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A recent case in the Federal Court of Australia in which Stone & Wood Group unsuccessfully claimed that Elixir had passed off their product, is set to have significant impacts on Australian businesses.

If you own a business or are part of the marketing of a business’ products, this article will provide you with everything you need to know following the case.

 

What is passing off?

Passing off is a tort, that is just what it sounds like, that is, one business passing off their product as another business’ product. An English case by the name of Reckitt & Colman Products v Borden Inc.established the 3 elements of passing off that are still in use today in Australia.

These elements act as a check list for a Judge in determining whether someone has committed the tort of passing off. In the case of passing off, the elements are:

  • Reputation
  • Misrepresentation
  • Damage
  1. Reputation
    For this element to be satisfied, the plaintiff’s ‘get-up’ must be recognised by the public as belonging specifically to the plaintiff. For example, when you hear the phrase “just do it” you probably think of Nike. Likewise, if you see a large yellow ‘M’ you will associate it with McDonalds. These are examples of get-ups that are recognised as belonging to a specific company.
  2. Misrepresentation
    Secondly, the defendant must have made a misrepresentation to the public that their product is the plaintiff’s product. To follow on with the previous example, if another fast food company was to put a large yellow ‘M’ on their product, this would most likely constitute a misrepresentation to the public that their product was a McDonald’s product. When deciding whether this element has been satisfied it does not matter if the misrepresentation was intentional or not, and the Judge should consider whether the defendant’s actions are likely to cause the public to think their product is the plaintiff’s, as opposed to whether the public actually believes it.
  3. Damage
    In addition to the above, for a claim of passing off to be successful the plaintiff must show that they have suffered, or are likely to suffer damage as a result of the public erroneously believing the defendant’s product was the plaintiff’s. For example, if the plaintiff can show that when the public bought the defendant’s product they were actually intending to buy the plaintiff’s product and the plaintiff lost business because of it, this would probably satisfy the element of damage.

 

Stone & Wood Group v Intellectual Property Development Corporation

In this 2018 case, Stone Group claimed that Elixir has passed off their craft beer called ‘Pacific Ale’. Ultimately this claim was unsuccessful, but it was the court’s reasoning that is important for businesses to be aware of and understand.

Stone & Wood’s product was called Stone & Wood Pacific Ale and looked like this:

 

Elixir’s product was called Thunder Road Pacific and looked like this:

 

The Court’s reasoning for finding that Elixir did not pass off Stone & Wood Group’s product were as follows:

  1. Reputation
    The Court decided that the words ‘pacific ale’ are not the prominent feature of Stone & Wood Group’s product. It was found that ‘Stone & Wood’ were the essential and prominent words and that Stone & Wood Group do not have a reputation among the public as being associated with the phrase ‘pacific ale’.
  2. Misrepresentation 
    It was held that Elixir did not misrepresent their product as being that of Stone & Wood Group due to the fact that the labels look very different and are easy to distinguish between. As you can see above, the label on Stone & Wood Groups’ beer has the words ‘Stone & Wood’ featured very prominently whereas Elixir’s label features ‘Pacific Ale’ prominently. Moreover, the colours and other symbols and images on the labels are very distinct as well.

Further to this point is that the words ‘pacific ale’ are a description of the product and therefore cannot be a misrepresentation by Elixir. For example, a lot of food products use the word ‘lite’ on their labels but this isn’t a misrepresentation by any company because ‘lite’ is just being used to describe the product. Importantly, the Court in this case said that even though Stone & Wood Group may have been the first beer company to use the words ‘Pacific Ale’ as a descriptor, it doesn’t mean that other companies cannot subsequently use it as a descriptor for their products.

 

What does this mean for businesses?

The findings of the Stone & Wood Group and Elixir case mean that a company can use a competitor’s phrase if:

  • the phrase they are using is not the most important/prominent part of the competitor’s label (ie. the phrase used isn’t part of the competitor’s reputation like the “Just Do It” is for Nike);
  • they make the packaging and label significantly different to that of their competitor; and
  • the phrase is merely a description of the product.


The Court in this case even said that it doesn’t matter that the defendant used the phrase for the purpose of benefiting off the plaintiff’s success, so long as the above criteria is met.

 

Conclusion

If you have been accused of passing off a competitor’s product, if you think a competitor has passed off your product or even if you are in the process of designing a label or catch phrase and are unsure whether it will constitute passing off, please do not hesitate to contact Lynn & Brown Lawyers for expert advice.

 

About the authors:

This article has been co-authored by Chelsea McNeill and Steven Brown at Lynn & Brown Lawyers.  Chelsea is in her third year of studying Law at Murdoch University.  Steven is a Perth lawyer and director, and has over 20 years’ experience in legal practice and practices in commercial law, dispute resolution and estate planning.

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