users in different parts of the Identified Regions will have different levels of knowledge and experience regarding the PDC directories.
435 I consider that most directory users who lived or worked in the Identified Regions of Queensland and Northern Territory prior to June 2005 are likely to have understood that the PDC directories were rival directories to the Yellow Pages directories. PDC directories with yellow covers had been published in those areas since 1996 and many directory users will have been using them for some years. All would have had both directories delivered to their home or business each year, and many of them would have kept and used both directories. It is hard to see how they would not have understood that they were from different trade sources. Each year they would have also have been reminded by the respondents’ marketing campaigns that the directories were in competition.
436 Apart from the name, the PDC directories published in the Identified Regions of Queensland and Northern Territory after June 2005 had the same appearance and content as the earlier directories. In my view directory users who had come into contact with the earlier PDC directories were likely to approach the post-2005 directories under the LD Name and Logo as just another edition. They would view the new directories with the starting assumption that the new edition continued to be a rival directory to Telstra’s Yellow Pages.
437 This may be contrasted with directory users living and working in the Identified Regions of New South Wales. Largely these users had not previously seen or used a PDC directory. For most of them the first time they would have seen a PDC directory is when it was delivered to their home or business.
438 However, many of them would have become aware of the PDC directories because:
(a) in the sales canvass PDC sales representatives would have contacted every business within that region, and had face-to-face meetings with a large number of them during which they were shown examples of the proposed new yellow covered directories;
(b) the respondents undertook extensive pre-publication television and newspaper advertisements. These often included examples of the pending new yellow covered directories; and
(c) the respondents undertook post-publication advertisements which displayed the new yellow covered directories.
This marketing is likely to have meant that many directory users in the Identified Regions of New South Wales understood that a new yellow covered directory, which was an alternative to Telstra’s directories, was in the offing.
439 Even so, it is likely that there remained many directory users in such Identified Regions who had not been reached by the respondents’ marketing. Those directory users would not have seen a yellow covered PDC directory under the LD Name or Logo until it was sent to their home or business.
Some directory users see yellow as generic
440 Another important characteristic of the class of directory users is that some of them will attribute less significance to the use of yellow covers.
441 I accept, as Telstra contends, that:
(a) from 1975 to about the mid-1980s Telstra’s Yellow Pages directory was the only directory published in Australia featuring a yellow cover;
(b) from about the mid-1980s to 1996 the third-party directories that had yellow covers had relatively small circulations and were published in discrete markets. Directory users outside those markets are unlikely to have been aware of their use of yellow;
(c) prior to the PDC directories commencing to use yellow covers in 1996, no other significant Australian directory used yellow covers;
(d) a large number of Australian third-party directories were published between 1990 and 2005 without yellow covers; and
(e) the respondents commenced to use yellow covers in 1996 partly in order to attract some of Telstra’s legitimacy in the marketplace.
442 Even so, I consider that many directory users were likely to have seen Telstra’s use of yellow covers as showing that it was a classified directory rather than as signifying that it came from a particular trade source, at least to an extent.
443 As I have said at [121]-[129], it is clear from the evidence of Mr Harvy, Mr Moule, Glenn and Adam Hargraves, and the examples provided by Ms McGarry that yellow pages and yellow covers were widely used internationally. In accepting that yellow was internationally recognised in 1975 as the colour of classified directories, Mr Harvy did not attempt to somehow screen or partition Australia from that understanding. I can see no cogent basis for treating the recognition of the colour yellow at that time as being different in Australia to the rest of the world, and I see any such contention as quite unrealistic. As Jagot J said in Australian Health & Nutrition Association Limited trading as Sanitarium Health Food Company v Irrewarra Estate Pty Ltd trading as Irrewarra Sourdough [2012] FCA 592 at [34] “the modern world is characterised by rapid communication and extensive cultural exchanges particularly from the USA in the forms of films, television programs, music, books and travel.”
444 I accept that the international use of the colour yellow in respect of directories is, without more, irrelevant. But it must be relevant insofar as that international use becomes known to Australian consumers and affects the extent of any association in their minds between yellow and Telstra’s products.
445 Many directory users from the Identified Regions will have enjoyed the benefit of travelling or living overseas. Very large numbers of Australians have done so since international air travel became cheaper. The evidence is that in 1993 alone 1.6 million Australians travelled to the top 10 international destinations which included the USA and UK.
446 Some of those international travellers, particularly those who went to English speaking countries, will have seen international directories which use yellow pages and/or covers. Some of them, particularly business travellers, will have used such directories. Telstra’s use of yellow pages and covers and their knowledge of the use of yellow pages and covers overseas meant that many of those directory users will see yellow as a standard colour for classified directories.
447 This understanding is likely to have been confirmed by the third-party use of yellow in Australia. The evidence tends to show that yellow was seen in the Australian market as a standard colour for classified directories well prior to 1996. Mr Moule testified, and I accept, that when the BIG Directories was first published in 1987, BMA chose to use yellow pages for the classified section because “it was the colour used for classified sections of directories world wide”. I also accept the thrust of the evidence of Glenn and Adam Hargraves that in 1996 they saw yellow as the “natural choice” for their directories because it was a standard colour for classified directories.
448 As I have set out at [105]-[120], prior to the commencement of the impugned conduct in June 2005, Australian directories used yellow as follows:
(a) the BIG directories published annually by BMA from 1987 utilised yellow pages. By 1997 BMA published approximately 3.5 million BIG Directories nationwide each year in Melbourne, Sydney, Perth, Brisbane, Gold Coast, Sunshine Coast, Northern Territory, Adelaide, Hobart, Northern NSW, Cairns, Townsville, Wollongong and Canberra;
(b) the PDC directories published annually by the respondents utilised yellow pages from 1994, and yellow pages and covers from 1996. By July 2006 when Telstra made its first complaint, the respondents had published about eight million directories in total in the Identified Regions of Queensland, Northern Territory and New South Wales;
(c) the Rockingham and Kwinana Community Directory published annually by RMK in the discrete markets of Rockingham, Mandurah and Kwinana in Western Australia from 1985 utilised yellow pages and yellow covers. Each year about 64,000 copies were published; and
(d) a series of small directories in discrete markets including the Chinese Business Directory published in Brisbane, the Australian Business Directory – Your Multicultural Guide in Sydney, the Karratha & Districts and the Mid West Business & Community directories in Western Australia, the Whitsundays Telephone Guide, Yellow Duck online directory, and the other small directories to which I earlier referred had yellow pages and/or yellow covers.
449 Telstra makes no complaint about the widespread use of yellow pages in Australian directories and it made no complaint about the PDC directories’ use of yellow covers over the decade until July 2006. Yet it now seeks to draw a sharp distinction between the use of yellow pages and yellow covers. While there is a difference, Telstra seeks to inappropriately elevate the use of yellow covers to a special status. In circumstances where the question is one of the impression left with consumers and where:
(a) it is common ground that directory users will have little emotional involvement with the directories;
(b) directory users are likely to be more concerned about the functionality and features of a directory than its branding; and
(c) directory users are likely to be focused on searching for information rather than on directory branding;
I do not draw a sharp distinction between use of the colour yellow on pages and on covers.
450 Mr Weissenberg’s evidence also indicates that some consumers are likely to have seen yellow as generic in respect of directories. He said, and I accept, that colours may become associated with an industry over time, and that yellow had become associated with telephone directories. He said:
…the colour yellow has some significance insofar as it means directories. It has become, over time, generic in terms of it being a colour that people have come to associate with directories, in my view.
He explained further that the colour yellow:
…[is] ubiquitous… [O]ver time colours become synonymous with categories. For example… to take a different analogy, if you look at a box of tissues, its become synonymous with Kleenex, because they have been there for so long. It’s just generic: the word “Kleenex” in America means facial tissue. It’s not - you know, they [say] - “Pass me a Kleenex”, no matter what the brand is. And I think something similar happens in this category: that there’s a colour and it becomes synonymous with the category.
451 As I have said, there was a deficiency in the foundation for his opinion in that regard and I treat that part of his evidence with caution. But I see it as having some probative value. It is confirmed by the evidence of Mr Harvy, Mr Moule and Glenn and Adam Hargraves that yellow was seen around the world as the standard colour for classified directories, and confirmed by the widespread use of yellow in Australian directories. I also consider it common sense.
452 Telstra argues that Mr Weissenberg’s concession that yellow was associated with Telstra in the minds of consumers undercut his own evidence about yellow being “standard”. I do not agree. I treat his evidence as being that many consumers will see yellow as associated with Telstra because of the extent of Telstra’s use of that colour, but that to an extent yellow had become generic.
453 I also accept Mr Weissenberg’s evidence that the first brand to enter a marketplace and establish a category often sets the tone for traders that follow. Telstra’s monopoly on telephonic communication in Australia through most of the 20th century gave it a competitive advantage and it dominated the market for telephone directories. When it adopted the colour yellow on its directory covers in 1975 it did not choose a colour that was distinctive, it chose the internationally recognised colour of telephone directories. With some consumers this will have reinforced the view that yellow was the standard colour for the industry.
454 Of course, Telstra’s huge use of yellow extending over many years must be weighed in the balance, but I consider that many directory users in the Identified Regions are likely to see yellow covers on a directory as signifying only that it is a directory, rather than as signifying a particular directory. As I have said, directory advertisers are in a different position. Their likely understanding that the PDC directories were not published by or associated with Telstra derives from the different circumstances that apply to them.
H. TELSTRA’S REPUTATION IN THE COLOUR YELLOW
The requirement to establish a relevant reputation
455 There is no requirement for Telstra to establish that it had an exclusive reputation in yellow at the relevant time. As the Full Court in Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 72 IPR 261 (“Cadbury Appeal”), per Black CJ, Emmett and Middleton JJ, held at [97]-[99]:
Both in the context of Pt V of the Trade Practices Act and the common law tort of passing off, trade indicia other than names and logos can become associated with a particular trader, such that a use by another trader could give rise to misleading or deceptive conduct or passing off. If particular branding elements used by a trader have been identified in a special way with that trader in the minds of the members of the public, there may be misleading or deceptive conduct by reason of the appropriation of those particular branding elements by another trader.
There is an overlap between causes of action arising under Part V of the Trade Practices Act 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 Part 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.
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 Part 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. (Emphasis added.)
456 Of course the passages at [97] and [99] of the Cadbury Appeal must be read together. If they were not then some inconsistency might be seen to arise between:
(a) the Full Court’s explanation at [99] that “the question is not whether the applicant has shown a sufficient reputation”; and
(b) the statement of the Full Court in S & I Publishing at 588 that “an applicant must establish that it has acquired the relevant reputation in the name or get-up such that the name or get up has become distinctive of the applicant’s business or products.”
457 As Kenny J said in Nutrientwater Pty Ltd v Baco Pty Ltd (2010) 265 ALR 140 at [90] the Full Court’s statement in the Cadbury Appeal at [99] meant that in a claim under ss 52 and 53(c) and (d):
…one must focus on the statutory questions to which ss 52 and 53(c) and (d) give rise. When addressing these questions, the fact, if it be proven, that NW had a reputation in the feature or features allegedly appropriated by Baco such that the feature or features had become distinctive of its business or products is relevant to the answer the court gives.
458 If the applicant can establish that its get up or an element of it has become distinctive of it or its products, then the use by another trader of its get up or brand element might give rise to a misrepresentation which will found a cause of action under s 52.
The date for assessing reputation
459 In an action for passing off it is established that the applicant’s reputation is to be assessed as at the date of the commencement of the conduct complained of. This choice is justified, first, on the basis that the respondent should not have the benefit of its own misconduct in eroding the applicant’s goodwill. Secondly, the applicant cannot succeed where its reputation at the time the respondent’s conduct commenced was not sufficient to sustain a claim of passing off, even though its reputation grew thereafter: Davison M and Horak I, Shanahan’s Australian Law of Trade Marks and Passing Off (5th ed, Thomson Reuters, 2012) at [95.1760] and the authorities there cited.
460 The same is true in a misleading or deceptive conduct claim. See Taco Bell at 195-196, 203-204 per Deane and Fitzgerald JJ; Thai World Import & Export Co Ltd v Shuey Shing Pty Ltd (1989) 17 IPR 289 (“Thai World”) at 302 per Gummow J; Anheuser-Busch, Inc v Budejovick Budvar, Nrodn Podnik & Ors [2002] FCA 390 at [237] per Allsop J. In Thai World Gummow J said that the rule that the relevant time for the assessment of the conduct is when the impugned conduct commenced was “true both of passing off and of proceedings for contraventions of s 52 of the Trade Practices Act.” As his Honour explained, the rationale is that the complainant’s goodwill is not to be taken as eroded by the wrongful trading of the other party in the period before the institution of and the resolution of proceedings between them, and the question is to be analysed by reference to the cause of any likely deception, and who was responsible for it.
461 There is a dispute in the present case as to the date upon which to consider whether Telstra had acquired a reputation in the colour yellow.
462 The pleadings allege that the respondents’ conduct from June 2005 was misleading or deceptive, and the respondents therefore contend that is the date for considering Telstra’s reputation. But Telstra contends that it had established a secondary reputation in yellow by 1996 and it argues for assessment of reputation at that time. Although Telstra does not plead that the respondents’ conduct from 1996 until June 2005 was misleading or deceptive it does not concede that question. It argues instead that the respondents intended to deceive consumers when they adopted yellow covers in 1996, and that their false intention continued thereafter.
463 Another complication regarding the appropriate date for assessing Telstra’s reputation is the fact that the respondents expanded the coverage of their directories region by region. By way of example, the respondents’ expansion into New South Wales commenced with the publication in 2005 of the Coffs Harbour directory, next in 2006 they published directories in Port Macquarie and in Taree & Forster-Tuncurry, in 2007 in Northern Rivers, then in 2008 in Port Stephens and Tweed Coast, continuing from there. There is a flavour to Telstra’s contentions that its reputation in yellow should be assessed in each new region as at the date that the PDC directories commenced to be published in that region.
464 I do not accept Telstra’s contentions. Because the question is related to who was responsible for any likely deception, Telstra’s reputation must be considered in June 2005 when it pleads the misleading conduct commenced. It is in light of its reputation at that time (and thereafter) that the Court must assess whether the respondents’ use of yellow covers was misleading. Telstra’s reputation in yellow as at 1996 cannot be central as consideration of whether the respondents’ conduct from June 2005 is misleading or deceptive requires consideration of:
(a) the respondents extensive use of yellow pages and covers from 1996 to 2005;
(b) the extensive Australian third-party use of yellow pages and to a lesser extent yellow covers from 1996 to 2005;
(c) the extensive use of yellow pages and covers in overseas directories from 1996 to 2005, insofar as that use had come to the attention of Australian consumers and affected their understanding of the association between yellow and Telstra in Australia; and
(d) Telstra’s use of yellow on its directory covers was inconsistent and reduced over the period from 1996 to 2012.
465 But there is no need to analyse this question further given my conclusion that, whether Telstra’s reputation in the colour yellow is assessed at 1996, June 2005 or later, the respondents did enough to distinguish their directories from Telstra’s directories. I have taken a cautious approach and have considered Telstra’s reputation as at both 1996 and 2005.
The respondents’ contentions
466 It is uncontentious that Telstra has a reputation in the Yellow Pages Trade Marks and the overall get up of its print directories, website and mobile app. The question is whether (and if so to what extent) one element of Telstra’s get up - the colour yellow - had become distinctive of Telstra or its directories, independently of the Yellow Pages and the Walking Fingers branding.
467 The respondents strenuously contend that Telstra failed to establish a secondary reputation in the colour yellow, viewed in isolation. They base this contention on the fact that, amongst other things:
(a) the colour yellow is generic in relation to classified directories;
(b) Telstra only used the colour yellow in association with the Yellow Pages branding, and never independently; and
(c) Telstra’s use of the colour yellow was inconsistent and reduced over the period from 1996 to 2005.
I now deal with these contentions.
Yellow is generic to an extent
468 Yellow is a primary colour in common usage in trade and commercial settings. It is not inherently distinctive of Telstra’s products and Telstra did not contend that the shade of yellow it used was an “out of left field” choice. The shades of yellow used by Telstra on its covers and pages, and the shades used by other Australian directory providers were often similar.
469 Yellow could only become distinctive of Telstra’s products through use, and Telstra only advances a case based upon its extensive use of yellow on its directories and in its marketing. The respondents contend that the colour yellow is generic in respect of classified directories and, in that context, a question arises as to whether, or to what extent, Telstra’s use of yellow meant that it became associated in the minds of consumers in a special way with Telstra.
470 I have already dealt with this issue at [440]-[454] when setting out my view as to the characteristics of the class. It suffices to reiterate that I consider that many directory users in the Identified Regions are likely to have seen yellow covers on a directory as indicating that it is a directory, rather than signifying it as Telstra’s product.
Yellow only used in association with Yellow Pages and the Walking Fingers
471 The respondents contend that yellow, considered alone, cannot be seen as distinctive of Telstra’s products because from 1975 Telstra always used the Yellow Pages Trade Marks including the Walking Fingers to signify its products together with the colour yellow. They argue that the ubiquitous and well-recognised Yellow Pages branding meant that consumers needed to look no further to understand the origin of Telstra’s directories.
472 Telstra contends that its marketing “generally made extensive use of the colour yellow in isolation so as to emphasise connection between that colour and the Yellow Pages brand.” I reject that contention as contrary to the evidence. Mr Harvy conceded that in the relevant period Telstra always used the Yellow Pages including the Walking Fingers branding on its directories and in its marketing. The many examples of Telstra’s directories and marketing in evidence confirm this.
473 For all practical purposes yellow was only used together with the Yellow Pages and Walking Fingers branding.
474 In this sense the proposition that Telstra had acquired a secondary reputation in the colour yellow by 1996 or 2005 runs contrary to its actual use of yellow. At no stage did it publish or market its yellow covered directories without also using a Yellow Pages Trade Mark. Telstra’s use of the colour yellow was quite different to the use of brand elements (such as the McDonald’s golden arches or the Nike swoosh) which are used to identify those businesses without additional indicia.
475 I see Telstra’s marketing as displaying a lack of confidence that the colour yellow, viewed in isolation, was sufficient to identify its product as originating from Telstra. An example of this lack of confidence may be seen in a range of Telstra billboard advertisements in 2000. They were almost entirely yellow in colour. I reproduce below a billboard from that range which suggested using Telstra’s directories to locate a golf driving range.
The billboard enquires of readers “Do you want to know about driving ranges” and Mr Harvy accepted that the Yellow Pages branding, in the bottom right corner was used so that the reader would know what the answer to that question was.
476 If Telstra was confident that the colour yellow, considered alone, signified its directories there was no need for the Walking Fingers to be used on that range of billboards. Yet Telstra used that trade mark. It may not have been sensible marketing practice for Telstra not to use its well-recognised Yellow Pages Trade Mark, but the fact that over almost 40 years of marketing Telstra never used the colour yellow alone tends to show a concern that without a Yellow Pages Trade Mark consumers would have little idea about the origin of its products. This points away from the contention that Telstra had acquired a reputation in the colour yellow, independently of the other branding elements.
477 In cross-examination Mr Weissenberg was pressed on the question as to whether colour alone could operate to signify a product. He was given the example of the colour red used on cans of Coca-Cola and coupled with marketing which sought to associate having a good time at the beach and surfing with Coca-Cola. He testified that he considered it unlikely that a primary colour used as a brand element, viewed in isolation, would become associated in the minds of consumers with a trade source. He said:
Within the context and how the symbols and cues are used. The colour red on its own is not enough. It is how it is used in association with other symbols and cues which might lead to the interpretation that this is Coca-Cola.
…
If you gave me a red can and put brand X on there and you showed me surfing I would think there’s no association with Coca-Cola whatsoever, on that. It’s the addition of the script Coca-Cola and the other cues that they use to identify them that would lead to that association, not the colour red on its own. It’s part of it, but it’s not the whole answer.
478 He accepted the possibility that some consumers would identify one particular element of a brand and give it a secondary meaning but said:
…it is more likely that it is the combination of elements that would lead to the association. You can’t give a, you know, a universal answer. In some cases one element may be more important than the other three elements, but in my view it is more likely to be conglomerative associations as opposed to just simply one.
479 I accept Mr Weissenberg’s evidence in this regard. The fact that Telstra always used Yellow Pages branding, in conjunction with the colour yellow shows the difficulty for Telstra in establishing that it had acquired a secondary reputation in yellow, standing alone.
Telstra’s use of the colour yellow was inconsistent and reduced over time
480 As I detail at [137]-[164] between 1996 and 2012 Telstra significantly departed from its practice of using almost entirely yellow covers on its directories. Its use of yellow was inconsistent and it reduced over that period. In my view those consumers who were concerned about trade source would place less significance than previously on Telstra’s use of yellow, standing alone, as signifying its products.
Consideration regarding reputation in Yellow
481 The difficulty in Telstra’s case can be seen in the fact that yellow was a standard colour for telephone directories and that when Telstra used yellow:
(a) it used a shade which was not an “out of left field” choice;
(b) it never used yellow, standing alone; and
(c) its use of yellow was inconsistent and reduced over time.
482 There is real force to the respondents’ contentions, but I have reached the view that Telstra established that it had acquired a secondary reputation in the colour yellow as at 1996 and as at 2005. The matters I have set out do not show that Telstra had no reputation in yellow, but rather that the association in the minds of consumers between yellow and Telstra was not strong. In general terms I have concluded that Telstra acquired a reputation in yellow covers because:
(a) Telstra’s use of yellow on its directories and in its marketing was extensive, of long duration and far reaching;
(b) to an extent Glenn and Adam Hargraves conceded that Telstra had a reputation in yellow;
(c) Mr Weissenberg accepted that yellow was associated with Telstra;
(d) the respondents’ taking of Telstra’s yellow covers to improve the legitimacy of their directories is evidence that Telstra had a reputation in yellow; and
(e) (although I take a cautious approach to this evidence) the contemporaneous consumer surveys tend to show that yellow was associated with Telstra in the minds of consumers.
I now deal with each of those matters.
Telstra’s extensive use of yellow
483 I set out at [48]-[61] Telstra’s distribution of yellow covered directories and its extensive and broad-reaching marketing campaigns since 1975. It is unnecessary to do so again. Telstra’s use of yellow in its directories and in its marketing was vast.
Concessions by Glenn and Adam Hargraves
484 The evidence of Glenn and Adam Hargraves tends to show that Telstra had acquired a secondary reputation in the colour yellow as at 1996. Glenn Hargraves accepted that Telstra had a substantial reputation in the colour yellow. Adam Hargraves said that Telstra’s yellow phone books were familiar to the general public because Telstra had published Yellow Pages in yellow for 22 years, and he accepted that yellow was an essential part of Telstra’s get up.
Mr Weissenberg’s evidence of association between yellow and Telstra
485 Mr Weissenberg accepted that consumers would more readily reach for a directory believing that it was a Telstra publication if it was coloured yellow, because of the association of yellow with Telstra.
The taking of Telstra’s yellow covers
486 Also, as I explain at [538], I am satisfied that one of the reasons behind the respondents’ adoption of yellow covers in 1996 was a desire to attract some of the legitimacy that consumers saw in Telstra’s yellow covered directories. This fact provides eloquent testimony that Telstra had a reputation in the colour yellow. As Foster J said in Winnebago Industries, Inc v Knott Investments Pty Ltd (No 2) [2012] FCA 785 at [128], the intention to take advantage of a reputation itself provides “telling evidence of reputation”.
The consumer surveys
487 As I set out at [261]-[271], Telstra’s consumer surveys conducted tend to show an association in the minds of consumers between the colour yellow and Telstra’s directories. For example, this can be seen in:
(a) the 1995 Research International Survey which concluded that the equity of the Yellow Pages brand rests with two visual symbols namely the colour yellow and the Walking Fingers;
(b) the 1995 Clemenger/Interbrand Pacific Review which stated that the goodwill in the Yellow Pages brand lay in a combination of the Yellow Pages name, the Walking Fingers and the colour yellow;
(c) the 1998 Open Mind Survey which stated that consumers considered the colour yellow to be one of the “constants” about the Yellow Pages branding; and
(d) the 2000 AC Nielsen Report in which 6% of unprompted participants said that they identified the colour yellow with Yellow Pages. Following prompting as to whether they identified the colour yellow with any product or service in connection with telephone directories, 81% of participants identified Yellow Pages directories.
488 For the reasons I have previously expressed, I take a cautious approach to this evidence. There is also some consumer survey evidence which points the other way. Even so, it has some probative value. It tends to confirm other evidence that Telstra had a secondary reputation in the colour yellow in 1996 and 2005.
I. did the respondents intend to deceive?
489 Telstra is not required to establish that the respondents intended to mislead or deceive consumers. Conduct may be misleading or deceptive or likely to mislead or deceive even if the respondents acted reasonably and honestly and did not intend to mislead or deceive: Google Inc v Australian Competition and Consumer Commission (2013) 294 ALR 404 at [9] per French CJ, Crennan and Kiefel JJ. But where a Court finds that a trader intended to deceive it may more readily infer that, in all probability, the intention has been or will be effective: Australian Woollen Mills Ltd v FS Walton & Co Ltd (1937) 58 CLR 641 (“Australian Woollen Mills”) at 657 per Dixon and McTiernan JJ; Campomar at [33]; Bodum at [216]. This is because “the courts have long recognised that traders best know their trade”: Telmak Teleproducts (Aust) Pty Ltd v Coles Myer Limited (1989) 89 ALR 48 at 69 per Wilcox and Einfeld JJ.
490 Telstra strenuously argues that the respondents set out to deceive consumers when they adopted yellow covers in 1996. It contends that Glenn and Adam Hargraves intended to “clone” the features of the Yellow Pages directories, and that the yellow covers that the PDC directories adopted from 1996 were paramount to that aim.
The evidence regarding intention to deceive
491 As I have said, Glenn and Adam Hargraves worked for the USA directory publisher, PDC-USA, in 1992-93. On their return to Australia in 1993 they decided, building on the experience they had gained, to start their own business producing telephone directories. They incorporated PDC as the corporate vehicle for their business venture, and in doing so copied PDC-USA’s name.
492 PDC commenced publishing telephone directories with multi-coloured covers in 1994 in Mackay and in Rockhampton & Gladstone in Queensland, and in Alice Springs and Darwin in the Northern Territory. They used yellow pages for classified listings in the same way as PDC-USA did (and as did Telstra and the BIG directories, amongst other Australian classified directories). This meant the PDC directories had a section with yellow pages and a section with white pages. These were named in the directories as the “Yellow Section” and “White Section” to identify the classified listings and alphabetical listings sections.
493 The evidence shows that the Yellow Pages Trade Marks were well recognised and one of Australia’s most loved brands. The contemporaneous consumer surveys tend to show that directory users saw Yellow Pages directories as official, reliable and accurate and they dominated the market. The respondents’ business struggled in the first two years and they faced an uphill task in persuading advertisers to buy classified listings without being able to establish the likely level of consumer usage or the reliability and accuracy of their directories.
Telstra’s contentions regarding intention to deceive
494 It was against this background that PDC adopted yellow covers and spines on its directories in 1996. Telstra argues that the respondents deliberately adopted yellow covers so as to mislead consumers by creating the impression that they were published by or otherwise associated with Telstra, or so that consumers could not readily distinguish that they did not originate from Telstra. Telstra points to the following matters in support of that conclusion:
(a) admissions made by Glenn and Adam Hargraves;
(b) that Glenn and Adam Hargraves knew that Telstra had acquired a reputation in yellow;
(c) the fact that adoption of yellow covers meant that the PDC directories looked more like Telstra’s directories;
(d) the 1996 Sales Training manual written by Adam Hargraves;
(e) the derivative nature of the respondents’ business model which involved copying;
(f) the adoption of the Local Directories name in 2005 when the respondents expanded into New South Wales;
(g) the refusal to abandon the use of yellow covers in response to Telstra’s complaints;
(h) the conduct of the respondents’ sales representatives in promoting the similarities of the PDC directories to Telstra’s directories; and
(i) the unsatisfactory nature of Glenn and Adam Hargraves’ evidence regarding the move to yellow covers.
I now deal with each of these matters.
The admissions made by Glenn and Adam Hargraves
495 Adam Hargraves said that the PDC directories struggled to achieve credibility in the market in the first two years. Glenn Hargraves conceded that the respondents adopted yellow covers in part to help in demonstrating that their directories were orthodox and official. This points in favour of the inference for which Telstra contends.
Adam and Glenn Hargraves knew that Telstra had acquired a reputation in the colour yellow in connection with its Yellow Pages directories
496 Glenn Hargraves accepted that Telstra had a substantial reputation in the colour yellow, and Adam Hargraves knew that Telstra’s yellow phone books were familiar to the general public and thought that yellow was an essential part of Telstra’s get up. These matters also point towards the inference for which Telstra contends.
The decision to adopt yellow covers meant that the respondents’ directories looked more similar to the Yellow Pages directories
497 The adoption of yellow covers made the PDC directories more similar in appearance to Telstra’s directories. That fact is capable of supporting the inference for which Telstra contends.
The sales training manual written by Adam Hargraves
498 Telstra relies on a sales training manual written by Adam Hargraves (“1996 Sales Manual”). There is a dispute as to the date upon which the manual was written but I accept Adam Hargraves’ evidence that he wrote it in 1996. In fact, little turns on whether it was written then, or a year or so earlier or later. The evidence shows that later sales training manuals came into operation in 1999 and in 2008. The later sales training manuals are different to the 1996 Sales Manual, and in my view are quite unremarkable. They provide no cogent basis for an inference that the respondents intended to deceive.
499 Telstra relies on statements in the 1996 Sales Manual to the effect that the PDC directories had “cloning features” including the “Yellow Section” and the “White Section” which existed so that the PDC directories would be “familiar at a glance”. The manual stated that the PDC directories would strip “Yellow Pages of its uniqueness” so that “when the prospective client thinks Yellow Pages you want him to think of two possibilities”.
500 The 1996 Sales Manual is unfortunately worded, which gave me cause for concern. But having closely reviewed the manual I consider Telstra’s reliance on it to be selective and overstated.
501 Firstly, while the manual described PDC directories as embracing the “yellow page” concept “meticulously” and set out a number of “cloning features”, it did not at any point describe the use of yellow covers as such a feature. As Adam Hargraves said, if yellow covers was one of the important “cloning features” it would have been mentioned.
502 Secondly, while the term “cloning” carries a connotation of copying, the manual read as a whole does not indicate that the respondents copied Telstra’s get up. It indicates little more than that the respondents sought to improve consumers’ perception of the orthodoxy or legitimacy of their directories through use of the ordinary features of such directories. Under the heading “Cloning” the manual stated:
The prospective client must first recognise that PDC produces genuine telephone directories, not ‘business directories’ or ‘community diaries’. Build credibility in the product by demonstrating the PDC directories are orthodox and official.
This is best achieved by explaining to the prospective client that minimal public education is required to demonstrate, have them examine one of our current phone directories and use it to find a service. The prospective client will naturally observe that the PDC directory is familiar at a glance.
They will discover that the ‘yellow page’ concept is embraced meticulously in PDC directories. Emphasise that no instructions were required before the client used and found the particular service.
503 Under the heading “Cloning Features” various features are set out, which are just features that a directory user would expect in any telephone directory. I can see nothing illegitimate in the use of such features, and I reiterate that there is no reference to yellow covers as such a feature. Nor do I see anything illegitimate in describing the PDC directories’ classified listings as the Yellow Section and its alphabetical listings as the White Section. Having earlier decided to use yellow coloured pages for the classified listings section (about which Telstra does not complain) it was reasonable for the respondents to use the term Yellow Section to describe it.
504 Contrary to Telstra’s contentions, in my opinion, the 1996 Sales Manual indicates that the respondents sought to differentiate their directories from Telstra’s products rather than to trade on their similarities. Under the heading “Building On Differences” the manual stated:
Building on the differences between Yellow Pages and PDC is merely giving the prospective client a reason to buy. In other words the benefits of advertising with PDC far outweigh those of the Yellow Pages.
505 The manual then set out some of the purported differences in the PDC directories which the respondents’ sales representatives were trained to point out to prospective advertisers. They included that the PDC directories:
(a) were more compact, easy to use and easy to store;
(b) contained a comprehensive and up-to-date full colour street directory which could be easily stored in the car;
(c) contained a comprehensive alphabetical fax directory;
(d) were more durable than Telstra’s directories because the covers are thicker and specially coated with a UV varnish; and
(e) were focused around market areas as opposed to area codes so that businesses could focus their advertising budget specifically to the area that they draw clientele from. The advantage of this was said to be that businesses would not be paying the costs of a directory for an area that they did not draw business from.
This strongly points away from an intention to deceive.
506 The evidence of the training conducted by the respondents’ senior officers and executives, and the evidence of 35 PDC sales representatives (set out at [360]-[374]) also indicates that at all times since the respondents first published their directories they have sought to differentiate their directories from Telstra’s directories.
507 The 1996 Sales Manual provides little support for an inference that the respondents set out to deceive consumers when they adopted yellow covers.
The derivative nature of the respondents’ business model
508 Telstra contends that the respondents’ business model was derivative and involved copying from other businesses. It argues that they:
(a) copied their name from PDC-USA;
(b) copied data from Telstra; and
(c) published a directory in New Zealand based on the New Zealand Yellow Pages.
509 I attach no significance to the fact that the respondents incorporated under the same name as a USA corporation which does not trade here. Nor is there any evidence that PDC-USA has any concern in relation to that use.
510 I also attach little significance to the respondents’ admission that they copied data from Telstra, in circumstances where Telstra did not own that data.
511 Finally, I do not consider that the evidence regarding the respondents’ attempt to publish a directory in New Zealand supports an inference that they set out to deceive consumers in Australia. The respondents’ unsuccessful foray into New Zealand in 1996 tends to show that they did not choose the colour yellow so as to copy. In a letter written on behalf of the respondents to Telecom New Zealand on 1 July 1996, the respondents said that:
…the colour yellow is associated in the public mind as being a business directory source; especially when the product itself is a business directory. We deny that Telecom has a proprietary right to the colour yellow.
It appears that the respondents took the same position as they do in the present case, but faced with expensive legal proceedings as they were, the respondents agreed not to use yellow pages or covers in New Zealand.
512 The various matters to which Telstra points show only that the respondents were not original thinkers and the features of their directories were not new ideas. Little turns on that.
The adoption of “Local Directories” name in 2005 when the respondents expanded their operations into New South Wales
513 It is uncontentious that from July 2005 the respondents began to use the name “Local Directories” instead of “PDC Directories”. Mr Stoten deposed that this branding was used in all directories published from 2005, coinciding with the expansion into the New South Wales market. That was the only significant change to the branding at the time.
514 Both Mr Stoten and Glenn Hargraves deposed that initially there was some small variation in the way the name was used. For example the first PDC directory published with the Local Directories name was the Cairns 2005/2006 directory which was branded “PDC Local Directories” to reflect the fact that in Queensland at that time PDC was still the publisher of the directory. But, as Glenn Hargraves deposed, from 2006 all PDC directories used the LD Name and Logo standing alone.
515 Mr Wilkin deposed that moving to the name Local Directories was his suggestion and that it was accepted by Glenn Hargraves and Mr Stoten in favour of a number of alternative names put forward by Mr Stoten. He deposed that it was chosen for two main reasons. Firstly, it was consistent with the respondents’ practice of publishing directories with a local focus which covered a smaller geographical area than the corresponding Telstra regional directories. Secondly, it captured an existing tendency amongst consumers to refer to the respondents’ directories as “Local Directories”. Mr Wilkin deposed that customers would often say to him words to the effect of “you are the guy from the local directories”. Glenn Hargraves deposed to similar conversations. I accept this evidence.
516 Telstra describes “Local Directories” as a wholly descriptive name and argues that the 2005 rebranding, in combination with the existing yellow covers, meant that the PDC directories were not properly differentiated from Telstra’s directories. It argues for the inference that the respondents set out to deceive in 1996, and maintained that intent through the change to the LD Name and Logo in 2005.
517 I do not agree. There is little or no cogent evidence that the respondents’ adoption of the LD Name and Logo was intended to deceive consumers. I accept the evidence of Mr Stoten, Mr Wilkin and Glenn Hargraves that the Local Directories name was chosen because:
(a) it reflected the local areas that they targeted;
(b) it accentuated an important difference between their directories and Telstra’s directories; and
(c) it leveraged off an existing tendency among consumers to refer to the respondents’ business and directories as Local Directories.
It was only natural that the respondents would seek to take advantage of their directories’ position in the market through such a name.
518 In my opinion the stylised LD Name and Logo, coupled with other differences to which I have referred, operated to properly distinguish the PDC directories. I can see no basis for an inference that when they moved to the LD Name and Logo and continued their pre-existing use of yellow covers the respondents set out to deceive consumers.
The refusal to abandon the use of yellow covers in response to Telstra’s complaints, although prepared to abandon other trade indicia
519 As Telstra contends, the evidence shows that following complaints by Telstra the respondents were prepared to cease:
(a) using the walking fingers device which was part of the YPA logo;
(b) listing Sensis out of alphabetical order in the “General Enquiries” section; and
(c) using the red highlighting in their Quick Find Index;
but they were not prepared to cease using yellow covers. I accept that this shows that yellow covers were important to the respondents.
520 But I do not accept that it shows an intention to deceive when they adopted them in 1996, nor that it shows such an intention in 2005 when the respondents retained yellow covers and transitioned to the LD Name and Logo.
521 The evidence shows that having used yellow covers for 10 years from 1996 and having distributed over seven million yellow covered directories, without complaint by Telstra, the respondents considered yellow to be part of their get up. Their reasons for not wishing to change the colour of their directories at that point were commercial and pragmatic. I accept Adam Hargraves’ evidence that he did not consider that consumers were confused, and he believed that consumers would query a colour change after many years of trading with that colour. Indeed it would have been surprising for the respondents to agree to abandon a long-standing part of their get up after 10 years of successful use. I do not infer from the respondents’ refusal to abandon yellow covers that they intended to deceive consumers when they adopted them, or when they continued to use yellow covers from 2005.
The conduct of the respondents’ sales consultants in promoting to prospective advertisers that directory users would be unable to distinguish the PDC directories from Yellow Pages directories
522 I dealt with Ms Lock’s evidence at [245]-[247] and I gave it little weight. But even if I accepted her evidence, there is no evidence of any widespread practice in that regard. The unchallenged evidence of the PDC sales representatives as to their training and conduct strongly indicates otherwise. This provides no support for the inference that the respondents set out to deceive.
Glenn and Adam Hargraves’ evidence regarding the adoption of yellow covers
523 The proceeding was commenced by Telstra in April 2007 and was initially listed for trial on all issues in November 2008. In advance of that trial Adam Hargraves swore affidavits dated 10 October and 10 November 2008 and Glenn Hargraves swore an affidavit dated 10 November 2008. Although, as Telstra contends, the use of yellow covers was always an issue in the proceeding, neither Glenn nor Adam Hargraves explained the 1996 decision to adopt yellow covers in their affidavits. Nor did any other witness.
524 Glenn Hargraves swore a further affidavit on 23 April 2012 in which he set out an explanation for the 1996 adoption of yellow covers. He said:
I decided it was time to create a new, more consistent and a cleaner look for the covers. I decided to use photographs of the local area, combined with yellow as the predominant colour for the top and bottom of the photo and the spine of the directory. I had seen this type of look in many of the directories I had seen in the US.
No other evidence was filed on that issue.
525 At the trial Adam Hargraves gave evidence before Glenn Hargraves. In cross-examination he gave a more detailed explanation, which Telstra contends is quite different to Glenn Hargraves’ affidavit. He said:
The problem with doing covers like this [the 1995 Mackay and Darwin directory covers] is that every time we got a photograph from one of the photographers, local photographers that we used, we had to change the font to contrast correctly with the photograph, the colour of the photograph or the predominant tone in the photograph. And these graphic elements that we were coming up with, like, in this case is a palm tree, in the Mackay one it was a plane that we used, there was a lot of creativity – as old fashioned as that looks, there was a lot of creativity and effort that went into producing that. And the idea of coming up with a frame was to get some consistency, because we were expanding into a lot of different areas around Queensland and the Northern Territory and we saw ourselves back in those days expanding to all regional areas where we felt that we could release a product like this. And it was uniform, it was easy, it was just about dropping a photograph in and we would have a template, and so it was an effort to standardise and to turn our production into a sausage factory machine and make it more efficient. The use of the colour yellow was because the majority of our phone books…contained yellow paper. It seemed a natural choice because it was an industry colour and it was the paying section of our book. That’s the history. (Emphasis added.)
526 He gave evidence that the decision to commence using yellow covers:
Just seemed like a natural thing to do, given that this is our industry, and yellow is a big part of it, and I certainly hadn’t seen anything negative in my time in the States. It was not a controversial point. We had independent companies competing with state-owned utilities, or using not only the colour yellow on the covers and inside, but also the walking fingers device.
527 When Glenn Hargraves was cross-examined he moved away from his statement that he had made the decision to adopt yellow covers. He accepted that it was Adam who had done so.
528 Telstra strongly attacks the testimony of Glenn and Adam Hargraves as a recent invention. It contends that Adam and Glenn Hargraves gave deliberately untruthful evidence about the decision to adopt yellow covers because they realised truthful evidence would implicate them in misleading or deceptive conduct and passing off.
529 I was troubled by the fact that, having sworn an affidavit in April 2012 that it was his decision to move to yellow covers, Glenn Hargraves changed his evidence and accepted that it was Adam Hargraves who had done so. However, at the time little would have turned on whether it was his or Adam Hargraves’ idea. I accept his evidence that he found it hard to recall now, 16 years after the event. In the finish little turns on whether he or Adam Hargraves made the decision, and it is most likely that both were involved in the decision.
530 I was also concerned by the delay in Glenn and Adam Hargraves’ explanation of their reasons for adopting yellow covers and the inconsistencies in their account. This caused me to give careful thought to the reliability of their evidence. But having reflected on the evidence I have concluded that, in the main, Glenn and Adam Hargraves gave reliable evidence. As I have said, they gave their evidence thoughtfully, made concessions against interest, accepted that it was possible that some consumers were confused or misled by their directories, and gave a rational and plausible account.
531 I also reached the view in respect of Adam Hargraves that having endured a divorce, a criminal investigation for tax fraud, criminal charges, a criminal trial and appeal and then incarceration, and having ceased his active involvement in the day-to-day operations of PDC’s business between about January 2000 and October 2007, that these civil proceedings were not centrally important to him. Although not a significant factor in my conclusion as to the reliability of his evidence, this tended to increase my confidence in his testimony.
532 However, I am not satisfied that they gave a full account of their reasons for the adoption of yellow covers in 1996.
Consideration regarding intention to deceive
533 On my view of the evidence three main reasons lay behind Glenn and Adam Hargraves’ decision to move to yellow covers.
534 Firstly, their experience working for PDC-USA taught them that yellow pages and yellow covers were widely used (and apparently successfully) in classified directories in the United States. They also knew that, in Australia, Telstra’s directories and the BIG directories which were published around Australia used yellow pages for their classified listings, also apparently successfully. They considered that yellow was the “natural choice” for the covers of PDC’s directories. Adam Hargraves said, and I accept, that they wanted their directories to look more like a telephone book. It would do so if it was coloured yellow.
535 Secondly, I accept:
(a) Glenn Hargraves testimony that he saw some benefits in having a “more consistent and a cleaner look” on their directory covers; and
(b) Adam Hargraves testimony that a more “consistent”, “uniform” and “standardised” look to their directory covers would give rise to savings and some creative advantages for PDC.
536 I am not satisfied that Adam Hargraves’ evidence was a recent invention. His explanation at trial about the need for “consistent”, “uniform” and “standardised” covers roughly accords with Glenn Hargraves’ affidavit in April 2012 that he wanted to create a “more consistent and a cleaner look” for the covers. This tends to show that Adam Hargraves’ account was not recently invented. I also accept that Adam Hargraves’ failure to provide a timely explanation for the adoption of yellow covers was partly explained by the fact that he endured the hardships to which I have referred. Given everything else he was going through it is unlikely that he was particularly focused on his evidence in civil proceedings.
537 Telstra argues, and I accept, that once Glenn and Adam Hargraves decided on “consistent” or “uniform” coloured covers they could have chosen any of a myriad of colours. There are many Australian third-party directories that do not use yellow covers. But I am satisfied by the evidence of Mr Harvy and Mr Moule as to the recognition of yellow as a standard colour for directories, the widespread use of yellow pages and covers in international directories, the widespread use of yellow pages in directories in Australia by that time, and the evidence of Glenn and Adam Hargraves, that the respondents legitimately saw yellow as the natural choice for their directories. Once the respondents made their decision to move away from multi-coloured covers to a “consistent” or “uniform” look, yellow was the natural choice.
538 However I do not accept Glenn and Adam Hargraves’ evidence that they had no regard to Telstra’s use of yellow covers when they decided to adopt yellow covers on the PDC directories. In all the circumstances I see that evidence as implausible. In my view the third reason for the respondents’ adoption of yellow covers was their desire to attract some of the legitimacy of yellow as an element of Telstra’s get up. The evidence tends to show that Glenn and Adam Hargraves:
(a) understood that using yellow covers would make their directories look more similar to Telstra’s directories;
(b) thought that the colour yellow was an essential part of Telstra’s get up, and understood that Telstra had a substantial reputation in yellow; and
(c) believed that yellow covers would make their directories more orthodox and official in appearance.
In part the respondents took yellow from the get up of Telstra’s directories in an effort to attract the legitimacy that might bring to its directories.
539 Experience teaches that it is far from unusual for a new entrant to a market to attempt through packaging, use of colour, or use of other trade indicia to attract some of the familiarity that consumers have in the products of the market leader. As Mr Weissenberg said:
The first brand that comes into the marketplace and establishes the category sets the tonality for everyone else and, you know, they follow in terms of packaging, in terms of colour use, etc. That is quite a common thing.
But that is not the same thing as setting out to deceive.
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.
541 In my view the various matters to which Telstra points are insufficient for the conclusion that the respondents set out to deceive consumers. I am confirmed in this view by other evidence.
542 Firstly, I accept Adam Hargraves’ evidence that the respondents did not intend PDC’s directories to be “easily mistaken” for Telstra’s products, only that he wanted the respondents’ directories to look like legitimate telephone books. I also accept his denial that he and Glenn Hargraves adopted yellow covers in order to deceive consumers. He testified, and I accept:
I certainly didn’t do it to, in some sneaky way, be considered to be a Telstra product, and I didn’t think you would have that effect…
543 Secondly, I accept the unchallenged evidence of the sales representatives that they were trained to focus on the differences between the competing directories and the advantages of PDC’s offering, and that they in fact focused on the differences in their sales pitch to advertisers.
544 Thirdly, the absence of an intention to deceive can be seen in the get-up of the respondents’ directories in 1996. In my view the get-up of the PDC directories in 1996 is quite different to the get-up of Telstra’s directories.
545 I set out at [143]-[144] the images of the front and back covers of the PDC 1996 Rockhampton and Mackay directories and Telstra’s corresponding 1996 Rockhampton, Gladstone, Mackay, Whitsundays, Emerald and Longreach Districts co-bound directory. The differences at that time included that:
(a) the PDC directories had a large local photograph occupying most of the front cover and Telstra’s directories did not;
(b) Telstra’s directories prominently carried the Yellow Pages Trade Mark including a large Walking Fingers, and the PDC directories did not;
(c) the PDC directories carried the PDC Name and Logo and Telstra’s directories did not;
(d) the PDC directories were more compact in size, only covered the local area, and the cover promoted that it contained street maps as an extra feature; and
(e) the back cover of the PDC directories was an advertisement whereas the “flip” cover of Telstra’s directory was the White Pages.
The “flip” cover with White Pages branding had a local photograph but the cover was clothed in blue, not yellow.
546 It is noteworthy that Telstra no longer alleges that the publication of these directories was misleading or deceptive. Telstra’s decision to abandon that claim was wise.
547 Insofar as Telstra alleges that the respondents intended to deceive consumers in 2005 when they moved to the LD Name and Logo and maintained the yellow covers, I have the same view. I set out at [150] the front cover of the 2005/2006 PDC Alice Springs directory and Telstra’s corresponding co-bound 2005-06 Northern Territory directory.
548 In my view, the get-up of the PDC directories at that time remained quite different to the get-up of Telstra’s directories, even though Telstra had brought the appearance of its Yellow Pages directories closer through the use of large photographs.
549 From 2006 the respondents used a more distinctive LD Name and Logo. I reproduce below the front cover of the PDC 2006/2007 Coffs Harbour & Grafton directory and Telstra’s corresponding co-bound 2006/2007 directory for Ballina, Casino, Coffs Harbour, Grafton, Lismore and Murwillumbah.
550 I am not satisfied that the respondents intended to deceive consumers in 1996 or in 2005.
551 I note in passing that I see Telstra’s attack on the respondents’ 1996 decision to adopt yellow covers as inconsistent with their conduct at the time. The evidence shows that Telstra was well aware between 1996 and 2005 that the respondents were publishing yellow covered directories and enjoying a deal of success. Telstra was concerned about PDC’s emergence as a competitor yet it made no complaint about their use of yellow covers until July 2006.
552 While it is of no real significance to my decision, I infer that at the time Telstra did not consider that the respondents’ use of yellow covers was misleading or deceptive. In my view it is likely that Telstra belatedly moved to attack the respondents’ use of yellow covers because of its commercial concerns rather than because the respondents’ yellow covered directories had suddenly become misleading. The evidence tends to show that Telstra largely moved to attack the respondents’ use of yellow covers because the respondents had moved into New South Wales, one of its largest markets. But nothing turns on that.
Failed Intention to Deceive
553 It must also be borne in mind that conduct engaged in with an intent to deceive may nevertheless fail in its purpose: S & I Publishing at 588. In the circumstances of the present case, even if I was satisfied that the respondents intended to deceive I would conclude that this intent was not fulfilled. I do not reach that conclusion lightly as “when a dishonest trader fashions and implements a weapon for the purpose of misleading potential customers it at least provides a reliable and expert opinion on the question whether what is done is in fact likely to deceive”: Australian Woollen Mills at 657.
554 But such an expert opinion must be weighed with the other evidence. As the Full Court explained in Windsor Smith Pty Ltd v Dr Martens Australia Pty Ltd (2000) 49 IPR 286 (“Dr Martens Appeal”) at [33] per Sundberg, Emmett and Hely JJ, even a deliberate copy of a competitor’s get up:
…is simply one piece of evidence to be assessed with such other evidence as may be adduced on the issue. In some circumstances, proof of an intention to mislead may readily lead to an inference of the likelihood of deception. In other circumstances an intention to mislead may lead nowhere: the intention may simply miscarry.
See also: REA Group Ltd v Real Estate 1 Ltd [2013] FCA 559 at [212] per Bromberg J and Vendor Advocacy Australia Pty Ltd v Seitanidis [2013] FCA 971 [200] per Middleton J.
555 In the present case, I consider that if the respondents intended to deceive consumers their intent miscarried.
J. The Likelihood that Consumers were Misled
556 Telstra relies on the following categories of evidence to indicate a likelihood that a significant proportion of consumers in the target section of the public were misled, namely:
(a) the viva voce evidence of directory user confusion;
(b) the viva voce evidence of misleading conduct to directory advertisers through PDC sales representatives;
(c) the viva voce evidence that directory advertisers were confused;
(d) the evidence of consumer confusion in the contemporaneous consumer surveys;
(e) the Bartley Survey; and
(f) concessions made by Glenn and Adam Hargraves.
557 I have already dealt with this evidence in detail and it suffices to shortly reiterate my views. I consider the evidence falls well short of establishing that the hypothetical ordinary or reasonable directory user or directory advertiser was misled or deceived, or was likely to be misled or deceived. Put another way, Telstra failed to establish that a significant proportion of the classes of directory users or advertisers would have suffered from a misconception that the PDC directories were published by or associated with Telstra or its directories.
The viva voce evidence of directory user confusion
558 Telstra adduced evidence from two directory users namely Dr Carlyle and Ms Robertson, and provided second-hand accounts of confusion amongst directory users through Mr Mays, Ms Parsons and Mr Lyon. As I have said at [185]-[203], I attach little probative value to that evidence and I see it as weak, second-hand and impossible to adequately probe or unpack. Further, even in the event that some users suffered the relevant misconception, it is likely that for many of them that was because they made the erroneous assumption that all directories were associated with Telstra. Such an assumption does not arise in consequence of the respondents’ conduct.
The viva voce evidence of misleading conduct to directory advertisers through PDC sales representatives
559 Telstra adduced some evidence that the respondents’ sales representatives acted in a misleading way. They did this through the first-hand accounts of Ms Lock, Mr Swinbourne, Ms Bolewski, and through Mr Brown’s second-hand account of advertisers’ complaints. I dealt with this evidence at [257]-[260] and I will not set it out again. It is of little probative value. Even if I accepted Mr Brown’s account of the complaints by numerous unidentified directory advertisers, all of them were in the same region and all apparently understood that the respondents offered a rival directory to Telstra’s directory. This can be seen in the fact that they telephoned Mr Brown to discuss advertising in the Yellow Pages.
560 I prefer the detailed and unchallenged evidence of Mr McCurdy and the other PDC executives who provided training, and in particular the evidence of 35 PDC sales representatives as to their practices in selling advertising space to advertisers over many years and throughout the Identified Regions.
561 I must accept the possibility that there were some instances of misleading conduct by PDC sales representatives who were paid on commission but I am not satisfied that there was any widespread practice by them in which:
(a) they introduced themselves to consumers as being from Yellow Pages, Local Yellow Pages, Community Yellow Pages or Sensis;
(b) they advised prospective advertisers that directory users would not be able tell the difference between the rival directories and that the advertiser should therefore advertise in both; or
(c) they sought to pass themselves off as representing Telstra or its directories.
The viva voce evidence that directory advertisers were confused
562 Sensis account executives, Mr Owen, Ms Parsons, Mr Hodgson, Mr Brown, Mr Lyon and Mr Millroy gave second-hand accounts that directory advertisers were confused as to the trade source of the PDC directories. I dealt with that evidence at [204]-[243] and I give it little or no weight.
563 I consider it quite unlikely that a significant proportion of directory advertisers suffered the misconception that the PDC directories were published by or associated with Telstra given:
(a) the respondents’ sales canvass process;
(b) the respondents’ marketing campaigns before and during the sales canvass;
(c) the fact that the respondents’ sales representatives wore company-branded attire and introduced themselves as being from Local Directories;
(d) the sales representatives’ focus on differentiating the PDC directories from Telstra’s directories in their sales pitch; and
(e) the likelihood that, because they were being asked to purchase an expensive service, and that decision often involved a choice between the PDC directories and the well-recognised Yellow Pages directories, they would have paid close attention to the appearance and content of the PDC directories.
The viva voce evidence has little utility
564 Even if I accept the viva voce evidence that directory users and/or directory advertisers were confused as to the origin of the PDC directories, the isolated examples put forward by Telstra are of little assistance in relation to whether a significant proportion of the two classes were misled by the respondents’ conduct: National Exchange at [23] per Dowsett J. The evidence shows that Telstra looked hard for instances of directory users and advertisers who were misled or confused as to the origin of the PDC directories, including by making “trap” telephone calls. However, it adduced firsthand evidence of very few and comparatively few second-hand accounts. The examples given stand in contrast to the many millions of impugned directories published by the respondents since 2005 and the tens of millions of sales contracts that must have been made between advertisers and PDC.
565 As French J said in State Government Insurance Corp v Government Insurance Office of New South Wales (1991) 21 IPR 65 (“State Government Insurance”) at 84:
Generally speaking … evidence from consumers that they have been misled by the impugned conduct is of limited utility. It has no statistical significance and the court cannot draw inferences from it that any section or fraction of the population will have similar reactions. But if the inference is open, independently of such testimonial evidence, that the conduct is misleading or deceptive or likely to mislead or deceive, then it may be that the evidence of consumers that they have been misled can strengthen that inference. (Emphasis added.)
566 As Franki J said in Taco Bell at 202:
[E]vidence that some person has in fact formed an erroneous conclusion is admissible and may be persuasive but is not essential. Such evidence does not itself conclusively establish that conduct is misleading or deceptive or likely to mislead or deceive. The court must determine that question for itself. The test is objective. (Emphasis added. Citations omitted.)
The relevant enquiry is by reference to a hypothetical ordinary or reasonable member of the class, the test is objective, and proof of actual deception is no substitute for the Court’s exercise of independent judgment.
The evidence of consumer confusion in the contemporaneous consumer surveys
567 Telstra relies on contemporaneous consumer surveys and reports as showing a likelihood that advertisers and directory users are or were misled by the appearance of the respondents’ directories. Amongst others it relies on:
(a) the 1997 Competitive Strategy Report;
(b) the 1999 Rockhampton/Mackay report;
(c) the May 2004 TNS Report; and
(d) the 2006 Competitive Strategy Report.
568 I dealt with this evidence at [272]-[290] and I will not go through it again. In broad summary, the surveys tend to show that those directory users who chose to use the PDC directories largely did so because they:
(a) they had a more local “feel” because of the large local photograph on the cover;
(b) were instantly recognisable because of the local photograph;
(c) were smaller and less cumbersome than Telstra’s directories;
(d) were more convenient to use and less time-consuming because they were more local and contained fewer irrelevant listings;
(e) included high-quality street maps which, together with their compact size, made them suitable for use in the car, whereas Telstra’s directories were not; and
(f) had larger and easier to read print and a better layout than Telstra’s directories.
569 The surveys also tend to show that those directory advertisers who chose to advertise in the PDC directories largely did so because they:
(a) were of superior quality, used better quality paper, had better process colour, and had a better and more spacious page layout than Telstra’s directories;
(b) offered geographical coverage which often more closely met the advertisers’ needs;
(c) offered cheaper advertising rates; and
(d) had the various advantages for directory users set out above (which made it likely that directory users would decide to use the PDC directories instead or as well as Telstra’s directories).
They advertised in the PDC directories because it made commercial sense to do so, and many advertised in both directories.
570 The consumer surveys do not indicate a likelihood that a significant proportion of directory users or advertisers in the target classes suffered from a misconception that the PDC directories originated from or were associated with Telstra. In fact, they tend to show that many directory users and advertisers saw real differences in the appearance of the rival directories, and real advantages in PDC’s offering.
The Bartley Survey
571 Telstra seeks to rely on the finding in the Bartley Survey that 16% of the participants thought that the PDC directory they were shown was produced by or associated with Telstra. But as I set out at [291]-[332], I have real doubts about the survey methodology and I give it little weight.
Concessions made by Glenn and Adam Hargraves
572 Telstra relies upon concessions by Glenn and Adam Hargraves that some consumers may have been misled. For example, Adam Hargraves said that he was unwilling to “rule out” that a person who glanced at a PDC directory might think it was associated with Telstra and he accepted that there might be consumers who could get it wrong. He seemed to concede that there may have been some initial confusion in the marketplace when he said “I think whatever confusion was at the beginning because our budget was a lot leaner. There would be so much less confusion now, because we splash it.”
573 Glenn Hargraves conceded that “initially, maybe” some people just looking at the front cover of the Coffs Harbour PDC directory might have mistaken it for being a Telstra directory, and that he was aware of “some cases” where people made such a mistake.
574 In my view these concessions must relate to directory users rather than advertisers. I say this because the interaction of advertisers with the PDC directories involved much more than these descriptions. Telstra overstates the probative value of Glenn and Adam Hargraves’ concessions in relation to directory users. Adam Hargraves’ concession that there may have been some initial confusion in the marketplace is of no real significance. Telstra’s claim of misleading or deceptive conduct does not commence to run until June 2005, and that concession (as far as it went) related to the respondents’ conduct in or about 1996. The thrust of his evidence was that the respondents’ practices in 2005 were quite different to those in 1996.
575 Further, the question is not whether a directory user might get it wrong “at a glance” as some fleeting confusion of that type is not enough to establish a breach of s 52. The thrust of Adam Hargraves evidence was that:
So for the majority, I don’t think people are that thick up there that they couldn’t work out that it was a different product from a different company, but, yes, there could be people out there that would get it wrong.
I agree. Their evidence that there might be (or were) some directory users who were confused as to the origin of PDC’s directories was a sensible concession. But it does not show a likelihood that a significant proportion of that class may have been misled. Nor does it show that the confusion arose because of the respondents’ conduct. As I have said, some consumers are likely to have made the erroneous assumption that all directories were associated with Telstra.
576 Of course, the position for advertisers was quite different to that of directory users. They were called on to make a decision about an expensive purchase which typically involved careful consideration of the appearance and content of the PDC directories.
577 As Mr Weissenberg said, directory users are likely to be focused on functionality more than branding. The contemporaneous surveys tend to show that directory users saw real advantages in the functionality of the PDC directories and understood the difference between them.
K. Did the respondents do enough to distinguish their directories
578 The primary question in the case is whether, having adopted an element of the get up known to be associated in the minds of consumers with the Yellow Pages directories, the respondents have “done enough having regard to the relevant differentiation factors to distinguish its rival product” from the Yellow Pages directories, such that it cannot be said that consumers are misled or deceived: Bodum at [198] per Greenwood J with Tracey J agreeing.
579 The question whether the respondents have “done enough” to distinguish their directories is not to be undertaken by way of side by side analysis of the directories, but from the perspective of the hypothetical ordinary or reasonable directory user or advertiser confronted with one of the PDC directories in the Identified Regions.
The relevance of the strength of Telstra’s reputation
580 In deciding whether the respondents’ conduct was misleading or deceptive (or likely to be so) the Court must have regard to the strength of any reputation that Telstra had acquired in the yellow covers of its directories. As Heerey J explained in Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shop Pty Ltd (No 8) 75 IPR 557 (“Cadbury Trial”) at [57]:
…The more extensive a plaintiff’s reputation, the easier it will be to show that any contrary message that might be conveyed to consumers by third-party usage can be discounted. Conversely, knowledge of third-party usage can impact on the likelihood or otherwise of consumers being misled or deceived. The hypothetical reasonable chocolate consumer could think along these lines:
Purple makes me think of Cadbury chocolate. But I know that other chocolate makers’ products such as Violet Crumble use purple. So Cadbury does not have a monopoly in the use of purple for chocolate. Seeing chocolate in a purple wrapper with Darrell Lea’s name on it in a Darrell Lea shop does not makes me think it comes from Cadbury.
581 For the reasons I express at [466]-[488], I do not consider that Telstra acquired a strong reputation in yellow, viewed in isolation.
582 The respondents were therefore not required to do as much to distinguish their directories. However, my view in this regard is not significant to the result. Even if Telstra had acquired a strong reputation in yellow by 1996 or 2005, having regard to all the differences, I consider the respondents did enough to distinguish their directories.
The relevance of the use of common trade indicia
583 In deciding whether the respondents’ conduct breached s 52 it is necessary to inquire why any proven misconception has arisen: Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 (“Hornsby”) at 228 per Stephen J with Jacobs J agreeing; Taco Bell at 203 per Deane and Fitzgerald JJ. In cases regarding the alleged taking of a competitor’s trade indicia it is necessary to understand whether (or to what extent) any misconception suffered by consumers arises through the applicant’s use of common or descriptive trade indicia.
584 As Lord Simonds said in Office Cleaning Services Ltd v Westminster Window & General Cleaners Ltd (1946) 63 RPC 39 at 42:
[W]here a trader adopts words in common use for his trade name, some risk of confusion is inevitable. But that risk must be run unless the first user is allowed unfairly to monopolise the words. The court will accept comparatively small differences as sufficient to avert confusion. A greater degree of discrimination may fairly be expected from the public where a trade name consists wholly or in part of words descriptive of the articles to be sold or the services to be rendered.
And as his Lordship said at 43:
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.
585 In Hornsby, Sydney Building Information Centre, had been trading under that name for more than 20 years, and Stephens J accepted that there been some instances of confusion with the newly named Hornsby Building Information Centre. In an often quoted passage his Honour 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.
…
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. (Citations omitted and emphasis added.)
See also Connect.Com.Au Pty Ltd v GoConnect Australia Pty Ltd (2000) 50 IPR 535 at [61] per Emmett J.
586 While these authorities relate to the use of common or descriptive words as a trade name, the same principles must apply in relation to the use of other common trade indicia.
587 Yellow is a primary colour in common usage, and consumers can be taken to be aware that many directory providers will want to use such a bright and attractive colour on their products. This is even more the case when many consumers are likely to see yellow as a standard colour for classified directories.
588 In using a single primary colour to signify its directories Telstra must accept that small differences in the get up of other traders using yellow will render them immune from action. Otherwise, to paraphrase Stephens J in Hornsby, s 52 becomes an instrument for the creation of a monopoly in the use of a primary colour. Telstra was unable to take me to any authority where exclusive right to the use of a single colour had been secured in reliance upon rights under s 52 or the principles of passing off.
589 While I consider the respondents were therefore not required to do much in order to distinguish their directories, that view is not material to my decision. Even if Telstra’s use of the colour yellow is not treated as being use of common trade indicia I am satisfied that the PDC directories were properly distinguished from Telstra’s directories.
The differentiation of the PDC directories
590 Although they used yellow on their covers, and consumers associated yellow with Telstra to an extent, the PDC directories were properly differentiated from the corresponding Telstra directories. It is not a question for side-by-side comparison but the differences are obvious and may be listed as follows:
(a) Telstra’s directories prominently carried the Yellow Pages Trade Marks including the Walking Fingers, and the PDC directories did not;
(b) Telstra’s directories contained a White Pages directory co-bound with the Yellow Pages directory and were separately branded with the White Pages trade mark, and the PDC directories were not;
(c) Telstra’s directories were partly coloured in yellow for the Yellow Pages, and partly in blue for the White Pages, whereas the PDC directories only used yellow;
(d) the PDC directories carried the LD Name and Logo and Telstra’s directories did not;
(e) the PDC directories had a single large photograph of a local landmark occupying most of the front cover whereas the Telstra directory had a quite different cover design, and used stock photographs; and
(f) the PDC directories covered only the local area;
(g) the PDC directories were physically smaller; and
(h) the PDC directories contained a high quality street map (which was promoted on the cover).
The covers of the PDC directories
591 Items (a) to (e) of the above list relate to the appearance of the covers of the PDC directories. I have already set out the appearance of the PDC directories in the period 1996 to 2005, and set out my view that they were well-differentiated from Telstra’s directories in that period. Telstra does not plead otherwise.
592 The situation is not materially different in the period 2005 to trial. Again, while accepting that a side-by-side comparison is inappropriate, I reproduce below examples of the front covers of four directories for four different years in this period, namely, 2005/2006, 2007/2008, 2011/2012 and 2012/2013:
(a) the 2005/2006 PDC Darwin directory and Telstra’s corresponding 2005-06 co-bound directory for the Northern Territory;
(b) the 2007/2008 PDC Alice Springs directory and Telstra’s corresponding 2007/08 co-bound directory for the Northern Territory;
(c) the 2011/2012 PDC Port Macquarie & Kempsey directory and Telstra’s corresponding 2012 co-bound directory for Port Macquarie, Kempsey, Camden Haven, Nambucca, Wauchope and Lord Howe Island; and
(d) the 2012 PDC Rockhampton & Gladstone directory and Telstra’s corresponding 2012/13 co-bound directory for Rockhampton, Gladstone, Yeppoon & Emerald.
593 Firstly, I see the absence of the well-recognised Yellow Pages Trade Mark with the Walking Fingers from the PDC directories as a strong point of differentiation. The evidence shows that for almost 40 years Telstra had never published its directories or undertaken its marketing without using that branding. Directory users and advertisers needed to look no further than the well-known Walking Fingers logo to know that a directory was Telstra’s product. Other than those consumers who erroneously assume that any directory is associated with it, Telstra draws a long bow in arguing that directories without that brand are likely to be seen by directory users or advertisers as published by or otherwise associated with Telstra. An ordinary or reasonable directory user or advertiser would not have thought that a yellow covered directory without that branding was Telstra’s directory.
594 Secondly, the same might be said (to a slightly lesser extent) of the White Pages trade mark. For most of the regional areas in which the PDC directories were published, Telstra’s corresponding directories had for many years been co-bound with the White Pages. The White Pages trade mark was also well-known and its absence from the PDC directories was another point of difference.
595 Thirdly, the PDC directories’ use of the LD Name and Logo is another significant point of difference. I do not accept the contention that it lacks distinctiveness. It may be that the words Local Directories are descriptive, but I consider the stylised LD Name and Logo is distinctive. For convenience I reproduce again the LD Name and Logo used from 2006 to trial:
I consider it well distinguishes the PDC directories.
596 Fourthly, while both directories used yellow covers, the overall get-up of the PDC directories was quite different. The main difference was that in 2005 and 2006 when the respondents commenced publishing yellow covered directories under the LD Name and Logo they maintained their use of a large rectangular photograph of a local landmark in the centre of the cover. Some of the consumer surveys indicated that consumers found that get-up “instantly recognisable”. By then, Telstra had also moved to using large photographs on the cover of its regional co-bound Yellow Pages directories but they were stock rather than local photographs and quite different in layout. Telstra started using local photographs after the 2006 Competitive Strategy Report.
597 Fifthly, the PDC directories were materially smaller than Telstra’s directories which was another important point of difference. Telstra contends that there is no evidence that consumers identify the source of directories by reference to their size. It also argues that the thickness of the rival directories varied across regions so that consumers could not draw an inference as to the source of either directory based on that feature alone. It also contends that, although the height and width of the PDC directories are usually less than the corresponding Yellow Pages, this feature cannot serve to differentiate the PDC directories to consumers who have never previously been exposed to them. It argues that those consumers would have most likely assumed that the Yellow Pages directory had simply changed size and become smaller.
598 I do not agree. Without descending into the minutiae of the rival directories in each region since June 2005 I am satisfied that the PDC directories were typically smaller in height and width, and typically appreciably thinner (depending on the region), although this appears to have changed in about 2011. I reproduce below images of the spines of four PDC directories sitting alongside Telstra’s corresponding directory, namely:
(a) the 2004 Rockhampton & Gladstone PDC directory and corresponding co-bound 2004-05 Rockhampton, Emerald, Gladstone and Longreach Districts Yellow Pages/White Pages directory;
(b) the 2005/2006 Darwin PDC directory and corresponding co-bound 2005-06 Northern Territory Yellow Pages/White Pages directory;
(c) the 2005/2006 Alice Springs PDC directory and corresponding co-bound 2005-06 Northern Territory Yellow Pages/White Pages directory; and
(d) the 2006/2007 Coffs Harbour & Grafton PDC directory and Telstra’s corresponding co-bound Ballina, Casino, Coffs Harbour, Grafton, Lismore, Murwillumbah directory.
It is also plain from the consumer surveys that directory users understood that the PDC directories were typically smaller than Telstra’s directories.
599 The size difference also pointed to important functional differences. Mr Weissenberg’s evidence and the consumer surveys indicate that functional differences between the directories were important to directory users (and therefore to directory advertisers). At one level it is just common sense that many directory users would prefer to use a directory that was smaller and less cumbersome and therefore more convenient to use. The PDC directories’ smaller size also meant that they were handy for use in a car, and this utility was increased by the addition of high quality street maps (and better quality than Telstra’s street maps).
600 That consumers understood that the PDC directories were more compact is clear from Telstra’s consumer surveys and market research. It is apparent that many of those consumers who chose to use the PDC directories did so because of perceived benefits which included its more compact size and greater convenience.
601 Sixthly, the local focus of the PDC directories was an important point of difference. Telstra contends that there is no evidence that directory users identify the source of a directory by reference to its geographical coverage, and argues that when they receive the directory they will base their decision to keep or discard it solely on an initial impression as to its identity, and may not even notice that the coverage area of the directory is different.
602 I do not accept this. The consumer surveys show, and common sense confirms, that many directory users prefer not to have to pick their way through business advertisements that are located too far away to be convenient. As an example, one can readily understand why an Alice Springs resident with a household plumbing problem would have little interest in picking his or her way through the various classified advertisements for Darwin-based plumbers in Telstra’s Northern Territory Yellow Pages directory.
603 I consider it clear that the respondents did enough to distinguish their directories. The hypothetical ordinary or reasonable directory user would not (because of the respondents’ conduct) have suffered the misconception that the PDC directories were published by or associated with Telstra. It must also be said that to the extent that the rival directories became more similar in appearance that was Telstra’s doing. For example, while the respondents’ get-up stayed the same, over the years from 1996 Telstra’s regional co-bound Yellow Pages directories:
(a) moved from no photographs or only small photographs to a greater use of them;
(b) moved from using stock photographs to using local photographs. The 2006 Competitive Strategy Report shows that before 2006 Telstra’s regional directories only used generic stock photographs that were not from the local area. It recommended that the covers be enhanced “with additional local images, that are instantly recognisable by the majority of people located within the boundary”;
(c) moved to using local photographs in a rectangle in the centre of the cover (in a somewhat similar design to PDC) in 2007/2008; and
(d) moved to smaller directories. For example, (as shown at [592(c)-(d)] above) Telstra’s 2011/2012 and 2012/2013 directories had become smaller than the PDC directories.
604 Further, given the way in which advertisers or prospective advertisers interacted with the respondents and their directories, there is no prospect that the hypothetical ordinary or reasonable advertiser would have been left with the impression that the PDC directories were published by or associated with Telstra.
The other trade indicia
605 Telstra also relies on the respondents’ use of some or each of the Other Trade Indicia from time to time as indicating that the respondents did not properly differentiate their directories. It relies on the following:
(a) from 2005 to March 2007 using the term “Yellow Section” to describe the classified listings section which was printed on yellow pages;
(b) from 2005 to March 2007 using the term a “White Section” to describe the alphabetical listings section which was printed on white pages;
(c) listing the contact details for Sensis as the first entry, and Telstra as the second in the General Enquiries section at the front of the directories;
(d) from 2000 to September 2006 having, within its pages, a depiction of two walking fingers as part of the YPA logo;
(e) from 2000 to 2006 the statement that the first or second respondent is “An international member of the ‘Yellow Pages Association’” or “An international member of the ‘Yellow Pages Publishers Association’”; and
(f) from 2005 to 2007, featuring a “Quick Find Index” for listings in the Yellow Section with a red coloured strip and the words Quick Find Index on the side of all pages contained in the index and the use of capitalised letters in red rectangles as a heading structure within the index.
The use of these indicia started earlier than 2005, but Telstra abandoned its claim in relation to the respondents’ publication of their directories prior to that date.
606 I consider Telstra’s contentions in this regard have little substance, and there are several points which may be made about the use of the indicia.
607 Firstly, the thrust of Telstra’s case is that the external appearance of the PDC directories misled consumers, not the contents of the directories. The Other Trade Indicia would usually not be seen by a directory user until he or she had already picked up and commenced using the PDC directory. By that time, on Telstra’s case, the user had already been enticed into the respondents’ marketing web. Telstra gave little accent to the Other Trade Indicia in its case. The respondents’ use of the indicia ceased in 2007 yet Telstra maintains the claim that the respondents’ publication of their directories is misleading or deceptive.
608 Secondly, little cogent evidence was advanced as to the role that the Other Trade Indicia played in creating the impression alleged, namely that the PDC directories originated from or were associated with Telstra. The little evidence that was adduced tended to show that any misleading impression based on the appearance of the directory was dispelled upon its use. For example:
(a) Dr Carlyle said that once he had flipped over the first few pages of the PDC directory he could see it was “completely different” to the Yellow Pages;
(b) Ms Robertson realised that she was dealing with a PDC directory simply by looking at the cover more closely; and
(c) Mr Stoten said, and I accept, that a quick flick through the pages of a PDC directory would clarify who produced it.
609 Thirdly, insofar as Telstra seeks to rely on the contents of the directories creating a misleading impression it must also accept that the disclaimers in the directories pointed expressly in the other direction. As I detail at [80]-[81]:
(a) from 2005 the PDC directories contained a disclaimer on the first page of the A-Z listings section of the directories;
(b) from 2006 the scope of the disclaimer was expanded so that each reference to Telstra, such as in the General Enquiries section of the PDC directories was accompanied by an asterisk and the explanation that “this directory is in no way associated with, sponsored, or authorised by Telstra Corporation Limited, Yellow Pages, White Pages or Sensis Pty Ltd”;
(c) from May 2007 a disclaimer was printed on the base of every alternate page of the A-Z listings section and the Classified Section;
(d) from 2000 a small disclaimer appeared under the YPPA logo including the walking fingers;
(e) from May 2007 the disclaimer was strengthened to read “Local Directories is in NO WAY associated with Telstra Corporation Limited or Sensis Pty Ltd.”; and
(f) from about this time each directory included over 500 disclaimers confirming that the PDC Respondents were not associated with Telstra.
610 The disclaimers are otherwise not material to my decision. I note in passing that if (contrary to my view) the appearance of the PDC directories did create the misleading impression alleged, the disclaimers would be insufficient to dispel that impression. I say this because:
(a) none of the disclaimers appeared on the covers of the directories and they could not have come to the attention of a directory user until he or she was already using the directory;
(b) it is unlikely that directory users would read a classified directory sequentially like a novel. They would search for a category of goods or services in which they are interested by turning to the index or by going straight to the relevant heading. This reduces the likelihood that the disclaimer at the front of the A-Z listings section would have been noticed; and
(c) while the disclaimers situated throughout the directory since 2007 are likely to have come to the attention of directory users, by then the use of Other Trade Indicia had ceased.
611 Fourthly, there is nothing misleading in the use of some of the Other Trade Indicia. I say this because:
(a) the respondents had used yellow pages for the classified listings in their directories since 1994, without complaint by Telstra, and it had used white pages for its alphabetical listings. Having done so, there was nothing illegitimate or misleading in their describing the classified listings section as the Yellow Section and the alphabetical listings section as the White Section. Some description was necessary to assist the directory users. I accept that the respondents could have used other names such as “Business Directory Section” or “Classified Pages Section” for the classified listings, and A-Z Listings Section for the alphabetical listings (as they later did), but that means little; and
(b) I do not accept that the respondents’ use of the colour red in their Quick Find Index and use of capitalised letters in red rectangles as a heading structure within that index conveyed a misleading impression as to the origin of their directories. An index was essential for the directories to have utility, and it was sensible for the respondents to highlight the index for the convenience of the users. While red was the colour of Telstra’s index it does not signify Telstra’s products. Red stands out well against yellow pages and the respondents were free to choose that colour.
I take a different view about the legitimacy of the respondents’ use of the YPA logo with the walking fingers. But it appeared on one page inside the directory, with a disclaimer below it at the relevant time, and its use only continued until 2006. I attribute no significance to that use in all the circumstances.
612 I do not consider that the use of the terms Yellow Section and White Section, the use of the colour red in the Quick Find Index, or the short-term use of the walking fingers logo associated with the YPPA logo, whether considered independently or in conjunction with the other pleaded conduct, would have conveyed to the hypothetical ordinary or reasonable directory user or advertiser that a PDC directory was published by or associated with Telstra.
613 For these reasons the claims of misleading or deceptive conduct and passing off must be dismissed.
L. The Misleading or deceptive conduct Cross-Claim
614 PDC, ALD and LD (“the cross-claimants”) allege that Telstra engaged in misleading or deceptive conduct by publishing comparative claims about the levels of consumer use of the cross claimants’ directories in 16 editions of its Yellow Pages directories in the period 2004–2008 (“the Advertisements”). The Advertisements contained information in text and graphs purporting to show the extent to which the PDC directories were used by directory users as their main information source when seeking a supplier of goods or services.
The facts
615 It is uncontentious that between 2004 and 2007, Telstra published the Advertisements in various editions of its Yellow Pages directories. However, there is no agreement as to which of Telstra’s directories the Advertisements were published in. I accept the evidence of Mr Stoten that they appeared in the following 16 editions of the Yellow Pages (“the relevant editions”):
(a) the Ballina, Casino, Coffs Harbour, Grafton, Lismore, Murwillumbah directories for 2004/2005, 2005/2006 and 2007/2008;
(b) the Forster, Gloucester, Kempsey, Lord Howe Island, Nambucca, Port Macquarie, Taree, Wauchope directories for 2004 and 2005;
(c) the Northern Territory directories for 2004/2005, 2005/2006 and 2006/2007;
(d) the Mackay, Whitsundays, Rockhampton, Gladstone, Emerald & Longreach Districts directory for 2004/2005;
(e) the Rockhampton, Gladstone, Emerald & Longreach Districts directories for 2005/2006 and 2007/2008;
(f) the Mackay & Whitsundays directory for 2007/2008;
(g) the Townsville, Mount Isa, Cloncurry, Hughenden Districts directory for 2007/2008;
(h) the Cairns District directories for 2004/2005 and 2007/2008; and
(i) the Sunshine Coast, Gympie, Caboolture Districts directory for 2007/2008.
616 The Advertisements were based on consumer surveys commissioned by Telstra and undertaken by the market research company TNS in 2003, 2004, and 2006, which involved questioning consumers about matters such as their awareness of various directories, when they last used the directories, which of the directories was their preferred source of information, and which of the directories was the most used by them.
617 In the surveys the cross-claimants were referred to as “PDC” and the survey asked participants about use and awareness of “PDC” as a directory. For example, the overall result for “most used” directory was obtained by asking survey participants the following question:
Now, thinking about all of the information sources you have used when you needed to find a business, or a supplier of products or services. Which information source would you say you have actually used most often?
618 In the Advertisements Telstra presented a comparison of the responses for the “most used” directory, which included the responses for directories named “PDC”. Consistently across the various surveys, Telstra’s Yellow Pages scored 45% to 57% against the variable “most used” whereas the cross-claimants’ directories scored substantially lower.
619 The 2003 survey was conducted in 14 different regions in January and March to April of 2003. It reported that only 1% of the survey participants said that “PDC” was their “most used” information source.
620 The 2004 survey was conducted in January of 2004. It also reported that only 1% of the participants said that “PDC” was used “most often” by them as their preferred information source.
621 The 2006 survey was conducted in January of 2006. It covered regional markets in all eight states and territories of Australia. It reported that “PDC” was the “most used information source” in respect of only:
(a) 1.2% of survey participants in all regions:
(b) 10.7% of participants in Northern Territory;
(c) 5.4% of participants in North Queensland;
(d) 2% of participants in Sunshine Coast; and
(e) 0.6% of participants in Northern New South Wales.
The Advertisements
622 The survey responses were compiled and Telstra published the relevant editions containing the Advertisements with the results presented in text and by graphs. For example, the Advertisement in Telstra’s 2004 Forster, Gloucester, Kempsey, Lord Howe Island, Nambucca, Port Macquarie, Taree, Wauchope regional directory stated:
Advertising in the Yellow Pages directory means you can catch customers at a key time – when they are ready to buy. 57% of people surveyed use the Yellow Pages directory as their most used source of buying information.
623 This was accompanied by a graph which showed that 57% of people surveyed use the Yellow Pages as their most used source compared with 2% for PDC’s directories. I reproduce the graph below.
624 Each Advertisement was accompanied by a footnote which provided that the source of the data was “independent research” of people aged 18 to 64 in certain regional directory markets between 2003 and 2006.
625 The Advertisements in each of the relevant editions followed a similar format. While the different surveys produced varying results the figure for “PDC” was always comparatively tiny.
626 In response to a complaint from the cross-claimants, Telstra undertook not to publish the claims in the Advertisements in any future editions of its Yellow Pages directories, and it has not done so.
The target class
627 The conduct about which cross claimants complain was not directed at any specific individual and it is necessary to identify the target section or sections of the public.
628 The relevant conduct is Telstra’s publication of the Advertisements in the relevant editions of its directories between 2004 and 2007. They were directed to people in the geographical regions covered by those directories who were advertisers or prospective advertisers in classified directories, who own or manage businesses in those regions. The Advertisements were aimed at persuading prospective advertisers to choose to advertise in Telstra’s Yellow Pages rather than in other directories, including the cross-claimants’ directories.
629 The broad class is made up of people who are advertisers or prospective advertisers in print and online directories who own or manage a business in the areas in which the Advertisements were published, who are or may be prepared to pay to list their goods or services in such directories.
The characteristics of the class
630 Apart from the fact that the Advertisements were published in less geographical regions than the representations in the primary claim, the class of directory advertisers in the cross-claim has the same characteristics as that class in the primary claim. Not all members of the class are likely to respond to the Advertisements in the same way. The class will include a broad range of business people of differing shrewdness, education, commercial experience, information, age and vocations. The evidence shows that most are small business people, and although not sophisticated they are unlikely to be lacking in discernment.
Consideration
631 The cross-claimants allege that the Advertisements conveyed four related representations which I deal with below.
The consumers surveyed had access to the cross-claimants’ directories
632 Firstly, the cross-claimants allege that the Advertisements conveyed the representation that the consumers surveyed had available to them the cross claimants’ directories as an alternative reference to Telstra’s directories for information about suppliers of goods or services (“the First Representation”).
633 Telstra denies this and contends that:
(a) the Advertisements made no representation as to the individual circumstances of the consumers surveyed; and
(b) the representations were about the “use” rather than the “availability” of the directories.
634 I do not agree. I consider that the Advertisements conveyed the First Representation. The hypothetical ordinary or reasonable advertiser would have understood from the Advertisements that the consumers surveyed had an opportunity to access the directories or information sources (“the directories”) about which they were being surveyed, and that the survey results reported were based on the participants’ knowledge of those directories. The Advertisements said that they were the product of “independent research” which would form or strengthen the expectation of an ordinary or reasonable advertiser that the surveys were conducted fairly and reliably.
635 Of course, the reader would understand that individual survey participants may not have actually owned or used the full range of the directories covered in the survey. But the Advertisements would have caused an ordinary or reasonable advertiser to understand that the directories were at least available to them.
636 The First Representation was misleading or deceptive or likely to mislead or deceive because the evidence shows that many of the survey participants were from areas where the cross-claimants’ directories were never published. The surveys covered different geographical areas to the areas in which the cross-claimants published their directories. They provided evidence of numerous examples of this, and it is unnecessary to detail them.
637 In essence, the evidence is that the cross-claimants’ directories were only published in four of the 14 regions covered by the 2003 survey, two of the 13 regions covered by the 2004 survey and three of the eight regions covered by the 2006 survey. That is, they were not published in the majority of the geographical areas from which the survey participants were drawn.
638 Sometimes, where the cross-claimants’ directories were published within a geographical area covered by the survey, their publication did not extend throughout that area. For example, the 2006 survey included a region identified by Telstra as “Northern Queensland”. It was impossible for the reader to know exactly what that description covered. However, the description “Northern Queensland” covers an area which is about five times larger than the areas covered by the cross-claimants’ directories. At the time of the Advertisements the cross-claimants’ Queensland directories covered only Cairns, Townsville, Sunshine Coast, Rockhampton & Gladstone, Mackay and Mount Isa.
The cross-claimants published directories throughout the areas surveyed
639 Secondly, the cross-claimants allege that the Advertisements conveyed the representation that the cross-claimants were publishing and/or had published telephone directories in the whole of the areas in which the surveyed consumers were surveyed (“the Second Representation”).
640 Telstra denies this. It contends that the Advertisements did not convey this representation because it:
(a) did not purport to provide any information as to whether the cross-claimants’ directories were published in the whole of the areas surveyed; and
(b) did not make any representation about the publication of the cross-claimants’ directories.
641 I disagree. I consider that the Advertisements conveyed the Second Representation. A footnote to the Advertisements listed the areas in which the survey was conducted, and the Advertisements contained no suggestion that the directories named were published in only a handful of those areas. The Advertisements would have conveyed to the hypothetical ordinary or reasonable advertiser that the directories which were the subject of the consumer survey were available in all of the areas in which consumer usage and awareness was being measured.
642 As I have said, the Advertisements stated that they were the product of “independent research” which would have formed or strengthened the expectation that the survey was conducted fairly and reliably. Prospective advertisers had no reason to think that the directories which were the subject of a consumer awareness survey were not even published in the location where awareness was being measured. Even if they understood that the survey was somehow more nuanced or skewed, prospective advertisers could not know which of the directories mentioned were published in the surveyed areas so that they could properly understand the results.
643 The Second Representation was misleading or deceptive or likely to mislead or deceive because, as I have said, the evidence shows that the cross-claimants’ directories were not published in all of the areas surveyed.
The cross-claimants published directories by reference to the acronym “PDC”
644 Thirdly, the cross-claimants allege that the Advertisements conveyed the representation that the cross-claimants are and/or were publishing directories which were branded under or by reference to the initials “PDC” (“the Third Representation”).
645 Telstra denies this and contends that the Advertisements made no representation as to how the cross-claimants’ directories were branded.
646 I do not accept Telstra’s contention. I consider that the Advertisements conveyed the Third Representation. I reiterate that the survey was said to be based upon “independent research” which implied that it was conducted fairly and reliably. The survey participants were asked identify which directory they used and only a tiny percentage said they used “PDC”. However, the cross-claimants did not use that name on their directories in Queensland and Northern Territory after 2005/2006 and never used it in New South Wales. The survey result was therefore likely to understate the real number of consumers who used their directories.
647 A prospective advertiser would assume that the Advertisements recording the results for “PDC” accurately set out consumer usage of the cross-claimants’ directories when they did not. The Advertisements conveyed a representation to an ordinary or reasonable advertiser that the cross-claimants’ directories, which were the subject of the survey, were branded “PDC”.
648 The Third Representation was misleading or deceptive or likely to mislead or deceive because the Advertisements set out consumer usage of directories produced by “PDC” when that was not always the name under which the cross-claimants’ directories were published.
The survey results provided an accurate basis for comparing use of the directories
649 Fourthly, the cross-claimants allege that the Advertisements conveyed the representation that the survey results provided an accurate and reliable basis for comparing the use made by the surveyed consumers of Telstra’s directories with the cross-claimants’ directories for the purpose of sourcing information about the supply of goods or services (“the Fourth Representation”).
650 Telstra accepts that the Advertisements conveyed this representation. This representation was the whole point of the Advertisements. However Telstra denies that the representation was false.
651 Telstra accepts that the result in relation to this representation flows from the result in relation to the three earlier representations. I have found the First, Second and Third Representations were conveyed and that they were misleading or deceptive or likely to mislead or deceive. It is therefore established that the Fourth Representation was misleading or deceptive. The survey results did not provide an accurate or reliable basis for comparing consumer usage and awareness of Telstra’s directories with the cross-claimants’ directories, and were in fact wholly unreliable in the form presented. Telstra made no attempt to remedy the likely misconception which advertisers would suffer by setting out the limitations of the survey data in a footnote.
Telstra’s further contentions
652 Telstra seeks to rely on the fact that the Advertisements published in 2004 referred to “Geelong info pages”. It contends that prospective advertisers in New South Wales, Queensland and the Northern Territory would have understood that directories relating to Geelong were not available to them or published in their states or territory, and would therefore have understood that the First and Second Representations were not made.
653 As a matter of logic, I accept this but I do not accept that the reference to “Geelong info pages” meant the First and Second Representations were not conveyed. It is the impression conveyed to the ordinary or reasonable advertiser which is important, rather than a careful analysis of each part of the Advertisements. As a matter of impression an ordinary advertiser would have understood that the consumers surveyed had access to the various directories referred to, and that the cross-claimants’ directories were published throughout the geographical areas surveyed.
654 Telstra also contends that the First and Second Representations were (if made) substantially true when published in 2007/2008. It argues that the cross-claimants’ directories were published in the whole of, or almost the whole of, the regions surveyed for those Advertisements (namely, Northern Territory, Northern Queensland, Northern New South Wales and the Sunshine Coast). As an example, it argues that by publishing separate directories for Cairns and Townsville the cross-claimants’ directories cover most of the Northern Queensland survey area.
655 I do not accept this. Telstra offered no evidence which allowed the Court to compare the geographical areas covered by the cross-claimants’ directories with the survey areas, or any evidence which allowed the Court to compare the population within the area covered by the cross-claimants’ directories with the population in the survey area. I note also that the impugned Advertisements were published from 2004 to 2007 and Telstra makes this contention only in relation to the Advertisements in 2007/2008.
656 Finally, Telstra notes that the cross-claimants made no allegation based on the falsity of the survey results presented in the Advertisements. For example, it contends that the 2004 survey result in the Rockhampton survey shows only a marginal difference between the 1% result for “PDC” presented in the Advertisements and the true figure of 2%.
657 I do not accept this. Without properly performing the surveys to take account of the identified deficiencies it is impossible to know what the survey result would have been. Further, even using the figures presented, this submissions does not withstand scrutiny. The survey results were presented as regional averages not as city specific figures. I accept the cross-claimants’ contention that in the example cited, the 1% figure for Rockhampton would have risen to about 9.3% if averaged across the Rockhampton, Mackay and Whitsundays region.
Conclusion
658 I am satisfied that Telstra engaged in misleading or deceptive conduct or conduct that was likely to mislead or deceive in breach of s 52 of the TPA.
659 The issues of liability and damages have been separated. I will direct the parties to confer and propose a timetable for that hearing, including an order for mediation.
M. the Unjustifiable threats of copyright infringement cross-claim
660 PDC, ALD and LD (“the cross-claimants”) seek declaratory relief and damages for unjustifiable threats pursuant to s 202 of the Copyright Act.
The Facts
661 It is uncontentious that Telstra threatened breach of copyright proceedings against the cross-claimants in a letter of demand of 10 July 2006 sent to the cross-claimants and their solicitors. The letter relevantly stated:
As you are no doubt aware, Telstra has copyright in the Yellow Pages and White Pages directories (“Telstra’s Directories”) and the headings books used to generate the headings used in Telstra’s directories (“the Headings”). This was confirmed by the Full Federal Court in Desktop Marketing Systems Pty Ltd v Telstra Corporations [sic] Ltd (2002) 55 IPR 1. Therefore, it is a breach of Telstra’s copyright for PDC/ALD to reproduce a substantial part of Telstra’s directories or the Headings.
Telstra also pointed to Telecom Corporation of New Zealand Ltd & Anor v Colour Pages Limited & Anor (High Court of New Zealand, unreported, 14 August 1997) in which McGechan J found that copyright subsisted in telephone directories.
662 It is uncontentious too that Telstra subsequently brought a claim of copyright infringement against the cross-claimants, and that claim was unsuccessful before the Federal Court and the Full Court. The High Court refused special leave: see Telstra Corporation Limited v Phone Directories Company Pty Ltd [2010] FCA 44 (“Telstra Copyright Trial”); Telstra Corporation Limited v Phone Directories Company Pty Ltd [2010] FCAFC 149 (“Telstra Copyright Appeal”); and Telstra Corporation Limited & Anor v Phone Directories Company Pty Ltd & Ors [2011] HCATrans 248 (2 September 2011) (“Telstra Copyright Special Leave Application”).
Legislative framework and relevant principles
663 Section 202 of the Copyright Act relevantly provides:
202 Groundless threats of legal proceedings in relation to copyright infringement
(1) Where a person, by means of circulars, advertisements or otherwise, threatens a person with an action or proceeding in respect of an infringement of copyright, then, whether the person making the threats is or is not the owner of the copyright or an exclusive licensee, a person aggrieved may bring an action against the first-mentioned person and may obtain a declaration to the effect that the threats are unjustifiable, and an injunction against the continuance of the threats, and may recover such damages (if any) as he or she has sustained, unless the first-mentioned person satisfies the court that the acts in respect of which the action or proceeding was threatened constituted, or, if done, would constitute, an infringement of copyright.
(2) The mere notification of the existence of a copyright does not constitute a threat of an action or proceeding within the meaning of this section.
…
664 Similar provisions relating to groundless threats appear in almost all Australian intellectual property legislation. In my view, there is no relevant difference between the prohibition of groundless threats in s 202 and the unjustified threats provision in s 128 of the Patents Act 1990 (Cth) (“Patents Act”), and analogous provisions in s 129 of the Trade Marks Act 1995 (Cth) and s 46 of the Circuit Layouts Act 1989 (Cth). The authorities relating to these analogous provisions are applicable in the present case.
665 In JMVB Enterprises Pty Ltd v Camoflag Pty Ltd (2005) 67 IPR 68 (“JMVB”) at [208]-[211] Crennan J summarised the operation of the Patents Act regime in the following terms:
The aggrieved party, in this case the respondent, must first establish the making of a threat: Australian Steel Co (Operations) Pty Ltd v Steel Foundations Ltd (2003) 58 IPR 69; [2003] FCA 374 at [16]. The threat must be made in Australia, in that it must be received in Australia and relate to an Australian patent or design: for an example in the context of a patent, see Townsend Controls Pty Ltd v Gilead (1989) 16 IPR 469 at 474 (Townsend Controls).
A threat arises where the language, by direct words or implication, conveys to a reasonable person that the author of the letter intends to bring infringement proceedings against the person said to be threatened: U & I Global Trading (Aust) Pty Ltd v Tasman-Warajay Pty Ltd (1995) 60 FCR 26 at 31; 32 IPR 494 at 499–500 (U & I Global). A threat may arise without a direct reference to infringement proceedings: Lido Manufacturing Co Pty Ltd v Meyers & Leslie Pty Ltd (1964) 5 FLR 443 at 450–1. However, a communication merely notifying a person of the existence of a patent or a patent application, together with a statement that any suggestion that the recipient is entitled to replicate the invention is not maintainable, or a communication seeking confirmation that no improper or wrongful use or infringement of the patent has come to the recipient’s attention is not a threat: see s 131; Australian Steel Co (Operations) Pty Ltd v Steel Foundations Ltd at [17].
Once a threat has been established, it is prima facie unjustifiable unless the person making the threat establishes that it was justified: U & I Global at FCR 32; IPR 500. The court may grant the relief applied for unless the person threatening infringement proceedings establishes that the relevant conduct infringes or would infringe a valid claim of a patent: s 129; see also U & I Global at FCR 33; IPR 500–1; Doric Products Pty Ltd v Lockwood Security Products Pty Ltd (2001) 192 ALR 306 at 308 ; 53 IPR 270 at 273; [2001] FCA 1877. Ultimately, the grant of relief is discretionary: Townsend Controls at 475.
A threat can be made by means of a letter from a legal representative: Sydney Cellulose Pty Ltd v Ceil Comfort Home Insulation Pty Ltd (2001) 53 IPR 359 at 374 ; [2001] FCA 1350. I am satisfied that the letters in this case amount to threats. The statement that proceedings “will be commenced forthwith” if the relevant campervans are not withdrawn from the market is clear. Further, the statement that the respondent “reserves” its right to sue if certain information and declarations are not provided is a threat to sue for infringement on a future occasion: see U & I Global at FCR 32; IPR 501.(Emphasis added.)
In my view each of these points are applicable to a claim pursuant to s 202 of the Copyright Act.
666 The onus of establishing that the threat is justifiable is on the holder of the copyright. Once a claim of an unjustifiable threat has been made the authorities provide that it is prima facie unjustifiable unless the respondent establishes that it was justified: JMVB at [210].
Consideration
667 There can be no question that Telstra’s letter of demand constituted a threat of copyright infringement. The only question is whether that threat was unjustifiable within the meaning of s 202.
668 In brief, Telstra contends that it proceeded with its copyright claim on the basis of the law as it then was and that it was only because of the handing down of the High Court’s decision in IceTV Pty Ltd v Nine Network Australia Pty Ltd (2009) 239 CLR 458 (“IceTV Appeal”) that its claim failed. Thus, Telstra says that its threat was not “unjustifiable”.
669 The cross-claimants contend that s 202 provides a statutory cause of action for groundless threats of infringement even if made bona fide and they argue that the defence to the groundless threats claim must therefore be rejected. I do not agree.
670 The authorities show that it is no defence to a claim for an unjustifiable threat of copyright infringement that it was made in good faith in the honest belief that copyright had been infringed: S W Hart & Co Pty Ltd v Edwards Hot Water Systems (1980) 30 ALR 657 (“S W Hart”) at 661 per Lavan SPJ; Coogi Australia Pty Ltd v HySport International Pty Ltd & Ors (1998) 86 FCR 154 (“Coogi”) at 193 per Drummond J and Nine Films & Television Pty Ltd v Ninox Television Ltd (2005) 146 FCR 144 at [48] per Lindgren J; Nine Network Australia Pty Ltd v IceTV Pty Ltd (2007) 73 IPR 99 (“IceTV Trial”) at [228] per Bennett J cf Benmax v Austin Motor Co Ltd [1953] 70 RPC 284 at 295 per Evershed MR (with Jenkins LJ and Morris LJ concurring).
671 In my view bona fides must be understood as a reference to the subjective state of mind of the party making the threat. For example in S W Hart at 661 Lavan SPJ described it by reference to “good faith” and “honest belief”. Butterworths Concise Australian Legal Dictionary defines bona fide as meaning “in good faith; with sincerity” and “to do something in good faith or with an honest intention.” Conduct may be bona fide yet unjustifiable where a party honestly believes that a particular course of conduct is legitimate, but it is not.
672 The parties were unable to refer the Court to any authorities on the meaning of “unjustifiable threats” within s 202. Section 13 of the Acts Interpretation Act 1901 (Cth) permits section headings to be considered in construing a provision. Section 202 appears under the heading “Groundless threats of legal proceedings for copyright infringement.” “Groundless” is defined in the Macquarie Dictionary to mean “without basis or reason”. The term “unjustifiable” has the same meaning. The Macquarie Dictionary defines it to mean the inverse of “justifiable”, which means “capable of being justified; that can be shown to be, or can be defended as being, just or right; defensible.” In context I consider the meaning of “unjustifiable” is a reference to the objective strength of the legal position underpinning the threat.
673 Support for this approach can be found in the rationale for s 202 and analogous provisions in the other intellectual property regimes. As Bennett J observed in IceTV Trial at [228]:
The history of the section suggests that it was concerned to deter unjustified threats themselves, threats that did not result in infringement proceedings or could not be justified for actual infringement; threats made to “frighten away competitors or to damage such persons less directly, by threatening to sue their customers as joint tortfeasors”… It is a right extended to the threatened person not generally available to those threatened with an action for a civil wrong. (Citations omitted.)
674 In Avel Pty Limited v Intercontinental Grain Importers Pty Limited (1996) 65 FCR 154 at 159 per Sheppard, Beazley and Tamberlin JJ, the Full Court held that an important rationale for the groundless threats regime in copyright, patents and trade marks legislation is to guard against abuse of the protections afforded under that legislation. Their Honours went on to conclude that a mere “threat in the air” would be caught by the provision. Similarly, Cooper J described the Patents Act regime as “a statutory defence to proceedings against conduct which is otherwise unlawful”: U & I Global Trading (Aust) Pty Ltd v Tasman-Warajay Pty Ltd (1995) 60 FCR 26 at 32.
675 It follows that the question of whether a threat is justifiable is to be answered by reference to whether the threat had a proper legal basis. Contrary to the cross-claimants’ contention, the question before the Court is not limited to the bona fides of Telstra in making the threat that it did. The question is whether Telstra’s threat was objectively groundless or unjustifiable. This is a different enquiry to an enquiry as to Telstra’s subjective intent and the two ought not be conflated.
676 Telstra submits that its threat was justified because it asserted a legal position that was supported by Full Court authority at the time. The cross-claimants did not argue that Telstra’s position, at that time, was not well grounded.
677 At the time Telstra made its threat, Desktop Marketing Systems Pty Ltd v Telstra Corporation Ltd (2002) 119 FCR 491 (“Desktop Marketing”) per Black CJ, Sackville and Lindgren JJ was binding Full Court authority. In that case Telstra successfully argued that copyright subsisted in its directories and that Desktop Marketing had infringed its copyright by producing CD-ROMs with directory listings that had been obtained from its directories and rekeyed by workers in the Philippines. The Full Court held per Sackville J at [431]–[432] (with Black CJ and Lindgren J delivering separate but concurring judgments) that a directory is a factual compilation and may be protected by copyright as an original work on the basis that substantial labour and expense has been devoted to its creation.
678 Desktop Marketing was accepted as good law in contemporaneous intellectual property texts. For example, the learned authors Davison M, Monotti A and Wiseman L in Australian Intellectual Property Law (Cambridge University Press, 2010) at [6.2.1.1.2] cited it and stated “[t]here are many examples of compilations that have been protected by copyright. For example … telephone directories.” Similarly, Stewart A, Griffith P and Bannister J in Intellectual Property in Australia (LexisNexis Butterworths, 2010) at [6.10] noted that “the Desktop Marketing decision reinforced the prevailing view that the standard of originality required under Australian law was low.”
679 Desktop Marketing remained good law until the High Court decision in the IceTV Appeal. In this case, although not necessary to decide, at [187]-[188] Gummow, Hayne and Heydon JJ expressed their disapproval of Desktop Marketing in the following terms:
One final point should be made. This concerns the submission by the Digital Alliance that this Court consider the Full Court’s decision in Desktop Marketing and, to the contrary of Desktop Marketing, affirm that there must be some “creative spark” or exercise of “skill and judgment” before a work is sufficiently “original” for the subsistence of copyright. It may be that the reasoning in Desktop Marketing with respect to compilations is out of line with the understanding of copyright law over many years. These reasons explain the need to treat with some caution the emphasis in Desktop Marketing upon “labour and expense” per se and upon misappropriation. (Citations omitted. Emphasis added.)
680 Following the IceTV Appeal Gordon J heard the Telstra Copyright Trial in an earlier part of the present proceedings. Applying their Honours’ observation in the IceTV Appeal, Gordon J held that some independent intellectual effort or the exercise of sufficient effort of a literary nature was required for copyright to subsist. Her Honour decided that copyright did not subsist in Telstra’s directories. As I have said, this conclusion was affirmed by the Full Federal Court and special leave to appeal to the High Court was refused.
681 I am satisfied that on the law as it stood on 10 July 2006, Telstra’s threat of copyright infringement was based on strong Full Court authority. It had good legal grounds for asserting the rights against the cross-claimants that it did. Although its claim of copyright infringement failed, I do not consider that s 202 is aimed at deterring such an action. I cannot see Telstra’s conduct in making the threat as an “abuse” of the copyright regime, or a “threat in the air”. Telstra’s letter of demand was not conduct of the kind that s 202 is aimed at capturing. In my view, Telstra’s threats were not “groundless” or “unjustifiable” within the meaning of s 202. The cross-claim must be rejected.
| I certify that the preceding six hundred and eighty-one (681) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Murphy. |
Associate:
