Virbac S A v Merial
[2014] NZCA 619
•17 December 2014 at 10.30 am
| IN THE COURT OF APPEAL OF NEW ZEALAND |
| CA805/2013 [2014] NZCA 619 |
| BETWEEN | VIRBAC S A |
| AND | MERIAL |
| Hearing: | 14 October 2014 |
Court: | Wild, Miller and MacKenzie JJ |
Counsel: | D L Marriott for Appellant |
Judgment: | 17 December 2014 at 10.30 am |
JUDGMENT OF THE COURT
AThe appeal is allowed in part. We direct that FIPROLINE be registered, but only in respect of goods containing the active ingredient fipronil.
BThe cross-appeal is dismissed.
CThe appellant will have costs for a standard appeal on a band A basis, and costs of $1,500 on the cross-appeal, with usual disbursements of both.
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REASONS OF THE COURT
(Given by Miller J)
Introduction
Virbac S A and Merial are French companies which make and sell veterinary pharmaceutical products on a very large scale.[1]
[1]Both are among the eight largest firms in their field.
Merial sells flea treatment products under the trade mark FRONTLINE in more than 150 countries, including New Zealand. It or its predecessor firms have done so since 1994. FRONTLINE is said to be the world’s largest selling flea treatment for dogs and cats. It contains fipronil, which kills adult fleas and is used in many insecticides, and methoprene, which kills flea eggs and larvae.
Virbac also sells flea treatments in which fipronil is the active ingredient. It began selling its products internationally in 2008 or 2009 under the mark FIPROLINE, with significant success.[2] It now wishes to introduce FIPROLINE-branded products to the New Zealand market.
[2]The parties disagree on the date, but nothing turns on it.
On 1 April 2010 Virbac applied to register FIPROLINE in New Zealand. The Assistant Commissioner of Trade Marks, J Walden, authorised registration against Merial’s opposition.[3] An appeal succeeded before Mallon J, who found for purposes of s 17(1)(a) of the Trade Marks Act 2002 that in use FIPROLINE would deceive or confuse consumers by causing them to wonder whether products associated with it were those of Merial, and further that FIPROLINE would also confuse or deceive if used for products that do not contain fipronil.[4]
[3]Virbac S A v Merial [2012] NZIPOTM 16.
[4]Merial v Virbac S A [2013] NZHC 2773.
The questions in Virbac’s further appeal are whether use of the FIPROLINE mark is likely to deceive or cause confusion, first, in relation to the FRONTLINE mark, and second, if used for goods that do not contain fipronil. There is a
cross-appeal; Merial claims that Virbac is deemed to have admitted through its pleadings that FIPROLINE would indeed deceive or confuse if used for goods that do not contain fipronil.
The marks and their existing uses
Merial has registered four relevant New Zealand trade marks; they are FRONTLINE, FRONTLINE PLUS, FRONTLINE ORIGINAL and FRONTLINE REGULAR. Counsel drew no distinction among the marks, and we will refer to them collectively as the FRONTLINE mark. All are word marks registered in Class 5 for veterinary preparations including insecticides and anti-parasitic preparations.
The parties agree that FRONTLINE enjoys a well-established reputation in New Zealand, where sales exceeded $5 million between 2006 and 2010. FRONTLINE PLUS has long been New Zealand’s largest-selling flea treatment. FRONTLINE products are advertised in traditional media and at point of sale. They are sold almost exclusively through veterinary clinics or vet-associated companies, although there are some internet sales. All packaging clearly displays both the mark and the word “fipronil”. FRONTLINE products range in retail price from $30 for a 100 ml spray to $73 for a box of six pipettes. Use is occasional; the packaging suggests that a single treatment is effective for two months.
FIPROLINE is also a word mark for which registration has been sought in Class 5 for veterinary preparations, particularly an anti-parasitic preparation for external use.
The litigation before us is but one front in an international trade marks war which began when Virbac registered FIPROLINE in France, Germany, the United Kingdom and the Benelux states. Registration was effected without opposition, Merial evidently having overlooked the applications, but Merial has since sought to remedy the oversight by bringing infringement proceedings in France.
Since then FIPROLINE has been registered over Merial’s opposition in Spain,[5] and registration has been refused in Argentina and Costa Rica.[6] In many other jurisdictions Merial has resisted FIPROLINE’s registration and final decisions are pending. The New Zealand application is one of 15 filed in April 2010.
[5]In a decision of the Spanish Patents and Trademarks Office delivered on 7 February 2011. It appears that the mark has also been registered in Austria, Greece, Italy and Japan.
[6]Re Carlos Diógenes Corrales’ Application Administrative Registry Tribunal San José 2009-449-11-TRA, 27 August 2009 and Merial v Corrales Federal Civil and Commercial Court of Appeals Argentina 11890/03, 13 February 2007. Registration was sought by a third party not associated with Virbac.
FIPROLINE-branded products are sold overseas through a variety of retail outlets including supermarkets, chemists, pet stores and internet retailers. It is likely that Virbac will use the same sales channels in New Zealand. Where the parties compete, Merial has responded to FIPROLINE’S entry by marketing FRONTLINE products through the same channels. There is evidence, for example, of FRONTLINE and FIPROLINE flea treatments being sold side by side in French supermarkets. Merial is likely to respond in the same way here, should FIPROLINE-branded products enter the market.[7]
The legal setting
[7]The parties do dispute the relevance of Merial’s competitive response for purposes of s 17(1)(a); we address that point below.
Section 17(1)(a) of the Trade Marks Act poses this question:[8]
Having regard to the reputation acquired by [FRONTLINE], is the Court satisfied that [FIPROLINE], if used in a normal and fair manner … will not be reasonably likely to cause deception and confusion amongst a substantial number of persons?
[8]Pioneer Hi-Bred Corn Co v Hy-Line Chicks Pty Ltd [1978] 2 NZLR 50 (CA) at 57. See also Re Smith Hayden & Co Ltd’s Application (1946) 63 RPC 97 (HC) at 101.
This is ultimately a question of fact which is treated as a practical business matter and answered by reference to all the circumstances.[9] In a case such as this one, where an opponent alleges that the new mark will cause confusion or deception affecting its own existing mark, the Assistant Commissioner takes the following approach:
(a)The opponent must first establish awareness of its mark in New Zealand at the application date. Such awareness or reputation must be sufficiently substantial to make confusion a reasonable possibility.[10]
(b)The opponent’s reputation having been established, the applicant must show that its mark does not offend against s 17(1)(a).
(c)The Assistant Commissioner decides what is likely to happen if each mark is used in New Zealand in a normal way as a trade mark for the respective owners’ goods.[11] Evidence about use overseas is relevant only insofar as it informs the assessment of what will happen here.[12]
(d)The Assistant Commissioner compares the impression conveyed by the marks, taking into account the idea of each mark and how it looks and sounds.[13] Recognising that goods bearing the marks need not be sold side by side, allowance is made for imperfect recollection.[14]
(e)The Assistant Commissioner also considers the goods to which the marks are or – in the applicant’s case – will be applied, the market or markets[15] in which those goods are or will be sold, and the characteristics of market participants.[16]
(f)A person is “deceived” when misled by the applicant’s mark into thinking that the goods bearing the mark come from some other source, and “confused” when caused to wonder whether that might be so.[17]
(g)The number of persons at risk of deception or confusion must be substantial or significant. That assessment being hypothetical, the Assistant Commissioner treats it as a matter of judgement, not calculation. The decision is made having regard to the class of persons potentially at risk. That class comprises those people who will be exposed to goods bearing the applicant’s mark and who know, as at the application date, of the opponent’s reputation in its mark.[18] Where the goods are sold in the same market, the relevant class is ordinarily the entire market.[19]
[9]Pioneer Hi-Bred Corn Co, above n 8, at 76 per Richardson J;. Anheuser-Busch Inc v Budweiser Budvar National Corp [2003] 1 NZLR 472 (CA) at [74].
[10]Pioneer Hi-Bred Corn Co, above n 8, at 62.
[11]Anheuser-Busch Inc, above n 9, at [30] cited in TKS SA v Swatch AG (Swatch SA) (Swatch Ltd) [2012] NZHC 2642 at [37]. See also, New Zealand Breweries Ltd v Heineken’s Bier Browerij Maatschappij NV [1964] NZLR 115 (CA) at 139 and Re Pianotist Co Ltd’s Application (1906) 23 RPC 774 (Ch) at 777.
[12]Pioneer Hi-Bred Corn Co, above n 8, at 61.
[13]New Zealand Breweries Ltd, above n 11, at 139 per Turner J.
[14]De Cordova v Vick Chemical Co (1951) 63 RPC 103 (PC) at 106.
[15]We use the plural because markets have product, supply chain level and geographic dimensions, and the decision maker’s choice among them is instrumental in nature; that is, market definition is not an end in itself but an aid to analysis. In Pioneer, for example, the market was a small one because the product concerned (breeding poultry) was a raw material in a supply chain, and the relevant consumers were not the general public but poultry farmers.
[16]New Zealand Breweries Ltd, above n 11, at 139. See also Anheuser-Busch Inc, above n 9, at [75] where the test is put this way: “It is necessary to consider how the trade marks will be regarded and how they will be pronounced and heard by those to whom they will be presented in the course of trade”.
[17]Pioneer Hi-Bred Corn Co, above n 8, at 62.
[18]Sexwax Inc v Zoggs International Ltd [2014] NZCA 311 at [54]; Pioneer Hi‑Bred Corn Co v Hy‑Line Chicks Pty Ltd [1975] 2 NZLR 422 (SC) at 429; and New Zealand Breweries Ltd, above n 11, at 134.
[19]Pioneer Hi-Bred Corn Co, above n 8, at 62 and Sexwax Inc, above n 18, at [55]–[58].
Where, as here, the goods are sold to the general public for domestic use, the Assistant Commissioner, or a court on appeal, may rely on personal experience as a member of the public. In such a case evidence from market participants or experts is not necessary.[20] Nor, in the absence of any credibility finding or exercise of discretion, should an appellate court defer to the Assistant Commissioner: the court must act on its own opinion.[21]
[20]Pioneer Hi-Bred Corn Co, above n 8, at 62, applying proposition 10 in the list therein. Indeed, in many cases, such evidence has been considered to be irrelevant: see Re H J Lees & Son (London) Ltd’s Application (1955) 72 RPC 75 (Ch); Re Edward Hack’s Application (1940) 58 RPC 91 (HC) at 100; and Re Smith Hayden & Co Ltd’s Application, above n 8.
[21]Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [7] and [17] and New Zealand Breweries Ltd, above n 11, at 139.
An issue arose before us about Merial’s likely competitive response to Virbac’s entry. As noted above, FRONTLINE is not presently sold in supermarkets but FIPROLINE will be and Merial is likely to respond by offering FRONTLINE through the same channels. We accordingly inquired of counsel whether we might assume that the products will be sold side by side, with the possible consequence that little allowance need be made for imperfect recollection. After the hearing counsel reached agreement, inviting us, for purposes of this case only, not to take any competitive response into account but rather to assume that Merial will continue to market FRONTLINE as it has always done.
We are willing to adopt that assumption here, because we are satisfied that it makes no difference in the end. We accept that some consumers will continue to purchase through veterinarians, who may promote a preferred product. That being so, a significant proportion of sales is likely to be made otherwise than side by side after Virbac enters the market.
We observe, however, that the question posed by the section is simply whether use of the applicant’s mark is likely to deceive or confuse the public. Of course the Assistant Commissioner assesses the opponent’s reputation and the risk of deception and confusion at the application date.[22] She does so by reference to actual use of the opponent’s mark and any fair use of the applicant’s.[23] The inquiry is nonetheless forward-looking and factual in nature.[24] It is not self-evidently correct that the Assistant Commissioner must make factually inaccurate assumptions about future circumstances of sale – such as likely sales channels – following the applicant’s entry. However, all of that is for another day.
Is use of FIPROLINE likely to deceive or confuse?
[22]Pioneer Hi-Bred Corn Co, above n 8, at 61.
[23]Anheuser-Busch Inc, above n 9, at [74]. The principal question in that case was whether the applicant’s dissimilar mark was likely to be shortened in commercial use to BUD, which more closely resembled the opponent’s mark.
[24]See proposition 3 in Pioneer Hi-Bred Corn Co, above n 8, at 61.
It is common ground that Merial has a substantial reputation for its FRONTLINE-branded goods in New Zealand.
The goods to which the marks are attached are very similar flea treatments which will be sold in the same market.[25] The class of persons with whom we are concerned accordingly comprises potential purchasers in that market.[26] That class is by no means confined to veterinarians and those who purchase from them, if only because FIPROLINE and other flea treatments will be sold in supermarkets and other retail outlets. Pet ownership being widespread in the community, the consumers are the general public and they have the same general characteristics.
[25]Compare Sexwax Inc, above n 18.
[26]Pioneer Hi-Bred Corn Co, above n 8, at 61.
We agree with Mallon J that, contrary to the view taken by the Assistant Commissioner, there is no reason to characterise the entire class of potential purchasers as discerning and cautious.[27] Flea treatments are not an expensive and seldom-purchased product to whose acquisition consumers are likely to pay very close attention. Some consumers will buy through veterinarians, who are undoubtedly discerning, but those who buy at supermarkets or similar retail outlets will do so without benefit of veterinary advice. Some consumers may pay close attention to the choice of flea treatment, treating the product as medicinal, but some may assume that all flea treatments on the market are safe, some may care more about fleas infesting their homes than the welfare of their pet, and some may be motivated by price alone.
[27]Merial v Virbac S A, above n 4, at [29].
The Assistant Commissioner and the Judge reached opposing views on the marks’ similarity. The Assistant Commissioner found them visually, aurally and conceptually dissimilar:[28] she observed that FRONTLINE is an ordinary word with laudatory or defensive connotations, while FIPROLINE is a neologism which may signal to some that products to which it is attached contain fipronil;[29] she drew attention to Virbac’s evidence that FIPROLINE is intended to evoke the active ingredient and the idea of a range or line of products; and she noted that the first syllables differ.
[28]Virbac S A v Merial, above n 3, at [46].
[29]At [47]–[50].
The Judge found the marks visually and aurally similar:
[39] … The “F” at the beginning, the “line” at the end and their similar length provide quite strong similarities in my view. Although they are conceptually different, the actual use of FRONTLINE includes reference to fipronil and there is an awareness of that. Allowing for imperfect recollection and the competing products not necessarily being sold side by side, the purchasing public may think that FIPROLINE (which contains the active ingredient fipronil) is, or is associated with, FRONTLINE (which contains the active ingredient fipronil).
As noted, she did not accept that consumers are universally discerning. That being so, she concluded that Virbac had failed to show that use of FIPROLINE was not likely to confuse or deceive.
We prefer the Assistant Commissioner’s view that the marks are dissimilar, for several reasons. First, the only similarity, apart from the initial letter, is the concluding element “line”, which in this context evokes the neutral idea of a range of products.
Second, FRONTLINE is a compound noun whose parts “front” and “line” together have the ordinary meaning identified by the Assistant Commissioner, while FIPROLINE is an invented word having no ordinary meaning. Mallon J found (when dealing with the second ground of appeal) that FIPRO is unusual and distinctive.[30] We take the same view. In our opinion it is the dominant feature of the mark.
[30]At [31].
Third, FIPRO evokes the active ingredient, fipronil, and further suggests to an educated purchaser that the product has a generic quality, fipronil being common to many insecticides.[31] In this respect we differ from Mallon J. She also considered that FIPRO evokes fipronil, but she reasoned further that the association might cause consumers who know of the active ingredient to associate FIPROLINE with FRONTLINE.[32] We were told that Merial did not advance that argument in the High Court. If it were correct, it would risk giving Merial intellectual property rights to the name of an active ingredient that is now common to the trade.[33] In our opinion, consumers who know of the active ingredient are less rather than more likely to confuse the two marks; they will assume that FIPROLINE derives not from FRONTLINE but from the active ingredient.
[31]The evidence is that fipronil was originally developed by a predecessor to Merial, but there is no suggestion that Merial retains intellectual property rights in relation to it.
[32]At [39].
[33]New Zealand Breweries Ltd, above n 11, at 140.
Fourth, the sound of the marks is dissimilar. We observe that FIPROLINE has three syllables, not two.
Allowance must be made for imperfect recollection. As noted, we consider that some purchasers will not be discerning and cautious, and we have assumed that the products will not be sold side by side in supermarkets. But in our opinion the marks are clearly dissimilar, so that even in those circumstances they are not likely to be confused.
For these reasons we are satisfied that use of FIPROLINE is not likely to deceive or cause confusion vis-à-vis FRONTLINE. The appeal must be allowed to that extent. We turn to the second ground of appeal.
Should registration be confined to goods containing fipronil?
The Assistant Commissioner found it likely that because FRONTLINE packaging identifies it as the active ingredient the public are to some extent aware of fipronil.[34] She ruled inadmissible evidence from veterinarians that customer confusion would result if FIPRO-branded products did not contain fipronil.[35] In the result, she did not limit registration to goods containing fipronil.[36]
[34]At [42].
[35]At [15].
[36]At [63].
Mallon J reached a different conclusion, holding:
[31] … Given that, at least amongst those who have purchased FRONTLINE, in my view it is likely that they will expect a competing flea treatment sold under the name FIPROLINE to contain fipronil. I say that because “FIPRO” is an unusual and distinctive sound – it would therefore seem to be an unlikely coincidence if FIPROLINE (used for flea treatment of cats and dogs) did not contain fipronil (known to be an active ingredient in another flea treatment for cats and dogs sold under the name FRONTLINE).
As noted above, we agree with Mallon J that “FIPRO” is an unusual and distinctive sound, and that FIPROLINE suggests that products bearing the mark contain fipronil.
Mr Marriott resisted the latter conclusion. He argued that, the Assistant Commissioner having ruled evidence of customer confusion inadmissible, there is no evidence that anyone would expect a product whose name begins with FIPRO to contain fipronil. We note, however, that the Assistant Commissioner’s ruling did not extend to the evidence of veterinarians that they themselves expect FIPROLINE to include fipronil as the active ingredient. In any event, Virbac’s own evidence is that the mark is intended to evoke fipronil. The Assistant Commissioner having found, in our opinion correctly, that there likely exists some public awareness of fipronil, we agree with Mallon J that FIPROLINE is likely to cause confusion if used in connection with products that do not contain it.
Mr Marriott invited us, should we reach this conclusion, to order that the specification of goods be narrowed to preparations that contain fipronil as an active ingredient. We agree that that is the proper remedy.
The cross-appeal
On 18 November 2010 Merial amended its notice of opposition to include the additional ground that FIPROLINE is confusingly similar to fipronil, so that FIPROLINE would confuse if used for goods that do not contain fipronil. Virbac did not file an amended counter statement in response to the amended notice of opposition.
No point appears to have been taken about Virbac’s failure to amend its pleadings before the Assistant Commissioner, but in the High Court Merial alleged that Virbac was deemed to accept the additional allegation in the amended notice of opposition.
Mallon J rejected this claim, noting that Virbac’s counter statement contained bare denials and that as a matter of fact Merial itself did not proceed on the basis that its claim had been admitted.[37] She observed that there was nothing to show the pleading point was taken at first instance.
[37]At [25].
Merial has cross-appealed. The pleading issue is in a sense immaterial, Merial having succeeded in its substantive claim that FIPROLINE evokes fipronil, but it does have implications for costs.
The notice of opposition and counter statement have the same purpose as pleadings in a regular civil proceeding.[38] They should fairly inform the Assistant Commissioner and the parties of the material facts and issues. In this case that objective was satisfied. Counsel did not contend that Merial was in any way disadvantaged by Virbac’s opposition. That may explain why the point was not taken at first instance. The cross-appeal is without merit. We dismiss it accordingly.
Decision
[38]VB Distributors Ltd v Matsushita Electric Industrial Co Ltd (1999) 9 TCLR 349 (HC) at [43].
The appeal is allowed in part. We direct that FIPROLINE be registered, but only in respect of goods containing the active ingredient fipronil.
The cross-appeal is dismissed.
The appellant, having succeeded in substance on the appeal, and also on the cross-appeal, will have costs of the appeal as for a standard appeal on a band A basis, with an additional $1,500 for the cross-appeal. It will also have its usual disbursements of the appeal and cross-appeal.
Solicitors:
Harrison Stone Lawyers, Auckland for Appellant
AJ Park, Auckland for Respondent
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