McCain Foods (Aust) Pty Limited v Conagra, Inc. HC Wellington AP 105/00

[2001] NZHC 546

IN THE HIGH COURT OF NEW ZEALAND
WELLINGTON REGISTRY AP 105/00

BETWEEN McCAIN FOODS (AUST) PTY LIMITED
Appellant

AND CONAGRA, INC.
Respondent

Hearing: 22 March 2001

Counsel: B W F Brown QC for the Appellant
C L Elliott and C Warburton for the Respondent

Judgment: 22 June 2001

JUDGMENT OF WILD J

Solicitors:
Brandons, Wellington for Appellant
Baldwin Shelston Waters, Wellington for the Respondent

CONTENTS
Para No.
Introduction [1]
Background [2]
Approach on appeal [13]
The basis of the appeal [16]
The legislation [17]
The Assistant Commissioner’s decision, the opposing arguments on it and my conclusion on them
Error in finding of inherent capability to distinguish in terms of s 15(2) (b)
Assistant Commissioner’s decision [18]
McCain’s argument [30]
Conagra’s response [34]
My decision [44]
Error in taking into account evidence of McCain’s activities in using HEALTHY CHOICE post Conagra’s 1989 application
Assistant Commissioner’s decision [59]
McCain’s argument [60]
Conagra’s response [61 ]
My decision [64]
Assistant Commissioner’s incorrect exercise of his s 16 discretion
Assistant Commissioner’s decision [69]
McCain’s argument [72]
Conagra’s response [73]
My decision [74]
Result [78]
Costs [80]

Introduction

[1] Was the Commissioner of Trade Marks correct in entering, upon the respondent’s (“Conagra’s”) application, the trade mark HEALTHY CHOICE in Part B of the register of trade marks? That is the issue arising on this appeal and cross-appeal under s 66 Trade Marks Act 1953 (“the Act”) from a decision of Assistant Commissioner of Trade Marks W D Howie delivered on 3 May 2000.

Background

[2] The case is a little unusual. Conagra is a large United States corporation marketing food products under several brands. It is not contested that the brand HEALTHY CHOICE was developed by Conagra in the United States after careful research. It has been used continuously as a trade mark by Conagra on its products marketed in the United States, and has become there a valuable and well known brand.

[3] Conagra applied on 6 April 1989 to protect the mark HEALTHY CHOICE in Class 29 on the basis that it proposed to use it in New Zealand.

[4] The application was initially rejected by the Patents Office, but after a hearing (at that stage, only Conagra as applicant was heard) before Assistant Commissioner McCardle, the Patent Office allowed the application to proceed in Part B of the register, with separate disclaimers of “HEALTHY” and “CHOICE”.

[5] The Patent Office advertised Conagra’s application in the Patent Office Journal on 24 July 1997 with the following specification of goods:

“meat, fish, poultry and game, not being live; frozen prepared dinners in this class comprised of fruit and/or vegetables and meat or seafood or poultry.”

[6] The appellant (“McCain”) is the large Australian subsidiary of an even larger Canadian company. McCain filed a notice of opposition to the application on 4 September, and Conagra a counter statement on 9 December, 1997.

[7] A substantial amount of evidence was then filed by both parties and the opposed application was heard by Assistant Commissioner of Trade Marks Mr W D Howie on 20 December 1999. As I have mentioned, he delivered his decision on 3 May 2000.

[8] From the evidence before him, particularly the decision of Hill J in the Federal Court of Australia in Conagra Inc. v McCain Foods(Aust) Pty Ltd (1991) 22 IPR 175, Assistant Commissioner Howie made various findings about the use of the mark HEALTHY CHOICE in New Zealand. Following its application in April 1989 to register that mark, Conagra did not use it here. McCain did. This use had its genesis in a trip to the United States made by McCain’s marketing manager in October 1989. He saw Conagra’s products on sale in the United States under its HEALTHY CHOICE brand and returned to Australia with samples, recommending that McCain “look closely at this one”.

[9] Having been advised by their Australian attorney that the mark HEALTHY CHOICE was either descriptive of the goods or deceptive, and therefore not registerable in Australia, McCain sought registration in Australia of a composite mark of HEALTHY CHOICE with the McCain logo. It launched the McCain HEALTHY CHOICE produce in Australia in February 1991. Conagra sued McCain in Australia as a consequence, alleging passing off and misleading or deceptive conduct. Conagra was partially successful at first instance but an appeal by McCain was allowed.

[10] McCain subsequently applied for registration in New Zealand of a number of trade marks. On 7 April 1993 it applied for registration of the mark McCAIN HEALTHY CHOICE (& device) in Classes 29 and 30 for prepared frozen foods including meals being goods in those Classes. On 22 August 1994 it applied for registration of the mark HEALTHY CHOICE, also in Classes 29 and 30, with the same description of goods.

[11] The evidence before Assistant Commissioner Howie was that McCain has used both those marks extensively in New Zealand, since 1993 in relation to fries and since June 1994 for frozen dinners.

[12] Conagra made little if any use of the mark HEALTHY CHOICE in New Zealand until 1998, when it appointed a New Zealand distributor. McCain threatened to sue that distributor if it marketed in New Zealand Conagra products under the HEALTHY CHOICE brand. In the face of that threat, Conagra decided not to proceed with marketing here until its entitlement to registration had been determined.

Approach on appeal

[13] Although s 66 of the Act does not expressly state that an appeal such as this is by way of re-hearing, that is the effect of s 66(3) which provides:

“(3) In any such appeal the Court shall have and may exercise the same discretionary powers as are conferred upon the Commissioner.”

[14] Accepted by the parties as correct is the approach to an appeal by way of re-hearing described by Somers J in this Court in Pratt v Wanganui Education Board [1977] 1 NZLR 476 at 490. In summary, the appellate court reconsiders the case on the basis of the evidence heard at first instance (plus any additional evidence admitted on appeal), but applying the law at the time of the appellate hearing.

[15] In the specialist (some would say arcane) area of trade marks, Judges have invariably accorded the Commissioner’s decision considerable weight: Bestform Foundations Inc. v Commissioner of Trade Marks [1957] NZLR 574, 578; Effem Foods Ltd v Commissioner of Trade Marks (1996) 7 TCLR 246, 248; 5 NZBLC 104,209, 104,211; Procter & Gamble Ltd’s Trade Mark Applications [1999] RPC 673, 677. An exception perhaps is the robust decision in VB Distributors Ltd v Matsushita Electric Industrial Co. Ltd (1999) 9 TCLR 349 where at 355 Hammond J said:

“. . . On the other hand, as with all specialist tribunals, there is real benefit in that tribunal’s views being subjected to independent scrutiny from time to time. And to the extent that the determination of likelihood of confusion rests upon a comparison of the marks themselves, the appellate court is in as good a position as the trial tribunal to come to a conclusion.”

The basis of the appeal

[16] This is three-fold. McCain:

[a] Alleges that the Assistant Commissioner erred in concluding, in terms of s 15(1) of the Act, that the mark HEALTHY CHOICE was capable of distinguishing, in the course of trade, Conagra’s goods from other goods. In particular, McCain alleges error in the finding of inherent capability in terms of s 15(2)(a).

[b] Alleges that the Assistant Commissioner also erred in taking into account evidence of McCain’s activities in relation to use of the trade mark, subsequent to Conagra’s 1989 application.

[c] Challenges the Assistant Commissioner’s exercise of his discretion under s 16.

The legislation

[17] Sections 12, 15 and 16 of the Act provide:

“12 Saving for use of name, address, or description of goods or services - No registration of a trade mark shall interfere with-

(a) Any bona fide use by a person of that person’s own name or of the name of that person’s place of business, or of the name, or of the name of the place of business, of any of that person’s predecessors in business; or

(b) The use by any person of any bona fide description of the character or quality of that person’s goods or services, not being a description that would be likely to be taken as importing any such reference as is mentioned in paragraph (e) or paragraph (f) of subsection (1A) of section 8 of this Act or paragraph (e) or paragraph (f) of subsection (3A) of section 47 of this Act.

15 Capability of distinguishing requisite for registration in Part B - (1) In order for a trade mark to be registrable in Part B of the register it must be capable, in relation to the goods or services in respect of which it is registered or proposed to be registered, of distinguishing goods or services with which the proprietor of the trade mark is or may be connected in the course of trade from goods or services in the case of which no such connection subsists, either generally or, where the trade mark is registered or proposed to be registered subject to limitations, in relation to use within the extent of the registration.

(2) In determining whether a trade mark is capable of distinguishing as aforesaid the Commissioner or the Court may have regard to the extent to which-

(a) The trade mark is inherently capable of distinguishing as aforesaid; and

(b) By reason of the use of the trade mark or of any other circumstances, the trade mark is in fact capable of distinguishing as aforesaid.

(3) A trade mark may be registered in Part B, notwithstanding any registration in Part A in the name of the same proprietor of the same trade mark or any part or parts thereof.

16 Prohibition of registration of deceptive, etc., matter - (1) It shall not be lawful to register as a trade mark or part of a trade mark any scandalous matter or any matter the use of which would be likely to deceive or cause confusion or would be contrary to law or morality or would otherwise be disentitled to protection in a Court of justice.

. . .”

The Assistant Commissioner’s decision, the opposing arguments on it and my conclusion on them

Error in finding of inherent capability to distinguish in terms of s l5(2)(a)

Assistant Commissioner’s decision

[18] The Assistant Commissioner’s decision starts by dealing, in turn, with the opposing arguments of McCain and Conagra. The nub of McCain’s argument rested upon the assertion that, in April 1989 in New Zealand, the trade mark HEALTHY CHOICE was so descriptive it must be deemed to be inherently incapable of distinguishing Conagra’s goods. McCain argued that the words “healthy” and “choice” in combination are directly descriptive of the character or quality of the goods for which Conagra sought registration.

[19] The Assistant Commissioner referred then to the difficulty in reconciling McCain’s own behaviour and evidence with that assertion. McCain’s evidence was that HEALTHY CHOICE was now a trade mark which distinguished McCain’s goods in the New Zealand market. McCain’s witnesses from the grocery business did not suggest the mark described a product or range of products.

[20] McCain had urged the Australian position upon the Assistant Commissioner. The decision records a lack of detailed evidence as to the situation in Australia, but states that it is relevant that McCain in Australia “is once again . . . using HEALTHY CHOICE as a trade mark and seeking to secure a position as a registered trade mark in a market.”

[21] The Assistant Commissioner encapsulated Conagra’s argument thus: its mark HEALTHY CHOICE taken as a whole is sufficiently distinctive so as to be capable of distinguishing its goods once Conagra begins using the mark; other traders in the New Zealand market could not have legitimate reasons for using the mark.

[22] The decision refers to the evidence of Conagra’s independent expert, Mr Innes, that the mark HEALTHY CHOICE “is the clever coining of two powerfully suggestive words”. Because each word was powerfully suggestive, “there was a tendency not to place sufficient weight on the branding value of the combination”.

[23] The decision sees, as the only relevance of the United States position, the awareness on the part of people involved in the New Zealand grocery trade of Conagra’s United States brand - awareness arising from trade publications, food magazines and so on.

[24] The Assistant Commissioner’s review of Conagra’s submissions ends by noting Conagra’s reliance on McCain’s evidence that HEALTHY CHOICE has become in the New Zealand market a trade mark distinctive of McCain’s goods.

[25] Then the Assistant Commissioner turned to the law. It is in that part of his decision that his reasoning and determination of the inherent capability aspect appear. First, he notes the entitlement, recognised in s 12 of the Act, of people to use ordinary English words to describe their business and their goods. The decision recognises a continuum “with at the extremes purely descriptive names at the one end, completely invented names at the other and in between, names that contain ordinary English words that are in some way or other at least partly descriptive” (the description of Hill J in the Australian Federal Court in the trade practices case, Equity Access Pty Ltd v Westpac Barking Corporation (1989) 16 IPR 431 at 448). The decision poses, as one test in defining the threshold for registration: would traders in the ordinary course of their business and without improper motive decide to use the word or words in the mark in relation to goods for which the mark is sought to be protected?

[26] The decision then eschews a consideration of the many cases (mainly English) cited by the parties in favour of an approach, to determining whether HEALTHY CHOICE was registrable under s 15, based on the following passage in the judgment of Gault J for the Court of Appeal in Mainland Products Ltd v Bonlac Foods New Zealand Ltd [1998] 3 NZLR 341 at 345-346:

“The normal meaning (if any) of the word will be a primary consideration. The way it is used in relation to particular goods will be another. Also relevant will be the nature of the market, the kinds of customers and the general circumstances of trade in the goods concerned. These matters are to be discerned from the evidence including any direct evidence of what the usage has conveyed to the relevant members of the trade or public.”

[27] In the course of dealing with normal meaning, the Assistant Commissioner referred to the publications exhibited by Mr Wilmott, a witness for McCain. Mr Howie took the view that those examples clearly fitted within the provisions of s 12(b) of the Act, and would not be interfered with by registration of Conagra’s mark. But, finding his overall consideration of the normal meaning of the words inconclusive, he moved to the next step in Gault J’s guidelines: the way in which HEALTHY CHOICE is used in relation to the goods. Here, the Assistant Commissioner refers back to the factual position I have outlined in paragraphs [8] to [12]. He concluded:

“This evidence does establish that as at the present time both companies have adopted HEALTHY CHOICE as a trade mark to which they attach significant value. This would support a position that as at the date of the application the trade mark had some inherent distinctiveness and was capable of distinguishing goods.”

[28] The Assistant Commissioner then turned to the final matter identified by Gault J in Bonlac: the nature of the market, the kinds of customers and the general circumstances of the trade in the goods. He found that the independent witnesses from the New Zealand market now all recognised HEALTHY CHOICE as a trade mark or brand, and none suggested that the words were merely descriptive of a range of products. Nor did any witnesses suggest those products needed to meet certain characteristics which could relate to a descriptive interpretation of the words HEALTHY CHOICE. Whilst recognising that that evidence post-dated Conagra’s 1989 application, the Assistant Commissioner found it of value in determining the inherent distinctiveness of the words as at 1989.

[29] Having applied the Bonlac guidelines to the evidence before him, much of it relating to activities post-1989, the Assistant Commissioner concluded that, as at April 1989 and for the stated goods in the New Zealand market, the words HEALTHY CHOICE were inherently capable of distinguishing Conagra’s goods.

McCain’s argument

[30] For McCain Mr Brown submitted that the Assistant Commissioner had erred both as to conclusion and methodology. As to conclusion, he argued that the words HEALTHY CHOICE are wholly descriptive, and not at all distinctive of Conagra’s products. Mr Brown made four points in support of this submission:

[a] He referred to the position in Australia and the United Kingdom, where the respective Registrars of Trade Marks have rejected Conagra’s application(s) for registration on the grounds that the words HEALTHY CHOICE are essentially descriptive of the character or quality of the goods and/or insufficiently distinctive. Mr Brown intended that those reasons had equal application in New Zealand, and Assistant Commissioner Howie was wrong to hold otherwise.

[b] He referred to Kerly on Trade Marks (12th Edition, 1986) para 8-46 Laudatory epithets:

“A mere laudatory epithet is not registrable as a trade mark, regardless of the extent of use. This was established by ‘Perfection’. To the extent that a word is not merely laudatory, but gives a more-or-less fanciful or indirect indication that the marked goods have special or desirable properties, registration may be possible on sufficient evidence of reputation: as in ‘Sheen’.

A word may be a mere commendatory epithet when applied to some goods, and yet distinctive when applied to others; thus the word “Health” has been held not to be distinctive for cocoa and chocolate; but it might become distinctive of a make of fishing rods.”

[c] He invited critical analysis of Mr Innes’s evidence, to which I have referred in paragraph [23]. He pointed out that the words “healthy” and “choice” are direct and explicit, in no way implicational nor allusory, at least not in the context of food, are placed in their logical and usual sequence, without gimmickry, misspelling, phonetic representation or any of the other techniques that are frequently utilised in “coining” (i.e. fabricating) a new word. In a discussion about or promotion of a product in terms of nutritional or beneficial selection, he suggested the expression “healthy choice” would be a common selection from the ordinary vocabulary. Mr Brown referred here to publications exhibited by McCain’s witness, Mr Wilmott. Mr Wilmott deposed that these were recent examples of numerous instances of such use of which he was aware. The first of the articles is headed “UK Industry Helps Consumers Make Healthy Choices”. The second article is from The New Zealand Herald of 20 May 1999. The article, in the Health Supplement, describes the Heart Foundation’s Pick the Tick food labelling programme. It says that, by looking for the distinctive red tick, shoppers can choose products confident that they meet the Foundation’s nutritional criteria “and are healthy choices as part of a balanced diet”.

[d] He placed particular reliance on the judgment of McCarthy J in Bestform Foundations Inc. v Commissioner of Trade Marks [1957] NZLR 574 at 578:

“It follows, in my view, that this appeal fails for two reasons. First, because ‘the words are so apt for a normal description that no trade mark use and momentary distinctiveness can justify a permanent monopoly’. Secondly, the coined word is merely descriptive of the goods in a laudatory sense, being intended to convey the thought that the goods in question are capable of producing the best form to a female figure.”

[31] Mr Brown developed his contention as to erroneous methodology largely in the course of analysing the Assistant Commissioner’s decision. He pointed out that Bonlac was an infringement claim concerned with the issue whether the use of the word ‘vintage’ was likely to be taken as use as a trade mark or as a bona fide description. Whilst the principles outlined by Gault J are relevant in such a case, they have no application here where the issue is not whether a mark has been infringed, but whether it is registrable in the first place. Mr Brown submitted that the Assistant Commissioner erred in applying the Bonlac approach in determining registrability in terms of s 15. His points were that the Assistant Commissioner was wrong to consider the normal meaning of the words “healthy” and “choice” in part by reference to the evidence (Bonlac did not suggest that as appropriate), was wrong to move to the second step of considering the way the words “HEALTHY CHOICE” were used in relation to particular goods, and certainly their use as a trade mark post-1989, and was also wrong to consider the general circumstances of trade in the goods concerned.

[32] Then Mr Brown argued that, had the Commissioner taken the traditional approach, applying conventional principles arising from the English and Australian cases well summarised by McGechan J in Dollar Rent a car Systems, Inc. 24 March 1998, HC Wellington AP121/97, he would have concluded that the combination of HEALTHY and CHOICE was not inherently capable of distinguishing in terms of s 15(1).

[33] Lastly, under this ground of appeal, Mr Brown argued that the Assistant Commissioner had erroneously been led into viewing McCain’s use of HEALTHY CHOICE as inappropriate, and this in turn had led to a flawed view that McCain’s stance was inconsistent. The contention was that there was nothing inconsistent in McCain on the one hand seeking registration for itself of the mark HEALTHY CHOICE, while on the other opposing Conagra’s application on the grounds that the mark was a combination of words merely descriptive, and thus not registrable. If the mark was registrable, then it is only in Part B and only after substantial use in New Zealand making it distinctive of the user/applicant’s goods. McCain might eventually be able to gain such registration, but Conagra could not as it has never used the mark in New Zealand. McCain’s use of the mark in New Zealand in any event could not assist Conagra, because it was not the use of the same mark. McCain’s use has been of the mark it first sought to register, McCAIN HEALTHY CHOICE (& device). So McCain’s use is not of an identical or even comparable mark. Mr Brown submitted that the Assistant Commissioner’s consideration of the use of HEALTHY CHOICE as a mark, and in particular the censorious view he had taken of McCain’s conduct - had led him to stray from the correct issue: whether or not it was a registrable trade mark. Even if McCain had acted badly, it did not assist in answering that issue.

Conagra’s response

[34] Not surprisingly, Conagra supported Assistant Commissioner Howie’s decision as being sound in terms of principle, and accurate as to its factual findings and conclusions. In its cross-appeal, Conagra sought further to support the Assistant Commissioner’s decision on the basis that the evidence of Conagra’s use of the mark HEALTHY CHOICE in the United States of America was admissible and relevant, and confirmed that the mark was capable of becoming distinctive in New Zealand.

[35] Mr Elliott argued that “HEALTHY CHOICE” was not in that small class of marks inherently unregistrable because, for example, they were laudatory epithets such as “excellent”, geographical names like “Auckland” or words purely descriptive such as “frozen pizza”. He referred to Kerly para 8.73 which, in relation to the English equivalent of s 15(2), refers to:

“. . . balancing an inherent tendency to unregistrability, on the one hand, against evidence showing distinctiveness in fact on the other . . .”

Conagra’s submission was that s 15(2)(a) and (b) must be read together, as each informs the other.

[36] Conagra next submitted that the reference in s 15(2)(b) to “the use of the trade mark” was not restricted to use by Conagra as applicant. But Mr Elliott said this argument need not be pursued or resolved, as the Assistant Commissioner was clearly entitled to consider relevant use of the trade mark under the head “any other circumstances” demonstrating that the trade mark is in fact capable of distinguishing. He contended that the words “any other circumstances” are unrestricted, and referred to D R Shanahan, Australian Law of Trade Mark and Passing Off, 2nd Edition 1990 pp 128-129; and to the reasoning of Assistant Commissioner Frankel in Total, Trade Mark Application 219488, 15 December 1998:

“. . . Simply that Colgate cannot have it both ways. If the mark has become distinctive of its goods it must be inherently capable of distinguishing.”

[37] Mr Elliott also relied on Kerly paras 8-68, 8-70 and 8-72, particularly the first in which, in a footnote in relation to Part B registration, the authors submit “that evidence that the mark is distinctive in markets where conditions are proved to be similar might well help to establish the necessary capacity to distinguish here”.

[38] Next Mr Elliott pointed out that, in cases of honest concurrent use or other special circumstances, s 17(3) permits registration of identical or similar marks, and he argued that there is no reason in principle why those parties could not rely on each other’s use to support a claim that an identical mark used by both of them was capable of distinguishing.

[39] At this point Conagra introduced the ground in its notice of cross-appeal. That, as I have mentioned, is that the Assistant Commissioner erred in not taking into account the very extensive use made by Conagra of its HEALTHY CHOICE trade mark in the United States of America. Mr Elliott noted the Assistant Commissioner’s acceptance that HEALTHY CHOICE had become a very successful “mega brand” for Conagra in the United States, and the extensive evidence before the Assistant Commissioner that the two markets were similar. Conagra’s submission was that the Commissioner, although he may have felt it unnecessary, ought to have given Conagra the benefit of its hugely successful branding of HEALTHY CHOICE in America. Cited in support was the judgment of Gibbs J in the High Court of Australia in Burger King Corporation v Registrar of Trade Marks (1973) 1A IPR 504 at 508:

“On principle it would seem to me that evidence that a trade mark has in fact become distinctive in one market tends to show that it is capable of becoming distinctive in another market, at least if conditions in the two markets are similar.”

[40] Mr Elliott was content to adopt the test for registrability suggested by Lord Parker in The Registrar of Trade Marks v W & G Du Cros Ltd, [1913] AC 624 at 635; (1913) 30 RPC 660 at 672:

“. . . whether other traders are likely, in the ordinary course of their business and without any improper motive, to desire to use the same mark, or some mark nearly resembling it, upon or in connection with their own goods”.

[41] Applying that test here, Mr Elliott made these points:

[a] As the Assistant Commissioner’s decision recorded, Conagra had developed the HEALTHY CHOICE mark in America after much careful research.

[b] HEALTHY CHOICE was newly coined and involved adopting a unique approach built around the concept of “wellness”. Descriptiveness was not one of the selection criteria.

[c] There is no evidence that anyone, let alone traders in the food and beverage area, had used the trade mark HEALTHY CHOICE or thought of combining the two words before 1989. Thus, there was no risk of registration causing substantial difficulty or confusion to others.

[d] The recent examples given in evidence by McCain of use of “HEALTHY CHOICE” were not use in a trade mark sense, and thus unlikely to be inhibited by registration. Further, those examples are well after Conagra had established HEALTHY CHOICE as an international brand. This is relevant because in Chunky Trade Mark [1978] FSR 322 at 335 Whitford J said:

“Taken as a whole, the evidence, to my mind, establishes that, as at the relevant date, the date of application for registration, ‘chunky’ was a word known but little used. It was not as of that date, in the language of Fletcher Moulton LJ, a word which probably and almost naturally would be used by others to describe any kind of foodstuff, human or animal. In spite of the increasing sales of tinned foodstuffs since the early 1950s, there is no evidence whatsoever to establish that anybody ever thought of using it before the applicants put their brand upon the market.

That in such context it had descriptive possibilities is plain. These were undoubtedly recognised by others so far as the field of pet foods is concerned in the 1970s. This, however, was after the mark had been popularised by the extensive promotion embarked upon by the applicants subsequent to the introduction of the word as their brand name.”

[e] The only other party seeking to use HEALTHY CHOICE as a trade mark in New Zealand is McCain. From the outset McCain was aware of Conagra’s 1989 application for registration, and its use in New Zealand cannot be characterised as bona fide and does not give it any proprietary rights over the mark.

[f] All but one of the English cases relied upon by McCain, and BestformFoundations, were cases involving unused marks - where there was no evidence of prior use. That distinguishes them from the position here where there is evidence of extensive use of the trade mark both in New Zealand (by McCain itself) and in the United States (by Conagra).

[42] Mr Elliott emphasised that McCain was not submitting that the Assistant Commissioner had applied the wrong test, but rather that his reliance on Bonlac was unorthodox and inappropriate. He pointed out that the Assistant Commissioner had accurately stated the test (essentially Lord Parker’s test from W & G Du Cros Ltd), and had correctly identified the concept of a continuum. His reliance on Bonlac was only as to the need to take into account the particular facts of the case, and that was as appropriate in assessing registrability as it was in determining infringement. Conagra relied on In the matter of American Screw Coy’s Application No. 773,098 for the Registration of a Trade Mark [1959] RPC 344 at 346:

“The question remains whether such reference is direct. In considering this question, the Registrar or the Court is not in any way bound by strict grammatical usage, for the test is intended to relate to the conditions obtaining in industry and commerce . . . For a reliable answer some appreciation of the standard obtaining in the relevant trade circles must be made . . . .”

[43] In any event, Mr Elliott argued that the key consideration in resolving the infringement issue in Bonlac and the registrability issue here are very similar. In terms of s 15, in order to determine whether HEALTHY CHOICE is a mark capable of distinguishing, an important question is whether it is wholly descriptive e.g. like “frozen pizza”. In Bonlac the question was whether the infringer was using the word “vintage” as a trade mark or as a mere description. In both cases the key issues relate to whether the term is a trade mark in the true and inherent sense, or a mere description. Mr Elliott submitted that the Assistant Commissioner had used Bonlac principles only as a practical guide to considering the various factual inquiries which he properly needed to make. Had he adopted the same course without reference to Bonlac it could not have been open to criticism.

My decision

[44] I consider the Assistant Commissioner correctly recognised the continuum between words merely laudatory or descriptive at the extreme of inherent unregistrability, and completely invented names wholly appropriate for registration at the other extreme, and the difficulty of drawing the boundary between the two. In the grey area between those extremes, determining registrability is a matter of judgment in the circumstances and upon the evidence in the particular case.

[45] ‘Healthy’ and ‘Choice’ either singly or in combination are not, in my view, words merely laudatory or descriptive. “Perfection” is a classic example of the former (cf PERFECTION [1910] 1 Ch. 130; (1909) 26 RPC 837) and “brick” of the latter (BRICK trade mark (1931) 48 RPC 392). “Best” and “biggest” are further, obvious examples of laudatory epithets, as are “wholemeal bread”, “frozen peas” and “Wellington”, of terms purely descriptive of goods, the last geographically. Of such words Kerly at para 8-41 says:

“. . . the inherent unsuitability is so strong that no degree of distinctiveness in fact can counterbalance it . . . (such) words are totally unregistrable.”

[46] Each of “healthy” and “choice” on its own is descriptive, as Conagra recognised when applying for registration of “HEALTHY CHOICE”, by disclaiming each of those words when used separately. But it is the registrability of the combination of the two words which is the issue, and therefore consideration of them separately is of only limited helpfulness.

[47] I do not accept Mr Brown’s criticism, as inappropriate and unorthodox, of Assistant Commissioner Howie’s adoption of a Bonlac approach in assessing whether HEALTHY CHOICE is registrable under s 15. The issue in Bonlac was whether Bonlac’s use of the word “Vintage” on its cheese wrapping was likely to be taken by wholesalers and retailers and retail customers as use as a trademark (thus infringing Mainland’s registered trade mark VINTAGE), or merely as a bona fide description of the character of Bonlac’s own cheese. The issue for Assistant Commissioner Howie, and for me on this appeal, is whether HEALTHY CHOICE was in New Zealand in 1989 capable of distinguishing Conagra’s goods from those of other traders. It seems to me that the approach suggested by Gault J for the Court in Bonlac is equally apt to both situations. The inquiry in both cases was/is as to the way in which traders and customers would perceive the words in question: as a distinguishing mark, or merely as descriptive of the product in question.

[48] Nor do I accept Mr Brown’s submission that, had the Assistant Commissioner taken the “orthodox” course followed in the cases reviewed by McGechan J in Dollar Rent a Car Systems, Inc., he would not have admitted HEALTHY CHOICE to Part B of the Register. Dollar and the cases referred to in it are but instances of the application of well established principles (primarily the test propounded by Lord Parker in W & G Du Cros Ltd) in determining registrability. Because, as McGechan J commented, “ ‘Dollar’ is a very commonplace word indeed”, His Honour’s concentration was upon cases of similarly commonplace words: “Heavenly” [1967] RPC 306; Next [1992] RPC 455; Always [1986] RPC 93; Needle Tip [1973] RPC 113 and Torq-Set [1959] RPC 344. Two principles emerged from McGechan J’s review of these cases:

[a] That a commonplace word is less likely to be viewed as inherently distinctive (contrast some made-up word). A possibility exists, but a Court will be less easily persuaded.

[b] A concern that legitimate commercial freedom e.g. to advertise, using commonplace words be preserved. Rights to use the language are not to be snatched away. His Honour concluded “Certainly, registration of the mark would have an unduly chilling effect”.

[49] Although he did not cite W & G Du Cros Ltd, Assistant Commissioner Howie posed Lord Parker’s widely accepted test, and his decision also refers to and discusses both the principles identified by McGechan J in Dollar. It cannot be submitted that the Assistant Commissioner lacked a firm grasp of those fundamental principles.

[50] This first ground of appeal focuses on s 15(2)(a). The distinction between ss 14 and 15, and the place or context of clause (2)(a) in s 15, needs to be borne in mind. The requisite for registration of a trade mark in Part B of the register is its capability of distinguishing the proprietor’s goods: s 15(1). That requisite is not the same for Part A registration (under s 14) which concerns marks adapted to distinguish. Registrability under Part A is at the date of application - whether the mark at application date has been adapted to distinguish. Registrability under Part B is forward looking. The distinction, or rather the different focus of Part B registration, was explained thus by Edmund Davies LJ in TARZAN Trade Mark [1970] RPC 450 at 458:

“This seems to me to apply correctly the test propounded by Lloyd-Jacob J and approved of by the Court of Appeal in the WELD-MESH Trade Mark [1966] RPC 200 case, that the phrase ‘capable . . . of distinguishing’ in section 10(1) emphasised that, in spite of the absence of a sufficient distinguishing characteristic in the mark itself, that distinctiveness can be acquired by appropriate use, thereby overcoming a negative quality in the mark. This could happen to the present applicants who, in time, may cogently submit that TARZAN has acquired distinctiveness. Whether that will prove to be so remains to be seen, but in the light of circumstances existing at the time of application I do not consider that the learned trial judge is shown to have come to an erroneous conclusion regarding Part B registration either.”

[51] “May” has been held to mean “must”, at least where it is used in s 14(3) of the Act in relation to registration in Part A: TARZAN Trade Mark [1970] RPC 450 per Salmon LJ at 455; Duckworth, Turner & Co. Ltd v Commissioner of Trade Marks [1959] NZLR 1341, 1344. Although unconvinced that a word plainly permissive should be interpreted as being mandatory, I am content in this judgment to accept that Assistant Commissioner Howie needed to be satisfied both that HEALTHY CHOICE is inherently capable of distinguishing and that, by reason of its use or any other circumstances, it is in fact capable of distinguishing.

[52] Inherent cability (or capability “in law” as it has been termed) and capability in fact are different concepts, but the distinction between them is not altogether easy to grasp. Indeed, in TARZAN at p 460 Edmund Davies LJ expressed regret “that so important a branch of the law is governed by so perplexing and tortuous a statute”. The explanation attempted by Eve J in BRICK Trade Mark (1931) 48 RPC 392 at 397 rather demonstrates this:

“It is not sufficient to show that the user of the mark has, in fact, so distinguished the goods of the Applicant as to make it impossible to hold that it is not capable of distinguishing, because, as has been pointed out in the authorities to which I have been referred, even with a long user and with a user which may be said truthfully to have shown that such user has established the capacity of the mark to distinguish, it is still the duty of the Court to enquire whether or not the mark is capable of distinguishing notwithstanding the evidence that it has for a long time shown its capacity for distinguishing. It sounds somewhat Pickwickian, but there it is. That was determined in cases which, of course, are all binding upon me.”

[53] In Smith, Kline & French [1976] RPC 511 at 538 Lord Diplock said that the reference to “inherently adapted” in s 14(3) “has always been treated as giving statutory expression to the doctrine previously stated by Lord Parker” in W & G Du Cros Ltd. In TARZAN Trade Mark Edmund Davies LJ adopted Harman LJ’s interpretation in WELD-MESH Trade Mark [1966] RPC 200 at 228: “By ‘inherently adapted’ I take the Act to mean adapted of itself, standing on its own feet”. Although both passages refer to s 14(3), I find them of assistance in assessing, in terms of s 15(2)(a), HEALTHY CHOICE’s inherent capability of distinguishing. My assessment of that inherent capability is this:

[a] Neither word is a laudatory epithet, and I did not understand Mr Brown so to argue.

[b] Importantly and significantly, none of the witnesses from the New Zealand market place considered the words “healthy” and “choice” in combination were merely descriptive, or even really descriptive at all, of a particular product or range of products. I agree. May I demonstrate why by adapting a passage from Assistant Commissioner Frankel’s decision in TOTAL:

“. . . it is not usual to ask for (food) which is `healthy choice’. There is no such thing as (healthy choice food). Such a statement would not be ordinary English and would have no meaning unless it was a reference to a brand name or trade mark ‘HEALTHY CHOICE”’.

[c] Conagra’s uncontested evidence is that it coined HEALTHY CHOICE in the United States, building it around the concept of “wellness”. When Conagra sought registration of HEALTHY CHOICE in New Zealand in 1989 no-one was using that mark here, nor had anyone thought of combining the two words. There was thus no risk of registration causing confusion. This evidence supports registrability in Part B.

[d] I do not consider that registration of “HEALTHY CHOICE” will prevent or inhibit the ordinary use of the English language by writers on food, health and the like. I agree with the Assistant Commissioner that the examples exhibited by Mr Wilmott would be protected from infringement by s 12. In fact, as they are not even descriptions by a person of that person’s goods, I consider they are wholly unobjectionable. Thus, registration does not give rise to the concerns - the “snatching away of the language” or “chilling effect of registration” referred to by McGechan J in Dollar Rent a Car Systems, Inc. I see no similarities between this case and cases such as TARZAN Trade Mark and Holts Trade Mark (1896) 13 RP C I 18, 121 where the Courts held that the words in question (“Tarzan” and “Trilby”), although undoubtedly originally invented, had long ago become too well-known to be any longer so regarded, and were not registrable as marks.

[54] Taking into account all these considerations, I can see no sound remaining basis on which McCain can contend that HEALTHY CHOICE is inherently incapable of distinguishing.

[55] Before I leave s 15(2)(a), I refer to Assistant Commissioner Howie’s reliance on McCain’s post-1989 use in New Zealand of the mark HEALTHY CHOICE. He said:

“In this case we have a somewhat unusual situation. (McCain) has used the mark extensively in New Zealand since 1993. It has sought to protect the mark in its own name by filing trade mark applications. It has exhibited in evidence labels which it has used on products sold in the New Zealand market. Those labels in my view clearly establish the words HEALTHY CHOICE are being used by (McCain) as a trade mark. (McCain) has also provided evidence that it has extensively promoted its range of products using the trade marks since their introduction in 1993.”

[56] I consider McCain’s use is most appropriately considered under s 15(2)(b). However, I agree with the view Assistant Commissioner Frankel expressed in TOTAL, that use does have some relevance in considering inherent capability of distinguishing. She said (and I slightly adapt):

“. . . (McCain) cannot have it both ways. If the mark has become distinctive of its goods it must be inherently capable of distinguishing.”

[57] Although Mr Brown did his skilful best to overcome the difficulty posed by McCain’s own conduct, I think the Assistant Commissioner was entitled to view it in the way he did. It is not a case, at least under s 15, of chiding McCain, which is rather what Mr Brown suggested the Assistant Commissioner had done. It is simply the inconsistency and untenability of McCain on the one hand claiming that HEALTHY CHOICE has become distinctive of its products in the New Zealand market, while on the other opposing Conagra’s registration of that mark on the basis that it is inherently incapable of distinguishing any goods.

[58] I do not misunderstand Mr Brown’s argument that it is McCain’s use of HEALTHY CHOICE in New Zealand which has rendered that mark distinctive of McCain’s goods here. He contended that at some future point McCain might be able to achieve registration, whereas Conagra (which has not used the mark in New Zealand) could not. But none of this detracts from the point that, if through use a mark has become distinctive of a trader’s goods, then that suggests that it is inherently capable of distinguishing.

Error in taking into account evidence of McCain’s activities in using HEALTHY CHOICE post Conagra’s 1989 application

Assistant Commissioner’s decision

[59] Under the broader concept of “other circumstances” in s 15(2)(b), the Assistant Commissioner considered that he could again rely on McCain’s evidence that HEALTHY CHOICE had become in New Zealand a mark distinctive of its products. But he touched on this point only lightly, because he had already found that evidence relevant in considering inherent capability under s 15(2)(a).

McCain’s argument

[60] Mr Brown submitted that the Assistant Commissioner erred in his apparent willingness to take into account on the issue of “capable of distinguishing” the post-application conduct, not of Conagra (because there was none) but of McCain. He submitted, without supporting reasoning, that this was erroneous in the s 15(2)(b) context. It was, I think, a recognition that the Assistant Commissioner’s reliance was restricted to his s 15(2)(a) inherence analysis, that curtailed this part of Mr Brown’s argument.

Conagra’s response

[61] Mr Elliott submitted that there was an abundance of authority that post application use of a mark was relevant in determining registrability. He referred to Kerly at Para 8-73:

“Whilst the question of capacity to distinguish must of course be decided as of the date of the application for registration, it should be borne in mind that evidence of subsequent events may be particularly relevant to a Part B application: for if a mark has between application and decision become distinctive (even to particular groups of people or in particular places) it must at the date of application been capable of doing so.”

Footnote: This point needs emphasising: the Registry, and even the Court (as Buckley J., in ‘Rotolok’ [1968) RPC 227 at 230) may tend simply to assume events since application to be irrelevant.”

[62] Brown & Grant Para 2-34 is to similar effect:

“In determining whether (at the date of application) a mark is capable of distinguishing, the Commissioner will be assisted by evidence of the use of the mark, particularly in cases where a mark has a low inherent capability to distinguish. Such evidence even if subsequent to the date of application will still be relevant in determining the capability of the mark to distinguish as at the application date [Kerly 12th ed 8-73 fn 74 observes that this point needs emphasising as the Commissioner and the court may tend simply to assume that events since application are irrelevant].
Where there is no evidence of user the matter falls to be determined solely in the light of the ‘inherent capacity’ of the mark to distinguish [Bestform Inc v Commissioner of Trade Marks [1957] NZLR 574,575]”.

[63] Mr Elliott also referred to Davis v Sussex Rubber Co. (1927) 44 RPC 412 and Pound Puppies Trade Mark [1988] RPC 530, which support the view expressed in Kerly and Brown & Grant.

My decision

[64] Section 15(2)(b) refers to “the use of the trade mark or any other circumstances”, as factors the Commissioner may have regard to in determining whether the trade mark is in fact capable of distinguishing. It is thus unarguable that Assistant Commissioner Howie could have regard to the use of HEALTHY CHOICE as a mark in New Zealand. Both counsel, in argument, proceeded on the footing that Assistant Commissioner Howie had held, or recognised, that s 15(2)(b) was restricted to use by Conagra. I can find nothing in his decision indicating that, indeed the following passage indicates quite the opposite:

“Working from first principles it would seem reasonable that if the mark through use by the opponent (i.e. McCain) has become distinctive, then that ought to be a circumstance that can be relied upon by the applicant (Conagra) but having regard to the approach taken above it is only one factor in the analysis adopted following the guidelines set by Gault J.”

[65] My tentative view is that s 15(2)(b) is not restricted to use by an applicant for a trade mark. But, as that may be an important issue in some other case, and as I do not need to decide it here, I do not do so. The evidence as to McCain’s use of HEALTHY CHOICE in New Zealand is, unarguably, an “other circumstance” relevant to the issue of capability in fact of distinguishing. And that evidence is that HEALTHY CHOICE has become distinctive of McCain’s (similar and competing) products in the New Zealand grocery trade since it began using the mark in about 1994. The only way that Mr Brown could overcome this difficulty was by emphasising that use, and through use recognition, of a trade mark is not synonymous with registrability. I accept that, but reiterate my view that distinctiveness achieved through actual use over a number of years is at least a pointer to registrability.

[66] I regard s 15(2)(b) considerations as firmly favouring Conagra. And, where the evidence of use establishes, overwhelmingly, that a trade mark is in fact capable of distinguishing, then inherent capability can retreat in its importance.

[67] In upholding the Assistant Commissioner’s decision, I prefer not to rely on the ground advanced by Conagra in its cross-appeal. On the authority of Burger King, I accept that use of a trade mark in a comparable market can be relevant under s 15(2)(b). But it must be of the same trade mark, or at least one not materially different, and in a comparable market. For McCain, Mr Brown challenged both points. He submitted that Conagra’s trade mark usage in the United States is of HEALTHY CHOICE in conjunction with a “running man” device. He contends that is a different mark from the simple word mark HEALTHY CHOICE. He contends that that distinction must be taken to be accepted by Conagra which has sought an amendment of its New Zealand application to the “running man” device mark, he says “as a means of seeking to address the distinctiveness problem”. Further, he points to the evidence of Mr Wilmot for McCain challenging that New Zealand and the United States of America are similar markets.

[68] In so far as the Assistant Commissioner Howie considered, under s 15(2)(b), McCain’s use of the mark HEALTHY CHOICE in the New Zealand grocery trade as relevant to his determination of registrability, I consider he was correct.

Assistant Commissioner’s incorrect exercise of his s 16 discretion

Assistant Commissioner’s decision

[69] The final consideration for the Assistant Commissioner was s 16. Richardson J in the Court of Appeal in Pioneer Hi-Bred Corn Company v Hy-Line Chicks Pty Ltd [1978] 2 NZLR 50 at 61 made it clear that the parties’ rights on an application for registration are to be determined at the date of application. That rendered McCain’s post-1989 use of HEALTHY CHOICE irrelevant vis a vis Conagra. But in case the public interest was separate from that of the parties, the Assistant Commissioner considered the effect of McCain’s post-1989 use. The decisions of the House of Lords in General Electric [1973] RPC 297 per Lord Diplock at 334-5 and of the Australian Federal Court of Appeal in Campomor Sociedad Limitada v Nike International Ltd (1998) 41 IPR 252 at 293-297 establish that only confusion or deception resulting from some fault or blameworthy act of the registered proprietor of the mark will disentitle that proprietor to registration. The Assistant Commissioner found no such culpability on Conagra’s part. He accepted that there could be confusion for a period if Conagra secured registration of HEALTHY CHOICE and began using the mark in New Zealand. He said:

“Insofar as this is an issue within my discretion as is suggested in the passage from Kerly because of the way in which the mark was adopted by (McCain) and as there has been no blameworthy act by (Conagra) it is my decision that in all the circumstances that discretion should be exercised in favour of allowing the present application to proceed.”

[70] The Assistant Commissioner cited the following passage from Kerly (from para 10-27):

“In relation to an application for registration, the primary question to be decided is whether the mark was deceptive (or otherwise ‘disentitled to protection’) at the date of the application to register. It is submitted, however, that registration ought to be refused if the mark is deceptive at the date of the decision whether or not to register, regardless of the position at the date of application. Whether in such a case registration necessarily is forbidden by s 11 is not clear; the section says ‘it shall not be lawful to register’ (which would seem clearly to operate, at the moment of registration, notwithstanding that a completed registration will date back); but it applies only to marks ‘disentitled to protection in a court of justice,’ and those words would seem applicable (in the light of GE [1973] RPC 297, 334 (HL)) if and only if the proprietor is to blame for the deceptiveness. Even, however, if the mark has become deceptive through no fault of the proprietor, it is submitted that registration of a deceptive mark should be refused as a matter of discretion.”

[71] The Commissioner then said this:

“Insofar as this is an issue within my discretion as is suggested in the passage from Kerly because of the way in which the mark was adopted by the opponent and as there has been no blameworthy act by the applicant it is my decision that in all of the circumstances that discretion should be exercised in favour of allowing the present application to proceed.”

McCain’s argument

[72] Whilst accepting that Kerly refers to a “discretion”, Mr Brown doubted whether that was what was intended to be conveyed. He made the further point that Kerly anyway is plain as to how the “discretion” should be exercised - by refusing registration of a deceptive mark. As the Assistant Commissioner had acknowledged the likelihood of confusion, if only temporarily, Mr Brown submitted that he ought appropriately to have exercised his “discretion” by refusing registration.

Conagra’s response

[73] Mr Elliott shared Mr Brown’s doubt as to whether s 16 gave the Assistant Commissioner a discretion. But, assuming it did, Mr Elliott argued that it had been exercised in an entirely proper way. He contended that any discretion differently exercised would permit McCain to rely on its subsequent, improper use of HEALTHY CHOICE to defeat Conagra’s 1989 application for registration. As well as being wrong in legal principle (Mr Elliott relied upon Aktiebolaget Manus v Fullwood & Bland Ltd (1949) 66 RPC 71 at 73 and 75-76), that would defeat the fundamental purpose of the Trade Marks Act of facilitating registration of trade marks without the need for prior use. That was the basis for Richardson J’s statement at p 61 in Pioneer Hi-Bred v Hy-line Chicks Pty Ltd [1978] NZLR 50 at 61 that the parties’ rights were to be determined at the date of application. And in 1989 HEALTHY CHOICE was not deceptive or confusing, as McCain was not using it in any market.

My decision

[74] A discretionary aspect, although not express, is implicit in s 16. On established principles, which I regard as applying in trade mark law, I could not interfere with the Assistant Commissioner’s exercise of his discretion unless satisfied that he proceeded on a wrong principle, gave undue weight to some factor or insufficient weight to another, or was plainly wrong: Fuehrer v Thompson [1981] 1 NZLR 699 (CA), 702-703.

[75] The factors which influenced the Assistant Commissioner were “the way in which the mark was adopted by (McCain)”, and the lack of any blameworthy act by Conagra. The Assistant Commissioner had good authority for the latter factor: General Electric; Campomor Sociedad.

[76] I am unable to view the Assistant Commissioner’s censorious view of McCain’s conduct as an irrelevant factor, or as one to which undue weight was accorded. It would not be right or just for McCain to be able to avail itself of its post-1989 use of the mark HEALTHY CHOICE, so as to argue that the confusion which might result if Conagra obtained registration of the mark it had applied for in 1989 and commenced to use it disentitled registration under s 16. Although McCain’s use of the mark may not have been illegal, or at least its legality was not tested, I view it, as did Assistant Commissioner Howie, with circumspection, if not critically. The fundamental principle of law that a party cannot take advantage of its own wrong: (c.f Moreton v Montrose Ltd [1986] 2 NZLR 496, 503 (CA)) does not assist McCain, even though it may not have acted illegally.

[77] I am not persuaded that Assistant Commissioner Howie wrongly exercised the discretion I consider he had under s 16.

Result

[78] None of McCain’s grounds of appeal has succeeded. The appeal is accordingly dismissed.

[79] Conagra’s cross-appeal is also dismissed.

Costs

[80] McCain must pay Conagra’s costs. I classify the proceeding as Category 3, but Band B. Conagra may have its costs for junior counsel at the hearing.