Koppamurra Wines Pty Ltd v Mildara Blass Ltd

[1998] FCA 226

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SG 119  of   1997

BETWEEN:	KOPPAMURRA WINES PTY LTD APPLICANT
AND:	MILDARA BLASS LIMITED RESPONDENT
JUDGE(S):		VON DOUSSA J
DATE OF ORDER:		3 MARCH 1998
WHERE MADE:		ADELAIDE

THE COURT ORDERS THAT:

1. Subject to the applicant providing security in the amount of $250,000 in the form of a

   bank guarantee or some other form satisfactory to the parties, the respondent is restrained from using or applying the word Koppamurra or any substantially identical or deceptively similar word, whether alone or in conjunction with any other name, word, device, mark or logo, in the labelling, packaging, marketing or promotion of its wine products.

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SG 119 of 1997

BETWEEN:	KOPPAMURRA WINES PTY LTD APPLICANT
AND:	MILDARA BLASS LIMITED RESPONDENT

JUDGE(S):	VON DOUSSA J
DATE:	3 MARCH 1998
PLACE:	ADELAIDE

REASONS FOR JUDGMENT

This is an application by Koppamurra Wines Pty Ltd for an interlocutory injunction.  The trial of the principal proceedings has been listed for 25 May 1998.  Notwithstanding that trial date, which is not far away, the applicant presses for interlocutory orders in the following terms:
(1) an injunction restraining the respondent, Mildara Blass Ltd, from using or applying the word "Koppamurra" or any substantially identical or deceptively similar word, whether alone or in conjunction with any other name, word, device, mark or logo, in the labelling, packaging, marketing or promotion of its wine products, and, (2) an injunction restraining the respondent from holding out to the public that Koppamurra is an established region or name.

I indicate at the outset that I think an injunction in some form ought issue on an interlocutory basis.  I will return to consider the terms of the injunction after giving reasons for my conclusion.

The background of the matter is as follows.  In 1973 Mr Greenshields with another purchased some 10 hectares of land near the township of Joanna in the south‑east of South Australia.  In 1975 they planted vines.  In 1979 the first commercial vintage from the vineyard was produced.  In 1980 the name Koppamurra was selected by Mr Greenshields as the business name for the winery and that name has been applied to the wine produced from the vineyard since then.  The business names Koppamurra and Koppamurra Wines were registered in 1981, but lapsed some years later for reasons that are not clear on the papers.

In 1991 the applicant company was formed, and it took over the vineyard and winery business previously conducted by Mr Greenshields and his partner.

It is the applicant’s case that the Koppamurra name was chosen to distinguish its products, and that at the time that it was chosen, the name was not in any way used or known as a geographical regional name.  In 1992 a trademark registration of  “Koppamurra” in class 33 was obtained for goods, and a similar trademark for services was obtained on 23 May 1995.

In 1993 Mildura Blass Ltd and two other large wineries, BLR Hardy and Yalumba, commenced to purchase land in the vicinity of the applicant’s land, and have since planted large areas of vines.  In 1994 there were suggestions made to the proprietors of the applicant that the name Koppamurra be used as a regional name for the area, and subsequently there have been discussions between a number of parties about that possibility.

In 1995 there was a meeting of growers and wine companies developing vineyards in the area which broadly speaking encompasses the Hundreds of Jessie and Joanna, and on 4 August 1995 there was another meeting called to form an association of grape growers.  That meeting
adopted the name “Koppamurra Grape Growers Association”, but did so against the protests of the applicant.  There have, since then, been continuing discussions with the applicant about using the name as a regional name.  The applicant has resisted various suggestions for co‑existence with the other wineries that have been put forward.

The Koppamurra Grape Growers Association in late 1995 applied to the Australian Wine and Brandy Corporation for the name Koppamurra as a geographical indicator, but ultimately that application was not successful.  Apparently the Australian Wine and Brandy Corporation was in agreement that the area designated was an appropriate area to be given a geographical indicator but did not approve the name.  In mid 1997 it apparently became clear to several major wine companies who are participants in the Koppamurra Grape Growers Association, including the respondent, that agreement over the name would not be reached with the
applicant.  On 15 August 1997 the Koppamurra Grape Growers Association issued a media kit which commenced a campaign to promote the use of the name Koppamurra as a regional geographic name.

On 13 October 1997 the respondent launched a new wine label, applied to a 1995 vintage from the vineyards it has developed in the general area.  The wine was promoted under the brand name Flanagans Ridge, but the labelling included on the front of the bottle the word “Koppamurra” without further description under the name “Flanagans Ridge’.  On the reverse side of the bottle, there is another label containing two references to “Koppamurra” but in the context first of Koppamurra being a viticultural area immediately north of Coonawarra, and secondly, as part of the address of the Flanagans Ridge winery which is shown as “Flanagans Ridge, Eldersley Road, Koppamurra via Naracoorte”.

The launch of the wine received prominence in the media, and in particular in an article which appeared in the Stock Journal, on 6 November 1997.  At that time the applicant was not aware that the respondent's wine under the Flanagans Ridge label had been released.  The applicant claims to have been ambushed over the use of the Koppamurra name.  On learning of the release of the wine through the media publication, attempts were made by the applicant to obtain a bottle of the wine.  A bottle was acquired late in November 1997.  Correspondence followed between the applicant's solicitors and solicitors for the respondent, the applicant seeking a remedy in respect of what it asserted to be a misuse of the name Koppamurra, and an infringement of its trademark.  A satisfactory resolution not being reached, these proceedings were commenced on 24 December 1997.

At one stage in the documents on the Court file it was suggested by the respondent that the applicant should be denied an interlocutory injunction on the basis that it had delayed in bringing the proceedings.  However that argument has not been advanced today, and insofar as it may be relevant to pass a view on it, in my view there was no unreasonable delay on the part of the applicant in coming to court to remedy what it perceived to be an infringement of its rights arising from the release of the Flanagans Ridge product.

The proceedings allege three causes of action against the respondent. The first, speaking broadly, alleges an infringement of the applicant’s trademarks. The second alleges passing off, and the third alleges a breach of section 52 of the Trade Practices Act 1974 (Cth) on the basis that the respondent has engaged in misleading and deceptive conduct by referring to and promoting the area as the geographical region of Koppamurra. The respondent denies liability on each of the causes of action. It says that the registered trademarks were invalidly registered, and that the register is liable to be rectified. It has filed a cross-claim seeking the expungement of the registrations.

The respondent asserts that the registrations were invalid essentially because Koppamurra is, and at all material times relating to the registration was, a regional geographical name that is not and never has been distinctive of the applicant's product. Further, the respondent says that it has not used the name Koppamurra as a trademark, but merely as a geographical region indicator on its labelling. Finally, it raises a defence under s.122(1) of the Trademarks Act 1995 (Cth) in that it says the name Koppamurra was used in good faith to indicate the geographical origin of the product.

It is against that background that I have to decide the application for the interlocutory injunction. The Court is required to consider on an application for an interlocutory injunction whether there is a serious question between the parties to be tried, and, if so, whether the applicant is likely to suffer irremedial harm that cannot be adequately rectified by an award of damages if an injunction is not granted.  If the view is formed that damages are an adequate remedy, it is then inappropriate to order injunctive relief.  Finally, if damages will not be an adequate remedy it is necessary to consider where the balance of the convenience lies between the parties.  That involves a balance, on the one hand, of the applicant's position without an injunction and, on the other hand, of the respondent's position with an injunction in the terms contemplated.

In this case there is a supplementary issued raised by the papers, related, I think, to the balance of convenience.  That is whether the protection normally required by the Court for a respondent in the form of an undertaking as to damages is adequate.  Material has been put forward by the respondent which questions the ability of the applicant to adequately compensate the respondent for the losses that it is likely to suffer if the injunction sought is granted, and it later turns out that the respondent has a good defence to the claims.

The respondent has conceded that there is a serious question to be tried, and has urged the view that it is not necessary or relevant for the Court to further investigate the merits of the applicant’s claims.  Notwithstanding that concession, in submissions both sides have made a valiant effort to canvass the aspects of the merits which they see as likely to sway the sympathies of the Court in their favour.  However, I take the view that it is not possible in a case where there are serious factual disputes, such as exist here, to form a view about the merits.  It would be unwise to try to prejudge any particular factual issue.  In my view the position is, as Mr Scerri has put it, that there are serious questions on both sides and it is not possible for the Court to go further than to note that.

If the region around Joanna - in the Hundreds of Jessie and Joanna - is and has at all material times been known as the Koppamurra region, and that is a fair geographical description, all the respondent’s actions may well have been be fully justified.  On the other hand, if the area is not known and has not been known as the geographical region of Koppamurra, then, as the applicant alleges, there appears to have been a deliberate and carefully planned scheme to hijack the Koppamurra name from the applicant, and to promote that name vigorously as a regional name so that in the minds of the public generally, and in particular in the minds of the wine industry and wine consumers, it is recognised as an area that produces a desirable regional wine.  The papers on file draw an analogy between the marketing benefits for wine produced in the Coonawarra region and marketing benefits that would flow from wine coming from what is asserted to be the Koppamurra region.

The applicant complains that the release of the 1995 vintage of Flanagans Ridge wine in October 1997 by the respondent has been one of the central steps taken to promote the Koppamurra name as a new geographical regional name.  That launch involved some 926 cases of wine, several hundred of which had been sold by 5 January 1998.  The launch was accompanied by considerable promotion, including promotion through the media.

The applicant is concerned that if an injunction is not now granted the respondent has stock of some 15 to 20,000 cases of the 1996 vintage of Flanagans Ridge, which is about to be put onto the market.  It is a much bigger quantity than before, and inferentially would carry a promotion that was more widespread.  In the applicant's submission the release of the 1996 vintage of Flanagans Ridge would constitute a serious invasion of its rights in respect of the trademark in that the promotion is likely to instil in the minds of the public, the wine industry and wine consumers the notion that Koppamurra refers to a region.

The applicant says, on the question of irremedial damage, that if the launch of the 1996 vintage occurs and if the promotion of the name as a regional name in the manner that has occurred over the last few months continues, there is likely to arise a general recognition in the minds of the community such that “what was not reality becomes reality”  in the marketplace. The applicant says if that occurs there will have been a generification of the name such that there will be a risk that others in the area will be able to use the name as a geographical regional name in good faith and thereby avoid infringing the trademarks pursuant to the provisions of s122(1)(b) of the Trademarks Act.

The decision in Angove’s Pty Ltd v Johnson (1982) 66 FLR 216 in my view indicates that that risk is not a fanciful one. In that case there was at the outset an established geographical region, but there was, well-known to the respondent, a dispute about the respondent's entitlement to use the name to describe its business. The respondent nevertheless went ahead and used the name. It succeeded with a defence under what was then s64 of the Trademarks Act.

Assuming that the applicant is correct in its assertion that Koppamurra was not a regional name, to avoid the name becoming recognised through promotion and present use before the conclusion of the proceedings, especially in the wine trade, the applicant says, and I accept, that it would be forced to take action against other people who were seen by it to be engaging in conduct that would amount to an infringement of its trademarks.  In particular it would be forced into a situation where it was required to take action against retailers of the respondent's product and all others who used the name “Koppamurra” as descriptive of a geographical region in the wine trade.

The pending release of the 1996 vintage in my view would seriously exacerbate a difficult position in which the applicant already finds itself in seeking to protect its name.  The applicant is a small company.  It would, in my view, suffer an injustice if it were not protected by an injunction as it would be put under pressure to bring proceedings of the kind I have just mentioned against other potential infringers at a time when it is required to be directing its resources towards the trial of the merits of this particular case.

Further, in my view, if no injunction is granted it is likely that the decision refusing the injunction would be taken as an encouragement by other producers of wine in the area to take advantage of the Koppamurra name.  Other producers might well treat the refusal to grant an injunction as a green light to enter the market and to add to the pressures that have already arisen to have the name recognised as a geographical name.  Other producers may well be prepared to run the risk of having to pay some damages to the applicant for acting in that way because the commercial advantage of getting the region recognised, and thereby limiting the utility of the applicant's trademarks, would be greater than the cost of paying damages.

In my view, the observations of the High Court in the Beecham Group Ltd v Bristol Laboratories (1968) 118 CLR 618 at 625-626 are particularly relevant. I reach the conclusion that irreparable damage is likely to be caused to the applicant's business if an injunction is not granted, and the utility of their trademarks would be diminished.

On the balance of convenience it is again pertinent to refer to the observations of the High Court in Beecham at page 626. The applicant is the established user of the Koppamurra name, and it is the holder of the trademarks. The respondent, on the other hand, is a new entrant.

The respondent has deliberately sought to resolve the dispute over the use of the Koppamurra name by taking the matter into its own hands.  In my view there were other courses that it could have taken, but it has chosen to take a commercial risk in forcing the issue.  The respondent is substantially the stronger economic entity and, in my view, it has played on that fact to try and resolve the dispute in the market place, rather than in the Courts.  The respondent has placed on the market a product that challenges the applicant’s trademark and it has forced the applicant to initiate these proceedings.  The respondent did so in a way that deliberately kept the applicant in the dark about its plans until the product was on the market.  The respondent thereby achieved an uninterrupted start in the market.  In my view, these are matters that the Court is entitled to take into account in deciding how now to protect the applicant, on the assumption, for the moment, that the applicant is in the right.

The respondent, on the other hand, says that if it is in the right an injustice will occur to it because it will suffer very substantial damage.  Its losses, it is alleged, will fall under a number of different heads which are explored in the affidavit of Mr King, and have been the subject of submissions.  Certain calculations have been produced today on the footing that the proceedings will be resolved in 3½ months.  I have to say that with the best will in the world of everyone involved that seems to me to be an optimistic hope.  Not only may there be delays in the trial process, not the least of which is the likelihood that the trial could run longer then counsel estimate, there is also the risk that for one reason or another the judgment might not be delivered the day following the trial!   There is also the possibility of an appeal, and a risk that the trial judge at the end of the day might be found to have been wrong.  So the uncertainty of the parties might continue beyond the delivery of the trial judgment.  The losses may accrue over a longer period than has been estimated, although if an injunction is made, as I think it should be in some form or another, the respondent obviously has to mitigate its losses.  Further, I am not satisfied that the losses are likely to be as high as those estimated by Mr King.

I consider that many of the losses which the respondent says are likely to flow from an injunction are losses that the respondent will encounter because it chose to pursue a commercial solution to the problem and the risks that were associated with it.  It is in that sense I think that the High Court in the Beecham case at 626 talks about someone going into a situation with their eyes open.

In my view, so long as the applicant can give an undertaking as to damages which has real value as a condition of obtaining the injunction, the balance of convenience lies in favour of the applicant.

I consider the financial position of the applicant is not properly described when reference is made to it as being a company with $3 cash and unverified other assets and liabilities.  I see no reason to question the veracity of Mr Greenshields' affidavit. Nor do I think that the Court should disregard the valuation of the applicant’s major assets just because the valuer has not sworn to the valuation.  Mr Greenshields may not be an expert valuer, but he is someone who has knowledge of the wine industry, and I am prepared to accept that a person in his position would have more than a fleeting idea of the values of wine stock.  Mr Greenshields may not be right to the last dollar, but I am prepared to accept his evidence that the assets of the trust administered by the applicant company exceed its liabilities by several hundred thousand dollars (and it would seem by something in the order of $500,000, even if the loan accounts of the three unit holders are taken into account).

Sometimes the fact that an applicant company is a trust company is a good reason to doubt whether it can give an adequate undertaking as to damages.  However, in the present case the major asset of the trust (the vineyard) is registered in the applicant's name.  It is plain that the applicant in bringing these proceedings is acting in pursuit of the objects of the trust, and that it has a right to indemnity from the assets of the trust.  The action that is being taken by the applicant has been ratified by the unit holders in their affidavits.  The unit holders have given an undertaking that they will not call up their loan accounts pending the resolution of these proceedings and an undertaking that they will be subordinated to the claims of the respondent.

There is however a possibility, which I think in a commercial sense must be treated as a real one, that the net asset position of the trust could be diminished somewhat, indeed considerably, between now and whenever it might be necessary to act upon an undertaking as to damages in the event that the applicant fails, because funds will be required to finance a major piece of litigation.  There is the further possibility that I mention, and I pass no view on whether it is more than merely theoretical, that if it appears to the unit holders on the way through the trial that the wind is blowing against them, that money might be taken out of the trust so as to reduce its overall worth in the event of failure.

Theoretical commercial risks of this kind must be taken into account, and the respondents protected against them so far as that is possible without causing injustice or undue hardship to the applicant.  I consider that some security from the applicant is needed to ensure that the undertaking as to damages remains a valuable one. 

If I can digress for a moment, I have raised with the parties the need to ensure that this case proceeds expeditiously to trial on the dates that are set.  It is obviously important to both sides to have it resolved.  If an undertaking as to damages is given, obviously that undertaking is a matter that has to be taken into account in any assessment of what the net value of the suing entity might be in the event of failure, and it is because of that that I raised with the parties the question whether there was going to be an application for security for costs.  On such application the argument could be advanced that if the applicant were called on to pay damages pursuant to the undertaking, the assets of the applicant would be so depleted that the remaining net worth of the applicant might not be sufficient to cover an award of costs in the respondent’s favour.

With that in mind I raised the question of whether there ought be security in the form of a bank guarantee rather than personal guarantees of one sort or another from the unit holders.  Personal guarantees of the kind discussed in argument are likely to give rise to difficulty.  I have in mind that if there is in place security such as a bank guarantee for an adequate sum, that would be available to cover the position of the respondent in the event of failure.  Any application later made by the respondent for security for costs would then be likely to be very short-lived, and could not become a vehicle by which the resolution of the proceedings would have to be delayed.

Whilst I am informed by Mr Scerri that his client has given no present instructions to make an application for security for costs, I thought it best to mention it, as I have done, in an effort to try and avoid it, and for that reason to require that there be security in some form other than by personal guarantees if that is at all possible.  The documents on the Court file at the moment do not indicate that security of this kind is not possible.  I therefore announce my view that there should be an injunction, but subject to there being adequate and appropriate security given by the applicant.  In my view that needs to be in the form of a bank guarantee, or something similar, so that security is there to protect the position of the respondent generally in the event of the applicant’s failure. I consider the security should be in the amount of $250,000.  I fix that figure having regard to the likelihood that the case will take longer than 3½ months from now to resolve, and to cover the possibility that there might be some lurking thought in the mind of somebody on the respondent's behalf that the respondent could now bring an application for security for costs.

So far as the terms of the injunction are concerned, in my view there is no need for the injunction in terms to refer to the name “Koppawarra”.  Whilst that was at one time a name that the respondent sought to register as a trademark, there is no reason to doubt the respondent's assertion that it has no present intention of using the name in the promotion of its wine.  If an injunction is made in the terms of paragraph 1.1 of the application, excluding the words "including Koppawarra", that will sufficiently afford to the applicant the protection it is entitled to have in regard to its position as alleged by it in the statement of claim.

There has been argument about whether there should be a wider injunction in terms that restrain the respondent from holding out to the public that Koppamurra is a established geographical name.  I have suggested in argument that perhaps the wider injunction sought could be limited by inserting the words "in trade and commerce".  If that were done, I am not certain that such an injunction would carry the hidden problems that Mr Scerri suggested, but without further exploring that, it seems to me that an injunction in terms of paragraph 1.1 should be adequate to protect the applicant’s position.  If something unexpected and unforeseen happens which the applicant believes invades its legal position, no doubt it will quickly let everyone know.

I therefore propose to stand the matter over to a time that is convenient to Counsel to enable the applicant to consider how security will be given.

I certify that this and the preceding ten (10) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice von Doussa

Associate:

Dated:            3 March 1998

Counsel for the Applicant:	Mr WSN Wells QC & Mr J Shortt-Smith
Solicitor for the Applicant:	Finlaysons
Counsel for the Respondent:	Mr C Scerri & Mr A Monichino
Solicitor for the Respondent:	Arthur Robinson & Hedderwicks
Date of Hearing:	3 March 1998
Date of Judgment:	3 March 1998