High Court decision in E&J Gallo Winery v Lion Nathan Australia Pty Ltd handed down: Barefoot trade mark

The High Court yesterday handed down its anticipated decision in the case of E&J Gallo Winery v Lion Nathan Australia Pty Ltd. This case has far-reaching implications for trade mark owners, in particular, in relation to what will constitute ‘use’ of a trade mark in Australia.

Background

E&J Gallo Winery (E&J Gallo), a US wine company, acquired the Australian trade mark ‘BAREFOOT’ with respect to wine (Gallo Mark) in January 2005 from a US company trading as Barefoot Cellars (Barefoot Cellars). Barefoot Cellars exported some of the ‘Barefoot’ wine to Germany.

Sixty cases of wine bearing the Gallo Mark were then imported from Germany by a Victorian liquor wholesaler, Beach Avenue Wholesalers Pty Ltd (Beach Avenue).

Without E&J Gallo’s knowledge, between the period 7 May 2004 and 8 May 2007, Beach Avenue offered for sale, and imported into Australia, 144 bottles of wine under the Gallo Mark.

Meanwhile, during 2006 and 2007, Lion Nathan Australia Pty Ltd (Lion Nathan) began to develop a new beer. Between September 2007 and December 2007, Lion Nathan lodged three trade mark applications which incorporated the word ‘barefoot’, including the mark ‘BAREFOOT RADLER’ (Lion Nathan Marks). In January 2008, Lion Nathan launched its new beer under the name ‘BAREFOOT RADLER’.

E&J Gallo commenced proceedings against Lion Nathan for trade mark infringement alleging that use of the word ‘Barefoot’ in respect of beer infringed the Gallo Mark in respect of wine. Lion Nathan cross-claimed and sought an order for removal of the Gallo Mark from the Register on the basis that the Gallo Mark had not been ‘used’ in Australia (for the purposes of the non-use provisions in the Trade Marks Act 1995 (Cth) (Act)) by the registered owner for a three year period from 7 May 2004 to 8 May 2007.

Grounds of appeal to the High Court

E&J Gallo sought to appeal the Full Federal Court’s finding that the mere presence of goods bearing a trade mark in the course of trade does not amount to ‘use’ of the mark in Australia for the purposes of section 92 of the Act and that in order to have used a trade mark, the owner must have ‘projected’ its goods (ie engaged in conduct that may lead to its goods being dealt with in Australia).

E&J Gallo also sought to reverse the order that the Gallo Mark be struck off the Register.

High Court’s decision

The High Court on Wednesday upheld E&J Gallo’s appeal.

Principal issue

The principal issue that the High Court considered was whether there was use in Australia, for the purposes of the Act, by the registered owner (or its predecessor in title) of the Gallo Mark in relation to wine between 7 May 2004 and 8 May 2007.

The High Court found that whether there has been use of a trade mark under the Act does not depend on whether the owner knowingly ‘projects’ the goods into the Australian market. Rather, it is dependant on the goods being ‘in the course of trade’ in Australia (ie being sold or offered for sale in Australia). The Court held that the wine was in the course of trade when it was imported into Australia.

The Court’s decision reinforced the fundamental principle that a trade mark operates as a badge of origin of the goods to which it is affixed. The Court stated that ‘during the trading period, the trade mark functions as an indicator of the origin of the goods, irrespective of the location of the first sale’3.

Therefore, the Court held that the sale of BAREFOOT wine under the Gallo Mark in Australia by Beach Avenue constituted use of the Gallo Mark during the three year period under the Act.

Orders made

The High Court declared that advertising, offering for sale and selling in Australia beer under the Lion Nathan Mark, without the licence or authority of E&J Gallo, infringed the Gallo Mark in respect of wine.

The Court also issued an injunction to restrain Lion Nathan from selling, offering for sale, advertising or promoting beer under the name BAREFOOT RADLER or any other name that is substantially identical with or deceptively similar to the Gallo Mark, without the licence or authority of E&J Gallo.

The Court also refused to grant special leave to cross-appeal to Lion Nathan.

Importance of the decision

In the writers’ view, it is difficult to disagree with the High Court’s decision.

In particular, it would not appear that it is necessary for a trade marked product to be ‘projected’ into a particular jurisdiction by the trade mark owner for the trade mark to operate as a ‘badge of origin’. What would appear to be relevant is that the product initially originated from the owner or, where the trade mark is licensed to another, is applied to the product with the consent of the owner on condition that the trade marked product meets quality specifications prescribed by the owner.

In either of these scenarios, once the trade marked product enters into the course of trade, it would appear that the trade mark would continue to act as a ‘badge of origin’ of the owner, even if the product passes through different jurisdictions without the physical product being ‘projected’ there by the owner of the trade mark.

The decision would appear to be good news for trade mark owners, particularly where their trade marks are being used on products which might pass through different legal jurisdictions.

Given the increasing influence of globalisation, this would not be an uncommon occurrence.