Trade Mark News & Information

Trademark Lawyer Sydney-Federal Court – Kraft v Bega

Kraft Foods Group Brands LLC and H.J Heinz Company Australia Limited v Bega Cheese Limited (No 8) [2019] FCA 593 (1 May 2019)

This case involved a dispute as to ownership of a trade mark comprising the trade dress or get-up of peanut butter packaging described as “a jar with a yellow lid and a yellow label with a blue or red peanut device, with the jar having a brown appearance when filled”.

O’Callaghan J found that Bega had acquired ownership of this trade dress and could restrain use of it by Kraft and Heinz. There were also some related claims and cross claims where each party was partly successful.

Kraft Foods Limited was the Australian subsidiary of Kraft Foods Inc. This Australian subsidiary changed its name to Mondelez Australia (Foods) Limited in 2012 following a restructuring where Kraft Foods Inc split itself into a global snacks business and a North American grocery business. There was also an intellectual property and holding company called Kraft Foods Global Brands LLC.

Kraft Foods Group Brands LLC is a Delaware corporation and has, since July 2015, been a subsidiary of the Kraft Heinz Company. H.J Heinz Company Australia Limited is the Australian subsidiary of the Kraft Heinz Company.

In July 2017, Bega acquired the peanut butter business and the assets and goodwill of Mondelez Australia (Foods) Ltd and subsequently commenced selling Bega branded peanut butter with the disputed trade dress from late 2017.

H.J Heinz Company Australia Limited has been manufacturing and selling Kraft Branded peanut butter including the disputed trade dress, in relatively limited quantities, since about April 2018.

At the time of the trial, only Bega’s peanut butter was available at major Australian supermarkets which accounts for about 80% of the total nationwide annual sales of peanut putter. These major supermarkets declined to stock the new Kraft peanut butter manufactured by H.J Heinz Company Australia Limited due to the risk of consumer confusion. However, both peanut butter products were still available at smaller, independent supermarkets.

Kraft’s position was that Bega never acquired rights to the trade dress when it purchased the peanut butter business from Mondelez. This was because Kraft Foods Limited (and subsequently, Mondelez) were mere licensees of the trade dress which was owned by Kraft Foods Global Brands LLC. Hence the rights to the trade dress were not something Mondelez could sell to Bega. Rather, Bega only acquired the licence to use the trade dress which ceased on 31 December 2017. Further, Kraft contended that the goodwill of the peanut butter manufacturing business which Bega acquired is a separate concept from the trade dress which is a diagnostic cue for only the Kraft brand.

Bega’s position was that the trade dress is an unregistered common law trade mark which was an inseparable part of the peanut butter business of Kraft Foods Limited (and subsequently Mondelez) which could not be assigned or transferred to Kraft Foods Inc or Kraft Foods Global Brands LLC separately and apart from the whole of the relevant peanut butter business. Accordingly, at all times before the sale to Bega, the Australian entities Kraft Foods Limited and Mondelez owned all the rights to the trade dress. Further, the evidence relied upon by Kraft as to purported licensing of the trade dress to Kraft Foods Limited and Mondelez was insufficient. Hence, Bega contended that it owns all rights in the trade dress because it acquired those rights as part of its acquisition of the peanut butter business from Mondelez in 2017.

O’Callaghan J noted earlier cases confirming that goodwill is inseparable from the business to which it adds value and cannot be dealt with except in conjunction with the sale of that business. His Honour also noted that goodwill inures to an entity by that entity using, in its business, all of the sources that give rise to the attraction of custom in the business. Further, the assignment or licencing of an unregistered trade mark is not possible without the assignment of the underlying goodwill of the business. Control exercised by the US based companies over the manufacturing, labelling, promotion and sales of peanut butter by Kraft Foods Ltd and Mondelez did not mean that the goodwill in the trade dress inured ultimately to the benefit of Kraft Foods Group Brands LLC . The relevant goodwill in the peanut butter business resided with Kraft Foods Limited and then Mondelez after the restructure in 2012. Kraft Foods Limited could not have assigned the rights in the trade dress to any other member of the Kraft corporate group without also assigning its peanut butter business, which it did not do. His Honour rejected Kraft’s contention that the relevant goodwill generated through use of the KRAFT brand and the trade dress inured to the benefit of Kraft Foods Global Brands LLC through the relevant licensing arrangements. Any purported shift in ownership of the trade dress to an upstream company in the Kraft global group was ineffective as a matter of Australian law.

His Honour also considered the evidence relating to the relevant licensing arrangements. None of the Agreements relied upon expressly identified the KRAFT trade mark or the trade dress, but Kraft contended this arose by way of inference because they were produced by Mondelez in response to a subpoena. O’Callaghan J concluded that the evidence did not establish that the Australian entities, Kraft Foods Ltd or Mondelez, used the trade dress or the Kraft trade mark as a licensee. Further, the April 2012 Assignment document under which Kraft Foods Ltd transferred ownership of various Australian registered trade marks to Kraft Foods Global Brands LLC could not be relied upon to support Kraft’s contention that, at all material times, Kraft Foods Global Brands LLC was the beneficial owner of those marks and Kraft Foods Ltd merely held bare legal title. Hence, that Assignment also did not support Kraft’s contention that the goodwill in the trade dress inured to the benefit of Kraft Foods Group Brands LLC and not Kraft Foods Ltd.

O’Callaghan J also considered the documents relating to the 2012 restructure and concluded that the relevant Agreement purported to assign to Kraft Foods Group Brands LLC the goodwill associated with the trade dress, but that was ineffective under Australian law.

As part of the acquisition by Bega in 2017 of the peanut butter business of Mondelez, Bega took on specific obligations of Mondelez with respect to certain licensed trade marks. However, this did not prevent Bega from claiming ownership of the trade dress and Bega had not breached any terms in respect of its use of the trade dress.

As a result of the 2017 acquisition, Bega acquired the right to use the trade dress and could not mislead consumers within the meaning of the Australian Consumer Law by doing that to which it has a contractual right. Further, Bega was entitled to take action to protect its goodwill in its peanut butter business by preventing use of the trade dress by others, including Kraft.

Following the 2017 acquisition, Bega published a series of radio and television advertisements promoting its peanut butter product and represented that Kraft peanut butter is now Bega peanut butter. Kraft alleged these advertisements contained up to eight representations which were misleading or deceptive under the Australian Consumer Law. O’Callaghan J found only one misrepresentation in a television advertisement which stated that Bega peanut butter is “now Australian owned and made” and reasonably conveyed the  message that peanut butter previously sold under the Kraft brand is not, or was not, Australian made, which was incorrect.

However, O’Callaghan J upheld a cross claim by Bega that Kraft and Heinz also breached the Australian Consumer Law by issuing a press release in October 2017 foreshadowing that Kraft peanut butter will be back on Australian supermarket shelves in early 2018. This misleadingly represented that it would be the same product as previously sold through Mondelez. It was not something which Kraft could bring “back”. Rather, the Kraft product could only be a product with a similar sensory profile as the product that is now the Bega peanut butter. A corollary of this statement was a further representation which misled consumers who wanted to buy the same product they had previously purchased into believing that they should purchase the Kraft product once launched and not the Bega product.

His Honour also found that use of the slogan “loved since 1935” by Kraft and Heinz conveyed a misrepresentation that the new product being supplied by Kraft Heinz was the same product as that which had been supplied prior to July 2017 by reference to the Kraft trade mark.

Given the finding that Bega owned the trade dress, his Honour also found that Kraft engaged in misleading or deceptive conduct by using this trade dress on its newly launched product. It followed that it was unnecessary for his Honour to decide Bega’s copyright cross claim relating to use of the trade dress on labelling for Kraft Heinz new 2018 labels.

O’Callaghan J upheld Kraft’s trade mark infringement claim arising from Bega sending its peanut butter with “The Good Nut” branding to supermarkets in ‘shippers’ (being a form of shelf ready packaging) which included Kraft’s registered Hexagon Logo, but his Honour did not form any view regarding Kraft’s allegations this conduct also constituted denigration or tarnishment of that registered mark. His Honour considered there was insufficient evidence to decide whether Bega’s conduct also constituted misleading or deceptive conduct and/or passing off.