Muzz Buzz Franchising Pty Limited v JB Holdings (2010) Limited [2013] NZHC 1599

The Australian and New Zealand markets are often viewed by foreign business owners as a single market, which is reflected in the numerous franchises and businesses that operate across both countries.  As Australian-based businesses expand their business operations throughout Australia they will often look to New Zealand as a natural extension.  As such, Australian businesses will often wish to stop anyone in New Zealand  from copying their trade marks and related intellectual property, as this may stop them  from expanding into New Zealand.  Some of the many ways in which an Australian business can achieve this were discussed in a recent decision of the High Court of New Zealand in which an Australian company (Muzz Buzz Franchising Pty Limited) was able to stop a New Zealand based competitor, JB Holdings (2010) Limited, from trading under a similar mark.

Muzz Buzz Franchising Pty Ltd's trade mark rights

Muzz Buzz operated  drive-through coffee outlets throughout Australia, starting in 2002.  All of its outlets operated under the MUZZ BUZZ mark and adopted the same distinctive shape of its drive through coffee kiosk as depicted below.

Muzz Buzz anticipated expanding into New Zealand and in 2007 registered trade marks for the words "MUZZ BUZZ", "MUZZ BUZZ DRIVE THROUGH COFFEE", the stylised MUZZ BUZZ logo and the word "BUZZ" in relation to various goods and services elements of drive through coffee businesses.  However, Muzz Buzz did not open  an outlet in New Zealand until 2012.

JB Holdings (2010) Ltd's conduct

JB Holdings traded under the trade mark JITTA BUZZ and first opened a drive-through coffee outlet in Auckland in 2010 with a second outlet opened in 2012.  A picture of its drive through coffee outlet is below.JB Holdings also operated a webpage with the above JITTA BUZZ marks and with various texts and phrases that Muzz Buzz argued were similar to those used by Muzz Buzz on its website.

Muzz Buzz's Allegation

Muzz Buzz took action against JB Holdings' use of the JITTA BUZZ trade marks and related "get up", alleging that JB Holdings:

  • breached its copyright in its website and kiosks;
  • infringed its registration of the BUZZ group of grade marks;
  • constituted "passing off"; and
  • breached the Fair Trading Act 1986, as "misleading and deceptive conduct".

JB Holdings found to breach copyright and infringe trade mark registrations

Justice Toogood found that JB Holdings had infringed Muzz Buzz's copyright subsisting in its website.  He did not find that Muzz Buzz's kiosks were capable of attracting copyright and as such JB Holdings had not infringed Muzz Buzz's copyright in the kiosks.

Justice Toogood also found that JB Holdings had infringed Muzz Buzz's trade marks, as the JITTA BUZZ trade marks were held to be confusingly similar to Muzz Buzz's trade mark registrations, particularly given the distinctive character of the word BUZZ.

Australia and New Zealand regarded as one market when enforcing intellectual property rights

In order for Justice Toogood to reach a finding that JB Holdings had engaged in misleading and deceptive conduct under New Zealand's Fair Trading Act 1986 and under the tort of passing off, Justice Toogood needed to consider whether Muzz Buzz had developed protectable goodwill or  business reputation in the New Zealand market. 

To demonstrate this, Muzz Buzz submitted evidence of its reputation in Australia, actual instances of confusion that had occurred in New Zealand as well as evidence demonstrating the likelihood that the New Zealand public would have been exposed to its MUZZ BUZZ trade marks. This included its sponsorship of a Perth basketball team which competed in an Australian national tournament which was televised in New Zealand, as a New Zealand team also competed in the same tournament.  The Judge concluded that it was probable that New Zealand television viewers of the Australian National Basketball League games would have seen the Muzz Buzz logo associated with the Perth team.

Justice Toogood applied Dominion Rent A Car v Budget Rent A Car System (1970) Ltd [1987] 9 IPR 307, in which the Court of Appeal of New Zealand found that an Australian company's reputation and goodwill can extend to New Zealand if there is a sufficient business connection with New Zealand.  Justice Toogood went on the say that the globalisation of the marketplace, particularly in relation to New Zealand and Australia, preceded the creation of the Internet and that it can hardly be doubted that New Zealand and Australia may, for the purposes of enforcing intellectual property rights, be regarded as one market.

First use of a trade mark in New Zealand is not enough to defeat a claim to infringement of reputation-based rights in a trade mark

Justice Toogood held that it was not enough for JB holdings to argue that they were the first to operate and use their trade marks in New Zealand, given Muzz Buzz's well-established reputation in Western Australia and elsewhere, including in New Zealand, through internet access.  He referred to Lord Cooke in the Dominion Rent A Car Ltd case to support a view that

in cases of natural expansion of established businesses into new territories it may not be right to regard exclusive rights as acquired by the first entrant in point of time; an international reputation already earned by the second entrant and extending to the new market militates against an automatic first-past-the-post approach to the establishment of goodwill.

As a result, the judge awarded injunctive relief to Muzz Buzz on the basis that he considered JB Holdings' conduct to be misleading and amount to the tort of passing off.

Lessons for businesses expanding into New Zealand

This case provides some helpful tips for companies that are well establish overseas and looking to enter the New Zealand market.  In particular, any such businesses looking to expand into New Zealand should:

  1. Obtain registration of your trade mark(s) in New Zealand as soon as possible.

 A trade mark infringement may be found if another party uses a mark that is confusingly similar to a registered mark and covers the same or similar goods or services. 

In the absence of a registration, a company would only be able to stop another company from using a similar mark if it can demonstrate a reputation in New Zealand. In addition, it is a defence in New Zealand if that other party used the infringing mark before the date you filed your application for registration or before you used your trade mark (whichever is earlier).  It is therefore important to make a footprint in New Zealand as soon as possible to avoid other parties utilising this defence.

Before applying to register a trade mark, it is worthwhile conducting a search of the New Zealand trade marks register and marketplace to determine if there are any similar trade marks in use.

  1. Ensure your company's online presence (such as online forums, shops and social media sites) is not restricted to specific countries.

This may include, for example, obtaining a ".co.nz" domain name and allowing ordering and shipping of your goods to New Zealand.

  1. Participate in promotional activities that increase the likelihood that New Zealanders would gain an awareness of your trade mark.

These may include, for example, sponsoring or advertising in global and/or trans-Tasman sporting competitions, large trans-Tasman entertainment events and festivals, global art exhibitions as well as publications available in New Zealand and television programmes that are televised in New Zealand.

  1. Ensure you maintain accurate records of any intended expansion into New Zealand, including the dates of dealings and business plans, as well as records of any promotional activities in New Zealand.

Although JB Holdings used its trade mark in New Zealand first, Muzz Buzz successfully argued that its rights in New Zealand pre-dated JB Holdings.  This was supported by evidence demonstrating an awareness in the MUZZ BUZZ trade marks in New Zealand since 2007. 

  1. Lodge comprehensive and specific evidence when claiming reputation in a mark

A spill over reputation will not be inferred by the New Zealand Trade Marks Office or courts simply because there is extensive use overseas.  Nor will judges readily apply their personal knowledge of a trade mark to find against a party in the absence of extensive evidence to support their view. 

Any evidence filed will need to go that additional step further to demonstrating how a reputation acquired overseas would also result in a reputation in New Zealand.

If you wish to secure registration of your intellectual property rights in New Zealand, or need to enforce your rights against a third party, please contact us and we can discuss this further.