Highest court supports international brand owners

In E & J Gallo Winery v Lion Nathan Australia Pty Limited ([2010] HCA 15, May 19 2010), the High Court of Australia has allowed an appeal by E & J Gallo Winery in its dispute with Lion Nathan Australia Pty Limited concerning Barefoot wine and Barefoot Radler flavoured beer.

In 2001 the licensee of the BAREFOOT trademark, Barefoot Cellars, exported cases of Barefoot wine from California to a distributor in Germany. Part of this shipment was imported into Australia by an Australian importer, without the knowledge of the trademark owner. In June 2007 Lion Nathan applied to cancel Gallo's BAREFOOT mark for non-use and, in January 2008, launched its Barefoot Radler flavoured beer. A number of bottles of Barefoot wine were sold in Australia by the Australian importer during the alleged non-use period.

On appeal from the Full Court of the Federal Court, the High Court considered the following issues:
  • whether the import and sale of Barefoot wine into Australia amounted to use of a trademark;
  • whether Barefoot Cellars' use of the BAREFOOT mark (under the quality control of the trademark owner) amounted to use by the trademark owner - namely, whether Barefoot Cellars was an authorized user under the Australian Trademarks Act 1995;
  • whether use of the trademark was in good faith; and
  • whether the Barefoot wine sold in Australia remained "in the course of trade".
The High Court unanimously:
  • allowed Gallo's appeal against the cancellation for non-use of its BAREFOOT mark for wine;
  • confirmed by grant of injunction its previous agreement with the decision of the Full Court that Lion Nathan's use since January 2008 of 'Barefoot Radler' for flavoured beer infringed Gallo's BAREFOOT mark for wine;
  • remitted the case to the trial judge to assess financial remedies (damages or account of profits); and
  • ordered Lion Nathan to pay all legal costs of the proceedings.
The High Court agreed with Gallo's argument that the Barefoot wine, exported to Germany without restriction on resale, then imported into and sold in Australia, remained in the "course of trade" in Australia. The court held that the offering for sale and sale of Barefoot wine in Australia amounted to use of the BAREFOOT mark. The mark functioned as an indicator of the origin of the goods, irrespective of the location of the first sale. The court confirmed that Barefoot Cellars' use of the mark amounted to use by the trademark owner.

The High Court rejected arguments by Lion Nathan that:
  • it was necessary that the wine be knowingly 'projected' into Australia by the trademark owner; and
  • the sales in Australia were not in good faith.
The court found that, although the quantities were small, the sales were of commercial quantity, and there was no suggestion that they were not for the purpose of profit-making and establishment of goodwill.

This important trademark decision by Australia's highest court reaffirms the classic principle that a mark is 'used' when it functions as an indicator of the trade origin of goods. It will be welcomed by global brand owners because it removes any suggestion that conventional international distribution might not be regarded as sufficient use to protect trademarks.

For a background discussion on this case please see "Lion Nathan gets its claws out in BAREFOOT Case" and "Gallo Winery wins battle, but loses BAREFOOT war".

Odette Gourley, Corrs Chambers Westgarth, Sydney  

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