Thousands of hours and dollars can go into branding your business to distinguish your products or services from your competitors. Australia encourages competition in the commercial arena, but there is a line between healthy competition and misleading customers. The recent decision in Verrocchi v Direct Chemist Outlet Pty Ltd [2016] FCAFC 104 sheds some light on when a competitor’s use of a similar logo or tag line is considered misleading or deceptive. 

Chemist Warehouse vs. Direct Chemist Outlet

Verrocchi is the founder of the well-known Australian discount retail pharmacy chain, Chemist Warehouse. Verrocchi brought proceedings against Direct Chemist Outlet (DCO) for using a similar image and colour scheme to the storefront of Chemist Warehouse, by claiming the following points:

  1. DCO adopted a deceptively similar fit-out for their stores and a non-distinctive name, which would lead consumers to believe that DCO was associated with Chemist Warehouse;
  2. DCO failed to distinguish themselves from Chemist Warehouse and intentionally copied the stores’ visual appearances; and
  3. As a result, consumers we likely to be misled or deceived.

When Close is Not Close Enough

The Court dismissed Verrocchi’s claims (and then again on appeal), demonstrating the difficulty of securing a right to a particular look in a competitive industry. The Court found that: 

  • Chemist Warehouse had “insufficient uniformity” in the visual appearance of their storefronts. In other words, Chemist Warehouse did not maintain the colour scheme and overall appearance across the stores so that a customer could identify the brand. 
  • DCO did intend to mislead or deceive consumers or pass off as being associated with Chemist Warehouse.
  • DCO’s red half-sunburst logo was distinctive enough from Chemist Warehouse’ red house with a chimney logo.
  • Yellow is a colour that is frequently used to grab consumer’s attention and communicate cheap or discounted items across various industries. Therefore, the colour scheme was not sufficiently associated with Chemist Warehouse to demonstrate its origin.

Trade Mark Infringement

In addition to the allegations of misleading or deceptive conduct, Verrocchi made a separate claim that DCO had infringed Chemist Warehouse’s trade mark by copying their tagline:

Chemist Warehouse owned the trade mark for their tag line since 2007. Between 2006 and 2009, DCO used the slogan:

There is a clear resemblance between the two, but despite their striking similarity, the Court decided that because businesses commonly use the slogan to convey messages of cheapness, it was too descriptive to prevent DCO from using the tag line.

Adding insult to injury, DCO subsequently brought a cross-claim against Chemist Warehouse. They argued that the descriptive language of their tag line should have prevented the retailer from registering the trade mark in the beginning. As a result, the trade mark has been removed from the register.

Comparing Similarities for Misleading or Deceptive Conduct

When comparing two allegedly similar logos, slogans or store-front appearances, the main question is whether the consumer will be, or is likely to be misled or deceived. This doesn’t require a side-by-side comparison.

The question is about the overall impression a business creates in the consumer’s mind. So, if a business has obtained a reputation through its shop-front appearance and a competitor used a similar image or colour scheme, would a consumer think they were purchasing from the first business?

Not only did Chemist Warehouse fail to prove such a reputation, but it also lacked consistency across its storefronts, further damaging its claim for distinctiveness.

What Does This Mean?

The Chemist Warehouse case demonstrates the importance of using a distinctive and consistent image to distinguish your brand. So, when you are holding your next marketing meeting to refresh your brand’s look, consider the following points:

  • Do your research and come up with a unique image that your industry has not yet seen. 
  • If your business operates multiple stores, ensure consistency in their visual appearance to distinguish yourself clearly from the competition. 
  • To avoid IP Australia rejecting or deregistering your trade mark, come up with something distinctive to demonstrate a clear association between your mark and your business.

If you have any questions or need help with your business’ branding strategy, get in touch with LegalVision’s specialist IP lawyers on 1300 544 755. 

Alexandra Shaw
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