E & J Gallo Winery v Lion Nathan Australia Pty Ltd

E & J Gallo Winery v Lion Nathan Australia Pty Ltd

E & J Gallo Winery v Lion Nathan Australia Pty Ltd

This proceeding before the High Court ([2010] HCA 15 (19 May 2010)) related to an application by Lion Nathan to cancel Gallo’s registration of the trade mark BAREFOOT.

Facts of the case

In earlier proceedings before the Federal Court and, on appeal, to the Full Court of the Federal Court, Gallo claimed that Lion Nathan’s use of the trade mark BAREFOOT RADLER on beer infringed the trade mark BAREFOOT registered for wine. Lion Nathan counterclaimed by seeking cancellation of the registered trade mark on the grounds of nonuse. Although Gallo’s claim for trade mark infringement was initially not successful, the Full Court of the Federal Court ruled that Lion Nathan’s use of the trade mark BAREFOOT RADLER infringed Gallo’s registered trade mark. However, the Full Court upheld the primary judge’s finding that Gallo’s trade mark was not used in Australia and should be removed from the register of trade marks.

The issue on appeal to the High Court was whether there had been use in good faith by Gallo, or its predecessor in title, of the registered trade mark BAREFOOT in Australia.

The decision

It was Lion Nathan’s contention that to establish use of a trade mark in Australia it was necessary that an overseas manufacturer knowingly “projects” his goods into the course of trade in Australia. In response to this contention the High Court ruled that an overseas manufacturer who has registered a trade mark in Australia and who himself (or through an authorised user) places the trade mark on goods which are then sold to a trader overseas can be said to be a user of the trade mark when those same goods, to which the trade mark is affixed, are in the course of trade, that is, are offered for sale and sold in Australia. This is because the trade mark remains the trade mark of the registered owner (through an authorised user if there is one) whilst the goods are in the course of trade before they are bought for consumption. The Court cited a prior Federal Court judgement to the effect that whilst a trade mark remains on goods, it functions as an indicator of the person who attached or authorised the initial use of the mark. According to that authority, during the trading period the trade mark functions as an indicator of the origin of the goods, irrespective of the location of the first sale.

Provided that the use of the trade mark in Australia was authorised, the High Court considered that the facts of the case were sufficient to constitute a use of the registered trade mark.

In order to establish that the use of the trade mark BAREFOOT in Australia was authorised, Gallo relied on the quality control exercised by Gallo’s predecessor in title as well as a consulting agreement which provided for the monitoring of the quality of the wine. The High Court accepted that this evidence effectively established that the use of the registered trade mark had occurred under the control of Gallo’s predecessor in title and that the use was therefore properly authorised in accordance with the provisions of the Trade Marks Act. His Honour Justice Heydon handed down a separate judgement in relation to the quality control issue. In response to Lion Nathan’s criticism of Gallo’s evidence as being vague and absent of primary records, His Honour said that the evidence was “indeed both vague and indirect”. The evidence was not, according to His Honour, “perfect” but it was sufficient for purposes of establishing the requisite level of quality control.

In relation to whether the use of the trade mark by Gallo was in good faith, the High Court stated that whilst a single act of sale may not be sufficient to prevent removal, in the case of genuine use, a relatively small amount of use may be sufficient to constitute “ordinary and genuine” use judged by commercial standards. A commercial quantity of wine, some 144 bottles, was imported and offered for sale under the registered trade mark by Beach Avenue during the statutory period. Some 41 sales during that time were proven by reference to invoices and tax paid. There was no suggestion in the evidence that the offering for sale and selling either overseas or in Australia was for any purpose other than making profit and establishing goodwill in the registered trade mark. It was not contended that the use was fictitious or colourable. In all the circumstances, said the High Court, the use was genuine and sufficient to establish use in good faith.

Lion Nathan further contended that Gallo’s use of the word BAREFOOT in combination with a footprint device was not use of the trade mark as registered. In rejecting this contention the High Court said that the addition of the device to the registered trade mark is not a feature which separately distinguishes the goods or substantially affects the identity of the registered trade mark because consumers are likely to identify the products sold under the registered trade mark with the device by reference to the word BAREFOOT. The device is an illustration of the word. The monopoly given by a registration of the word BAREFOOT alone is wide enough to include the word together with a device which does not substantially affect the identity of the trade mark in the word alone. Except for a situation of honest concurrent use, another trader is likely to be precluded from registering the device alone while the registered trade mark remains on the Register. The device is an addition to the registered trade mark that does not substantially affect its identity. Accordingly, the use of the registered trade mark with the device constituted use of the registered trade mark in accordance with s 7(1).

Commentary

Based on Gallo’s evidence, the High Court has confirmed that beer and wine are similar goods. This finding no doubt owes much to Gallo’s diligence in putting before the Court at first instance extensive and persuasive evidence regarding the trade channels through which wine and beer pass and other circumstances having particular relevance to the marketing and consumption of wine and beer in Australia.

Of particular importance was the High Court’s confirmation that a trade mark, registered in Australia by an overseas manufacturer, remains the trade mark of the registered owner whilst the goods are in the course of trade irrespective of the location of the first sale. The High Court’s clear statement on this point gives to foreign-based owners of trade marks registered in Australia an increased level of security in the protection of their trade mark rights in this country.