FEDERAL COURT OF AUSTRALIA

Nature's Blend Pty Ltd (ACN 126 406 488) v Nestle Australia Ltd (ACN 000 011 316) [2010] FCA 198

THE COURT ORDERS THAT:

1.                  The application be dismissed.

2.                  The applicants pay the respondents costs of the application.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

Background

1                     The first and second applicants conduct a small family owned business that sells veterinary, animal, medical and human products. The third and fourth applicants are directors of each of the first and second applicant and are the registered owners of Australian Trade Mark No 1165481 for the words ‘LUSCIOUS LIPS’ for various goods, including confectionary, in class 30.

2                     The business was started in 1986 by the third and fourth applicants. In 1988 the second applicant was incorporated to conduct the business and then in 2007 the first applicant was incorporated. At present, the first and second applicants promote the business and the relevant brands. Unless otherwise indicated, I will refer to the first and second applicants and their two directors, the third and fourth applicants, together as the ‘applicants’.

3                     Initially, the applicants’ business was confined to the sale of veterinary, animal and medical products, however, some time in 2004, the applicants expanded into human products including confectionary.

4                     The priority date of the ‘LUSCIOUS LIPS’ Trade Mark is 12 March 2007, being the date of lodgement of the trade mark application. On the applicants evidence, the mark was thought of in early 2006, at which time a logo which incorporated a picture of green lips was printed on some of the applicants’ products. At this time, the applicants engaged a third party to manufacture lip shaped chocolates in a green wrapper. These chocolates were given away to customers and prospective customers in order to market the applicants’ business. The label on the chocolates said ‘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 bottom of the box.

The respondent’s marks

5                     The respondent acquired the Allen’s lolly business in 1989 and currently manufactures approximately 75 product lines under the ‘ALLEN’S’ trade mark. Lollies have been manufactured and sold in Australia under the ‘ALLEN’S’ mark since 1891, and ‘ALLEN’S’ has been registered as a trade mark in respect of confectionary since 1967. Allen’s lollies have been the market leader in the Australian lollies market for a considerable time. ‘ALLEN’S’ is a well-known mark to Australian consumers of confectionary.

6                     From around May 2007 to around March 2009 the respondent manufactured, distributed and sold confectionary under its mark ‘ALLEN’S’ and the product name ‘RETRO PARTY MIX’ in packaging which included the expression ‘luscious Lips’ on the rear of its packaging as follows:

That’s right! All your favourites are back, so put on those flares and 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. [emphasis added]

7                     The Retro Party Mix range of lollies was first sold in May 2007 following a development process that began in about July 2006. A draft of the narration set out at [6] was provided by a third party design agency and, at this stage of the process, the lips were referred to as ‘gorgeous GUMMY LIPS’. After receiving internal advice that the word ‘gummy’ should not be used as the lips lollies are jellies and not gum-based confectionary, it was decided that the lips lollies would be referred to as ‘luscious Lips’. Other changes were effected to the draft provided by the design agency before the final version: one such change was the amendment of the capital ‘P’ in ‘Partying Pineapples’ to read ‘partying Pineapples’.

8                     The Brand Manager in the Confectionary and Snacks Division of the respondent, Ms Haylock, gave evidence that the word ‘luscious’ was chosen for its appetite appeal as a food cue, that it was seen as fun and that it worked well with the alliteration already used for the other lollies.

Trade mark legislative provisions

9                     The relevant provisions of the Trade Marks Act 1995 (Cth) (the Act) are set out below.

10                  Section 120(1) of the Act provides that:

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.

Section 6 defines ‘sign’ as including:

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.

Section 7(4) provides that:

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

Section 17 defines a trade mark as:

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.

The applicants’ claim

11                  The applicants propound three causes of action: trade mark infringement under the Act, the tort of passing off and misleading and deceptive conduct under the Trade Practices Act 1974 (Cth). Orders were made on 25 September 2009 that the question of quantum be postponed pending the determination of all questions of liability.

12                  The parties agreed that the alleged infringing conduct first occurred in May 2007. The respondent successfully objected to evidence of the applicants’ business activities after this date on the grounds of relevance. In respect of the trade mark infringement action, the applicants accepted that the relevant comparison is between the ‘LUSCIOUS LIPS’ Trade Mark and the respondent’s conduct in the course of trade. The applicants also accepted that, in respect of the passing off claim, the relevant date on which to assess the claim was May 2007. However, with respect to the trade practices claim, the applicants submitted that because the conduct complained of was continuing, or at least continued for some time after May 2007, the Court should consider evidence of the applicants’ business activities after this date.

13                  In ruling on the objections to evidence, I held that the applicable date for the trade practices claim was May 2007. In my view the case law is clear: although a court may consider evidence after the relevant date for the purpose of relief, it may not do so in relation to liability. See Thai World Import & Co Ltd v Shuey Shing Pty Ltd (1989) 17 IPR 289 at 302 and Health World Ltd v Shin-Sun Australia Pty Ltd (2008) 75 IPR 478 at [76]. As this hearing concerned only the issue of liability, evidence as to the applicants’ business after May 2007 was not relevant.

14                  The applicants took issue with the following acts of the respondent.

·                    The sale (and offer for sale) of the Retro Party Mix confectionary product.

·                    Promotional material which referenced ‘luscious Lips’, including that which is available online at www.nestle.com.au. Specifically, the applicants referred to the July 2007 edition of a magazine published by the respondent titled Plenty. This particular edition was 23 pages long and on page 21 under the hearing ‘What’s news?’ a promotion for the Retro Party Mix product appeared. The promotion included a picture of the front of the product packaging, and the words ‘Nestle is turning back time to bring you new ALLEN’s Retro Party Mix’ were followed by the words quoted at [6].

·                    The offer for sale of the Retro Party Mix Product on the website www.goodygoodygumdrops.com.au. The website shows a picture of the front of the product packaging, along with the words ‘Allen’s Retro Party Mix 1kg. A fantastic selection of all of our favourite Allen’s Lollies from years gone by. Great for all ages’, followed by the words quoted at [6], and then followed by the words ‘All Delicious! All FUN! 99% Fat Free!’. There was a similar promotion on the websites facebook.com and ebay.com.

15                  In these reasons I will refer to the allegedly infringing actions of the respondent together as the sale of the Retro Party Mix confectionary product (which is how it was presented by each party in oral submissions). However, I have considered each of the allegedly infringing uses set out at [14].

Is ‘luscious Lips’ descriptive or laudatory of confectionary?

16                  The applicants submit that the phrase ‘luscious Lips’ is not a phrase which ordinarily and naturally describes confectionary and is ‘in no sense laudatory of confectionary, whether in relation to the shape, appearance, or taste’, nor does it refer to the character or quality of confectionary. On their view, the phrase is inherently distinctive and newly-coined by the fourth applicant in relation to confectionary. They do say that as of 12 March 2007, the phrase had another meaning quite apart from confectionary in that it described the shape and physical appearance of female human lips.

17                  The respondent sought assistance from the dictionary definitions of ‘luscious’ to show that the phrase is descriptive. The Macquarie Dictionary gives these meanings:

Adj. 1. Highly pleasing to the taste or smell; luscious peaches. 2. sweet to the senses or the mind. 3. very luxurious; extremely attractive. 4. sweet to excess; cloying.

18                  The Oxford English Dictionary gives this meaning:

1.         Of food, perfumes, etc: Sweet and highly pleasant to the taste or smell.

19                  Based on these definitions, the respondent submitted that the natural and ordinary meaning of ‘luscious Lips’ in the context of confectionary is that such confectionary is lip shaped and sweet to taste, and accordingly that the adjective is descriptive and laudatory of the product. In its view, the word ‘luscious’ was used as part of a marketing blurb to describe the individual lollies inside the packet.

20                  A mark may have a descriptive element but still serve as a badge of origin. See Aldi Stores Ltd Partnership v Frito-Lay Trading Co GMBH (2001) 54 IPR 344 at [60].

21                  In Johnson & Johnson Australia Pty Limited v Sterling Pharmaceuticals Pty Limited (1991) 30 FCR 326 Gummow J said at 347:

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 …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.

22                  In my view, the plain meaning of the words ‘luscious Lips’ would be taken by consumers as descriptive or laudatory of confectionary in the Retro Party Mix product.

Did the respondent use ‘luscious Lips’ as a trade mark?

23                  The key question is whether the words ‘luscious Lips’ would have appeared to consumers as possessing the character of a brand, that is to say, were the words used so as to indicate a connection in the course of trade between the respondent and the confectionary. See Shell Co of Australia Ltd v Esso Oil (Aust) Ltd (1963) 109 CLR 407; Johnson & Johnson Australia Pty Limited 30 FCR 326.

24                  The words ‘luscious Lips’ are substantially identical with or deceptively similar to the ‘LUSCIOUS LIPS’ mark. However this in itself is not sufficient to infringe; the context is all-important. See Shell Co of Australia Ltd 109 CLR at 422 per Kitto J.

25                  The approach to ‘trade mark use’ was neatly encapsulated by Allsop J in Anheuser‑Busch, Inc v Budějovický Budvar, Národní Podnik (2002) 56 IPR 182 at [184].56 IPR 182 at [184]–[186]:

The notion of trade mark use is now give content by ss 7 and 17 of the TM Act…

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…

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.

26                  The words ‘luscious Lips’ appear on the back of the confectionary packet as part of the blurb set out at [6]. On the front of the packet the respondent’s well-known trade mark ‘ALLEN’S’ appears prominently in yellow letters over the red background colour of the confectionary packet. The symbol ‘®’ accompanies the ‘ALLEN’S’ mark, indicating to consumers that the mark is registered. The ‘ALLEN’S’ mark occupies approximately the top third of the space on the front of the packet.

27                  Below the ‘ALLEN’S’ mark, in slightly smaller font, but still prominent on the packaging is the product title ‘RETRO PARTY MIX’. This title is not a registered mark. Also splashed across the front of the packet are pictures of the different types of lollies that can be in found inside.

28                  On the back of the product, the ‘ALLEN’S’ mark and the product description ‘RETRO PARTY MIX’ appear again, on the top left section of the packet. Above the ‘ALLEN’S’ mark the words ‘Quality Favourites since 1891’ appear. The words set out at [6] appear in yellow below the ‘ALLEN’S’ mark and the ‘RETRO PARTY MIX’ words, in a font size that is significantly smaller, so that the blurb sits in the middle of the left side of the packet. Significantly, the respondent’s trade mark ‘NESTLE’ and accompanying ‘®’ symbol appear on the top right of the packet in a font size that is similar to the words in the impugned blurb.

29                  The Retro Party Mix product is sold in varying sizes. Two sizes were in evidence: the 190g and 1kg. The packaging on the two sizes was essentially the same, save that the 190g packet had a small clear window on the lower front of the packet that enabled a person to see the confectionary inside, whereas the 1kg packaging was opaque.

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.

33                  The question of use as a mark also arises outside the infringement context, namely when deciding whether a mark has been used to establish distinctiveness to justify registration under s 41(5) or (6) of the Act. In Chocolaterie Guylian NV v Registrar of Trade Marks (2009) 258 ALR 545 I held that the shape of a seahorse was not capable of registration partly because the evidence failed to establish that the applicant’s seahorse shape was used as a mark. As in the present case, the applicants in Chocolaterie Guylian NV 258 ALR 545 used the seahorse shape on packaging alongside two other marks, one being the prominent GUYLIAN mark. At 575 I said:

It is by no means the only shape that features on Guylian’s packaging. Many of the other sea shell shapes are displayed with equal prominence…  On these boxes, the seahorse shape does not in my view function as a trade mark. It is not used in any sense to identify Guylian but to illustrate some examples of the elegance of the chocolates and the contents of the box more generally…it does not seem to me likely that consumers would conceive of the seahorse shape on Guylian’s boxes as a trade mark, so much as simply an example of the novelty shapes that Guylian manufactures.

34                  The applicants referred to the High Court’s decision in Mark Foy’s Limited v Davies Coop and Company Limited (1956) 95 CLR 190 where the majority (Dixon CJ and Williams J) held that the defendant’s use of the word mark ‘Tub Happy’ constituted infringement. At 195 Dixon CJ said:

Though [the defendant] did of course put forward the claim that “tub happy” means washable, it was a meaning it was necessary to suggest. It was not a meaning that had sprung unaided to the mind and it was not one which he was able to establish by reference to instances of known usage.

35                  This case does not assist the applicants. The words ‘Tub Happy’ are not analogous to ‘luscious Lips’ as in my view the latter expression, in the context in which it appears on the Retro Party Mix packet, does have a meaning that could spring ‘unaided to the mind’, namely, that of a confectionary product that has a sweet taste and is in the shape of lips. The expression is not meaningless; it has an inherent capacity to describe the confectionary: cf Wellness Pty Ltd v Pro Bio Living Waters Pty Ltd (2004) 61 IPR 242.

36                  In this case the words ‘luscious Lips’ are significantly less prominent than the word CAPLETS in Johnson & Johnson Australia Pty Limited 30 FCR 326 and KETTLE in Pepsico Australia Pty Ltd (t/as Frito-Lay Australia) 135 ALR 192. In those cases the impugned wording appeared on the front of the packet.

37                  The applicants submitted that because the Retro Party Mix product contains different lolly varieties, the origin of each lolly variety could be expected to be identified by reference to brand and sub-brands. This may be so. However, in my view a consumer looking at the words ‘luscious Lips’ as part of the descriptive narrative on the back of the Retro Party Mix confectionary packet would not be left thinking that those words are being used to distinguish this confectionary from the confectionary of others.

38                  When considering the evidence on use as a whole, I am not satisfied that the there has been ‘use as a trade mark’ for the following reasons.

39                  First, the word ‘luscious’ is descriptive and is intended to convey to consumers a laudatory, perhaps even humorous, description of such of the respondent’s confectionary contained in the Retro Party Mix Product which are shaped as lips, in the same way that the expression ‘cool Cola Bottles’ or ‘yummy Honey flavoured Bears’ provides a laudatory description of confectionary in the product that are shaped like cola bottles and bears respectively. It may be the case that some consumers would not read the marketing narration on the back of the pack at all. However, for those consumers who took the time to do so, my impression is that they would have taken ‘luscious Lips’ as essentially a humorous way to describe the products contents, not as a badge of origin. See Johnson & Johnson Australia Pty Limited 30 FCR 326.

40                  Second, the effect of the words ‘luscious Lips’ on consumers is diluted by the prominence of the well known mark ‘ALLEN’S’ on both the front and back of the packaging, along with the mark ‘NESTLE’ appearing on the back of the packaging. These two registered marks perform the role of distinguishing the respondent’s confectionary from that of others. In addition, the product name ‘RETRO PARTY MIX’ appears in large font on the front and the back of the product. I accept that, in some circumstances, there may be trade mark use despite other marks appearing on the product: see Anheuser-Busch, Inc 56 IPR 182. However, in my view, this case is distinguishable from that type of case. In Anheuser‑Busch, Inc 56 IPR 182 the infringing mark ‘Budweiser’ was the most prominent word on the label. That is not the case here. In this case, the registered marks ‘ALLEN’S’, and to a lesser extent ‘NESTLE’, are prominent especially when contrasted with the positioning and use of the words ‘luscious Lips’. See Chocolaterie Guylian NV 258 ALR 545.

Did the respondent use ‘luscious Lips’ descriptively in good faith – s 122(1)(b)(i)

41                  In view of my earlier findings, it is not necessary to consider whether the respondent can rely on the good faith defence in s 122(1)(b)(i) of the Act. However, for completeness I will do so briefly. Section 122(1)(b)(i) of the Act provides:

In spite of section 120, a person does not infringe a registered trade mark when the person uses a sign in good faith to indicate the kind, quality, quantity, intended purpose, value, geographical origin, or some other characteristic, of goods or services.

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.

43                  The respondent led evidence that its Brand Manager, Ms Haylock, thought of the word ‘luscious’ on 7 February 2007 when drafting and editing the blurb that was to appear on the back of the packet. Ms Haylock’s job responsibilities require her to be informed about the Australian confectionary market, including competitor’s products and their relative place in the market. Ms Haylock’s evidence was that until she was contacted by the respondent’s Corporate Counsel in October 2009, she had not heard of any of the applicants or their Luscious Lips chocolate or jelly products.

44                  The applicants led evidence that the fourth applicant thought of the name ‘Luscious Lips’ in January 2006. As noted, the applicants applied for the mark to be registered on 12 March 2007. Prior to the application, the applicants use of the words was limited to the marketing activities set out at [4]. There was no evidence of any sales of the products before 12 March 2007.

45                  On this evidence, I am satisfied that the respondent was not aware of the applicants’ use of the words ‘Luscious Lips’ and therefore has not acted in bad faith. Further, as indicated at [22], I am satisfied that the words are descriptive of the respondent’s confectionary product. Had it been necessary to do so, I would have held that the respondent had made out the s 122(1)(b)(i) defence.

Was the respondent’s use of ‘luscious Lips’ misleading or deceptive conduct or passing off?

46                  The applicants also allege, albeit somewhat faintly (to borrow that phrase from Sackville J in Pepsico Australia Pty Ltd (t/as Frito-Lay Australia) 135 ALR at 219), that the respondent has committed the tort of passing off and contravened ss 52(1), 52(a), (c) and (d) of the Trade Practices Act  based on essentially the same facts as the trade mark infringement claim. As noted at [12]-[13], the relevant date for assessing these claims is May 2007 when the respondent first sold the Retro Party Mix product.

47                  In May 2007 the applicants reputation in ‘Luscious Lips’ was not substantial. The promotion of the name was in its infancy: the applicants were giving away lip shaped chocolates in green wrappers marked with ‘Luscious Lips Nature’s Blend’ to customers and prospective customers, the name was being promoted through the applicants website and the mark had just started being added to stationary (this occurred in April 2007). In fact, the first applicant was not yet incorporated (this occurred in July 2007). The trade mark application for ‘Luscious Lips’ would still have been pending (application date was 12 March 2007). Further, at this time, only a small fraction (significantly less than 10%) of the applicants’ business was for human products.

48                  Ms Haylock had not heard of the applicants or their mark ‘Luscious Lips’. Given it was her job responsibility to be informed of the Australian confectionary market, one can infer that, in May 2007, consumer awareness of the applicants and their mark was limited.

49                  In contrast, the brands Allen’s and Nestle are well-known to Australian confectionary consumers. Their history is set out briefly at [5]. In my view, when considering the use of the words ‘luscious Lips’ on the packaging, there is an insufficient likelihood that consumers or retailers in the relevant class would have been misled into thinking the respondent or its Allen’s Retro Party Mix product was in any way connected with the applicants or their product. Therefore, the passing off and misleading and deceptive allegations must fail.

Conclusion

50                  The applicants’ claims should be dismissed with costs.

Associate:

Dated:         10 March 2010