No lucky escape for Indonesian cigarette manufacturer

In NV Sumatra Tobacco Trading Company v British American Tobacco Services Limited ([2011] FCA 1051, September 9 2011), the Federal Court of Australia has held that the trademarks LUCKY DRAW and LUCKY DREAM were not deceptively similar to LUCKY STRIKE, but were deceptively similar to LUCKIES.

British American Tobacco Australia Services (BAT) is the owner of trademark registrations for LUCKY STRIKE and LUCKIES in respect of tobacco. It has used both of these marks in Australia for more than four decades. These marks are used separately, but appear on the same packaging. LUCKIES is promoted and used as a nickname for LUCKY STRIKE. Although the market share for the product is relatively modest, millions of cigarettes have been sold under the trademarks LUCKY STRIKE and LUCKIES, and the court found that BAT had a reputation in each of those marks.
NV Sumatra Tobacco Trading Company (NVS) sought to register the trademarks LUCKY DRAW and LUCKY DREAM in respect of cigarettes and various other smokers’ articles. BAT successfully opposed the registration of the applications (for further details please see "Lucky strike for British American Tobacco") and the decision of the registrar was appealed to the Federal Court.

In an opposition matter, the opponent bears the onus of establishing its case; however, there are differing views concerning the standard of proof required.
The court reviewed case law in support of the standard being the balance of probabilities, as well as case law in support of a higher standard, namely that the trademark should clearly not be registered. Although, as a question of construction, it favoured the view that the standard should be the balance of probabilities, the court believed that it should apply the higher standard on the basis of previous decisions of the Full Federal Court.
The decision also discussed the evidence filed at length. Much of it sought to provide opinions as to whether consumers would be confused if the marks were permitted to co-exist, but none was admitted as expert opinion evidence on this issue. Evidence from retailers of many years standing as to whether they, as opposed to their customers, would be confused was admitted as evidence borne out of their own experience. Expert evidence from a linguist called by BAT was admitted for its opinions on the tendency of nicknames to be used in the Australian vernacular, but not in its opinions as to likely consumer behaviour with respect to NVS’s marks. As is usual, the question of whether there would be confusion in the marketplace was held to be a matter for the court to decide.
With regard to the comparison of the marks, the evidence indicated that the dominant manner in which the main goods in question - cigarettes - were purchased was via oral request. The trademarks LUCKY DRAW and LUCKY DREAM were not considered to be deceptively similar to the trademark LUCKY STRIKE. The court took the view that each of those phrases contains two equally weighted words and, when each mark is considered as a whole, they are sufficiently different. This was notwithstanding the fact that BAT’s goods are the only cigarettes in the market that contain the word lucky' in their trademark.
A likelihood of confusion, however, was found between LUCKIES on the one hand, and LUCKY DRAW and LUCKY DREAM on the other. It was held that retailers and consumers alike could construe a reference to LUCKIES as a reference to LUCKY STRIKE, LUCKY DRAW or LUCKY DREAM. BAT had educated the market to use the nickname LUCKIES for LUCKY STRIKE, and a propensity for Australian consumers to adopt such a nickname was evident. It was considered likely that the same nickname would be adopted for the trademarks LUCKY DRAW and LUCKY DREAM.
The court then turned to the comparison of the goods. BAT’s registrations for LUCKY STRIKE and LUCKIES covered “manufactured tobacco”, and NVS’s applications claimed “cigarettes, cigarette filters, kretek cigarettes, cigarettes papers, white cigarettes, ashtrays (not made of precious metal), cigars, tobacco, lighters, matchers, smokers’ articles”. The court took the view that tobacco, cigars and all the cigarette goods are within the description of “manufactured tobacco”, but that all the other goods could not be so described. Registration was permitted for the other goods. 
The court held that:
  • the trademarks LUCKY DRAW and LUCKY DREAM are not deceptively similar to LUCKY STRIKE;
  • the trademarks LUCKY DRAW and LUCKY DREAM are deceptively similar to LUCKIES and should clearly not be registered in respect of tobacco, cigars and cigarette goods; and
  • the trademarks LUCKY DRAW and LUCKY DREAM can be registered in respect of ashtrays, lighters, matches and smokers articles, which were held not to be goods of the same description as manufactured tobacco. 
Although the issue of the standard of proof required was discussed, it was not decisive in this case, and it appears that the question of what is the correct standard will remain unclear until decided by the Full Federal Court.

Michelle Cooper and Sean McManis, Shelston IP, Sydney

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