Mere similarities between products insufficient in passing-off action

Australia

In Nutrientwater Pty Ltd v Baco Pty Ltd ([2010] FCA 2, January 6 2010), the Federal Court has dismissed an application for injunctive relief by Nutrientwater Pty Ltd against its competitor Baco Pty Ltd. Nutrientwater claimed that the get-up of Baco's enhanced water product was strikingly similar to its own, giving rise to claims in passing off and the statutory prohibition against misleading or deceptive conduct.

Nutrientwater Pty Ltd manufactures, promotes and sells a range of enhanced waters. It entered the Australian market in November 2005. In May 2009 Baco Pty Ltd launched its product in Australia. In the proceedings, Nutrientwater relied on the spectrum of colours used across its product range, the coloured horizontal bands and the shape of the bottles to make the product stand out on the shelves in retail stores.

In February 2008 Coca-Cola Amatil launched its range of enhanced waters in Australia (Vitaminwater). Vitaminwater had launched in the United States in 2000. By 2006 there was a large market in the United States for enhanced waters. Vitaminwater ranked among the top 10 sellers in the United States and its rise in that country was highly publicized. Throughout 2007 and 2008, other brands of enhanced waters entered the Australian market, including Emma &Tom's, Bickford's Vitamin H20 and Schweppes' Smart Water.

When Vitaminwater launched in Australia, Nutrientwater received complaints from consumers who claimed to have been misled into purchasing Vitaminwater products when they had been intending to purchase Nutrientwater products. Consumer feedback was that the confusion arose by reason of the colour of the labels and the fact that variant beverages of the Vitaminwater product were almost identical to Nutrientwater's products. Despite this, Nutrientwater took no legal action against Vitaminwater.

As part of its defence, Baco claimed that Nutrientwater had substantially copied the packaging of the Vitaminwater products. The court concluded that the Nutrientwater product shared a number of similar features with the US Vitaminwater product, including:

  • the predominant focus on vitamins;
  • the use of all-black text on the label;
  • the use of a clear plastic bottle and clear plastic lid, with similar positioning of the label and label size relative to the overall bottle size;
  • the use of a wraparound label;
  • similar names for each variant product (eg, energy and immunity); and
  • the use of coloured labels matching the colours of each variant beverage.

On January 18 2008 Baco briefed its designer to create labels for a range of enhanced water products that it intended to produce and sell. Baco supplied its designer with samples of the Nutrientwater products, the US Vitaminwater products, Emma & Tom’s products and Schweppes' Smart Water products. Baco contended that it provided the Nutrientwater product to its designer as an illustration of a successful enhanced water product in the Australian market.

In December 2008 Nutrientwater obtained samples of Baco’s enhanced water product, which was still in trial phase. Nutrientwater threatened to sue Baco. Baco redesigned its packaging and labelling without any admission of liability. The court accepted that these modifications were intended to differentiate Baco's product from market competitors – specifically Nutrientwater.

In May 2009 Baco introduced its Grassroots enhanced water products to the Australian market. Nutrientwater commenced proceedings against Baco in June 2009.

The tort of passing off prevents an entity from misrepresenting that its goods or services are the goods or services of another trader, or that there is an association or connection between its goods and services and those of another trader. Nutrientwater needed to establish that it had the necessary reputation in the elements of packaging or get-up in question when Baco launched its product range. The features of the get-up that Nutrientwater claimed were similar to its own products included:

  • the bottle shape;
  • the use of a clear plastic lid;
  • a tall wraparound label;
  • the use of light-hearted or quirky label comments;
  • the use of prominent nutritional panels; and
  • the colours of the beverages.

At trial, Nutrientwater relied most heavily on the choice of colours and the use of bright horizontal bands of colour on the labels corresponding to the beverage colours. Nutrientwater also alleged that Baco had engaged in misleading or deceptive conduct in contravention of Section 52 of the Trade Practices Act 1974 (Cth). The court held that, unless Nutrientwater had a reputation in those features of its get-up, Baco's use of the features relied upon by Nutrientwater was unlikely to convey misrepresentations such as to amount to misleading or deceptive conduct.

The court concluded that Nutrientwater relied upon a combination of features, rather than any one particular feature, which were said to be distinctive of the Nutrientwater product range. Further, the court found that, by the time Baco entered the market in May 2009, those features had become indicative of enhanced water products in general, rather than any particular brand or source.

The court did not accept that Nutrientwater had established such a degree of distinctiveness in the colours of the Nutrientwater product range (or any other feature, alone or together) which might have justified its submission that it had a discrete reputation in those colours or some other feature of the get-up. In particular, the court pointed to Nutrientwater's copying of the US Vitaminwater product and Vitaminwater's subsequent entry into the Australian market. The court concluded that features that might have been viewed as distinctive of the Nutrientwater products in the Australian market were no longer distinctive after Vitaminwater established itself in Australia. For this reason, the court found that Nutrientwater had no established reputation in the get-up of the product by the time Baco entered the market in May 2009. Any reputation that might have existed in those features had been lost due to the entry of other competitors in the market by May 2009.

As to whether the outcome would have been different if Nutrientwater had been able to establish the necessary reputation, the Court concluded that because Baco applied its own trademarks to clearly distinguish its products, a consumer was not likely to believe that the Baco products came from the same source as the Nutrientwater products. Moreover, consumers would not be misled into thinking that the Grassroots products were Nutrientwater products, or that there was any connection or association between the Grassroots products and Nutrientwater.

The decision demonstrates that a claimant will not succeed in an action for passing off, or misleading or deceptive conduct, merely due to similarities between the products in question. It is essential for any potential claimant to be able to demonstrate that it has established a reputation in a particular feature or get-up.

In this case, the court accepted that certain features or get-up can become associated with a particular trader, such that use by another trader could give rise to misleading and deceptive conduct or passing off. However, a claimant will need to establish that the particular feature or get-up alleged to have been appropriated is identified in a special way with the claimant in the mind of members of the public. Only in such circumstances may a court find that a trader has engaged in misleading or deceptive conduct by reason of the appropriation of that particular feature or get-up.

The decision also highlights the importance of securing IP protection for products, where possible, prior to entry into the market. In this case, Nutrientwater may have been able to obtain a design registration in relation to some of the predominant features of its product. Design registration in Australia is for a maximum term of ten years. If a particular product feature or get-up is a registered design, this may prevent competitors from using an identical or substantially similar feature or get-up in relation to their products.

Sarah Matheson and Kelly Griffiths, Allens Arthur Robinson, Sydney

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