Gallo Winery wins battle, but loses BAREFOOT war

In E & J Gallo Winery v Lion Nathan Australia Pty Limited ([2009] FCAFC 27, March 24 2009), the Full Court of the Federal Court of Australia has partly overturned the primary judge's decision, holding that Lion Nathan Australia Pty Limited had infringed E & J Gallo Winery's trademark from the time it commenced selling its Barefoot beer until the date of the order for Gallo's trademark to be removed.

Gallo, the registered owner of the BAREFOOT trademark for wine, brought proceedings against Lion alleging that the latter's Barefoot Radler beer infringed its trademark. Lion cross-claimed, seeking removal of Gallo's BAREFOOT trademark from the register on the grounds of non-use.

The primary judge concluded that there had been non-use of Gallo's registered trademark. He ordered the removal of the mark from the register on the grounds that the sale of BAREFOOT-branded wine took place in Australia without Gallo's knowledge. The primary judge also held that Lion had not infringed Gallo's registered mark because Lion's actual use of the mark BAREFOOT RADLER was not likely to deceive or cause confusion. He also concluded that beer and wine were not "goods of the same description" (for further details please see "Lion Nathan gets its claws out in BAREFOOT Case").

On appeal, the Full Court upheld the primary judge's findings on the removal application, but overturned his decision on infringement.

The key questions before the court wereas follows:
  • What constitutes use of a trademark in Australia by the registered owner under the non-use provisions of the Trademarks Act 1995 (Cth)?
  • Are beer and wine "goods of the same description" for the purposes of trademark infringement under Section 120(2) of the act?
In relation to the removal application, Gallo argued that so long as there was "use" of the mark, the owner's awareness of this use was irrelevant. The court rejected this argument. Instead, relying on the decision of the High Court in Estex Clothing Manufacturers Pty Limited v Ellis and Goldstein Limited, the court held that:

"the owner of the mark must have engaged in conduct of some type which the owner might reasonably contemplate would result in dealings with its goods marked with its mark in Australia while the goods were in the course of trade."

The Full Court also confirmed that an order for trademark removal did not operate retrospectively.

In relation to infringement, the court held that:

  • beer and wine were "goods of the same description"; and
  • the marks BAREFOOT RADLER and BAREFOOT were deceptively similar and, therefore, use of BAREFOOT RADLER for beer was likely to deceive or cause confusion.
In finding that beer and wine were "goods of the same description", the court's rationale was that both drinks were:
  • alcoholic beverages;
  • generally distributed by the same major wholesale distributors and retailers; and
  • directed at the same type of customer.
By contrast, the court found the difference in the manner of manufacture, sale and consumption of the goods to be materially less significant factors.

This case provides an important message to trademark owners: even if an order to remove a trademark registration based on non-use has been made, there can nonetheless be infringement of the trademark while it was registered and before the date of the order for removal. Further, to defend a removal action, it is important to demonstrate genuine commercial use of the trademark within Australia or that such use by the trademark owner or an authorized user had some connection with Australia.

Lisa Ritson and Janice Lo, Blake Dawson, Sydney

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