Homart Pharmaceuticals Pty Ltd v Careline Australia Pty Ltd  FCA 403 (20 April 2017)
This is an interesting case involving similar packaging. Careline was successful in its action to restrain Homart’s use of misleading or deceptive packaging for a cosmetic product even where quite different trade marks were involved.
Careline has, since 2008, manufactured and sold a bio-placenta cosmetic product sold in 3 and 6 ampoule containers under the trade mark CHANTELLE. The packaging for this product had undergone some changes over the years, but Careline relied on packaging used after November 2014, an example of which is shown below:
In February and March 2016, Homart commenced selling a directly competitive cosmetic product, also in 3 and 6 ampoule containers, under the trade mark CHERI. An example of the packaging is shown below:
In May 2016 Careline’s solicitors sent letters to Homart, some of Homart’s customers and certain media outlets complaining about the CHERI product. Some employees of Careline also posted messages on WeChat.
Homart took objection to this and commenced proceedings on 13 May 2016 alleging Careline’s complaints constituted misleading or deceptive conduct. Careline filed its cross-claim on 17 May 2016 alleging Homart’s conduct in selling its CHERI product constituted misleading or deceptive conduct. At the trial, affidavits of 21 witnesses were read and most of them were cross examined with the assistance of an interpreter.
Careline primarily alleged that Homart intentionally adopted visual features for its packaging which closely resembled the CHANTELLE packaging, resulting in a representation to consumers that its product is the CHANTELLE product or made with the sponsorship or approval of the maker of the CHANTELLE product, and is otherwise associated with the CHANTELLE product or its makers.
Homart admitted that it was aware of and considered get up used by other manufacturers including Careline, but denied it intentionally adopted the visual features of the CHANTELLE product.
Relevant consumers and market
After considering the evidence, Burley J made various findings of fact regarding the relevant consumers and market conditions. These included that the respective CHANTELLE and CHERI products compete directly for customers who are typically persons of ethnic – Chinese origin and who are local Australian-Chinese, tourists and “daigou” (persons who purchase products in Australia for export to their customers in China) who speak a Chinese language. These competing products are sold in shops where they are placed on display. They are often not displayed side by side and frequently one or other of the products will be available in one store but not both. The CHERI product is typically sold at a slightly lower price, but price is not really a reliable differentiator between the respective products. Both products are also sold online. Consumers would often consult a small image of the product on their phone when making an in store purchase. Also, to the extent the products are referred to by name, some consumers identify the CHANTELLE product by reference to “the gold box” or something similar.
Comparison of products and reputation of CHANTELLE product
Burley J compared the respective products, noting their points of similarity and differences, and then assessed the reputation of the CHANTELLE product. His Honour noted their striking similarity. With regard to reputation, the CHANTELLE product range was sold in more than 280 retail outlets with retail sales from November 2014 in the current packaging get up approaching AU$2 million. These products were also promoted on Careline’s website, on posters at Sydney International Airport, as well as on Facebook and WeChat social media platforms, and on point of sale brochures. Sales were also made via various third party websites including eBay, MyShopping and Amazon where coloured photographs of the products and their packaging were displayed. The evidence relating to amounts spent by Careline on advertising and promotion was too generalised and His Honour did not rely on this when assessing reputation.
One of Careline’s witnesses gave evidence as to a significant drop in sales of the CHANTELLE product which coincided with the launch of the CHERI product, but his Honour treated this with caution and accepted that other factors are likely to have played a role in this.
Homart relied on evidence of other products in the relevant market to contend that the colour gold is not unique to products in the Chinese market and other products also displayed features of the CHANTELLE product get up. However, Burley J found that none of the 36 or so products relied upon by Homart has the same or even a materially similar combination of features to those of the CHANTELLE product. Hence the evidence of third party usage could not be said to discount or diminish the force of the representation conveyed to consumers by reason of the get up of the CHERI product. His Honour reached the conclusion that the get up of the CHANTELLE product was distinctive and products of other parties were materially different in one or more respects. While the colour gold is of significance to the relevant consumers, they would also be familiar with different hues and textures of gold. No other third party product utilised the same matte bronze-gold colour with minimalist additions in the form of a centred black name on the top surface., and otherwise no adornment or writing on the visible surfaces.
Burley J concluded that the particular get up of the CHANTELLE product is unique and that this product had acquired a sufficient reputation in its get up amongst the relevant consumers by the time of the launch of the CHERI product.
Development of CHERI product
His Honour then went on to consider the design process adopted by Homart in the creation of its CHERI product and reached the conclusion that the “intention in creating the Homart design was to adopt the colour, shape, arrangement and style of the Careline 6-ampoule box and its contents for its bio-placenta product, including its internal arrangement, for the purpose of maximising its impact on the market and to benefit from the reputation developed by Careline in its product”. Ms Yeh of Homart “did intend to replicate the features of the CHANTELLE bio-placenta packaging, with the exception of its name, with the understanding that the likely consequence would be that the similarities of that packaging would be influential to consumers in their choice of product”. Burley J considered “the objective similarities between the packaging of the Homart and Careline products defy a conclusion that Ms Yeh was not aware that they would have an impact on consumers”. His Honour reached the view that the “evidence supports a finding that Homart did intend, by adopting Careline’s packaging for its 6-ampoule bio-placenta product, to gain a market advantage at the expense of Careline from the adoption of its packaging”.
Significance of CHERI trade mark
Homart submitted that the use of its CHERI trade mark serves to distinguish its brand and reflects a clear intention not to mislead. However, Burley J referred to earlier cases which are authority for the proposition that “the get-up of a product may contain within it a misrepresentation as to origin even where the name on the product is different to the original which is said to have been replicated. In each case it will be a question of fact and degree”.
Homart also sought to rely on the existing reputation of its CHERI brand arising from sales of other cosmetic products prior to the adoption of this brand for its bio-placenta products, but His Honour considered the evidence of the promotion and sale of other CHERI branded products to be weak. Significantly, the get up of the earlier CHERI products was notably different to Homart’s new bio-placenta product branding where Homart added “Australia” to CHERI. Hence, this is not a situation where businesses with very strong brand names have each adopted similar get ups.
Burley J was satisfied that “in the context of a case such as the present, the relevant misrepresentation is implicit. It is that a bio-placenta product with the get-up of the Homart product is the same as, or associated with, the manufacturer of the CHANTELLE bio-placenta product. In such a case, the “rapier of suggestion” may well be subtle, and designed to influence prospective customers in favour of Homart’s product upon the basis of an underlying assumption. In the present case, that assumption is that two products of the same distinctive get-up are from the same source. The unique combination of features making up the get-up of the CHANTELLE bio-placenta product are eye-catching. They extend to the packaging in open or closed configuration and provide strong visual cues by which a consumer would note and remember the product. From this combination, quite separately to the name, the consumer is informed of the origin, quality and type of goods being purchased. Homart has taken all of those cues. The suggestion conveyed by the get-up is not, in my view, dispelled sufficiently by the use of the CHÉRI Australia brand name”.
His Honour concluded, at paragraph 199, “it is likely that a not insubstantial number of persons within the relevant class, who are aware of the CHANTELLE bio-placenta product, would be diverted from a search for that product by the get-up of the Homart product. They may note that something seems different about the brand name, but be convinced by the other similarities in the get-up that her or his recollection as to the brand name was mistaken. A consumer familiar with the CHANTELLE bio-placenta product may well recall its get-up, but have no or an imperfect recollection of its name and acquire the CHÉRI bio-placenta product believing it to be the CHANTELLE bio-placenta product. This would be especially likely in circumstances where the store does not stock both brands. The rapier of suggestion caused by the similarity in get-up will in those circumstances result in a sale for Homart.” Further, at paragraph 202, his Honour found that “Homart intentionally adopted a get-up for its product for the purpose of appropriating part of the trade or reputation of Careline. The choice of the CHÉRI Australia brand name was not, in the particular circumstances of this case, sufficient.”
Although the respective 3 ampoule product packaging contained greater differences, they are sold side by side with the 6 ampoule product with the result that a consumer “cannot meaningfully distinguish the effect of the representations conveyed by the more visually obvious 6-ampoule get-up and those of the 3-ampoule variant”.
Hence, by selling its CHERI bio-placenta products, Homart has engaged in conduct that is misleading or deceptive or likely to mislead or deceive in contravention of the Australian Consumer Law and Burley J granted an injunction restraining the sale of these products.
Homart’s claims alleging misleading or deceptive conduct by Careline
Burley J dismissed Homart’s claims that Careline’s complaint letters and online posts themselves constituted misleading or deceptive conduct, but this aspect of the case does reinforce the risks in publishing allegations regarding a competitor’s conduct and care needs to be taken to avoid exposure to liability through such actions.