Stone & Wood drowns sorrows in Pacific Ale defeat

The Full Federal Court has dismissed an appeal by the Byron Bay craft brewery, Stone & Wood, in its dispute with Victorian craft brewery Elixir over use of the term “Pacific Ale” in Stone & Wood Group Pty Ltd v Intellectual Property Development Corporation Pty Ltd [2018] FCAFC 29 (9 March 2018).

Stone & Wood had failed at first instance to establish that Elixir’s use of the term amounted to passing off, misleading and deceptive conduct under the Australian Consumer Law or an infringement of its registered trade mark. They had also failed to defend a cross-claim by Elixir that Stone & Wood had made groundless threats to bring an action for trade mark infringement.

Stone & Wood appealed against the orders dismissing its claims for passing off and under the Australian Consumer Law and also sought leave to appeal the primary judge’s orders on the groundless threats claim, although they did not appeal the decision on the trade mark infringement aspect of the case.

The beers

In November 2010, Stone & Wood started selling its Stone & Wood Pacific Ale, having chosen the name ‘Pacific Ale’ because it reflects the place where the beer is brewed and they considered that the word ‘Pacific’ generates a “calming, cooling emotional response”. In about January 2015, Elixir launched a beer named ‘Pacific Ale’ under the Thunder Road brand (Thunder Road Pacific Ale), which they re-named ‘Pacific’, following letters of demand from Stone & Wood. At the time Thunder Road Pacific Ale was launched, the only beer named ‘Pacific Ale’ being sold in Australia was the Stone & Wood Pacific Ale (there were some other beers using ‘Pacific Ale’ or ‘Pacific’ but most were produced and sold after Stone & Wood introduced its Pacific Ale to the market).

Images of the products in contention are presented below:

First instance

At first instance, Stone & Wood argued that Elixir’s use of the names ‘Pacific Ale’ and ‘Pacific’ would lead consumers to order or buy the Thunder Road beer when they intended to order or buy Stone & Wood Pacific Ale and/or that Elixir falsely represented to consumers that the Thunder Road beer was promoted, distributed and/or sold with the licence or authority of Stone & Wood, or that that there was a connection with Stone & Wood Pacific Ale.

The primary judge noted that “at the time the Thunder Road Pacific Ale was launched, Elixir was aware that Stone & Wood were producing a beer called ‘Pacific Ale’; knew there were a lot of consumers who, when they saw the name Stone & Wood, would think of Stone & Wood Pacific Ale; knew that the name ‘Pacific Ale’ had come to be very closely associated with Stone & Wood in Australia; and knew that Stone & Wood Pacific Ale had a good reputation in the craft beer market”.

His Honour also noted that in choosing the name ‘Pacific Ale’, Elixir was to some extent seeking to take advantage of the success of the product of that name in the Stone & Wood range but he did not believe that they intended to obtain an advantage by consumers thinking the Thunder Road product was Stone & Wood Pacific Ale or that there was an association between Thunder Road and Stone & Wood or its product.

His Honour ultimately dismissed Stone & Wood’s claims, after considering a range of relevant factors including the dominant Stone & Wood brand name, the differences in packaging and colour used, the “overall look and feel” of the products, the context in which the goods would be bought and the descriptive aspect of the word “Pacific”.

Stone & Wood’s trade mark infringement claim under the Trade Marks Act was also dismissed and Elixir was found not to have infringed the registered mark shown below:

To add to Stone & Wood’s woes, Elixir successfully cross-claimed under s 129 of the Trade Marks Act, alleging that Stone & Wood had made groundless threats to bring an action for trade mark infringement. As the infringement claim failed, the key issue was whether Stone & Wood had made out the defence under s 129(5), i.e., had they pursued an action for infringement with due diligence? His Honour noted that they had not commenced the action for infringement when they initially commenced proceedings but only sought leave to add this claim a month later, after Elixir had cross-claimed for groundless threats, and that no satisfactory reason for this delay had been given by Stone & Wood. As such, Stone & Wood had not acted with due diligence.

Appeal

Stone & Wood did not appeal the trade mark infringement aspect of the decision but reformulated the passing off and Australian Consumer Law claims on appeal (without change of substance). Their case was that “Elixir falsely represented that there was an association or connection between Thunder Road’s Pacific Ale/Pacific beer and Stone & Wood’s Pacific Ale beer, or between Thunder Road’s Pacific Ale/Pacific beer and Stone & Wood, or between Thunder Road and Stone & Wood”. However, the full court upheld all of the primary judge’s reasons and dismissed the appeal, finding that Stone & Wood’s reputation was in ‘Stone & Wood Pacific Ale’ not ‘Pacific Ale’ alone and that Elixir had not represented any association between the beers.

Stone & Wood’s application for leave to appeal in relation to the groundless threats aspect of the decision was also dismissed, with the full court finding that Stone & Wood had presented no argument that demonstrated error on the part of the primary judge and that they did not provide a proper explanation for the delay.

One (comment) for the road

Stone & Wood’s plight highlights how pioneers in a market can become the victim of their own success and the importance of early brand protection. Stone & Wood could potentially have had a much stronger case against Elixir if they owned a trade mark registration for PACIFIC ALE on its own. Elixir is clearly also aware of this and has been attempting to thwart Stone & Wood’s attempts to register that mark. That battle still looms large with Elixir having lost its opposition to Stone & Wood’s registration of the PACIFIC ALE mark before the Trade Marks Office and having appealed that decision to the Federal Court.

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By Nicky Shanks