Federal Court shows True Colours: More on the Law of Colour in Labelling

By Joe Lederman
Managing Principal,
BALDWINS Australian Lawyers and Consultants

© May-June 2006

On 27 April 2006, Justice Heerey of the Federal Court handed down a decision which found that “Cadbury does not own the colour purple and does not have an exclusive reputation in purple in connection with chocolate” and that “Darrell Lea is entitled to use [the] purple”. This decision presents significant consequences for legal rights over the use of colours in product labelling in Australia. It is possible that further trademark issues may yet be determined in the competitive Australian chocolate confectionery market.

This FoodLegal Bulletin article will analyse the decision by Justice Heerey in relation to Trade Practices Act issues and discuss the current state of the law in Australia regarding rights to the use of colours in labelling, including trademarks law.

The Cadbury v Darrell Lea decision

Cadbury Schweppes believed that due to the fact that it had a 55% share of the chocolate confectionery market and had used the colour purple since the 1920s, it had “substantial, exclusive and valuable reputation and goodwill” in the purple used in relation to its chocolate confectionery. As a result, it claimed that the use of that colour purple by other chocolate confectionery companies, including Darrell Lea, constituted misleading and deceptive conduct under section 52 of the Trade Practices Act 1974 (Cth), false representation that the goods have sponsorship from Cadbury under section 53(c), and false representation that the company has sponsorship from Cadbury under section 53(d).

The judge found there would need to be two main legal requirements for such actions by Cadbury to succeed. Firstly, Darrell Lea would need to have subjectively had the intention of associating themselves with Cadbury or Cadbury’s products. In this case, such subjective intention was not found as there was evidence to show that the reason Darrell Lea chose purple in its colour scheme was because it was a colour which complemented the wooden panelling in its retail stores.

Secondly, the judge found that “it may not be enough that a particular colour is associated in the mind of consumers with a particular product”. Cadbury needed to show that the colour purple in relation to chocolate confectionery leads consumers to the conclusion that the product MUST be a Cadbury product. In other words, it is insufficient for a colour to be likely to be recognized with a particular product, there must be conclusive evidence that a colour leads consumers to think of the product. In this case, it was found that because of the existence and popularity of Nestlé’s Violet Crumble chocolate confectionery in the same market which also had a purple label, it could not be said that the association is conclusive. It was shown that recognition of the Cadbury brand required the colour, the name and the “glass and a half” device and not just the particular colour purple by itself.

Distinction from BP v Woolworths

BP v Woolworths (decided 2004) was an earlier case in which the supermarket chain Woolworths appealed against a Trademarks Office decision to grant a trademark to BP which gave it exclusive use of the colour green in relation to service station buildings and facilities. Leave has been granted for appeal to the Full Federal court but only on the question of factual analysis and not the question of substantive law.

This case is not directly comparable to the Cadbury case as the decision was based on trademark law rather than being a case alleging misleading and deceptive conduct under section 52 of the Trade Practices Act 1974 (Cth). However, there are aspects of the analysis of the use of colour which can be discussed.

In each case, the different judges had found that whether or not an exclusive right to use the particular colour in relation to relevant products was dependent on the particular facts: In the Cadbury case before Justice Heerey in the Federal Court, it was found that for the purposes of substantiating a claim of misleading and deceptive conduct under section 52 of the Trade Practices Act, Cadbury needed to have a reputation such that the colour purple would lead consumers to the conclusion that a purple chocolate bar must be Cadbury. By contrast, the test for BP, in relation to a trademark registration of the colour was a requirement for the green used by BP in relation to service stations to be “distinctive”. In assessing the distinctiveness of the colour green for BP, Justice Finklestein made his decision based on survey evidence similar to the type used in Cadbury.

The decision in BP drew on the fact that a very large proportion of survey respondents were able to identify BP service stations from photos of green unlabelled service stations. A similar test was applied in Cadbury but the use of purple for Violet Crumble meant that there was no conclusive association between Cadbury and purple wrapping for chocolates.

More on the Law of Colours

The Cadbury case before Justice Heerey on the Trade Practices Act and the BP case in relation to trademarks illustrate two different legal rights to the use of colours for which the test for validity is similar but not the same. First of all, a company can acquire exclusive use of a distinctive colour through trademark law. Secondly or alternatively, a company can claim to have a business goodwill and reputation in relation to a colour that is capable of being protected by section 52 of the Trade Practices Act 1974 (Cth). The biggest difference between the two is that the trademarks registration system provides a monopoly right into the future. By contrast, the best that the Trade Practices Act 1974 (Cth) can offer is potentially a protection of the status quo by preventing companies from gaining market share by pretending to be your company. Obviously, the trademark registration is the stronger legal right to be sought.

In order to obtain a trademark, a company needs to show that the “sign” (which is defined as being able to include a “colour”, see Trademarks Act 1995 (Cth) s 6), is able to distinguish one’s goods or services from another’s (Trademarks Act 1995 (Cth) s 17). If the Trademarks Office accepts that sufficient distinctiveness exists in that market, the trademark of the colour might be registrable. Once a trademark has been registered, a company would have exclusive rights to use the colour with respect to the goods or services or classes of goods or services claimed in the registration.

Under the Trade Practices Act 1974 (Cth), the usage of another’s colour on a product will constitute misleading and deceptive conduct if it can be seen as taking advantage of the other’s reputation. In some industries, this can sufficiently create the same monopoly right as a trademark if the company already has sufficient reputation in a market.

For both options, in order to gain an exclusive right to a colour, there must be distinctiveness about the colour in regard to the relevant goods or services to the extent where consumers would unmistakably associate that colour in that market with the brand. An example is the green used by BP in the service stations market.

For companies that wish for their brand to be identified by a colour, the implications of the two judgments would suggest it is more likely that where there is not a Trademark a competitor may get away with legally using a colour if there is at least one player in the market other than the dominant player who uses that colour.

However, the case of Cadbury v Darrell Lea suggests that in the absence of a trademark registration it might be difficult for a company to claim that misleading and deceptive conduct has occurred under section 52 of the Trade Practices Act 1974 (Cth) no matter how much market share the company has.