Monday, August 1, 2011

Mitre 10 v Masters [2011] VSC 343 - protecting secondary branding

The matter of Mitre 10 Australia Pty Ltd v Masters Home Improvement Australia Pty Ltd [2011] VSC 343 (Mitre 10 v Masters) was an application by Mitre 10 for an injunction in the Supreme Court of Victoria. Mitre 10 was seeking to restrain a newcomer to the home improvement market, Masters, from using a particular colour scheme for the Masters store branding. By the time the application was made by Mitre 10, Masters had not commenced trading. Masters is a joint venture between Woolworths Ltd and a US company, Lowe's.

I have included a discussion of this case below.

Mitre 10 said that it had a colour branding strategy which included the colours blue, light blue, grey and white. This included a trademark with white and light blue letters on a blue background. On reading the judgment, it appears that the colour scheme being referred to includes that which is set out in the following picture.

Mitre 10 said that the Masters' brand colour scheme was the same and not just similar. It appears that the Masters colour scheme referred to includes the following.

Mitre 10 said that because of the similarity between the branding schemes, if Masters was to use that scheme then this would amount to misleading or deceptive conduct in breach of Schedule 2 of the Competition and Consumer Act 2010 (Cth) because the branding would be likely to mislead or deceive consumers into believing that:
  • Masters’ stores are Mitre 10 stores; 
  • Masters’ stores are advertised, promoted and operated with the licence or approval of Mitre 10; and
  • The Masters’ business is the Mitre 10 business which has the sponsorship or approval of Mitre 10 or is affiliated with it.
    Mitre 10 also said that Masters was committing the tort of passing off, as Masters was attempting to pass off its stores as those of Mitre 10, and its business as having a connection or affiliation with Mitre 10.

    Macaulay J provided a useful and concise summary of what the Court needs to be satisfied of in an interlocutory injunction application. The matters include that there is a prima facie case, that damages are not an adequate remedy, and that the balance of convenience favours the granting of an injunction (at [31] to [34]):
    31There is no dispute as to the particular principles that should apply in deciding the matter at an interlocutory stage. A number of factors are considered and, although they may be stated separately, they are nonetheless interrelated.

    32 The first is whether the plaintiff has made out a prima facie case. This consideration is explained in Australian Broadcasting Corporation v O’Neill in which Gummow and Hayne JJ said:

    The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd. This Court (Kitto, Taylor, Menzies and Owen JJ) said that on such applications the court addresses itself to two main inquiries and continued:

    ‘The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief ...’.

    By using the phrase ‘prima facie case’, their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial.
    33 The second consideration is whether or not damages would be an adequate remedy.
    34 The third consideration is what is usually called the balance of convenience, but has been expressed by the Court of Appeal in Victoria in terms of where the lowest risk of injustice lies: In our view, the flexibility and adaptability of the remedy of injunction as an instrument of justice will be best served by the adoption of the Hoffman approach. That is, whether the relief sought is prohibitory or mandatory, the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’, in the sense of granting an injunction to a party who fails to establish his right at the trial, or in failing to grant an injunction to a party who succeeds at trial.
    The latter case on the balance of convenience is a reference to Bradto v State of Victoria [2006] VSCA 89.

    Mitre 10 argued that the colour scheme was an example of secondary branding, citing Merkel J (as he then was) at [57] in Telstra Corporation v Royal & Sun Alliance Insurance Ltd [2003] FCA 786:
    Secondary branding or suggestive brand advertising occurs when a word, character, symbol or image creates, on its own, instant recognition or association with a particular product or business. The adoption of such characters, symbols or images by another advertiser will usually raise the question of whether that advertiser is representing that it, or its goods or services, have an affiliation, association or connection they do not have.
    Mitre 10 used the Clark Rubber store brand as an analogy (which included a bright yellow store with red and blue lettering for signage) saying that Mitre 10 had developed similar secondary brand recognition and Masters should therefore be restrained from using the same colours. Mitre 10 relied on Intellectual Property Pty Ltd v Mygroups Pty Ltd [2006] FCA 15 where the Court restrained a competitor from using a similar colour branding strategy to Clark Rubber.

    However Macaulay J refused the injunction application for the following reasons:
    1. All four colours did not constitute the uniform colour scheme, which reduced the scope for acquired distinctiveness (at [43]).
    2. The particular colour scheme was not distinctive or idiosyncratic (at [44]).
    3. The colour scheme of Mitre 10 has not been around for long and was only implemented in 2007, which means it is not entrenched in the minds of the consumers as being indicative of the Mitre 10 brand (at [45]).
    4. Mitre 10 has a previous colour scheme and the new scheme has only been implemented in 50% of its stores. The new colour scheme of Mitre 10 is likely to be competing with the old colour scheme in the minds of consumers and a uniformly recognised colour scheme is a work in progress (at [46]).
    5. The colour scheme of white letters on blue background is commonplace for hardware (at [47]).
    6. Because of the different names and marks, it is unlikely that ‘ordinary and reasonable members of the classes of prospective purchasers’ would have a misconception that a Masters store is a Mitre 10 store (at [48]).
    7. Even if Mitre 10 could show that it had an arguable case, the balance of convenience favoured Masters as it would have to delay the store opening, completely reinvent its colour scheme and delay the commencement of any contracts and activities if an injunction was granted (at [52] to [57]).
      Mitre 10 v Masters is interesting because it demonstrates the limits of protection for secondary branding, particularly where there is a question of whether the particular secondary branding has become entrenched in the minds of consumers. The summary of the principles for obtaining interlocutory injunctions is useful also, as a general checklist.

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