REASONS FOR JUDGMENT

THE COURT:

INTRODUCTION

1                     The appellants contend that the respondent (Nestlé) has infringed the registered trade mark ‘LUSCIOUS LIPS’.  The mark is registered in the names of the third and fourth appellants who in turn are directors of each of the first and second appellants.  The first and second appellants conduct a family business selling veterinary animal, medical and human products.  (Unless the context otherwise requires, the appellants will be referred to collectively as Nature’s Blend). 

2                     It is common ground that Nestlé has used ‘luscious Lips’ on its product packaging and promotion.  However, at first instance, the primary judge concluded that Nestlé had not, in doing so, used ‘luscious Lips’ as a trade mark.  Further, his Honour concluded that there was no infringement of the registered trade mark as Nestlé had used the sign in good faith to indicate a descriptive characteristic of the goods.  It had done so honestly and without any ulterior motive.  It had been unaware of Nature’s Blend and the trade mark.  

3                     Nature’s Blend challenges both the infringement and the good faith conclusions.  On appeal, Nature’s Blend presses the trade mark infringement case.  Claims made at first instance based on the tort of passing off and misleading and deceptive conduct under the Trade Practices Act 1974 (Cth) have not been pursued. 

4                     For reasons indicated below, the primary judge was correct.

BACKGROUND

5                     In 1891, ‘lollies’ under the ‘Allen’s’ mark were first manufactured and sold in Australia.  In 1967, Allen’s was registered as a trade mark in respect of confectionery. 

6                     Nestlé is a large corporation.  It has been in the food business, including confectionery, for many years.  It acquired the Allen’s lolly business in 1989.  Nestlé manufactures approximately 75 product lines under the Allen’s trade mark.  Allen’s lollies have been the market leader in the Australian lollies market for a considerable time and Allen’s is a well known mark to Australian consumers of confectionery. 

7                     A ‘RETRO PARTY MIX’ range of lollies was first sold by Nestlé in May 2007.  This was preceded by a development phase commencing in July 2006.  As part of that process, in January 2007, Nestlé developed the first version of what has been described in the cases, including this one, as a ‘blurb’ to describe its product.  It was to appear on the back of its packaging and originally read:

‘That’s right all your old favourites are back so put on those flaires [sic] & party on down with … cool COLA BOTTLES, those radical RACING CARS, HUNNY GUMMY BEARS, totally freeeekie Teeth, gorgeous GUMMY LIPS, pimping PINEAPPLES and outrageous RASPBERRIES’

8                     In the next month Nestlé decided not to use ‘GUMMY LIPS’ because the lip lollies were jellies and not gum based.  It chose to refer to the lip shaped lollies as being ‘luscious Lips’.  The Brand Manager for Nestlé, Ms Haylock, was responsible for deciding upon the word ‘luscious’ in describing the Lips.  Ms Haylock gave evidence which was accepted that she chose the word ‘luscious’ for its appetite appeal as a food cue, that it was seen as fun and it worked well with the alliteration already used for the other lollies.  (Whether she personally or another employee initially came up with the idea was less clear). 

9                     As a result, the revised blurb read:

That’s right! All your old favourites are back, so put on those flares & get ready to party! Up to 7 lolly varieties including … cool COLA Bottles, those radical Racing Cars, yummy Honey flavoured Bears, totally freeeekie Teeth, luscious Lips, partying Pineapples and outrageous Raspberries. 

10                  The business owned by the first and second appellants was started in 1986 by the third and fourth appellants.  In 1988 the second appellant was incorporated to conduct the business.  In July 2007, the first appellant was incorporated and joined in the activity of promoting the business and relevant brands.  Although initially Nature’s Blend’s business was confined to the sale of veterinary and medical products, in 2004 the business expanded into products for human consumption including confectionery. 

11                  In January 2006, the fourth appellant decided upon the name of ‘LUSCIOUS LIPS’ as a trade mark for confectionery.  At about that time, Nature’s Blend engaged a third party to manufacture lip shaped chocolates in a green wrapper.  These were given away to prospective customers with a label on the chocolates bearing the words ‘LUSCIOUS LIPS’ with ‘NATURE’S BLEND’ underneath on a blank background.  The chocolates were also provided in a small transparent box which contained a card showing the words ‘LUSCIOUS LIPS’ on the base of the box. 

12                  On 12 March 2007, the third and fourth appellants, before embarking on sales, applied for the ‘LUSCIOUS LIPS’ trade mark registration in respect of goods including confectionery.  At this stage, there had been no sales by Nature’s Blend of any of their ‘LUSCIOUS LIPS’ products. 

13                  The first sales of Nestlé’s RETRO PARTY MIX product was in May 2007 at a time when the primary judge found that Nature’s Blend’s reputation in ‘LUSCIOUS LIPS’ was not substantial and the promotion of the name was in its infancy.  His Honour observed that only a small fraction (significantly less than 10% of the Nature’s Blend business) was for products for human consumption. 

14                  In August 2008, Nestlé of its own choice commissioned new package designs which did not include reference to ‘luscious Lips’.  This decision was not as a result of any approach or concern expressed by Nature’s Blend.  At this stage Ms Haylock who was in charge of brand promotion had still not heard of Nature’s Blend or their product.  The evidence of Ms Haylock was that it was not until very much later (October 2009) that she first heard of Nature’s Blend or their mark ‘LUSCIOUS LIPS’.  This occurred when she was first contacted by Nestlé’s corporate Counsel. 

15                  In February 2009, Nestlé made a presentation to Woolworths which included its new packaging and shortly after it proceeded to use the new packaging which did not refer to ‘luscious Lips’.  The new blurb on the back of the packet simply read ‘Up to seven lolly varieties including pineapples, cola bottles, racing cars, honey bears, teeth, lips, ripe raspberries’. 

16                  The claim advanced by Nature’s Blend relates to the conduct of Nestlé during the confined period up to the date of this further launch.  Although the duration was less than two years, Nature’s Blend points to confidential evidence illustrating that the volume of sales in this general market is considerable.  Nevertheless the trial at first instance was as to liability alone. 

STATUTORY FRAMEWORK

17                  In relation to the allegation of trade mark infringement, the following provisions of the Trade Marks Act 1995 (Cth) (the Act) arise on Nature’s Blend’s argument and Nestlé’s defence:

6          Definitions

…

signincludes the following or any combination of the following, namely, any letter, word, name, signature, numeral, device, brand, heading, label, ticket, aspect of packaging, shape, colour, sound or scent.

7          Use of trade mark

…

(4)        In this Act:

use of a trade mark in relation to goodsmeans use of the trade mark upon, or in physical or other relation to, the goods (including second‑hand goods).

…

17        What is a trade mark?

A trade markis a sign used, or intended to be used, to distinguish goods or services dealt with or provided in the course of trade by a person from goods or services so dealt with or provided by any other person.

120      When is a registered trade mark infringed?

(1)        A person infringes a registered trade mark if the person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered.

…

18                  A defence of good faith is established under s 122 of the Act which, relevantly, provides:

122      When is a trade mark not infringed?

(1)        In spite of section 120, a person does not infringe a registered trade mark when:

…

(b)        the person uses a sign in good faith to indicate:

(i)         the kind, quality, quantity, intended purpose, value, geographical origin, or some other characteristic, of goods or services; or

…

RELEVANT PRINCIPLES

19                  In considering the reasons of the primary judge and the arguments put on appeal, it is necessary to bear in mind the principles governing whether Nestlé used ‘luscious Lips’ as a trade mark.  They may be summarised as follows:

1.                  Use as a trade mark is use of the mark as a ‘badge of origin’, a sign used to distinguish goods dealt with in the course of trade by a person from goods so dealt with by someone else: Coca-Cola Co v All-Fect Distributors Ltd (1999) 96 FCR 107 at [19]; E & J Gallo Winery v Lion Nathan Australia Pty Limited (2010) 265 ALR 645 at [43].

2.                  A mark may contain descriptive elements but still be a ‘badge of origin’: Johnson & Johnson Australia Pty Ltd v Sterling Pharmaceuticals Pty Ltd (1991) 30 FCR 326 at 347- 348; Pepsico Australia Pty Ltd v Kettle Chip Co Pty Ltd (1996) 135 ALR 192; Aldi Stores Ltd Partnership v Frito-Lay Trading GmbH (2001) 54 IPR 344 at [60].

3.                  The appropriate question to ask is whether the impugned words would appear to consumers as possessing the character of the brand: Shell Company of Australia Ltd v Esso Standard Oil (Australia) Ltd (1963) 109 CLR 407 at 422.

4.                  The purpose and nature of the impugned use is the relevant inquiry in answering the question whether the use complained of is use ‘as a trade mark’: Johnson & Johnson at 347 per Gummow J; Shell Company at 422.

5.                  Consideration of the totality of the packaging, including the way in which the words are displayed in relation to the goods and the existence of a label of a clear and dominant brand, are relevant in determining the purpose and nature (or ‘context’) of the impugned words: Johnson & Johnson at 347; Anheuser-Busch, Inc v Budějovický Budvar, Národní Podnik (2002) 56 IPR 182.

6.                  In determining the nature and purpose of the impugned words, the Court must ask what a person looking at the label would see and take from it: Anheuser-Busch at [186] and the authorities there cited.

It will be necessary to discuss these principles in further detail below.

REASONING OF THE PRIMARY JUDGE

20                  Nature’s Blend took issue with three different classes of acts of Nestlé, although they were collectively dealt with by the parties as being the sale of the ‘RETRO PARTY MIX’ confectionery product.  Nothing turns on the other forms of promotion of the different usages by Nestlé.  They were not treated discretely either before the primary judge or on appeal.

21                  Nature’s Blend argued that the phrase luscious lips was inherently distinctive and newly coined by the fourth appellant in relation to confectionery.  This was because, as of 12 March 2007, the phrase had another meaning quite apart from confectionery in that it described ‘the shape and physical appearance of female human lips’. 

22                  The primary judge noted that a mark may have a descriptive element but still serve as a badge of origin. 

23                  His Honour reached the conclusion that the plain meaning of the words ‘luscious Lips’ would be taken by consumers as being descriptive or laudatory of the lip shaped confectionery in the RETRO PARTY MIX product.  (It was accepted that the words ‘luscious Lips’ was substantially identical with or deceptively similar to the ‘LUSCIOUS LIPS’ mark). 

24                  Having concluded the use of ‘luscious Lips’ was descriptive, the primary judge then turned to consider the question of whether Nestlé was also using ‘luscious Lips’ as a trade mark.  The question was approached on the basis of whether the words ‘luscious Lips’ would have appeared to consumers as possessing the character of a brand, that is to say, whether the words were used so as to indicate a connection in the course of trade between Nestlé and the confectionery. 

25                  The primary judge examined the context of the usage, noting that ‘luscious Lips’ appeared on the back of the confectionery packet as part of the blurb.  In contrast, on the front of the packet was Nestlé’s well known trade mark ‘ALLEN’S’ appearing prominently in yellow letters over the red background colour of the confectionery packet.  The symbol ‘®’ accompanied the ALLEN’S mark indicating to consumers that the mark was registered.  The ALLEN’S mark occupied approximately the top third of the space on the front of the packet.  Below that ALLEN’S mark in slightly smaller font but still prominent on the packaging was the product title ‘RETRO PARTY MIX’.  (This title is not a registered mark).  Splashed across the front of the packet were pictures of the different types of lollies that could be found inside it, including an image of the lip shaped lolly. 

26                  His Honour concluded (at [39]) that ‘luscious’ was descriptive and was intended to convey to consumers a laudatory perhaps even humorous description of such of Nestlé’s confectionery contained in the RETRO PARTY MIX product which are shaped as lips.  This it did in the same way that the expression ‘cool Cola Bottles’ or ‘yummy Honey flavoured Bears’ provide a laudatory description of confectionery and of the products that are shaped like cola bottles and bears respectively. 

27                  His Honour appeared to be of the view that some consumers may and some may not read the blurb or marketing narration on the back of the pack at all.  However, for those consumers who took the time to do so, his Honour’s impression was that they would have taken ‘luscious Lips’ as essentially a humorous way to describe the product’s contents, not as a badge of origin.

28                  A further consideration for his Honour was the fact that the impact of the words ‘luscious Lips’ was diluted by the prominence of the well known mark ‘ALLEN’S’ on both the front and back of the packaging along with the mark ‘NESTLÉ’ appearing on the back of the packaging.  As his Honour observed (at [40]), it was those two registered marks that did perform the role of distinguishing Nestlé’s confectionery from that of others.  The words ‘ALLEN’S’ and ‘NESTLÉ’ were prominent, especially when contrasted with the positioning and use of the words ‘luscious Lips’. 

29                  On the good faith defence, the primary judge was of the view that Nestlé was not aware of Nature’s Blend use of the words ‘luscious Lips’ and therefore had not acted in bad faith (at [45]). 

ARGUMENTS ON APPEAL

30                  Although several arguments and several grounds of appeal were advanced, the trade mark infringement arguments were put together, followed by the good faith defence arguments. 

WAS ‘luscious Lips’ USED AS A TRADE MARK?

31                  On the first and major argument as to breach, Nature’s Blend complains that the primary judge gave insufficient attention to the proper meaning of their own mark.  Rather, and it is said, erroneously, the primary judge focussed only on the conduct of and usage by Nestlé of the expression ‘luscious Lips’.  It was argued that because it was the registered mark which must be used without authority if infringement was to be established, the Court must ‘look first to the mark as registered and ascertain its meaning’.  Only then was the Court able to decide whether Nestlé had used that mark.  In particular, the complaint was that the primary judge had failed to identify that the words in the mark were registered in relation to confectionery generally, not just lip shaped confectionery.

32                  In that regard, it was contended for Nature’s Blend that the evidence pointed away from the expression ‘luscious lips’ having any meaning in relation to confectionery before the fourth appellant coined the trade mark.  No person other than the fourth appellant was identified as having referred to confectionery by use of the words ‘luscious lips’ or even ‘luscious’ or ‘lips’.  Moreover, it was argued that ‘luscious lips’ had a distinct meaning quite apart from confectionery in that it described the shape and physical appearance of female human lips. 

33                  There is no requirement that the meaning of the registered mark must first be ascertained.  It is to be noted that there was no dispute below that the words used by Nestlé were substantially identical to those used by Nature’s Blend.  Had there been an issue on this topic, the evaluation of the registered mark would have required close consideration.  In order to determine whether there had been substantial identity or deceptive similarity, the mark of Nature’s Blend would have required close consideration in order to ascertain its essential features.  In doing this, the importance of the differences and similarities of the Nestlé usage would be assessed having regard to the essential features of the registered mark:  Shell Company at 414. 

34                  As to the argument that the primary judge erred by failing to ascribe a meaning to ‘LUSCIOUS LIPS’ as at 12 March 2007 independently and apart from considering the alleged in infringing conduct, there is no error apparent in this approach.  It is the impugned conduct that is the relevant point of the inquiry: see [19(3)] and [19(4)] above.  As Gummow J observed in Johnson & Johnson (at 347), after citing Kitto J in Shell Company:

When the issue is one of infringement, a pivotal question is whether the use complained of is use by the alleged infringer as a trade mark.  The answer to that question requires an understanding of the “purpose and nature” of the impugned use.  (emphasis added)

35                  Nature’s Blend stresses that prior to the expression ‘luscious lips’ coming to the fourth appellant’s mind as a brand for chocolate, those words had not ‘sprung unaided’ in anyone’s mind to be used in relation to confectionery.  Moreover it was not a natural, obvious or inevitable description of confectionery.  It was thus inherently distinctive and hence well adapted to be used as a badge of origin for the proprietor of confectionery sold under or by reference to those words.  Therefore ‘luscious lips’, when used in relation to confectionery, could have a variety of connotations for the reasonable consumer.  This was a strong indicator that any commercial usage of the words in relation to confectionery by a competitor was trade mark usage. 

36                  In Lion Nathan (at [43]), the High Court approved the following test for use ‘as a trade mark’ as formulated by the Full Court of this Court constituted by Black CJ, Sundberg and Finkelstein JJ in Coca Cola (at [19]):

Use “as a trade mark” is use of the mark as a “badge of origin” in the sense that it indicates a connection in the course of trade between goods and the person who applies the mark to the goods …  That is the concept embodied in the definition of “trade mark” in s 17 - a sign used to distinguish goods dealt with in the course of trade by a person from goods so dealt with by someone else.

37                  The appropriate question is whether the words ‘luscious Lips’ would have appeared to consumers as possessing the character of a brand:  see [19(1)] to [19(3)] above.  This was the question correctly identified by the primary judge (at [23]) citing Shell Company per Kitto J at 425 and Johnson & Johnson per Gummow J at 348.  As noted by Kitto J in Shell Company (at 422), context is all important. 

38                  Additionally, Allsop J in Anheuser-Busch (at [184]-[186]) said:

184       The notion of trade mark use is now given content by ss 7 and 17 of the TM Act.  See [129] above.

185       The task is to examine the way the words are used in their context, including the totality of the packaging, to assess their nature and purpose in order to see whether they are used to distinguish the goods from goods of others:  Shell Co above,at 422-5; Mark Foys Ltd, above at CLR 198-200 IPR 473-5; Johnson & Johnson Aust Pty Ltd v Sterling Pharmaceuticals Pty Ltd (1991) 30 FCR 326, 335, 342-5, 347-9; 101 ALR 700, 717-20,723-5; 21 IPR 1 at 11-12; 19; 24-5; Pepsico Australia, above at 162-3, 167-9 and 178-82; Musidor BV v Tansing (t/as Apple Music House) (1994) 52 FCR 363, 376-7; Koninklijke Philips Electronics NV v Remington Products Australia Pty Ltd (2000) 100 FCR 90 at 100-1; 177 ALR 167 at 175-6; 48 IPR 257, 265-6; and Aldi Stores, above at [22] - [30] and [54] - [58].

186       The assessment is made from the perspective of what a person looking at the label would see and take from it, as to the purpose and nature of its use:  Shell Co, above at 425; Wrigley’s (A’sia (sic)) Ltd v Life Savers (A’asia) Ltd (1936) 37 SR (NSW) 9 at 16; Aldi Stores, above at[22] - [24] and [76].

39                  In addressing this question, the primary judge correctly noted that the context is all important:  see [19(5)] and [19(6)] above.  His analysis did involve examining the way in which the words were used in their context including the totality of the packaging in order to assess the purpose and nature of the words from the perspective of a consumer reading the label.  In this regard, the primary judge noted the observation of Allsop J in Anheuser-Busch at [191] and the authorities cited by Allsop J, noting that the branding function can be carried out in different places on packaging with different degrees of strength and subtlety and observing that ‘[O]f course, the existence on a label of a clear dominant ‘brand’ is of relevance to the assessment of what would be taken to be the effect of the balance of the label’. 

40                  The primary judge correctly noted that the words ‘luscious Lips’ are significantly less prominent than the word ‘CAPLETS’ in Johnson & Johnson and the word ‘Kettle’ in Pepsico where the impugned wording appeared on the front of each of the packages in each instance.  In neither instance was the usage held to be as a trade mark.  His Honour correctly observed (at [30]-[32]):

30.       In Pepsico Australia Pty Ltd (t/as Frito-Lay Australia) v Kettle Chip Co Pty Ltd (1996) 135 ALR 192 the Full Court held that the word ‘KETTLE’ was not used as a trade mark in respect of kettle cooked potato chips. Relevantly, the potato chips packet also prominently displayed the well‑known trade mark ‘Thins’ and another well-known phrase ‘Double Crunch’. Sackville J, with whom Lockhart J agreed, said at 213:

The purpose and effect of the words are to be determined by having regard to the context in which they are used. In this connection, the fact that Frito‑Lay has used the words in conjunction with its own distinctive mark (THINS and, perhaps, DOUBLE CRUNCH) does not prevent the use being for the purpose of distinguishing its chips from those of other traders. However, the use of the distinctive marks on Frito‑Lay’s packets has a bearing on whether the words ‘Kettle Cooked’ have been used to show the commercial origin of the potato chips in the packets, or whether they have some other purpose and effect. It is necessary to consider the words used, as they present themselves to buyers or potential buyers of Frito‑Lay’s chips who are to form a view about what they are meant to connote.

31.       In Anheuser‑Busch 56 IPR 182 Allsop J held there was trade mark use, and in relation to other marks on the packaging said at [191]:

It is not to the point, with respect, to say that because another part of the label (the white section with “Budejovicky Budvar”) is the obvious and important brand, that another part of the label cannot act to distinguish the goods. The “branding function” if that expression is merely used as a synonym for the contents of ss 7 and 17 of the TM Act, can be carried out in different places on packaging, with different degrees of strength and subtlety. Of course, the existence on a label of a clear dominant “brand” is of relevance to the assessment of what would be taken to be the effect of the balance of the label.

32.       In Johnson & Johnson Australia Pty Limited 30 FCR 326the Full Court held that the word ‘CAPLETS’ on a paracetamol product called ‘TYLENOL’ had not been used as a trade mark. At 341 Lockhart J said:

The context in which CAPLETS appears on the TYLENOL packaging and in its advertising demonstrates plainly in my opinion, that the use is essentially descriptive and not a badge of origin in the sense that it indicates a connection in the course of trade between the product TYLENOL and the appellant. A person looking at the packaging would assume that the word CAPLETS describes or indicates the shape of the product contained in it or the dosage form.

41                  Nature’s Blend contends that the issue of trade mark usage ought to be decided on the basis that the reasonable consumer would consider all of the RETRO PARTY MIX packaging, and would read the back of the packets, as well as the front.  The front of the packaging contained little information about the product itself except illustrations, the manufacturer’s brand and reference to it being a RETRO PARTY MIX.  Nestlé accepted that reasonable consumers would be expected to look at the back of Nestlé’s product before purchasing but that is not the same as accepting that all consumers would actually read the blurb. 

42                  Even if most consumers may look at the back of Nestlé’s packet before purchase or even read the blurb, such an inspection would simply reveal that one of the mixed lollies in Nestlé’s product is described in a light and amusing context as being ‘luscious Lips’.  However, by the time the consumer has read the blurb, if indeed the consumer does so, he or she has already seen that it is in an Allen’s brand of product with the name of the product variant being RETRO PARTY MIX.  If the consumer does go on to read the blurb, the consumer is well aware by that stage that the brand and commercial source is Allen’s.  Further, on looking at the back of the packet the consumer would also see another very well known trade mark, namely, NESTLÉ.  The consumer then is left in no doubt as to the commercial origin of the product by the time he or she has read the relatively long discursive and humorous description referring to one of the lolly varieties as being ‘luscious Lips’.

43                  Nature’s Blend submits that the primary judge erred in appearing to reason that as the mark was descriptive, therefore Nestlé’s use of the mark in RETRO PARTY MIX confectionery was not a badge of origin.  That was not the approach taken by the primary judge.  Many marks may be partly descriptive.  But this says nothing about whether or not a sign has been used as a trade mark:  see [19(2)] above.  In Aldi Stores Ltd (at [60]) Lindgren J said:

Aldi’s submission is to the effect that a word which, devoid of context (as typed on an application for registration of a trade mark) may be understood to be “entirely descriptive”, can never be used as a trade mark.  I do not accept the submission.  I will have occasion later to discuss in more detail what his Honour meant when he used the expression “entirely descriptive” (see [167]-[172] below), but it suffices for the present to note that it is well established that words which, devoid of any context or which in one particular context may be understood to be descriptive, may nonetheless be used as a trade mark: JB Stone & Co Ltd v Steelace Manufacturing Co Ltd (1929) 46 RPC 406; Bass, Ratcliff & Gretton Ltd v Nicholson & Sons Ltd (1931) 49 RPC 88 at 109 per Lord Macmillan; Picot Ltd v Goya Ltd [1967] RPC 573 at 578;  James Watt Constructions Pty Ltd v Circle-E Pty Ltd [1970] 3 NSWR 481 per Hope J;  Kolotex Glo Australia Pty Ltd v Sara Lee Personal Products (Aust) Pty Ltd (t/a Hilton Hosiery) (1993) 26 IPR 1 per Wilcox J.

44                  Similarly, Gummow J in Johnson & Johnson said (at 347-348):

Where the trade mark allegedly used by the defendant comprises ordinary English words (such as “Page Three”, considered by Slade J in News Group Newspapers Ltd v The Rocket Record Co Ltd [1981] FSR 89 at 102) then, as this decision illustrates, that circumstance may be taken into account by the court in the process of reasoning by which it accepts or rejects a submission that the use in question is not a trade mark use but a description of the goods in question. To say that is not to gainsay the point made by Dixon CJ in Mark Foys Ltd v Davies Coop and Co Ltd (the Tub Happy case) (1956) 95 CLR 190 at 194-195 that language is not always used to convey a single, clear idea; a mark may have a descriptive element but still serve as a badge of trade origin. However, where the issue is one of infringing use by use of a word mark (as in the present case), the fundamental question remains, to paraphrase what was said by Williams J in the same case (supra) (at 205), whether those to whom the user is directed are being invited to purchase the goods (or services) of the defendants which are to be distinguished from the goods of other traders “partly because” (emphasis supplied) they are described by the words in question.  (emphasis added).

45                  Nature’s Blend also relied in its argument on the comparative packaging of Nestlé’s CHEWMIX product.  It is also a mix of confectionery.  This product was sold at the same time and through the same trade channels in which the RETRO PARTY MIX product was sold.  The contents of the CHEWMIX product are identified as ‘SHERBIES, MILKO CHEWS and REDSKINS …’.  Each of these names is a registered trade mark of Nestlé in relation to confectionery.  The contents of the CHEWMIX pack are clearly identified by sub‑brand and represented on the rear panel of the packaging.  Nature’s Blend also points out that SHERBIES can be considered to be somewhat descriptive (orange chews fizzy sherbet centre).  Likewise, MILKO CHEWS (chews with milk), and REDSKINS (raspberry flavoured confectionery).  Nonetheless, each mark as referred to on the rear of the panel of the Chewmix product was used as a badge of origin. 

46                  Nature’s Blend argues that the primary judge erred by diluting the significance of ‘luscious Lips’ as it appears on the packaging, by the prominence of the registered ALLEN’S and NESTLÉ marks.  Allen’s differentiates the products which it sells by sub-brands and the illustration of Allen’s products.  Some of those sub-brands are registered trade marks, for example, SHERBIES, REDSKINS, MILKO CHEWS and KILLER PYTHONS.  Others are not, such as RETRO PARTY MIX. 

47                  However the presentation of the CHEWMIX product is quite different from the presentation of the RETRO PARTY MIX.  In the case of the former, SHERBIES, REDSKINS and MILKO CHEWS are depicted on the front of the CHEWMIX product as distinctively wrapped and individually branded products.  There is no corresponding depiction on the RETRO PARTY MIX product.  The only reference to the expression ‘luscious Lips’ at all appears on the back of the packet within the ‘blurb’.

48                  The primary judge was correct in taking into account the prominence of the registered ALLEN’S and NESTLÉ marks on the packaging in contrast to the location and style of the expression ‘luscious Lips’.  That approach was entirely in conformity with the authorities on which the primary judge relied. 

49                  Nestlé’s use of ‘luscious Lips’ did not infringe the trade mark. 

DID NESTLÉ ESTABLISH A GOOD FAITH DEFENCE

50                  As the primary judge noted, it was not necessary to consider this aspect of Nature’s Blend’s argument at trial, the infringement contention having failed.  Nevertheless for completeness his Honour did so. 

51                  The primary judge concluded that he was satisfied that Nestlé had not ‘acted in bad faith’.  Nature’s Blend argues that such a conclusion is not the same as the statutory requirement that Nestlé use the sign ‘in good faith’.  Nature’s Blend goes on to say that the defence under s 122(1)(b) of the Act puts the onus of proof on Nestlé whereas, in substance, the primary judge wrongly reversed the onus of proof. 

52                  This contention overlooks that the primary judge, speaking of the statutory defence, said (at [42]):

To rely on this defence, the respondent must show it acted honestly and without any ulterior motive. See Johnson & Johnson Australia Pty Limited 30 FCR 236 per Gummow J at 353-354; Alcon Inc v Bausch & Lomb (Australia) Pty Ltd [2009] FCA 1299.

53                  Moreover, the primary judge went on to analyse the evidence of Nestlé’s Brand Manager. 

54                  It was clear from [42] of the reasons, that his Honour understood that the onus was on Nestlé.  The analysis of the evidence given by Ms Haylock, the Brand Manager for Nestlé, was that she was not aware of Nature’s Blend or their ‘luscious Lips’, chocolate or jelly products.  By this stage, Nestlé had ceased using the expression ‘luscious Lips’ but for reasons quite unrelated to Nature’s Blend’s trade mark.  His Honour also concluded that the lack of knowledge of Ms Haylock, notwithstanding her responsibility on behalf of Nestlé for being informed as to the Australian confectionery market was not surprising as there had been no evidence of any sales of products by Nature’s Blend prior to Nestlé’s launch. 

55                  Nature’s Blend relied on the fact that in cross-examination Ms Haylock was unable to recall in what circumstances ‘luscious Lips’ came to be used.  Nature’s Blend argued that other persons who appear also to have been involved in the selection of the words ‘luscious Lips’ on the RETRO PARTY MIX packaging were not called and, accordingly, it should have been inferred that their evidence would not assist in establishing the good faith defence. 

56                  The primary judge was not bound to draw such an inference, nor should he have done so.  The evidence of Ms Haylock was that she made the decision to use ‘luscious Lips’ and she explained why.  It is true that on cross-examination she could not positively recall whether she or someone in her team first came up with the use of the expression in the blurb but in all the circumstances, this was immaterial.  There was no hint of evidence of awareness of Nature’s Blend’s mark.  The effect of the primary judge’s conclusions was that:

1.                  when Nestlé completed its final sign off on the artwork for its product around 7 March 2007, Nature’s Blend had not yet applied for their trade mark (this occurring on 12 March 2007) and their application could not be searched on the Register of Trade Marks.  There was no other basis upon which Nestlé could possibly have been aware of Nature’s Blend’s luscious lips product; and

2.                  when Nestlé made its first sales, on 16 May 2007, Nature’s Blend’s trade mark application was pending on the Register but Nestlé still had no other reason to know of Nature’s Blend or their luscious lips product. 

57                  The primary judge’s acceptance of the good faith defence was entirely appropriate. 

CONCLUSION

58                  The appeal is dismissed with costs.

Associate:

Dated:         13 September 2010