Decision highlights difficulties in identifying relevant ‘description’

Australia
In Solahart Industries Pty Ltd v Solar Shop Pty Ltd ([2011] FCA 700, June 21 2011), the Federal Court of Australia has held that photovoltaic solar cells that generate electricity (but do not store water and are not hot water systems as such) are “goods of the same description” as solar hot water systems.

Solahart Industries Pty Ltd is a well-known manufacturer and supplier of roof-mounted solar hot water systems. Solar Hut Pty Ltd supplies roof-mounted photovoltaic solar systems.

Solahart owns three trademarks consisting of the word 'Solahart' and alleged that each of those marks had been infringed by Solar Hut’s sale of its photovoltaic systems under the SOLARHUT brand. Its allegation of infringement under Section 120(1) and 120(2) of the Trademarks Act 1995 required that it establish (among other matters) that:

  • Solar Hut’s photovoltaic cells are goods in respect of which Solahart’s marks (or either of them) are registered; or
  • the cells are goods “of the same description” as the goods in respect of which Solahart’s marks are registered.
Solahart’s three registrations are in respect of different products, but are all in Class 11 of the Nice Classification. The court noted that photovoltaic cells generate electricity; it also noted that: “coal-fired power stations, certain species of nuclear reactor and a car battery” also generate electricity. Thus, while each of the relevant Class 11 products are capable of being operated by electricity, the court considered that a device that generates electricity which powers those products is not, without more, such a product itself. Were it otherwise, any source of electricity would be a hot water system in Class 11 (and that proposition was described as “outlandish”). However, the court did express the opinion that a different answer to that question might result if it had been shown that the photovoltaic cells were dedicated solely to providing electricity to heat water.

Solarhart’s second argument was that Solar Hut’s cells were nonetheless “goods of the same description” as those in respect of which its three marks were registered. Resolving this particular issue clearly troubled the court and this is the only issue that is dealt with in the balance of this report.

The court identified various characteristics of each company’s products, finding numerous points of similarity and distinction. For example, Solar Hut’s cells consist of solar panels made of semi-conductor material which, when struck by radiation from the sun, generate electricity. The panels are typically installed on a customer’s roof and supply electricity to the household. By contrast, Solahart’s hot water heaters are heat transfer devices. Heat is collected from the roof-top cells and transferred into the household’s hot water system.

However, both products bring about a reduction in a household’s use of electricity; both involve roof-mounting of solar collectors; and both utilise radiation coming from the sun. On the other hand, their purposes are different: one is a hot water heater, the other an electricity generator; one is installed by a plumber, the other by an electrician.

The court went on to observe:

The question posed by Section 120(2)(a) of whether one kind of good is 'of the same description' as another is a question whose answer will often be inherently contestable. [O]ne may no more readily answer whether a monkey is an animal of the same description as a baboon than one may say that trademark attorneys are lawyers of the same description as intellectual property barristers.”

The difficulties in identifying the relevant ‘description’ are well known. This case exemplified them because both products can be described as roof-mounted devices for collecting energy from the sun and, in that sense, they are goods bearing the same description. On the other hand, one is a hot water heater and the other an electricity generator and, in that sense, clearly they are not.

The court considered that the difficulty in this area exists not in the identification of any particular description, but in sifting those descriptions which are relevant from those that are not. In that context, the court noted that a number of guidelines had been suggested in earlier cases, such as:
  • the nature and origin of the goods;
  • the uses made of the goods, including their intended uses; and
  • the trade channels through which the goods are bought or sold.
To that list, the court thought that one might add “the phenomenon of internet retailing which rather tends to blur, almost to extinction, these kinds of consideration”.

In conducting its analysis, the court, citing Justice Gummow in New South Wales Dairy Corporation v Murray Goulburn Co-operative Co Ltd ((1989) 86 ALR 549), proceeded on the basis that “a sensible business judgment is called for… and, in that context, notions of substitutability appear to be apposite”.

In the Dairy Corporation case, it was held that, although flavoured milk and lunch-sized package cheese were both sources of calcium for children, they were not goods of the same description because, in fact, there was no evidence that they were substituted for each other.

The final conclusion was that, when judged at the consumer level, there was a real choice between the purchase of a solar-powered hot water system and a solar-powered electrical generator. This was because consumers who want to reduce their electricity bill by the use of renewable energy would face this choice and, therefore, it was likely for there to be competition between the two products. Accordingly, the court held that “the class of consumers to whom the products are sold sufficiently overlap to mean that they are goods of the same description”.

Although that was not regarded as the sole test to be applied, it was the defining factor which, in light of the inconclusive nature of the other factors, led to the court’s conclusion. By analogy, the court thought that this issue was “not so very distinct” from the issue raised in E & J Gallo Winery v Lion Nathan Australia Pty Ltd ((2009) 175 FCR 386), where it was held that beer and wine are “goods of the same description” because, although beer and wine are not interchangeable for every drinker, they were considered to be substitutable.

Julian Gyngell, Kepdowrie Chambers, Wahroonga

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