Artboard 1Icon/UI/CalendarIcons/Ionic/Social/social-pinterest

A crunchy dispute over peanut butter is smoothly resolved by the Full Federal Court

06 May 2020

#Intellectual Property

Published by:

A crunchy dispute over peanut butter is smoothly resolved by the Full Federal Court

Last month, the Full Federal Court handed down its decision in the Bega v Kraft[1] saga that has revolved around the ownership and use of the ‘trade dress’ of the peanut butter formally sold by Kraft. The decision of the Federal Court in the first instance was upheld.

What is your ‘get-up’?

Kraft used several registered trade marks on its peanut butter products, including the word ‘KRAFT’, the hexagonal logo containing the word ‘KRAFT’, and the phrase ‘Never Oily, Never Dry’ for example.

Kraft also used:

  • a yellow lid on its peanut butter since the early 1990s
  • a clear jar with a yellow lid with the Kraft hexagon logo presented centrally on its label since around 1997
  • a jar with a yellow lid and a yellow label with a blue or red peanut device, the jar having a brown appearance when filled, from around 2007.

This last description (used since 2007) was considered to be the ‘Peanut Butter Trade Dress’ and is depicted here:

(Image source: Kraft Foods Group Brands LLC v Bega Cheese Limited (No 8) [2019] FCA 593, accessed via austlii.edu.au on 27 April 2020)

In its intra-group licensing agreements, the Kraft entities described ‘trade dress’ as “the rights in the…characteristics of the visual appearance of a product packaging including the shape or appearance of the container, graphic design, and color scheme or design, or a combination…that serve as a source identifier and are used on the package in combination with a licensed [brand]”.

This is what can be also referred to as a brand’s ‘get-up’ or ‘look and feel’.

Background

In 2017, Bega purchased the rights to Kraft’s peanut butter business having bought the recipe and the goodwill of the business (including the Peanut Butter Trade Dress).

Since late 2017, Bega has sold Bega-branded peanut butter products using elements of the Peanut Butter Trade Dress (though without the Kraft trade marks that Kraft retained), and used these in conjunction with the Bega brand.

In April 2018, a Kraft entity began again to manufacture and sell peanut butter products in Australia, in relatively limited quantities but also using elements of the Peanut Butter Trade Dress.

When the case was first brought, Kraft and Bega each claimed that they were entitled to use the Peanut Butter Trade Dress in relation to peanut butter products to the exclusion of the other. Kraft relied on causes of action based on contract, passing off and the misleading or deceptive conduct provisions of the Australian Consumer Law. Bega, on the other hand, relied on passing off and the misleading or deceptive conduct provisions of the Australian Consumer Law. 

The Federal Court at first determined that Bega had validly purchased the Peanut Butter Trade Dress and was therefore entitled to use it to the exclusion of Kraft. For example, the subject of one complaint brought by Kraft was an advertisement produced by Bega that effectively stated that the [now] Bega peanut butter was the same as the peanut butter that had previously been marketed as Kraft peanut butter. The court did not agree that this advertisement or these representations were misleading saying that: “the same business is providing them; it just has a different owner. It’s exactly the same product as it was.”

Appeal

The appeal really centred around the true construction of the restructure documents pursuant to which the Peanut Butter Trade Dress was licensed within the Kraft business before it was sold to Bega.

The Full Court rejected Kraft’s version of what was achieved, or not achieved, by the restructure documents (which Kraft said resulted in the Peanut Butter Trade Dress not transferring to Bega). The court found the relevant Kraft entity had the relevant rights in the Peanut Butter Trade Dress to sell to Bega and that these rights then transferred as part of the goodwill of the business.

What lessons can be learned?

  • consider what elements forming part of your ‘get-up’ or trade dress might actually be able to be registered as trade marks. This will improve your ability to enforce your rights in the marks against others, and provide more certainty about what is being exchanged in a licensing or sale agreement
  • ensure that any internal and external licensing agreements accurately reflect what you consider to be your trade dress and who you want to own and control these assets, so that when these assets are sold, there is less likelihood of disputes about what has been sold
  • be aware of the courts’ findings that the assignment or licensing of an unregistered trade mark is not possible without the assignment of the underlying goodwill of the business – that goodwill is inseparable from the business to which it adds value and cannot be dealt with except in conjunction with the sale of that business
  • when buying a business, be careful with any subsequent use of assets that were not included in the sale. In this case, and also upheld by the Court on appeal, Bega ran into trouble when it kept using Kraft branded ‘shippers’ (the cardboard box used to transport the product and then store on the supermarket shelf). The shippers were printed with the Kraft name and logo, both registered trade marks of Kraft’s that it retained. This conduct constituted trade mark infringement under s 120(1) of the Trade Marks Act.

Author: Emily Booth

[1] Kraft Foods Group Brands LLC v Bega Cheese Limited (No 8) [2019] FCA 593

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Share this