“What is the line between inspiration and appropriation? That is the question at the heart of the dispute in the present case”. This is the judge’s opening salvo in In-N-Out Burgers, Inc v Hashtag Burgers Pty Ltd  FCA 193 (February 26, 2020).
In this trade mark case the judge concluded that the activity of the Australian trader went beyond a ‘homage’ to a well-loved burger US burger business, and its adoption of a similar mark was infringement, passing off and amounted to misleading and deceptive conduct under Australian consumer laws.
It is not uncommon for one trader to be inspired or influenced by another. In this decision involving objection by the USA owner (INO) of various registrations in Australia for IN-N-OUT and IN-N-OUT Burger Logo shown below (the INO marks), the use of variations of DOWN-N-OUT (the DNO marks) by Hashtag Burgers (Hashtag) was held to go beyond homage into the realm of trade mark infringement.
INO claimed trade mark infringement, misleading and deceptive conduct under the Australian Consumer Law (ACL) and passing off. While trade mark infringement did not require INO to establish reputation in its marks, objection under ACL and passing off have the requirement that INO establish a reputation in Australia, and the action of passing off has the additional requirement that INO demonstrate damage as a result of use of the DNO trade marks.
INO has not yet set up any ongoing business in Australia - it had some use in Australia, by way of “pop-up” store events over a number of years, in addition to significant reputation as a result of overseas travellers being familiar with INO marks in the US, and the INO website being frequently accessed from Australia. Perhaps the most convincing evidence of INO’s reputation in Australia came directly from Hashtag. Its directors engaged a third party to design the DNO marks with reference to INO and its social media promotions referred to “the menu will be kept simple, similar to the original In-N-Out, with addition of a vegetarian option” or “we’re teaming up with the Hashtag_Burger Boys over this rainy weekend to bring you In-N-Out down under”.
In court Hashtag explained the adoption of the DNO marks was intended to be “cheeky”, with no intention to mislead and confuse customers that the Hashtag business was associated with INO or was the Hashtag “down under” business of INO.
With respect to the trade mark infringement claim, the judge determined that “N-OUT” was an essential feature of the INO marks and the DNO marks, such that use of DNO marks in the face of imperfect recollection of the INO marks would be likely to give rise to deception or confusion. In addition, while IN-N-OUT and DOWN-N-OUT have different meanings, both marks convey the same impression. Hashtag’s intentions in adopting the DNO mark was relevant in assessing likelihood of confusion and in its evidence Hashtag was largely silent on its intentions. In the absence of evidence from Hashtag the judge said: “the inference is open from the evidence tendered by the applicant (INO) that the respondents (DNO) adopted aspects of the applicant’s registered trade marks in order to capitalise on its reputation” and “The only remaining question is whether the respondent DNO achieved what they set out to do. In my opinion they did. They sailed too close to the wind. There is sufficiently close resemblance to give rise to a real, tangible danger of confusion."
Turning to the ACL claims of misleading or deceptive conduct, Hashtag claimed that INO did not conduct business in Australia and therefore had no goodwill or reputation in Australia. However, it is valid law in Australia that a business may have goodwill or reputation in the absence of conducting business, given the nature of global markets, travel and online business. The judge determined that “the applicant’s (INO) name and brand were known to a substantial number of people who were its potential customers, whether from visiting and In-N-Out restaurant or from reading and hearing about the restaurants and its burgers. They include Australian consumers and visitors to Australia, particularly visitors to the United States”.
For the claim of passing off, INO needed to establish loss or damage. Damages were demonstrated under the “user principle”. This provides that a plaintiff is entitled to recover, by way of damages, a reasonable sum from a defendant who has wrongfully used the plaintiff’s property, even though the plaintiff may not have suffered actual damage from the use and the wrongdoer may not have derived actual benefit. It will be interesting to learn what quantum of damages is awarded, but a decision of costs and damages will be some months away.
Would a “dilution” law be useful in Australia?
Therefore, DNO succeeded on all three claims: infringement, passing off and misleading and deceptive conduct under ACL. If Australia had a law of dilution similar to that which operates in the United States this may have founded another cause of action. Trade mark dilution occurs when a defendant commercially uses a trade mark or trade name similar to a famous mark such that it harms consumer perception of the famous mark – elements being harmed by way of blurring or tarnishment. Assuming that INO could establish the requisite level of fame, presumably both blurring and tarnishment may have been establish by Hashtag’s activity. However, while the introduction of a law of dilution has been raised by legal minds over the years, it does not appear to be on the radar.