S46 CATCHWORDS TRADE PRACTICES - misleading or deceptive conduct - well-advertised product having a distinctive get-up - similar product distinctively labelled - whether likely to mislead or deceive. PRACTICE AND PROCEDURE - interlocutory injunctions - whether serious question to be tried - applicant's success possible but not probable - considerations affecting balance of convenience. Trade Practices Act 1974 3.52 NYLEX CORPORATION LIMITED v SABCO LTD VG 331 of 1986 NYLEX CORPORATION LIMITED v DAWN PLASTICS PLY LTD VG 366 of 1986 Woodward J. 25 November 1986 Melbourne IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG No. 331 of 1986 GENERAL DIVISION BETWEEN : NYLEX CORPORATION LIMITED Applicant and SABCO LTD Respondent IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG No. 366 of 1986 GENERAL DIVISION BETWEEN : NYLEX CORPORATION LIMITED Applicant and DAWN PLASTICS PTY LTD Respondent MINUTES OF ORDER COURT: Woodward J. DATE: 25 November 1986 PLACE: Melbourne THE COURT ORDERS THAT: l. The applications for interlocutory injunctions be dismissed. 2. Costs be reserved. (NOTE: Settlement and entry of orders is dealt with by 0.36 of the Federal Court Rules). IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) VG No. 331 of 1986 ) GENERAL DIVISION ) ) BETWEEN : NYLEX CORPORATION LIMITED Applicant and SABCO LTD Respondent IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG No. 366 of 1986 GENERAL _ DIVISION BETWEEN : NYLEX CORPORATION LIMITED Applicant and DAWN PLASTICS PTY LID Respondent COURT: Woodward J. DATE: 25 November 1986 PLACE: Melbourne REASONS FOR JUDGMENT These are applications for interlocutory injunctions arising from the manufacture and sale by the respondents of green garden hoses with yellow stripes which are said to be deceptively similar to the applicant's hoses. Two actions, against Sabco Ltd ('Sabco') and Dawn Plastics Pty Ltd ('Dawn'), have been heard together. The applicant ('Nylex') is a company with a well-established reputation in the manufacture and sale of gardening products. It shares with Dawn about 95% of the garden hose production in Australia and produces more than Dawn. Dawn sells some of its product in its own name and also sells to several other wholesalers, including Sabco. Since 1965, Nylex has been marketing a dark green garden hose with criss-cross reinforcing in a lighter greenish colour. In doing so 1t has regularly used the word 'Premier', though it has not always been consistent in the prominence given to the word or in the context in which the word has been used. It is the proprietor of the trademark in respect of the name 'Garden Premier', but seems to have seldom used those words together in that way. It is seeking registration of a trademark in respect of the words 'Premier Gold', which it is currently using in advertising and labelling. No infringement of trade mark 1s alleged. Green is the most common colour for garden hoses and, since about 1973 or 1974, several other manufacturers have also marketed green garden hose with criss-cross reinforcing. In a number of cases they have done so in conjunction with the word 'Premium', used to indicate that these hoses were of better quality than hoses that had not been reinforced - they were at the higher end of the market. In 1979 Sabco, a firm with a long-standing reputation in brushware, was expanding unto the garden tools market and began selling a green, criss-cross reinforced hose, manufactured by Dawn, under the name 'Longlife Premium'. In 1981/82 the word 'Longlife' was dropped. Up to this point Nylex made no objection to the course which events had taken. In 1982 two pairs of thin longitudinal gold stripes were added to its 'Premier' hose, but not to its other lines. This was not the first time that stripes had been used on the Australian market and it seems they were becoming popular in the United States, but the gold stripe was less obtrusive than earlier stripes used in Australia, and wags distinctive at the time it was introduced. It was intended to be so; advertisements stated that it was the only hose with a gold Stripe. It was featured in the applicant's advertisements that year as its highest quality product, the word 'Premier' being used consistently and prominently on labels and in advertisements featuring the striped hose. In 1983 Dawn manufactured, and submitted to Sabco for consideration, a lighter green non-reinforced garden hose with a single yellowish stripe. It was not proceeded with, and so the applicant retained for that year its unchallenged market of green hoses with gold stripes. In 1984, Dawn made garden hoses for sale in 'Big W' chain stores which were lighter green, criss-cross reinforced in Silver, and had six stripes in either pink or yellow. They were sold as 'Premium Reinforced Hose', but apparently did not come to the notice of the applicant. If they did, no action was taken. In 1985, Dawn made, among others, a silver/grey hose with a black stripe, which was sold by another company as 'Aurora, Premium Quality Reinforced Hose'. In 1984 and 1985, Nylex produced brochure and television advertisements which gave prominence to the word 'Premier', but also made a feature of the 'gold stripe' as a sign of quality. In 1986 it went further along this path, introducing the expression 'Premier Gold' as a description for the hose in question. This year Dawn has manufactured a dark green, criss-cross reinforced hose, with three quite bright yellow stripes, which is being marketed by Dawn itself, Sabco and others in conjunction with the word 'Premium'. There is evidence that this hose was chosen by Sabco in preference to a silver/grey hose with yellow stripes anda green hose with black stripes. There was further evidence that a completely different manufacturer has this year produced (but may not yet have marketed) a green, criss-cross reinforced hose with very bright yellow stripes. The criss-crossing is in a brighter green than is the case with the applicant's or respondents' hoses. There 1s also on the market a silver green, criss-cross reinforced hose with black stripes. The applicant mounts a significant advertising campaign each year in which its products are featured. The hose which provides the basis for this action is always sold in conjunction with the words 'Nylex' and 'Premier' and with some attention usually being directed to the gold stripe. However the 1986 television advertisement does not refer in terms to the stripe, although it is visible, and it concludes with the words, which are also used in some of the brochure advertising, "It's Nylex or it's nothing". The respondents do not advertise their hoses except at the point of sale. There their goods are clearly labelled with their respective names, and the labels are quite different in colour and artwork from those of the applicant. Counsel for the applicant have argued that it has acquired a distinctive reputation in the get-up of its dark green, criss-cross reinforced garden hose with its gold stripes, and that anyone marketing a green hose with stripes which are gold, yellow or any other colour similar to gold, would be guilty of misleading and deceptive conduct within the meaning of s.52 of the Trade Practices Act 1974 ('the Act'). They said this would be so unless the nature of the striping (or, I assume, the shade of green used) was so strikingly different from the applicant's as to make the hose an obviously different product. In fact the applicant''s hose has two pairs of narrow bronze or gold lines opposite each other, and the respondents' hose has three wider, brighter yellow lines, evenly spaced around the hose. From a distance of five or six paces the applicant's gold stripes are difficult to discern in a roll, whereas, in a similar light, one of the stripes on the respondents' hose will show out more clearly. Observations of both hoses will depend a good deal on lighting conditions (including the presence of reflected light from the shiny surface of the hose), the way in which the hose is presented, and the distance of the viewer. The case put for the applicant is that potential buyers May see an advertisement for the Nylex product, or hear about it from a friend, and remember that they have been urged to look for a hose with a gold stripe. When making their purchases they may find the Dawn/Sabco product, and either forget that the advertised hose was from Nylex or assume that what they are seeing is the Nylex product under another name. It is said, in effect, that the labelling will not prevent the deception of a significant number of purchasers. The respondents, however, point out that the applicant's advertising always puts the Nylex name forward, as illustrated by the regularly used slogan "It's Nylex or it's nothing". They concede, for purposes of this hearing, the applicant's reputation in its gold-striped green hose, but say that it is only a reputation in association with the Nylex brand name, and is arguably confined to its two pairs of thin gold stripes. There was evidence that Nylex hose is sometimes sold in bulk without labelling. The respondents normally label their bulk hose and have undertaken to be careful to do so in future. I can see little significance for present purposes in Nylex's failure to label in these circumstances; but this is a matter to which I shall return. The applicant's counsel have also argued that' the respondents' breach of s.52 1s aggravated or compounded by the use of the word 'Premium' in a similar way to the applicant's use of 'Premier'. As the evidence stands, I can see little substance in this submission. The words, though similar, are different, and each of them - particularly the respondents' 'Premium' - is in regular use to denote high quality in products generally and hoses in particular. I do not believe that potential purchasers would attach proprietary significance to the word 'Premium', or be misled by its use, at least in the present context. If the applicant is to succeed, I believe it must do so on the basis of its gold stripes ona closely similar background to that of the respondents' yellow stripes. (I say 'closely similar' because the criss-crosses on the respondents' hose appear aqua or blue-green, while those on the applicant's hose are light green). It is, of course, unnecessary for me to go any further, in this application for interlocutory relief, than to decide whether there is a serious question to be tried (Epitoma Pty Ltd v Australasian Meat Industry Employees' Union (1984) 54 ALR 730; Bullock v Federated Furnishing Trades Society of Australasia (1985) 60 ALR 235). I have, after careful consideration, reached the conclusion that the applicant could ultimately succeed, though its case is not strong. One reason for saying that the case is not strong 1s that, as the evidence stands, I am not satisfied that there was any intention on the part of the respondents to mislead or deceive. I think it is quite likely that they arrived at the colour combination complained of by the simple process of taking their most popular green criss-crossed hose, deciding to add a stripe in conformity with United States trends, and then finding that yellow looked better on green than any other colour did. This, of course, is not the end of the matter - an innocent deception can still constitute a breach of s.52 of the Act (see Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197), but a court will much more readily find a breach of s.52 where there 1s clear evidence of an intention to deceive or of recklessness. Having decided to market this particular product, the respondents set about labelling it with their own distinctive labels, using their own brand names which, at least in Sabco's case, were well known and quite distinct from the applicant's highly publicized name. I believe that few purchasers would be confused by the degree of similarity between the hoses, given their distinctive labelling. However one can imagine a minority remembering that a gold stripe was supposed to be some guarantee of quality and forgetting the name Nylex, or thinking there must be some affiliation between that company and the respondents. Whether the possibility is sufficiently substantial to found a_ successful claim under s.52 of the Act is a question which I do not have to decide. Parkdale v Puxu (above) was a case concerning the similar design rather than the get-up of two products, but statements by the Court about the significance of labelling are, I believe, relevant to the present case. Gibbs CJ said, at 200, "If an article is properly labelled so as to show the name of the manufacturer or the source of the article, its close resemblance to another article will not mislead an ordinary reasonable member of the public". It may well be that a particular get-up is so closely identified with a manufacturer over a period of time that even a different label would not dissuade purchasers from assuming a connection (counsel suggested the Dimple Haig whisky bottle as a possible example). But the use of gold stripes on one particular quality of green hose over a four year period does not strike me as being in any way comparable with that example. I think 1t is strongly arguable that Nylex is not entitled to a monopoly in Australia in the use of almost any sort of gold or yellow stripe on most shades of green hose in spite of clear labelling to show that the hose is some other company's product. If the Nylex 'Premier' hose had normally not been labelled, different considerations might apply (see William Edge and Sons Pty Ltd v William Niccolis_ and Sons Ltd £19113 AC 693). But the Nylex name was being forcefully advertised ("It's Nylex or it's nothing") and the product was usually clearly labelled at the point of sale. A failure to label bulk hose dispensers in some retail outlets is, in my view, a matter of minor significance. - 10 - Having decided, though not without doubt, that there is a serious question to be tried, it 1s necessary now to consider the balance of convenience. I think this lies quite distinctly in favour of refusing the application. If the applicant is ultimately successful it should not be too difficult a task to compare the anticipated gales of its 'Premier Gold' hoses, which it could reasonably have expected to make without the competition of similar Dawn and Sabco hoses, with those it actually makes in the face of such competition. Damages could be awarded accordingly and injunctions given which would secure the applicant's future monopoly in its get-up. At the time of hearing, Dawn had manufactured about one quarter of its seasonal requirement of the hose in question - some $120,000 worth. Most of this was in the hands of distributors and some part of it has no doubt been sold already. More will presumably have been manufactured in recent weeks, because the height of the summer sales season is approaching. Although Dawn could switch fairly quickly to a different coloured stripe, it would take some time for it to consult its major customers about preferred colours, and the large quantities of yellow-striped hose still in stock would not be available for sale. The loss to the respondents, and perhaps toa number of retailers, would be considerable. The extent of those losses would be at least as hard to calculate, if the respondents - ll - succeed, as the applicant's losses if injunctions are not granted and 1t ultimately succeeds. In fact, because there could be a flow-on effect into later years, I think the losses would be harder to calculate and would probably be greater. I believe also that, ina case suchas this, it is better to let the litigating competitors achieve maximum possible sales - and then redistribute the profits if necessary - than seriously to restrict one of those competitors. I think this approach is particularly appropriate where it has not been established that there has been any deliberate attempt to mislead or deceive. In reaching this conclusion I have not overlooked the interests of the consuming public but, for reasons given earlier, I am not persuaded, as the evidence stands, that any significant number of potential customers will be misled or deceived by the respondents' labelled products. Weighing together (as I believe I should - see Bullock's case, above, at 241) the applicant's prospects of success in these actions and the balance of convenience, I have reached the firm view that the applications for interlocutory injunctions should be dismissed. Costs will be reserved. - 12 - I certify that the eleven (11) preceding pages are a true and accurate copy of the Reasons for Judgment herein of The Hon Mr Justice Woodward Associate Dated: 25 November 1986 Counsel for Nylex Corporation Ltd: Mr A.C. Archibald QC and Mr H. Jolson Solicitors for Nylex Corporation Ltd: Messrs Clayton Utz Counsel for Sabco Ltd: Dr C.N. Jessup Solicitors for Sabco Ltd: Messrs Mallesons Counsel for Dawn Plastics Pty Ltd: Dr C.N. Jessup Solicitors for Dawn Plastics Pty Ltd: Messrs Arthur Robinson and Hedderwicks