In a long running Federal Court battle Bega Cheese has won the rights to use the yellow lid, yellow label and a blue or red peanut shape.

In 2018 Kraft Foods Group Brands LLC commenced proceedings in Australia against Bega Cheese Limited over the similarities in the peanut butter jars and labelling attempting to stop Bega’s use of the yellow lid, yellow label and a blue or red peanut shape. Kraft claimied that Bega had breached Australian Consumer Law and by engaging in passing off, trade mark infringement and breach of contract which amounted to misleading and deceptive conduct.

Since the mid-1930’s Kraft has manufactured and sold peanut butter products in Australia. In 2012, the Kraft underwent a business restructure. Mondelez Australia (Foods) Pty Ltd (known as Mondelez), which was formerly known as Kraft Foods Limited, was the entity under the Kraft Foods Group Brands LLC that manufactured and sold Kraft peanut butter using packings of a yellow lid, yellow label and a blue or red peanut shape on the label (known as the “trade dress”). In mid-2017, the assets of Mondelez were acquired by Bega who subsequently began producing and marketing peanut butter.

Kraft argued that Bega was not entitled to do this as, when the peanut butter business was sold to Bega, it was not sold with the rights to the “trade dress” as Mondelez only held a licence to use this and this licence expired in December 2017. Kraft argued that, as Mondelez never owned the goodwill of the trade dress, this could not have been assigned or passed to Bega as an asset of the business. As such, Bega was not entitled to use the trade dress.

The Federal Court of Australia did not agree with this argument and found that the master agreement between Kraft and Mondelez did support the use of the trade dress under a licence as the agreement did not explicitly refer to the trade dress or any trade mark. The Court also found that the goodwill arising from the habitual use of the trade dress by Mondelez after the restructure, as it was the entity using the trade dress attached to the goodwill of Mondelez as an entity and as such, the rights to use the trade dress were transferred to Bega as part of the goodwill in the business acquired when the assets of Mondelez was purchased by Bega.

Justice O’Callaghan observed that “goodwill” is the attractive force which brings in custom, is inseparable from the business to which it adds value and cannot be dealt with except in conjunction with the sale of that business. It was Mondelez that applied the trade dress to the goods, put the goods bearing the trade dress into the marketplace, and thereby attained a reputation sufficient to found an action in passing off or under the Australian Consumer Law. It was this business, assets and goodwill that Bega acquired. As a result, the right to use the trade dress rests with Bega and not with Kraft.

Why is this case important with respect to trademarks?

  1. This case reaffirms that in Australia, 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. Unregistered trademarks are a source of goodwill and cannot be assigned other than with the assignment of the goodwill in the underlying business in respect of which the trade mark is used.
  2. This case reinforces the benefits of registering all commercially valuable brand identifiers as trade marks (including aspects of packaging) This decision now calls into question whether brand owners can licence unregistered trademarks without assigning the goodwill in the business concerned. In this case Kraft had not registered the trademark and, as this case notes, there are limitations in seeking to enforce unregistered trademark rights.
  3. This decision highlights the importance of ensuring that agreements to assign or license intellectual property rights are drafted through the lens of the jurisdiction in which those rights were created. Kraft was operating under US law and probably should have contemplated differences between US and Australian law when licencing the trade dress in Australia.

The benefits of registering a trademark is that it provides clear rights of exclusivity in respect to the use of the registered trademark with no need to demonstrate to the Court a reputation in the market associated with the trademark.

The arguments put forward by Kraft with respect to the licence agreement between it an Mondelez also demonstrate how critical it is for companies to have properly drafted Intellectual Property Licence Agreements to ensure all intellectual property, including trademarks are protected from being transferred. The comments made in this case raise serious concerns for businesses that rely on licensing of unregistered trademarks as part of their normal business operations, for example franchisors. The primary concern is that contractual terms can be seemingly displaced, despite the parties agreeing that an unregistered mark is a licensed mark under the terms of the licence particularly where the brand owner is not exercising sufficient control over the trademark, as was the case here with Kraft who was not exercising any control over the trade dress. While this case concerned trade dress and get-up, the principles would apply to any unregistered word or logo mark which is licensed to another party.

If you think you have a trademark that should be registered or would like more advice on protecting your brand, our team here at Adams & Partners Lawyers are able to assist you.

 

Wriiten by Amelia Hatton – August 2019

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