In Hansen Beverage Company v Bickfords (Australia) Pty Ltd ( FCAFC 181, November 14 2008), the Full Federal Court of Australia has set aside the orders made at first instance and remitted the matter to the trial judge. In a unanimous decision, the court held that the primary judge had adopted an incorrect approach in considering whether Hansen Beverage Company’s use of the trademark MONSTER ENERGY was sufficient to support an action for misleading and deceptive conduct under the Trade Practices Act 1974 (for further details please see "MONSTER Case highlights importance of trademark registration").
Hansen produces an energy drink called Monster Energy, which was launched in the United Sates in April 2002. Hansen did not apply to register the trademark MONSTER ENERGY or formally launch the product in Australia. Bickfords (Australia) Pty Ltd
became aware of Hansen's Monster Energy product during a trip to the United States in February 2005 and set about developing a new energy drink. Bickfords approached Hansen to discuss a possible licensing agreement for the MONSTER trademark, but no agreement was concluded between the parties. Bickfords subsequently applied for the registration of the trademarks MONSTER and MONSTER ENERGY and proceeded to launch its own Monster Energy drink in the Australian market. According to its evidence, Bickfords proceeded with its launch because its market research found no indication that Hansen was promoting its product in Australia and members of the public seemed to have no awareness of it.
There was no dispute between the parties that the similarities of the respective Monster Energy products could mislead or deceive for the purposes of the act and the tort of passing off. As a result, the decision turned on:
- what reputation Hansen needed to establish in Australia; and
- who needed to be misled or deceived when determining what constitutes misleading and/or deceptive conduct.
An action for passing off is an action designed to protect the goodwill and reputation of a business. Therefore, in order to be successful, Hansen needed to prove that it enjoyed sufficient reputation in the MONSTER ENERGY mark in Australia in relation to energy drinks at the relevant date (determined to be April/May 2006) such that use of MONSTER ENERGY by Bickfords conveyed a misrepresentation that Bickfords's product was actually that of Hansen (or was in some way associated with Hansen). In contrast, the act is concerned with consumer protection. Consequently, the act makes no reference to reputation, although case law establishes that the likelihood of consumers being misled or deceived relates to a “significant” or “substantial” proportion of persons within the relevant market. Accordingly, the sufficiency of the reputation that is required to be shown may be less in proceedings under the act than in proceedings alleging passing off.
The primary judge referred to National Exchange Pty Ltd v Australian Securities and Investments Commissions
((2004) 61 IPR 420), in which the Full Court held that it was necessary for the plaintiff to show that a significant proportion of the persons to whom the misleading conduct was directed were misled or likely to be misled. The primary judge then decided that based on Hansen’s evidence and marketing strategy, the target market for Hansen’s products were males between the ages of 18 and 30. The primary judge held that unless Hansen could establish the required reputation among this target market, it could not succeed.
However, the Full Court agreed with Hansen’s submissions that the primary judged had erred in deciding that Hansen had to establish a reputation among a particular class of persons. In particular, he had erred because he proceeded on the erroneous basis that, even if the number of members in that class of persons (extreme sports followers) was significant, it could not be relied on to establish reputation because the group of extreme sports followers was not the group targeted for advertising of Bickfords's product. Hansen argued that the primary judge should simply have asked whether there was a sufficient number of persons in the Australian community who would be likely to be misled. The Full Court agreed, stating that the question to be answered was:
“whether a not insignificant number of persons in the Australian community, in fact or by inference, have been misled or are likely to be misled, even if those persons are mostly or exclusively extreme sports enthusiasts.”
One of the judges also indicated that the trial judge should give greater weight to Hansen’s indirect marketing campaign in considering the reputation established by Hansen. However, there was no clear guidance given on how the trial judge should determine what constitutes a "not insignificant number of persons in the Australian community".
It remains to be seen (and there must be significant doubt as to) whether the trial judge will find a sufficient number of persons likely to be misled or deceived. However, the Full Court decision indicates an interest on the part of the Australian courts in deterring traders from using marks borrowed from abroad, while also illustrating the benefits of early registration in Australia to protect rights in a name.
Nathan Sinclair and Sean McManis, Shelston IP, Sydney