Federal Court gives green light for competition

The Federal Court has heralded a green light for competition in the discount pharmacy market in handing down its decision in a misleading and deceptive conduct case between the owners of Chemist Warehouse (Applicants) against Direct Chemist Outlet (Respondents). In this case, Harwood Andrews successfully defended the Respondents and also made out the Respondents counterclaim, invalidating the Applicants trademark “Who is? Australia’s Cheapest Chemist”. This decision sends a positive message for businesses that will now be able to adopt elements of their competitor’s business model (if it’s brand can be sufficiently distinguished from the competitor’s brand) without fear of penalty.  

Applicants claim

The Applicants claim centred on the argument that the 'get up' used by the Respondents on its store fronts, website and catalogues was so similar to that of the Applicants, 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.

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 Applicants;
   
• publishing or distributing catalogues displaying a get up that is substantially identical or deceptively similar to the of the Applicants;
   
• publishing a website with a get up that is substantially identical or deceptively similar to the of the Applicants;
   
• marketing a pharmacy with a get up predominantly comprising the background colours red, yellow and blue with a red logo with white writing; and
   
• using a slogan that is deceptively similar to the registered trademark with the words "Who is? Australia's Cheapest Chemist".

Respondents defence and counterclaim

The Respondents did not deny that they had adopted various elements of the Applicants business model but successfully argued 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. The Respondents further argued that 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 also made a counterclaim invalidating 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.

Court’s finding

The Court held that the applicant was unable to show a uniform appearance (particularly in store fronts) that could be said to comprise the Applicants get up.

The Court made the following findings in reaching its decision:

• The use of colours by a business, such as yellow, provides high visibility for the business and indicates that the business offers discount products. A business is entitled to take advantage of the branding characteristics of a particular colour.
   
• A customers perception of a store’s get up will vary depending on their physical approach to the store.
   
• Confusion by consumers is not enough to establish liability for misleading or deceptive conduct.
   
• The Respondents sufficient distinguished their stores from those of the Applicants.
   
• Evidence establishing reputation in a geographical area would not have affected the decision of the Court.
   
• The Applicants did not rely on their trademark but instead relied on alleged misleading and deceptive conduct.
   
• In establishing a claim for misleading and deceptive conduct, there must be evidence of uniformity sufficient to establish a “common identity” in the applicant’s brand.
   
• If competing businesses have similar external appearances but dissimilar internal appearances a Court will take this into consideration in when determining what relief is available to an aggrieved applicant.

What this means for your business

If you can sufficiently distinguish your brand from that of your competitor, the adoption of elements of your competitor’s businesses model is not sufficient to establish a claim for misleading and/or deceptive conduct. Further, 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”.[1]

Follow this link to access the complete judgement

For more information about what this Court decision means for your business please contact:

Benjamin Broadhead
Special Counsel
Harwood Andrews
T: 03 5226 8549  |  0413 561 332
E: bbroadhead@harwoodandrews.com.au

[1] Unilever Australia Ltd v Societe Des Produits Nestle SA (2006) 154 FCR 165 at [36] per Bennett J.