FEDERAL COURT OF AUSTRALIA

Snack Foods Limited v Premier 1st Pty Ltd [2013] FCA 135

THE COURT:

1.    GRANTS leave to the first respondent to file in Court the affidavit of Larry Silber affirmed on 22 November 2012.

2.    ORDERS that, until further order, pursuant to s 50 of the Federal Court of Australia Act 1976 (Cth), the contents of the Confidential Annexures LS1, LS6, LS11, LS12, LS13, LS14, LS15, LS16, LS17 and LS25 to the affidavit of Larry Silber affirmed on 22 November 2012 and the contents of Confidential Exhibit MF-1 to the affidavit of Mark Fryday affirmed on 1 November 2012 (the Confidential Documents) not be published or disclosed to any person and that the Confidential Documents be placed in the Court’s file in two separate envelopes marked “Confidential” accordingly, which envelopes are not to be opened without a prior order of the Court or a judge.

3.    GRANTS leave to the first respondent to file in Court the affidavit of Larry Silber affirmed on 23 November 2012 upon the undertaking of the first respondent’s solicitor to file the original of that affidavit as soon as it becomes available.

4.    GRANTS leave to the applicants to file in Court the affidavit of Mark Fryday affirmed on 22 November 2012.

5.    ORDERS that the applicants’ Interlocutory Application for injunctive relief made in their Originating Application and pressed this day (23 November 2012) (the applicants’ Interlocutory Application) be dismissed.

6.    ORDERS that the costs of and incidental to the applicants’ Interlocutory Application as between the applicants and the first respondent be the first respondent’s costs in the proceeding.

7.    ORDERS that the costs of and incidental to the applicants’ Interlocutory Application as between the applicants and the second respondent be costs in the proceeding.

8.    ORDERS that Orders 2, 3, 4 and 5 made by the Court on 13 November 2012 be vacated.

9.    ORDERS that the proceeding be listed for directions at 9.30 am on 7 December 2012 before Perram J.

10.    GRANTS leave to the parties to approach Perram J for an earlier listing for directions for the purpose of considering any application the applicants or any other party wishes to make for the fixing of an expedited final hearing of the matter and procedural directions directed to that end.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    This proceeding was commenced on 1 November 2012 by the filing of an Originating Application. No Statement of Claim was filed at that time. The matter was allocated an earlier than usual return date for that Originating Application at the request of the applicants.

2    The first applicant (Snack Foods) is the registered owner of Australian registered trade mark No 1430770 for the words POPPED CORNERS (the POPPED CORNERS trade mark). The POPPED CORNERS trade mark is registered in relation to goods in classes 29 and 30. Its registration dates from 15 June 2011. Snack Foods is also the registered owner of other Australian registered trade marks, one of which is for the word KETTLE.

3    The second applicants (SBI and SBF) are both wholly owned subsidiaries of Snack Foods. They operate as a partnership trading under the name “Snack Brands Australia”. Those corporations carry on the business of manufacturing, marketing, distributing and selling a wide range of snack food products in Australia, including products sold under the brands Kettle, Thins, Samboy, CCs, French Fries, Cheezels and Real McCoy. The business conducted by SBI and SBF is a substantial enterprise having sold in excess of 150 million packets of snack foods in Australia in the financial year ended 30 June 2012.

4    SBI and SBF are authorised by Snack Foods to use the POPPED CORNERS and KETTLE trade marks in connection with their business activities.

5    For some time, the applicants have been preparing to launch a popped corn snack food product in Australia in respect of which the POPPED CORNERS trade mark will be used. As at November 2012, that launch was expected to occur in March 2013. As at late November 2012, when I heard the Interlocutory Application described below, the applicants had not yet used the POPPED CORNERS trade mark in Australia or at all.

6    The second respondent (Medora) distributes and sells in the USA a triangular shaped corn-based snack food product under the product name POPCORNERS. An associated US corporation, Ideal Snacks Corporation (Ideal Snacks), manufacturers the product for Medora. Medora is the registered owner of US trade mark registration no 3872791 in respect of the word POPCORNERS. This registration was filed on 24 March 2010 and was based upon a first use in commerce date of 3 March 2010. This trade mark is registered in relation to corn-based snack foods.

7    The first respondent (Premier 1st) is an Australian trading company which has entered into an arrangement with Medora for the importation and distribution of the POPCORNERS range of products in Australia. It began negotiating with Medora in March 2011 and thereafter took steps to bring its distribution arrangements with Medora to fruition. In particular, in the period from October 2011 up to November 2012, Premier 1st engaged in an extensive marketing and promotional campaign in relation to the POPCORNERS products. The evidence before me (much of which is confidential) established that Premier 1st had invested significant resources over the eighteen months or so before November 2012 in organising its distribution arrangements with Medora and in endeavouring to secure supply contracts for the POPCORNERS products in Australia. The evidence disclosed that a shipment of the US manufactured POPCORNERS products arrived in Australia in October or November 2012. Those products are packaged in colourful packaging which prominently displays the word POPCORNERS.

8    By their Originating Application, the applicants sought final injunctions restraining the respondents from importing, selling, offering for sale, distributing, advertising or promoting in Australia any snack food product under or by reference to the name or mark POPCORNERS, or under or by reference to any other name or mark substantially identical or deceptively similar to the POPPED CORNERS trade mark, and from similarly exploiting the trade mark KETTLE. In addition, by way of final relief, the applicants sought an order that Premier 1st destroy or deliver up for destruction any stocks of snack food products to which the name or mark POPCORNERS or KETTLE has been applied which are in the custody, possession or power of Premier 1st, its employees, agents or distributors. The applicants also claimed damages for trade mark infringement or, in the alternative, an account of profits. As well, they claimed interest and costs.

9    The applicants also claimed interlocutory injunctive relief in the same terms as the final injunctions sought by them.

10    The matter was first listed before the Court on 13 November 2012. On that occasion, the Docket Judge ordered a timetable designed to ready the applicants’ Interlocutory Application for hearing before him on 7 December 2012.

11    When the matter came before the Docket Judge on 13 November 2012, the applicants had already filed the affidavit of Mark Fryday affirmed on 1 November 2012. In addition, the applicants had issued a subpoena for production directed to a third party, Dainty Food Australia Pty Ltd (Dainty). That subpoena was made returnable before a Registrar on 21 November 2012.

12    Since at least January 2012, Dainty has imported into Australia and supplied to retailers here, popped corn products which bear the POPCORNERS trade mark although they are supplied by Kenover Marketing LLC, a US corporation, and not by Medora. The Dainty imported products are labelled as kosher products. The evidence disclosed that the kosher POPCORNERS products imported and distributed by Dainty were available to the public in supermarkets and specialty stores. In particular, those products were available in Coles (Coles) and Woolworths (Woolworths) supermarkets in both Sydney and Melbourne. In the major supermarkets, these kosher products were not segregated from the general run of snack food products and were readily available to all consumers. After being challenged by Snack Foods’ lawyers, on 1 November 2012, Dainty gave an undertaking inter partes not to supply the kosher POPCORNERS products in future pending the determination of the present proceeding. Dainty did not agree to withdraw any product which was already on supermarket shelves. However, notwithstanding the existence of that undertaking, the product remained on the shelves of supermarkets and stores continuously throughout 2012 right up to the day of the interlocutory hearing before me.

13    On 20 November 2012, the solicitors for the applicants contacted the Chambers of the Docket Judge with the following request:

We wish to enquire whether his Honour has availability on Thursday or Friday this week to hear an urgent application by our clients for interim relief pending the hearing of our clients’ application for interlocutory relief on 7 December. This application is being made in light of the First Respondent’s withdrawal, with effect from this Thursday 22 November, of an undertaking previously provided in relation to the subject matter in this proceeding. Given that the interim relief to be sought by our clients extends only to the scheduled hearing on 7 December, we anticipate that the hearing of our clients’ application this week will be relatively brief.

14    On 15 November 2012, the lawyers for Premier 1st had notified the applicants’ lawyers that an inter partes undertaking previously given by Premier 1st would be withdrawn on 22 November 2012.

15    As at 20 November 2012, the only step that had been taken in accordance with the timetable previously directed by the Docket Judge was the filing and service of a brief by the applicants in support of their Interlocutory Application. The remaining steps (which included provision for the respondents to file evidence and submissions) were to be undertaken in the period between 16 November 2012 and 30 November 2012.

16    The Docket Judge was unable to deal with the matter on such short notice. Accordingly, the request made by the applicants’ solicitors to which I have referred at [13] above was referred to me as Duty Judge. As requested by the solicitors for the applicants, I listed the applicants’ Interlocutory Application for hearing before me at 9.30 am on 23 November 2012. By the time that the matter came on before me, the parties had resolved the applicants’ claims for interlocutory relief in respect of the trade mark KETTLE. For that reason, the only trade mark which remained in issue before me was the POPCORNERS trade mark.

17    After hearing the parties on that day, I refused to grant any interlocutory injunctive relief.

18    In addition, I vacated the interlocutory hearing listed before the Docket Judge on 7 December 2012. The approach advocated by the Court and accepted by the parties after I refused the applicants’ application for interlocutory relief was that the matter should be allocated an early final hearing. I was not prepared to countenance a further interlocutory hearing notwithstanding that the applicants had initially endeavoured to preserve their capacity to proceed with their Interlocutory Application in front of the Docket Judge on 7 December 2012.

19    These Reasons for Judgment are my reasons for making the orders and directions which I made on 23 November 2012.

The Relevant Principles (Interlocutory Injunctions)

20    In Samsung Electronics Co Ltd v Apple Inc (2011) 286 ALR 257 at 271–279 [44]–[74], the Full Court explained the source of the power of this Court to grant injunctive relief in patent cases and the principles upon which it will consider doing so on an interlocutory basis.

21    This Court’s power to grant injunctive relief in an action for infringement of a registered trade mark is conferred by s 126(a) of the Trade Marks Act 1995 (Cth) (the TM Act). That subsection empowers the Court to restrain an infringement of an Australian registered trade mark subject to such terms and conditions, if any, as the Court thinks fit. Section 120 of the TM Act specifies the circumstances in which a person infringes a registered trade mark.

22    I shall endeavour to extract the important points of principle from the passages in Samsung Electronics Co Ltd v Apple Inc to which I have referred at [20] above. In doing so, I do not intend to alter or dilute in any way the judgment of the Full Court. Rather, I intend to apply it. The matters which I particularly wish to emphasise are:

(a)    Where the source of the Court’s power to grant an injunction is a specific provision in a statute (as is the case here), the term “injunction” takes its context from the provisions of the particular statute in question (at 271–272 [46]–[47]);

(b)    Where the merits and the question of convenience are fairly evenly balanced, there will be no injustice in requiring the party seeking relief to demonstrate good prospects of success before imposing almost certain prejudice on the other side (at 272–273 [49]–[51] esp at [51]);

(c)    Where an interlocutory injunction is sought in respect of private rights, it is necessary to identify the legal or equitable rights which are to be determined at the trial and in respect of which final relief is sought (at 272 [52]);

(d)    As Mason ACJ said in Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153:

… In order to secure such an injunction the plaintiff must show (1) that there is a serious question to be tried or that the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief; (2) that he will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted; and (3) that the balance of convenience favours the granting of an injunction.

(e)    The Court’s task of assessing the balance of convenience and justice requires the Court to determine whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted (at 273–274 [55] and the passages cited therein from Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618).

(f)    The question of whether or not the plaintiff must show that he will suffer irreparable harm if no injunction is granted is one of the matters which will ordinarily need to be addressed in the Court’s consideration of the balance of convenience and justice (at 276 [61]).

23    At 276–278 [62]–[70], the Full Court discussed the balance of convenience and justice and the relationship between the basket of considerations relevant to the Court’s assessment of that matter and the need for a plaintiff to establish a prima facie case or serious question to be tried. The observations of the Full Court in those passages are of particular relevance to the present case. The Court said:

62    The assessment of harm to the plaintiff, if there is no injunction, and the assessment of prejudice or harm to the defendant, if an injunction is granted, is at the heart of the basket of discretionary considerations which must be addressed and weighed as part of the court’s consideration of the balance of convenience and justice. The question of whether damages will be an adequate remedy for the alleged infringement of the plaintiff’s rights will always need to be considered when the court has an application for interlocutory injunctive relief before it. It may or may not be determinative in any given case. That question involves an assessment by the court as to whether the plaintiff would, in all material respects, be in as good a position if he were confined to his damages remedy, as he would be in if an injunction were granted: see the discussion of this aspect in I C F Spry, The Principles of Equitable Remedies, 8th ed, Lawbook Co, New South Wales, 2010, pp 383–9; pp 397–9; and pp 457–62.

63    The interaction between the court’s assessment of the likely harm to the plaintiff, if no injunction is granted, and its assessment of the adequacy of damages as a remedy, will always be an important factor in the court’s determination of where the balance of convenience and justice lies. To elevate these matters into a separate and antecedent inquiry as part of a requirement in every case that the plaintiff establish “irreparable injury” is, in our judgment, to adopt too rigid an approach. These matters are best left to be considered as part of the court’s assessment of the balance of convenience and justice even though they will inevitably fall to be considered in most cases and will almost always be important considerations to be taken into account.

64    Gleeson CJ also observed in Lenah Game Meats (at [18]), that, where there is little or no room for argument about the legal basis of the applicant’s claimed private right, the court will be more easily persuaded at an interlocutory stage that a prima facie case has been established. The court will then move on to consider discretionary considerations, including the balance of convenience and justice. But, as his Honour also observed at [18]:

18    The extent to which it is necessary, or appropriate, to examine the legal merits of a plaintiff’s claim for final relief, in determining whether to grant an interlocutory injunction, will depend upon the circumstances of the case. There is no inflexible rule.

65    The resolution of the question of where the balance of convenience and justice lies requires the court to exercise a discretion.

66    In exercising that discretion, the court is required to assess and compare the prejudice and hardship likely to be suffered by the defendant, third persons and the public generally if an injunction is granted, with that which is likely to be suffered by the plaintiff if no injunction is granted. In determining this question, the court must make an assessment of the likelihood that the final relief (if granted) will adequately compensate the plaintiff for the continuing breaches which will have occurred between the date of the interlocutory hearing and the date when final relief might be expected to be granted.

67    As Sundberg J observed in Sigma Pharmaceuticals (Aust) Pty Ltd v Wyeth (2009) 81 IPR 339; [2009] FCA 595 at [15] (Sigma Pharmaceuticals), when considering whether to grant an interlocutory injunction, the issue of whether the plaintiff has made out a prima facie case and whether the balance of convenience and justice favours the grant of an injunction are related inquiries. The question of whether there is a serious question or a prima facie case should not be considered in isolation from the balance of convenience. The apparent strength of the parties’ substantive cases will often be an important consideration to be weighed in the balance: Tidy Tea Ltd v Unilever Australia Ltd (1995) 32 IPR 405 (Tidy Tea) at [416] per Burchett J; Aktiebolaget Hassle v Biochemie Australia Pty Ltd (2003) 57 IPR 1; [2003] FCA 496 at [31] per Sackville J; Hexal Australia Pty Ltd v Roche Therapeutics Inc (2005) 66 IPR 325; [2005] FCA 1218 at [18] per Stone J; and Castlemaine Tooheys at CLR 154; ALR 558 per Mason ACJ.

68    It may also be necessary to consider and evaluate the impact that the grant or refusal of an injunction will have or is likely to have on third persons and the public generally.

69    In Patrick at [65] and [66], Brennan CJ and McHugh, Gummow, Kirby and Hayne JJ, in a joint judgment, expressly adopted a passage from Spry, 1997, pp 402–3, which may be summarised as follows:

(a)    in assessing the balance of convenience in an interlocutory injunction application, the interests of the public and third persons are relevant and have more or less weight according to other material circumstances;

(b)    whether those interests tend to favour the grant or the refusal of an injunction in any given case depends upon the circumstances of that case; and

(c)    hardship visited upon third persons or the public generally by the grant of an interlocutory injunction will rarely be decisive.

70    In order to address the balance of convenience and justice in the present case, it is necessary to consider the nature and strength of Apple’s case and the circumstances in which Samsung decided to compete with Apple by importing the Galaxy Tab 10.1 into Australia and by promoting and selling that device in this country.

The Applicants’ Case

24    The applicants have sued for infringement of the POPPED CORNERS trade mark. Snack Foods is the registered owner of that trade mark and SBI and SBF are authorised users of that trade mark. Absent any challenge to the validity of that trade mark, the applicants would have a strong case for infringement given the similarity between the POPPED CORNERS trade mark and the POPCORNERS trade mark.

25    Premier 1st accepted that the applicants had established a prima facie case or serious question to be tried in respect of their cause of action for infringement of the POPPED CORNERS trade mark. However, it was submitted on behalf of Premier 1st that it had good prospects of establishing at a final hearing that the POPPED CORNERS trade mark ought to be cancelled and, in any event, that it had not infringed that trade mark. The submission was that the Court was obliged, in assessing the strength of the applicants’ prima facie case overall, to take into account the prospects of Premier 1st succeeding in one or more of its challenges to the trade mark and of succeeding in its defence to the infringement claim.

26    Premier 1st contended that it is an aggrieved person within the meaning of s 88(1) of the TM Act and, as such, has standing to seek orders from the Court cancelling the POPPED CORNERS trade mark. It argued that Snack Foods was not the true owner of that trade mark in June 2011 when it applied for its registration in Australia. The true owner was Medora. That circumstance would have been a ground upon which Snack Foods’ application might have been opposed (s 58 of the TM Act) and was thus a ground for cancellation of that mark (s 88(2)(a) of the TM Act). A similar position obtained in respect of the s 59 ground of opposition (no intention to use the trade mark) and the s 62A ground of opposition (bad faith).

27    Premier 1st also argued that the use of the POPPED CORNERS trade mark in Australia was, by reason of the prior reputation in Australia of Medora and Premier 1st in the POPCORNERS trade mark, likely to mislead or deceive and cause confusion. It would thus be contrary to the Australian Consumer Law.

28    It also argued that the circumstances of the case provided Premier 1st with a defence to the applicants’ infringement case on the grounds of honest concurrent use (s 122(1)(fa) of the TM Act) and prior continuous use (s 124 of the TM Act).

29    These defences to infringement and challenges to the POPPED CORNERS trade mark will obviously have to be investigated and fully litigated at a final hearing. However, on the material before me, I considered that Premier 1st and Medora had a real prospect of establishing one or more of these matters. Snack Foods and the other applicants had taken steps to register the POPPED CORNERS trade mark in circumstances where it was well aware of the existence of Medora, its business and its products. That state of affairs provided some foundation for the contentions advanced by the respondents although, of course, they would need to establish much more if they are ultimately to succeed in the positive arguments which they have raised.

30    In my judgment, all of the matters to which I have referred at [25]–[29] above should be taken into account when I come to consider the balance of convenience and justice and I intend to do so when considering those aspects of the case.

31    In my judgment, it must be accepted that the applicants have established a prima facie case. For present purposes, I intend to have some regard to the strength of Premier 1st’s challenges to the validity of the applicants’ trade mark and the other defences to the applicants’ infringement case when I come to assess the balance of convenience and justice.

The Balance of Convenience and Justice

The Applicants’ Position

32    The applicants claimed that, in late 2010, they began to develop a popped corn chip product to be sold in Australia under the POPPED CORNERS trade mark. They said that, as at late November 2012, that project was at a highly advanced stage. As I mentioned earlier in these Reasons for Judgment (at [5] above), the applicants’ POPPED CORNERS product was scheduled for release on the Australian market in March 2013.

33    In mid September 2012, the applicants became aware that Premier 1st was intending to import and sell in Australia a range of snack foods products manufactured by Medora under the name POPCORNERS. There is no doubt that this is what Premier 1st intended to do unless restrained by the Court. Thus, there was no dispute as to whether Premier 1st had engaged in the conduct which the applicants contend constituted infringement of the POPPED CORNERS trade mark.

34    On 14 September 2012, the applicants’ lawyers, King & Wood Mallesons (KWM) sent a letter of demand to Premier 1st. In that letter, KWM asserted on behalf of the applicants that Premier 1st would infringe the POPPED CORNERS trade mark should it proceed to import and sell in Australia the US sourced POPCORNERS products. The letter concluded with the following:

In light of the above, please confirm as a matter of urgency and by no later than 4.00 pm on Tuesday 18 September 2012 that you will not promote, import or supply any snack food products under the mark POPCORNERS, or under any mark substantially identical or deceptively similar to POPPED CORNERS, in Australia.

35    Phillips Ormond Fitzpatrick (POF), who were then acting for Premier 1st, responded to KWM’s letter of demand by letter dated 17 September 2012. That letter was a holding letter.

36    KWM pursued the matter by letter dated 19 September 2012 sent to POF. On the same day, Premier 1st gave an undertaking inter partes not to supply the POPCORNERS products in Australia without providing seven (7) days’ notice to the applicants.

37    By letter dated 21 September 2012 sent to KWM, POF provided a detailed substantive response to KWM’s original letter of demand. The letter was argumentative but nonetheless endeavoured to come to grips with the basis or bases upon which Premier 1st might attack the applicants’ trade mark.

38    Thereafter, for another week or so, KWM and POF continued to debate the prospects of Premier 1st having the applicants’ trade mark cancelled.

39    In an email sent by Mr Waters of POF to KWM on 25 September 2012, he said:

Meanwhile, I note that in our letter of 19 September 2012, Premier 1st gave an undertaking not to supply any product under the POPCORNERS trade mark in Australia without first providing you with seven days written notice. Should your client in the meantime institute proceedings against Premier 1st seeking interlocutory relief, we will produce that letter and seek indemnity costs.

40    As I have noted at [36] above, the undertaking set out at [39] above had been proffered in a letter from POF to KWM dated 19 September 2012.

41    The parties’ respective lawyers continued to correspond with each other throughout October 2012. In the course of that correspondence, each of KWM and Corrs Chambers Westgarth (CCW), who, by then, had taken over the representation of Premier 1st, took the time to advance their clients’ respective positions in relation to the applicants’ allegation that any attempt to import and sell in Australia POPCORNERS products would infringe the applicants’ registered trade mark.

42    On 19 October 2012, KWM sent yet another letter to CCW. In that letter, KWM said:

Our client has just received information, based on the attached Aztec industry scan data, to suggest that Woolworths Limited may have commenced the supply of products under the POPCORNERS trade mark in Australia, or that such supply is imminent. Our client has reason to believe that your client may be in some way involved in the supply of POPCORNERS products to Woolworths. This matter is obviously a very serious concern to our client, particularly given the undertaking provided by your client on 19 September. …

43    KWM went on to demand that Premier 1st provide additional undertakings to the applicants.

44    CCW responded to KWM’s concerns by email sent on the same day. CCW denied, on behalf of Premier 1st, that it had breached its undertaking. In particular, CCW denied that Premier 1st had sold products to Woolworths bearing the POPCORNERS trade marks.

45    The present proceeding was commenced approximately two weeks after 19 October 2012.

46    The applicants’ Application for Interlocutory Relief was supported by two affidavits affirmed by Mark Fryday who is the Marketing Director employed by Snack Brands Australia.

47    The evidence given by Mr Fryday established the following (as at late November 2012):

(a)    The applicants’ intention to develop and ultimately sell in Australia a new popped corn product was formulated in around October 2010.

(b)    From October 2010 and throughout 2011, the applicants took serious commercial steps to develop such a product.

(c)    The applicants had reached the point where they anticipated launching their new popped corn product under the name POPPED CORNERS in March 2013. As at late November 2012, however, no product bearing that name had been sold in Australia and no use of that name or trade mark has been undertaken by any of the applicants.

48    At pars 34–36 of his affidavit affirmed on 1 November 2012, Mr Fryday said:

34.    As stated in paragraph 28 above, one of the principal reasons for the selection of POPPED CORNERS as the brand for the Applicants’ “popped”-style corn chip products was its perceived resonance with Australian consumers. In my opinion, the visual and aural appeal of the POPPED CORNERS brand, and the fact that it is unlike any other snack food product brand on the Australian market, is a significant factor in the likely success of the Second Applicant’s product.

35.    The trade mark was also chosen because of its fun and playful nature, and also because it alludes to the “popped” style of the product, to “popcorn” and to the corn chip nature of the product (POPPED CORNERS). In my experience, the success of a snack food product (as with many other food and beverage products), can depend very significantly on the appeal of the brand name and its ability to capture the excitement of the target market.

36.    For the reasons set out above, I regard the POPPED CORNERS Trade Mark to be an integral and inseparable component of the brand identity of the Second Applicant’s new popped corn chip product. The packaging artwork and launch plans for the Applicants’ new product have all been developed to reflect and reinforce the POPPED CORNERS brand identity and I consider that the brand is likely to be a critical factor in the likely success of the Second Applicant’s product on the Australian market.

49    Mr Fryday testified that, in his opinion, the sale of the POPCORNERS products in Australia by Premier 1st, shortly before the release of the applicants’ POPPED CORNERS products in March 2013, would inevitably erode the distinctiveness and value of the applicants’ POPPED CORNERS brand and trade mark. He said that, in his opinion, the sale of those products would be likely to cause irreparable damage to the value and goodwill that otherwise might have attached to the applicants’ POPPED CORNERS trade mark. In addition, at par 41 of his affidavit affirmed on 1 November 2012, Mr Fryday expressed a fear that the sale of the POPCORNERS products in Australia:

… [had] the real potential to reduce consumer demand for the Applicants’ POPPED CORNERS product upon its release and reduce the applicants’ prospective sales of that product.

50    He went on to explain this fear. He speculated that, if the taste of the competing product was not to consumers’ liking, it would detrimentally affect the applicants’ prospects of successfully launching their products. He also speculated that, if the POPCORNERS products contained genetically modified ingredients (a matter about which he was unable to comment) that circumstance might also cause irreparable damage to the applicants.

51    At par 45 of his affidavit affirmed on 1 November 2012, Mr Fryday said:

Finally, it is my opinion that the adage “you only get one chance to make a good impression” is particularly apt in the context of consumer and grocery products, including snack foods. It is my strong view that if the First Respondent commences distribution of the Second Respondent’s POPCORNERS product in Australia, it is likely to “poison the well” for the Applicants in relation to their imminent release of POPPED CORNERS in 2013, in the sense that the Applicants will suffer unquantifiable, permanent and enduring damage to the goodwill and reputation in their POPPED CORNERS brand and unquantifiable loss of sales of goods under the POPPED CORNERS brand.

52    It is readily apparent from the above synopsis of the evidence adduced on behalf of the applicants that, because the applicants had not yet sold any products in Australia as at the date of the interlocutory hearing before me under the trade name POPPED CORNERS or in respect of which the POPPED CORNERS trade mark had been used, it was difficult for Mr Fryday to make any real comparisons between the applicants’ products and the POPCORNERS products intended to be sold here by Premier 1st. In particular, there was no attempt to make good the proposition that the POPCORNERS products were somehow inferior to those which might be launched by the applicants or to make good the further proposition that those products contained genetically modified ingredients. Whilst it may be accepted that there was a theoretical risk that the sale of the POPCORNERS products might damage the reputation of the applicants and unfairly and unreasonably impinge upon the launch of their products in March 2013, I considered that these matters were, for the most part, speculative and not of significant weight.

The Respondents’ Position

53    As at late November 2012, Medora and Ideal Snacks had been selling popped corn snack food products in the USA under the name POPCORNERS since early 2010. Medora had registered the word POPCORNERS as a trade mark in the USA in March 2010, a period of more than 2½ years before the interlocutory hearing.

54    It appears that the applicants were aware of these matters as early as February 2011. This was very soon after, according to their version of events, they had begun to develop their new popped corn product.

55    On the material before me at the moment, it is a reasonable inference that the trade mark application made in Australia on 15 June 2011 by Snack Foods was made by that corporation in circumstances where it was well aware of the businesses of Medora and Ideal Snacks and of Medora’s US registered trade mark POPCORNERS.

56    In the period from early 2011 to late November 2012, Premier 1st had spent a great deal of time and considerable sums of money in negotiating a distributorship arrangement with Medora and in seeking retail opportunities in Australia for the sale of Medora’s POPCORNERS products. Those efforts had eventually resulted in real opportunities to sell to the major grocery retailers in Australia. In particular, by late 2012, Woolworths had agreed to stock POPCORNERS products. Indeed, Woolworths had insisted that its first delivery of POPCORNERS products take place on the Monday following the interlocutory hearing (ie on Monday 26 November 2012). It was that insistence on the part of Woolworths that had led to Premier 1st withdrawing its inter partes undertaking. There was no evidence suggesting that Premier 1st had been aware of Snack Foods’ registered trade mark in 2011 or at any time in the first half of 2012.

57    Woolworths had included POPCORNERS products in its December 2012 marketing materials, including in its Christmas 2012 catalogue. The products were also included in its current shelf plans.

58    Mr Silber, who gave evidence on behalf of Premier 1st, at par 62(b)–64 of his affidavit affirmed on 22 November 2012, said:

62    (b)    From my experience of supplying products to Woolworths, I know that it takes about 14 days for a product to be delivered to Woolworths stores nationally from the Woolworths Distribution Centre. Any delay in delivering stock to the Woolworths Distribution Centre beyond 25 November 2012 will certainly delay the arrival of that stock into Woolworths stores. If the delivery of that stock is delayed pending the resolution of the Applicants’ application for interlocutory relief (which I understand is scheduled to be heard on 7 December 2012), the stock is not likely to arrive in Woolworths stores at least until very close to Christmas, if Woolworths proceeds with the order at all. This would result in Woolworths having advertised a product which would not be available to it. It would also result in Premier 1st failing to deliver a large quantity of stock of a new product to a key customer. This would certainly impact adversely on Premier 1st’s reputation with Woolworths as a reliable supplier.

63    For the reasons set out above, I believe that if Premier 1st were to ask Woolworths to delay delivery of the order by two weeks, Woolworths would almost certainly cancel the order because Premier 1st will have failed to meet Woolworths’ delivery requirements and will have disrupted marketing activities.

64    Given the forward planning of retailers such as Woolworths, I believe it is likely to be several months before Premier 1st would have another opportunity supply PopCorners to Woolworths, if ever. I have had experiences in the past with the buyers for major retailers refusing to deal with Premier 1st again where Premier 1st has been unable to deliver a product on time. By way of example, a few years ago, Premier 1st agreed to provide a fruit juice product to Woolworths. Premier 1st was unable to deliver that product on time for reasons beyond its control. In response, Woolworths cancelled the order. Premier 1st’s failure to deliver this product on time resulted in one of the Woolworths’ buyers in question refusing to deal with Premier 1st for some time after this event. Another buyer that was involved in this failed order still raises the issue of Premier 1st’s failure whenever I deal with him.

59    There is no doubt that, if Premier 1st had been prevented from selling POPCORNERS products in Australia, it would have lost sales in the future. The sale of POPCORNERS products in the future was expected to be a very significant source of revenue for Premier 1st.

60    At pars 67–70 of his affidavit affirmed on 22 November 2012, Mr Silber outlined the consequences for Premier 1st of the grant of an interlocutory injunction. He said:

Lost Resources

67     PopCorners is the most important product in the Premier 1st range at the moment. Premier 1st and its employees, consultants and contractors have been working on the PopCorners range for over 18 months and have invested between 900 and 1300 hours and the sum referred to in item 4 of CONFIDENTIAL ANNEXURE LS1 into market research, packaging and importation issues, marketing and sales of PopCorners. This time and effort could have been devoted to developing other products and the loss to Premier 1st if it were unable to supply PopCorners would be unquantifiable.

Lost stock and risk to visibility of Premier 1st

68     If an injunction is granted I believe that it is very unlikely that Premier 1st would be able to sell Premier 1st current stock at a later time and Premier 1st’s current stock, worth the sum referred to in item 5 in CONFIDENTIAL ANNEXURE LS1, is likely to be wasted. I hold this belief for the following reasons.

(a)    This product has a limited shelf life of 12 months. By the time products arrive in Premier 1st’s warehouse they have a shelf life of approximately 10 months. However, retailers will generally only purchase product with at least 4 to 6 months of shelf-life remaining.

(b)    It is likely that it will be months before this case is finally resolved and, as discussed above, an interim injunction may cause Woolworths to cancel its order, leaving Premier 1st with a very large amount of stock to shift and no pending order sufficient to do so.

69    Most importantly, the monies tied up in this stock cannot be used to purchase other products or to undertake any other product investment. I believe that the financial loss to Premier 1st of the value of ‘dead stock’ referred to above would be so great that it will put the entire company at risk of liquidation for the following reasons.

(a)    Writing off the value of stock referred to will wipe out the majority of this financial year’s budgeted profit.

(b)    The budgeted annual forecast of PopCorners’ sales to Woolworths and our other customers represents the proportion of our annual sales turnover referred to in item 6 of CONFIDENTIAL ANNEXURE LS1.

(c)    Premier 1st has given undertakings to its major bank lender under which it needs to achieve certain financial covenants every quarter, and every year.

(d)    If Premier 1st has to write off the value of this stock, Premier 1st will not meet its financial covenants, and this would likely cause its major bank lender to withdraw its lending.

70     Further, in an effort to recoup the potential losses and avoid liquidation, Premier 1st would certainly need to retrench employees.

The Balance

61    The applicants have established a prima facie case for infringement of their trade mark POPPED CORNERS. However, Premier 1st has reasonable prospects of defending the applicants’ infringement case and of securing orders from the Court for the cancellation of that trade mark.

62    The potential harm to the applicants articulated in the evidence of Mr Fryday was almost entirely speculative. This was largely a function of the fact that, as at the date of the interlocutory hearing before me, there was no POPPED CORNERS branded product in any market in Australia and none expected until around March 2013 when it was anticipated that the products would be launched. As at the date of that hearing, the applicants had not used that trade mark in Australia (or, indeed, anywhere else).

63    For Premier 1st, on the other hand, there was real and significant potential loss that would be caused by the grant of an interlocutory injunction. Its prejudice would be certain. It had taken many months to secure orders from Woolworths, with the first of those orders required by Woolworths to be delivered to its distribution centre on 26 November 2012. Orders from other retailers were expected shortly thereafter. The power of the major grocery retailers in Australia (Coles and Woolworths) in the grocery market is well-known. Incapacity to deliver to Woolworths, once an order had been placed, would almost certainly result in a decision by Woolworths to abandon the products altogether. That would have been catastrophic for Premier 1st. It would also have led to Woolworths being reluctant or unwilling to deal with Premier 1st in the future.

64    The kosher POPCORNERS product sold by Dainty to various retail outlets had been available continuously in stores throughout 2012. The kosher POPCORNERS products were available in Coles and Woolworths supermarkets and were not restricted to specialty stores nor were they segregated within the larger retail outlets.

65    The applicants did not move quickly when, in September 2012, they learned of the intentions of Premier 1st. Instead of taking urgent action, the applicants, through KWM, engaged in a lengthy dialogue with Premier 1st and its lawyers in an endeavour to negotiate a satisfactory outcome. Whilst it is true that they did so against the background of the 19 September 2012 inter partes undertaking, it must be said that that undertaking gave precious little protection to the applicants given that it might be withdrawn upon seven days’ notice.

66    The applicants could have pressed for an early final hearing from mid September 2012. Such a proposal would have almost certainly been accommodated by the Court. The likelihood was that a first instance decision would have been available prior to or not long after the applicants’ launch of its POPPED CORNERS products. Instead, the applicants chose to delay the commencement of proceedings. They then decided to pursue interlocutory relief on a contested basis rather than press for an early final hearing. The urgency generated by the withdrawal of the 19 September 2012 undertaking was, in all the circumstances, somewhat artificial given that the undertaking had always been on terms that it could be withdrawn on seven days’ notice and given that the applicants had learned some information as early as the middle of October 2012 which suggested that a sale to Woolworths was imminent.

67    Taking all of the above factors into account, I concluded that the balance of convenience and justice favoured the refusal of interlocutory relief.

Conclusion

68    For all of the above reasons, I refused the applicants’ Application for interlocutory injunctive relief and made the other orders which I made on 23 November 2012.

Associate:

Dated:    25 February 2013