Stone & Wood Group Pty Ltd v Intellectual Property Development Corporation Pty Ltd  FCAFC 29 (9 March 2018)
Unsuccessful appeal by Stone & Wood. The Full Court upheld the primary judge’s finding of no misleading or deceptive conduct and passing off. The primary judgement is reported here .
Stone & Wood operate breweries in the Byron Bay and Murwillumbah areas of New South Wales. Their first beer was launched in 2008 and known as ‘Draught Ale’. This was re-named in November 2010 as ‘Pacific Ale’. This is one of the four main craft beer products produced by Stone & Wood, but is their best selling product, accounting for some 80-85% of its total sales. Their craft beer products are marketed and sold mostly across the eastern seaboard of Australia. Stone & Wood also owns the trade mark shown below registered from 18 November 2010 for beer in class 32.
Intellectual Property Development Corporation is an intellectual property holding company related to Elixir Signature Pty Ltd (Elixir) which operates a brewery in Brunswick, Victoria and commenced selling beer in May 2010. One of its brands is Thunder Road and this beer is sold in both ‘on premise’ and ‘off premise’ trade channels in Victoria, New South Wales, Western Australia and Tasmania. In or about January 2015, it launched a beer named ‘Pacific Ale’ under the Thunder Road brand. Following receipt of letters of demand from Stone & Wood, it changed the name of this beer from ‘Pacific Ale’ to ‘Pacific’.
Images of bottles and packaging of Stone & Wood Pacific Ale and Thunder Road Pacific Ale/Pacific beers are shown below:
The primary judge concluded the labels and packaging of the Thunder Road products look very different to the labels and packaging of the Stone & Wood Pacific Ale beer. The dominant feature of the Stone & Wood Pacific Ale is the ‘Stone & Wood’ brand name, while the dominant feature of the Thunder Road products is the word ‘Pacific’. The colours used in the labels and packaging are quite different. All in all, the overall ‘look and feel’ of the Stone & Wood Pacific Ale is very different from the Thunder Road Pacific Ale / Thunder Road Pacific. The adoption of the name ‘Pacific Ale’ or ‘Pacific’ does not convey an association or connection between the Thunder Road products, on the one hand, and Stone & Wood or Stone & Wood Pacific Ale, on the other.
The trade mark infringement claim also failed because the primary judge concluded the words ‘Pacific Ale’ and ‘Pacific’, used by the respondents in relation to beer, are not deceptively similar to Stone & Wood’s registered trade mark.
The primary judge upheld Elixir’s cross claim that Stone & Wood’s threats of legal proceedings based on trademark infringement were groundless. Their initial demand letter included an allegation of trademark infringement, but they did not begin and pursue the infringement action with due diligence. The claim for infringement was not included in the originating application and was introduced by amendment only after the respondents’ cross claim was filed. Indeed, the primary judge commented that, but for the cross claim, it is doubtful whether the trademark infringement claim would have been brought at all.
Leave for Stone & Wood to appeal the groundless threats aspect was refused as the Full Court found no error by the primary judge. Elixir also raised some minor points by way of Notice of Contention, but they were dismissed. On appeal, Stone & Wood did not pursue the trade mark infringement claim, so the Full Court’s judgement was confined to the misleading or deceptive conduct under the Australian Consumer Law and passing off issues. The appellant, Stone & Wood, focused its appeal on establishing the tort of passing off and contended that, if this was made out, then it would also succeed on the misleading or deceptive conduct claim. Essentially, this concerned a contention that Elixir falsely represented there was an association or connection between Thunder Road’s Pacific Ale/Pacific beer and Stone & Wood’s Pacific Ale beer, or between Thunder Road’s Pacific Ale/Pacific beer and Stone & Wood, or between Thunder Road and Stone & Wood. The appellant did not pursue its claim that the conduct of Elixir involved or represented that the Thunder Road beer was Stone & Wood’s beer.
Few of the findings made by the primary judge were attacked. The appellant’s basic complaint was that the primary judge failed to give proper weight and significance to the findings that he did make. The primary judge made findings about the craft beer market and consumers of these products. The get-up and packaging of the respective products was very different. It was not part of the appellant’s case that there was confusion or misrepresentation by reason of the get-up of Elixir’s beer. Rather it was the use of the words ‘Pacific Ale’ and ‘Pacific’ that lead to the asserted misrepresentations. The primary judge also found the appellant’s beer to have acquired a substantial reputation, but that the Stone & Wood brand is a significant focus of its marketing activities and that the words ‘Pacific Ale’ appear in conjunction with ‘Stone & Wood’, rather than on their own, in most cases. The primary judge, also noted the distinction between an intention to deceive and an intention to take advantage of an aspect of the market developed by the appellant. In choosing the name ‘Pacific Ale’, Elixir was to some extent seeking to take advantage of the success of the product of that name in the Stone & Wood range, but the primary judge did not find that Elixir intended to obtain an advantage through consumers thinking there was some association with Stone & Wood or its product. Rather, Elixir intended to distinguish its products to avoid confusion by different packaging, labelling and get-up. The primary judge noted that, since Stone & Wood launched its Pacific Ale product, the term ‘Pacific’ has come to serve a function of describing beers made from hops from Australia and New Zealand. However, while this word had a descriptive aspect, ‘Pacific Ale’ was not a style of beer in the technical sense. The primary judge accepted expert evidence from Professor Lockshin that consumer purchasing behaviour is based on a subconscious memory of cues that link to the product such as a word, colour or logo, but did not accept evidence that consumers have learned to identify Stone & Wood products solely by their sub-brand names. Rather, the Stone & Wood brand has a role to play in the purchasing behaviour.
The appellant contended that, in January 2015, the only connotation of ‘Pacific Ale’ or ‘Pacific’ in the context of craft beer was an association with Stone & Wood and argued the primary judge erred in finding the term ‘Pacific’ had a descriptive aspect. The Full Court observed that reference to the term ‘Pacific’ being descriptive is perhaps inadequate. Language is more subtle than a binary distinction between the concepts of descriptive or distinguishing. “A word may have no precise meaning but be capable of evoking geographic as well as metaphoric resonances, without being particularly apt to distinguish goods of rival traders”. Nonetheless, the Full Court agreed with the primary judge that the terms ‘Pacific Ale’ and ‘Pacific’ do have a descriptive or non-distinctive quality and that the words ‘Pacific Ale’ are not used as a prominent branding reference on the Stone & Wood product. The fact that ‘Pacific Ale’ was not a recognised style of beer was not inconsistent with this finding.
The appellant also contended that the primary judge ought to have accepted the expert evidence of Professor Lockshin to the effect that Stone & Wood Pacific Ale had come to be known to consumers as Pacific Ale. This evidence was excluded on the basis that it was an assertion without underlying reasoning and the Full Court found no error in how the primary judge dealt with this expert evidence.
The Full Court did not find any error and agreed with the primary judge’s finding that Stone & Wood did not have a substantial reputation in the phrase ‘Pacific Ale’ alone. The reputation accepted was ‘Stone & Wood Pacific Ale’ with the words ‘Pacific Ale’ not being used alone, but being used in a subsidiary way, and having a descriptive quality. Given the different get-up of Elixir’s beer in the context of the discerning and attentive target market for craft beer as well as for less informed consumers at licensed premises, it was open for the primary judge to conclude that there was no association between Thunder Road Pacific Ale or Pacific and Stone & Wood or Stone & Wood Pacific Ale.
The Full Court referred to previous authority for the proposition that appropriation of aspects of the get-up of a trader’s product and the taking advantage of a market created by the trader by a competitor’s product will not on its own amount to passing off. Significant weight needed to be given to the primary judge’s finding, after careful analysis of the evidence, that Elixer had sought to take advantage of Stone & Wood’s success, but did not set out to deceive. Elixir had sufficiently distinguished its beer from that of Stone & Wood and was entitled to use the words ‘Pacific Ale’ and ‘Pacific’ in the manner it did, particularly given the primary judge’s findings as to reputation, distinctiveness and descriptiveness of these words.