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Kraft not so crafty: Bega wins round 2 in the peanut butter war (for now)

Malcolm Campbell, ||

On 15 April 2020, the Full Court of the Federal Court held in favour of Bega Cheese Ltd (Bega) in its long-running legal battle with Kraft Foods Group Brands LLC (Kraft). Kraft’s appeal in Kraft Foods Group Brands LLC v Bega Cheese Ltd (No 8) [2020] FCAFC 65 (Appeal) was unanimously dismissed and it was held that Bega has the exclusive right to use Kraft’s iconic peanut butter trade dress. However, in a recent turn of events, Kraft has filed an application in the High Court seeking special leave to appeal the judgment of the Full Court of the Federal Court.

Background

Since 1935, Kraft had sold peanut butter in Australia and used a number of registered trade marks in connection with its peanut butter products. In addition to its registered trade marks, from 2007, Kraft also used the following trade dress in respect of its peanut butter products, which consisted of 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’ (Trade Dress):

In 2017, Bega purchased the assets from several of Kraft’s Australian and New Zealand subsidiaries, including Kraft’s peanut butter business. Bega’s asset purchase included acquiring all the assets and goodwill of Kraft’s Australian subsidiary, Mondelez Australian (Foods) Ltd, which had been using the Trade Dress under licence from Kraft in Australia. Following its purchase, Bega then began using the following packaging, which utilised the Trade Dress:

However, in 2018, an entity of Kraft tried to re-enter the Australian market and began using elements of the Trade Dress in respect of a peanut butter product. In the initial proceedings, both Kraft and Bega asserted their exclusive right to use the Trade Dress, which was recognised as a common law, unregistered trade mark. The Federal Court held in favour of Bega and found that it had purchased the Trade Dress from Kraft in 2017 as part of the asset and goodwill purchase, which granted it the exclusive right to use the Trade Dress.

The Appeal

The Full Court of the Federal Court dismissed Kraft’s Appeal on 15 April 2020 and upheld the earlier finding that Bega is entitled to the exclusive right to use the Trade Dress. The Full Court also clarified that in Australia, common law trade marks are always assigned with the underlying goodwill of the business. Therefore, as Kraft owned the rights to the Trade Dress at the time of the asset and goodwill sale to Bega, the Trade Dress was also assigned to Bega as part of the goodwill of the peanut butter business.

Implications of the decision

The Federal Court’s decision demonstrated the importance for businesses to consider which elements of its branding can and should be protected as a registered trade mark. Registering branding elements such as colour combinations or an aspect of packaging will further protect an entity’s rights. In addition, securing a trade mark registration will provide certainty around the ownership of any trade marks in a business sale or licensing arrangement. In addition, it is also important to ensure that any agreements or licensing arrangements clearly provide relevant provisions with respect to all registered and unregistered trade marks.

Appeal to the High Court

It was recently announced that Kraft will try to challenge the Full Federal Court decision by seeking special leave to appeal the decision in the High Court. If it is determined that the High Court has a case to hear, it could lead to there being more implications with respect to the ownership of unregistered trade marks.

If you have a query relating to this particular matter, or you would like to speak with an expert in Coleman Greig’s Intellectual Property team about protecting your brand, please do not hesitate to get in touch today.

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