Clifford Gouldson Lawyers

Trade marks, colour schemes and distinctive shopfronts: are they protected?

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2/10/2015

The recent case of Verrocchi v Direct Chemist Outlet Pty Ltd* is an excellent example of “how close is too close?” in trade mark terms.  This is particularly so when it comes to businesses protecting their own generic trade marks or co-existing alongside those of a competing business.

This is something on which savvy legal consumers are increasingly taking advice, and there are some key points to take away from the case for all business owners.
 
Background
 
Mario Verrochi and Jack Gance (the proprietors of the Chemist Warehouse chain) brought an action against Direct Chemist Outlet for:

  • infringing Chemist Warehouse’s trade mark “Is this Australia’s Cheapest Chemist?” with the deceptively similar “Who is Australia’s Cheapest Chemist?” trade mark; and
  • misleading or deceptive conduct related to imitating Chemist Warehouse’s visual style and “get-up”, particularly the use of garish yellow signage and decorations.
In addition to defending these claims, Direct Chemist Outlet made a cross-claim that Chemist Warehouse’s trade mark was not sufficiently distinctive, and should have its registration revoked by the court.
 
Trade mark infringement?
 
Chemist Warehouse’s claim of trade mark infringement overwhelmingly failed. The court held that the trade mark was not distinctive, and that Direct Chemist Outlet’s use of the wording would not have constituted trade mark use anyway. The cross-claim was accepted by the court, and Chemist Warehouse’s trade mark registration was cancelled. To understand why this happened, we must first consider a side-by-side comparison of the marks:





As can be clearly seen, the slogans and their presentation are strikingly similar. It would not be a stretch of the imagination to think that the second is a derivative of the first, and readers placing themselves in the shoes of Mr Verrochi and Mr Gance could surely imagine the alarm that such a similar mark would inspire. But because of the “generic” and “descriptive” nature of the original phrase, it took only an extremely minor variation in the wording and design to avoid infringement.
 
This highlights one of the major pitfalls when seeking registration of a trade mark: applying for a mark that is too generic and/or descriptive, and therefore does not distinguish the goods or services offered under the trade mark.

Generic terms tend to be common names and categories for a good or service, and descriptive terms are words that describes the nature, type, quantity or kind of a good or service.

A simple example of a generic and descriptive trade mark might be an internet service provider that applies for the word mark “Toowoomba’s Best and Fastest Home Internet”, with such an application almost certainly doomed to fail. Alternatively, an application for the word mark “Doctor Jet’s Home Internet” would have a greater chance of success, due to the novelty of the name and lack of descriptive elements.

Misleading or deceptive conduct?

Chemist Warehouse’s other argument was that the imitation of its get-up would mislead consumers into thinking that there was a connection between itself and Direct Chemist Outlet. You might already be aware of Chemist Warehouse’s bright and garish use of yellow paint on its shopfronts, and the similarly dazzling use of the colour within the store and its catalogues. Direct Chemist Outlet employed a similar colour scheme on its shopfront, in-store and its publications.
 
However, the assertion made by Chemist Warehouse that this amounted to misleading or deceptive conduct was rejected by the court. Judge Middleton held that the colour yellow has two well established uses in the retail industry: increasing visibility, and denoting cheapness.

He identified several other traders who use a similar colour scheme, (including JB HiFi and Bob Jane T-Mart), and highlighted several differences between the two parties’ external get-ups. Attention was also drawn to the significant differences between the interior layouts employed by the two parties, with Chemist Warehouse opting for a “busy” and “cluttered” warehouse look, as opposed to Direct Chemist Outlet’s more traditional pharmacy design.

What does this mean for business owners?
 
Business owners and operators should take heed of the following:

  1. It is difficult to protect a distinctive shopfront or in-store layouts and colour schemes. The level of similarity would need to be truly significant, and it would need to be shown that there was a real intention to mislead or deceive.  This is almost always difficult and expensive to prove.
  2. A registered trade mark is not always a magic bullet against competitors using similar wording or images, as the less distinctive a trade mark is, the smaller your scope of protection gets. Generic and descriptive terms, such as geographical place names (e.g. “Australian Electrical”) or indications of quality or kind (“Cheapest Tyres”), are a recipe for trouble. Even if a generic or descriptive mark makes it through examination, competitors would only need to make minor alterations to the mark in order to avoid infringement. Businesses need to take this into account as part of their IP Strategy and either avoid these types of marks in new branding, or take steps to increase the distinctiveness of their existing ‘generic’ brand so as to retain the brand goodwill.
  3. It is extremely important to seek good legal advice when considering a trade mark registration. Even though the “Is this Australia’s Cheapest Chemist?” trade mark passed IP Australia’s examination in 2009, its validity was sharply extinguished in court as it was determined that it did not actually fulfil the requirements for registration in the first place. When planning for your IP portfolio, it is always preferable to ensure a trade mark application is designed for maximum defensive coverage as well as maximum registrability.

 

_______________________
* [2015] FCA 234

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