Green light for competition

On 17 March 2015, Justice Middleton of the Federal Court handed down his decision in Verrocchi and Gance –v- Direct Chemist Outlet Pty Ltd  (ACN 123 831 210) and Ian Tauman.

Harwood Andrews, acting for the respondents (Direct Chemist Outlet), successfully defended allegations made by the applicants (Chemist Warehouse) of misleading and deceptive conduct and succeeded in a counterclaim invalidating the applicants trademark “Who is? Australia’s Cheapest Chemist”.

The decision represents a green light for competition in the discount pharmacy market.

The case involved an allegation by the applicants that the ‘get up’ used by the respondents on their store fronts, website and catalogues was so similar to that of the applicant, that it is likely to cause consumers to believe that the respondents pharmacies are either the applicants pharmacies or at least affiliated with the applicants group.

The applicants sought orders restraining the respondents from:

• using an external get up on the store fronts that is substantially identical or deceptively similar to the of the applicant;
   
• publishing or distributing catalogues displaying a get up that is substantially identical or deceptively similar to the of the applicant;
   
• publishing a website with a get up that is substantially identical or deceptively similar to the of the applicant;
   
• marketing a pharmacy with a get up predominantly comprising the background colours red, yellow and blue with a red logo with white writing;
   
• using a slogan that is deceptively similar to Australian Registered Trademark No 1195650, with the words “Who is? Australia’s Cheapest Chemist”.

The respondents maintained that the heavy use of yellow (particularly on the store fronts) and the use of generic slogans was used to create a highly visible store and help create an image of a discount retailer. The respondents did not deny that they had adopted various elements of the applicants business model but relied on the fact that it had sufficiently distinguished itself from the applicants business through its use of identifying features such as the rising sun logo and personal images of pharmacists on store windows.

Further, the respondents issued a counterclaim seeking to invalidate the applicants trademark “Who is? Australia’s Cheapest Chemist” on the basis that it was descriptive and not so distinctive as to be used as a trade mark.

The applicants failed in their claim and the respondents counterclaim was allowed.

His Honour ultimately found that the applicant was unable to show a uniform appearance (particularly in store fronts) that could be said to comprise the applicant’s get up at any relevant date. As to the counterclaim, His Honour found that the trademark was merely descriptive and was not distinctive enough to be used as a trademark.

In reaching his decision, His Honour made various observations:

1. Branding is important in a business model and the use of some colours, such as yellow, provides high visibility and denotes a value proposition. Whilst Chemist Warehouse contended that DCO did not need to use yellow, His Honour noted that they are entitled to use that colour so as to take advantage of the fact that the colour is highly visible and denotes a value proposition.
    
2. The view conducted at the beginning of the proceeding enabled the court to appreciate that a customer’s view of a stores get up varies depending on the direction from which the customer approaches the store.
    
3. Confusion by consumers is not enough to establish liability under the TPA or ACL.
    
4. Whilst the respondent may have copied some of the ideas of the applicant they did not do so with the intention to mislead or deceive consumers. Further, the respondents sufficiently distinguished their stores from those of the applicants.
    
5. The applicants did not adduce any evidence establishing reputation on a geographical basis and even if they did, the ultimate decision would not have differed.
    
6. The applicants did not rely on any trademark (the warehouse logo for example) in describing the overall get up of their stores, catalogue or website; instead the applicants relied on alleged misleading and/or deceptive conduct.
    
7. Chemist Warehouse has been unable to disclose sufficient uniformity in the visual branding to support a claim for misleading and deceptive conduct.
    
8. The interior of the stores are different and if His Honour had have found that the external appearance was deceptively similar the fact that the interiors were different may have had an impact on the relief sought.

What does this mean?

• Whilst the law in this area is well established, the decision acts as reminder that providing you can sufficiently distinguish your brand from that of your competitor (such as the appropriate use of a logo or other identifying features) the adoption of elements of your competitors businesses model is not sufficient to establish a claim for misleading and/or deceptive conduct.
   
• Extensive use of a trademark is not, on its own, sufficient to justify a trademark. The trademark must be “a reliable badge of trade origin on its own”: see, Unilever Australia Ltd v Societe Des Produits Nestle SA (2006) 154 FCR 165 at [36] per Bennett J.

For more information contact:

Benjamin Broadhead
Special Counsel
Harwood Andrews
T: 03 5226 8549
E: bbroadhead@harwoodandrews.com.au