The power of trade dress: Learnings from Kraft v Bega

Kraft Food Group Brands LLC v Bega Cheese Limited [2020] FCAFC 65 (14 April 2020)

The Full Federal Court has ruled that Bega, not Kraft, is the lawful owner of the distinctive peanut butter trade dress comprising a jar with yellow lid and a yellow label with a blue or red peanut device (the Peanut Butter Trade Dress, shown below).

What you need to know

• Trade dress (or “get up") can be extremely valuable. Businesses that have built up valuable goodwill in aspects of trade dress should carefully consider obtaining additional trade mark registrations to ensure the rights can be separated from the business in a transaction.

• Thorough due diligence and clear identification of IP rights, both registered and unregistered, in any transaction is imperative.

• Corporate groups should carefully consider whether any existing intra-group IP assignments are effective to transfer ownership of any unregistered trade marks, noting that it is not possible under Australian law to assign an unregistered trade mark separate from the goodwill of the business to which it relates.

Background

For many years Kraft peanut butter was manufactured and sold in Australia by an Australian Kraft entity, Kraft Foods Ltd (KFL), in packaging displaying the KRAFT brand and the Peanut Butter Trade Dress.

As part of a global restructure in 2012, Kraft separated its grocery business from its snack business and KFL was renamed Mondelez Australia (Foods) Ltd (MAFL). MAFL continued to operate the Australian peanut butter business under the KRAFT brand and the Peanut Butter Trade Dress.

The issues between Bega and Kraft emerged in 2017 after Bega acquired most of the Australian and New Zealand businesses of MAFL, including the peanut butter factory in Port Melbourne. Following the acquisition, Bega took over the manufacturing site and rebranded the peanut butter by removing the KRAFT brand but continued to use the Peanut Butter Trade Dress.

In response to Bega’s use of the Peanut Butter Trade Dress, Kraft commenced legal proceedings alleging breach of contract, misleading or deceptive conduct in contravention of the Australian Consumer Law (ACL), and passing off. Kraft asserted that, due to various assignments and licences entered into as part of the 2012 restructure, Kraft was the lawful owner of the Peanut Butter Trade Dress and that MAFL (and therefore Bega) was a mere licensee.

Bega counterclaimed that it had lawfully acquired rights to the Peanut Butter Trade Dress when it acquired the peanut butter business from MAFL in 2017 and that Kraft had engaged in misleading or deceptive conduct as a result of its use of the Peanut Butter Trade Dress in respect of a new KRAFT peanut butter launched by Kraft in April 2018.

Who owned the Peanut Butter Trade Dress?

This required a careful review of the 2012 restructure agreements which resulted in the separation of the Kraft grocery business (GroceryCo) from the Kraft snack business (SnackCo). Kraft asserted that the peanut butter product line was allocated to GroceryCo as part of the 2012 restructure and that the KRAFT brand and Peanut Butter Trade Dress were merely licensed to SnackCo’s IP holding company (and ultimately to KFL/MAFL).

The Court rejected Kraft’s argument. It found that, on their true construction, the transaction documents allocated the Australian peanut butter business and related IP (including the Peanut Butter Trade Dress) to what became the SnackCo business. As there was never a sale of the Australian peanut business to a Kraft global entity, the rights in relation to the Peanut Butter Trade Dress remained with KFL/MAFL following the restructure until those rights were eventually sold to Bega in 2017 as part of the sale of the peanut butter business.

The ACL claims

Having found that Kraft did not own rights in the Peanut Butter Trade Dress, the Court went on to find that Bega did not engage in misleading or deceptive conduct by using the Peanut Butter Trade Dress.

The Court noted that Bega had removed the KRAFT brand from the products and was using the Peanut Butter Trade Dress in connection with the Bega brand. In those circumstances, the Court ruled that the reasonable consumer was likely to understand that Bega had taken over the peanut butter business formerly conducted by Kraft, which was true. The Court did not agree that reasonable consumers would be misled into believing that Bega is somehow “associated” with the original Kraft brand.

There were a number of additional ACL claims by both Kraft and Bega, including a claim that Kraft made misleading representations in a press release about the launch of its peanut butter in Australia. Bega took issue with the claim “back on… shelves” on the basis that it conveyed that Kraft’s peanut butter products would be the same products that had been sold in Australia until June 2017 under the KRAFT brand. The Court agreed with Bega and found the press release claim to be misleading as it represented that Kraft’s peanut butter product was the same as the product previously sold under the KRAFT brand and that Bega’s products were not the same products that consumers had previously bought by reference to the KRAFT brand, when in fact they were.

Disclaimer:
The information in this article is of a general nature. It does not constitute formal legal advice and should not be relied upon as such. Please contact Provenance Legal if you require advice about a specific legal matter.