Synopsis

The Full Federal Court has decided that Lion Nathan's adoption and use of the trade mark BAREFOOT RADLER infringed Gallo's trade mark BAREFOOT registered for wine. In reaching this conclusion the Court concluded that Lion Nathan's radler beer is a good of the same description as wine.

In the same proceedings the Court ruled that Gallo's registration for the trade mark BAREFOOT be removed from the trade marks register on the ground that the trade mark had not been in use in Australia for a continuous period of three (3) years.

Gallo successfully obtained special leave to appeal the Full Court's non-use ruling to the Australian High Court. The issues before the High Court are whether there is use of a registered trade mark in Australia by the registered owner of the trade mark in circumstances where the trade mark is applied to goods outside Australia and the registered owner of the mark is not aware that those goods are being offered for sale or sold in Australia and whether, in the circumstances envisaged by the first question, the only use of the registered trade mark in Australia is the use made by the wholesaler or retailer in Australia who offers the goods for sale rather than the registered owner of the trade mark.

These issues have implications for all overseas owners of trade marks registered in Australia in circumstances where goods bearing the registered trade mark are offered for sale in this country by unrelated third parties. The issues raised by Gallo are likely to be considered by the High Court before the end of this year.

INTRODUCTION

In August 2006 Lion Nathan Australia Pty Ltd (Lion Nathan) developed the concept of lemon flavoured beer to be marketed under the name BAREFOOT RADLER. The company subsequently applied to register the trade mark BAREFOOT RADLER for beer and the product under that trade mark was launched in Australia in January 2008.

The trade mark BAREFOOT was already registered as a trade mark in Australia by E & J Gallo Winery (Gallo) for wine and, in early 2006, Gallo commenced discussions with MacWilliams Wines Pty Limited for the sale of BAREFOOT wine in Australia. However, it was not until 14 September 2007 that MacWilliams first commenced marketing BAREFOOT wine in this country.

The first shot in the dispute between Lion Nathan and Gallo regarding the trade mark BAREFOOT occurred on 8 June 2007 when Lion Nathan applied to cancel Gallo's registration of the trade mark BAREFOOT on the grounds of non-use – that is, that Gallo had not made any use of the trade mark BAREFOOT in Australia for a period of three years preceding the non-use application. Gallo's response to this action was twofold. First, Gallo contended that a limited quantity of BAREFOOT wine originating from Gallo's Californian winery had been sold in Melbourne by Beach Avenue Wholesales Pty Limited, a wine wholesaler, during the period 2004 to 2007. Secondly Gallo contended that Lion Nathan's use of the trade mark BAREFOOT RADLER infringed Gallo's registration of the trade mark BAREFOOT.

PROCEEDINGS BEFORE FEDERAL COURT

The claims for infringement under the Trade Marks Act and application for cancellation of the trade mark registration were heard by His Honour Justice Flick of the Federal Court. In relation to Gallo's claims that there had been use of the trade mark BAREFOOT by Gallo in Australia during the three year period up to 8 May 2007 by reason of the sales made by Beach Avenue Wholesalers, His Honour was of the view that such sales did not constitute use of the trade mark by Gallo. From the evidence before the Court it was apparent that the wine under the BAREFOOT label was originally exported from the United States of America to Germany and later imported into Australia. According to His Honour, it could not be accepted that there had been use of the trade mark by the registered owner merely by reason of the fact that the BAREFOOT wine, or some of the wine exported originally to Germany, by some unexplained circuitous route ultimately arrived in Australia and was then available for sale in this country. On the authority relied upon by His Honour, an overseas manufacturer of goods uses a trade mark in Australia only if such person “projects” his goods into the course of trade in Australia. In the present case, said His Honour, there was no “projection” by Gallo of its wine into the Australian market. His Honour concluded that there was no use of the trade mark by Gallo in Australia and, furthermore, there were no special facts or circumstances that justified the retention of the trade mark on the trade marks register.

In considering Gallo's claim for the infringement of the registered trade mark BAREFOOT it was necessary for Gallo to establish not only that the two trade marks BAREFOOT RADLER and BAREFOOT are substantially identical or deceptively similar but also that Lion Nathan's radler beer is a good of the same description as wine. His Honour had little difficulty in concluding that the words BAREFOOT RADLER are deceptively similar to the registered trade mark BAREFOOT. The issue of the similarity between the goods was more contentious and detailed submissions were presented to the Court by both parties. On behalf of Gallo it was contended that both beer and wine are alcoholic beverages generally distributed by the same major wholesale distributors. It was emphasised by Gallo that Lion Nathan purposely intended that its beverage be seen as an alternative to wine and that both Lion Nathan's radler beer and wine were intended for consumption in summer. Furthermore, Gallo argued that the same retailers distributed wines and beer. In response, Lion Nathan pointed to the different origins, ingredients and manner of manufacture of wines and beer as well as differences between the manner of selection and consumption. Lion Nathan also argued that its intention to attract wine drinkers was not relevant to the issue of product similarity.

Having considered these arguments His Honour concluded that BAREFOOT RADLER beers are not goods of the same description as wine. It followed that Lion Nathan's use of the trade mark BAREFOOT RADLER did not infringe Gallo's registration of the trade mark BAREFOOT.

APPEAL TO THE FULL FEDERAL COURT

On appeal to the Full Federal Court Gallo challenged the primary judge's finding that Lion Nathan's radler beer and wine were not similar. Gallo also challenged His Honour's conclusions in respect of the non-use of the trade mark BAREFOOT. In its cross-appeal Lion Nathan contended that its trade mark BAREFOOT RADLER is not deceptively similar to the trade mark BAREFOOT.

In relation to the similarities between Lion Nathan's radler beer and wine the Full Federal Court reviewed the arguments advanced before the primary judge and noted the factors which supported the view that Lion Nathan's beer were goods of the same description as wine. The Court tended to agree with the arguments put forward on behalf of Gallo and concluded that such arguments point convincingly to Lion Nathan's beer and wine being goods of the same description. According to the judgement, the considerations which led to His Honour Justice Flick reaching the opposite conclusion were “materially less significant”. The Court's finding was therefore that Lion Nathan's radler beer constitutes goods of the same description as wine.

Having reached this conclusion it was necessary for the Court to consider Lion Nathan's claim that its trade mark BAREFOOT RADLER is not deceptively similar to Gallo's registered trade mark BAREFOOT. The Court's ruling on this issue was that notwithstanding the inclusion of the word RADLER in Lion Nathan's mark, the word BAREFOOT remains prominent and there is an obvious and clear link between that word and an imperfect recollection of Gallo's registered mark sufficient for there to be likelihood of deception or confusion.

This being so, there was a prima facie infringement of Gallo's trade mark registration by Lion Nathan unless the manner in which Lion Nathan had used its trade mark was not likely to deceive or cause confusion. This issue raises the socalled “proviso defence” to trade mark infringement under Section 120(2) of the Trade Marks Act. However, given the Court's finding that the respective trade marks were deceptively similar, that circumstance – according to the Court – would render it more likely that the actual use of infringing mark was likely to deceive or cause confusion. Also relevant, said the Court, would be the matters considered in determining whether the goods were of the same description.

It followed that, from the time Lion Nathan launched its beer under the trade mark BAREFOOT RADLER, Lion Nathan infringed Gallo's registered trade mark.

In considering Gallo's claims that the use of the trade mark BAREFOOT that had occurred in Australia during the three year period up to 8 May 2007 constituted use of the trade mark by the registered owner, the Court considered that the primary judge had correctly concluded that such use was not use by Gallo of its trade mark in Australia. The Court rejected Gallo's contention that the owner of a registered trade mark uses the mark in Australia simply because goods to which the owner (or an authorised user) has affixed the mark are traded in the ordinary course of trade in Australia. In the result, the Court agreed with the primary judge that Gallo's registered trade mark be removed from the register on the grounds of non-use.

SPECIAL LEAVE TO APPEAL TO THE HIGH COURT

Gallo has successfully obtained special leave to appeal the Full Federal Court judgement to the High Court. The leave to appeal application raises two specific issues.

The first issue is whether there is use of a registered trade mark in Australia by the registered owner of the trade mark in circumstances where the trade mark is applied to goods outside Australia and the registered owner of the mark is not aware that those goods are being offered for sale or sold in Australia. The second issue to be considered by the Court is whether, in the circumstances envisaged by the first question, the only use of the registered trade mark in Australia is the use made by the wholesaler or retailer in Australia who offers the goods for sale rather than the registered owner of the trade mark.

These issues have implications for all overseas owners of trade marks registered in Australia in circumstances where goods bearing the registered trade mark are offered for sale in this country by unrelated third parties. The issues raised by Gallo are likely to be considered by the High Court before the end of this year.