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No Go for Descriptive Trade Marks

Michael McDonald | October 21st, 2015

A recent Federal Court case demonstrates the fundamental importance of choosing brands and marketing strategies that differentiate your business from your competitors.  In this case, Chemist Warehouse issued trade mark enforcement proceedings against its competitor, Direct Chemist Outlet, and not only lost the case, but will also lose its trade mark registration because it lacked the requisite distinctiveness under the Trade Marks Act (Cth).

This case also illustrates the potentially significant financial impact that descriptive trade mark registrations can have. In addition to its registered trade mark being invalidated, Chemist warehouse was ordered by the Court to pay the other party’s legal expenses as well as having to bear its own legal fees.  Therefore, descriptive brands are not the way to go.

The claims

In the case of Verrocchi v Direct Chemist Warehouse, the applicants, trading as ‘Chemist Warehouse’ issued proceedings against Direct Chemist Outlet (DCO) for the following:

  1. Misleading or deceptive conduct under the Australian Consumer Law and passing off in relation to the ‘get-up’ used by DCO. Chemist Warehouse alleged that DCO had copied the visual appearance of its stores which depict yellow as a prominent feature along with other primary colours red and blue; and
  2. Infringement of its registered trade mark ‘Is this Australia’s Cheapest Chemist?’.

The Federal Court’s findings

Misleading or deceptive conduct and passing off

Justice Middleton found that there was no sufficiently common identity in the design and layout of the Chemist Warehouse stores to give rise to a distinctive store get-up associated with Chemist Warehouse. This was because the stores did not have a uniform external appearance.  His Honour also found nothing distinctive about Chemist Warehouse’s catalogues and website. The only distinctive and consistently used branding element in the store exterior get-up was the Chemist Warehouse logo.

Further, his Honour found that DCO had sufficiently distinguished the trade indicia of its stores, so that the logo, colours and physical appearance of their stores, catalogues and website would not be likely to mislead or deceive the relevant consumers.

Consequently, Chemist Warehouse failed in its claims for misleading or deceptive conduct and passing off.

Trade mark infringement

Chemist Warehouse alleged that DCO’s use of the slogan ‘Who is Australia’s Cheapest Chemist?’ infringed Chemist Warehouse’s registered trade mark ‘Is this Australia’s Cheapest Chemist?’ (the Trade Mark).

However, interestingly, Justice Middleton held that the Trade Mark was not valid because it did not meet the distinctiveness requirements under s.41 of the Trade Marks Act (the Act). This was because a trade mark must be perceived as ‘a reliable badge of origin on its own’ and in his Honour’s view the slogan was merely descriptive. Even if the Trade Mark had been found to be valid, Justice Middleton did not consider that DCO had used the slogan ‘as a trade mark’ and accordingly there would have been no infringement in any event.

So why would you want to use a brand that is descriptive of your goods or services?

As trade mark lawyers, we are commonly told by clients that they want to establish a business with a brand that is very descriptive of their business offering. This is usually because they want customers to immediately understand what their business provides.

However, from a legal perspective, adopting a descriptive brand is in fact very risky, for the following reasons:

  1. In order to register a trade mark, your mark:
    • must not be substantially identical or deceptively similar to any earlier filed trade marks; and;
    • must be ‘distinctive’ of the goods or services that you provide (rather than descriptive).

    If a trade mark is descriptive of the goods or services, the Trade Marks Examiner is unlikely to allow the trade mark to proceed to registration because it would be unfair to allow one person to have a monopoly right over a word or phrase that other traders may wish to genuinely use in the ordinary course of trade.  Whether a trade mark is ‘descriptive’ would also depend on the nature of the goods or services in question.  For instance, ‘apple’ would be descriptive of apples or apple trees, whereas ‘apple’ is not descriptive of computer products.

    In some circumstances it may be possible to register a descriptive mark if you can submit sufficient evidence to the Trade Mark Examiner to demonstrate that the mark has ‘acquired distinctiveness’ through extensive use over time.

  2. It is a defence to trade mark infringement if a person uses a mark in good faith to indicate the kind, quality, quantity, intended purpose, value, geographical origin, or some other characteristic, of goods or services under s.122(b)(i) of the Act.This means that even if you are able to eventually register a trade mark by demonstrating that the brand has acquired distinctiveness through extensive use, you will not be able to enforce your trade mark registration against a third party if they are using their mark in a descriptive way and can rely on s.122(b)(i).An example of this is the case of Pepsico Australia Pty Ltd & Anor v The Kettle Chip Company Pty Ltd [1996] FCA 1236 where it was held that the term ‘kettle cooked chips’ was used descriptively and did not infringe the Kettle Chip trade mark. This is because the use of the word ‘kettle’ referred to the way in which the chips were cooked.
  3. As demonstrated in the Chemist Warehouse case, you can lose your trade mark registration if the Court finds that your trade mark is not sufficiently distinctive as required under the Act.Moreover, if you issue proceedings against another party and are unsuccessful as a result of your trade mark being invalidated, the Court will ordinarily order you to pay the other party’s legal costs of running the proceeding to trial (as well as having to bear your own legal costs).

So what is the moral of the story?

Be very careful about the brand that you adopt. Make sure that you select a name that is sufficiently distinctive so that you do not have to encounter the difficulties described above.

Also ensure that you select a name that is different from other brands to ensure that you do not expose yourself to an action by another trader for:

  1. infringement of their registered marks; or
  2. misleading or deceptive conduct or passing off.

Why would you want your brand to be similar to those of your competitors? If you have a good business, you should set yourself apart by adopting a unique brand position; be different!

However, if you do want to include descriptive wording or a descriptive tag line in your branding, you should ensure that there are some other ‘distinctive’ parts of your branding. In this way you should be able to obtain a registration for a composite trade mark (which would include wording and a graphic image).

Further, if you are in the business of licensing or franchising you should ensure that that the appearance of all shop fronts is as similar as possible to increase your chances of being able to take action against third parties for misleading or deceptive conduct or passing off. The lack of uniformity in appearance of its shop fronts was one of the reasons that Chemist Warehouse was unsuccessful in its claims.

It is also important to ensure that any franchise or licence agreements provide sufficient quality control mechanisms to ensure consistent usage of the branding.

About mdp

We provide the following services:

  • conducting trade mark searches and providing advice regarding adopting new brands;
  • expanding the scope of protection of existing brands;
  • registering all forms of IP in Australia and overseas;
  • providing commercial and structuring advice;
  • preparing licence and franchise agreements;
  • expanding businesses internationally;
  • IP enforcement; and
  • commercial litigation.

If you have any queries, please feel free to contact Sarah Verstak on 03 9620 9660 or sverstak@mdplaw.com.au.

Michael McDonald

Michael McDonald

Director, BA LL.B at mdp
Michael is a highly respected and pre-eminent lawyer, commercial advisor and businessman with a career spanning more than 35 years across corporate, commercial and intellectual property law. He has specialist expertise in, and passion for, commercialising and growing Australian businesses both in Australia and internationally.
Michael McDonald

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