A recent Federal Court decision by a trial judge has left overseas trade mark owners concerned as to what constitutes trade mark use in Australia of their foreign mark, when goods bearing their registered mark arrive in this country through no action or intent on their part.
The case also examined the very interesting issue of whether these days the goods of beer and wines are considered to be goods of the same description in light of an overlap in wholesaling and retailing practices, and the fact that traditional beer brewing companies now also own significant wine interests.
BACKGROUND
In the case of E&J Gallo Winery v Lion Nathan Australia Pty Ltd, the plaintiff Gallo Winery sued Lion Nathan for trade mark infringement of its registration for the mark BAREFOOT in relation to wines. Lion Nathan, who had launched a range of beer under the trade mark BAREFOOT RADLER, denied infringement and cross-claimed for removal of Gallo Winery’s BAREFOOT mark from the Register for non-use.
Gallo Winery which is based in California is the second largest wine producing company in the world and distributes its products in over 90 countries. It is the registered owner in Australia of the word mark BAREFOOT registered from 9 March 1999 in relation to “wines”. On 17 January 2005, Gallo Winery had acquired the mark from an individual, Michael Houlihan, who operated a business called Barefoot Cellars. By early 2006, there were discussions between Gallo Winery and McWilliams Wines, for the sale of BAREFOOT wines into Australia. Up to that time, a limited quantity of BAREFOOT wines originating from California had previously been sold during the period 2004 and 2007 by a wine wholesaler in Melbourne. In September 2007, Gallo licensed its BAREFOOT trade mark to McWilliams Wines and on 14 September 2007 the first bottles of BAREFOOT cabernet merlot and semillon sauvignon blanc wines were placed on the Australian market.
Lion Nathan is a well known producer of beer and wine products in Australia and New Zealand, in January 2008 the company launched a new type of “radler” beer using the words BAREFOOT RADLER as a trade mark. The term radler is apparently German for “cyclist” and use of the term to describe a beer originated in 1922, when a Munich publican started mixing dark beer with lemonade to meet the high demand from large groups of cyclists who wanted a more refreshing drink so they could continue on their journey without falling off their bicycles.
INFRINGEMENT CLAIM BY GALLO WINERY
There are three tests for trade mark infringement in Australia summarized as follows:
- Direct trade mark infringement – where the marks are substantially identical or deceptively similar and where the alleged infringing goods/services are the same as the registered goods/services
- Non-direct trade mark infringement – where the marks are substantially identical or deceptively similar and where the alleged infringing goods/services are not the same but considered to be of the same description or closely related to the registered goods/services
- Unrelated trade mark infringement – where the marks are substantially identical or deceptively similar and where the alleged infringing goods/services are totally unrelated to the registered goods/services but confusion arises because the registered mark is so well known in Australia.
In this case, Gallo Winery claimed infringement of its mark under the second test of infringement. While the judge considered that the two marks BAREFOOT AND BAREFOOT RADLER were deceptively similar he held that there was no infringement because the beer sold by Lion Nathan was not goods of the same description as wines including for the following reasons:
- Beer is made of water, starch and yeast with a flavoring such as hops whereas wine is made of crushed grapes and certain varieties of yeast.
- Grapes are grown on vineyards and managed on an annual cycle.
- Wines vary significantly depending on variety of wine to be produced.
- In restaurants sold via wine lists of different wine styles whereas beer is usually sold by reference to brand names.
- Although both wine and beer are sold through restaurants and liquor stores, the manner of their sales are different. Beer is rarely sold by reference to country and variety. About 20% of beer is displayed on shelves while the bulk of beer sold is kept in a cool room which is the main selling area for beer. Wines by contrast are carefully categorized, with red and white wine displayed separately, and within these divisions, displayed according to grape varieties. Wine takes up about 80% of a shop floor which is the main selling area for wine.
- The manner of their consumption is different. Beer is consumed for its thirst quenching qualities, whereas wine is consumed in a sipping fashion.
CROSS-CLAIM OF REMOVAL FOR NON – USE BY LION NATHAN
The non-use of a mark or the non-use of a mark in good faith in Australia for a continuous period of 3 years is a basis upon which an application may be made for the removal of the mark. In the case the relevant period was 7 May 2004 to 8 May 2007.
Gallo Winery relied on the following three factors to prove use of the mark during the relevant time period:
The offering for sale and the sale of BAREFOOT wine during the relevant period by the wine wholesalers in Melbourne was use in good faith by Barefoot Cellars as an authorized user of the mark.
The evidence showed that the BAREFOOT wine found its way to Australia via Germany. What happened to the wine in Germany is not known except that some of it was later imported by the wine wholesaler in Melbourne. During the relevant period there was sale of a dozen bottles of zinfandel to a tavern in Queensland, 3 bottles in Victoria and a single cash sale bottle.
Gallo Winery argued that the prior registered owner of the mark, Mr Houlihan, licensed the mark to Barefoot Cellars and that the sales by the wine wholesaler in Melbourne constituted use by Barefoot Cellars and in turn Mr Houlihan. The evidence also showed that neither Mr Houlihan nor Barefoot Cellars knew that any BAREFOOT wine exported to Germany may ultimately find its way to Australia and that lack of knowledge was said by Gallo Winery to be irrelevant.
Gallo Winery’s Counsel argued that the case supported the proposition that a trade mark is used in Australia if the product to which the mark is applied is sold in Australia. The judge did not agree and found that there could not have been use of the BAREFOOT mark during the relevant period by the registered owner simply because some of the wine happened to be offered for sale or was in fact sold in Australia by way of some unexplained circuitous route from Germany or elsewhere. He found that there was no agreement between Mr Houlihan or Barefoot Cellars and the wine wholesaler in Melbourne.
The judge distinguished previous cases on the basis that there was no projection by the registered owner Mr Houlihan of goods bearing the mark into Australia. Therefore, there was no authorized use of the mark by Barefoot Cellars during the relevant period.
The offering for sale and the sale of BAREFOOT wine during the relevant period was use in good faith by the wine wholesaler in Melbourne as an authorized user.
The Judge found that at no time during the relevant period or for that matter any time after the wine was shipped did Mr Houlihan exercise any quality control of use of the mark by the wine wholesaler in Melbourne. So this contention was likewise rejected.
The negotiation and preparation by Gallo Winery for the distribution of BAREFOOT wines by McWilliams Wines in Australia was use by Gallo Winery in good faith during the relevant period.
The evidence showed that commencing in about September / October 2006, discussions ensued between Gallo Winery and McWilliams Wines in relation to the distribution of BAREFOOT wines in Australia by way of a licensing arrangement or import/distribution structure. By March 2007, there were further discussions between the parties and McWilliams decided to allocate some of its wine production to BAREFOOT wines. Gallo Winery argued that such negotiations constituted strong evidence that the mark was being used. Unhappily for Gallo Winery, the judge concluded that all Gallo Winery had done were preliminary or preparatory acts. An intention to use a mark is not enough to defeat an application for removal for non-use.
Finally, Gallo Winery’s Counsel tried to raise the proposition that there were obstacles to Gallo Winery’s use of the mark in Australia, or failing that, the judge was asked to exercise his discretion and not remove the BAREFOOT mark from registration. The judge found no such obstacles to exist and further that there were no special facts or overriding public interest in existence to warrant non removal of the mark.
The Court dismissed Gallo Winery’s claim for trade mark infringement and ordered removal of the BAREFOOT mark from the Register as a result of non use. The matter has been appealed.
However, the case remains a warning to overseas trade mark owners that the sale or offering for sale of their products in this country may not be enough to constitute trade mark use by them unless it was done with their knowledge or intent.
If you would like any further information in relation to this article, please do not hesitate to contact Jennifer McEwan
