Lion Nathan legs it with Barefoot
In E & J Gallo Winery v Lion Nathan Australia Pty Limited [2009] FCAFC 27 the Full Federal Court has affirmed a first-instance decision to remove E & J Gallo’s ‘BAREFOOT’ trade mark from the Register for non use, thus confirming that Lion Nathan has the right to market its 'BAREFOOT RANDLER' beer product. Whilst confirming the first instance decision to remove the 'BAREFOOT' trade mark, the Appeal Court overturned the Trial Judge's finding that beer and wine are not ‘goods of the same description’ and held that Lion Nathan was infringing the ‘BAREFOOT’ trade mark during the 6 month period which it remained on the Register and Lion Nathan had sold its ‘BAREFOOT RADLER’ beer.
So although ultimately losing their trade mark, the Appeal may have proven worthwhile for E & J Gallo. This will be clearer when the question of remedies for the period Lion Nathan was infringing Gallo's trade mark is resolved. On the other hand, the finding that wine and beer are 'goods of the same description' has opened the door for Lion Nathan to bring its own infringement action.
Background
E & J Gallo Winery (Gallo) is a large wine-producing company incorporated in the United States whom in 2005 acquired the share capital in a company trading under the name ‘Barefoot Cellars’. As part of that deal they acquired the Australian ‘BAREFOOT’ trade mark for wine in Class 33. Although ‘BAREFOOT’ was very successful in the United States, only a very limited quantity of the wine had been sold by Beach Avenue Wholesalers Pty Ltd (BAW) in the Australian market during the period from 7 May 2004 to 8 May 2007 (the non-use period). Importantly, there was no evidence that Gallo, or its predecessor, knew about these sales.
In 2006 Lion Nathan Australia Pty Limited (Lion Nathan) began to develop a new full strength, carbon-neutral beer with lemon and lime twist which they coined ‘BAREFOOT RADLER’. Upon learning of Gallo’s ‘BAREFOOT’ trade mark they commissioned some investigations into the use of that mark. Lion Nathan’s investigations revealed no use and filed an action for removal in the Australian Trade Marks Office in May 2007. They proceeded to launch their beer product in January 2008.
The beer launch proved too much to, er, bear, and Gallo initiated proceedings in the Federal Court against Lion Nathan for trade mark infringement. Lion Nathan then brought itsremoval action to the Federal Court by way of a cross-claim. Both actions were heard together in April 2008. The decision was reported by the Australian Trade Marks Law Blog here. In that case, Flick J found in favour of Lion Nathan in both its defence to infringement and its counter-claim to have Gallo’s ‘BAREFOOT’ trade mark removed from the Register for non use.
In July 2008 Gallo appealed with respect to Flick J’s decision on (i) non use of the ‘BAREFOOT’ trade mark and (ii) whether the good in question, beer and wine, were ‘goods of the same description’. Lion Nathan’s cross-appeal concerned the date upon which the removal order should commence arguing that the date should be 8 May 2007 rather than 27 June 2008 (the date of the decision).
The Appeal Decision
The decision was broken up into two questions:
Was there use of the ‘BAREFOOT’ trade mark during the non use period for the purposes of Section 92(4)(b) of the Act?
The Court acknowledged that there was no direct authority on the issue of ‘whether, when a registered trade mark is used in Australia on, or in physical or other relation to the goods, which are offered for sale and sold here but manufactured overseas by an owner or authorised user of the mark who applied the mark to them, the use of the mark constitutes a use by the owner, even though that person may not know that the goods are being offered for sale or sold in Australia but rather sold them to a foreign distributor for resale without any limitation on where they might be resold’.
Along the same lines as the Trial Judge the Court rejected Gallo’s submissions and found that ‘use’ is not made out merely because goods to which a trade mark has been affixed by the owner, or an authorised user, are traded in the ordinary course of trade in Australia. Rather, the ‘owner must have engaged in conduct of some type which the owner might reasonably contemplate would result in dealings with its goods marked with its mark in Australia while the goods were in the course of trade’.
The Full Court went further in its analysis to find that in order for the statutory scheme of the Act to be a cohesive one, the use to which Section 92 of the Act is directed ‘is use of the same character which would warrant registration of the trade mark in the first place. That is conduct, by or on behalf of the owner, associated with a witting or deliberate use of the trade mark in Australia.’ There was no course of trade as between Gallo and BAW or any other party in Australia.
Finding that the ‘BAREFOOT’ mark should be removed the Court then considered the cross appeal. The Full Court noted that Section 101(2) of the Act is clear because it is ‘an order directing someone to do something’. Accordingly, the act of the Registrar removing a trade mark from the Register can only be done after the order is made. An investigation into whether such an order can be made retrospectively was held to be a ‘false issue’. Infringement of a trade mark during the time that it remains on the Register is therefore possible.
Are beer and wine ‘goods of the same description’?
Rather than look at the question of whether beer and wine are ‘goods of the same description’ in isolation the Full Court found it was relevant to note the purpose or object of Section 120(2) as protecting the statutory monopoly a registered owner has to use their mark. In this context they found this requires a ‘consideration of what members of the consuming public might perceive as a result of the use of the alleged infringing mark on the goods in question and whether they might be led to believe they were goods of the registered owner’. When looked at through this prism, it is clear how late on a Saturday evening one might think that beer and wine are ‘goods of the same description’. The Full Court overturned Flick J’s finding on this issue.
The question of deceptive similarity between ‘BAREFOOT’ and ‘BAREFOOT RADLER’ was decided in the affirmative leading to the conclusion that Lion Nathan had infringed the ‘BAREFOOT’ mark from the time it launched its product in January 2008 until the date of the Federal Court decision.
So What?
By affirming Flick J’s decision on the issue of non-use, trade mark owners, particularly foreign ones, need to be conscious that Australian trade marks may be vulnerable if the owner does not put their products into the Australian market either directly or through an authorised user.
Also, the vibe of the recent major non-use cases is that trade marks clearance searches MUST include related classes and potential uses, even if the goods or services at issue face little risk of technological convergence with others. In the Pioneer decision (a convergence case) discussed by the Australian Trade Marks Law Blog here, Bennet, J., chose to exercise her discretion in allowing Pioneer to retain its trade mark in circumstances where some argue there had not been use in the broad category of ‘computer peripheral’ goods for a period of three years. In the Bing! software case (another convergence case) discussed by the Australian Trade Marks Law Blog here, a partial non-use application might have led to a different result. The vibe, and our recommendation , is to search widely when selecting a mark.
