NZLII Home | Databases | WorldLII | Search | Feedback

Court of Appeal of New Zealand
You are here:  NZLII >> Databases >> Court of Appeal of New Zealand >> 2018 >> [2018] NZCA 45

Database Search | Name Search | Recent Decisions | Noteup | LawCite | Download | Help

National Mini Storage Limited v National Storage Limited [2018] NZCA 45 (12 March 2018)

Last Updated: 22 March 2018

IN THE COURT OF APPEAL OF NEW ZEALAND
BETWEEN
 Appellant
AND
 First Respondent NATIONAL STORAGE HOLDINGS LIMITED Second Respondent NATIONAL STORAGE (NZ) PTY LIMITED Third Respondent NATIONAL STORAGE (OPERATIONS) PTY LIMITED Fourth Respondent
Hearing:
8 and 9 November 2017
Court:
Kós P, Miller and Winkelmann JJ
Counsel:
A H Brown QC and J Oliver-Hood for Appellant J G Miles QC and JWS Baigent for Respondents
Judgment:


JUDGMENT OF THE COURT

  1. The appeal is dismissed.
  2. The appellant must pay the respondents one set of costs for a complex appeal on a band B basis and usual disbursements. We certify for second counsel.

____________________________________________________________________

TABLE OF CONTENTS



REASONS OF THE COURT

(Given by Miller J)

Introduction

[1] Self-storage is the name given to a service in which customers rent a storage unit to which they transport their own goods, accessing the unit whenever they want. The appellant, National Mini Storage Ltd (which we will call “NMS”) has long offered such services in Auckland. The first respondent, National Storage Ltd (which together with the other respondents we will call “NS”), is an Australianlisted company that carries on business elsewhere in New Zealand and now wants to enter the Auckland market.
[2] NMS seeks an injunction to prevent NS using the words “national storage” to operate and promote its services in what is described as the greater Auckland area, corresponding to the jurisdiction of the Auckland Council.[1] The injunction is sought under the Fair Trading Act 1986, on the ground that if NS establishes self-storage facilities in Auckland and brands its services using “national storage” a significant number of customers who know of NMS will be misled and deceived into dealing with NS.[2] This claim rests on the premises that “national mini storage” has acquired a secondary meaning by association with NMS and “mini” does not sufficiently distinguish NMS from NS.
[3] Each party brands its services through various media using brand marks that are admittedly distinctive. NMS contends, however, that consumers will be misled when they use word searches to find self-storage facilities on the Internet, either because they are searching for NMS but imperfectly recall its name or because they enter its name correctly but are confused when they see a Google search engine results page (which we will call a “SERP”) that lists both NMS and NS.[3] The SERP names the firms but their distinctive branding is not usually visible until the consumer “clicks through” to their websites.
[4] Although NS has yet to offer facilities in Auckland, it has established itself in New Zealand without opposition from NMS, carrying on business in nine locations (the nearest of which is in Hamilton), and its services appear alongside those of NMS on a SERP generated from a search made in Auckland. So it is possible to gauge the risk of consumer confusion with more confidence than might otherwise be the case when a quia timet injunction is sought.[4]
[5] In the High Court, Muir J undertook a lengthy review of the evidence and held that:
[6] The appeal alleges that the Judge made certain errors of law, but for reasons that will become apparent the appeal does not turn on these claims. In our opinion the appeal must fail unless NMS can upset the Judge’s factual findings, on which we accordingly focus.

Roadmap

[7] We begin by introducing the protagonists, describing the market and recounting NS’s entry to New Zealand markets. We then summarise some uncontroversial points of law to set the evidence in context.
[8] Turning to the evidence, we:
[9] We next examine errors of law that the Judge is said to have made. Notably, he is said to have distinguished other Internet cases erroneously on the ground that they involved predatory conduct or an intention to deceive, and to have assessed the risk of confusion not upon the consumer’s first encounter with the SERP but after the consumer has clicked through to websites. We then deal with a defence based on acquiescence before turning to the remedy sought.

The protagonists

[10] NMS offers self-storage facilities from nine branches in Auckland, where it has carried on business since 1991. Despite its name, it does not operate in any other regions. It brands itself using the following mark:

2018_4500.png

It holds a trade mark for that image and it has sought a trade mark for the word mark NATIONAL MINI STORAGE. A disclaimer on the registered mark notes that it confirms no exclusive right to use each of the words separately.

[11] NS trades under that name in Australia and, since 2015, in New Zealand, where it has established nine branches. It has none in Auckland itself; its nearest branch is in Hamilton. It brands itself using the following marks:[12]

2018_4501.png2018_4502.png

It holds a New Zealand trade mark for the image on the right.

Markets for self-storage facilities

[12] Consumers of self-storage services fall into two categories: households, who are known as retail consumers and rent facilities on some infrequent happening such as the sale of a house, an extended overseas trip, or a move into residential care; and businesses, which rent space on a more sustained basis to store stock or archive documents. This proceeding is concerned with retail consumers.[13]
[13] It is common ground that there exist local geographic markets for self-storage services. The evidence is that consumers seek facilities within reasonably close proximity to their homes or places of business. Muir J found that NMS and a firm called Storage King together dominate the Auckland market.[14] They control about 80 per cent of the available facilities and the remainder is distributed among 39 very small firms. Occupancy rates run at about 90 per cent, which is regarded as full utilisation when allowance is made for a degree of churn. Between them, NMS and Storage King appear to exercise a degree of market power.

NS’s entry to New Zealand markets

[14] NS first announced its intention to enter New Zealand markets in August 2014 and soon afterward expressed interest in buying NMS. The overture was rejected. NS then commenced business in other centres, and in February 2016 it announced its intention to enter Auckland.
[15] On 1 July 2016 NMS’s lawyers invited NS to undertake not to use its mark “National Storage” in the greater Auckland area. NS refused and this proceeding followed. It was filed on 5 September 2016.
[16] As a result of the proceeding, NS has yet to offer services in Auckland. During the trial it undertook not to target the word “mini” in its Google marketing practices should it open facilities there. Because of the way Google prioritises listings on a SERP (including the fact that Google gives priority to listings that match the search term exactly, such as NMS’s website when a consumer searches for “national mini storage”) listing for NS are likely to appear lower on a SERP than listings for NMS if a consumer searches for “mini”-related words and phrases.[15]
[17] We dispose in passing of NMS’s argument that the undertakings are an admission that NS’s advertisement may mislead. We agree with Mr Miles QC, for NS, that they need not and ought not be interpreted in that way. They were offered as a credible commitment to NS’s promise that it will not target “mini” in its marketing. They accordingly distinguish this case from others in which one firm targeted another’s name in a deliberate attempt to mislead consumers.
[18] The Judge found, and we accept, that NS has acquired some presence in Auckland notwithstanding that it has yet to enter the local market:[16]

Trading names and the reasonable internet user

[19] We begin with some uncontroversial propositions intended to set what follows in context. First, for Fair Trading Act purposes consumers are not misled by the adoption of a trading name unless a class of consumers associates that name with goods or services of another firm.[17] Distinctiveness or reputation is a question of fact.
[20] Second, a court assesses the risk of consumers being misled or deceived by putting itself in the position of a hypothetical internet user who is reasonably informed and reasonably attentive. It is not necessary either that the defendant has actually misled anyone or that it should mean to do so.[18]
[21] Third, a plaintiff must show that the number of people in the group targeted by the defendant’s behaviour who are likely to be confused or deceived is substantial or significant.[19] If that cannot be shown, a court may either conclude that the conduct should not be characterised as misleading or deceptive or decline relief in the exercise of its remedial discretion.[20]
[22] Fourth, a trader who adopts a generic or descriptive trading name must be prepared to live with some degree of confusion, because small distinctions may be enough to defeat a claim under the Fair Trading Act (or in passing off).[21]

NMS’s brand recognition in Auckland

[23] The proposition that retail consumers may mistake NS for NMS rests on the premise that they know of NMS already; in other words, that the phrase “national mini storage” has acquired a secondary meaning in the form of association with NMS. That such association exists is not in dispute. NS concedes it and Muir J accepted it.[22] It is nevertheless one of NMS’s principal points on appeal, because the Judge found that the association is slight; there is only “some element” of secondary meaning.[23] NMS contends that this finding materially understates its reputation.
[24] Muir J characterised “national mini storage” as a descriptive name.[24] Mr Brown QC, who appeared for NMS, challenged this conclusion, arguing that the Judge failed to consider the three words as a group and submitting that “national mini” is capable of secondary meaning. The first of these submissions is factually incorrect. The Judge did state that each of the three words is descriptive, but he also clearly found that the name as a whole is descriptive.[25] We agree with him that the name is intrinsically descriptive of a service, but we readily accept that it is capable of acquiring secondary meaning and especially so because “mini” selfstorage is an Americanism that is not commonly used in this country.
[25] We turn to the question of NMS’s market recognition. Mr Brown submitted that the Judge failed to deal with the evidence on this point. He drew our attention to the many ways in which NMS has marketed itself over the past quarter-century. Notably:
[26] We accept, as we think the Judge did, that NMS has made all of these efforts to achieve brand recognition. If that were the only evidence, a court might infer that its efforts have had a significant effect. NS, after all, has also spent what must be significant sums on branding, presumably in the expectation that its investment will generate a return.
[27] But the self-storage industry is characterised by low brand recognition. Selfstorage was succinctly described in evidence as a needs-based service, bought grudgingly in a crowded and undifferentiated market. Surveys show that a high proportion of the public cannot name a single operator. Muir J cited a series of surveys showing that 42 per cent of Auckland respondents could not name a single brand and few — 6.1 per cent in one study — could name NMS unprompted (though 26.4 per cent did so when prompted).[26] We are not persuaded that the Judge was wrong to find that NMS’s brand recognition is low. That fact creates some potential for confusion, as Mr Brown submitted, but it is initially significant because it indicates that the proportion of customers affected by the injunction who know something of NMS — and so are susceptible to confusion in the first place — is low.

Pathway to deception

[28] Muir J found, uncontroversially, that knowledge of NMS is primarily attributable to street signage and NMS’s website.[27] Such knowledge is accordingly associated with its distinctive branding, which gives central prominence to the word “mini”. The brand mark of NS is also distinctive. So the field of potential confusion is confined to inquiries or transactions that do not use the marks.
[29] NMS accordingly focuses its case on internet searches made by consumers who imperfectly recall NMS (sometimes by relying on an incomplete word of mouth recommendation) and so fail to enter its name correctly, or by consumers who do recall NMS by name but are confused when presented with a SERP that includes results for both NMS and NS. It is immaterial, NMS submits, that such confusion may be remedied when the customer clicks through to a website and sees the website owner’s branding.
[30] How material is this group of potentially confused people as a proportion of the market as a whole? According to evidence adduced by NMS, between January 2013 and October 2016 approximately 27 per cent of customers came to hear of its services via its website or by email. The remainder were attracted by other forms of marketing (such as signage/passing by a store, referrals, etc). So a substantial minority of NMS’s customers use the internet to transact with it.
[31] The Judge also accepted that 75 per cent of the 60,000–70,000 annual visits to NMS’s website resulted from Auckland-based internet searches. Half of those searching had not previously visited NMS’s website and 30 per cent used a phone or tablet rather than a PC.[28] A significant number of people use unbranded searches such as “storage Auckland”, which indicates that they were not looking for a particular firm. “Storage” and “storage Auckland” were the most frequently used search terms, accounting for approximately 70 per cent of keyword searches. This generic strategy is consistent with consumer ignorance and indifference about supplier identity, although those with imperfect recollection of NMS presumably may also use unbranded searches in the expectation that a SERP which lists providers by name will prompt memory. “National mini storage”, plainly a branded search, was the third most common term, accounting for some 15 per cent of searches.[29] So evidence of searching behaviour is consistent with many consumers not being confused about supplier identity; many search generally for storage and some search specifically for NMS.
[32] We pause to put this evidence in context. NMS seeks an injunction preventing NS from using “national storage” when it enters a market said to comprise the greater Auckland area. So the question whether the number of consumers at risk of confusion is significant must be answered by reference to the market as a whole. It is only that subset of consumers who have imperfect recollection of NMS that might potentially be confused. We have cited evidence that in one survey 26.4 per cent of respondents could name NMS when prompted. And since the firms’ branding is distinctive, we are also concerned with that subset of consumers who use word searches to find a storage provider on the Internet. We are accordingly concerned with that subset who a) know of NMS but have imperfect recollection and b) use Internet searches to find a provider.
[33] We turn to consider the SERP before posing the question whether it is likely to confuse such consumers.

The SERP

[34] The SERP depicted below was produced on a search undertaken just before trial on “national mini storage”. We use it here for illustrative purposes. The search terms can be seen in the search bar at the top of the page. Below it are two entries for NMS: first, an advertisement for NMS, and the second an organic listing.

2018_4503.png

[35] As this example shows, Google displays advertisements, which are identified as such, and follows them with organic search results.
[36] Organic search results are so called because Google’s algorithm generates them by reference to the consumer’s search terms, location and search history (among other factors). A business may indirectly influence the likelihood of its webpage appearing higher on the list of organic search results by, for example, making prominent use on its website of common search terms, but Google does not sell organic listings.
[37] Google does sell AdWords: certain keywords or phrases that, if searched, will bring up an advertisement for the business (“national mini storage” in the above example). Businesses may bid competitively for AdWords. Google does not disclose exactly how it ranks advertisements when there is competition (though it does say that the ranking is not purely based on the amount each business bids).
[38] Also of note is the “Google maps listing” included in this example, which appears below the organic search result for NMS. When a consumer uses search terms that include a geographical term, or when they search on a mobile phone or other device that discloses their location to Google, a map is displayed on the SERP with nearby providers of the particular goods or services the consumer is searching for. (This example was generated by a witness in Auckland.)
[39] Finally, a “knowledge panel” may appear on the right-hand side of the SERP, as it does in this example. Google generates the knowledge panel organically; the business does not pay for it, and knowledge panels do not appear in all searches. Instead, a panel is generated by the algorithm that underlies Google’s search engine when it determines a particular word or phrase can be associated with a particular business.
[40] The case for NMS is that consumers may be confused by ads, organic search results, map listings and knowledge panels for NS appearing alongside results for NMS.

How and when might a customer be confused when making a Google search?

[41] NMS complains that the Judge erred in his factual assessment of the likelihood of deception or confusion, partly because he is said to have failed to conduct his own assessment of the risk of an informed and reasonably attentive user being confused, instead simply preferring the evidence tendered by NS. He ought to have begun with consumers’ low brand awareness and their reliance on Internet searches. It is said that the evidence shows many users who searched for NMS, using keywords such as “national”, “mini” and “storage” were directed to a SERP that included both NMS and NS and may well have mistaken NS for NMS. That is so, Mr Brown submitted, because the word “mini” is the only distinction that the SERP offers between the two.

No error of law in evaluating the evidence

[42] It is convenient to address here what is said to have been an error of law. Mr Brown submitted that while Muir J recognised relevant characteristics of the industry, such as low brand awareness, and identified the standard to be that of the reasonably informed and attentive Internet user, he failed to apply that test by putting himself in the position of the consumer. We do not accept this submission. Having identified the reasonably informed and attentive consumer as the relevant standard, Muir J undertook a thorough review of the evidence and found that NMS failed to show that the consumer would confuse NS for NMS or think the two firms were related. His conclusions were that:[30]

(a) The plaintiff has not established imperfect recollection among a sufficiently substantial group of consumers for that to be considered a relevant “pathway to deception” for s 9 purposes.

(b) The plaintiff has failed to establish on the balance of probabilities that a sufficiently substantial group of consumers is likely to be misled or deceived simply on account of the similar features in the plaintiff’s and defendants’ names, taking into account:

(i) the prominence and importance of the word “Mini” in the plaintiff’s name;

(ii) the strong differentiation in branding between the two companies;

(iii) the greater degree of discrimination which may fairly be expected from the public where a trade name is wholly or in part descriptive of the service provided;

(iv) the distinctiveness of the respective parties’ advertising, organic listings and URLs; and

(v) the undertakings given by the defendants.

(c) In the result I do not consider the alternative “pathway to deception”, emphasised in the plaintiff’s closing, relevantly made out.

(d) In relation to whether a substantial number of consumers will consider the respective businesses related, I prefer the evidence of Mr Shand for the reasons indicated.

(e) I consider the evidence of actual confusion slight in the context of the energies devoted to its identification and insufficient to dissuade me from the conclusions drawn from the expert evidence.

He went on to state that having regard to “the degree of discrimination which can be expected of consumers in this context”, there would be no material level of deception.[31] We turn to consider whether he was correct.

The Google AdWords data

[43] Central to NMS’s case was its own Google AdWords data showing the top 10 search terms resulting in click-throughs for the periods June 2011 to January 2015 and February 2015 to October 2016. We reproduce the data in the following tables. The first column specifies the particular search term used. The second column specifies how many times an ad for NMS appeared on a SERP after a consumer searched for that term. The third column specifies the number of consumers who clicked on the ad, and the fourth column specifies the percentage chance that a consumer who searched for a particular term clicked on the ad and visited NMS’ website. The higher the clickthrough percentage, the more likely a customer who searches for that term would click on an ad linking to NMS’s website:

(i) Period June 2011 to January 2015

Search term
Impressions
No. of click-throughs
Click Through Rate or Percentage
National mini storage
11659
3993
34.24%
Mini storage
3687
1462
39.65%
Storage
43287
1011
2.33%
National mini storage Albany
1189
623
52.39%
Storage North Shore
2655
580
21.84%
Mini storage Auckland
1163
571
49.09%
National mini storage Takanini
1089
521
47.84%
National mini storage Penrose
1312
513
39.10%
Storage Auckland
12147
405
3.33%
Storage Takanini
620
337
54.35%


(ii) Period February 2015 to October 2016

Search term
Impressions
No. of click-throughs
Click Through Rate or Percentage
National mini storage
10169
4051
39.83%
Mini storage
2079
896
43.09%
National mini storage Albany
1536
636
41.40%
National storage
1247
583
46.75%
National storage NZ
604
329
54.47%
Mini storage Auckland
764
333
43.58%
National mini storage Penrose
853
303
35.52%
Storage Albany
835
224
26.82%
Storage North Shore
1240
196
15.80%
National mini storage Auckland
453
193
42.60%
[44] The tables show that searches containing “mini” are by far the most significant. The Judge accepted that these consumers were looking for NMS and were unlikely to be misled by a SERP showing both NMS and NS.[32]
[45] Searches for “national storage” were a small proportion of all of the searches that led to customers clicking on an ad linking to NMS’s website. NMS contended that searches for “national storage” and similar terms were cases of imperfect recollection, evidencing potential confusion at the point of searching. One of its expert witnesses, Mr Brandon, expressed the opinion that click-throughs from such searches comprised 7.4 per cent of total clickthroughs on NMS ads from all search terms over the period June 2011 to October 2016.
[46] The Judge examined this claim closely and found that the evidence limited any imperfect recollection to a much smaller and immaterial number of consumers, for several reasons. Notably:
[47] The Judge also found that there was no significant evidence of imperfect recollection with organic searches; NMS data showed that those who originated their search with “national storage” but clicked through to NMS comprised only 0.007 per cent of all click-throughs in the period between 5 August 2016 and 5 November 2016.[36] There was also evidence that Google’s algorithm learned to distinguish between the two firms, so that NS dropped in organic ranking when searches were undertaken for national mini storage.
[48] The Judge also rejected an alternative “broad path to deception” resulting from “storage + [location eg Albany]” searches. Mr Brandon suggested that these customers might know there was a storage facility in their suburb but might not know it belonged to NMS, and he suggested that these customers might be confused once NS entered the market and established facilities in the same areas. He rejected the premise that customers searching generically for storage in a location were seeking NMS. Nor did he accept that even if they were seeking NMS such people were likely to click on NS by mistake, for the SERP would prompt recollection by giving them NMS’s name and, if they clicked through, its brand mark.[37]

Imperfect recollection

[49] Mr Brown argued that the Judge was wrong to discount evidence of imperfect recollection. He submitted that there was no evidence that NS had any reputation in Auckland at relevant times. He did not deny that Mr Brandon had incorrectly calculated the percentage of click-throughs for the period June 2011 to September 2016, but he pointed out that there were periods in which the percentage was about 7 per cent and these periods were correlated with NS branding activities. He submitted that the Judge was wrong to find that some of these people were likely looking for NS, since its rebranding of premises (in Christchurch) and sponsorships did not start until October 2015.
[50] We are not persuaded that the Judge erred. The proposition that customers who searched for “national storage” and clicked through to NMS evidence imperfect recollection rests on the weak premise that there is no other explanation for using that search term. “National storage” is generic, by which we mean that the term describes a class of services, and there was entirely unremarkable evidence from NS’s expert, Mr Shand, that consumers do use generic search terms to generate a SERP showing multiple providers for comparison purposes.
[51] Further, the data also suggest that NMS is associated with the word “mini” and those who do search for it tend to use that word; put another way, “mini” sufficiently allows NMS to distinguish itself. It was also open to Muir J to find that NS had an increasing profile attributable in part to its sponsorship activities in Australia, and that, rather than any confusion, may explain an increase in the number of “national storage” searches in the period after NS entered New Zealand markets. We accept that some Auckland consumers will have been exposed to NS’s brand via their sponsorship of prominent sports teams (see [18(a)] above), and their use of signage and promotional materials at those sports games. We reject Mr Brown’s assertion that Aucklanders would not have been exposed to this sponsorship. To take the Brisbane Broncos as an example, the evidence discloses that the club has 50,000 Facebook followers in New Zealand, 500,000 television viewers in New Zealand each year, and travels to New Zealand for multiple games each year (including for the Auckland Nines tournament). It is reasonable to infer that NS’s association with that club increased awareness of its brand in Auckland.[38]
[52] Further, and as the Judge noted, consumers are used to being presented with links to the websites of multiple providers on a SERP and expect to distinguish among them as competitors in a marketplace.[39] Clicking through to websites may indicate not that consumers are confused about supplier identity but that they are evaluating offerings and seeking contact details.
[53] For these reasons, we agree with the Judge that the likely level of confusion from imperfect recollection is very low, and the number of customers at risk is not sufficiently substantial to justify characterising NS’s conduct as misleading or deceptive, let alone a remedy.[40] Such confusion as there may be is the consequence of NMS’s descriptive or generic name.

Confusion by association on the SERP

[54] NMS also argues that consumers will be deceived when they search specifically for NMS by typing “national mini storage” into the search bar and find that the SERP includes results for NS. This argument Mr Miles described as a belated change of stance at trial when it became apparent that the imperfect recollection claim had become problematic. Mr Brown firmly rejected this characterisation, but the Judge found substance in it. He accepted that NMS’s case had always included deception by this means but found that its expert witnesses, Messrs Brandon and Sareczky, paid limited attention to it in their briefs of evidence. By contrast, Mr Shand for NS did give detailed evidence that confusion is unlikely in such cases.[41]
[55] The Judge accepted that a consumer who uses the search term “national mini storage” or “national mini” will generate a SERP in which both firms feature prominently. Searches for the exact term “national mini storage” will get priority, and searches for “national mini” will give NMS greater priority on the SERP so long as NS undertakes not to target “mini”.[42]
[56] However, the Judge found that even within the SERP — that is, before the consumer clicks through to a website — there is significant differentiation. The SERP does not display the firms’ distinctive brand marks unless a knowledge graph appears. But their full names are given. NMS markets itself by saying that it is “100% Kiwi Owned and Operated” and that it provides “Auckland Self Storage units with 9 convenient locations that are secure, professionally managed and great value!”. NS’s results do not mention ownership and they claim that its solutions are “tailored”.
[57] The Judge evidently did not attach additional significance to the Google Maps listing on the SERP (see [34] above) showing storage facilities by name and location. He did not discuss it in detail, perhaps because the map listings also mention NMS by name. Mr Brown argued before us that maps listings matter because on mobile phones they provide a button that allows the user to call the business directly without going through its website. We accept that consumers who use a mobile phone or tablet — comprising some 30 per cent of searches — and use that button will lose an opportunity to remedy any confusion by viewing branding on a website. However, such consumers may choose instead to go to the website, especially if they are comparing providers. And the central point remains that a consumer who is looking for NMS will see the firm’s name on the map listing in connection with its locations.
[58] A search for “national mini storage” on the eve of trial also produced a SERP showing a knowledge panel for NS (it is the SERP depicted at [34] above). This Mr Brandon considered likely to cause further confusion. The Judge disagreed, pointing out that the knowledge panel shows the distinctive NS brand mark and a consumer who is familiar with the NMS brand mark is likely to appreciate that NS is a different company. He also accepted that NMS can optimise its own search results, taking steps that will lead Google to generate its own knowledge panel which, because only one knowledge panel is displayed, will “bump” that for NS from the SERP.[43]
[59] Mr Brown submitted that the Judge was wrong to discount the knowledge panel. By consent an updating affidavit was filed, and by reference to that evidence he submitted that on searches for NMS the knowledge panel for NS is now the largest and most prominent feature of the SERP. It now contains links to NS’s Australian website and social media pages. He submitted that this means that should NS commence business in Auckland its organic search results are likely to appear on the front page of a SERP for “national mini storage”.
[60] We accept, as did the Judge, that NMS and NS are both likely to continue to appear on a SERP for “national mini storage”. Indeed, that is likely whether or not NS offers services in Auckland, as the updating affidavit demonstrates. We agree with him, however, that the knowledge panel shows the distinctive NS brand mark while the SERP identifies NMS by name. It follows that a reasonably informed and attentive consumer who is looking for NMS is unlikely to be confused by the knowledge panel. We also agree with the Judge that NMS is capable of optimising its own search results. Finally, we note that in evidence Mr Sarezcky said that, if both firms were to appear in map listings on the SERP (i.e. both have physical premises near the consumer) Google was unlikely to display any knowledge panel, which further suggests that optimisation will render this issue moot.

Any confusion dispelled on investigation

[61] It is important to emphasise that Muir J found that there is no significant confusion at the SERP; that is, on initial encounter with a result showing both NMS and NS without their associated branding. Mr Brown contended otherwise, submitting that “the approach taken by the Judge in his discussion of the expert evidence involved taking into account the actual websites of the parties”. We accept that the Judge did take the websites into account, but his findings about confusion did not assume the customer had clicked through to websites. He made it clear that the question was whether on consideration of the SERP as a whole an informed and reasonably attentive user would be misled.[44] When discussing Mr Shand’s evidence he found that the SERP would not mislead,[45] before turning to the question of whether any confusion would be dispelled on clicking through.[46]
[62] As noted at [5(d)] above, the Judge also found that when a consumer clicks through to the websites of NMS or NS any confusion is likely to be dispelled.[47] The two sites make use of the brand marks and strong colours, they feature different designs and NMS emphasises its New Zealand ownership. We accept this finding and return to it at [73] below.

Preference for NS’s expert evidence

[63] Muir J undertook an extensive review of all of the expert evidence and clearly preferred that given for NS. He found Mr Shand better qualified than either Mr Sareczky or Mr Brandon, in that Mr Shand had a broader range of relevant experience in branding and marketing. His opinion was reasoned and he was impartial and helpful.[48] Ms Castelli, who also gave evidence for NS, was similarly helpful, and though she was not independent of NS (she is one of its executives) she was found to have relevant expertise.[49] By contrast the data did not sustain some of Mr Brandon’s conclusions (see [45]–[46] above).[50] And Mr Sareczky’s evidence was discounted largely because he did not reliably identify some of the information on which he based his opinions, because he appeared to make selective use of data, and because he was prone to advocacy.[51]
[64] We pause to note that Mr Brown criticised the Judge’s reliance on Ms Castelli, as she was not independent of NS. This is to conflate independence and impartiality. An expert witness who lacks independence may yet exhibit the essential quality of impartiality, and the decision to admit and rely on the evidence is a discretionary one for the trial Judge.[52]
[65] In this case, the Judge took the entirely unremarkable approach of hearing Ms Castelli give evidence, and then ruling her evidence admissible. It was also a matter for him whether her lack of independence went to the weight that could be placed on her evidence.[53]
[66] Mr Brown submitted that the Judge overlooked evidence that 12.3 per cent of NMS customers had asked a friend or relative for a recommendation, which was likely to be affected by imperfect recollection. He also emphasised that there is a relatively long lead time between initial inquiry and purchase, creating the conditions for consumers to mistake NS for NMS in the interim. He argued that the Judge offered limited reasoning to support his conclusions about imperfect recollection and submitted that NMS’s reference to New Zealand ownership is a “generic selling point”. “Mini” distinguishes, but it is secondary to “national” and could be missed entirely.
[67] We do not accept these submissions. NMS’s own AdWords data showed that a significant number of consumers look for it using “mini” as part of their search term. These will include those making contact not from personal knowledge of NMS but following a recommendation. As Mr Miles submitted, NMS has heavily emphasised “mini” in its branding and it is the word that NS has undertaken not to target. As discussed at [47] above, we are satisfied that the Judge was entitled to conclude from the AdWords data that the proportion of customers who might potentially be confused was very small. The data tended to show, rather, that consumers were knowledgeable and discriminating. We agree with the Judge that, as noted at [52] above, they are likely to engage in comparison shopping, well aware that the SERP presents them with a marketplace populated by a number of competing firms.

Inability to demonstrate actual confusion

[68] The Judge found support for his conclusions in NMS’s inability, despite much effort, to adduce evidence of actual confusion. Mr Brandon produced seven transcripts of calls by potential customers to the NS help desk. The Judge accepted that only one of these evidenced confusion.[54] In two other cases, people calling NS had asked whether there was any association with NMS, evidencing wonderment rather than confusion. NMS itself adduced evidence of one customer asking a similar question, and another who wanted to and did call NMS but evidently had googled NS too.
[69] Mr Brown argued both that the evidence did show actual confusion and that the Judge was wrong to insist upon it, for such evidence is notoriously hard to find. We agree with the Judge, however, that the evidence of actual confusion was slight. We also consider that while such evidence is often elusive its absence in this particular case justified drawing an inference against NMS. NS already appears on SERPs alongside NMS and as Muir J noted, NMS went looking for confusion.[55] It developed a template designed to elicit evidence of confusion and sent it to all its branches, but without eliciting anything. It also discovered many online communications which evidenced no confusion.

Conclusions on likelihood of confusion

[70] At [5] above we set out Muir J’s overall conclusions on this topic. In short, he was not persuaded that a significant number of consumers are likely to be misled or deceived should NS begin to offer services in Auckland under its name.
[71] We agree with the Judge. It bears emphasis that NMS’s objective is to limit the extent consumers see NS on a SERP generated by a search for “national” and “storage”, as well as by searches using “mini”. This requires that it show consumers are likely to be misled by the SERP notwithstanding its essential characteristic as a marketplace and the differentiation that both ads and organic searches present. In our opinion there is no risk of confusion when customers search for “mini” and the level of potential confusion among those who seek NMS out using “national”, or who may think the two firms associated, is too low — by a substantial margin — to characterise the use of NS’s name as misleading or deceptive.
[72] These conclusions apply at the SERP. There might be some risk of confusion were NS to target “mini” when promoting its services, but it has undertaken not to do so.
[73] This being so, we need not discuss the concept of initial interest confusion. Proponents of this concept contend that consumers are accustomed to ephemeral confusion on a SERP and expect to resolve it by clicking through to websites; and that being so, confusion should be assessed not when first acted upon but subsequently, before any transaction is entered. Mr Brown argued that Muir J erroneously adopted this concept. We do not accept that he did, although he did express sympathy for it. We observe that courts have traditionally been unwilling to excuse defendants who claim that consumers had the means to resolve their confusion once they had acted upon it by entering the defendant’s premises.[56] The policy question whether a SERP should be treated differently should be reserved for a case that turns upon it. We do accept that remedy may be affected where initial confusion is remedied before a transaction is entered, but that is a different point.[57]

Errors of law?

[74] As noted at [6] above, Mr Brown submitted that Muir J made certain errors of law. We have addressed most of them in passing and we now turn to the remaining question, whether the Judge erroneously held that deliberate predatory conduct is required. It is said that Muir J sought to distinguish authorities on Internet searching because they involved “deliberately predatory conduct”.[58] In each case, Mr Brown submitted, it was not the intention of the defendant that mattered but the confusing similarity of names in an Internet search.
[75] This argument is something of a straw man. As a matter of fact Muir J did not distinguish these authorities solely because the defendant had been predatory or intended to deceive. He recognised that the law does not require deliberate deception but stated correctly that courts more readily find deception when satisfied that such was the defendant’s object, and he distinguished the authorities on their facts.[59] He pointed out that two cases — Intercity Group NZ Ltd v Nakedbus NZ Ltd (Intercity) and Victoria Plum Ltd v Victoria Plumbing Ltd (Victoria Plum) — involved defendants who had deliberately bid for AdWords on the plaintiff’s name and whose advertisements had exacerbated confusion.[60] Another case, Vancouver Community College v Vancouver Career College (Burnaby) Inc (Vancouver Community College), involved a defendant which had adopted a domain name that included an acronym by which the plaintiff had long been known and who otherwise failed to distinguish its services.[61] The questions asked of him were essentially factual and he observed that the facts of these cases lay a considerable distance from those before him.[62]
[76] The courts in these cases intervened decisively for a plaintiff whose name had been appropriated by a rival which acquired the name, or words very close to it, for Google advertising purposes. We do not doubt the correctness of the decisions. But we consider that the Judge was right to distinguish them here. Briefly:

Passing off

[77] As noted, NMS elected to argue its case under the Fair Trading Act, treating passing off as something of an afterthought. There are distinctions between the two causes of action, as Muir J outlined, but they do not matter in this case.[69] Muir J held that his conclusions under the Fair Trading Act disposed of the passing off claim.[70] That conclusion was not in dispute before us, and we dispose of the claim in the same way.

Acquiescence

[78] In the High Court NS mounted an affirmative defence of estoppel by acquiescence, relying on Shotover Gorge Jet Boats Ltd v Marine Enterprises Ltd and Dominion Rent A Car Ltd v Budget Rent A Car Systems Ltd, in which the defence was recognised.[71] The defence rested in this case on NMS’s failure to take or warn of action when NS signalled its intention to enter New Zealand markets.
[79] The Judge upheld this defence. He reviewed the evidence, including that of meetings between the two firms’ principals in connection with NS’s interest in buying NMS, and found that NMS did not object to NS using its name. He accepted that NS was “materially prejudiced by NMS’s passivity” because it commenced business in New Zealand under its own name, without appreciating that it might need another name and branding in Auckland.[72]
[80] We need not deal with this ground of appeal in light of our conclusions above. However, we record briefly that we accept Mr Brown’s submission that the defence was not made out and ought to have been dismissed.
[81] As Mr Miles accepted, the defence was based on silence in the face of a duty to speak. It is not enough, in our opinion, that NMS knew NS intended to enter New Zealand markets and its managing director, Mr McFadzien, accepted at trial, with benefit of hindsight, that NMS ought to have issued a warning at that time. This was a commercial context involving arms-length parties, and nothing about their relationship created a reasonable expectation that NMS would speak.[73]
[82] Further, NS may have assumed that NMS would not react, but we do not accept either that it was reasonable to so assume or that NMS knew NS was acting in reliance upon such assumption — if indeed it was. NS appears to have believed, rightly as it turns out, that its name and branding were sufficiently distinctive. And as Mr Brown submitted, NMS had refused to sell and NS must have appreciated that it intended to continue operating in Auckland under its own name and branding and would defend its patch if NS entered the market.

The remedy sought

[83] Muir J held that if he were wrong on liability he would nonetheless deny relief. He found the scope of the injunction unsatisfactory for several reasons: it covered an ill-defined and arbitrary area; the area was too large because NMS does not carry on business in parts of it; there are practical difficulties in carving up the market by reference to the areas NMS does service; NMS would unfairly benefit when consumers searched for NS and failed to find it; NS would have to invest large sums to establish a sub-brand in Auckland; and an injunction could not eliminate any confusion that already exists.[74]
[84] Mr Brown noted that when discussing the defence of acquiescence the Judge remarked that discretionary public interest considerations weighed against relief. In particular, the public would benefit from increased competition in a market in need of it, and this might outweigh any modest level of confusion.[75] We accept that the primary public interest at work in a case such as this is the interest of consumers in not being misled.[76] But the Judge was not trading off deception against public benefit. He did not cite competition when discussing relief. Generally, if confusion exists but does not affect a substantial number of people relief may be refused in the exercise of discretion, and in such a case the court might take other public interest considerations into account.[77]
[85] Mr Brown also submitted that the Judge was wrong to characterise the area subject to the injunction as too extensive, for NMS has customers throughout Auckland. We reject this submission. There may be exceptions, but NMS’s own evidence was that the catchment for storage facilities is local, with customers typically seeking facilities within a radius of seven kilometres of their homes, and there are parts of greater Auckland, including some substantial urban centres as well as Waiheke and Great Barrier Islands, in which NMS has no facilities. Its southernmost facility is in Takanini and its northernmost in Albany.
[86] Counsel also noted that New Zealand courts have granted regional injunctions in the Internet age. He relied principally, however, on Taylor Bros Ltd v Taylors Group Ltd, a 1988 decision in which the defendant was prevented from entering the Wellington drycleaning market under its own name because the plaintiff had an established reputation in the same name.[78] We accept that a regional injunction might be granted notwithstanding that it would not preclude Auckland consumers from learning of NS or prevent confusion. As Muir J noted, the injunction would preclude NS from operating facilities in Auckland under its name and so would prevent NMS business migrating to NS.[79] He did not dismiss a regional injunction as ineffective in the Internet age.
[87] In our opinion the Judge was right to characterise the injunction as overbroad. He was also correct to note that it would not prevent confusion that may already exist and might compound such confusion by giving NMS an unfair opportunity to capture consumers looking for NS should NS be required to enter the market under another name. Although the defence of estoppel by acquiescence has failed, NMS’s failure to act earlier is relevant to relief to the extent that it may needlessly have raised NS’s costs of entry.

Result

[88] The appeal is dismissed.
[89] The appellant must pay the respondents one set of costs for a complex appeal on a band B basis and usual disbursements. We certify for second counsel.






Solicitors:
Spencer Legal, Auckland for Appellants
Simpson Grierson, Auckland for Respondents

[1] The area extends from one line traversing the North Island from Waikaretu to Miranda in the south to another doing so from Mangawhai to Paparoa in the north: National Mini Storage Ltd v National Storage Ltd [2017] NZHC 1775 at [307].

[2] There is also a cause of action in passing off, but NMS chose to focus on the Fair Trading Act 1986 and neither party suggested that any different result would follow in, or spent much time on, passing off.

[3] The proceeding focuses on Google because it is the search engine used for 90 per cent of website searches in New Zealand.

[4] We use “confusion” as a convenient shorthand term to describe what happens when consumers are misled or deceived into mistaking NS for NMS or thinking that the two firms are associated.

[5] National Mini Storage Ltd v National Storage Ltd, above n 1, at [124].

[6] At [181].

[7] At [159].

[8] At [191] and [232(b)].

[9] At [264].

[10] At [314]–[315].

[11] At [307]–[310] and [314].

[12] In the High Court judgment, National Storage is noted as having a trade mark for the mark on the left: at [8]–[9]. In the chronology submitted to us by the parties, the mark on the right is noted as being the one that National Storage has a trade mark for, and that chronology is consistent with the evidence of Mr Castoulis, the managing director of National Storage. We do not see this difference as material.

[13] The injunction would obviously affect commercial users too, but we were not told what proportion of the market retail consumers represent.

[14] National Mini Storage Ltd v National Storage Ltd, above n 1, at [21]–[23].

[15] At [194].

[16] At [213]–[217] and [221].

[17] Neumegen v Neumegen and Co [1998] 3 NZLR 310 (CA) at 317 per Richardson P and Blanchard J.

[18] Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28]. See also Intercity Group (NZ) Ltd v Nakedbus NZ Ltd [2014] NZHC 124, [2014] 3 NZLR 177 at [158] [Intercity].

[19] Peter Bodum A/S v DKSH Australia Pty Ltd [2011] FCAFC 98, (2011) 280 ALR 639 [Peter Bodum] at [209].

[20] Neumegen v Neumegen and Co, above n 17, at 317 per Richardson P and Blanchard J.

[21] Airport Rentals Ltd v Airport Car Rental (Southern) Ltd (1995) 6 TCLR 664 (HC) at 667.

[22] National Mini Storage Ltd v National Storage Ltd, above n 1, at [123]–[124].

[23] At [124].

[24] At [120].

[25] At [120].

[26] At [25]–[27].

[27] At [32].

[28] At [34].

[29] At [35]. NMS provided two tables that highlighted the top 10 search terms that led to consumers clicking on an ad for its website, one covering the period June 2011 to January 2015 and the other covering the period February 2015 to October 2016. The terms “storage” and “storage Auckland” do not appear in the second table for reasons that were not made clear to us. See below at [43].

[30] National Mini Storage Ltd v National Storage Ltd, above n 1, at [280].

[31] At [281].

[32] At [177(a)].

[33] At [173]–[175].

[34] At [179].

[35] At [176].

[36] At [183].

[37] At [190]–[191].

[38] We observe that this Court has previously recognised, in the passing off context, that goodwill in the Australian market might translate to the New Zealand market: Dominion Rent a Car Ltd v Budget Rent A Car Systems (1970) Ltd [1987] NZCA 13; [1987] 2 NZLR 395 (CA) at 406 per Cooke P.

[39] National Mini Storage Ltd v National Storage Ltd, above n 1, at [91].

[40] Neumegen v Neumegen and Co, above n 17, at 317 per Richardson P and Blanchard J.

[41] National Mini Storage Ltd v National Storage Ltd, above n 1, at [129]–[135].

[42] At [194].

[43] At [198(ii)].

[44] At [92].

[45] At [254]–[255] and [265].

[46] At [266].

[47] At [267].

[48] At [237].

[49] At [209].

[50] At [171], [175] and [182].

[51] At [160].

[52] Prattley Enterprises Ltd v Vero Insurance New Zealand Ltd [2016] NZCA 67, [2016] 2 NZLR 750 at [93]–[102].

[53] National Mini Storage Ltd v National Storage Ltd, above n 1, at [208]–[209].

[54] At [272].

[55] At [278].

[56] See for example Trust Bank Auckland Ltd v ASB Bank Ltd [1989] NZCA 30; [1989] 3 NZLR 385 (CA) at 389; and Tot Toys Ltd v Mitchell [1993] 1 NZLR 325 (HC) at 368.

[57] Red Eagle Corporation Ltd v Ellis, above n 17, at [30]–[31]; and Tot Toys Ltd v Mitchell, above n 56, at 367–368.

[58] National Mini Storage Ltd v National Storage Ltd, above n 1, at [38].

[59] At [38].

[60] Intercity, above n 18; and Victoria Plum Ltd v Victorian Plumbing Ltd [2016] EWHC 2911 (Ch), [2017] Bus LR 363 [Victoria Plum].

[61] Vancouver Community College v Vancouver Career College (Burnaby) Inc 2017 BCCA 41.

[62] National Mini Storage Ltd v National Storage Ltd, above n 1, at [93]–[94].

[63] Intercity, above n 18, at [3].

[64] Compare Intercity, above n 18, at [137]–[138].

[65] Victoria Plum, above n 60, at [48].

[66] At [124]–[126].

[67] Vancouver Community College, above n 61, at [21]–[23].

[68] At [70]–[72].

[69] National Mini Storage Ltd v National Storage Ltd, above n 1, at [110].

[70] At [282].

[71] Shotover Gorge Jet Boats Ltd v Marine Enterprises Ltd [1984] 2 NZLR 154 (HC) at 160–161; and Dominion Rent A Car Ltd v Budget Rent A Car Systems (1970) Ltd, above n 38, at 407 per Cooke P.

[72] National Mini Storage Ltd v National Storage Ltd, above n 1, at [293].

[73] James Every-Palmer “Equitable Estoppel” in Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) 601 at 633.

[74] National Mini Storage Ltd v National Storage Ltd, above n 1, at [307]–[316].

[75] At [295].

[76] Peter Bodum, above n 19, at [200]; and Tot Toys Ltd v Mitchell, above n 56, at 370.

[77] Neumegen v Neumegen and Co, above n 17, at 317 per Richardson P and Blanchard J.

[78] Taylor Bros Ltd v Taylors Group Ltd [1988] 2 NZLR 1 (CA).

[79] National Mini Storage Ltd v National Storage Ltd, above n 1, at [311].

NZLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback
URL: http://www.nzlii.org/nz/cases/NZCA/2018/45.html