FEDERAL COURT OF AUSTRALIA Bacchus Distillery Pty Ltd v BDS Marketing Australia Pty Ltd [2011] FCA 827 Citation: Bacchus Distillery Pty Ltd v BDS Marketing Australia Pty Ltd [2011] FCA 827 Parties: BACCHUS DISTILLERY PTY LTD v BDS MARKETING AUSTRALIA PTY LTD and CB GLOBAL MANAGEMENT PTY LTD File number: VID 673 of 2011 Judge: NORTH J Date of judgment: 30 June 2011 Date of hearing: 29, 30 June 2011 Place: Melbourne Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 34 Counsel for the Applicant: Ms E A Strong SC with Mr I Horak Solicitor for the Applicant: Clayton Utz Counsel for the Respondents: Mr S R Horgan SC with Mr B J Murphy Solicitor for the Respondents: Carter Lawyers IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 673 of 2011 BETWEEN: BACCHUS DISTILLERY PTY LTD Applicant AND: BDS MARKETING AUSTRALIA PTY LTD First Respondent CB GLOBAL MANAGEMENT PTY LTD Second Respondent JUDGE: NORTH J DATE OF ORDER: 5 JULY 2011 WHERE MADE: MELBOURNE UPON the applicant and BDS International Ltd by their counsel undertaking: (a) to submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person, whether or not a party, adversely affected by the operation of the interlocutory order below or any continuation (with or without variation) thereof; and (b) to pay the compensation referred to in (a) to the person there referred to: THE COURT ORDERS THAT: 1. Until the hearing and determination of this proceeding or until further order, each of the Respondents be restrained, whether by itself or by its servants or agents or otherwise, from causing to be manufactured, importing, distributing, promoting for sale or supply, offering, displaying, advertising, selling and/or supplying any alcoholic beverages in or under and by reference to the packaging which appears on any of the following: (a) Exhibit A1 being the Respondents' COWBOY 2 litre cask, as partially depicted in the photograph which is Annexure A1 to this order; (b) Exhibit A2 being the Respondents' COWBOY 700 ml bottle, as partially depicted in the photograph which is Annexure A2 to this order; (c) Exhibit A3 being the Respondents' COWBOY 6 x 30ml pack with contents, as partially depicted in the photograph which is Annexure A3 to this order; and (d) Exhibit A4 being the Respondents' QF 6x30ml pack without contents, as partially depicted in the photograph which is Annexure A4 to this order or any packaging which is a colourable imitation of that which appears on: (e) the COWBOY Liqueur Product (2 litres) being Exhibit VH-36 to the Affidavit of Vincent Heng affirmed 23 June 2011 (the Heng Affidavit), as partially depicted in the photograph in Exhibit VH-35 which is Annexure A5 to this order; (f) the COWBOY Liqueur Product (700ml) being Exhibit VH-34 to the Heng Affidavit, as partially depicted in the photograph in Exhibit VH-33 which is Annexure A6 to this order; (g) the COWBOY Shot Products wrap or COWBOY shot being Exhibits VH-20, VH-21 and VH-22 and Exhibits VH-16, VH-17 and VH-18 respectively to the Heng Affidavit, as partially depicted in the three photographs in Exhibit VH-19 and the four photographs in Exhibit VH-15 which are Annexure A7 and Annexure A8 respectively to this order; and (h) the QF Shot Products wrap or QF shot being Exhibit VH-56 and Exhibit VH-54 respectively to the Heng Affidavit, as partially depicted in the photograph in Exhibit VH-55 and the photograph in Exhibit VH-53 which are Annexure A9 and Annexure A10 respectively to this order. 2. Each of the following exhibits be confidential and access be restricted to the Respondents' legal advisors: (a) Confidential Exhibits VH-39; (b) Confidential Exhibit VH-40; (c) Confidential Exhibit VH-51; (d) Confidential Exhibit VH-52; (e) Confidential Exhibit VH-58; (f) Confidential Exhibit VH-59; (g) Confidential Exhibit VH-78; (h) Confidential Exhibit VH- 85; (i) Confidential Exhibit VH-86; (j) Confidential Exhibit VH-87; (k) Confidential Exhibit VH-88; (l) Confidential Exhibit VH-89; (m) Confidential Exhibit A6; (n) Confidential Exhibit A7; and (o) Exhibit LJS-3 to the affidavit of Leanne Janine Scott sworn 28 June 2011. 3. Confidential Exhibit A5 be confidential and access be restricted to the Applicant's legal advisors. 4. The Respondents file and serve their Fast Track Response on or before 22 July 2011. 5. The Applicant file and serves any Reply on or before 29 July 2011. 6. The Applicant and the Respondents file and serve lists of documents verified by affidavit on or before 16 September 2011 and make available for inspection the documents recorded therein. 7. That the Respondents pay 60% of the Applicant's costs of and incidental to the application for interlocutory relief. 8. That pursuant to Order 72 of the Federal Court Rules, the proceeding be referred to mediation by a mediator whose identity is to be agreed between the parties on or before 14 days from the date of this order and in default of such agreement the mediation be conducted by a registrar of this Court. 9. The mediation is to take place on or before 19 August 2011 and the result of the mediation to be reported to the Court within 2 days of its completion. 10. If the proceeding does not settle at mediation then, in the case of the mediation being conducted by a Registrar, the Registrar, if appropriate, shall conduct a case management conference immediately following the mediation at which the Registrar may give further directions as to the conduct of the proceeding. 11. The directions hearing is fixed for 10:15am on 3 October 2011. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. Annexure A1 Annexure A2 Annexure A3 Annexure A4 Annexure A5 Annexure A6 Annexure A7 Annexure A8 Annexure A9 Annexure A10 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 673 of 2011 BETWEEN: BACCHUS DISTILLERY PTY LTD Applicant AND: BDS MARKETING AUSTRALIA PTY LTD First Respondent CB GLOBAL MANAGEMENT PTY LTD Second Respondent JUDGE: NORTH J DATE: 30 JUNE 2011 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 Before the Court is an application filed on 24 June 2011 by Bacchus Distillery Pty Ltd (Bacchus), the applicant, for interlocutory orders restraining the respondents, BDS Marketing Australia Pty Ltd (BDS Marketing) and CB Global Management Pty Ltd (CB Global) (collectively "BDS"), from using the words "Cowboy" or "QF", or packaging substantially identical or deceptively similar to Bacchus packaging, in relation to the promotion and sale of alcoholic beverages. 2 The application relies on three causes of action. First, pursuant to s 120(1) of the Trade Marks Act 1995 (Cth), Bacchus alleges that BDS infringed the trademark, "The Cowboy Pack", registered by Bacchus from 2 August 2001 for use with specified alcoholic beverages. Second, Bacchus alleges contravention by BDS of ss 18 and 29(1)(a), (g) and (h) of the Australian Consumer Law (ACL), as set out in Schedule 2 to the Competition and Consumer Act 2010 (Cth). Section 18 of the ACL provides: (1) A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. (2) Nothing in Part 3-1 (which is about unfair practices) limits by implication subsection (1). 3 Section 29(1)(a),(g) and (h) relevantly provides: (1) A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of good or services: (a) make a false or misleading representation that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use; or … (g) make a false or misleading representation that the goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits; or (h) make a false or misleading representation that the person making the representation has a sponsorship, approval or affiliation; 4 Third, Bacchus alleges that BDS committed the tort of passing off. 5 Bacchus produces and markets cream based liqueurs and has done so since 1994. In 2004, BDS Marketing was established as the marketing arm of Bacchus. From 2004 until March 2011, BDS Marketing distributed and marketed the products of Bacchus. The current CEO of Bacchus, Mr Vincent Heng, and a current director of Bacchus, Mr Damien Hajdinjak, were previously directors of BDS Marketing. The current CEO of BDS Marketing, Mr Mark Iacovangelo, was previously an employee of Bacchus. BDS Marketing and CB Global have the same directors. CB Global owns the intellectual property in the products of BDS Marketing. 6 In about March 2011, a disagreement arose between Bacchus and BDS Marketing, with the result that BDS Marketing ceased distributing for Bacchus. There is litigation in the Supreme Court of Victoria arising from that disagreement. 7 This case is concerned with butterscotch and cream flavoured liqueurs and melon and cream flavoured liqueurs sold by Bacchus. Photos of the packaging appear as annexures A5 to A9 to the orders to be made by the Court. The butterscotch and cream flavoured liqueurs are branded with the word "Cowboy" in 700ml bottles (annexure A6), two litre casks (annexure A5) and in six-packs of shots (annexure A7). The 700ml bottles have been marketed in the same way since 2005, the two litre casks have been marketed in the same way since late 2006 / early 2007, and the six-packs of shots have been marketed since 2003 in the original flavour, butterscotch with cream, and later in two additional flavours, butterscotch with coffee, and butterscotch with chocolate. The melon and cream flavoured liqueur sold by Bacchus is branded "QF" and has been sold in a six-pack of shots since February 2004 (annexure A9). 8 The conduct which is the subject of the application arose in around March 2011 at the time of the disagreement between Bacchus and BDS Marketing. Bacchus learned that BDS intended to market certain products that would compete with the products of Bacchus previously referred to. 9 The specific nature of the BDS products was not clear to Bacchus until the commencement of the hearing. Bacchus saw a flyer representing products which they thought appeared similar to the products marketed by them. Bacchus then served a notice to produce on BDS on 24 June 2011 which caused BDS to produce their products at the beginning of the hearing. Photos of the BDS packaging appear as annexures A1 to A4 to the orders to be made by the Court. The products produced by BDS were a 700ml bottle marked with the word "Cowboy", containing butterscotch and cream flavoured liqueur (annexure A2), a two litre cask of the same product (annexure A1), and a six-pack of shots containing the same product (annexure A3). BDS also produced its packaging, without the shots, of a six-pack of "QF" melon and cream liqueur shots (annexure A4). 10 Both parties agreed that the test for an interlocutory application such as the present is, first, whether there is a serious issue to be tried, so that if the evidence remains the same there is a probability that the applicant would succeed at trial, and, second, whether the balance of convenience favours the grant of an injunction. A further discretionary matter often considered is whether irreparable damage would enure to the applicant if an injunction is not granted, and whether damages would be adequate compensation in those circumstances. 11 On the question whether there is a serious issue to be tried, there is considerable overlap between the elements to be established for the statutory causes of action under the ACL and the passing off cause of action. APPLICANT'S SUBMISSIONS 12 In relation to the statutory and passing off causes of action, Bacchus first submitted that it had developed a reputation connected with the use of the words "Cowboy" and "QF" and its distinctive packaging of the liqueurs. Bacchus contended that the products to be marketed by BDS use the words "Cowboy" and "QF" and get-up in such a way that consumers are likely to be misled into believing that the BDS products are in fact the products of Bacchus. In particular, Bacchus emphasised the similarities in packaging, arguing that the BDS packaging is strikingly similar to the packaging of Bacchus, with the similarity extending to the colour, prominence and positioning of the "Cowboy" logo and, in the case of the "Cowboy" and "QF" six-packs of shots, the shape and size of the packaging. 13 Further, Bacchus argued that the marketing of BDS products would harm the business built up by Bacchus over many years. In support of the argument that Bacchus had developed such a reputation, Bacchus provided evidence that the "Cowboy" products constituted 40 percent of its revenue. Confidential exhibits to the affidavit of Vincent Heng sworn on 23 June 2011 demonstrated that large volumes of the products have been sold by Bacchus over a considerable period. The confidential exhibits indicated that Bacchus has a substantial revenue stream in the millions of dollars, and 40 percent would also be a substantial amount. 14 The evidence of Bacchus regarding reputation was also based upon the presence of the Bacchus products in major supermarkets and most retail liquor outlets in Australia. Bacchus provided evidence of substantial promotion and marketing activities, including flyers and notifications to wholesalers about special deals. Bacchus also provided evidence that in 2005/2006 it spent over $1 million on television advertising. Bacchus said it attended exhibitions such as 'The Wedding Show' to promote its products, and that its products have appeared in catalogues of major supermarket chains in Australia. 15 In relation to the balance of convenience, Bacchus argued that it had a strong prima facie case, a matter which it correctly said should be taken into account when assessing whether there is a serious issue to be tried. Bacchus said it acted promptly in response to the conduct of BDS. Importantly, Bacchus observed that whilst it currently sells the products in question, and has been doing so for a substantial time, BDS is attempting to enter the market against the background of a dispute between parties who previously cooperated in the same commercial enterprise. 16 On the question whether damages would be an adequate remedy, Bacchus provided evidence of the potential losses which would be incurred by it if no injunction were granted. This evidence related primarily to the detriment which would be suffered by Bacchus if BDS products caused it to lose shelf space in supermarkets. Entitlements to such shelf space are difficult to obtain and to reclaim if lost. Further, Bacchus contended it may suffer an additional loss of customers in relation to a new product it is poised to launch, which would be prejudiced if BDS was permitted to market the products on its flyer. 17 Bacchus also said that the financial position of BDS demonstrated that BDS would be unlikely to be able to meet any substantial damages order. The figures indicated in confidential exhibits show a modest trading profit in the 2009/10 financial statements. THE RESPONDENTS' SUBMSSIONS 18 In relation to the statutory and passing off causes of action, BDS first contended there was no serious issue to be tried regarding its use of the words "Cowboy" and "QF". BDS contended that Bacchus has no significant reputation in the use of the word "Cowboy" because it merely describes a butterscotch flavoured liqueur, just as "QF" describes a melon flavoured liqueur. BDS drew the Court's attention to various advertisements for the Bacchus "Cowboy" products and pointed out that "Cowboy" was used together with other words to identify the products, such as "Bacchus" or "Smoothie". Likewise, the word "Bacchus" was used on the packaging to identify the "QF" product. Thus, it was contended by BDS that the words "Cowboy" and "QF" are not identifiers of a Bacchus products in particular. 19 BDS also pointed to other producers of liqueurs who use the word "Cowboy" and "QF" in their marketing, suggesting that the words "Cowboy" and "QF" are descriptions of types of drink and not of products associated solely or significantly with Bacchus. BDS contended that the refusal of the United States authorities to register the trademark "Cowboy" supported their case. 20 The second contention of BDS on whether there is a serious issue to be tried concerned the packaging of the products. BDS emphasised the ways in which its packaging of the products is dissimilar to the Bacchus packaging. In particular, BDS highlighted the difference in the colouring of the labels on the "Cowboy" products and the different size of the packaging. Further, BDS drew attention to the products of BDS being marked in each case with the word "Creative" in addition to "Cowboy". BDS also drew attention to the Bacchus product logo having a circular motive behind the word "Cowboy", whereas the BDS packaging displayed a star. 21 On the balance of convenience, BDS contended that if an injunction were granted it would suffer a very substantial loss of profits. Estimates were proffered in the affidavit of Mark Iacovangelo sworn on 28 June 2011. 22 BDS also contended that Bacchus was not in a financial position to meet any damages award which might result in its favour. CONSIDERATION 23 In relation to the statutory and passing off causes of action, the contention of BDS that there is no relevant reputation shown by the use of the words "Cowboy" or "QF" alone is accepted. For the purposes of this interlocutory proceeding, it is also accepted that these are descriptors used to denote a type of drink, but are not themselves limited to, or associated solely or significantly, with Bacchus. 24 On the other hand, Bacchus' contention that the BDS products, namely, the "Cowboy" 700ml bottle, two litre cask and six-pack of shots, and the "QF" six-pack of shots, are so similar in get-up to the Bacchus products as to mislead consumers into believing that those products are, or are associated with, the Bacchus products is accepted. Further, it is accepted that the similarity between the products is likely to injure Bacchus in the trade of its products. There is, therefore, a serious issue to be tried in relation to the packaging of the "Cowboy" 700ml bottle, two litre cask, six-pack of shots, and the "QF" six-pack of shots. 25 The balance of convenience also favours the grant of injunctions directed to the packaging of the BDS products. Importantly, Bacchus is trading, whilst BDS is merely aiming to enter the market. 26 The contention that Bacchus is in no position to meet an undertaking as to damages is not accepted. Bacchus proffered an undertaking to be given by its parent company. The financial position of the parent company appears, both in relation to its assets and its annual profit and loss, to be in a position to meet a significant damages claim. 27 Furthermore, it is accepted that there would be significant damage to Bacchus if its products were threatened by the BDS products, with Bacchus losing potential customers as a result of a loss of shelf space. 28 The contention of BDS regarding its potential loss of profits was largely unsubstantiated, not supported by any trading history, and appeared to be significantly exaggerated. 29 In relation to the trademark case, there is not a sufficiently strong serious issue to warrant the grant of an injunction directed only to the alleged trademark infringements. The trademark alleged to have been infringed is "The Cowboy Pack", registered by Bacchus. That is not a description used by BDS. At this interlocutory stage of the proceedings, it is not evident that the relevant products are utilising the registered trademark as part of the sale process of those products. Rather, the reference to "Cowboy" is a reference to a flavour of liqueur and not a reference to the products of Bacchus. COSTS 30 Bacchus sought its entire costs of the interlocutory application, whilst BDS argued that costs should be reserved or, alternatively, that it pay only a proportion of the costs. 31 Whilst in some cases there is good sense in waiting until the determination of the final proceedings in order to fix the costs of an interlocutory application, this is not a hard-and-fast rule. This is a case in which a preliminary assessment of the potential outcome at trial can be formed. It is a case in which those views can be sufficiently formed to govern the making of an order for costs now. The advantage of making such an order now is that the circumstances of the interlocutory application are freshly in mind. 32 By way of preliminary view it can be said that the causes of action of Bacchus under the ACL and in passing off seem strong. However, Bacchus has not been successful regarding its trademark case and difficulties are foreseen in this case at trial. 33 The argument in favour of awarding only a proportion of the costs to Bacchus is that it has not been entirely successful. Bacchus responded by saying that the material filed in support of its case would have been the same in any event. I am not satisfied that this is correct. In the circumstances of this case, the evidence filed on behalf of Bacchus was voluminous and more than was necessary for an interlocutory application. It has to be remembered that an interlocutory application is by definition an application conducted as a matter of urgency where the Court is only able to form a superficial view about the facts. It is unfortunate when the Court and the opposing parties are burdened with a volume of material unnecessary for the limitation of that task. 34 For those reasons, I will order that BDS pay 60 per cent of Bacchus' costs of and incidental to the interlocutory application. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice North. Associate: Dated: 21 July 2011