Anheuser-Busch Inc v Castlebrae Pty Ltd
[1991] FCA 634
•25 OCTOBER 1991
Re: ANHEUSER-BUSCH INCORPORATED
And: CASTLEBRAE PTY LTD; CRAIG SHAUN HULL and CORAL MAY HULL
No. G612 of 1990
FED No. 634
Trade Marks - Copyright - Trade Practices
(1991) AIPC 90-840
23 IPR 54
(1991) 7 ACSR 231
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
INDUSTRIAL DIVISION
Davies J.(1)
CATCHWORDS
Trade Marks - name and image of dog used by applicant in beer advertising - applications for trademarks - prior registration by respondent - whether a substantial copy of applicant's American trademarks - whether fraudulent - "character merchandising" - whether respondent's trademarks capable of becoming distinctive of goods associated with it - expungement from register.
Copyright - whether drawings of dog artistic or literary works - whether a breach of copyright.
Trade Practices - whether respondent's conduct misleading or deceptive.
Copyright Act 1968 (Cth) - s.196
Copyright (International Protection) Regulations - Part I, Schedule 1 - Reg. 4(3)
Trade Practices Act 1974 (Cth) - s.52
Trade Marks Act 1955 (Cth) - ss.22(1), 22(5), 25(1), 26(1), 28
HEARING
MELBOURNE (heard in Sydney)
#DATE 25:10:1991
Counsel for the applicant: Mr J.V. Nicholas
Solicitor for the applicant: Corrs Chambers Westgarth
ORDER
Each of the First and Second Respondents, whether by themselves, their servants or agents or otherwise, be restrained from using in any way in the course of business, any representation of a bull terrier which is identical to, substantially identical with or deceptively similar to the character appearing in the forms depicted in exhibit "SKL-2" to the Affidavit of Stephen K. Lambright sworn 14 October, 1990.
Each of the First and Second Respondents, whether by themselves, their servants or agents or otherwise, be restrained from using in any way in the course of business, any presentation of a bull terrier which is identical to, substantially identical with or deceptively similar to the character appearing in the forms depicted in exhibit "DH-1" to the Affidavit of David Henderson sworn 24 October, 1990.
Each of the First and Second Respondents, whether by themselves, their servants or agents or otherwise, be restrained from using in any way in the course of business the name "SPUDS MACKENZIE" or any name substantially identical with or deceptively similar thereto including the name "SPUDS MACSTUD".
Each of the First and Second Respondents, whether by themselves, their servants or agents or otherwise, be restrained from selling or offering for sale or by way of trade distributing any t-short or other garment upon which appears any of the characters or names referred to in Orders 1, 2 and 3 hereof or any other name or character which is substantially identical with or deceptively similar to any such name or character.
Each of the First and Second Respondents within 28 days of the date of this Order deliver up on oath all articles of clothing, brochures, labels, advertising and promotional material in their possession or control upon which appears any of the characters or names referred to in Orders 1, 2 and 3 hereof or any other name or character which is substantially identical with or deceptively similar to any such name or character.
Pursuant to s.22 of the Trade Marks Act, 1955 (Cth) that the register kept thereunder be rectified by expunging therefrom the entries in respect of each of the trade marks numbered A466883 and A466884.
The First and Second Respondents pay the Applicant's costs of these proceedings.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
In these proceedings, the applicant, Anheuser-Busch Inc., seeks injunctive relief against the first and second respondents, Castlebrae Pty Limited ("Castlebrae") and Craig Shaun Hull, in respect of conduct alleged to be in breach of s.52 of the Trade Practices Act 1974 (Cth), to constitute a breach of the applicant's copyright, and to constitute passing off. It was conceded by counsel for the applicant that the evidence did not establish any such personal conduct on the part of the third respondent, Coral May Hull, as would justify the making of an order against her. The applicant also seeks an order removing from the register of trade marks two trade marks of which Castlebrae is the registered proprietor.
At the hearing, the applicant was represented by Mr J.V. Nicholas of counsel. The respondents filed a defence but did not appear. The Registrar was given notice of the proceedings in accordance with s.22(5) of the Trade Marks Act 1955 (Cth), but did not appear.
Anheuser-Busch Inc. is a company incorporated in the United States of America. Its brand, "Budweiser", has for many years been the largest selling brand of beer in the world. Since April 1981, the applicant has marketed a reduced calorie version of Budweiser under the trade name "Bud Light". The worldwide sales of Bud Light beer have grown from 214,732 hectolitres in 1981 to 12,863,984 hectolitres in 1989. The evidence discloses that sales of Budweiser beer in Australia increased from 2,900 cases in 1981 to 12,600 cases in 1987. There is evidence that, in the year 1 July 1989 to 30 June 1990, sales of Budweiser beer in Australia amounted to 77,000 litres. There is no express evidence that Bud Light was sold in Australia.
In approximately 1982, a Mr Jonothan Moore, a citizen of the United States of America and an employee of DDB Needham Worldwide Inc., the applicant's advertising agency, created for the applicant for advertising purposes a drawing of a dog resembling an English bull terrier with the description "Spuds MacKenzie, the Original Party Animal". This fictional character, a clothed and outfitted English bull terrier, was adopted by the applicant as the central character in an advertising campaign for Bud Light beer. Spuds MacKenzie, the Original Party Animal, became a great success in the United States and has been depicted in many guises such as "hanging-twenty" (the dog riding on a surfboard), skateboarding, partying and so on. Spuds MacKenzie has appeared in newspapers and magazines and on television. There are in evidence a number of extracts from newspapers showing either advertisements of Bud Light depicting Spuds MacKenzie or articles concerning Spuds MacKenzie. The earliest of these is an article of 24 June 1985 which discusses the success of Spuds MacKenzie, described as "the Original Party Animal". Spuds was said to be a cult figure.
Spuds MacKenzie, both the name and the image, has appeared in the United States not only in the advertisements for Bud Light beer but on many items in the clothing class, including t-shirts, hats and jackets, since early 1985. A witness for the applicant estimated that in 1987, a year in which the character was widely exploited on merchandise, merchandise of the value of more than $US15,000,000 was sold and of this, the value of t-shirts alone carrying the Spuds MacKenzie name and image exceeded $US4,000,000. The name and image has also appeared on items in the luggage class including tote bags and umbrellas since early 1987. According to the evidence before the Court, Spuds MacKenzie is no longer merely an element of a successful advertising campaign, but a character popular in its own right. I use the pronoun "it" rather than "he" as the first live Spuds MacKenzie bull terrier paraded in 1985 apparently was a "she".
The applicant is the registered proprietor of a number of trademarks in the United States of America for the name Spuds MacKenzie and the character. All but one of the registrations are in Class 32 (beer) or Class 25 (clothing). In addition, the applicant has lodged applications for trademarks in several countries. In Australia, application No. 502279 has been lodged in Class 25 and application No. 502280 in Class 32.
In the United States of America, the applicant has also obtained 43 copyright registrations in the visual arts category and 18 copyright registrations in the performing arts category. The earliest copyright registration is dated 14 May 1987. The copyright laws of the United States of America are significantly different from those of Australia and of other countries such as the United Kingdom. In the United States, the introduction in any judicial proceedings of the certificate of registration "made before or within 5 years after first publication of the work" constitutes "prima facie evidence of the validity of the copyright and of the facts stated in the certificate." See Stewart, "International Copyright and Neighbouring Rights", 2nd Ed., pp 638-41. As Stewart states at p 639, although copyright registration is different from the system of searching and adjudication involved in issuing a patent (and I would add a trademark), "copyright registration is considerably more than a ministerial function". At p 640, Stewart remarks that "a timely certificate can be a very potent weapon in the plaintiff's hands."
In Australia, as in the United Kingdom, there is no system of copyright registration. Accordingly, in practice, more emphasis is placed on trademark registrations. The applicant's applications for trademark would seem to be a very modest protection.
From the evidence before the Court, I draw the conclusion that, in about 1987, the first respondent, Castlebrae, or more precisely its principal executive the second respondent, Craig Shaun Hull, thought that advantage could be taken of the applicant's character, Spuds MacKenzie. Castlebrae became registered under the Trade Marks Act effective from 12 June 1987, of the name Spuds MacKenzie and a drawing of Spuds MacKenzie, presumably Mr Hull's drawing, the registration being with respect to Class 25, the goods specified being "clothing, including t-shirts, sweatshirts, surfware in this class, footwear and hats." Castlebrae also became registered as from the same date in Class 25 as the proprietor of a drawing, again I assume Mr Hull's drawing, of Spuds MacKenzie, the name given being on this occasion "Spuds MacStud", and underneath the drawing appearing the words "Clothes for Heroes". There can be no doubt that the trademarks as registered were, though not an exact copy of any of the applicant's American trademarks, nevertheless, a substantial copy thereof. The second of the marks which contained the name "Spuds MacStud" and the description "Clothes for Heroes" was so derivative of the Spuds MacKenzie character developed by the applicant that it was described as deceptively similar. Castlebrae, through Mr Hull, exploited the character "Spuds MacKenzie" by the sale of printed t-shirts carrying a depiction of the character with words such as "The Original Party Animal", "Clothes for Heroes" and so on. Several patterns were produced and offered to the public. The drawings were more similar to those exploited by the applicant.
The course taken by Castlebrae and Mr Hull was fraudulent in the sense of being deliberately done with knowledge and to obtain a benefit to the disadvantage of the applicant. Indeed there is evidence from a private inquiry agent that, on 24 October 1990, Mr Hull said to him:-
"sorry I haven't got back to you sooner but I'm having trouble with Anheuser-Busch ... other people own the designs in the United States. They say they've got the copyright over the dogs. ... are having a go at me trying to stop me using it in Australia. However, I intend to sell to them my rights in it for $1/2 million. "
In registering and exploiting the marks, Mr Hull may have had in mind the principle of law which was affirmed by the High Court of Australia in The Seven Up Company v O.T. Limited (1947) 75 CLR 203. When the Seven Up Company, a corporation incorporated under the laws of the State of Missouri, applied to register a trademark, its mark "7Up", the Registrar of Trade Marks cited against the application a prior registration of the trademark "8 UP" of which O.T. Limited of Prahran, Victoria was the registered proprietor. At first instance, Williams J. stated at p 211:-
"In my opinion, the effect of these cases is that in the absence of fraud, it is not unlawful for a trader to become a registered proprietor under the Trade Marks Act of a mark which has been used, however extensively, by another trader as a mark for similar goods in a foreign country, provided the foreign mark has not been used at all in Australia at the date of the application for registration. But the position is different if at that date the mark has become identified with the goods of the foreign trader in Australia because those goods have been brought into Australia by the foreign trader himself or by some importer or in some other manner. The court frowns upon any attempt by one trader to appropriate the mark of another trader, although that trader is a foreign trader and the mark has only been used by him in a foreign country. It therefore seizes upon a very small amount of use of the foreign mark in Australia to hold that it has become identified with and distinctive of the goods of the foreign trader in Australia."
His Honour held, at p 211, that:-
"The mark `7Up' had never been used on the goods of the applicant in Australia and had never become associated in the minds of the Australian public with its goods at that date."
On appeal, his Honour's decision was upheld by Latham C.J, Rich and Starke JJ. At p 216, Latham C.J. said:
"The desire to use in Australia a successful trademark in competition in trade with a person who may come here and who uses that trademark in another country cannot be described as fraud or as involving any breach of the law."
Similarly, in W.G. and H.O. Wills (Australia) Limited v Rothman's Limited (1956) 94 CLR 182, it was held that the trademark "Pall Mall" should be struck from the register pursuant to s.72 of the Trade Marks Act 1905 (Cth), which provided for the rectification of the register where there had been no bona fide use of a trademark for a consecutive period of 3 years since the date of the last registration thereof. It was held that the whole trading in Pall Mall cigarettes, which had been sent to Australia during the relevant period, had taken place in the United States of America, that it was only there that the trademark had been used for the purposes of trade.
However, factual circumstances do not stand still. Since those cases were determined, there have been some developments of fact which necessarily have influenced the knowledge and perception of the Australian public with respect to trademarks and therefore, the effect which overseas marks may have in Australia.
Thus, there has been a great increase in the travel both of Australian citizens to other countries and of the citizens and residents of other countries to Australia. And the media, particularly television through satellite transmission, has become increasingly international. Magazines and newspapers, particularly magazines from the United States of America, have a worldwide circulation. Moreover, there has been an increasing public awareness of the existence and commercial significance of character merchandising. Thus, in Hogan v Pacific Dunlop Limited (1988) 83 ALR 403, Gummow J. said at 412:-
"The concept of a common law trade mark as a distinctive badge applied to goods has undergone much development in recent times, partly as a consequence of such changes in marketing techniques: Cadbury Schweppes Pty Ltd v Pub Squash Co Ltd (1981) RPC 429 at 490."
His Honour went on to say at 412-3:-
"There was an abundance of evidence in this case to indicate widespread practices in Australia whereby those holding copyright or other rights in fictional characters license, for reward, others to manufacture or deal in products in association with a representation of those characters. I infer from this evidence that the purchasing public would be aware in a general way of this practice."
More recently, Sir Nicholas Browne-Wilkinson V.C. considered the same point in Mirage Studios v Counter-Feat Clothing Co. Ltd. (1990) 21 IPR 302. His Lordship said at 304:-
"Character merchandising is an industry which has grown in sophistication over the comparatively recent past. The owners of the copyright in such cartoon characters as Ninja Turtles license their use and the use of the name of these fictitious characters and the reproduction of them on merchandise and goods. The return to the owner of the copyright, the creator of the character, is normally in the form of royalty payments. Those rights are extremely valuable in a case where the success of the underlying cartoon, video and television is as great as it has been in the present case; the royalties run into hundreds of millions of dollars."
At p 311, his Lordship said:-
"That dual nature of the plaintiffs' business (namely both the creation and exploitation of the cartoons and films themselves and the licensing of the right to use those creations) is in my judgment important. As I have said, if others are able to reproduce or apparently reproduce the Turtles without paying licence royalties to the plaintiffs, they will lose the royalties. Since the public associates the goods with the creator of the characters, the depreciation of the image by fixing the Turtle picture to inferior goods and inferior materials may seriously reduce the value of the licensing right. This damage to an important part of the plaintiffs' business is therefore plainly foreseeable."
At pp 311-312, his Lordship said:-
"But, crucially, the evidence shows that the public is aware that the Turtle characters would not normally appear without the licence of the plaintiffs, i.e. they connect the Turtles with the plaintiffs. The question is whether that link between the goods being sold and the plaintiffs is sufficient to found a case in passing off. In my judgment, it should be."
See also Hutchence v South Seas Bubble Co. Pty. Ltd. (1986) 64 ALR 330.
The evidence shows that by the time Castlebrae made its two applications for registration, Budweiser Beer, the product of Anheuser-Busch was being actively marketed in Australia and both the product and its manufacturer, Anheuser-Busch, were well known in Australia. The evidence also establishes that Spuds MacKenzie was recognised as a character which had been developed by Anheuser-Busch and was being exploited by it in association with its products. Having regard to the volume of sales of the products of Anheuser-Busch worldwide and to the extent to which Spuds MacKenzie had been developed and exploited both directly in association with beer and in its own right as an exploitable character, I am satisfied that Castlebrae's marks were never capable of becoming distinctive of goods associated with Castlebrae.
That lack of distinctiveness in relation to Castlebrae is emphasised by the fact that the drawings and names appearing in Castlebrae's marks breach the copyright of which Anheuser-Busch was the owner. Castlebrae could not appropriate for itself that which was owned and was being exploited by Anheuser-Busch. I shall deal further with the question of copyright subsequently.
As is required by s.25(1) of the Trade Marks Act, a mark is not registrable unless it is distinctive or capable of being distinctive of goods or services in respect of which registration of the mark is sought and with which the applicant is or may be connected in the course of trade. Section 26(1) specifically provides that:-
"a trade mark is not distinctive of the goods or services of a person unless it is adapted to distinguish goods or services with which that person is or may be connected in the course of trade from goods in respect of which no such connexion subsists ... ".
Section 28 of the Trade Marks Act provides that a mark shall not be registered as a trademark if, inter alia it is a mark:-
"(a) the use of which would be likely to deceive or cause confusion;
(b) the use of which would be contrary to law; ... or
(d) which would otherwise be not entitled to protection in a court of justice ...".
The application of these provisions was considered in New South Wales Dairy Corporation v Murray Goulburn Co-operative Company Limited (1990) 171 CLR 363. It is not for present purposes necessary for me to discuss some of the difficulties which were considered by their Honours in that case, which difficulties arose from the fact that some of the grounds relied upon for the expungement of the registered trademark had arisen out of events which had occurred since the registration of the mark, events which, while they tended to show that the use of the mark at a later point of time may have been likely to deceive or cause confusion, did not show that such was the case at the time of the registration of the mark.
Section 22(1) of the Trade Marks Act provides for rectification of the register by, inter alia:-
"(b) ... the expunging or amendment of an entry wrongly made in or remaining in the Register".
In the present case, the marks of Castlebrae were registered effective from 12 June 1987. The evidence before the Court from persons resident in Australia who have identified Spuds MacKenzie as the character connected with Budweiser Beer, does not expressly trace their knowledge back to 1987. One witness has spoken of his knowledge through publications to which he subscribes and which he receives direct from the United States of America. Another witness spoke of American advertisements which he had seen on Channel 9. But no date was specified. Another witness, a bar manager, said in his affidavit that he recognised the character Spuds MacKenzie and associated the character with Budweiser Beer. The witness did not, however, give the source of his knowledge.
However, taking into account the fact that Spuds MacKenzie has been promoted in the United States since 1985, that the mark was adopted by Castlebrae and Mr Hull in Australia deliberately to take advantage of the notoriety or fame which Spuds MacKenzie had obtained in the United States as a trademark of Anheuser-Busch, that Budweiser beer was a product of Anheuser-Busch sold in Australia since 1981, that the Spuds MacKenzie mark would necessarily have been known to Australian residents as a mark connected with Anheuser-Busch and that the character Spuds MacKenzie was being actively promoted in the United States so that the connection between the character and Anheuser-Busch would increasingly become known worldwide, it seems to me that the marks for which Castlebrae became registered were not adapted to distinguish and were not capable of distinguishing goods or services in Australia as those with which Castlebrae was connected.
It is to be kept in mind that Spuds MacKenzie was the very type of mark that was likely to be and was in fact the subject of character merchandising, a development which, as I have said, has been increasingly recognised and protected by the courts. Castlebrae's registration in Australia must therefore be expunged.
In any event, the applicant is the owner of the copyright in the name and character, Spuds MacKenzie, pursuant to the provisions of the Copyright Act 1968 (Cth). A trade name, not being a literary work, will not of itself attract copyright protection. See Francis Day and Hunter Ltd v Twentieth Century Fox Corp Ltd. (1940) AC 112. But the many drawings and other depictions which have evolved of Spuds MacKenzie are artistic works and the character given to Spuds MacKenzie by the many circumstances in which Spuds MacKenzie has been shown has given rise to a character the subject of literary work. As the many registrations in the United States show, Spuds MacKenzie is a subject of copyright. See e.g. Hutchence v South Seas Bubble Co. Pty. Ltd., cited above.
As to ownership, it has been proved that the original creator of the name and character was a citizen of the United States, one of the countries set out in Part I of Schedule 1 of the Copyright (International Protection) Regulations. Regulation 4(3) provides that the provisions of the Copyright Act apply in relation to the author, a citizen of the United States, in like manner as those provisions apply in relation to persons who are at the material time Australian citizens.
Notwithstanding that the original creator of the name and character, Spuds MacKenzie, was not an employee of the applicant and thus a person to whom s.35(6) of the Copyright Act applied, there are in evidence copies of two deeds of assignment of the copyright to the applicant. Section 196 of the Copyright Act authorises the assignment of copyright in writing signed by or on behalf of the assignor. The instruments of which copies are in evidence answer that description. Moreover, the copyright registrations which the applicant has obtained in the United States are evidence that the applicant is the owner of the copyright.
As the Spuds MacKenzie name and character has been exploited in the United States of America as from 1985, I am satisfied that the applicant had at all material times relevant copyright which was the subject of protection by the Copyright Act. It follows that the actions taken by Castlebrae and Mr Hull have been a breach of copyright.
Moreover, because Castlebrae was using the character which had been developed for and was associated with Anheuser-Busch, Castlebrae's use of the mark was a breach of s.52 of the Trade Practices Act, being misleading and deceptive conduct. The actions of Castlebrae and of Mr Hull were additionally misleading and deceptive in that the actual drawings, being slightly different from those used by Anheuser-Busch, would have tended to mislead and deceive as to the design of the character Spuds MacKenzie. And the use of the name "Spuds MacStud" was likewise calculated to do so.
I need not discuss the tort of passing off on which counsel for the applicant also relied, save to say that the criteria which Sir Nicholas Browne-Wilkinson V.C. found to be established in Mirage Studios v Counter-Feat Clothing Co. Ltd., at pp 310-311 are also established in this present case.
As to Mr Hull's personal liability for the wrongful acts described above, it is sufficient to refer to the principle discussed in Australasian Performing Right Association Ltd. v Jain (1990) 26 FCR 53.
In these circumstances, the applicant is entitled to the following orders:-
1. Order that each of the First and Second Respondents, whether by themselves, their servants or agents or otherwise, be restrained from using in any way in the course of business, any representation of a bull terrier which is identical to, substantially identical with or deceptively similar to the character appearing in the forms depicted in exhibit "SKL-2" to the Affidavit of Stephen K. Lambright sworn 14 October, 1990.
2. Order that each of the First and Second Respondents,
whether by themselves, their servants or agents or otherwise, be restrained from using in any way in the course of business, any representation of a bull terrier which is identical to, substantially identical with or deceptively similar to the character appearing in the forms depicted in exhibit "DH-1" to the Affidavit of David Henderson sworn 24 October, 1990.
3. Order that each of the First and Second Respondents,
whether by themselves, their servants or agents or otherwise, be restrained from using in any way in the course of business the name "SPUDS MACKENZIE" or any name substantially identical with or deceptively similar thereto including the name "SPUDS MACSTUD".
4. Order that each of the First and Second Respondents,
whether by themselves, their servants or agents or otherwise, be restrained from selling or offering for sale or by way of trade distributing any t-short or other garment upon which appears any of the characters or names referred to in Orders 1, 2 and 3 hereof or any other name or character which is substantially identical with or deceptively similar to any such name or character.
5. Order that each of the First and Second Respondents within
28 days of the date of this Order deliver up on oath all articles of clothing, brochures, labels, advertising and promotional material in their possession or control upon which appears any of the characters or names referred to in Orders 1, 2 and 3 hereof or any other name or character which is substantially identical with or deceptively similar to any such name or character.
6. Order pursuant to s.22 of the Trade Marks Act, 1955 (Cth)
that the register kept thereunder be rectified by expunging therefrom the entries in respect of each of the trade marks numbered A466883 and A466884.
7. Order that the First and Second Respondents pay the
Applicant's costs of these proceedings.
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