Companhia Souza Cruz Industria E Comercio v Rothmans of Pall Mall (Australia) Ltd

[1998] FCA 689

FEDERAL COURT OF AUSTRALIA

TRADE MARKS - Application for registration of mark - Opposition to application by proprietor of an already-registered mark - Application refused for lack of distinctiveness and because mark was substantially identical with, or deceptively similar to, opponent’s mark - Appeal against rejection disallowed on ground of deceptive similarity - Comment deprecating the use of expert evidence regarding the meaning and pronunciation of ordinary English words.

Trade Marks Act 1955, ss 6, 25 and 33.

COMPANHIA SOUZA CRUZ INDUSTRIA E COMERCIO v ROTHMANS OF PALL MALL (AUSTRALIA) LTD

NG304 of 1997

JUDGE:         WILCOX J
PLACE:         SYDNEY
DATE:           17 JUNE 1998

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG304  of   1997

BETWEEN:	COMPANHIA SOUZA CRUZ INDUSTRIA E COMERCIO Applicant
AND:	ROTHMANS OF PALL MALL (AUSTRALIA) LTD Respondent
JUDGE:	WILCOX J
DATE OF ORDER:	17 JUNE 1998
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The appeal be dismissed.

1. The applicant, Companhia Souza Cruz Industria E Comercio, pay the costs of the respondent, Rothmans of Pall Mall (Australia) Ltd, excluding all costs associated with the use of expert linguistic evidence.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG304 of 1997

BETWEEN:	COMPANHIA SOUZA CRUZ INDUSTRIA E COMERCIO Applicant
AND:	ROTHMANS OF PALL MALL (AUSTRALIA) LTD Respondent

JUDGE:	WILCOX J
DATE:	17 JUNE 1998
PLACE:	SYDNEY

REASONS FOR JUDGMENT

WILCOX J:  This is an appeal against a decision of a delegate of the Registrar of Trade Marks, Michael Homann, refusing to register a trade mark, FREE, in respect of the category of goods (Class 34) described in the Trade Marks Register as “tobacco, cigarettes and smokers articles in general”.

Background
The applicant, Companhia Souza Cruz Industria E Comercio (“Souza Cruz”) is a corporation organised and existing under the laws of Brazil.  According to a statutory declaration made on 20 September 1995 by two directors of Souza Cruz, Flavio de Andrade and Milton de Carvalho Cabral, and lodged in support of the application for registration of the trade mark, over the two years immediately prior to that date Souza Cruz sold some 1.7 billion cigarettes (worth approximately US$17.9 million) under the name FREE.  The company first registered the word FREE under Brazilian trade mark law on 10 June 1980.  Subsequently, it obtained registration of the word FREE with artwork; there being two designs.  Each design included an emblem reminiscent of a crest or coat-of-arms with various horizontal and diagonal lines.  In their statutory declaration, the directors called these marks “FREE LABEL”.  They said “FREE LABEL” - I assume the simpler of the two designs, that substantially corresponds to the design sought to be registered in Australia - was subsequently registered in 50 other countries, which they listed, with registration dates.  In some countries, the plain word FREE was also registered.

On 16 July 1992 Souza Cruz lodged an application for registration in Part B of the Register of the so called “FREE LABEL” trade mark in Australia.  At that time the relevant Australian legislation was the Trade Marks Act 1955. That Act was superseded by the Trade Marks Act 1995, which commenced operation on 1 January 1996, before any decision was reached on Souza Cruz’s application. However, it is common ground between the parties that this is immaterial. As the application was accepted before the commencement of the 1995 Act, the provisions of the 1955 Act continued to apply to it: see s 241 of the 1995 Act.

Section 49 of the 1955 Act permitted any person, within three months of the Registrar’s advertisement of acceptance of a trade mark application, to lodge with the Registrar a written notice of opposition.  The respondent to the present proceeding, Rothmans of Pall Mall (Australia) Ltd (“Rothmans”), took advantage of this provision and lodged a notice opposing the application.  Mr Homann later said, in his reasons for decision, that Rothmans’ grounds of opposition “were very widely drawn but basically relied on the registration and use by Rothmans of the trade mark FREEDOM”.

Mr Homann heard submissions by representatives of both parties. Rothmans referred to both s 25 and s 33 of the 1955 Act. Section 25(1) provided that a trade mark is registrable in Part B of the Register “if it is distinctive, or is not distinctive but is capable of becoming distinctive, of goods or services in respect of which registration of the trade mark is sought and with which the applicant for registration is or may be connected in the course of trade”. Rothmans’ argument was that the trade mark FREE was not distinctive, or capable of becoming distinctive, of Souza Cruz’s products. Souza Cruz had not commenced to sell in the Australian market. The trade mark was not known in this country. Rothmans also submitted the mark FREE was objectionable because the name “Free” was a common Australian surname, there being evidence it occurred 732 times in the Australian Electoral Roll.

Section 33(1) of the 1955 Act provided:

“(1)     Subject to this Act, a trade mark is not capable of registration by a person in respect of goods if it is substantially identical with or deceptively similar to a trade mark which is registered, or is the subject of an application for registration, by another person in respect of the same goods, of goods of the same description as those goods or of services that are closely related to those goods, unless the date of registration of the first-mentioned trade mark is, or will be, earlier than the date of registration of the second-mentioned trade mark.”

Rothmans submitted to Mr Homann that the mark FREE was deceptively similar to its mark FREEDOM, registered in respect of the same class (Class 34) as was proposed in Souza Cruz’s application.

Mr Homann upheld both these grounds of opposition. In relation to s 25 he said:

“The trade mark at issue was evidently accepted on the basis that it was a composite mark consisting of the word FREE and the pictorial elements above and below that word.  Thus the disclaimer of the word FREE.  However, in the context in which the mark is used or proposed to be used, that is, on cigarette packets, it seems to me that the crest device is so extremely common that it would register with the ordinary purchaser as no more than a blur, to the extent that it is totally insignificant as a distinguishing factor.  Likewise, the so-called ‘panels’ seem to me, in the same context, to perform no trade mark function whatever but to be merely part of the get-up of the packet.  The trade mark is on that view of the matter nothing more in effect than the word FREE.  In accordance with the established guidelines for the acceptance of marks in Part B of the Register of words which are surnames but have a well-known other meaning the number of occurrences of such a word in the SFAS search ought not to exceed 400.  The word ‘free’ occurred almost double that number of times (732) when the examiner conducted the surname search.  I therefore consider that the trade mark is not registrable in Part B of the Register.”

In connection with s 33, Mr Homann stated:

“I consider also that the applicant’s trade mark is deceptively similar to the registered trade mark 567306 of the opponent.  While I take Ms Hill’s point that there are other marks on the Register which include the word ‘free’ as an element, such as FREEWAY, FREESTYLE, FREEPORT, I think that those marks are in a different category than that of the word FREEDOM.  Firstly, each of the former words has a different connotation than the word FREEDOM itself which is simply the abstract noun derived from the adjective ‘free’ and has the same connotations as that word.  Secondly, in pronunciation each of the former words bears equal stress on both syllables unlike FREEDOM which is strongly stressed on the first syllable, the noun of the second syllable being ‘slurred’, as it was described in London Lubricants (1920) Ltd’s Application (1925) 42 RPC 264, that is the vowel of the second syllable is weakened to the neutral vowel or schwa. I cannot therefore accept Ms Hill’s submission that the second syllable of FREEDOM is a ‘strong’ syllable. On the contrary, as I have indicated I think it is a particularly weak syllable which in the circumstances described by Mr Stevens could well be lost in speech. Ms Hill herself argued that in relation to the goods in question the oral/aural characteristics of the marks were of more importance than the visual. I accept that submission and for the reasons given conclude that the two marks could well be confused.”

Mr Homann allowed Rothmans’ opposition to the application for registration and refused to register Souza Cruz’s mark in Australia.

On 23 April 1997 Souza Cruz filed a Notice of Appeal in this Court challenging Mr Homann’s decision.  Rothmans was named as sole respondent.  Points of Claim and affidavits were filed by each party.  One of the affidavits was made by Paul Graeme Nicholson, an officer of BATMark Limited in England and an authorised attorney of Souza Cruz.  Mr Nicholson deposed to the fact that the FREE label mark has not been used in Australia since the date of the application for registration, although it had been used and registered “in several other countries throughout the world for several years prior to 1992”.  He went on:

“It has always been the intention of Souza Cruz that use of the ‘FREE Label’ mark would extend to Australia.  The delay in using the mark ‘FREE Label’ in Australia is due to a number of factors including the fact that the mark has not yet been registered as a result of the opposition filed by Rothmans of Pall Mall (Australia) Limited.  I understand that Souza Cruz intend that the mark ‘FREE Label’ will be used in Australia as soon as commercial circumstances permit after application no. 582639 has proceeded to registration.”

Although the proceeding before this Court is called an “appeal”, it is not so in the technical sense.  The proceeding is an original proceeding in which the Court considers the issues de novo:  see the decision of McLelland J in Titan Mining Engineering Pty Ltd v Arnall’s Engineering Pty Ltd (1988) 12 NSWLR 73 concerning the equivalent provisions of the Patents Act 1952. In exercising the functions of the Registrar, the Court may take into account any ground of objection, whether or not it is relied upon by the opponent (Rothmans): see s5(2) of the 1955 Act. Where a ground of opposition depends on some fact being established, the onus of proof of that fact rests on the party seeking to establish the ground of opposition; nonetheless, an overall onus rests upon the applicant to satisfy the Court, in effect acting as the Registrar, that the mark should be registered.

The contentions of counsel
Mr D M Yates SC and Mr D R Sibtain argued the case for Souza Cruz. Dealing with s 25 of the 1955 Act, they submitted the mark must be considered as a whole. It comprised the word FREE, in a particular stylised form with other elements in a fixed relationship to each other. They said:

“The evidence does not show that the particular combination of device elements is not new or, as a combination, is not distinctive or capable of becoming distinctive of the applicant’s products.  The device elements, as a combination, are not shown by the evidence to be common to the trade.  Further, whilst a monopoly in the use of the word FREE is disclaimed, the word is nevertheless an important element in the combination of elements which go to make up the composite mark.”

Counsel argued that, when considered as a whole, the mark is inherently adaptable to distinguishing Souza Cruz’s goods:  see Burger King Corporation v Registrar of Trade Marks (1973) 128 CLR 417 at 425-426; unlike the word WHOPPER in issue in that case, the word FREE is not descriptive of the goods. Nor, they said, does this word constitute a laudatory epithet that others might wish to use, without improper motive, in the ordinary course of business as a common right: see Clark Equipment Company v Registrar of Trade Marks (1964) 111 CLR 511.

Turning to s 33, Mr Yates and Mr Sibtain submitted Souza Cruz’s mark is neither substantially identical with, nor deceptively similar to, Rothmans’ FREEDOM mark. They said:

“In considering whether marks are substantially identical they are to be ‘compared side by side, their similarities and differences noted and the importance of these assessed having regard to the essential features of the registered mark and the total impression of resemblance or dissimilarity that emerges from the comparison’:  Shell Co (Aust) Ltd v Esso Standard Oil (Aust) Ltd (1961) 109 CLR 407 at 414-415; see also Seven-Up v Bubble Up Co Inc (1987) 9 IPR 259.

Having regard to the foregoing, it is submitted that the two marks in the present case are not ‘substantially identical’.  The respondent’s mark simply comprises the word FREEDOM.  The applicant’s work comprises the word FREE represented in a particular stylised form in combination with certain device elements.  The words FREEDOM and FREE, considered only as words, are visually distinct.  When FREE is rendered in its particular stylised form with the other device elements the lack of identity is even more pronounced.”

The Shell reference is to the first instance decision of Windeyer J. That decision was reversed on appeal but the Full High Court did not reject Windeyer J’s enunciation of principles. Windeyer J also spoke about deceptive similarity, remarking at 415 that it requires a different comparison from that which is necessary on the issue of substantial identity. He went on:

“The issue is not abstract similarity, but deceptive similarity.  Therefore the comparison is the familiar one of trade mark law.  It is between, on the one hand, the impression based on recollection of the plaintiff’s mark that persons of ordinary intelligence and memory would have; and, on the other hand, the impressions that such persons would get from the defendant’s television exhibitions.”

Windeyer J cited authority as to the proper approach, including these observations of Dixon and McTiernan JJ in Australian Woollen Mills Ltd v F S Walton & Co Ltd (1937) 58 CLR 641 at 658:

“An attempt should be made to estimate the effect or impression produced on the mind of potential customers by the mark or device for which the protection of an injunction is sought.  The impression or recollection which is carried away and retained is necessarily the basis of any mistaken belief that the challenged mark or device is the same.”

Mr Yates and Mr Sibtain accepted their client bears the onus of negativing deceptive similarity.  They referred to Gummow J’s formulation in Johnson & Johnson v Kalnin (1993) 26 IPR 435 at 439 - “no reasonable probability of confusion”. They said the comparison must be between the use of the two marks in a “normal and fair manner” and accepted this may be wider than the mark’s existing use. However, they said:

“Whilst the respondent’s registered trade mark is of the word FREEDOM per se, it has nevertheless committed itself to a particular form of use, depicted in the affidavit evidence.  This clearly shows how the respondent not only has used its mark, but also as to how it proposes to use its mark in the future.  The evidence thus gives a good indication of that manner of use which would be ‘normal and fair’ on the part of the respondent.  This can be contrasted with the very limited registration which the applicant seeks.  That registration (if granted) would be very limited because of the very nature of the mark itself which strictly comprises the features depicted in the evidence.  Thus, for the purposes of this comparison, there is no scope for the applicant to move outside the very limited nature of that proposed registration.  When the two competing marks are considered, having regard to their respective notional ‘normal and fair’ manner of use, it is submitted that there is no likelihood of deception or confusion between the two, as a matter of comparison.”

Mr Yates and Mr Sibtain maintained there was no real prospect of visual confusion.  The word “freedom” is nearly twice as long as “free” and the artwork included in Souza Cruz’s mark differs from any used by Rothmans for its FREEDOM mark.  They conceded there is a greater reason for concern about aural confusion; there is a common element in that the word “free” constitutes the first syllable of “freedom”.  But they argued the difference between a one-syllable word and a two-syllable word is obvious and prevents any possibility of confusion.  They pointed out the words “free” and “freedom” are ordinary English words of general import; there might be a greater risk of confusion if Souza Cruz’s mark was a variant of a distinctive word.

Mr D K Catterns QC, counsel for Rothmans, argued Souza Cruz is not entitled to registration of its mark because it has not established that, at the date of application, it proposed to use the mark: see the definition of “trade mark” in s 6 of the 1955 Act. He contended the mark fails to comply with s 25 of the 1955 Act because it is not distinctive, or capable of becoming distinctive, of Souza Cruz’s goods; the word “free” is at least potentially descriptive of the character or quality of the goods in respect of which registration is sought and is a word other traders may genuinely wish to use. Mr Catterns also said the word is objectionable because of its use as a surname.

Turning to s 33 of the 1955 Act, Mr Catterns submitted FREE is, at least, deceptively similar to FREEDOM. He pointed out s 33 does not require an intention to deceive or cause confusion, and it does not matter that the confusion “may be unlikely to persist up to the point of, and be a factor in, inducing actual sales”: see per Kitto J in Southern Cross Refrigerating Company v Toowoomba Foundry Proprietary Limited (1954) 91 CLR 592 at 595. Referring to evidence about the method of retail sale of cigarettes, Mr Catterns pointed out that, except for those purchased from a vending machine:

“cigarettes are usually obtained by a consumer asking for the cigarettes by brand name, ie a word, as distinct from the situation where the consumer self-selects the goods from the shelf in the particular store, where other features of packaging and graphics may be relevant.”

Mr Catterns emphasised that the goods in respect of which registration of Souza Cruz’s trade mark is sought are goods of the same description as those goods in respect of which Rothmans’ trade mark is registered.

Conclusions
Contrary to the view of Mr Homann, I do not think Souza Cruz’s mark fails to comply with s 25 of the 1955 Act. It is not currently distinctive of Souza Cruz’s goods, but it is capable of becoming distinctive. No doubt it is true that the crest device included in the mark is common; perhaps it would register with a potential purchaser “as no more than a blur”, as Mr Homann says. But I see no reason to doubt that potential purchasers would learn to recognise a melange consisting of the word FREE, displayed always with particular lines and symbols, even if they could not easily recall, or exactly describe, the detail of the lines and symbols.

The reason for rejection arising out of the existence of the surname “Free” is not easy to follow.  I gather from Mr Homann’s reasons there is a policy document issued by the Registrar of Trade Marks that decrees a mark, to be registrable, should not comprise or include a name that occurs more than 400 times in the Australian Electoral Register.  The policy document is not before the Court, so I do not know what rationale it advances for this dictat.  Why 400?  The answer does not matter.  The policy has no foundation in the Act; so it is devoid of any legal justification.  It is not for the Registrar to impose non-statutory restrictions on the words that may be registered as trade marks.  To the extent Mr Homann paid any attention to this aspect of the case, he erred in law.

In relation to s 33, I accept the submission of counsel for Souza Cruz that their client’s mark is not substantially identical to that of Rothmans. But I think it is deceptively similar to Rothmans’ mark. In this regard it is relevant to note some evidence given by David Charles George, Rothmans’ Corporate Affairs Manager. Mr George said it is common for a crest or coat-of-arms to be featured on cigarette packages. Rothmans commenced the manufacture of cigarettes in Australia in 1955 and has included a crest or coat-of-arms on its cigarette packets ever since. Mr George also said it is common for cigarette packaging to include a coloured stripe or block. He gave examples of the use of such features by Rothmans. It seems the design concepts embodied in Souza Cruz’s mark are not dissimilar to those already used by Australian cigarette manufacturers including Rothmans.

Mr George gave evidence about the distribution of Rothmans’ cigarettes.  It is not necessary to refer to what he said about wholesale distribution; it may be assumed wholesalers would readily distinguish between Souza Cruz products and those of Rothmans.  In relation to retail sales, Mr George said:

“Except in the case of cigarettes purchased from a vending machine, cigarettes are purchased by the consumer asking the salesperson for the cigarettes by the brand name.  Consumers rarely if ever select cigarettes themselves off a shelf or display.  In my experience consumers ask for cigarettes by reference to the brand name under which the cigarettes are sold.”

This evidence was not challenged.  There appear to be two major reasons for retailers requiring purchasers to ask for cigarettes, rather than allowing them to select the cigarettes from a shelf or display unit:  legal restrictions on the sale of cigarettes to minors and the ease of stealing such a small item as a packet of cigarettes.

The significance of Mr George’s evidence on this point is that the sound of the brand name is important.  The situation is the reverse of that discussed in Johnson & Johnson at 439. Gummow J there quoted the statement of Whitford J in  Mars G B Ltd v Cadbury Ltd [1987] RPC 387 at 395 about the modern practice of retailing confectionery by displaying goods that are picked up by customers, so that “the question of sound is perhaps becoming of diminishing importance”. In the present case, sound remains important; the name will normally be spoken by the purchaser to the sales assistant. Moreover, cigarettes are often retailed in places of entertainment, such as hotels, clubs and the like, where there is considerable ambient noise. Any substantial similarity between the sound of brand names is likely to cause confusion. Further, this is not a case where substantial similarity between sounds is negated by differences in underlying ideas. To the extent either name communicates an idea, it is the same idea.

I appreciate the point made by Mr Yates and Mr Sibtain about the difference between a one-syllable word and a two-syllable word.  But I think the point is answered by the reasoning of Mr Homann which I have already quoted and gratefully adopt.  In particular, I agree with Mr Homann that the second syllable of FREEDOM is a weak syllable that could well be lost in speech, especially in the circumstances I have just mentioned.

I accept the submission of counsel for Souza Cruz that there is such a degree of difference in length, between FREE and FREEDOM, as to make visual confusion unlikely, even if there is some similarity in the surrounding artwork.  If the retail sale of cigarettes was predominantly by self-selection from shelves or display units, I would be inclined to think there was not such a likelihood of confusion as to warrant a finding that FREE was “deceptively similar” to FREEDOM.  However, having regard to the normal method of retailing cigarettes, it is apparent the aural impression of the name is more important than the visual impression; and there is a real risk of confusion about that.

Each party filed an affidavit made by a linguistic expert as to the similarities and dissimilarities between the words FREE and FREEDOM.  Without any disrespect to these experts, their evidence was unnecessary.  It does no more than spell out the detail of what any reasonably well-informed non-expert already knows.  I think judges may be allowed (and expected) to know the meaning of ordinary English words and their methods of pronunciation.  It would be unfortunate if the notion got about that it was necessary for parties to go to the trouble and expense of retaining a linguistic expert in order to present an argument that a particular mark is, or is not, deceptively similar to another mark.  The courts have proved well able to reach conclusions about that question without the assistance of linguists.

In my opinion the applicant’s mark is deceptively similar to that of the respondent.  The Registrar rightly rejected the application for registration.  The appeal should be dismissed with costs, but excluding the costs associated with the respondent’s linguistic evidence.

I certify that this and the preceding nine (9) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox

Associate:

Dated:             17 June 1998
_

Counsel for the Applicant:	D M Yates SC and D R Sibtain
Solicitor for the Applicant:	Dunhill Madden Butler
Counsel for the Respondent:	D K Catterns QC
Solicitor for the Respondent:	Davies Ryan De Boos
Date of Hearing:	17 April 1998