Australia: Who Is Australia's Cheapest Chemist? A cautionary tale for all trade mark owners

HG IP&IT Alert: 20 May 2015

Registration of a trade mark grants an owner the best protection of a brand against unauthorised copying, and trade mark challenges by third parties. When used correctly, it is an important tool in shaping the way you do business and can often be used to gain an advantage over your competition. But is registration always enough? A recent case points towards the conclusion that trade mark owners are not always safe against scrutiny of their marks by the court just because the marks are registered.

In this Alert, Partner Hayden Delaney and Law Graduate Briar Francis explain the reasons for the judgement in Verrocchi v Direct Chemist Outlet1 and the impacts such a decision has on the registration and maintenance of trade marks in Australia.

Key Points

  • Even if strikingly similar, a phrase may not always be considered an infringement of a registered trade mark.
  • Importantly, the distinctiveness of any mark subject to litigation will often be questioned by the court, and registration does not exempt a mark from this scrutiny.
  • Registering a trade mark does not grant the owner a broad monopoly over use of the phrase in any context whatsoever. In every case, regardless of registration, there are criteria that must be satisfied under the Trade Marks Act 1995 (Cth) (Trade Marks Act), and marks that don't meet this criteria risk being deemed invalid by the court.

Background

Mario Verrocchi of Chemist Warehouse sued Direct Chemist Outlet (DCO) for intellectual property and consumer law related claims pertaining to allegations that DCO had copied certain aspects of Chemist Warehouse's business.

Particularly, Verrocchi claimed that DCO had made use of a trade mark deceptively similar to the registered trade mark "Is This Australia's Cheapest Chemist?" owned jointly by Verrocchi and another man. The trade mark was filed in August 2007 as a composite mark registered without limitation to colour. What made the phrase special as registered was that the words "Is This" were in a smaller font than the rest of the text, and positioned at a 45 degree angle.

From August 2006, DCO, a company in direct competition with Chemist Warehouse, began to put the phrase "Who Is Australia's Cheapest Chemist?" on its product catalogues and prescription backings. The words and sizing was positioned in a similar way to Verrocchi's registered trade mark. From that date up until commencement of the proceedings, DCO used variations of the phrase on its promotional material. At some point, DCO attempted to register the phrase as a trade mark but this did not proceed.

Mr Verrocchi argued that DCO's phrase was deceptively similar because both slogans contained the same idea, were used in respect of the same services, and the words were positioned in the same way. Mr Verrocchi claimed that use of the infringing mark would confuse consumers and that they would question whether there was some relationship between the two parties. Mr Verrocchi argued further that both of the phrases were questions and thus not purely descriptive, and that DCO could not be acting with the motive of an innocent trader as the question "Who Is Australia's Cheapest Chemist?" is not something a properly motivated pharmacist would usually pose.

Judgement

Mr Verrocchi failed in his claim on two important grounds:

  • that Mr Verrocchi's registered trade mark was not a valid trade mark under the Trade Marks Act; and
  • that DCO were not using the phrase as a trade mark.

The court did not deny that the two phrases were similar. In fact, Justice Middleton said in his judgement that DCO's phrase bore a striking resemblance to the registered trade mark. The primary problem, though, was that the registered mark itself was not distinctive enough to grant Chemist Warehouse a monopoly over use of the phrase. The words that form the phrase "Is This Australia's Cheapest Chemist?" are common and therefore it would be easy for other traders operating with innocent intentions to infringe such a trade mark. Extensive use alone was not enough to determine that the phrase was recognised by the market as Chemist Warehouse's own trade mark distinguishable from other traders, and the judge noted that Chemist Warehouse itself had acted to its own detriment by varying the mark as promoted over time.

Even if the mark had been distinctive enough to be a valid trade mark under the Trade Marks Act, the court found that DCO had not been using the phrase as a trade mark, thus had not committed any infringement. The rationale behind the decision provided by the court was similar to the finding against distinctiveness of the phrase, in that other traders in the industry would likely use similar phrasing to advertise their goods and services to consumers. Cheap prices were of paramount concern to both businesses as discount chemists, and DCO had used multiple slogans to convey the same message regarding competitive pricing. The slogans were thus descriptive of the category of pharmacies in which the two businesses operate, and not inherently distinctive.

Conclusion

This case highlights the importance of ensuring that your trade mark is distinctive, both at the time of application to a trade mark registry and throughout use of the mark. If the mark had been valid under the Trade Marks Act, it is extremely likely that the court would have found for the Applicants that DCO had infringed their trade mark. There is also a clear responsibility placed on the owners of trade marks to satisfy themselves of the validity of the marks that they file for registration and before they seek to enforce their rights in the registered trade mark.

Trade marks which are (on face value) non-distinctive (e.g. a phrase which is descriptive of the goods or services), but which still attain registration (e.g. because of acquired distinctiveness), are still subject to scrutiny by a Court. Registration does not mark the end of the owner's obligations and a Court always has the power to cancel a registration if a mark is found to be not adequately distinctive. There are strategies available to try to acquire and to maintain brand distinctiveness – brand owners should seek advice on these strategies prior to embarking on costly enforcement action.

Footnote

1Verrocchi v Direct Chemist Outlet Pty Ltd [2015] FCA 234

© HopgoodGanim Lawyers

Award-winning law firm HopgoodGanim offers commercially-focused advice, coupled with reliable and responsive service, to clients throughout Australia and across international borders.

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