Lion Nathan gets its claws out in BAREFOOT Case

In E & J Gallo Winery v Lion Nathan Australia Pty Ltd ([2008] FCA 934, June 20 2008), the Federal Court of Australia has ordered that the trademark BAREFOOT be removed from the register on grounds of non-use.
E & J Gallo Winery owned the registered trademark BAREFOOT for goods in Class 33 of the Nice Classification ("wines"). In early 2006 Gallo was involved in discussions with McWilliams Wines Pty Ltd (an Australian wine company) concerning the distribution of Barefoot wine in Australia. 
In 2006 and 2007 Lion Nathan Australia Pty Ltd began developing a new beer with lemon flavouring. It was decided that the beer would be sold under the trademark BAREFOOT RADLER, 'radler' being a traditional Bavarian beer flavoured with lemon and lime. Lion Nathan conducted a search of the Australian Trademarks Register in February 2007 and located Gallo's registration. However, it was not concerned by that registration as it covered only wine. Moreover, Lion Nathan had never heard of Gallo's Barefoot wine in Australia. In mid-July 2007 Lion Nathan filed an application to cancel Gallo's BAREFOOT registration on the basis that the trademark had not been used in Australia during the period from 2004 to 2007. 
In September 2007 McWilliams placed Barefoot wine on the market in Australia under licence from Gallo. In January 2008 Lion Nathan launched its new beer under the BAREFOOT RADLER mark in Australia. Gallo sued Lion Nathan for trademark infringement. Lion Nathan filed a cross-claim for cancellation of Gallo's BAREFOOT mark on the grounds that the trademark had not been used in the Australian marketplace in the past three years.
In considering Gallo's trademark infringement claim, the court concluded that the BAREFOOT and BAREFOOT RADLER trademarks so nearly resembled each other that the coexistence of the marks was likely to deceive or cause confusion. The court then considered whether Lion Nathan's radler beers were "goods of the same description" as wines. The court decided that they were not "goods of the same description", as the goods:
  • had different origins;
  • were made from different ingredients;
  • had different production processes;
  • were characterized differently; and
  • were consumed in different manners.
As the court found that radler beer and wine were not "goods of the same description", Gallo's trademark infringement action failed. 
The court subsequently considered Lion Nathan's cross-claim for cancellation of Gallo's BAREFOOT registration on the basis that the trademark had not been used by Gallo in Australia from 2004 to 2007. The court acknowledged that Gallo's Barefoot wine had been sold through a wholesaler in Australia during this period (Gallo sold its Barefoot wine to a purchaser in Germany, and the wine was then sold by the German purchaser to the Australian wholesaler). 
The court thus considered whether this constituted use of the trademark by Gallo in Australia. It stated that an "overseas manufacturer uses a trademark in Australia if it projects its goods into the course of trade in Australia". In this case, the court stated that Gallo had "projected" its goods into Germany and that the goods arrived in Australia without Gallo's knowledge. Moreover, there was no agreement whereby the goods were to make their way into the Australian market. As the wine sold in Australia was not actually "projected" into Australia by Gallo, the court found that there had been no use of the trademark by the registered owner.
Gallo also argued that it had used the BAREFOOT trademark during its negotiations with McWilliams to distribute the BAREFOOT wine in Australia. The court decided that the negotiations constituted "preliminary or preparatory acts" only, and not actual "use of the trademark". As there was no use of the trademark by Gallo in the relevant period, the court ordered that Gallo's BAREFOOT registration be cancelled.
This case indicates that Australian courts are adopting a very narrow approach to what constitutes "goods of the same description" when considering allegations of trademark infringement. This case also highlights the importance of ensuring active use of trademarks in Australia through direct sales and advertising in order to maintain valid trademark rights. If a trademark is not used in Australia within five years of registration, fresh applications should be filed to maintain valid rights. 
Lisa Ritson and Melissa Preston, Blake Dawson, Sydney

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