Intro

The decision of the Full Federal Court in Kraft v Bega [1] earlier this year over the design of peanut butter packaging, raises important questions regarding unregistered trademarks. Specifically, whether licensing agreements of unregistered trademarks may be ineffective if they do not also assign the goodwill of the business.

What is a “trade dress”?

A trade dress refers to the appearance of product packaging and includes the rights to the “visual appearance of a product packaging” for example its shape, colour scheme and graphics. Importantly, this is separate to the trademark itself. In Australia, lawyers more commonly refer to trade dress as “get-up”.[2] Both Kraft and Bega agreed that the trade dress was an unregistered (or common law) trademark. Generally, unregistered trademarks allow for actions to be taken under Australian Competition Law since whoever owns the mark can exclude others from using the same trade dress.

In this case, the parties agreed that the Peanut Butter Trade Dress (PBTD) was “a jar with a yellow lid and a yellow label with a blue or red peanut device, with the jar having a brown appearance when filled”.

Why was the use of the trade dress in dispute?

The design of the peanut butter jar was created by the Kraft Foods Group. In 2017, Bega Cheese purchased Kraft’s peanut butter including their ‘trade dress‘. After the sale, Kraft began to manufacture peanut butter and sell it with elements of the trade dress. After the sale. Both Kraft and Bega claimed that they were entitled to the exclusive use of the Peanut Butter Trade Dress.

Kraft contended that due to a company restructure, they were only licensees and as such the trade dress was not theirs to sell. Further, they attempted to separate the goodwill of the peanut butter business that Bega acquired from the goodwill associated with the trade dress of the peanut butter claiming it was a “diagnostic cue” that enhances only the Kraft mark.

Bega submits that under Australian common law, Kraft couldn’t assign the trade dress because as an unregistered trademark, it was impossible to separate it from the goodwill of the peanut butter business (and as such, cannot be assigned separately to the peanut butter business).

The outcome:

The purchase of Kraft peanut butter by Bega was validly executed, and consequently, they were able to use the trade dress to the exclusion of the original owners. Contrary to Kraft’s argument, the transfer documents were found to effectively transfer the trade dress as part of the goodwill of the business to Bega.

Justice O’Callaghan, deciding in favour of Bega, observed that “goodwill” is inseparable from the business it adds value to and cannot be dealt with separately. Further, goodwill provides rights to exclude others from using the trade dress to ensure attraction to that business. He granted Bega the right to use the yellow lid and red and blue labels, at the exclusion of all other competing brands.

Takeaways:

When selling a business, consult with a solicitor to consider which parts of your brand and product may be able to be registered as a trademark. This will help avoid legal disputes by clearly specifying which assets are being sold. Similarly, when buying a business or rights to a product, consult a lawyer to ensure all assets you intend to use are included in the contract of sale.

It may also be worthwhile registering any commercially significant brand elements rather than relying on the rights for unregistered trademarks provided at common law. Especially if trying to licence the use of your trade dress without assigning goodwill as otherwise they may not be validly licensed.

[1] Kraft Foods Group Brands LLC v Bega Cheese Limited (No 8), [2019] FCA 593.

[2] See Reckitt & Colman Products Ltd v Borden Inc [1990] UKHL 12; [1990] 1 All ER 873 at 880.