Stone & Wood Group Pty Ltd v Intellectual Property Development Corporation Pty Ltd [2016] FCA 820

The Federal Court has dismissed craft beer brewer Stone & Wood's allegations of misleading and deceptive conduct, passing off and trade mark infringement against the owners of a competing craft brewery named Thunder Road.

A tale of two (pacific) ales

Stone & Wood operates breweries in Byron Bay and Murwillumbah in northern New South Wales. In 2008 Stone & Wood began selling a draught beer it called Stone & Wood Draught Ale. In 2010, it commenced selling the beer in bottles and renamed the beer "Stone & Wood Pacific Ale". Stone & Wood Pacific Ale became the company's best selling product and accounted for 80-85% of its total beer sales.

Thunder Road owns and operates a brewery in Brunswick, Victoria and sells beer under the brand "Thunder Road". In January 2015 the brewery released a beer named Thunder Road Pacific Ale, available in both draught and bottled format. Following initial letters of demand from Stone & Wood, the beer was renamed "Thunder Road Pacific".

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Not satisfied with the change of name, Stone & Wood commenced proceedings seeking injunctive relief and damages.

The Craft Beer Market

In any case in which misleading and deceptive conduct is alleged, it is important to establish the context in which the alleged conduct takes place. In this case the attitudes and likely conduct of the target market were important.

The Court accepted the largely uncontested evidence of the expert witnesses called to the effect that the market was comprised of two broad groups. The first group was a young well informed group who would be knowledgeable of breweries. The second group was described as consumers "looking for a premium (perhaps ‘boutique’) experience". This group was likely to look at a bottle and associated packaging carefully in their selection process.

The proposition put forward by the expert called by Stone & Wood that consumers would identify the Stone & Wood products by their respective sub-brand names (e.g. "Pacific Ale") was not accepted by the Court when it was not supported by empirical testing.

Stone & Wood's claims of misleading and deceptive conduct and passing off

In this context Stone & Wood were unable to successfully argue that Thunder Road's use of the names "Pacific Ale" and "Pacific" misrepresented that:
(a) the Thunder Road Pacific Ale / Thunder Road Pacific is Stone & Wood Pacific Ale;
(b) the Thunder Road Pacific Ale / Thunder Road Pacific is promoted, distributed and/or sold with the licence or authority of Stone & Wood;
(c) the Thunder Road Pacific Ale / Thunder Road Pacific has the sponsorship or approval of Stone & Wood; and
(d) Thunder Road has the sponsorship or approval of, or an affiliation with, Stone & Wood.

The allegations were not established because, in particular:
1. nowhere on the relevant Thunder Road products is there any reference to Stone & Wood;
2. the labelling and packaging of the Thunder Road products are very different from the labelling and packaging of the Stone & Wood Pacific Ale in that the dominant feature of the Stone & Wood Pacific Ale is the ‘Stone & Wood’ brand name, while the dominant feature of the Thunder Road products is the word ‘Pacific’; and,
3. the colours are different.

Furthermore, the Court noted that the overall format of the labels and packaging of the Stone & Wood Pacific Ale followed the format of other beers in its range while the Thunder Road Pacific Ale and Thunder Road Pacific labels and packaging followed the format of the other beers in Thunder Road’s range. This counted against the proposition that Thunder Road had represented that there was an association or connection between its product and the Stone & Wood Pacific Ale.

The Court also concluded that the word "Pacific" in a sense had come to be used descriptively in the industry ("beers made from hops from Australia and New Zealand") which made it difficult for Stone & Wood to establish that the name ‘Pacific Ale’ distinguished its beer from the beer of other traders.

The Court also took into account that the brand ‘Thunder Road’ was not an insignificant feature on the Thunder Road label.

Trade mark infringement: "Pacific Ale" not a prominent feature of the trade mark

Stone & Wood owns a trade mark incorporating the Stone & Wood logo and the text "Handcrafted Pacific Ale" and "Byron Bay Australia".

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Stone & Wood claimed that the use of 'Pacific' or 'Pacific Ale' by Thunder Road amounted to trade mark infringement under section 120(1) of the Trade Marks Act 1995. This section requires a finding that the allegedly infringing words or images are substantially identical or deceptively similar to the registered mark. Stone & Wood argued that the words were deceptively similar to the registered mark but the Court rejected this argument.

Stone & Wood's threats found to be groundless

Thunder Road was also successful in its cross claim for relief against unjustified threats of trade mark infringement, which were made by Stone & Wood prior to the commencement of proceedings. Stone & Wood was unable to rely on the defence that it had subsequently brought the proceedings "with due diligence" as it had not included the action for trade mark infringement in its originating application; bringing it only after the cross claim in respect of alleged unjustified threats was filed by Thunder Road.

Lessons

As the Court commented, this case shows that 'there is a price to be paid for the advantages flowing from the possession of an eloquently descriptive trade name.' Whilst the success of the 'Pacific Ale' style of beer may well be credited to the Stone & Wood product, this will not prevent others from using it as a descriptor for their own product offerings where surrounding circumstances make it unlikely that there will be deception. As his Honour said, taking advantage of a market created by a competitor is insufficient to establish misleading or deceptive conduct; the question is whether the respondents have stepped over the line by making misrepresentations.