Flujo Holdings Pty Limited v Merisant Company [2016] NZHC 1779 (2 August 2016)

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UNDER	the Trade Marks Act 2002 and the Fair Trading Act 1986 and passing off
BETWEEN	FLUJO HOLDINGS PTY LIMITED Plaintiff
AND	MERISANT COMPANY First Defendant MERISANT AUSTRALIA PTY LIMITED Second Defendant SUGAR AUSTRALIA PTY LIMITED Third Defendant NEW ZEALAND SUGAR COMPANY LIMITED _{Fourth Defendant}

Hearing:	21 July 2016
Appearances:	D L Marriott for Plaintiff J B Rutter and E E Sherratt for Defendants
_Judgment:	_{2 August 2016}

[1] Flujo Holdings Pty Limited owns the intellectual property relating to a natural, non-sugar sweetener made with stevia. The product has been sold in New Zealand since 2010 under the brand name Natvia. Since 2013 the third and fourth defendants, Merisant Australia Pty Limited and New Zealand Sugar Company Limited have marketed a similar product under the brand name Naturals.¹

[2] Until this year Flujo regarded the Naturals packaging as being somewhat similar to that of Natvia but not so as to justify complaint. However, in January

2016 Merisant/NZ Sugar released a 40-stick box of Naturals sweetener in new packaging that Flujo considers has or will cause confusion with its product. In the substantive proceeding Flujo alleges passing off, infringement of a registered trademark and breach of the Fair Trading Act 1986. It seeks an injunction restraining Merisant/NZ Sugar from using the new packaging pending disposition of its claim.

[3] On the well established principles relating to interim injunction applications Flujo must show that there is a serious question to be tried, that the balance of convenience lies with it and that the overall justice of the case warrants interim relief.²Mrs Rutter, for Merisant/NZ Sugar, invited me to approach the matter on the basis that a strong prima facie case was required, rather than merely a serious question, as granting an injunction could be decisive of the substantive proceeding.³

I am not satisfied that interim relief would, necessarily, in fact, be decisive in this case and see no reason to depart from the usual basis on which applications of this kind are considered.

¹The first defendant, Merisant Company, and the third defendant, Sugar Australia Pty Limited, maintain that they have no involvement in the production, distribution or marketing of the Naturals product. For the purposes of this application the parties agreed to proceed on the basis that, in the event relief were granted, no orders would be made against the first and third defendants but that those parties would, without prejudice, take no steps to frustrate the terms of any injunction granted.

²American Cyanamid Co v Ethicon Ltd [1975] UKHL 1; [1975] AC 396, [1975] 1 All ER 504 (HL); Klissers

_{Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] NZCA 70; [1985] 2 NZLR 129
(CA).}

³DB Breweries Ltd v Lion Nathan Ltd [2007] NZHC 1232; (2007) 12 TCLR 25 (HC) at [16]–[17].

with stevia. At that stage there were no such products on the market; stevia was first approved for use as a food additive in Australia and New Zealand in August 2008.

[5] By the end of 2009 product and packaging development was complete, the “Natvia” name was registered as a trademark in Australia⁴and Flujo had been incorporated for the purpose of holding the assets, including intellectual property associated with the product. The product was first distributed in Australia in February 2010 and in New Zealand in July 2010. Its packaging, which has remained largely unchanged, featured green, beige and brown with pink “call-out” boxes and a

slogan “the 100% natural sweetener” prominently on the front. Flujo says that this look was a deliberate departure from the rather clinical look previously adopted by the makers of non-sugar sweeteners (which were largely artificial).

[6] Merisant is part of the Merisant group, which is active in the table-top sweetener market and is known for its artificial sweetener, Equal. At the same time as Flujo was developing Natvia, Merisant was also working on a stevia-based sweetener, Pure Via. It was launched in Australia 2009 but by 2012 was no longer being sold. In 2012 Merisant produced another stevia-based sweetener under the Equal brand. That product did not gain traction either.

[7] In October 2013, Merisant re-branded its stevia-based product as “Naturals” in new beige, brown and green packaging that included the statement “from the makers of Equal”. This package bore the slogan “100% natural” prominently on the front of the pack. The adoption of the “100% natural” claim had followed a decision by the Australian Advertising Claims Board dismissing NZ Sugar ’s complaint about Flujo’s use of the phrase.

[8] Flujo had some concerns about the new Naturals packaging which had moved well away from the blue Equal packaging towards the colour scheme that it was using. It did not consider the similarities were likely to cause confusion, however, perceiving that there were sufficient distinguishing features, including the statement

[9] Between 2013 and 2016 the Natvia brand grew faster than the Naturals brand. Natvia presently has the majority of the market for natural non-sugar table top sweeteners. In 2015 Merisant re-designed the Naturals packaging and in January

2016 began selling its 40-stick box in new packaging. The re-design included removing the reference to Equal (Mr di Bennedetto, Merisant’s Regional Managing Director for Asia Pacific, explained that the Equal brand was a barrier because consumers associated it with the artificial sweetener) and adding a prominent banner on the front containing the words “100% natural sweetener”. Its other products are still being sold in the previous packaging but that is said by Merisant/NZ Sugar to be merely a function of the decision to update the packaging as existing stores run out; eventually all the Naturals products will be sold in the new packaging.

[10] Mr Marriott, for Flujo, advanced the case primarily on the basis of the passing off cause of action, recognising the overlap between the requirements for that cause of action and one under the Fair Trading Act. He asserted that there was evidence that confusion had or would result from the similarities in the packaging and, further, that the similarities would have the effect of diluting Natvia’s goodwill.

[11] The well established requirements for the tort of passing off were described by the House of Lords in Reckitt & Coleman Products Ltd v Borden:⁵

The law of passing off can be summarised in one short general proposition – no man may pass off his goods as those of another. More specifically it may be expressed in terms of the elements which the plaintiff in such an action has to prove in order to succeed. These are three in number. First, he must establish a goodwill or reputation attached to the goods or services which he supplies in the mind of the purchasing public by association with the indentifying “get up” (whether it consists simply of a brand name or a trade description or the individual features of labelling or packaging) under which his particular goods or services are offered to the public, such that the get up is recognised by the public as distinctive specifically of the plaintiff’s goods and services. Secondly, he must demonstrate a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe the goods or services offered by him are the goods or services of the plaintiff ... Thirdly, he must demonstrate that he suffers or, in

⁵Reckitt & Coleman Products Ltd v Borden [1990] UKHL 12; [1990] 1 WLR 491 (HL) at 499 which provides a more succinct description of the essential elements of the tort than that set out in Erven Warnink BV v J Townend & Sons (Hull) Ltd [1979] AC 731, (1979) 2 All ER 927 (HL).

a quia timet action that he is likely to suffer, damage by reason of the erroneous belief engendered by the defendant’s misrepresentation that the source of the defendant’s goods or services is the same as the source of those offered by the plaintiff.

[12] Relevant to Flujo’s case is also the distinction between loss through diversion and loss through the dilution of its goodwill, described by McGechan J in Taylor Bros Ltd v Taylors Group Ltd.⁶

[13] Mrs Rutter submitted that the prominent features of the Natvia packaging relied on are merely descriptive or of such common style as to be incapable of generating goodwill. In particular, she argued that phrases similar to “100% natural sweetener” were commonly found on the packaging of many products and that consumers ascribed no significance to them in terms of brand recognition. Mrs Rutter accepted, however, that a combination of otherwise non-distinctive branding elements could be capable of creating a get-up that, overall, was

[14] A plaintiff must show that the get-up of its packaging or some element of that get-up is distinctive of the product as being its product in the minds of consumers or a substantial proportion of such consumers.⁸

[15] In Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Davison J identified the nature of the get-up required to be established by reference to the following passage from Payton & Co Ltd v Snelling Lampard & Co Ltd:⁹

[The Plaintiffs] ... must make out that the Defendant’s goods are calculated to be mistaken for the Plaintiffs’, and where, as in this case, the goods of the Plaintiff and the goods of the Defendant unquestionably resemble each other, but where the features in which they resemble each other are common to the trade, what has the Plaintiff to make out? He must make out not that the Defendant’s are like his by reason of those features which are common to them and other people, but he must make out that the Defendant’s are like his by reason of something peculiar to him, and by reason of the Defendant having adopted some mark, or device, or label, or something of that kind, which distinguishes the Plaintiff’s from other goods which have, like his, the

⁷_{Cookie Time Ltd v Griffins Foods Ltd HC Auckland
MI756-SW00, 11 December 2000.}

⁸_{Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd
[1985] NZCA 70; [1985] 2 NZLR 129 at 135 (HC).}

features common to the trade. Unless the Plaintiff can bring his case up to that he fails.

[16] A solely descriptive or generic term will not produce the goodwill or reputation required for a passing off action unless the claimant can show that the descriptive name has acquired a secondary meaning. In NZ Tax Refunds Limited v Brooks Homes Limited the Court of Appeal held that the names being used by the respondent, NZ-Tax Refund and Tax Refund NZ, although descriptive of the services being provided, were too close to the appellant’s existing business trading under the

name of NZ Tax Refunds.¹⁰The Court of Appeal adopted the approach described by

As a general rule the more distinctive a trading name is, both in itself and as identifying the plaintiff’s business, the further away competitors must keep in the names they adopt. On the other hand, if the plaintiff’s trading name is generic or descriptive (i.e. made up of words which describe common things and are in common use) the nearer the competitors may approach. In the second type of case only small distinctions may be enough to avoid passing off or conduct which can be impugned under the Fair Trading Act 1986.

Cases of this kind involve not only a comparison of the names themselves, but other factors, including the length of time the plaintiff’s name has generally been identified with the plaintiff, the similarity of the markets in which the competing parties are trading, the sophistication of those markets, and the circumstances in which the defendant has come to use the name of which the plaintiff complains.

[17] Even if distinctive, the presence of the brand on the get-up may be sufficient to ensure that there is no mistaking the source of the product so that goodwill is less likely to be associated only with the get-up.¹²In DB Breweries Ltd v Lion Nathan Ltd Harrison J held that the phrase “summer ale” used by competing brewers merely described the product and did not convey that all summer ale emanated from the same source; the brand name fulfilled that function.¹³

[18] The Natvia product is sold in a slightly rectangular cardboard box. The predominant colour of the box is bright green with a slightly flecked appearance

¹⁰_{NZ Tax Refunds Limited v Brooks Homes Limited
[2013] NZCA 90, (2013) 13 TCLR 531.}

¹¹_{Airport Rentals Ltd v Airport Car Rentals (Southern)
Ltd (1995) 6 TCLR 664 (HC) at 665.}

¹²WD & HO Wills (NZ) Ltd v Rothmans of Pall Mall (NZ) Ltd (1992) 5 TCLR 115 at 121; Clorxx New Zealand v Elldex Packaging Ltd HC Auckland CIV 2003-403-4292 13 November 2003 at [49]; The Coca-Cola Company v Frucor Soft Drinks Ltd [2013] NZHC 3282.

suggestive of recycled paper. The trademark, Natvia, appears in the top left corner. There is a large light beige, slightly flecked speech bubble on the front of the box containing the words “the 100% natural sweetener” and “call-out” boxes in different places. Below the speech bubble an uneven white band along the bottom of the packet depicts a pile of grains that resemble grains of sugar. Between the speech bubble and the pile of grains is an image of a wooden scoop containing white grains with some dropping onto the pile below.

[19] Mr Norris, a director of Natvia’s New Zealand distributor, described Natvia’s

All forms of the product are packed in packaging using a combination of bright green, brown, natural paper colour (light beige) and pink. Until the introduction of NATURALS BY EQUAL and more recently the new NATURALS packaging, no other product has used anything similar to this combination of colours throughout the entire time that Natvia has been sold in New Zealand.

The way in which the Natvia packaging was set out meant that the tag line “the 100 per cent natural sweetener” featured as the most prominent and dominant wording on the package, centrally located on a light beige/natural speech bubble along with a stevia plant leaf device. When the product was introduced this was a value cue as the product was the “only” 100 per cent natural sweetener on the supermarket shelves. This became the primary brand if you like, with Natvia featuring as an authentication or family brand.

[20] Mr Marriott submitted that, although the Natvia brand was displayed on the packaging in positions that could be readily found, it was the colours, textures, features and branding that portrayed the significant theme of the product. Specifically, it was the prominent speech bubble containing the logo “the 100% natural sweetener” that was central to the goodwill and reputation enjoyed by the product in the minds of consumers. He identified the following significant features of the packaging:

(a) It reproduces a recycled packaging appearance and conveys a natural earthy feel and theme with a green, brown and light beige colour scheme in its styling and layout.

(b) Prominent and centrally located banner or device featuring the words “the 100 per cent Natural Sweetener” in a brown and light beige colour way and in a larger font than all remaining text on the package and with the word “Sweetener” positioned below it.

(d) The product trademark located in the top left corner, comprising the word “Natvia” in a lower case letters in brown. The “V” is enlarged and stylised with a small beige leaf image above it.

[21] Mr Norris gave evidence that when the Natvia product was introduced, with its “the 100% natural sweetener” slogan, the product was, in fact, the only 100% natural table-top sweetener on the market that had the appearance of sugar.¹⁴The slogan was therefore a distinctive aspect of the get-up and signified the product’s unique place in the market. It was not clear to me what the phrase is considered to signify now that there is another competitor product; Mr Norris’ point was that,

given Natvia’s prominent claim to be “the” 100% natural sweetener, it was inevitable that any competing product using that claim and a similar get-up would be confused with the Natvia product.

[22] Since non-sugar sweeteners are marketed either as artificial sweeteners or natural sweeteners (which are manufactured from natural alternatives to sugar, notably stevia), in this context, the words “100% natural sweetener” are descriptive of the type of product known as natural sweeteners. The claim, in itself, would not ordinarily be capable of generating goodwill necessary for a passing off action. Flujo’s claim does not, however, rely solely on the slogan (and Flujo does not object to the other Naturals products that are marketed in different packaging with the slogan “100% natural”). Flujo’s case is that the slogan, coupled with the other features of the get-up, are distinctive and convey that the product is specifically associated with the Natvia brand and is viewed that way by consumers.

[23] I consider that there is a serious question as to whether the packaging that the Natvia product appears in is distinctive so as to found a claim for goodwill in it. Although the claim to being “the 100% natural sweetener” cannot, in itself, be regarded as distinctive, the overall get-up, particularly the striking bright green of the background, contrasting bright pink of the call out boxes and the prominent speech bubble, which makes the “100% natural” claim central to the message being

_{conveyed combine to produce an effect that is, arguably, distinctive and
capable of}

¹⁴The term “table-top” refers to sugar and sweeteners packed in containers convenient for use at

generating goodwill in the minds of customers. It may be that, ultimately, the existence of the trademark makes it sufficiently clear whose product it is so that the get-up itself will not sustain the passing off claim. At this stage, however, I proceed on the basis that the requirement is satisfied.

[24] As I have discussed, Flujo particularly relies on its “the 100% natural sweetener” slogan coupled with the prominent speech bubble device and its green/beige/brown colour scheme as distinctive of its brand. It asserts that the Naturals packaging utilises these (and other) features in such a similar way that confusion or deception either has or is likely to occur.

[25] I accept that the packaging is similar but the evidence does not satisfy me that there is a serious question that the Naturals packaging has or is likely to lead to confusion as to whose product it is. Like the Natvia product, the Naturals product is sold in a slightly rectangular packaging, though the shape is closer to square than the Natvia box. Like the Natvia product the most distinctive features of the Naturals packaging are the prominent device in the middle of the box featuring the slogan “100% natural sweetener” and the colour scheme. However, to my eye, neither those nor the other features are sufficiently like those of the Natvia product to be likely to cause confusion.

[26] The central device is dark brown with beige text, the opposite of the Natvia packaging, which is beige with dark brown text. The Naturals device is a stylised rectangular plaque shape, compared with Natvia’s (almost) round speech bubble.

[27] Although the colour scheme of the Naturals packaging is, like Natvia’s, beige, brown and green, these colours are used differently. Mid-beige is the background colour on the Natural’s box whereas light beige on the Natvia box is used for the speech bubble device. Green on the Naturals box is used only for text and call-out boxes whereas the Natvia box features bright green as the background colour. Brown on the Naturals box appears in a solid block as the central device whereas on the Natvia box it is used only for text. Overall, the Naturals box impresses as being predominantly brown and the Natvia’s box as predominantly green.

[28] Other aspects of the Natvia get-up said to be distinctive have not been used in a way that is similar. For example, the Naturals box does feature a pink call-out box but it is a minor feature in a different tone to the bright pink rectangular and square Natvia call-out boxes. The overall effect is more muted.

[29] Finally, although the “Naturals” trademark appears in the same position as the Natvia trademark ( top left corner) it is quite different, being cursive script with a realistic leaf image forming part of the crossbar of the “t” compared to Natvia’s print script with its distinctive stylised “v”.

[30] There is also insufficient evidence from which to conclude that consumers either have been or are likely to be confused between the brands. Mr Norris said that he had seen a letter to Flujo from a disgruntled consumer who had not received a cookbook which was part of a Merisant/NZ Sugar promotion. Flujo produced a screenshot of an instagram post referring to “natvianaturals” and a photograph of a Naturals box wrongly placed above a Natvia price tag in a supermarket. None of these instances are particularly compelling.

[31] Flujo also relied on sales figures for the year to 12 June 2016 showing a 3.7 per cent increase in unit sales for Natvia products overall but a 6.5 per cent decrease in unit sales of the 40-stick box. Conversely, over the same period the sales of the Naturals 40-stick boxes in the new packaging rose 7.1 per cent. Mr di Benedettto suggested that Natvia lost sales momentum in the first quarter of 2016 and the decrease was due to Natvia increasing its price and decreasing its marketing activity. Mr Hanna rejected both suggestions. I cannot determine that issue in the context of the present application. Given the paucity of evidence as to actual confusion I do not feel able to infer confusion from the sales figures alone.

[32] It is possible that at trial there will be stronger evidence to show actual or probable confusion. But the evidence before me is insufficient to show a serious issue for trial.

[33] Flujo asserts that since 2013, when it first moved to a predominantly brown packaging, Merisant/NZ Sugar has been progressively and deliberately moving

towards a packaging closer to that of the Natvia packaging for the purpose of reducing the distinctiveness of the Natvia get-up. Mr Hanna asserted in his evidence that the re-design of the new Naturals packaging was not so much to emphasise the key desirable qualities of the packaging hitherto not highlighted (as Merisant/NZ Sugar claimed) but rather to borrow Natvia’s branding techniques and take the essence of Natvia’s distinctive get-up.

[34] In making these assertions Flujo refers to the instructions given to Merisant/NZ Sugar’s design consultant in relation to the packaging redesign, including providing images of the Natvia packaging. Merisant/NZ Sugar and its design consultant strongly deny any element of calculation or intention to borrow from Natvia and say that providing images of competitor products is common practice to give context.

[35] This is an issue that cannot be resolved in the context of an interlocutory application and, in the absence of evidence showing a serious question regarding actual or probable confusion, does not, in itself, raise a serious issue that would justify injunctive relief.

[36] Since I have concluded that Flujo has not satisfied the threshold test of establishing a serious question to be tried it is not strictly necessary to go on and consider the balance of convenience. There are, however, two comments that I wish to make.

[37] If, ultimately, Flujo were to prevail it will have been significantly disadvantaged by not having obtained relief at this stage. Any problem caused by the new packaging is currently limited to the 40-stick box but that situation will not last. Merisant/NZ Sugar intends to introduce the new packaging for the other products in the Naturals range as the existing packaging runs out. If Flujo is right then it stands to lose significantly in terms of its market share. This type of loss is frequently regarded as not readily compensated by a damages award.

[38] Secondly, I am not particularly moved by Merisant/NZ Sugar’s claim as to how difficult it would be to revert to the older packaging. That is a finite problem

and a loss that is easier to measure than any loss of market share that Flujo might face from the influx of all Merisant/NZ Sugar’s products in new packaging.

[39] Had I found that there was a serious question to be tried then I would, for these reasons, have found that the balance of convenience favoured Flujo. The situation may justify an application for priority fixture.

[41] Counsel did not address the issue of costs. If costs are to be sought to be fixed rather than reserved Merisant/NZ Sugar may address the issue in a memorandum filed within seven days to which Flujo may reply within a further seven days and, if necessary, Merisant/NZ Sugar may respond within seven days

High Court of New Zealand Decisions

Flujo Holdings Pty Limited v Merisant Company [2016] NZHC 1779 (2 August 2016)

High Court of New Zealand

Flujo Holdings Pty Limited v Merisant Company [2016] NZHC 1779 (2 August 2016)