Misleading and deceptive conduct – trade indicia – “get up” of pharmacy chain – use of primary colours, especially yellow – appeal primarily against findings of fact.

Verrocchi v Direct Chemist Outlet Pty Ltd [2016] FCAFC 10

The appellants, Mr Verrocchi and Mr Gance, operate a chain of discount retail pharmacies trading under the name “Chemist Warehouse”. The respondents also operate a chain of discount pharmacies, under the name “Direct Chemist Outlet” (hereafter DCO). Each of the parties’ respective chains employs a bright colour palette consisting of yellow, red and blue.

The advent of a competitor using a similar colour palette appears to have been a bitter pill for the Chemist Warehouse parties to swallow. At first instance, the appellants argued that by adopting a descriptive and non-distinctive name “Direct Chemist Outlet”, and by intentionally copying various visual attributes of the appellants’ get-up, the respondents’ conduct was likely to cause consumers to mistakenly believe that there was an association between the parties’ pharmacies.

That claim was unsuccessful. Although each of the parties’ chains uses the primary colours as part of its trade indicia, the evidence showed that the relative use of each colour had evolved over time in each case, and that as at the date of the commencement of the proceeding there continued to be significant variation between individual stores within both chains as to the get up. In the case of the Chemist Warehouse parties, the learned trial judge, Justice Middleton, observed that “the only relevantly distinctive and consistently used branding element in the store exterior get-up was the Chemist warehouse logo”. His Honour accepted that the yellow colour was dominant and consistent, but also held that the appellants’ evidence merely highlighted a consistent use of yellow; that evidence did not establish that there was a “consumer association of the colour yellow alone with Chemist Warehouse or a reputation of such.” The trial judge also found that there were significant differences between the two chains’ respective trade indicia, and while DCO might have copied certain ideas and used bright, attention-grabbing colours for the same reasons as Chemist Warehouse, such copying was neither fraudulent nor sufficient to give rise to liability on DCO’s part.

On appeal, the appellants argued that the learned trial judge had “over-intellectualised” the likely analysis of the two sets of trade indicia by the hypothetical consumer. The appellants’ other grounds of appeal were criticised by DCO as being an attempt to overturn the trial judge’s findings of fact, a criticism with which the Full Court (Nicholas, Murphy and Beach JJ) largely agreed. The Court accepted that on an appeal by way of re-hearing it was open for a Full Court to reach a different conclusion of fact (namely whether conduct was misleading or deceptive in light of the primary findings of fact), the appellants still needed to show error on the part of the trial judge. Given that a finding of misleading or deceptive conduct involved a measure of “judicial estimation and impression”, such an onus would be expected to be difficult to discharge.

None of the appellants’ grounds of appeal were accepted by the Court. First, the appellant failed to persuade the Full Court that the trial judge’s findings as to variation in get up, lack of distinctiveness and lack of a relevant secondary reputation were in error. Nor did the appellants demonstrate error in the trial judge’s findings that the colour yellow used in a retail context may well connote discount products as well as grab consumers’ attention, but this and other bright colours have more of a functional quality rather than denoting trade origin – propositions with which the Full Court agreed. The Full Court also agreed with the trial judge’s treatment of the issue of copying: no intention to mislead had been found (which might tip the balance in favour of an applicant in a borderline case), as opposed to an intention to copy. Other grounds of appeal such as the trial judge’s failure to find reputation on a “geographical basis” and failure to find that the purported “dominant features” of the Chemist Warehouse get-up were “reinforced” by other promotional activity of Chemist Warehouse were similarly unsuccessful. Accordingly, the Court refused to prescribe a reversal of the trial judge’s conclusions.

As an aside, at first instance the respondents had been successful in their cross-claim for revocation of the following mark:

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Perhaps taking the view that they had had a dose of their own medicine, the appellants did not appeal the judgment against them on the cross-claim for revocation.