Fighting the Good Chocolate Fight

Melissa Long explains how the Court of Appeal resolved a dispute between chocolate manufacturers

 

INTRODUCTION 

Following the recent Court of Appeal decision in Chocosuisse Union des Fabricants Suisses & Ors v Maestro Swiss Chocolate Sdn Bhd [2013] 6 CLJ 53, this case commentary highlights certain aspects of the decision on the tort of extended passing-off and actions brought pursuant to the Geographical Indications Act 2010 (“GIA”).

 

BACKGROUND FACTS

The Appellants were Chocosuisse Union Des Fabricants Suisses de Chocolat, Kraft Foods Schweizs and Nestle Suisse SA. The former is a Swiss co-operative society for Swiss chocolate manufacturers. The latter two are Swiss manufacturers and exporters of various Swiss chocolate products under the “Toblerone” and “Nestle” brand.

On the Respondents’ end were Maestro Swiss Chocolate Sdn Bhd and 3 of its related companies. They manufactured and marketed a line of ‘VOCHELLE’ chocolate and chocolate related products that bore a “Maestro SWISS” house mark on its packaging.

The Appellants’ objected to the use of the words “Maestro SWISS” on the Respondents’ locally manufactured chocolate products as they felt that the words would lead the public to believe that the Respondents’ chocolates were Swiss chocolates.

Extended Passing Off

The Appellants relied upon the principles of ‘extended passing off’, founded on the English cases of Bollinger & Ors v Costa Brave Wine Co Ltd [1960] 1 RPC 16 (commonly known as the Spanish Champagne case) and Erven Warnick BV v Townend & Sons (Hull) Ltd [1979] 2 All ER 927 (the Advocaat case). In the classic form of passing off, trader X is aggrieved by trader Y misrepresenting trader Y’s own goods as that of trader X. In the extended form of passing off, the complainant may be one of several traders mutually and non-exclusively sharing in the goodwill and reputation of a special trade name, who is seeking to protect that goodwill and reputation from goods that have been falsely ascribed with that special trade name.

It is imperative that in the minds of the public, the special trade name distinguishes its class of goods from other similar goods as that class of goods is believed to have distinctive qualities. In the Spanish Champagne case, champagne traders successfully prevented the defendant’s Spanish sparkling wine from being labelled as ‘champagne’ in England as ‘champagne’ was recognised by the English public as being produced in the Champagne district of France. 

In the present case, the Appellants mounted their claim for extended passing off on the goodwill and reputation of “Swiss chocolate” in that “Swiss chocolate” connotes chocolate made in Switzerland and is recognised as high quality and premium chocolate. On the strength of the reputation and goodwill of “Swiss chocolate”, the First Appellant along with 2 other Swiss chocolate manufacturers had successfully brought a claim for extended passing off in England against Cadbury Limited for the use of “Swiss chalet” in relation to chocolate. This case was reported in Chocosuisse Union des Fabricants Suisse de Chocolat and Others v Cadbury Limited [1998] RPC 117 (Chancery Division) and [1999] RPC 826 (Court of Appeal).

Geographical Indications Act 2000

The Appellants further claimed that the Respondents were also in breach of the GIA. Section 5 of the GIA provides: 

“(1)   Any interested person may institute proceedings in the Court to prevent, in respect of geographical indications— 

(a)    the use in the course of trade of any means in the designation or presentation of any goods that indicates or suggests, in a manner which misleads the public as to the geographical origin of the goods, that the goods in question originate in a geographical area other than the true place of origin;”

The term ‘geographical indication’ is defined in Section 2 of the GIA as “an indication which identifies any goods as originating in a country or territory, or a region or locality in that country or territory, where a given quality, reputation or other characteristic of the goods is essentially attributable to their geographical origin”.

Locus Standi

One of the notable issues that arose in this case was whether the First Appellant had the necessary locus standi to bring the action for extended passing off. The Respondents contended that the First Appellant (a trade association) was not in itself in the chocolate trade and therefore did not share in the goodwill of “Swiss chocolate”.

 

HIGH COURT DECISION

On Extended Passing Off

The High Court found that “Swiss chocolate” had goodwill attached to it in Malaysia which the Swiss chocolate manufacturers were entitled to protect. It was found that the Malaysian public considered “Swiss chocolate” to mean chocolates made in Switzerland and recognised this class of chocolates as high quality and premium chocolates.

Nevertheless, the High Court ruled that the tort of extended passing off was not established as the Respondents had not represented their products as “Swiss chocolates”, and that no reasonable person would be confused by “Maestro SWISS” into believing the Respondents’ chocolates originated from Switzerland.

Amongst its reasons, the High Court cited that (i) “Maestro SWISS” was part of all the Respondents’ corporate names and served as a corporate logo; (ii) the visual appearance of the Respondents’ packaging did not focus on the “Maestro SWISS” words (noting that the “VOCHELLE” mark was dominant and striking and that the “Maestro SWISS” words were given less prominence); and (iii) the packaging identified the Malaysian origin of the chocolates.

On Geographical Indications Act 2000

The High Court held that the use of “Maestro SWISS” did not violate the GIA as it was not used or presented as a geographical indication on the Respondents’ packaging, unlike indications such as “Sabah tea” or “Sarawak pepper”.

On Locus Standi

As regards the First Appellant’s locus standi, the High Court accepted the Respondents’ contention that the First Appellant had no relevant goodwill in the instant case as it was not in the chocolate business and therefore did not have standing to sue for passing off. The High Court referred to the UK Court of Appeal’s decision in Chocosuisse v Cadbury in this finding.

 

COURT OF APPEAL DECISION

On Extended Passing Off

The Court of Appeal reversed the decision of the High Court and held that the Appellants’ claim for extended passing off was established as there was a likelihood of confusion in the minds of the members of the public that the Respondents’ chocolate products come from the distinctive group of “Swiss chocolates”.

In coming to its conclusion, the Court noted that the details of Malaysian origin on the Respondents’ products were on the back portion of the packaging and that members of the buying public do not normally examine details of the manufacturer printed on the back. 

The Court took into account the Appellants’ survey evidence, albeit with caution, and held that the High Court Judge was wrong in not giving the survey evidence any consideration at all. The Court found that the survey evidence supported evidence of the Appellants’ witnesses that showed likely confusion in the minds of the public. 

The Court also concluded that other evidence showed the Respondents’ conscious use of “Maestro SWISS” to give the impression of a link to Switzerland, notably that it was placed on the front of the product packaging in the red and white colours of the Swiss flag.

On Geographical Indications Act 2000

The Court of Appeal disagreed with the decision of the High Court that “Maestro SWISS” as used did not constitute a geographical indication.

The Court nonetheless held that the Appellants claim under the GIA failed due to Section 27(2) of the GIA, as “Maestro SWISS” pre-dated the date of commencement of the GIA on 15 August 2001.

Section 27(2) provides:

“In respect of a geographical indication in existence before the commencement of this Act, no suit or proceedings shall be brought under this Act for anything done before the commencement of this Act.” 

It is unclear from the judgment whether the Court decided this on the basis that “Maestro SWISS” had only been used by the Respondents prior to the GIA, or whether it was because “Maestro SWISS” existed and was first used prior to the GIA. In the event of the latter, it would mean that the words “anything done before the commencement of this Act” apply to any geographical indication used prior to the GIA despite continued use post-GIA.

On Locus Standi

The Court of Appeal held that the First Appellant had locus standi in the extended passing off action on account that its members share a common interest in protecting the designation “Swiss chocolates”. As a result, the Court held that the First Appellant belonged to the class entitled to share in the goodwill of “Swiss chocolates”. The Court referred to dicta from Chocosuisse v Cadbury (Chancery Division) in which Laddie J stated “Those entitled to use the word share a common interest in protecting its purity as a designation applied to a particular type of goods but in no real sense does it belong to an individual trader.

Interestingly, the court of first instance in Chocosuisse v Cadbury followed previous authority in deciding that Chocosuisse could bring proceedings only on its own behalf on account that membership may be affected if “Swiss chocolate” became unprotectable in England. The approach meant that Chocosuisse did not have locus to sue in a representative capacity i.e. on behalf of its members.

When the case went to appeal, the UK Court of Appeal similarly held that Chocosuisse did not have locus to sue in a representative capacity as it did not have the same interest as its members did in the proceedings. In addition, the Court took the view that Chocosuisse did not have locus to sue in its own right as the trade association did not have the business interest or goodwill necessary to bring the action for passing off against Cadbury. In other words, Cadbury’s actions in contention did not ‘pass off’ any goodwill belonging to Chocosuisse in its own capacity as a trade association. 

It would appear to this author that our Court of Appeal has taken a different approach in relation to the locus standi of a trade association if its members share in the goodwill and reputation of a designation.

 

CONCLUSION

The Court of Appeal’s decision reaffirmed the tort of extended passing off in preventing traders from misusing distinctive designations which have goodwill and reputation attributable to a distinguishable class of goods.

The grapevine reports that the parties have applied for leave to appeal to the Federal Court. It is hoped that leave will be granted so that the disputes between the parties will be resolved with finality by the apex court of Malaysia. In particular, authoritative rulings on the interpretation of Section 27(2) of the GIA and the locus standi of a trade association to commence an action for extended passing off would be welcomed by the legal and business fraternities in Malaysia.

 

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