Trade Marks – passing off – misleading or deceptive conduct – Pacific Ale – groundless threats.

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

Stone & Wood operate breweries in the Byron Bay and Murwillumbah areas of New South Wales and in November 2010 began promoting and selling a beer called Stone & Wood Pacific Ale bearing as a label, the registered trade mark:

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The Pacific Ale beer is Stone & Wood’s best-selling product, accounting for approximately 80-85% of Stone & Wood’s beer sales.

The second respondent (Elixir) operates a brewery in Brunswick, Melbourne, Victoria. It began brewing production operations in May 2010. Elixir distributes and sells beer under a number of brands, including “Thunder Road”, which readers may recall was involved in a significant non-use dispute with CUB regarding heritage beer trademarks some years ago. In about January 2015, Elixir launched a beer named “Pacific Ale” under the Thunder Road brand. Later, following letters of demand from Stone & Wood, this beer was re-named “Pacific”.

Images of the competing bottles, six packs and beer tap decals are set out below (the Thunder Road “Pacific” being essentially the same as “Pacific Ale” but for the missing word):

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In light of the differences between the visual depictions of the marks above, it is perhaps unsurprising that Moshinsky J found there to be no deceptive similarity between the marks, nor any misleading or deceptive conduct or passing off.

Stone & Wood’s best, but ultimately unsuccessful, argument appears to have been that customers would regularly order their beer orally without reference to the visual depiction of the product. In this regard, Moshinsky J considered the various ways that the products were sold.

In the licensed venue environment, his Honour accepted that in venues which sold Stone & Wood Pacific Ale, many customers refer to the product simply as “Pacific Ale”, but that was only done in that context, where there was an awareness that what was being purchased was a Stone & Wood product. His Honour concluded that it did not follow that such a customer would be likely to use that expression at a different venue which sells the Thunder Road product, not see the beer tap decal or other information indicating the product is the Thunder Road product, and thus mistakenly order the product thinking it is Stone & Wood Pacific Ale. In coming to that conclusion, his Honour observed that it was rare for both products to be sold at the one venue and that the decals for the beer taps were generally, though not always, visible to customers and they made quite clear what beer was being served. In any event, perhaps his Honour had in mind the famous aphorism of Lord Macnaghten in Montgomery v Thompson [1891] AC 217 (a case involving “Stone Ale”), that “thirsty folk want beer, not explanations.”

In the retail liquor store environment, his Honour observed that some bottle shops which sell craft beer arrange the beers by the brewery, while others do so by broad flavour, and if the shop sells both beers, his Honour held there was unlikely to be confusion between the two products because they would be near each other and the differences in the labelling and packaging would make clear that they were different products.

The parties also adduced expert marketing evidence. His Honour accepted the general proposition that purchasers do not shop for and purchase items from retail stores based on a side-by-side comparison with other products in the same category and instead learn what fulfils their needs and preferences and then make purchasing decisions using their subconscious memory of the cues that link to the product, which cues can be a word, colour or logo. However, his Honour did not accept, without any testing being performed,* that in the case of Stone & Wood Pacific Ale, the relevant cue was “Pacific Ale” rather than the entire logo or the entire name. This is a salient lesson for those seeking to rely on expert marketing evidence – theory only goes so far and essentially goes nowhere to proving a case without actual testing of the theory against the facts of the case.

Finally, Moshinsky J found that Stone & Wood had engaged in groundless threats of trade mark infringement and, in so finding, held that Stone & Wood had not established that it began its trade mark infringement action “with due diligence” within the meaning of s 129(5) of the Trade Marks Act 1995 (Cth). Stone & Wood had acted diligently in the initial round of letters of demand and response. However, once it was clear the dispute was not going to be resolved (in April 2015) its commencement of the proceeding in May 2015 was not sufficient, because no claim of trade mark infringement was made. It was only after the cross-claim for groundless threats was filed that the trade mark infringement claim was added in mid-June 2015. To many, two months may not be considered an inordinate delay. However, his Honour was particularly concerned that the claim for trade mark infringement was not raised on the initial pleading.

* of consumers’ perceptions, not the beer.