SmithKline Beecham (Australia) Pty Limited v Herron Pharmaceuticals Pty Ltd [2001] FCA 361

FEDERAL COURT OF AUSTRALIA

SmithKline Beecham (Australia) Pty Limited v Herron Pharmaceuticals Pty Ltd [2001] FCA 361

Carlton and United Breweries (NSW) Pty Ltd v Bond Brewing NSW Limited (1987) 76 ALR 633 cited SMITHKLINE BEECHAM (AUSTRALIA) PTY LIMITED v HERRON PHARMACEUTICALS PTY LTD N 178 OF 2001 HELY J 4 APRIL 2001 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 178 OF 2001

BETWEEN: SMITHKLINE BEECHAM (AUSTRALIA) PTY LIMITED

(ACN 008 399 415)

APPLICANT

AND: HERRON PHARMACEUTICALS PTY LTD

(ACN 010 481 366)

RESPONDENT

JUDGE: HELY J

DATE OF ORDER: 4 APRIL 2001

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. The Notice of Motion of 26 March 2001 be dismissed with costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 178 OF 2001

BETWEEN: SMITHKLINE BEECHAM (AUSTRALIA) PTY LIMITED

(ACN 008 399 415)

APPLICANT

AND: HERRON PHARMACEUTICALS PTY LTD

(ACN 010 481 366)

RESPONDENT

JUDGE: HELY J

DATE: 4 APRIL 2001

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 It is common ground that the respondent ("Herron") is an Australian owned company. Since 1987 television advertisements published by Herron have emphasised that fact. In some of the advertisements televised in the period 1997 up to February 2001 reference has also been made to the fact that particular Herron pharmaceutical products are Australian made. 2 Herron currently supplies analgesic products containing paracetamol under the trade name "Herron", in the form of tablets, capsules and capseals. The most recent paracetamol product launched by Herron is its capseal. The capseal was launched in mid-August 2000. Television advertisements for capseals were broadcast in August and September 2000, and again between December 2000 and January 2001. Those advertisements described Herron as the leading Australian owned brand of pain reliever. 3 It is common ground that capseals are made for Herron in the United States of America. They are not made in Australia, nor are they made by an Australian owned company. 4 These proceedings concern two television advertisements. The first advertisement ("KD1") was televised between 11 February and 17 February this year. KD1 depicts a packet of Panadol tablets and a packet of Herron tablets side by side on a white background. The text of KD1 is reproduced in the first schedule to this judgment. The second advertisement ("KD2") was televised between 18 February 2001 and 3 March 2001. KD2 depicts men walking in pairs through a park. The men's heads are depicted by large white tablets. In respect of each pair of men, one tablet bears the name "Panadol" and the other "Herron". The text of KD2 is reproduced in the second schedule to this judgment. KD2 is the first advertisement published by Herron which states explicitly that Panadol is foreign owned whereas Herron is Australian owned. 5 A letter of demand was forwarded to Herron in relation to KD1 and KD2 on 23 February 2001. Proceedings were instituted on 27 February 2001 and were returnable before a judge of this Court on 1 March 2001. At that time Herron had pre-booked television advertising time for KD2 until 3 March 2001. At the directions hearing held on 1 March the matter was fixed for a final hearing on 7 May 2001. Herron undertook to the Court that it would not broadcast KD1, and that it would not after 3 March 2001 broadcast KD2 without first giving to the solicitors for the applicant seven days prior written notice. 6 Thereafter a number of things happened. First, it became apparent to Herron that there had been a very favourable response to the first broadcast of KD2 and that it would be very valuable to its business if it could re-broadcast KD2 to capitalise upon and to reinforce its original impact. Second, the hearing date was put back from 7 May to 14 June 2001. Third, at about 7.30 pm on Friday 23 March 2001 the applicant's solicitors received a letter from Herron's solicitors giving seven days notice of their intention to republish KD1 and KD2. That intention was later modified so as to restrict it to KD2. 7 Accordingly, by motion filed on 26 March 2001 the applicant seeks an interlocutory injunction restraining Herron until the final hearing of the proceedings from publishing KD2 or any advertisement in substantially the same form. 8 The case presented by the applicant in support of its claim for interlocutory relief was more confined than the case pleaded in the Statement of Claim. For the purposes of this application, the case is that KD2 conveys that Herron products, generically, are made in Australia by an Australian owned company, or conveys both of those matters. That message is falsified by the fact that Herron's capseals are not made in Australia, nor are they made by an Australian owned company. As there is no dispute as to the latter matters, the issue is whether KD2 says anything about capseals at all, and if it does, whether it conveys that capseals are manufactured or made in Australia or by an Australian company. 9 The following things are clear in relation to KD2: - there is no express reference to capseals; - the figures in the advertisement have heads comprised of tablets; - there is a fleeting display at the end of the advertisement of a packet of Herron tablets; - there is no express reference to where Herron products are made; - there is no express statement that Herron products are made in Australia. 10 The applicant's case is that KD2 is a generalised message that Herron paracetamol products are made in Australia. A case to that effect may be made out on the basis of implications or suggestions, even if there is no express statement in the advertisement to that effect. Whether such a case is made out is largely a matter of impression and, of course, at this stage of the proceedings, the issue is whether there is a serious question to be tried, although the strength of the case is a relevant factor to take into account in conjunction with one's assessment of where the balance of convenience lies. 11 The applicants relied upon evidence of a telephone survey conducted shortly prior to the commencement of the proceedings. There is force in the respondent's contention that there are a number of unsatisfactory features about the survey evidence. The survey does not address the question as to whether KD2 conveys anything about capseals. One hundred and thirty two people responded to the survey in relation to KD2. Question 5 was: "What are all the things the ad is trying to say, apart from to buy the product?" Question 6 was: "And what is the main thing the ad is trying to say?" Twenty eight per cent of the persons surveyed (ie thirty seven people) gave as their response to each of these questions: "Herron is Australian made/buy Australian made." Eighty six per cent of the persons surveyed responded affirmatively to a leading question as to whether KD2 conveyed that Herron is Australian made, but, in my view the way in which the question was put makes it unsafe and unsatisfactory to place any weight on the responses given. In any event, the views of members of the public as to what an advertisement is "trying to say" are of very limited assistance in determining what the advertisement conveys, particularly when those views are presented through the filter of survey evidence. 12 It is reasonably arguable, but by no means is it certainly the case, that KD2 refers to Panadol and Herron analgesic products generally, rather than to the tablet form of those products only. The words are general, and the tablet heads are figurative in character. However, in my view, KD2 does not convey any particular message as to where or by whom particular Herron products are manufactured or made, as distinct from whose products they are. The message which KD2 conveys is that Panadol is a foreign owned product, whereas Herron is Australian owned, and is for that reason, to be preferred. I do not think that the advertisement conveys any more than that the products are the same, and the Australian owned product should be preferred to the foreign owned product. Buy from an Australian, rather than from a foreigner, is the essential thrust of the message. 13 In my view, the case which the applicant seeks to make that KD2 is misleading and deceptive because capseals are manufactured for Herron in America is a weak one. 14 Assessing where the balance of convenience lies in cases such as the present is always difficult. Herron has made arrangements to broadcast KD2 commencing on about 8 April next, but it made those arrangements with its eyes wide open as to the applicant's position. Nor do I think that the applicant has been guilty of any disentitling delay by reason of its failure to complain of earlier advertisements published by Herron which referred to Herron as being Australian owned, because the issue here is whether KD2 refers to Herron products as being Australian made and whether that claim is falsified by the fact that since about August 2000, capseals have been manufactured in Australia. Previous advertisements have not tendered that issue. 15 KD2 appears to have been a very effective advertisement on which Herron wishes to capitalise. I am satisfied that the respondent will suffer substantial damage if it is restrained from capitalising on the initial success of the advertisement. 16 The applicant may encounter some difficulties in proving its loss in the period between now and the final hearing should interlocutory relief be refused, but injunctive relief granted after a full hearing. That, however, cuts both ways as Herron would also encounter difficulties in establishing the damage which it suffers should interlocutory relief be granted, but final relief refused. This consideration undermines the value and protection to Herron of the usual undertaking as to damages: Carlton and United Breweries (NSW) Pty Ltd v Bond Brewing NSW Limited (1987) 76 ALR 633 at 640. 17 If it is Herron which has to prove its loss, speculation and hypothesis will necessarily be involved in establishing the financial benefit which Herron would have derived had it been permitted to televise KD2 in accordance with its intended program. If it is the applicant which has to prove its loss, Mr Husband's affidavit demonstrates that concrete data will be available to the applicant from which it can be seen how sales of the applicant's products are affected by Herron's advertisements. 18 It is, I think, fair to say that a central theme of Herron's marketing campaign over the last decade or so has been that Herron is "Australian owned", and this has been the key point by which Herron has sought to differentiate between its products and those of the applicant as its main competitor. To restrain the use of the advertisement and, in particular, the central claim as to corporate ownership would be to deprive Herron of a key part of its commercial weaponry. 19 I do not think that too much should be made of the fact that Herron proffered the undertaking which it did on 1 March 2001 because the undertaking was qualified, and what Herron now proposes is within the area of the qualification. In addition, the delay in the date of the final hearing has the effect that, unless terminated by notice, the restraint imposed by the undertaking would have continued for a period larger than originally anticipated. 20 In my view, the most relevant factor on the balance of convenience is where the greater risk of injustice lies on the issue of damage. On that basis, the balance of convenience favours the refusal of interlocutory relief, a conclusion which is reinforced by my assessment that the applicant's case, as propounded on the interlocutory application, is a weak one. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hely.