Consumers can tell one chocolate brand from another after all
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Cadbury has lost the latest battle over the exclusive use of the colour purple on chocolate wrapping but, regrettably, the chocolate wars are probably still far from over. On Friday 11th April, Justice Heerey in the Federal Court gave his judgment in respect of the ‘further trial’ of the action brought by Cadbury against Darrell Lea for having the temerity to use purple in some of its chocolate wrapping. (Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 8)  FCA 470). The action was based on passing off and an alleged breach of s52 of the Trade Practices Act which prohibits corporations from engaging in conduct that is misleading or deceptive or which is likely to mislead or deceive.
A little bit of background to this latest decision is probably necessary for those who, for reasons only known to them, have failed to follow the fate of purple in Australian litigation. At the original trial in 2006, Justice Heerey found for Darrell Lea and held certain expert evidence from Cadbury inadmissible. While there was a lot of evidence that consumers associated purple with Cadbury chocolate, there was also a lot of evidence of uses by other chocolate makers of purple and many factors which distinguished Darrell Lea from Cadbury chocolate. For example, the words Darrell Lea written prominently on Darrell Lea chocolate were subtle hints to consumers that the chocolate in question was not Cadbury. Some consumers actually picked up on the point.
An appeal to the Full Federal Court was successful but only in respect of the admissibility of the expert evidence. The Full Court held that the matter should be remitted to the primary judge for further trial. So Justice Heerey proposed to have a re-hearing restricted purely to the issue of the expert evidence that he had originally held to be inadmissible. Cadbury objected to that interpretation of the Full Court’s judgement and sought an order from the Full Court that a completely new trial be held. The Full Court rejected Cadbury’s claim and so the limited re-hearing proceeded although that only happened after the High Court declined to grant Cadbury leave to appeal against the Full Court’s ruling.
It is also worth noting that the big prize that Cadbury failed to obtain here is not just victory in this passing off case but a big step towards Cadbury successfully registering purple as a trade mark for chocolate. See the article by Lea Lewin in the Australian Trade Marks Law Blog on 11th February, 2008. If Cadbury can’t convince a Federal Court that use of purple by other chocolate makers is misleading or deceptive, its prospects of obtaining that registration on the basis that its use of purple has led to purple being distinctive of its chocolates will be severely diminished.
The re-hearing revolved around the evidence of three expert witnesses who claimed that Darrell Lea’s use of purple on some of its chocolate wrapping was deceptive or misleading. Obviously, after the Full Court’s decision, the evidence was admissible. The questions were really what weight should be given to the evidence and was it of such significance as to alter the original first instance decision. The answers were 'none' and 'no' although Justice Heerey put them somewhat more delicately than that.
The real problem with the evidence was that the three experts basically gave their views on the issue of passing off and deception based on only some of the evidence before the trial judge. Since they were in no better position than the judge to comment on these matters and, in fact, were in a vastly worse position to express an opinion, it was no great surprise that the judgment said, in part,
"I consider it appropriate to record that in the particular circumstances of this case, which is concerned with the packaging of a product intended to appeal to a wide segment of the general public, I have found the expert evidence of no real assistance. ... It seems to me that evidence of opinions based on market research and expert appreciation of consumer behaviour will rarely be of assistance in litigation where the court's primary concern is with the behaviour to be expected of, and the judgments likely to be made by, ordinary (even if it might thought, somewhat credulous) members of the community intent on making a relatively modest purchase in a conventional way."
Some of the deficiencies in the expert evidence were significant, especially given that the evidence has now been a critical part of the subject of two first instance hearings, two Full Court hearings and an application for leave to appeal to the High Court.
Several important matters were apparently not revealed to the experts when writing their affidavits. One expert was not aware that Darrell Lea did not sell block chocolate. Others did not know about Darrell Lea's use of 'boysenberry' for ten years without objection by Cadbury, the extent of sales of Cadbury without the colour purple (more than 50% of its sales) and the fact that Darrell Lea was rarely sold side by side with Cadbury. There were many other matters in evidence before the Court which it seemed were not in the minds of the experts when giving their evidence in chief.
One expert's evidence extended over 90 pages of affidavits and involved a detailed explanation of concepts such as 'misidentification', 'miscuing', 'misinference' and 'misassociation'. For example, 'miscuing' was described, in part, in these terms:
"... in this capacity the colour can function as a decision-heuristic [a shorthand decision rule or "rule of thumb" functioning to reduce decision-making effort while maintaining an adequate level of accuracy] cue, an operant-conditioning [a form of learning in which modification of behaviour is brought about by the consequences that followed upon the occurrence of the behaviour in the past (for example, reward)] cue, or a behaviour instigating cue."
One possible interpretation of the above statement is that consumers saw purple on chocolate wrappers, thought the chocolate was from Cadbury for that reason and then bought it.
In contrast to the exhaustive and possibly exhausting explanations of consumer behaviour contained in those affidavits, Heerey J made this somewhat shorter but possibly more accessible statement:
"The hypothetical reasonable chocolate consumer could think along these lines: Purple makes me think of Cadbury chocolate. But I know that other chocolate makers' products such as Violet Crumble use purple. So Cadbury does not have a monopoly in the use of purple for chocolate. Seeing chocolate in a purple wrapper with Darrell Lea's name on it in a Darrell Lea shop does not make me think it comes from Cadbury."
The judgment is an interesting example of a Federal Court judge declining to delegate the making of conclusions of fact on mundane matters to experts, especially when the experts do not have access to the array of evidence available to that judge. One can only hope that when Cadbury inevitably appeals this case that the Full Court will not depart from heurismin its consideration of the desirable approaches of trial judges and that it will not generate operant-conditioning which creates a reward for trial judges avoiding making decisions on straightforward matters.
Finally, the real problem here (apart from 90 pages of affidavits with instructions to Federal Court judges on how to suck eggs and our tax dollars being spent paying judges to read them) is s41(6) of the Trade Marks Act 1995 (Cth) which permits distinctiveness to be proven through use alone. Cadbury is chasing the big prize of exclusive property rights in the colour purple in respect of chocolate. One can understand its desire to obtain such a prize in respect of a colour traditionally associated with luxury and opulence. It can only do so by demonstrating extensive trade mark use of purple resulting in distinctiveness. In its push, the court system has been now been subjected to two first instance hearings, two Full Court hearings, one High Court application and there is more to follow. Obviously, Cadbury believes that the benefit to it of such action is significant. The real questions though are "What is the benefit to the community?' of exclusive rights in single colours, even assuming that Cadbury is ultimately successful, and 'Does that benefit justify the transaction costs and the costs to competitors and consumers?". Perhaps the answers are 'none' and 'no'.