Red Bull New Zealand Ltd v Drink Red Ltd
[2016] NZHC 531
•24 March 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-1033 [2016] NZHC 531
UNDER Trade Marks Act 2002 UNDER
Fair Trading Act 1986
BETWEEN
RED BULL NEW ZEALAND LTD First Plaintiff
RED BULL GmbH Second Plaintiff
AND
DRINK RED LTD First Defendant
DRINK RED (AUSTRALASIA) LTD Second Defendant
DRINK RED GLOBAL LTD Third Defendant
Hearing: 2 March 2016 Counsel:
A H Brown QC and S Wheeldon for Plaintiffs
P D M Johns and M E Hutchison for DefendantsJudgment:
24 March 2016
JUDGMENT OF BREWER J
This judgment was delivered by me on 24 March 2016 at 4:30 pm pursuant to Rule 11.5 High Court Rules.
Registrar/Deputy Registrar
Solicitors: Kensington Swan (Auckland) for Plaintiffs
Baldwins Law Ltd (Auckland) for Defendants
RED BULL NEW ZEALAND LTD v DRINK RED LTD [2016] NZHC 531 [24 March 2016]
Introduction
[1] The plaintiffs sue the defendants for selling energy drinks products which (allegedly) infringe the plaintiffs’ trademark relating to their Red Bull energy drinks, and for engaging in conduct which is misleading or deceptive, or which is liable to mislead or deceive. In plain terms, the plaintiffs’ case is that the defendants have created products sufficiently similar to the plaintiffs’ that the products are being, and are likely to be, confused. Thus, the defendants are piggy-backing on the plaintiffs’
marketing and making unlawful use of its intellectual property.1
[2] At the time the plaintiffs filed their claim against the defendants (11 May
2015), the product which the defendants were selling was a ready mixed drink containing vodka and an energy drink (Red RTD). In November 2015, the defendants began to market a new product, an energy drink without alcohol (Red Energy).
[3] The plaintiffs now apply for an interim injunction preventing the defendants from advertising, selling or otherwise dealing in these products.
[4] The trial date for the substantive claim is 31 October 2016.
Issues
[5] The issues I have to decide are:
(a) Is there a serious question to be tried?
(b) Where does the balance of convenience lie? (c) Where lies the overall justice of the case?
[6] If there is a serious question to be tried, then in assessing the balance of convenience the Court has regard to whether damages would adequately compensate
the plaintiff if an interim injunction were denied and it succeeded at trial. The
1 I will use “Red Bull” when referring to the plaintiffs’ energy drink.
converse is also relevant, namely whether damages would adequately compensate the defendant if an interim injunction were granted and the plaintiff failed at trial.
[7] In this case, it is common ground that if the plaintiffs succeed in their substantive claim they will not get damages. The defendants are $100 or $1,000 companies. Red RTD and Red Energy are their only products. They will not be able to pay damages if they lose the substantive case. Further, if an interim injunction is granted to the plaintiffs, then there will be no substantive hearing. Deprived of the ability to sell their products, the defendants will collapse.
Is there a serious question to be tried?
[8] Whether there is a serious question to be tried normally requires the plaintiff to show that its case is not “frivolous or vexatious” or that it has “no real prospect of success”.2 However, in cases where the grant of an injunction would cause the defendant real hardship, it has been held that it may be appropriate for the Court to require a plaintiff to prove a stronger case before allowing the injunction.3
[9] Because of the effect on the defendants of an interim injunction, I approach my analysis on the basis that the plaintiffs must demonstrate a strong prima facie case in support of its application for an interim injunction.
The pleadings
[10] The plaintiffs plead that the defendants have:
(a) Made a misrepresentation leading the public to believe that the defendants’ products are the products of the plaintiffs for the purposes of the tort of passing off:
(b)Breached s 9 of the Fair Trading Act 1986 (FTA), which prohibits conduct that is misleading or deceptive or is likely to mislead or
deceive:
2 American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL).
3 Finnigan v NZRFU (No. 2) [1985] 2 NZLR 181; NZ Olympic and Commonwealth Games Assn
Inc v Telecom NZ Ltd (1996) 7 TCLR 167, 170.
(c) Infringed s 89 of the Trade Marks Act 2002 (TMA) either by:
(i)Using the sign RED in respect of a similar product which is likely to deceive or confuse;4 or
(ii)Using the sign RED in a way that takes unfair advantage of, or is detrimental to, the distinctive character or repute of the trade name RED BULL, which is well known in New Zealand.5
The evidence
[11] The plaintiffs adduced the following as evidence:
(a) The opening statement of the defendants’ Trade Presenter (TP):
One of the world’s most popular drinks now available pre- mixed and ready to drink.
The plaintiffs argue that this can only be a reference to Red Bull and vodka cocktails.
(b) The following statement made on page five of the TP:
The second largest energy drink supplier sold 20 million cans in New Zealand last year.
The plaintiffs argue that it is well known that they are the second largest energy drink supplier in New Zealand. It submits that the reference is designed to create a link between the defendants’ product and Red Bull.
(c) The following statement made on page six of the TP:
Our core product is Яed 7%. It has that instantly
recognisable flavour of vodka and energy.
4 Trade Marks Act 2002, s 89(1)(c).
5 Trade Marks Act 2002, s 89(1)(d).
The plaintiffs argue that the only instantly recognisable flavour of vodka and energy is vodka and Red Bull. The plaintiffs also argue that this claim – combined with the fact that Red Energy has been produced so that it tastes, smells and looks the same as Red Bull – shows that the defendants intended to create the impression that their products contain Red Bull or are associated with it.
(d) The following statement made on page 10 of the TP:
What we know about 18 to 24 year olds: 29.3% have purchased vodka in the last three months. 21% have tried Red Bull.
The plaintiffs argue the only reason the defendants have referred to Red Bull in this context is to create the impression that Red RTD contains Red Bull or is a Red Bull product.
(e) The fact that the defendants’ Facebook page contains the same statement made in (a). The plaintiffs argue that this is a clear reference to Red Bull and vodka and explicitly states that this is what Red RTD comprises.
(f) Evidence showing that shop assistants and bar staff stated that the defendants’ products contained Red Bull. In November 2015, two barristers, Ms Franks and Ms Taefi, visited a total of 92 premises in Auckland, Wellington and Christchurch. They asked staff what the defendants’ drinks contained, and sometimes they specifically asked what energy drink was in the product. The key findings were as follows:
(i)In 17 out of 92 premises staff explicitly said that the defendants’ Red RTD product either is Red Bull or contains Red Bull, or staff understood the barristers to be asking for Red Bull when they asked for the defendants’ products. That is 18.5% of the premises canvassed.
(ii)Staff in 22 of the premises said that the defendants’ products are “like” Red Bull or “similar” to Red Bull or “probably” Red Bull. This means that of the 92 premises visited, staff in 39 (i.e. 42%) referred to Red Bull in relation to the defendants’ products.
(g) Evidence showing the defendants’ products alongside a sign saying:
“ANY RED BULL AND VODKA – Buy 2 for $20.00.”
(h) Evidence of two stores stocking the defendants’ products inside Red
Bull branded fridges.
(i)Evidence that four out of 97 stores contacted by telephone understood a request for the defendants’ product (Red) to be a request for Red Bull.
(j)Evidence of members of the general public being confused on the defendants’ own Facebook page. The following comments appeared under posts made by the defendants on their Facebook page:
(i) Dakota Rossellini: “Joshua Watson it’s the redbull with vodka!
Joshua Watson: “Ahhhh I think I recognise it now.”
(ii)Sarah Williams: “Not knowing that it is an alcoholic beverage I would assume it was another Red Bull can woth [sic] different branding etc (I think they had some sugar free cans out a few years ago that looked similar?) But know it is alcoholic (after reading) the only place you’re going to find this is in a bottle store so the difference is quite obvious.”
(iii) Stephen Price: “Apart from the backwards R it totally looks
like red bull.”
(k)The fact that the plaintiffs have previously released a RED Edition of its product. They submit that this makes it more likely that consumers would consider the defendants’ products to be a Red Bull product line extension.
(l)The way in which the defendants’ products use a panel of red on the front face of its cans finishing in an oblique angle as it transitions to silver. This can be referred to as the product’s “get up”. The plaintiffs argue that the use of similar oblique angle imagery plus the word “RED” can quite easily mislead or deceive consumers into believing the defendants’ product is a Red Bull product or contains Red Bull.
Analysis approach
[12] I will analyse the evidence in three parts. The first part considers the claims of passing off and breach of the FTA. I address these claims together because they target the same wrong: misleading or deceptive conduct on the part of the defendants that is likely to lead a consumer into believing that the goods of the defendants are the goods of the plaintiffs.6
[13] I go to the nub of the issue: the plaintiffs do not have a monopoly over the combination of energy drink and vodka. Another company is free to compete in the market for vodka and energy drink. But it must not mislead or deceive. Accordingly, the question can be put:
Is the defendants’ branding, advertising and general conduct, in all the circumstances, likely to mislead or deceive people into thinking that its products either actually contain Red Bull products or are otherwise associated with them?
[14] The second part considers whether there has been a breach of s 89(1)(c) of the TMA. This overlaps somewhat with the first part of the analysis because of the requirement that the use of a trade mark “would be likely to deceive or confuse”.
But, it also requires consideration of the following distinct questions:
6 The tort of passing off also requires the plaintiff to establish a goodwill or reputation attached to its goods and that it is likely to suffer damage by reason of the erroneous belief engendered by the defendant’s misrepresentation. I do not discuss these elements because of the conclusion I reach on the strength of the case as to whether there has been misleading conduct.
(a) Is the defendants’ trade mark similar to the plaintiffs’ registered trade marks?
(b) Are the defendants’ products similar to the plaintiffs’ product?
[15] The third part considers the separate claim advanced under s 89(1)(d) of the TMA. This provision raises different legal questions. It relates to trade names that are well known in New Zealand and prohibits the use of a similar sign that either:
(a) Takes advantage of the distinctive character or repute of the well known trade mark; or
(b)Is detrimental to the distinctive character or repute of the well known trade mark.
Passing off and breach of the FTA The Trade Presenter
[16] The plaintiffs first take issue with the defendants’ use of the phrase “one of the world’s most popular drinks is now available pre-mixed and ready to drink”. It argues that this “can only be a reference to RED BULL & Vodka cocktails”. I am unable to agree. There is an asterisk after the phrase “one of the world’s most popular drinks” which points to a note explaining that the phrase refers to “vodka mixed with energy drink” generally. Red Bull and vodka is not the only vodka and energy drink available to consumers. Although Red Bull is the dominant mixer used in vodka and energy drinks, I do not agree on the evidence before me that the reference to “vodka mixed with energy drink” can only be a reference to Red Bull and vodka cocktails.
[17] The plaintiffs point to the defendants’ use of the phrase: “the second largest energy drink supplier sold 20 million cans in New Zealand last year”. They argue that it is well known that the plaintiffs are the second largest energy drink supplier in New Zealand and submit that the reference is designed to create a link between the defendants’ product and Red Bull. Again, I am unable to agree. I do not have
evidence that a significant portion of consumers is aware that the plaintiffs are the second largest energy drink supplier in New Zealand. It would be unlikely for the defendants to refer so obliquely to the plaintiffs for the purpose of creating a conscious link in the mind of a consumer between the defendants’ products and Red Bull.
[18] The plaintiffs draw attention to the defendants’ use of the phrase: “[RED] has that instantly recognisable flavour of vodka and energy”. They argue that the only instantly recognisable flavour of vodka and energy is vodka and Red Bull. They further argue that this claim – combined with the similarity of the defendants’ products to vodka and Red Bull – shows that the defendants intended to create the impression that the defendants’ products contain Red Bull or are otherwise associated with it.
[19] I do not find that describing the flavour of vodka and energy as “instantly recognisable” is likely to mislead or deceive consumers into thinking that the defendants’ products contain or are associated with Red Bull. It may well be that the popularity of Red Bull and vodka has significantly contributed to the flavour of vodka and energy being “instantly recognisable”. It does not automatically follow, however, that the defendants, by highlighting the “instantly recognisable” flavour of vodka and energy, are misleading consumers into thinking the defendants’ products contain or are associated with Red Bull. As counsel for the defendants, Mr Johns, put it in his oral submissions, there is nothing misleading or deceptive about identifying products in the space in which a new product intends to compete.
[20] I am strengthened in this view by certain paragraphs in the affidavit of
Mr Pook, the General Manager of Red Bull New Zealand Ltd, sworn on
11 December 2015. At para [75] and paras [84]–[86], Mr Pook says that he is aware of the substitution of other energy drinks for Red Bull. He says:
[75] … [T]here is some product substitution undertaken by bars. Because Red Bull New Zealand does not supply its RED BULL Energy Drink products to all bars, we have encountered situations where unscrupulous bars will deliberately serve vodka and another energy drink even though the consumer has asked for a RED BULL & Vodka…
…
[84] … around six to nine years ago RED EYE energy drink was promoted to a number of bars in Auckland and Christchurch and some stocked it instead of RED BULL energy drink. Red Bull NZ became aware of incidences where bartenders were substituting RED EYE for RED BULL when people ordered a RED BULL and vodka…
[85] I also recall a previous Red Bull NZ sales manager sending letters from time to time bars who had been found substituting another energy drink for RED BULL… Based on the accounts I have heard, I understand that typically occurs when a bar does not stock RED BULL and a customer asks for a RED BULL and vodka, and the bar staff do not tell the customer about the substitution.
[86] … I have also had accounts from staff of MOTHER energy drink being surreptitiously substituted for RED BULL where a customer orders a RED BULL and vodka.
As a matter of logic, if the only instantly recognisable flavour of vodka and energy is vodka and Red Bull, it would not be possible for bars to surreptitiously substitute Red Bull for other energy drink products. The consumer would recognise the mixture to be a counterfeit. I accept that the popularity of Red Bull and vodka largely explains why the combination of energy drink and vodka is instantly recognisable. I do not accept, however, that the defendants’ use of the phrase “instantly recognisable flavour” would mislead or deceive consumers into confusing the defendants’ product for Red Bull.
[21] The plaintiffs point further to a statement in the TP that refers to the fact that
21% of 18 to 24 year olds have tried Red Bull.7 I do not consider that the reference to Red Bull in this context creates the impression that the defendants’ products either are or contain the plaintiffs’ products. The reference to Red Bull is in the context of identifying the drinking habits of the target market, specifically, 18 to 24 year olds. Identifying that a significant portion of the target market has purchased vodka in the last three months as well as having tried Red Bull illustrates the feasibility of introducing a pre-mixed vodka and energy drink to that market. I think this is a more natural interpretation than the one contended for by the plaintiffs, namely that the reference to Red Bull creates the impression that the defendants’ products
actually contain Red Bull or are associated with it.
7 Interestingly, the TP adduced as evidence by the defendants does not have this statement. It has a statement reading “21.1% have tried vodka mixed with energy drink” whereas the TP adduced by the plaintiffs refers to 21.1% trying specifically RED BULL.
[22] The TP does refer both expressly and obliquely to Red Bull. The critical question is whether those references are likely to mislead or deceive consumers into thinking that the defendants’ products either contain Red Bull or are otherwise associated with it. I am not satisfied that the Trade Presenter has this effect. I am inclined to view the Trade Presenter as referencing Red Bull to illustrate the viability of targeting a pre-mixed vodka and energy drink at a particular demographic group, rather than as creating a misleading or deceiving link with the plaintiffs’ products.
The evidence of Ms Franks and Ms Taefi
[23] I deal first with what I perceive to be unhelpful evidence as far as the plaintiffs are concerned. One of the key findings of Ms Franks and Ms Taefi was that staff in 21 of the visited premises said that the defendants’ products are “like” Red Bull or “similar” to Red Bull.8 In my view, that is not evidence of confusion. In fact, it is evidence of the contrary. The comparison acknowledges that the two products are different. This is made clear by the fact that many of those responses noted explicitly that the defendants’ products were not Red Bull products.
[24] In my view, the fact that 21 shop assistants compared the defendants’ products to Red Bull products hurts rather than helps the plaintiffs’ case. That is not a criticism. It was the plaintiffs’ duty to put before the Court all relevant responses and they discharged that duty.
[25] The plaintiffs also claim that shop assistants in 14 of the off licence premises visited told Ms Franks and Ms Taefi that the defendants’ Red RTD product is Red Bull, or contains Red Bull. I put aside one of the exchanges referred to by the plaintiffs in their submissions.9 Nevertheless, I am satisfied that the remaining 13 exchanges do illustrate a level of confusion amongst the staff members questioned
by Ms Franks and Ms Taefi. Those 13 staff members responded unequivocally to
8 The plaintiffs included in this part of its evidence one response that said that the defendants’ product was “vodka, Red Bull, probably”. I accept that this response does evidence a level of confusion on the part of the respondent.
9 That exchange occurred at Liquorland Manakau in Auckland. The shop assistant said of the defendants’ product: “it’s Red Bull but they cannot write it on the can because Red Bull does not like it”. I interpret that as express recognition on the part of the staff member that the defendants’ product is not associated with Red Bull. In context, the statement “it’s Red Bull” does not convey its literal meaning.
open questions that the defendants’ products either contained or were associated with
Red Bull.
[26] The plaintiffs also point to three exchanges where staff members confused a request for the defendants’ product as a request for Vodka Red Bull. I am not convinced this materially assists the plaintiffs’ case. The critical question is whether the defendants’ conduct is likely to mislead or deceive consumers into thinking that the defendants’ products either contain or are associated with Red Bull products. Here, the three staff members did not understand in the first place that Ms Franks was referring to the defendants’ product. Rather, the staff members assumed that Ms Franks was referring to Red Bull products. That is quite different from understanding the request to be a reference to the defendants’ product and nevertheless assuming that the product is associated with Red Bull.
[27] This point is applicable equally to the evidence adduced by the plaintiffs showing shop assistants in four stores understood requests for “Red energy without alcohol” to be Red Bull.
[28] The plaintiffs point to two further exchanges tending to show confusion. First, a bar manager thought that Red Bull was sponsoring an event when it was actually the defendants. Second, a sales assistant wanted point of sale material for the defendants’ product. He thought that the defendants’ product was a Red Bull product.
[29] On my analysis, therefore, staff in 21 out of 94 premises thought that the defendants’ products contained or were otherwise associated with Red Bull. That is just over 19%. In my view, that is a significant percentage.
[30] In response to this evidence, Mr Johns submits that the Court should be slow to conclude that this confusion would leak to the public at large. He argues that a lawyer going into a shop and asking pointed questions about products is a very artificial exercise. It is not, he argues, how people would buy the products. On this basis, Mr Johns cautions against relying too heavily on this evidence. Although I accept that there is a degree of artificiality in the exercise undertaken by Ms Franks
and Ms Taefi, I still consider the evidence as tending to prove that the defendants’ products are likely to mislead or deceive consumers into thinking that they contain or are associated with Red Bull. I say this for two reasons:
(a) First, if staff engaged in the actual business of selling alcohol consider the defendants’ products to contain or be associated with Red Bull, then it is likely that members of the general public would make the same mistake. Staff members working in liquor stores are more likely than ordinary consumers to know which products are associated with which companies.
(b)Second, the first port of call for a prospective purchaser who is confused as to whether the defendants’ Red products are associated with Red Bull is likely to be a staff member working at the store being visited.
Therefore, I do not accept Mr Johns’s submission that the Court should not rely on the evidence given by Ms Franks and Ms Taefi because they did not behave like typical consumers. I think it natural for a confused consumer to seek clarification from a staff member as to whether the defendants’ products are associated with Red Bull. If staff members are confused as to that, then it is likely that the confusion will “leak” to consumers.
[31] The plaintiffs point to evidence (including a photograph) showing Red RTD alongside a sign saying: “ANY RED BULL AND VODKA – Buy 2 for $20.00”. I am satisfied this sign would be likely to mislead or deceive a consumer into thinking the defendants’ product was an extension of or associated with Red Bull.
[32] Finally, the plaintiffs point to three instances where the defendants’ products were displayed inside RED BULL branded fridges. Only one photograph is provided to illustrate this. Having regard to that photograph, I consider the evidence to have little probative value. It shows a miscellany of products stored inside the fridge including a SMIRNOFF Vodka product and non-alcoholic BUNDABERG products. There is no evidence that consumers would be any more likely to confuse
the defendants’ products with the plaintiffs’ products because both are present in a
RED BULL fridge along with other products.
[33] To summarise, the evidence of Ms Franks and Ms Taefi does suggest that a significant percentage of shop assistants believed that the defendants’ products either contained or were associated with Red Bull products. In my view, those shop assistants, by virtue of their occupation, would be less likely to be confused about the source of the defendants’ products than an ordinary consumer. Therefore, the evidence of Ms Franks and Ms Taefi does suggest that the defendants have a serious case to answer.
Facebook confusion
[34] The plaintiffs first take issue with the fact that the defendants’ Facebook page repeats the claim made in the TP that “one of the world’s most popular drinks [is] now available pre-mixed and ready to drink”. For the reasons given at [16], I do not consider this statement to be misleading or deceptive.
[35] The plaintiffs then point to evidence of members of the general public being confused on the defendants’ own Facebook page. One Facebook exchange reads as follows:
Dakota Rossellini: “Joshua Watson it’s the redbull with vodka!
Joshua Watson: “Ahhhh I think I recognize it now.”
I accept this is evidence that Ms Rossellini and Mr Watson believed that the
defendants’ product either contains or is otherwise associated with Red Bull.
[36] The plaintiffs adduce the following example as evidence of confusion:
Sarah Williams: Not knowing that it is an alcoholic beverage I would assume it was another Red Bull can woth [sic] different branding etc (I think they had some sugar free cans out a few years ago that looked similar?) But know it is alcoholic (after reading) the only place you’re going to find this is in a bottle store so the difference is quite obvious.
Ms Williams explicitly states that the difference between the defendants’ products and Red Bull “is quite obvious”. Clearly, therefore, she was not confused. Ms Williams admitted, however, that she would assume the defendants’ product to be Red Bull if she did not know it was alcoholic. That does suggest that the defendants’ product has a get up that is easily confused with the get up of Red Bull or related products. The evidence does have, therefore, a slight probative value tending to prove that some consumers could be misled into thinking that the defendants’ products are actually Red Bull or related products.
[37] The plaintiffs also point to the following Facebook comment:
Stephen Price: Apart from the backwards R it totally looks like red bull.
This is somewhat equivocal. The comment could be taken to mean either:
(a) The defendants’ product would look very similar to Red Bull without
the backwards “R”, but because of the backwards “R” it does not; or
(b) The defendants’ product looks very similar to Red Bull
notwithstanding the backwards “R”.
[38] Overall, I do not consider the Facebook evidence to have a particularly strong probative value. The evidence in two of the three Facebook examples is largely equivocal. Those two examples appear under a hyperlink to a New Zealand Herald article about the current proceedings. As a result, the people making the relevant comments could not have been confused because they were aware that the plaintiffs are suing the defendants for misleading conduct. The comments as to confusion were made, therefore, in a particular context. The remaining Facebook example does tend to prove confusion, but taken in isolation it does not have much probative value.
[39] In sum, I do not place emphasis on the Facebook evidence.
Red Bull’s “RED Edition” can
[40] The plaintiffs point to the fact that it put out a RED Edition of its products in
2012-2015. Those cans had silver branding imposed over a red background. The plaintiffs submit that the trade (and consumers) would consider the Red RTD to be just another line extension from Red Bull.
[41] Mr Johns submits that the RED Edition Red Bull was sold in relatively small quantities for a limited time and is now discontinued. He further submits that the plaintiffs’ claim to have significant reputation in the RED Edition is almost certain to fail.
[42] In my view, there are marked differences between the defendants’ product and the Red Edition can. The latter has the “RED BULL” trade mark and a picture of a charging bull on it. The defendants’ can displays neither of these things and uses silver as its background colour.
[43] The importance of the plaintiffs’ RED Edition can, however, is that it shows the plaintiffs are prepared to stray from their usual silver and blue colouring template and release variations of their product with particular reference to the word “red”. Whilst, therefore, consumers are unlikely to confuse the defendants’ product with the plaintiffs’ RED Edition, they may assume nonetheless that the product is a Red Bull line extension.
[44] I conclude that the discontinued RED Edition Red Bull does help, to some extent, the plaintiffs’ case.
Disclaimers
[45] Some cans of Red Energy and Red RTD have a disclaimer printed in small red text along the side of the can. Some cardboard outers for the Red RTD four packs also have the disclaimer displayed beneath the nutrition panel. Some boxes of Red RTD containing 24 cans have the disclaimer printed on the side of the box lid. The disclaimer reads as follows:
This product does not contain Red Bull, and it is not endorsed by or affiliated in any way with Red Bull. We know you wouldn’t think that, but their lawyers thought you might.
The question is whether any of those disclaimers would neutralise conduct found to be otherwise misleading or deceptive conduct.
[46] The plaintiffs cite two Australian cases that discuss when a disclaimer is effective in doing so. In Hutchence v South Seas Bubble Pty Ltd, Wilcox J stated:10
There are occasions upon which the effect of otherwise misleading or deceptive conduct may be neutralised by a proper disclaimer … Such cases are likely to be comparatively rare and to be confined to situations in which the court is able to reach satisfaction – the onus resting on the party relying upon the disclaimer – that the disclaimer is likely to be seen and understood by all those – leaving aside isolated exceptions – who would otherwise be misled before they act in relation to the relevant transactions.
[47] The second case of Abundant Earth Pty Limited v R & C Products Pty Limited involved distribution and sale of an imported mustard product that had stickers on it containing a disclaimer. The Court said:11
… [W]here the competing products are small, inexpensive items the efficacy of a disclaimer, however prominent, cannot be assumed … The disclaimer now being affixed to the mustard is less than prominent and, we would expect, of little, if any, utility for present purposes. Nor are we persuaded that any attempt to increase the size or position of the disclaimer would improve the understanding of consumers. In the circumstances, we think that no useful purpose would be served here by any disclaimer.
[48] In the present case, a consumer could notice the disclaimer on the packaging or on the individual cans themselves. However, I do not consider their prominence, location or typeface would cause them to be effective against the tests raised by the cases.
Intention
[49] It is well established that intention is not a requirement of either a breach of
FTA or of passing off. However, the case law establishes that where intention is demonstrated it is a very powerful factor:12
10 Hutchence v South Seas Bubble Pty Ltd (1986) 64 ALR 330, 338–339.
11 Abundant Earth Pty Ltd v R & C Products Pty Ltd (1984) 59 ALR 211.
12 Shotover Gorge Jet Boats v Marine Enterprises Limited [1984] 2 NZLR 154, 157 line 45.
It is not necessary to show that the defendant intends to deceive, not is it necessary to show particular instances of deception or damage, although if that can be done it obviously greatly strengthens the plaintiff’s case.
[50] The plaintiffs submit that the defendants’ promotional material for their Red RTD product clearly shows an intention to have the trade believe that it is put out by, or associated with, the plaintiffs.
[51] In my view, the evidence does not support this submission. The plaintiffs rely heavily on the TP evidence to support their contention that the defendants intended to mislead or deceive. I have already rejected most of the arguments advanced by the plaintiffs in respect of the TP.
[52] Moreover, I do not think that the evidence before me supports the submission that the defendants had an intention to piggy back on Red Bull’s goodwill:
(a) The defendants have spent $442,000 on marketing their products;
(b)The defendants openly invite consumers to notice the differences between their products and Red Bull;
(c) The idea of creating a pre-mixed vodka and energy drink came before the choice to call the product “Red”. The defendants contracted with a firm called “Strategy” which considered multiple trade names before settling on Red.
[53] In my view, the evidence is not sufficient for me to infer that the defendants intended to pass off their goods as the goods of the plaintiffs.
Section 89(1)(c) of the TMA
[54] This provision requires:
(a) the defendants’ sign(s) to be similar to the plaintiffs’ registered trade mark(s);
(b) the defendants’ goods to be similar to the plaintiffs’ goods; and
(c) the use of the defendants’ sign(s) to be likely to deceive or confuse.
Similar goods
[55] The plaintiffs’ mark is registered in relation to “energy drinks namely non- alcoholic caffeinated beverages”. The defendants’ Red RTD is an alcoholic energy drink. I accept the plaintiffs’ submission that the goods are similar because:
(a) The goods are sold through similar trade channels. Both parties’
products are sold through liquor stores and licensed premises.
(b)The nature and kind of customer is similar. I agree with the plaintiffs’ submission that someone who purchases energy drinks is more likely to also purchase vodka and energy drink mixed products than someone who does not like energy drinks. There is, therefore, an overlap in the type of consumer of the goods.
(c) The nature and composition of the goods are similar. The products taste similar. This is particularly the case because vodka is colourless and tasteless. The mix tastes similar to Red Bull.
Similar marks
[56] The plaintiffs submit that certain of the defendants’ signs are similar to their series trade mark registration. I describe the defendants’ signs for ease of reference:
(a) The word “red” written in black rounded serif font with a reversed
“R” as follows: ЯED.
(b) The same as sign (a) but written in red as below:
(c) The word “red” written in black in the same manner as sign (a) imposed over a thin, rectangular red band finishing in an oblique angle as it transitions to silver.
(d)The get up of the cans containing the defendants’ products. The cans are thin and metallic. Two have sign (c) imposed over them. A third can has the same get up except the rectangular strip is silver rather than red.
(e) The capitalised word “red” as follows: RED.
[57] The plaintiffs have trade marks registered for the word “red” in both red and black where the “R” is capitalised as below.
[58] Hereafter, I refer to these marks as the “Red Series Marks”.
[59] The plaintiffs submit that the defendants’ signs (a) and (b) are very similar to the Red Series Marks because:
(a) As to colour, sign (a) is identical to the black version of their trade mark whilst the shade of red used in sign (b) is closely similar to the shade of red in their trade mark.
(b) The reversed R (Я) cannot be pronounced. Orally the marks are
identical.
[60] The plaintiffs submit that the same comments as to similarity for signs (a)
and (b) apply to signs (c) and (d).
[61] The plaintiffs submit that in the case of sign (e) there are also close similarities.
[62] I agree that there are similarities between the defendants’ signs and the Red Series Marks. In the context of the present proceedings, however, I think the Court would need to be satisfied that the marks are clearly likely to cause confusion. The analysis made in the context of passing off and the FTA is relevant here. For the reasons I give above, I think the plaintiffs’ evidence as to confusion falls short of establishing a strong prima facie case. I note that the tests in the FTA and in the tort of passing off are broader than the test in relation to s 89(1)(c) of the TMA. Section 9 of the FTA and the tort of passing off refer to the general conduct of the defendant whereas s 89(1)(c) first requires the Court to consider whether the defendant’s sign is similar to the plaintiff’s registered trade mark. In my view, the inquiry under s 89(1)(c) fits within a slightly narrower legal compass.
[63] Given my analysis of the FTA and the tort of passing off, the plaintiffs are unlikely to be helped in this inquiry by its separate claim advanced under s 89(1)(c) of the TMA
Section 89(1)(d) of the TMA
[64] The plaintiffs argue that even if the Court does not consider the defendants’ goods to be similar to their goods, there has still been infringement under s 89(1)(d) of the TMA. The plaintiffs submit that the defendants infringed s 89(1)(d) by using the sign RED in a way that takes unfair advantage of, or is detrimental to, the distinctive character or repute of the trade name RED BULL, which is well known in New Zealand.
Well known trade mark in New Zealand
[65] I consider, first, whether the plaintiffs have established that the Red Series
Marks are well known in New Zealand.
[66] In Daimler AG (formerly DaimlerChrysler AG) v Sany Group Co Ltd, Collins J considered a number of factors to assist in determining if a trade mark is well known for the purposes of s 25(1)(c) of the TMA. I think they are helpful in
determining whether a trade mark is well known for the purposes of s 89(1)(d). The factors relevant to this case are as follows:13
(a) The degree to which the mark is recognised by a significant portion of the community of those interested in the goods and services to which the mark relates.
(b) The period of time over which the mark has been promoted.
(c) The extent of the geographical area in which the mark has been promoted.
(d) The value associated with the mark.
[67] The plaintiffs point to evidence which led to the Red Series Marks being registered. A market survey of 250 participants, randomly selected, asked participants to think about the energy drink beverage category and to list the brand names that came to mind when they were shown the Red Series Marks. Ninety-two per cent of participants spontaneously associated the black version of the Red Series Marks with Red Bull, and 96 per cent of participants spontaneously associated the red version of the Red Series Marks with Red Bull. The survey was undertaken in
2006, but there is no evidence that a lower level of association would exist among members of the public today. This evidence strongly suggests that a significant portion of consumers of energy drinks would recognise the Red Series Marks.
[68] The Red Series Marks have been continuously promoted since 1996. It was this promotion that led to the marks acquiring the distinctiveness required for registration in 2006. That is a significant period of promotion.
[69] The marks have been promoted throughout New Zealand.
[70] The value of the plaintiffs’ sales in New Zealand in 2015 was $48,000,000. On the basis that a significant portion of relevant consumers spontaneously associate the Red Series Marks with Red Bull, I accept that they have considerable value.
[71] In my clear view, these factors establish that the Red Series Marks are well known in New Zealand.
Detriment and unfair advantage
[72] Section 89(1)(d) prohibits the use of a sign that takes unfair advantage of, or is detrimental to, the distinctive character or the repute of a mark well known in New Zealand. There is a dearth of New Zealand case law on these requirements. The plaintiffs point to the text Trade Marks in Practice, which suggests that the
requirements of s 89(1)(d) are as follows:14
(a) The strength of the distinctive character and reputation of the well- known mark will be relevant to the question of detriment.
(b)Detriment may involve “blurring” (making a mark less attractive), but considerable care is required in assessing the significance of such evidence in the absence of confusion and would need to show a change in the economic behaviour of the average consumer or the strong probability of that.
(c) Detriment may involve “tarnishing” (making a mark less attractive) where there is evidence that the use of the defendant’s sign results in a negative perception of the owner’s mark, but the negative impact must be demonstrably apparent.
(d)The unfair advantage requirement requires deliberate exploitation of the coat-tails of the well-known mark and an assessment of the evidence of the benefit obtained by the defendant from its use of the sign.
(e) Detriment and unfair advantage are both essentially questions of fact and must be to a sufficiently significant degree to warrant restraining use which is non-confusing. The court will look for proof of real future or actual detriment or unfair advantage and not merely a risk of such.
[73] In adoption of this commentary, the plaintiffs submit that the defendants have taken unfair advantage of the distinctive character or the repute of their mark and that the plaintiffs have suffered detriment to the distinctive character or the repute of their mark. The relevant paragraph of the plaintiffs’ submissions reads as follows:15
As to detriment, the plaintiffs submit that the evidence of consumer misleading, confusion and deception previously outlined as a result of the defendants’ use of RED in respect of both vodka and energy is ample example of detriment. Further, there is unfair advantage because the evidence – particularly the Trade Presenter for RED Vodka & Energy Drinks products and the defendants’ Facebook page – shows a deliberate exploitation of the goodwill and reputation of the Red series mark.
[74] As to unfair advantage, I have already rejected the plaintiffs’ submission that the TP and the Facebook page evidence an intention on the part of the defendants to have the trade believe that their products are put out by or associated with Red Bull. The text Intellectual Property in New Zealand suggests that there will “need to be
cogent evidence that a defendant was deliberately attempting to free ride.”16 I think
the evidence adduced by the plaintiffs falls short of that, particularly in the context of this proceeding where a strong prima facie case is required to support an interim injunction.
[75] As to detriment, I have already said that the evidence of confusion is not sufficiently strong to establish a strong prima facie case.
Strength of the plaintiffs’ case overall
[76] I now stand back and consider the evidence in its totality. The strongest evidence adduced by the plaintiffs is the evidence of Ms Franks and Ms Taefi which
shows that staff members in over 19 per cent of the stores they visited believed the
15 Para 149.
16 James and Wells Intellectual Property in New Zealand (Thomas Reuters online edition) 7.13.3.
defendants’ products either contained or were associated with Red Bull. The plaintiffs’ case is strengthened by the fact that they have previously released a RED Edition version of their product. On this basis, I accept that many consumers would be aware that the plaintiffs release a variety of products and have, in the past, emphasised the word “red” in their branding. I also accept that when the defendants’ products are placed alongside Red Bull advertising, there is a heightened risk that a consumer could be misled or deceived into believing the defendants’ products are associated with Red Bull. Additionally, I accept that the defendants’ disclaimer is unlikely to dispel any initial confusion.
[77] In my view, there is, on the ordinary standard, a serious question to be tried in respect of the two separate trade mark claims.
[78] As a result, I am entirely satisfied that the plaintiffs meet the ordinary threshold for what constitutes a serious question to be tried on a number of grounds. I am not satisfied, however, that the evidence demonstrates overall a strong prima facie case. There is too much room for argument.
[79] A considerable portion of Ms Franks and Ms Taefi’s evidence demonstrates that there is no confusion among shop assistants in alcohol stores. The comparisons to Red Bull made by a number of shop assistants tend to disprove rather than prove confusion. Moreover, as I have said, I do not consider the Facebook evidence to have a particularly strong probative value. Similarly, I do not think that the TP creates a conscious link in the mind of the consumer between the defendants’ product and Red Bull. In my view, the TP refers to Red Bull and vodka because it provides a point of reference from which the defendants assess the feasibility of entering their new product in the market. There is nothing necessarily illegitimate about this. I have not found that the plaintiffs’ evidence establishes a fraudulent intention on the part of the defendants.
[80] I note also that the plaintiffs have not adduced any real evidence of end consumers being misled or deceived. The Facebook commentators could not be confused because their comments were under a link to these proceedings. Similarly, Ms Franks and Ms Taefi approached shop assistants rather than end consumers.
Their evidence is, in my view, highly relevant but it does not demonstrate actual confusion amongst end consumers. Their evidence has to be used to infer that the end consumer will be misled or deceived.
Where does the balance of convenience lie?
[81] The weights to place in the respective scales of the balance are:
(a) For the plaintiffs: there is a serious question to be tried (to the usual standard) that (to put it broadly) the competition by the defendants is unlawful. If the plaintiffs win, the payment of damages would be unlikely to compensate it because such factors as loss of market share and damage to reputation are very hard to quantify. And if damages can be quantified, the defendants would be unable to pay them.
(b)For the defendants: the case against them does not reach the level of being a strong prima facie case. It has two products, and only Red Energy competes directly with Red Bull. If the interim injunction is granted, the defendants die. They cannot survive without selling their products.
[82] There is no evidence that the defendants’ products are serious rivals of the plaintiffs’ in the marketplace. There is no evidence that, among actual consumers, there is a serious degree of confusion or a serious likelihood of confusion. There is, however, evidence of some confusion among shop assistants and an inference of the potential for confusion among consumers. If the plaintiffs win at trial, they will knock the defendants out of the marketplace, albeit that damages will not be available, even if they could be quantified.
[83] I reach the view that the balance of convenience favours the defendants.
Where lies the overall justice of the case?
[84] The trial of the substantive case is scheduled to begin on 31 October of this year. The grant of an interim injunction would have the effect of winning the case
for the plaintiffs. The plaintiffs have a serious case to be tried on the evidence before me; but I do not consider it to be a strong prima facie case. Instead, I see a real need for many of the plaintiffs’ contentions to be tested properly at a trial.
[85] There is no evidence that leads me to find that the plaintiffs’ business will be harmed to any real degree by the competition from the defendants’ products continuing until the case is decided at trial.
[86] Likewise, there is insufficient evidence of the danger of confusion among consumers to warrant pre-emptive action by the Court.
[87] I have decided that the overall justice of the case favours the defendants.
[88] I record that I have considered whether I should distinguish between Red RTD and Red Energy. Much of the evidence focused on the former product (which is not of a kind produced by the plaintiffs) as opposed to the lately marketed Red Energy (which is a direct competitor of Red Bull). I decided that given my overall conclusions as to the balance of convenience and the overall justice of the case, I should not.
Decision
[89] The application for interim injunction is denied.
[90] I am inclined to award the defendants costs on a 2B basis. However, if there is anything in the background of which I am unaware, or if the parties cannot agree quantum, then memoranda can be filed within 20 working days of the date of this
Judgment, and any replies within a further five working days.
Brewer J
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