Tasman Insulation New Zealand Ltd v Knauf Insulation Ltd
[2014] NZHC 960
•9 May 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2011-404-8141 [2014] NZHC 960
UNDER The Trade Marks Act 2002 IN THE MATTER OF
Infringement of New Zealand trade mark registration number 105507
BETWEEN
TASMAN INSULATION NEW ZEALAND LIMITED
Plaintiff
AND
KNAUF INSULATION LIMITED First Defendant
AND
ECO INSULATION LIMITED Second Defendant
AND
BUILDFORNEXTGEN LIMITED Third Defendant
Hearing: 9-13, 16-20, 23-26 September and 21-22 November 2013 Counsel:
J G Miles QC, K W McLeod and J D Miles for the Plaintiff
C L Elliott QC, J G Hazel and B Cain for the DefendantsJudgment:
9 May 2014
JUDGMENT OF BROWN J
This judgment was delivered by me on 9 May 2014 at 4 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors: A J Park, Auckland
James & Wells Solicitors, Auckland
Counsel: J G Miles QC, Auckland
C L Elliott QC, Auckland
TASMAN INSULATION NEW ZEALAND LTD v KNAUF INSULATION LTD [2014] NZHC 960 [9 May
2014]
Introduction .......................................................................................................................................... [1] The New Zealand insulation market and participants .......................................................................... [7] Derivation of the word “batt” ............................................................................................................. [16] Summary of events relevant to the claims and counterclaims ............................................................ [22] The arrival of EARTHWOOL® insulation into New Zealand ....................................................... [22] The marketing of the EARTHWOOL® product ............................................................................ [36] Tasman reacts ................................................................................................................................ [43] The website ..................................................................................................... [54] The website ................................................................................................ [59] Pleadings and issues ........................................................................................................................... [64] Trade mark issues .......................................................................................................................... [65] Fair Trading Act issues .................................................................................................................. [70] Issue 1: Has there been genuine use of the BATTS® trade mark? ...................................................... [72] Issue 2: Has the BATTS® trade mark become generic in New Zealand? ........................................... [85] The law .......................................................................................................................................... [85] Decision of Commissioner of Trade Marks of 17 March 1977 ..................................................... [98]
An issue of retrospectivity ........................................................................................................... [105] The defendants’ evidence ............................................................................................................ [112] Tasman’s evidence: the “BATTS” survey.................................................................................... [137] The causation component ............................................................................................................ [149] (Positive) acts .............................................................................................................................. [151] Inactivity...................................................................................................................................... [157] Recognition by Tasman of risk of genericism ............................................................................ [160] Analysis ....................................................................................................................................... [169] Trade mark infringement .................................................................................................................. [174] The sign usage in issue ................................................................................................................ [181] Issue 3: Was there use of a sign in the course of trade and, if so, was that use as a trade mark? ..... [186] Use of a sign ................................................................................................................................ [186]
In the course of trade ................................................................................................................... [189] Is the sign as used likely to be taken as being use as a trade mark? ............................................ [191] The law ........................................................................................................................................ [192] The parties’ cases......................................................................................................................... [199] My assessment............................................................................................................................. [211] The installation instructions on the packaging ............................................................................ [214] The packaging label..................................................................................................................... [216] The sentence on the website page............................................................. [219] The use of “Batt” in the HTML code .......................................................................................... [222] The issue of “invisible” use ......................................................................................................... [224] Issue 4: Was the use of “batt” or “batts” within s 89(1)(a)-(c) ......................................................... [237] Issue 5: Is there an available defence under s 95? ............................................................................ [243] Law.............................................................................................................................................. [245] Discussion ................................................................................................................................... [252] Issue 6: Is there an available defence under s 66(1)(c)? ................................................................... [261] Issue 7: Was Tasman’s proceeding unjustified? ............................................................................... [262] The Fair Trading Act claims and counterclaims. .............................................................................. [272] Relevant principles ...................................................................................................................... [274] Issue 8: Is Knauf ’s EARTHWOOL® brand misleading or deceptive? ............................................. [282]
The evidence................................................................................................................................ [287] Discussion ................................................................................................................................... [303] Remedy........................................................................................................................................ [319] Issue 9: Is the manner of the marketing of the EARTHWOOL® product on the website misleading or deceptive? ..................................................................................................... [325]
Issue 10: Is the manner of the marketing of the EARTHWOOL® product on the website misleading or deceptive? ..................................................................................................... [335] Issue 11: Was the 26 August 2012 press release referring to “a competitor” false or misleading? .. [348]
Analysis ....................................................................................................................................... [357]
Issue 12: Was Tasman’s 7:1 compression ratio statement misleading or deceptive?........................ [361] Issue 13: Was the immersion test misleading or deceptive? ............................................................. [380] Disposition ....................................................................................................................................... [397]
Introduction
[1] It is common ground that beyond New Zealand the word “batt” is not the subject of trade mark protection for insulation materials.1 Although not common ground, there was evidence that when used as an alternative name for a slab or segment of building insulation material, the word “batt” is generic and of common usage abroad.2 In New Zealand, however, since 27 August 1973 the plaintiff (“Tasman”) has been the registered proprietor of Trade Mark 105507 for the sign “BATTS” in respect of insulating materials in class 17.
[2] Unsurprisingly therefore Tasman contends that use of the word “batts” in New Zealand to describe other manufacturers’ insulation products constitutes an infringement of Tasman’s registered trade mark. In particular Tasman sues for trade mark infringement in relation to the use of the words “batt” and “batts” both on the first
defendant’s (“Knauf’s”) EARTHWOOL® insulation product3 and on the website
the primary trade mark issue, in this litigation stems from the defendants’ contention that Tasman’s trade mark registration is not valid because even in New Zealand the word “batts” has become generic. The statutory ground for such a challenge in s 66(1)(c) of the Trade Marks Act 2002 (“the Act”) requires the defendants to prove not only that the word “batts” has become a common name in general public use but also that that state of affairs is as a consequence of the acts or omissions of Tasman.
[4] In addition to the trade mark issues, the parties’ various trading and marketing activities in New Zealand have excited claims and counterclaims of contraventions of the Fair Trading Act 1986. Tasman’s primary concern relates to alleged representations by the defendants concerning Knauf ’s EARTHWOOL® branded product. These representations, according to Tasman, convey the misleading impression that the product is manufactured substantially from animals’ wool whereas in fact it is
manufactured from recycled glass.
1 See Tasman’s September 2010 Guidelines at [165] below.
2 See Fletcher Insulation’s presentation at [355] below.
3 Knauf is the New Zealand agent for New Zealand trade mark registration 810389 EARTHWOOL in class 17 for insulation materials.
[5] The defendants’ concerns relate first to a representation by Tasman as to the compression ratio of Tasman’s packaged product and secondly to Tasman’s conduct of a demonstration comparing Tasman’s PINK®BATTS® insulation product and the Knauf EARTHWOOL® product floating on water. This demonstration, which I refer to as the immersion test, was dubbed “the Titanic test” by Tasman itself.
[6] Throughout this judgment I will refer to PINK, BATTS and EARTHWOOL followed by the ® symbol because each of those words is a registered trade mark in New Zealand. However, where the parties use a different format in documents which are referred to in the judgment (e.g. the plaintiff’s use of Pink Batts and the defendants’ use of EarthWool®), the form of the words actually used will be adhered to.
The New Zealand insulation market and participants
[7] The total market in New Zealand for insulation products is approximately
15 million square metres per year. Insulation can take several forms depending on the mode of application. When insulating wall cavities the most common form of insulation is a rectangular segment, whereas for ceiling cavities and attic spaces segments or rolls of insulation are more commonly used. Blown insulation and sheets of polystyrene are also commonly used.
[8] Such materials are primarily made from glass, polyester or wool. Insulation made from glass is the most commonly used, it being less expensive than polyester which in turn is less expensive than wool insulation. Numerous companies import from overseas insulation made from recycled glass whereas the importation of wool in large quantities into New Zealand is difficult due to New Zealand’s regulatory requirements. The raw material cost of wool is also higher.
[9] The term “glass wool” is often used by people in the insulation trade to refer to insulation made from glass whereas consumers in the general public tend to use the word “fibreglass”.
[10] Tasman, which is the only New Zealand manufacturer of insulation products made from recycled glass, manufactures in excess of seven million square metres of product per year. Since at least 1973 Tasman has sold its insulation under the
PINK®BATTS® brand name. The PINK® trade mark is owned by Owens Corning and is used by Tasman under licence in New Zealand.
[11] Bradford Gold, Premier and EARTHWOOL® are imported brands of insulation products made from recycled glass. Knauf markets and sells insulation under the EARTHWOOL® brand. Eco Insulation Ltd (“Eco Insulation”), the second defendant, markets and sells natural wool, polyester and polyester/wool blend insulation in New Zealand and is a New Zealand distributor of Knauf’s EARTHWOOL® insulation. Buildfornextgen Ltd (“BFNG”), the third defendant, is also a marketer and distributor in New Zealand of EARTHWOOL® insulation. In addition to Eco Insulation, companies manufacturing and selling insulation made from recycled and virgin sheep or other animal wood include Terra Lana.
[12] Key segments in the insulation market are: (a) New build houses;
(b) Alterations and additions;
(c) Retrofit of existing houses; and
(d) Commercial builds.
[13]
the m
The arket
(a)
decision-maker in relation to the choice of insulation varies dependent on segment and the supply channels but the evidence indicated that:
For new build houses the choice is made either by the architect, the
builder or the home owner; (b)
For alterations and additions, again the architect, builder or homeowner will select the insulation but if the work is DIY then the homeowner will
usually decide; (c)
For the retrofit of existing houses the homeowner usually decides; and
(d)For commercial builds the specifier (e.g. architect or project manager) or installer generally decides.
[14] There was a divergence in the evidence as to the extent to which homeowners influence the decision. Mr Hall of BFNG considered that in relation to categories (a) and (b) the insulation choices were largely driven by the architect, designer and perhaps builder whereas Ms Roberts for Tasman considered that homeowners had a more significant impact. In relation to new homes it was her view that approximately 50 per cent of the time the home owner made the choice, with the builder or occasionally the architect making the choice the other 50 per cent of the time. She considered that the percentage could be even higher in favour of the home owner in the case of alterations and additions where the home owner will sometimes still be resident in-house, perhaps have an account with the merchant and may pay the cost of the insulation directly to the insulation supplier.
[15] Ms Roberts explained that the reason why Tasman’s TV campaigns and advertising over the years have had such a strong consumer focus was because of its view that consumers are the primary audience while the builders in the trade are a secondary audience. That view had been influenced by research undertaken by Tasman, in particular the new home survey in which people who have had houses built in the previous 12 months are asked to complete an on-line questionnaire. In 2012 the survey involved some 700 people which she considered was a reasonably good sample size.
Derivation of the word “batt”
[16] It appears that the word “batt” originated in 1830-1840 and is derived from the word “batting” which originated in the period 1605-1615. “Batting” means cotton, wool or synthetic fibres in batts or sheets used as filling for quilts or bed covers.
[17] The word “batt” first appeared in The New Zealand Dictionary in 1994. The entry read:
Also often pink batt (a proprietary name, from the colour). A thick rectangular piece of matted fibre or fibreglass, usually intended for the insulation of houses.
[extended use of British bat(t) a felted mass of fur, etc., used in hat-making]
[18] The definition that appears in the New Zealand Oxford Dictionary (2005) is:
1.A thick rectangular wad of fibreglass etc., used as insulation in a ceiling or between the interior and exterior walls of a house etc.
2. A piece of felted material used for lining or insulating items such as
quilts or sleeping bags. [ORIGIN: Middle English in the sense ‘lump, piece’, of unknown origin]
[19] While on the subject of dictionaries it is convenient here to note the point made by Tasman that the Oxford Dictionary contained a form of disclaimer with reference to the inclusion of proprietary names while the 2009 Collins New Zealand Dictionary contained no entry for “batt” or “batts”.
[20] The word “batts” is used descriptively in other countries such as Australia4 and the USA to describe pre-cut pieces of insulation material, usually of rectangular shape, suitable for installation in building cavities. Other descriptive terms for the same material include “blankets”, “slabs”, “segments” and “pieces”.
[21] Apparently believing that also in New Zealand the words “batt” and “batts” were generic terms for pieces of insulation material, in 2011 Knauf exported some of its EARTHWOOL® product into New Zealand in packaging displaying the words “batt” and “batts” in the installation instructions. That step was the catalyst for the events the subject of this litigation.
Summary of events relevant to the claims and counterclaims
The arrival of EARTHWOOL® insulation into New Zealand
[22] In December 2010 Knauf Australia commenced exportation of insulation product to a New Zealand customer (which was not Knauf New Zealand) in transparent packaging. The primary brand name on the packaging was LoftRoll but the EARTHWOOL® brand also appeared in smaller print in an information panel.
[23] Subsequently in 2011 Knauf Australia exported a modest amount of its
EARTHWOOL® product for the purpose of gauging the potential market acceptance for the product in New Zealand. The product was contained in white and blue packaging
4 An example is the Fletcher Insulation presentation “Why Pink Batts are Superior to Knauf Batts” at
[355] below.
which displayed the words “batt” and “batts” in several places in the installation instructions printed on the packaging.5
[24] On becoming aware of the importation of product with packaging displaying those words Tasman sent a letter to Eco Insulation dated 26 October 2011 which included the following paragraphs:
It has come to our attention that you are using the word “Batts” on Knauf
Earthwool packaging to refer to insulation products.
“Batts” is not a generic term for insulation products. It is a registered trade mark. “Batts” can only be used with our authorisation to refer to our BATTS® insulation products.
Please cease distribution and immediately remove all references to the word “Batts” from your packaging where it is used to refer to insulation products generally.
[25] Eco Insulation forwarded that letter to Mr Stuart Dunbar of Knauf who in turn instructed Knauf ’s New Zealand attorneys, James & Wells, to send a response. The James & Wells’ letter of 1 November 2011 included the following contentions:
Our client acknowledges that your company currently has a trade mark registration for BATTS in New Zealand (Registration No. 105507). However, our client has taken all appropriate steps to ensure it is using the word “batts” in relation to its insulation products in a way that describes the goods, and not in a way that could be construed as being use in a trade mark sense as in, for example, PINK BATTS®. Such steps include ensuring that the word “batts” begins with a lower case “b”, except if it is in a descriptive title such as “With Existing Batt Insulation”, and that the word is not given prominence by being, for example, capitalised.
...
Further, our client believes that “batts” has become a generic term in New Zealand, as well as in many other countries around the world, to most accurately and appropriately describe a type of insulation material. Consequently, our client considers it should be allowed to use the word “batts” freely on its packaging and in the marketing materials for its goods.
As a result of the aforesaid, our client will not be ceasing and desisting from using the words “batts” on its packaging and in its marketing materials as your company has requested it immediately does.
[26] A J Park responded on 4 November 2011 advising that Tasman was unmoved by
James & Wells’ letter, that the trade mark BATTS® was not a generic term in New
5 Two extracts are set out at [181] below.
Zealand, that Tasman had a comprehensive compliance programme in place for its BATTS® trade mark and was confident of the validity of its registration. The letter repeated the request that the use of the BATTS® trade mark in relation to insulating materials, packaging for insulating materials and promotional materials should immediately and permanently cease.
[27] On 18 November 2011 James & Wells wrote to A J Park recording that, while trade mark infringement was denied, Knauf would cease any use of references to “batts” and steps were taken to amend the design of the proposed packaging and marketing material to secure that objective.
[28] In October 2011 Knauf New Zealand commenced importation of the EARTHWOOL® insulation product. The product imported by Knauf was contained in green and white packaging and originated in the United States.
[29] Like the earlier importations, the packaging carried a statement that the product was “made using recycled glass bottles”. However whereas the previously imported product had featured the catchphrase “insulation bonded with nature”, the catchphrase on the new product was “the feel good insulation”.
[30] The EARTHWOOL® brand name and the catchphrase were printed in the following format:
[31] The “EARTH” part of the trade mark and the words “feel good” were printed in
orange while the “WOOL” part of the trade mark and the other words in the catchphrase
were printed in green.
[32] However Knauf did not embark immediately upon a wide-scale marketing campaign because the Rugby World Cup was in progress and the cost of media exposure was very expensive. Knauf considered that at that particular point in time the market would be distracted and so it waited until after the Christmas period of 2011-
2012 before commencing wider marketing of the EARTHWOOL® product.
[33] Then on 17 November 2011 Mr Dunbar was advised that a shipment of Knauf insulation product had been detained by New Zealand Customs as a result of a Customs notice filed by Tasman. Customs had detained a total of 96 bales of insulation material because the goods’ packaging featured the words “batt” or “batts” in the installation instructions.
[34] Mr Dunbar deposed that this came as a great surprise to him because of the advice to Tasman that Knauf would remove any reference to the word “batts” on the packaging until the issue concerning such usage was resolved. He decided to forfeit the
96 bales detained by Customs rather than be diverted by litigation about that particular importation. Although there was no evidence of further instances of the use of the word “batt” on installation instructions, the word “batt” did appear in the description of the specification of the EARTHWOOL® product in a packaging label on the product.
[35] On 23 November 2011 Knauf filed an originating application (CIV-2011-404-
007656) for revocation of trade mark registration No 105507 on the grounds that in consequence of the acts or inactivity of Tasman the BATTS® trade mark had become a common name in general public use for a product in respect of which it was registered. Tasman then launched its trade mark infringement proceeding on 19 December 2011. The two proceedings were consolidated by an order of Potter J on 3 February 2012.
The marketing of the EARTHWOOL® product
[36] Prior to the commencement of its 2012 marketing campaign, during 2011 Knauf had distributed in New Zealand a small brochure introducing the EARTHWOOL® product and employing a play on Knauf ’s name, namely “KN’OATH!” That brochure referred to EARTHWOOL® as “a new generation of glasswool” and stated that EARTHWOOL® was made using recycled glass bottles and sand.
[37] The 2012 marketing campaign commenced with the release of the EARTHWOOL® Product Guide dated 1 January 2012. It contained the following statement including an allusion to the fact that the Rugby World Cup was over:
The rest of the World has left, but we are here for good to bring New Zealand softer, more environmentally friendly insulation. Made from ECOSE® technology EARTHWOOL® is proud to offer Kiwis a friendlier, more
sustainable choice of home insulation. To learn more about EARTHWOOL®, please visit Subsequent media releases maintained the light hearted tone. In the Sunday Star
Times of 1 April 2012 an advertisement was placed which commenced:
INTRODUCING EARTHWOOL® FROM KNAUF INSULATION (Our
competitors hope this is an April Fool’s Day ad).
This advertisement advised that EARTHWOOL® insulation was available for installation through Eco Insulation and RightHouse. It advised that DIY and builders could buy directly through the website at One week later the Sunday Star Times of 8 April 2012 featured an advertisement which read:
ENVIRONMENTALLY FRIENDLIER, SOFTER AND CHEAPER. No wonder Earthwool® is driving our competitors batty.
[40] This advertisement stated that the “revolutionary EARTHWOOL insulation” was made using recycled glass bottles and that it was “a major leap forward compared to traditional glasswool products”. It concluded with the statement:
Find out why Earthwool is causing other manufacturers to choke on their Easter eggs at: Then on 20 May 2012 the Sunday Star Times contained an advertisement headed “Looks Like We’re Driving our Competitors Totally Bats”. It included the following statement:
The arrival of Earthwool® is welcome news for New Zealand builders and home
owners. But it’s giving some competitors the shivers.
After years of market dominance, healthy competition has caused some to start complaining. Not everyone likes the idea that Earthwool® is a more environmentally friendly and softer glasswool insulation product.
[42] The advertisement prominently featured a price per m2 comparison of the PINK®BATTS®, Autex Greenstuf and EARTHWOOL® R2.2 wall products, the prices being $10.36, $21.09 and $5.78 respectively.
Tasman reacts
[43] It would appear that the EARTHWOOL® marketing campaign stirred Tasman to respond on the marketing front. Three different steps taken by Tasman subsequently gave rise to a number of the Fair Trading Act matters which are the subject of the litigation.
[44] First, in approximately mid 2012 Tasman produced a presentation called “Why Pink®Batts® Insulation”. A number of the pages in the presentation made references to the EARTHWOOL® product (albeit only in one instance by reference to the brand name) including comparative statements about the Tasman and Knauf products. In particular:
(a) Under the heading “Product Durability” it was stated that the Knauf product was “susceptible to slumping” and “requires strapping” and this was accompanied by photographs apparently supporting those statements;
(b)Under a subheading “Stiffness” there were comparative photographs of a PINK®BATTS® product and a Knauf product placed across a bar which showed that the Knauf product was considerably less stiff: the adjacent statement made was “5 x as slumpy”.
[45] In response Knauf placed an advertisement in the Sunday Star Times of
26 August 2012 the first part of which read:
WHY BROWN MAKES PINK SEE RED
Over the past few weeks, a competitor has been trying to discredit EarthWool®
claiming that our insulation is ‘bendy, slumpy, bulgy and bursty’.
Enough is enough.
We know Earthwool® is made using state of the art German technology and is arguably the best insulation in the world. We provide a 50 year warranty to prove it.
Here’s just a few reasons why our competitor is feeling left out in the cold:
The word ‘competitor’ was printed in a red/purple hue.
[46] At about the same time BFNG issued by email a press release containing essentially similar statements. That press release also announced a special purchase offer for EARTHWOOL® insulation. In order to take up that special offer it was necessary for purchasers to enter as the “promo code” the words “TASMAN-BS”.
[47] Tasman took objection to that advertisement because it considered that the reference to “a competitor” was intended to be a reference to Tasman. Tasman considered that the statement thus attributed to it was false and misleading in as much that Tasman had not released any statement in which it had tried to discredit the defendants’ EARTHWOOL® product by referring to it as “bendy, slumpy, bulgy and bursty”. Correspondence was exchanged between A J Park and James & Wells on this and other matters.
[48] The second of Tasman’s initiatives was the demonstration which Tasman called the “Titanic test”. In the last quarter of 2012 and in the first quarter of 2013 demonstrations were provided at a number of outlets which stocked PINK®BATTS®
products involving a comparison of the Tasman PINK®BATTS® insulation and the
Knauf EARTHWOOL® insulation. The instructions provided by Tasman to its staff performing the demonstrations stated:
TITANIC
Test Kit Instructions
Objective: Demonstrate this test to as many builders as you can
Target: 10 sessions before the 16th of November 2012
Test Kit instructions:
1. Place white cardboard liner on table – it allows the water colour change to be observed
2. Fill test containers with water
3. Place the container on the white cardboard
4. Float one sample of each product on its side in the container
5. Wait for 1-2mins. Do not leave product in for more than 5mins
6. Allow observers to observe (No need to comment)
7. Remove samples. Place in zip lock bag. Do not leave anything on site or allow photos etc.
8. Collect business cards of all observers write date, session number out of 10 on the back of the business card and send back to TINZ Head office
9. Dispose of samples in public rubbish bins off site
Prize for the TM that has completed all 10 sessions and has had the most observers in before the 16 November 2012.
[49] One such demonstration occurred on the morning of 5 February 2013 at a builders’ breakfast held at Carters, Petone, Lower Hutt hosted by Tasman. The demonstration involved placing a small piece of Tasman’s PINK®BATTS® insulation and a small piece of Knauf’s EARTHWOOL® insulation each in separate containers of
water. After a period of minutes the water permeated the EARTHWOOL® product and
it sank to the bottom of the bowl with the water in the bowl becoming discoloured. However the PINK®BATTS® product remained floating in its container for the period during which the presentation was conducted.
[50] Tasman’s third initiative was its statement concerning the compression ratios of the packaging of its product, the context for which is as follows. In the promotional materials for EARTHWOOL® a number of statements were made to the effect that its packaging achieved improved compression with more square metres per bag with consequential reduced demands for space for storage compared with other insulation. Indeed a number of quite specific statements were made at various points in time on the website including the statement that “up to 7 times as much insulation is contained in a single pack of EARTHWOOL® compared to traditional glass wool and polyester insulation”.
[51] While it was not clear whether Tasman’s statements were made as a reaction to the EARTHWOOL® promotional material, in its publication “Our Sustainable Future” Tasman claimed on pages 4-5 that its PINK®BATTS® products were “on average over
7:1 compression packed to reduce transport emissions”. The same claim was made in
“Element”, a New Zealand Herald supplement in August 2012.
[52] Subsequently in January 2013 Knauf commissioned McGlade Consulting Group
Ltd (“MCGL”) to order independent testing to verify Tasman’s compression ratio claim.
MCGL purchased six packs of Tasman’s PINK®BATTS® insulation (four packs of wall insulation (90mm) and two packs of ceiling insulation (180mm)) from a Placemakers store in Auckland and sent them to SGS New Zealand Ltd in Auckland for analysis.
[53] SGS conducted tests the results of which showed a variance of compression ratios from as low as 2.19:1 to as high as 7.39:1. In the majority of instances the compression ratio was an average of 5:1 or below. Those results provided the impetus for the defendants’ “compressibility” counterclaim under the Fair Trading Act.
The website
[54] At the outset of the litigation Tasman’s trade mark infringement claim was confined to the use of the words “batts” on the packaging of the imported EARTHWOOL® product. However subsequently Tasman took objection to use of the words “batt” or “batts” on the website which was controlled by BFNG. Two different complaints were made.
[55] First, on the website the following statement appeared:
The unique compression packaging of EarthWool® has increased the quantity of batts in every bag and therefore increased the m² per bag.
[56] Secondly, BFNG had also used the word “Batt” in the HTML code on the website. This computer code, which is not visible on the landing page of the website, can be accessed and viewed by an internet user. What the user would see would be the notation “Batt%20MastaBag.jpg”. BFNG had used the code “Batt” so that an internet
user searching for the trade mark BATTS® could be directed to the
website and the differently branded products marketed there.
[57] Although it ceased to refer to “batt” or “batts” on the packaging of its product, Knauf continued to import into New Zealand its EARTHWOOL® branded product. That product was marketed by Eco Insulation on the website and by BFNG on the website. Tasman alleged that that activity was misleading and deceptive conduct in breach of ss 9 and 10 of the Fair Trading Act because it conveyed the impression that the Knauf product was made from the wool of sheep or other animals when it was not.
[58] With reference to Knauf’s use of the EARTHWOOL® brand Tasman drew attention to the mode of presentation of the brand with the word “earth” printed in orange and the word “wool” printed in green above the caption “the feel good insulation”. Tasman’s complaint was that such use would cause consumers to be misled or deceived into believing that the EARTHWOOL® insulation products were made predominantly from a natural product, including sheep’s wool and wool from other types of animals, when in fact they were made from recycled glass bottles, sand and other materials.
The website
[59] In relation to the marketing of EARTHWOOL® on the website, two specific complaints were made by Tasman. The first was the presence of the following statement:
The award winning innovators behind the use of natural wool in home insulation in New Zealand.
This was set against the image of a house wrapped in a knitted scarf (which Tasman contended was woollen) together with the EARTHWOOL® mark, the words “wool insulation” and a prominent link to a page entitled “Advantages of Wool”.
[60] The second complaint concerned the following statements on the page entitled
“Advantages of Sheep’s Wool”:
Research shows that wool retains indoor air pollutants such as sulphur dioxide, nitrogen dioxide, and formaldehyde, which are emitted from gas stoves, heaters and building materials;
Our products are safe to handle and easy to install. No protective clothing is necessary;
Contains no carcinogenic chemicals. No asbestos or glass fibres. No toxic glues;
Our products are manufactured in New Zealand from pure, natural New Zealand wool;
A pure, natural safe product, wool helps protect our environment.
[61] Tasman also took objection to the manner in which BFNG promoted the EARTHWOOL® product on the website. In particular it drew attention to the following statement:
EarthWool® provides installers and home-owners with unrivalled benefits not associated with traditional glass wool or polyester.
[62] Tasman alleged that that conduct was liable to mislead the public as to the nature, manufacturing process or characteristics of Knauf’s EARTHWOOL® insulation products and in particular was likely to mislead or deceive consumers into believing that those products were made predominantly of a natural product including sheep’s wool and wool from other types of animals.
[63] The various statements and activities recited above resulted in claims and counterclaims alleging contravention of the Fair Trading Act 1986 being added to the litigation concerning the alleged infringement and invalidity of Trade Mark 105507.
Pleadings and issues
[64] At trial the most recent iteration of the parties formal cases comprised Tasman’s third amended statement of claim, the defendants’ fourth amended statement of defence and counterclaim and Tasman’s reply (albeit in response to an earlier version of the defence). In order to further define the scope of the hearing the parties participated in an Issues Conference on 30 July 2013 which led to the compilation of a List of Issues for Trial.
Trade mark issues
[65] Tasman alleges infringement by Knauf’s importation of insulation materials featuring the words “batt” and “batts” on the packaging or on a label attached to the packaging of EARTHWOOL® insulation. Tasman alleges infringement by BFNG by its use of the trade mark on the website in the two respects described in [55] and [56] above. In opening Mr Miles QC abandoned an allegation of infringement by Knauf and BFNG in connection with the use of the promo code
“TASMAN-BS” in the press release in August 2012.
[66] The defendants deny that they have infringed Tasman’s trade mark: they say that they used the word “batt” and/or “batts” in accordance with honest practices in industrial or commercial matters as a sign to indicate the kind, intended purpose or other characteristics of their goods, relying upon s 95 of the Act, and not as a trade mark.
[67] The defences and counterclaim involve a two-pronged attack:
(a) New Zealand trade mark registration 105507 BATTS® is not a valid registration and should be revoked pursuant to s 66(1)(c) of the Act because, in consequence of acts or inactivity of Tasman, “batts” is and had become by the alleged date of infringement a common name in general public use to describe insulating materials (typically rectangular in shape) and consequently does not and cannot function as a trade mark; and
(b)New Zealand trade mark registration 105507 BATTS® is not a valid registration and should be revoked pursuant to s 66(1)(a) of the Act because at no time during a continuous period of three years or more did Tasman put trade mark registration 105507 to genuine use in the course of trade in New Zealand in relation to insulating materials being the goods in respect of which the trade mark is registered.
[68] Knauf and BFNG also counterclaim against Tasman alleging that Tasman’s proceedings are unjustified proceedings in terms of s 105 of the Act as a consequence of the three trade mark issues raised, namely:
(a) the s 95 defence;
(b) the s 66(1)(a) genuine use challenge; and
(c) the s 66(1)(c) genericism challenge.
[69] Reflecting the logic that trade mark infringement and revocation claims are best dealt with in reverse order6 the List of Issues for Trial (amended to reflect the developments in Tasman’s opening) structured the trade mark issues in the following way:
Revocation
[1] Does [Tasman’s] use of “Pink Batts” and “Batts” constitute genuine use of the BATTS® trade mark: s 66(1)(a), Trade Marks Act 2002? [It is accepted that [Knauf] is an aggrieved person.]
[2] Has the BATTS® trade mark become a common name in general public use for insulating materials in consequence of the acts or inactivity of [Tasman]: s 66(1)(c), Trade Marks Act 2002?
Trade mark infringement
[3] Does [Knauf’s and/or BFNG’s] use of:
(a) the words “batt” or “batts” on the packaging of the “Earthwool”
insulation products;
(b) [deleted]
(c) the words “batt” or “batts” on the website of a sign;
2. In the course of trade? [4] If so, is the sign either:
1. Identical to the BATTS® trade mark; or
2.Similar to the BATTS® trade mark such that the use would be likely to deceive or confuse?
[5] Do [Knauf and/or BFNG] have an available defence under s 95 of the
Trade Marks Act 2002?
[6] Do [Knauf and/or BFNG] have an available defence (and counterclaim for revocation) on the basis of alleged genericism pursuant to s 66(1)(c) of the Trade Marks Act 2002?
Unjustified proceedings
[7] Was [Tasman] not justified in bringing the trade mark infringement proceedings against [Knauf and/or BFNG]?
6 Anheuser-Busch Inc v Budweiser Budvar National Corporation [2001] 3 NZLR 666 (HC) at [29].
Fair Trading Act issues
[70] Tasman alleges various contraventions of the Fair Trading Act 1986 by each of the defendants. Knauf counters with allegations of contraventions by Tasman. The essence of those several allegations is captured in paragraphs 8-13 of the List of Issues for Trial:
Fair Trading Act 1986: “Earthwool” brand
[8] Is [Knauf’s] “Earthwool” brand, the use of the “Earthwool” name, and the way in which the “Earthwool” product was distributed and marketed:
1.Liable to mislead the public as to the nature, manufacturing process or characteristics of the “Earthwool” insulation products, in particular that the products are made of sheep wool or wool from other types of animals when they are not;
2.Misleading or deceptive, or likely to mislead or deceive the public into thinking that the products are made of sheep wool or wool from other types of animals when they are not?
[9] Is the manner of Eco Insulation’s sale, advertising, and marketing of the “Earthwool” product on its website as pleaded in paragraphs 18 – 22 of the third amended statement of claim liable to mislead the public as to the nature, manufacturing process or characteristics of the “Earthwool” product, in particular
(i) That the “Earthwool” product is made of sheep wool or wool from other types of animals when it was not and
(ii) As the said website fails to distinguish between the “Earthwool” product and another insulation product made from wool distributed by Eco Insulation?
[10] Is the manner in which the “Earthwool” insulation products are being
marketed on the website as pleaded in paragraphs
35 – 36 of the third amended statement of claim;
1.Liable to mislead the public as to the nature, manufacturing process or characteristics of the “Earthwool” insulation products advertised on the website, in particular that the products are not made from glass or polyester but are instead made of sheep wool or wool from other types of animals when they are not;
2.Misleading or deceptive or likely to mislead or deceive the public into thinking that the “Earthwool” insulation products are not made from glass or polyester but are instead made of sheep wool or wool from other types of animals when they are not?
[11] Did Tasman use the alleged discrediting words referred to as paraphrased in the press release by [Knauf and/or BFNG] on 26 August
2012 asserting that “a competitor” had been trying to discredit the
“Earthwool” brand of insulation products?
Fair Trading Act 1986: Tasman’s conduct
[12] Was the statement, that PINK®BATTS® insulation products are on average over 7:1 compression ratio packed, accurate?
If the statement was not accurate;
1. Was it misleading or deceptive or likely to mislead or deceive;
2.Was it liable to mislead the public as to the nature, manufacturing process, characteristics, suitability for purpose or quantity of goods;
3.In connection with the supply or possible supply of goods or with the promotion by any means of the supply or use of goods, was it a false or misleading representation that goods are of a particular kind, standard, quality, grade, quantity, or composition?
[13] Are the presentations comparing Tasman’s insulation products with the
“Earthwool” brand of insulation products by placing both products in water;
1. An acceptable comparison of those products?
2. If not, then were presentations:
a) Misleading or deceptive or likely to mislead or deceive;
b)Liable to mislead the public at to the nature, manufacturing process, characteristics, suitability for purpose or quantity of goods?
[71] In opening, without admissions of liability, Tasman offered undertakings to the
Court in relation to the defendants’ counterclaims as follows:
(a) No average compression claim will be made in relation to Tasman products again in the future; and
(b)The comparative product presentations complained about by Knauf will not be repeated in the future.
Issue 1: Has there been genuine use of the BATTS® trade mark?
[72] Registration of a trade mark in New Zealand confers exclusive rights to the use of that mark reflected in the prohibitions on use detailed in Part 4 of the Act. However
the philosophy which underpins the Act is one of “use it or lose it”. Reflecting that
philosophy s 66(1)(a) provides:
66 Grounds for revoking registration of trade mark
(1) The registration of a trade mark may be revoked on any of the following grounds:
(a) that at no time during a continuous period of 3 years or more was the trade mark put to genuine use in the course of trade in New Zealand, by the owner for the time being, in relation to goods or services in respect of which it is registered:
...
(1A) For the purposes of subsection (1)(a), continuous period means a period that commences from a date after the actual date of registration and continues uninterrupted up to the date 1 month before the application for revocation.
[73] The application for revocation having been filed on 23 November 2011, the continuous period of three years for consideration in the present case ran from
23 October 2008 to 23 October 2011.
[74] Section 67 addresses the issue of the onus of proof in relation to an application for revocation under s 66(1)(a). It provides:
67 Onus of proof for revocation of registration of trade mark for non- use
If an owner or a licensee intends to oppose an application for the revocation of the registration of a trade mark under section 66(1)(a) …, the owner or the licensee must, within the period specified by the Commissioner or the Court,—
(a) provide proof of the use of the trade mark if the ground in section
66(1)(a) forms the basis for the application;
[75] Tasman’s argument was that it need only establish that during the continuous three year period BATTS® was put to genuine use in the course of trade in New Zealand by Tasman in relation to insulation materials. “Genuine use” includes actual use of the mark in a manner consistent with the essential function of a trade mark as a badge of
origin.7 Tasman contended that its use of BATTS® in advertising campaigns and on its
7 Ansul BV v Ajax Brandbeveiliging BV [2003] RPC 40 (ECJ) cited on this point in Sambbasivam v
Chetty (2011) 94 IPR 214 (HC).
insulation products sold on the insulation market during the three year period plainly amounted to genuine use.
[76] The defendants’ argument did not challenge the fact that the word “batts” had been used by Tasman. Rather it involved the proposition that there was no evidence that any product produced by Tasman had been marketed under or by reference to the word BATTS alone. The defendants submitted that all relevant products had been branded PINK®BATTS® and that such usage had been a deliberate course of conduct in
accordance with the direction in, for example, the 2007 style guide8 that the trade mark
BATTS® should never be used alone but always in association with the licensed trade mark PINK®. In opening Mr Elliott QC described the trade mark as being at its highest point a limping mark9 by design. In closing the defendants reconsidered that stance as being far too generous.
[77] On the basis that the evidence showed, or should be interpreted as showing, that BATTS (on its own) had not been used as a trade mark, the defendants’ contention was that the only real question was whether the use of the word BATTS in the context of PINK BATTS amounted to genuine use. Reliance was placed on passages from the dissenting judgment of Lockhart J in Johnson & Johnson Australia Pty Ltd v Sterling
Pharmaceuticals Pty Ltd10 who viewed the use of the term “caplets” as being
descriptive of a dosage form and not as an association in a trade mark sense.
[78] On the issue of descriptive use not amounting to genuine trade mark use, Tasman argued that the majority judgments of Gummow and Burchett JJ in Johnson & Johnson were to be preferred, drawing attention in particular to the following passage from the judgment of Burchett J:11
In my opinion, this aspect of the appeal fails. The respondent’s packets of Panadol and Panadeine each bore the word “Caplets”, quite prominently displayed immediately after the word “Panadol” and the word “Panadeine”. In each case, an asterix directed attention to a notification of the fact that “Caplets” as well as the other brand name, is a registered trade mark. These packets also
8 See [165] below.
9 Adopting Jacob J’s description of a secondary mark as a “limping” trade mark in Philips Electronics
BV v Remington Consumer Products [1998] RPC 283 (Patents Court) at 296.
10 Johnson & Johnson Australia Pty Ltd v Sterling Pharmaceuticals Pty Ltd (1991) 101 ALR 700 (FCA) at 713.
11 At 719-720.
bore writings describing the form of the contents by the word “tablet”, and
stating the quantity as a specified number of “capsule-shaped tablets”.
In that context, I think that the use of the word “Caplets”, in association with the words “Panadol” and “Panadeine” and with a statement that each is a registered trade mark, must be regarded as trade mark use. If it is not, I have difficulty in seeing how the respondent could have made a trade mark use of its registered trade mark, which must (by virtue of s 59 of the Act) be deemed to have been validly registered.
[79] Tasman submitted that the law is clear that the use of a registered trade mark, even if solely in conjunction with other trade marks, is “use” for the purposes of s 66(1)(a) and is therefore sufficient use to protect the registered trade mark from removal.12
[80] Certainly there is no rule that a secondary or even a third level product identifier cannot be a trade mark.13 Such secondary or even third level product identifiers can function as trade marks if they indicate to the consumer that the product originates from a particular undertaking.14 Each case will depend on its own facts. While there is no New Zealand authority directly on point, I consider that the principle finds support in the acceptance by the Court of Appeal in Fredco Trading Ltd v Miller15 of the proposition that it is possible for a mark to acquire distinctiveness even as part of another mark. The Court noted that that was the conclusion of the European Court of Justice in Société des produits Nestlé SA v Mars UK Ltd16 and quoted the following passage:17
Yet, such identification [as originating from a given undertaking], and thus acquisition of distinctive character, may be as a result both of the use, as part of a registered trade mark, of a component thereof and of the use of a separate mark in conjunction with a registered trade mark.
[81] If it is possible for a sign to acquire distinctive character as a result of its use in conjunction with a registered trade mark, then it must follow in my view that the use of
12 George Weston Foods Ltd v Manildra Flour Mills Pty Ltd (1999) 47 IPR 145 (IP AUST); Safari Trade Mark [2002] RPC 23 (Trade Mark Registry UK); Levi Strauss & Co v Shah [1985] RPC 371 (EWHC); Richemont International SA v Da Vinci Collections Pte Ltd [2006] SGHC 150, [2006]
4 SLR (R) 369 (Singapore).
13 Safari Trade Mark, above n 12 at [21].
14 Richemont International, above n 12, at [14].
15 Fredco Trading Ltd v Miller (2006) 8 NZBLC 101,761 (CA) at [81].
16 Société des produits Nestlé SA v Mars UK Ltd (Judgment) (ECJ Second Chamber) C-353/03, 7 July
2005 at [30].
17 At [30] (emphasis added).
the former sign (once registered as a trade mark) in conjunction with another registered trade mark is not disqualified from consideration as genuine use for the purposes of s 66(1)(a).
[82] In my assessment Tasman’s manner of use of “BATTS” in its advertising campaigns and on the packaging of its insulation products was not as mere description (in the manner which the defendants contend was Knauf ’s style of use of the words “batt” and “batts” in the installation instructions on the EARTHWOOL® packaging18) but as a trade mark. It was plainly a use of the word in a style calculated to signal that its role was to denote the source of the goods and hence to function as a badge of origin. This was reinforced by the requirement that the trade marks be used as an adjective, not as a noun: i.e. PINK BATTS INSULATION.19
[83] That the mark BATTS was being used by Tasman as a trade mark was supported by the fact that in several instances the word was marked with the symbol ®. As the hearing officer remarked in the George Weston case:20
... The kangaroo is marked with a symbol ®, not just once but twice. This can have no purpose except to put anyone who cares to look on notice that the kangaroo device is a registered trade mark.
... The latter question [the use or non-use of a particular trade mark] should, in my opinion, allow a careful examination of all of the elements in use. When that is done here, the symbol ®, carefully used for an obvious purpose, must tip the scale.
[84] Consequently I reject the arguments that there was non-use or no genuine trade mark use by Tasman of the BATTS® trade mark during the relevant continuous three year period. The first counterclaim is accordingly dismissed.
Issue 2: Has the BATTS® trade mark become generic in New Zealand?
The law
[85] The issue of genericism of trade marks was formerly addressed in s 24(1) of the
Trade Marks Act 1953 which provided that the registration of a trade mark would not be
18 See [181] below.
19 See [160] below.
20 George Weston, above n 12, at 150.
deemed to have become invalid by reason only of any use, after the date of registration, of a word or words as the name or description of an article. That saving was subject to two provisos, the first of which was:
(a) That there is a well known and established use of the word or words as the name or description of the article or substance by person or persons carrying on a trade therein, not being use in relation to goods connected in the course of trade with the proprietor or a registered user of the trade mark ...
[86] Where the proviso applied, and if the trade mark consisted solely of that word or words, the registration of the trade mark was deemed for the purposes of s 41 to be an entry wrongly remaining on the register so far as regards registration in respect of the article or substance in question or of any goods of the same description.
[87] It is apparent from the legislative history21 that s 66(1)(c) (clause 67(1)(c) at the time of drafting) reflects a change from the approach in former s 24:
Grounds for revoking registration of a trade mark
Clause 67(1)(c) provides that a registered trade mark may be revoked if the trade mark has become a common name in general public use. This is a shift from the Act where a trade mark may be revoked if it has become a common name in trade use.
This change is based on a specific policy decision concerning the grounds on which a trade mark registration may be revoked. The rationale for the decision is that a trade mark is a marketing tool. If a trade mark is used generically by the public it ceases to be able to function properly as a trade mark as it is no longer able to distinguish the owner’s goods and services from those of other persons.
Owners are expected to take action to safeguard against a trade mark becoming a common name in general public use. For example, owners must use their trade marks correctly, as adjectives not nouns, for example in advertising, the term ‘Levi jeans’ should be used, and not just “Levi’s’ to prevent Levis becoming a generic term.
[88] Giving effect to that legislative policy s 66(1)(c) provides:
66 Grounds for revoking registration of trade mark
...
21 Trade Marks Bill 2002 (142-1) (Select Committee report) at 4-5.
(c) that, in consequence of acts or inactivity of the owner, the trade mark has become a common name in general public use for a product or service in respect of which it is registered:
[89] Section 66(1)(c) has its genesis in s 22(1)(c) of the Trade Marks Act 1998 (Singapore) which in turn is materially identical to s 46(1)(c) of the Trade Marks Act
1994 (UK). It will be noted that an applicant for revocation alleging genericism must prove only that the trade mark has become “a” common name in general public use, not “the” name in general public use. Although the legislation in both England and Singapore includes the definite article, those equivalent provisions have been interpreted to mean that it is sufficient to demonstrate that the mark is “a” common name in the trade.22
[90] The English provision is also different to the extent that it continues to refer to the trade mark becoming a common name “in the trade” for a product or service. However reference to “in the trade” has been interpreted expansively. In particular in Bjornekulla Fruktindustrier AB v Procordia Food AB23 the Court of Justice of the European Communities (Sixth Chamber), after considering the different language versions of Article 12(2)(a) of the Trade Mark Directive, said:24
In general, the perception of consumers or end users will play a decisive role. The whole aim of the commercialisation process is the purchase of the product by those persons and the role of the intermediary consists as much in detecting and anticipating the demand for that product as in increasing or directing it.
Accordingly, the relevant circles comprise principally consumers and end users. However, depending on the features of the product market concerned, the influence of intermediaries on decisions to purchase, and thus their perception of the trade mark, must also be taken into consideration.
[91] The burden of proof which an applicant for revocation must satisfy has been described as a heavy burden.25 Proof that the mark has become a common name must
22 Hormel Foods Corporation v Antilles Landscape Investments MV [2005] EWHC 13 (Ch), [2005] RPC 28; Wing Joo Long Ginseng Hong (Singapore) Co Pte Ltd v Quinghai Xinyuan Foreign Trade Co Ltd [2009] FSR 13.
23 Bjornekulla Fruktindustrier AB v Procordia Food AB [2004] RPC 45, (ECJ Sixth Chamber).
24 At [24]-[25].
25 Wing Joo, above n 22, at [59].
be established by cogent evidence.26 The nature of the task is discussed in Kerly’s Law
of Trade Marks and Trade Names:27
Whether a mark has become the common name in the trade for a product or service is a question of fact to be decided in the circumstances. It is a qualitative test rather than quantitative. This ground depends on the evidence put forward in support of it. A tribunal would expect to see substantial independent evidence relating to the relevant product or service market. The evidence might come from surveys (as in Bjornekulla) or from persons of standing within the trade or from trade organisations and the like, showing the mark in use as the common name in the trade for a relevant product or service.
[92] Whether a trade mark has become “a common name in general public use” is a question of degree.28 The word “common” suggests that the use of the name must be established or widespread in the trade for the relevant goods.
[93] What is clear in all comparable jurisdictions is that merely some descriptive use of a registered trade mark does not make it a common name in the trade.29 Similarly, where a mark has become a household name, some use by way of synecdoche does not mean the mark has become truly generic or that such use is due to the acts or inactivity of the owner. Consumers who are aware of the trade mark significance of a name may nevertheless use it on occasion in a purely generic sense.
[94] Tasman’s submissions illustrated this by reference to use of the GOOGLE® trade mark:30
The GOOGLE® example referred to in the OHIM Manual for Cancellation Proceedings is illustrative of synecdoche use of a trade mark. When someone is doing research on the internet they may say that they will “google”, but this shorthand does not make the GOOGLE® trade mark a generic term. This “shorthand” does not mean that the source indication function of the mark has been lost.
[95] The ability of a mark to retain its source significance while occasionally being used by way of synecdoche was specifically recognised by Richard Arnold QC in
Hormel:31
26 Rousselon Frères et Cie v Horwood Homewares Ltd [2008] EWHC 1660 (Ch), [2008] RPC 30 at
[85].
27 Kerly’s Law of Trade Marks and Trade Names 15th ed, (Sweet & Maxwell, London, 2011) at [10-
119].
28 Kerly, above n 27, at [10-123].
29 Kerly, above n 27, at [10-123].
30 Tasman’s closing submissions at [36].
As to s 46(1)(c), since 1938 the claimant’s mark has become a household name. In such circumstances it is not surprising that occasionally it is used by way of synecdoche to stand for canned luncheon meat generally in the same way as, for example, PERRIER is sometimes used to stand for carbonated mineral water generally (the synecdoche being the use of the species to stand for the genus). This does not mean that it has necessarily become truly generic, still less that this is due to the acts or inactivity of the claimant.
[96] The applicant for revocation also carries the burden of proving the causation element, namely that the state of the trade mark being a common name in general public use is as a consequence of the acts or inactivity of the owner. This causation requirement was discussed in what appears to be the only New Zealand case to consider s 66(1)(c), DB Breweries Ltd v Society of Beer Advocats Inc,32 in which it was held that RADLER was not generic for beer. The Assistant Commissioner of Trade Marks there said:33
120.The “acts” component plainly refers to use of the mark by the owner in a manner that undermines its ability to distinguish the products or services of the trade mark owner from those of other undertakings.
121.The inactivity component is less obvious, but must plainly relate to situations where use has been made of the mark by another party in a manner that undermines its distinctive character and the owner has not taken steps to prevent this.
[97] Although in Hormel34 Richard Arnold QC suggested that a proprietor who registers a highly descriptive trade mark bears “a heavier burden” to take steps to prevent it becoming a common name from one who registers an inherently distinctive mark, the burden of proof of causation remains on the applicant.
Decision of Commissioner of Trade Marks of 17 March 1977
[98] The registration history for Trade Mark 105507 is noted in a decision of Assistant Commissioner K S Dalefield delivered in the context of a hearing of applications for rectification in respect of the registered trade marks ZEROBATT, THERMOBATTS, INSULBATTS AND BATTSULATION. The decision records that the application to register Trade Mark 105507, which was only made on 27 August 1973
some three months after the applications for rectification were made, was advertised in
31 Hormel, above n 22, at [176].
32 DB Breweries Ltd v Society of Beer Advocats Inc [2011] NZIPOTM 19.
33 DB Breweries, above n 32, at [120]-[121].
34 Hormel, above n 22, at [172].
the usual way, was open to opposition for three months from the date of the advertisement and, no notice of opposition having been filed, the application proceeded to registration in the normal manner.
[99] Consideration of the applications for rectification raised the issue, which was argued before Assistant Commissioner Dalefield, whether the word “BATTS” was generic. As Mr Dalefield recognised, he would have been placed in a most difficult position were he to have found that the word “BATTS” was generic (and hence insisted on disclaimers in the cases before him) when there was extant on the Register a mark consisting of the word “BATTS” alone, namely Trade Mark 105507.
[100] He concluded:
It seems to me for the reasons given above that I must find that the applicant for rectification has not discharged the onus placed upon it of proving that the word BATTS is generic and that I should therefore dismiss its applications. However, that is not to say that I find that the word BATTS is not generic. I am mindful of the possibility that the word might be generic, that registration No. 105507
BATTS exists and that whatever the reason, no action has been taken by the applicant for rectification in respect of this mark. For these reasons I am of the opinion that at this stage disclaimers of the word BATTS should not be required in respect of registrations 86531 ZEROBATT, B90168 THERMOBATTS, B90169 INSULBATTS and B90829 BATTSULATION.
[101] The defendants contended that this decision was relevant to the present litigation because it demonstrated that:
(a) from the outset the BATTS trade mark operated as a type of “pseudo” or “shadow” mark, at all times forming part of other “real” marks until BATTS® was registered in 1973;
(b)the risk of the mark being or becoming generic must have been apparent from at least 1977 such that Tasman and its predecessors must have known that a serious question mark hung over the mark in terms of its being generic; and
(c) from at least 1977 onwards Tasman and its predecessors must have known that the BATTS® trade mark was at real risk.
[102] Tasman submitted that the decision, which did not concern the BATTS® trade mark registration itself, provided no basis for the defendants’ submission because the decision said nothing about the factual distinctiveness of the BATTS® mark in 1973, let alone as at the relevant date in 2011. Tasman made the further point that the defendants’ argument baldly ignored the statutory presumption as to validity of registration in s 75 of the Act.
[103] I apprehend that one reason for the defendants referring to that decision was in support of their contention that the word “batts” was a factually generic term prior to Tasman’s predecessor securing a trade mark registration. Notwithstanding the period of registration, the defendants contended that a fundamental issue was whether BATTS was ever capable of functioning, and did in fact function, as a trade mark. It was suggested that its use as a descriptive term overseas, and allegedly in New Zealand, raised the question as to how the trade mark registration was secured in the first place.
[104] I do not accept that contention. This is not an appeal from a decision to register the trade mark. That registration has been on foot since 1973. Tasman’s point about the presumption as to validity is well made. In order to succeed, the current application must satisfy the requirements of s 66(1)(c) which do not involve an inquiry into the sufficiency of the original application for registration. However the focus on initial registration, together with the defendants’ reference to Tasman’s apprehension of the
risk of the mark becoming generic in the period from at least 1977 onwards,35 serves to
highlight the important issue of the baseline in time for the consideration of the
defendants’ genericism attack.
An issue of retrospectivity
[105] The date on which the relevant parts of the Act came into force was 20 August
2003.36 Given the reference to events prior to that date, and indeed as far back in time as 1977 (Knauf claimed to rely on evidence of alleged misuse and neglect “well before the Internet age”) questions arose as to the relevance of evidence prior to that date.
There were two aspects to this issue. The first, and perhaps more obvious, question was
35 A schedule B annexed to the defendants’ closing submissions intended to summarise acts and
inactivity by Tasman extended back to 1983.
36 Trade Marks Regulations 2003, reg 2.
whether acts or inactivity of the trade mark owner prior to 20 August 2003 can be taken into account in the consideration of the question whether the trade mark has become a common name in general public use.
[106] The second question followed from the fact of the causative component. If only acts or omissions since 20 August 2003 are relevant then, since the state of being a common name in general public use must be as a consequence of the acts or omissions, was evidence of the state of the trade mark prior to that date relevant?
[107] Whereas there are specific transitional provisions in respect of applications for revocation under s 66(1)(a) and (b),37 there is no transitional provision in respect of applications under s 66(1)(c). Consequently the question falls to be determined by reference to general principles.
[108] Although s 7 of the Interpretation Act 1999 states that an enactment does not have retrospective effect, that is qualified by s 4 which provides that the Interpretation Act prevails unless another enactment provides otherwise or the context of that other enactment requires a different interpretation. Consequently s 7 establishes a presumption that an enactment is not retrospective.
[109] The strength of the presumption depends on the nature and degree of the injustice that would result from the statute being given retrospective operation. Where palpable injustice would result the presumption should be given its fullest weight. On the other hand, where it might be considered to cause some injustice to one party but is clearly required to rectify manifest injustice to others, there would seem little reason to
give much weight to the presumption.38 The ultimate question is one of the construction
of the statute.
[110] One of the purposes in the statement of purpose section, in s 3(a) of the Act, is to clearly define the scope of rights protected by registered trade marks. That purpose statement reflects the emphasis in the Hansard material on the purpose of the Act being
to clarify and provide certainty for the operation of trade mark law. Such emphasis on
37 Trade Marks Act 2002, ss 208(4)-(7).
38 Doro v Victoria Railway Commissioners [1960] VR 84 (Vict SC) at 86 per Adam J.
clarity and certainty suggests that it is unlikely that the Act was passed with the intention that it would have retrospective effect save to the extent that that is addressed in the several focused transitional provisions.39
[111] Consequently I consider that the presumption against retrospectivity is not rebutted. It follows that whether the trade mark has become a common name in general public use can only be considered to the extent that such a state of affairs has occurred as a result of the acts or inactivity of Tasman since 20 August 2003.
The defendants’ evidence
[112] The defendants’ case that BATTS® has become a common name in general public use was primarily based on two sources of evidence: material from Trade Me and an analysis of the collection of discovered material.
[113] In May 2012 the operators of the New Zealand auction website, trademe.co.nz, provided to Knauf’s New Zealand attorneys a spreadsheet which contained all listings incorporating the word “batt” and “batts”. These were listings posted by private sellers (as one-off sales) and trades people on trademe.co.nz since 10 April 2002, which it appears is the first date from which Trade Me’s data is available.
[114] Because a number of the listings were for irrelevant products (e.g. batteries), Mr Hanssens, the marketing coordinator of Knauf Australia, was tasked with filtering out those irrelevant listings so that the instances of use related only to insulation. The filtering process removed 10,470 listings leaving 12,653 potentially relevant listings.
[115] Mr Hanssens then sorted the remaining information into five colour-coded categories (by reference to the title and the body of the listings):
1. “Pink Batts” used in the title and body, or just title of the listing (pink);
2. “Pink Batts” in the title and “batts” in the body of the listing (light blue);
3. “Batts” in the title and “Pink Batts” in the body of the listing (dark blue);
4. “Batts” in the title and/or body of the listing; no reference to “Pink Batts”
(orange); and
39 Sections 202-209.
5. No reference to “Pink Batts” or “batts” in the title; “Pink Batts” used in
the body of the listing only (yellow).
[116] In response to criticism by Tasman Mr Hanssens re-filtered the spreadsheet to remove certain other entries which were not for insulation products. The end result for the period between 2002 and 2012 for the five categories described above were:
1. 6417 listings;
2. 1870 listings;
3. 321 listings;
4. 2383 entries;
5. 1318 entries.
[117] Those figures were adjusted again during cross-examination to remove entries subsequent to November 2011, being the date of commencement of the proceeding. From the orange category 183 entries were removed for this reason, leaving approximately 2200 listings40 in that fourth group.
[118] Mr Hanssens explained that the spreadsheet was designed to be an unbiased illustration of the use of the word “batts” in New Zealand society. He made the point that, while it was possible that entries where “batts” had been used would be references to “Pink Batts” insulation products, the spreadsheet contained listings where the word “batts” was being used descriptively in relation to insulation products that were not “Pink Batts” products.
[119] Tasman was critical of this volume of material suggesting that the defendants had in effect “trawled” through the internet. The defendants were uncontrite. Inferring that Tasman’s description was to liken the exercise to a fishing expedition, the defendants contended that, when the need arises to show what is in the public mind, then the public domain is the principal place to source such evidence.
[120] I accept the defendants’ contention as to the significance of the public mind in a
case such as the present and to that extent I do not consider that Tasman’s criticism is
40 The cross-examination of Ms Roberts proceeded on the basis there were 2204 orange listings.
fairly made. Nevertheless, issues do arise as to the evidential value and hence utility of much of the material derived from that process.
[121] While contending that the Trade Me listings were problematic, in the sense that they did not provide the full context of the listings because the accompanying photographs were not before the Court, Tasman submitted that this evidence supported its case rather than the defendants’ case. Tasman calculated that the 2200 listings in the orange category (where “batts” or “Batts” was used in the title and/or body of the listing without reference to “Pink Batts”) represented 17.8 per cent of the total listings whereas
82.2 per cent of listings included reference to “Pink Batts” in either the title and/or the body of the listing. On a contextual analysis Tasman contended that those were therefore references to Tasman’s PINK®BATTS® products. The defendants did not appear to take issue with Tasman’s calculations.
[122] While fairly acknowledging that there was a certain degree of generic usage disclosed, Ms Roberts explained in cross-examination that a significant amount of what was loose usage would be intended to refer to Tasman’s product:
Q: I mean the numbers are just massive aren’t they?
A: I think, I know you have given some good examples, but in the dark blue group, in the light blue group, in the yellow group, there is also plenty of examples where Pink Batts is, the reference may say “batts” but the product they are referring to is Pink Batts insulation.
Q: But surely when you look at the evidence as a whole the overwhelming impression is that “batts” is used to describe a format of insulation?
A: No, I think it’s this word that Professor Brodie used, which is shorthand,
shorthand for Pink Batts insulation.
Q: So you think the overwhelming impression is that it’s referring to Pink
Batts?
A: Yes. Well 52% already start from that point.
Q: Well you’re probably going to be right, because Pink Batts has got 52%
of the market, so it’s going to be a big player in terms of sales. But –
A: But this is consumers, so consumers are using it correctly, or to refer to our Pink Batts product. Predominantly consumers; there will be builders in there.
Q: So you think the examples that I took you to are really, not really representative of the way in which people are using the word to describe a formatted product?
Ms Roberts stated that the trade audience would be building products people or personnel working with the brand in some 300-350 stores, some of which were small and some quite large.
[353] The presentation first stated that the Knauf product was susceptible to slumping and required strapping with associated photographs of the product installed in a wall and in a ceiling, under the heading “Stiffness”. Then the presentation presented comparative photographs of a piece of both the Tasman and Knauf R2.2 wall products suspended over a horizontal bar at their mid point. The photographs showed that the two ends of the Tasman product had fallen below the horizontal much less than the Knauf product. A statement adjacent to the photograph of the Knauf product stated “5 x as slumpy Over 50° Sag”.
[354] Ms Roberts acknowledged that from an installation point of view references to something that is “bendy” and something that is “slumpy” are references to the same deficiency.
[355] The second presentation, “Why Pink Batts are Superior to Knauf Batts”, was a document of the Australian company Fletcher Insulation. This document featured photographs depicting the comparative sagging susceptibility of the products although not utilising the same photographs as in the first presentation. In addition it contained a page focusing upon the comparative packaging quality of the Pink Batts product and the Knauf product including the statement:
Knauf packaging is prone to tearing and bursting (see image right).
The image referred to was a photograph of a five-high stack of the EARTHWOOL® product with red arrows apparently pointing to some inadequacy in the plastic packaging.
[356] Whereas there was no issue that the first presentation was presented and disseminated in New Zealand, Ms Roberts stated that so far as she was aware the Fletcher Insulation trade presentation was never circulated in New Zealand. In cross- examination she accepted that the document produced for the trade in Australia could have “got back to New Zealand”. However there was no other evidence which
suggested that the Fletcher Insulation document had made it to New Zealand save for its presence as part of the documentation in this proceeding.
Analysis
[357] Clearly the Knauf product was described by Tasman in the “Why Pink Batts Insulation” presentation as “slumpy”. The word “bendy” was not expressly stated. However I consider that the photograph of the EARTHWOOL® product which shows it to be bent to a point in excess of a right-angle clearly conveyed the message, albeit pictorially, that the product was “bendy”.
[358] While the Fletcher Insulation presentation does refer to the Knauf packaging being prone to “bursting”, which I would regard as sufficiently close to “bursty” to conclude that the statement alleged had been made, the evidence does not establish that the Fletcher Insulation presentation was presented or disseminated in New Zealand either to members of the trade or to the general public.
[359] Consequently I consider that the statement in the Sunday Star Times was inaccurate to the extent that it alleged that Tasman had been trying to discredit EARTHWOOL by a claim that it was “bulgy and bursty”.
[360] Consequently the statement was false and misleading to the extent that it included the words “bulgy and bursty” and constituted a contravention of s 13 of the Fair Trading Act.
Issue 12: Was Tasman’s 7:1 compression ratio statement misleading or deceptive?
[361] The events giving rise to the “compressibility” counterclaim under the Fair
Trading Act are recited at [50]-[53].
[362] Knauf’s fourth counterclaim alleged that the Tasman statement that its PINK BATTS products were “on average over 7:1 compression ratio packed” contravened ss 9, 10 and 13 of the Fair Trading Act for the reason that independent testing of the six Tasman products had shown an average compression ratio of 4.348:1, not 7:1. In its reply Tasman stated that its methodology for calculating the compression ratio as across
its PINK®BATTS® products produced an arithmetical average ratio of 7.48:1 but for simplicity it rounded off the ratio to 7:1.
[363] As noted at [71] above, in opening Tasman offered an undertaking (without admission of liability) to refrain from making claims in the future concerning the average compression of its products. Notwithstanding that undertaking, Knauf, as it is entitled to do, seeks a declaration and damages. Hence Issue 12 remains live.
[364] However my decision is specific to the pleaded contravention. It does not extend to what was described in the defendants’ closing submissions as “downstream” claims based upon utilising the compression ratio claims including calculations and claims regarding the environmental impact and benefits of Tasman’s product. In respect of those contentions, Tasman properly took the point that such “downstream” claims had not been pleaded and hence were not an issue in the litigation.
[365] Although there were several aspects to the contest on this issue, a key point of difference was the methodology. Whereas Tasman calculated its compression ratio based on how thick the PINK®BATTS® were before and after packing, the method of calculation of the compression ratio used by SGS was based on the nominal volume (as listed on the packaging) and the measured volume of the packaging.
[366] The testing by SGS was undertaken by Mr Chen, a materials engineer, who detailed the testing process in the various certificates as follows:
Tests for dimension and volume were conducted on the samples supplied. Each sample had it’s (sic) width and height measured at at (sic) its top, middle, and bottom locations. The width and height were then used to calculate the cross- sectional area at each location assuming the sample to have an ellipse cross- section (Area=Pi*Width*Height). The average of the areas was then used to calculate sample volume.
[367] The test results for the PINK®BATTS® R2.2 wall product obtained by Mr Chen were:
Sample
ID
Location
Width
(mm)
Height
(mm)
Area
(mˆ2)
Length
(m)
Volume
(mˆ3)
Nominal
(mˆ3)
Compression
Ratio
R 2.2
Wall
Top
Middle
Bottom
580 478 0.21
1.21
0.26
1.25
4.81:1
586 462 586 456
The nominal volume figure of 1.25 was obtained by multiplying the nominal total area of 13.9 m2 by the nominal thickness of 90 mm.
[368] The chart below summarises, in relation to each of the six products tested, the following:
(a) The SGS measurement in column B;
(b) Tasman’s theoretical finished height in column C; (c) The alleged understatement in column D.
A Product B
SGS actual (minimum) measured and reported bagged pack height (mm)
C Tasman
Theoretical finished
height (mm)
D
The understated amount in mm and % in actual height to theoretical height when using the Tasman theoretical finished height formula
R2.2 Wall
(580mm wide)
456
270
Understated by 186mm,
40%
R2.4 Wall
(580mm wide)
445
270
Understated by 175mm,
39%
R2.6 Wall
(580mm wide)
504
270
Understated by 234mm,
46%
R2.8 Wall
(580mm wide)
482
270
Understated by 212mm,
44%
R3.6 Ceiling
(432mm wide)
372
268
Understated by 104mm,
28%
R5.0 Ceiling
(432mm wide)
395
268
Understated by 127mm,
32%
[369] Tasman’s methodology was explained in the evidence of Mr Banaticla, a quality assurance and process technologist at Tasman. In brief, the average compression ratio was calculated on the average thickness compression against Tasman’s entire PINK®BATTS® product range when each product’s final thickness (after being manufactured but before being packed) is compared to the thickness of that product when packed into the bags in which it is marketed and sold.
[370] The degree of compression of the thickness for a piece of PINK®BATTS® insulation while in the polythene bag (which may contain between 7 and 26 pieces of insulation) depends on a number of factors including:
(a) The thickness of the PINK®BATTS® insulation in that pack; (b) The number of pieces in the pack;
(c) The size and shape of the polythene bag and the equipment used to pack the bags; and
(d)The fact that the thickness compression is comparatively less in the middle and greater at the edges because a bag curves around the stack of pieces of insulation.
[371] Taking those factors into account, Tasman assessed the compression of its product by comparing the height of a stack of insulation before packing against the height of the stack when packed. Because the final shape of a bale is irregular, it is said to be difficult to measure the height of the insulation inside a bag and consequently Tasman calculated the average (nominal) height of a compressed stack of insulation by measuring the available space in the bag.
[372] Mr Banaticla explained that Tasman used this method of assessing compression because it easily allowed for variations in piece size (different PINK®BATTS® products have different widths) and in bag size (wider bags are used for wall products than for ceiling products) and provides an effective basis for comparing the compression ratios between different products. It was also relatively easy to calculate.
[373] Applying that method to the PINK BATTS R 2.2 wall product (the product in the SGS certificate at [367] above) produced a thickness compression ratio of 7.0:1 calculated as follows: multiplying the number of pieces in a pack (21) by the final thickness of each piece (90 mm) produced a stack height of 1890 mm. Dividing that stack height by the nominal height of 21 pieces when inside a pack (270 mm) produced a thickness compression ratio of 7.0:1.
[374] Mr Banaticla deposed that using that method across the majority of the PINK BATTS product range (24 products) generated compression ratios for individual products varying from 3.3 to 10.4 with an arithmetical average ratio of 7.4:1. The average is weighted to reflect the volumes of particular PINK BATTS products sold by Tasman because a few products account for a very large proportion of Tasman’s sales. That weighted average is higher than 7.4:1.
[375] A point of difference which was explored in cross-examination and in closing submissions was the fact that Knauf used a formula for an elliptical-shaped product whereas Tasman used a formula for a rectangular-shaped product. The debate was fuelled by the fact that Tasman uses cylindrical bags (apparently because of machine limitations) but, as Mr Banaticla said in cross-examination: “the shape of the bag is nothing: if you have a plastic bag and fill it with water, it will become a cylinder and so it will assume the shape of the contents”.
[376] Tasman submitted that the difficulty which Knauf faced in this claim was that
Knauf had not calculated the actual average compression ratio because:
(a) It did not test all of the PINK®BATTS® insulation products;
(b) It had not taken into account the actual volumes of particular
PINK®BATTS® products sold by Tasman; and
(c) It did not measure the actual compression ratio of the six products it tested because it did not take the products out of the packaging. Rather, its testing measured the ratio between the nominal value as stated on the packaging and the actual volume of the packaged product.
With reference to that third proposition, Knauf, perhaps understandably, submitted that it should be entitled to rely on the information published by Tasman on its own packaging.
[377] I have come to the conclusion that Knauf’s claim is not made out on the
evidence. The reasons for that conclusion are essentially two-fold. First, while Knauf ’s
chagrin at the nominal volume discrepancy is understandable, the fact is that Tasman’s contention that Knauf did not calculate the actual average compression ratio is sound. That is important because the statement to which objection is made is that “the PINK BATTS products were on average over 7:1 compression packed”. The reference to “on average” makes it clear that there must be rates of compression above and below the stated ratio. It is only to be expected that undertaking calculations in relation to a subset of the total product range has at least the potential to produce a ratio below that stated by Tasman.
[378] My second reason is that, where there is more than one acceptable method for making a calculation, it ought not to be objectionable that a different result is obtained by the use of a different acceptable calculation. On that point I note the following exchange in the cross-examination of Mr Banaticla:
Q: And is your view that the use of a rectangular rather than an elliptical shape is more accurate or is it an easier approach?
A: I believe there is no one method that will represent all the compression ratios of different sizes and shape of products, because as I have said, they vary from products to products, bale to bale, and even the thickness of the product inside the bag varies as well. So we decided to just use the nominal values.
[379] For these reasons the compressibility counterclaim fails.
Issue 13: Was the immersion test misleading or deceptive?
[380] The circumstances relating to the immersion test recited at [48]-[49] above are the basis for Knauf’s fifth counterclaim against Tasman. Knauf’s allegation in summary is that such presentations, which involved a comparison of the PINK®BATTS® and
EARTHWOOL® products when submerged or soaked in water, were misleading or
deceptive in making a comparison in contrived and unrealistic circumstances which gave rise to false, misleading or deceptive distinctions concerning the products’ respective qualities.
[381] While denying the allegation, as noted above at [71] without admission of liability Tasman has undertaken to the Court to refrain from making a comparative product presentation of this kind in the future. Nevertheless, as it is entitled to do,
Knauf seeks a declaration of contravention and damages. Hence Issue 13 also remains live.
[382] Mr Ducarme, the Group Technical Director for the Knauf Insulation Division of the Knauf Group of companies, explained why the immersion test is misleading. His evidence was that the immersion test is relevant for the property of buoyancy and water absorption when the product is exposed to large quantities of liquid water (not vapour, which is the appropriate test). Because those conditions are not relevant to the fitness of the product for use as intended, in his opinion the immersion test appeared designed to communicate the existence of a problem which does not in fact exist. In his view the speed with which a piece of the product “sinks” when placed in water was not only irrelevant to its performance in practice but highly misleading.
[383] Tasman submitted that Mr Ducarme’s evidence largely became irrelevant because of what it described as a concession in his evidence, namely that it is good practice to recommend that insulation, which does become wet, be removed from building cavities, the source of the water intrusion repaired and the insulation dried prior to being reinstalled or replaced. Tasman relied on Mr Treanor’s evidence that he was unaware of anyone replacing insulation that had become wet. Rather, the insulation was either simply turned over or removed and dried and then reinstalled in the building cavity.
[384] Mr Ducarme viewed the practice advocated by Mr Treanor as poor workmanship and drew attention to Tasman’s own product data sheet for its PINK BATTS ceiling insulation which states on page six:
Storage
Pink® Batts® insulation must be protected from damage and weather. Store under cover in clean dry conditions. The installed product must remain dry at all times. The roof area should be inspected each year for leaks and excessive dampness. If the product has become wet or damp, the source of the dampness (e.g. leak in roof) must be repaired immediately and insulation replaced with new product of an equivalent R-value.
[385] Mr Miller, the Technical Manager at Tasman Insulation, explained that the EARTHWOOL® product soaks up and holds water much more rapidly than Tasman’s product. He said that was a clear indication that the binder used by Knauf may be
strongly hydrophilic which would cast doubt on the long-term durability of the binder. He offered the view that the immersion tests were reasonable in that they graphically demonstrated the propensity of the EARTHWOOL® product to absorb water.
[386] Mr Miller had been present when the immersion test was demonstrated at his workplace. His observation was that when the pieces of insulation were put in a bowl of water, the one with the organic binder sank very rapidly while the one with the polymer-based resin (the Tasman product) floated for some minutes. He was asked if it then sank to which he replied that it was not allowed to sink, it was removed before it sank.
[387] He was cross-examined about step 5 in the test kit instructions,130 in particular
the statement: “Do not leave product in for more than 5 mins”:
Q: … the implications of that are pretty clear aren’t they?
A: Both samples will, will absorb water and both samples will sink. Q: Perhaps within five minutes?
A: And perhaps within five minutes.
Q: So this is designed to ensure that doesn’t happen?
A: I would imagine so.
[388] Anticipating this thrust, Tasman submitted that the fact that the PINK®BATTS® product was removed before it too would have sunk was not in itself misleading or deceptive in light of Mr Treanor’s evidence. The point was made that the PINK®BATTS® product could be dried out and reused even if it was allowed to sink whereas that could not be done with the EARTHWOOL® product given that within a short time it had lost its shape.
[389] While the demonstration may have provided accurate information as to the implications of the hydrophilic binder, there was no component of the test which was designed to show that the Tasman product could be dried and reused. Indeed the test kit instructions directed that the samples were to be removed and disposed of in public
rubbish bins off-site.
130 At [48] above.
[390] The Tasman submission may be contrasted with the explanation provided by Tasman to the Commerce Commission in a letter dated 15 May 2013 with reference to the rationale for the demonstration. The letter stated:
The Test was used by Tasman sales representatives to demonstrate the durability of the binder used in Pink® Batts®. The Test did so by comparing Pink® Batts® with a competing (but un-named) product to show:
the length of time the respective products were able to repel water before absorbing water and sinking; and
the extent to which each product leached colour (indicating binder deterioration) following exposure to water.
[391] It is clear in my view that the direction in step 5 of the test kit instruction to not leave the product in the container for more than five minutes could defeat the first-stated objective of showing the length of time the respective products were able to repel water before absorbing water and sinking.
[392] Tasman submitted that the product demonstrations were literally true, there being no trickery involved and the respective products simply performed as they did when placed on top of water. Tasman accepted that, notwithstanding that a demonstration is literally true, if the demonstration conveys another meaning which is untrue then the proscriptions in the Fair Trading Act could still apply. It submitted that the law is helpfully summarised in Luxottica Retail New Zealand Ltd v Specsavers New
Zealand Ltd131 which was a comparative advertising case. The relevant considerations
were said to be:
(a) It is important to consider the whole advertisement;
(b) The focus is upon what is said rather than what is unsaid; (c) The obligation is to avoid falsehood; and
(d) There is no obligation to provide compendious explanations.
131 Luxottica Retail New Zealand Ltd v Specsavers New Zealand Ltd [2012] NZCA 357 at [39]-[46].
Tasman also cited Makita (Australia) Pty Ltd v Black and Decker (Australasia) Pty Ltd (1990) 18
IPR 270 (FCA) and Engineer Products Co v Donaldson Co Inc 165 F Supp 2d 836 (ND Iowa 2001).
[393] Tasman submitted that another important aspect was the identification of the class of consumers likely to be affected by the alleged misleading conduct. Although Tasman submitted there was little evidence as to exactly who saw the demonstrations, there was, in evidence, a summary of sales representative activity which provided some indication of the numbers who attended the mainly trade breakfast demonstrations.
[394] Tasman submitted that applying a robust assessment Knauf had failed to prove that the immersion test was not an acceptable comparison of the respective products or that any substantial number of actual consumers were, or are likely to be, misled or deceived as to a relevant characteristic of the EARTHWOOL® product. I do not accept that submission.
[395] First, there is no need for ultimate consumers to have viewed the demonstration. It was deliberately targeted at members of the trade and was in the nature of a training presentation.
[396] Secondly, whether or not the demonstration was an acceptable comparison so far as the durability of the hydrophilic binder was concerned, in my view the test was inappropriate and misleading in requiring the Tasman product to be removed from the container before it would inevitably also sink. I accept the evidence of Mr Ducarme on that issue. Consequently I consider that the Fair Trading Act claim in respect of the immersion test succeeds.
Disposition
[397] For the reasons above, I make the following findings and orders.
[398] In the case of conduct which, as a consequence of Tasman’s undertakings, will not be repeated, or conduct which is an historical event or subject matter, such as the two websites, which will be affected for the future by an order in relation to the EARTHWOOL® name, the relief is declaratory only.
[399] Findings:
(a) The defendants’ application for revocation of Trade Mark 105507 on the
grounds of non-use under s 66(1)(a) fails and is dismissed;
(b)The defendants’ application for revocation of Trade Mark 105507 on the grounds that the trade mark is a common name in general public use under s 66(1)(c) fails and is dismissed;
(c) Tasman’s claim for infringement of Trade Mark 105507 succeeds in respect of the use of “Batt” in the HTML code on the website. Otherwise the claim for infringement fails and is dismissed;
(d) There is no available defence under s 95(c)(i) to the use of “Batt” in the
HTML code on the website;
(e) The defendants’ application for an order that Tasman’s trade mark
infringement proceedings were unjustified fails and is dismissed;
(f) The defendants’ use of the name EARTHWOOL®, the brand EARTHWOOL® and the marketing of the EARTHWOOL® product is a contravention of ss 9, 10 and 13 of the Fair Trading Act;
(g)The manner of marketing of the EARTHWOOL® product on the website in the manner stated in Issue 9 was a contravention of ss 9 and 10 of the Fair Trading Act;
(h)The manner of marketing of the EARTHWOOL® product on the website in the manner stated in Issue 10 was a contravention of ss 9 and 10 of the Fair Trading Act;
(i) The defendants’ statement in the Sunday Star Times available on
26 August 2012 was false and misleading in contravention of s 13 of the
Fair Trading Act to the extent only of the inclusion of the words “bulgy and bursty”;
(j)The defendants’ claim that the Tasman statement that its PINK BATTS product was “on average over 7:1 compression ratio packed” contravened the Fair Trading Act fails and is dismissed;
(k) The defendants’ claim that Tasman’s immersion test was misleading and
deceptive in contravention of s 9 of the Fair Trading Act succeeds.
[400] In this judgment I have not engaged with a number of criticisms by the defendants of the adequacy of Tasman’s discovery of documents and a complaint that there was a conscious withholding of documentation in respect of a number of matters including in relation to the market surveys. If there is a wish to pursue such issues that can be addressed in the context of costs.
[401] Orders:
(1)An injunction restraining the third defendant, its directors, servants or agents from using the word “Batt” in the HTML code on the website.
(2)An injunction restraining the defendants from using the name or the brand EARTHWOOL® except where that name or brand is printed immediately alongside the words “glasswool” or “glass insulation” in the same font and print size.
(3)A declaration that the manner of marketing of the EARTHWOOL® product on the website in the manner stated in Issue 9 was a contravention of ss 9 and 10 of the Fair Trading Act.
(4)A declaration that the manner of marketing of the EARTHWOOL® product on the website in the manner stated in Issue 10 was a contravention of ss 9 and 10 of the Fair Trading Act.
(5)A declaration that the inclusion of the words “bulgy and bursty” in the Sunday Star Times available on 21 August 2012 was a contravention of s 13 of the Fair Trading Act.
(6) A declaration that Tasman’s immersion test was a contravention of s 9 of
the Fair Trading Act.
(7)An order for an inquiry as to damages payable to Tasman in respect of the conduct the subject of orders (1)-(5).
(8)An order for an inquiry as to damages payable to the defendants in respect of the conduct the subject of order (6).
[402] Orders (1) and (2) will lie in Court for 20 working days to enable the defendants to take steps to comply with the orders. Leave is reserved to apply to extend that period.
[403] Leave is reserved to the parties to apply within 15 working days for revised forms of the above orders.
[404] The parties are to file memoranda as to costs. Tasman’s memorandum is to be
filed by 30 May 2014 and the defendants’ memorandum by 20 June 2014.
Brown J
26
6
0