Tasman Insulation New Zealand Limited v Knauf Insulation Limited & Ors
High Court of New Zealand
9 – 13, 16 – 20, 23 – 26 September, 21 – 22 November 2013, 9 May 2014
 NZHC 960
Trade marks – infringement – counterclaim that trade mark is generic – counterclaim for non-use – defences under s 95: use in accordance with honest practices – allegation of unjustified proceedings – Trade Marks Act 2002 – ss 5, 6, 66(1)(a) and (c), s 89(1), 89(2), 95(c)(i) and s 105
This judgment explores a number of important issues under the Trade Marks Act 2002. These include consideration of the test for genericism introduced in the 2002 Act (s 66(1)(c)). The case also considers ‘use as a trade mark’ and whether use of a mark as a metatag will amount to infringement. In addition the case examines the defence in s 95(c) as to honest practices and a contention that the proceedings commenced were unjustified.
Trade mark issues
The plaintiff (Tasman) was owner in New Zealand of the registered trade mark BATTS as follows:
105507 BATTS 27 August 1973, class 17 insulating materials
Tasman alleged infringement of its registered trade mark as a result of:
(a) the first defendant (Knauf) importing into New Zealand insulation material featuring the words “batt” or “batts” on the packaging or on a label attached to the packaging of Knauf’s EARTHWOOL insulation;
(b) use of the word “Batt” in HTML code on the website www.earthwool.co.nz, being a website controlled by the third defendant, BFNG.
The defendants denied infringement and contended (by way of defence) that they had used the words “batt” or “batts” within section 95 of the Trade Marks Act 2002, i.e. in accordance with honest practices in industrial or commercial matters as a sign to indicate the kind, intended purpose or other characteristics of their goods.
There was a further two-pronged attack by the defendants.
(a) The first attack was that the trade mark registration for BATTS was not a valid registration and should be revoked pursuant to s 66(1)(c) because, in consequence of acts or inactivity of Tasman, “batts” was and had become, by the alleged date of infringement, a common name in general public use to describe insulating materials (typically rectangular in shape) and consequently did not and could not function as a trade mark.
Section 66(1)(c) came into force on 20 August 2003. Two issues arose as to its application. The first was whether “acts or inactivity” of the trade mark owner prior to 20 August 2003 could be taken into account in considering whether the trade mark had become a common name in general public use.
The second was that, if only acts or omissions since 20 August 2003 were relevant (since the state of being a common name in general public use must be as a consequence of the acts or omissions), then was evidence of the state of the trade mark prior to that date relevant?
As part of its evidence in support of the application, the defendants produced listings from a New Zealand online auction site (Trade Me) in the period 2002 – November 2011 (adjusted) showing various categories of listings. The categories included where there was “Batts” in the body of the listing or “Batts” in the title, or “batts” in both the title and body of the listing. The defendants argued from the results that it was not unreasonable to assume that all the generic use seen in the media was simply reflecting a degree of trade mark use (i.e. Pink Batts) and a lot of descriptive and thus generic use (“batts” alone). 
As another part of its evidence the defendants commissioned a consulting group to search publicly available resources and material prepared for use in New Zealand to find examples of generic references to “batt” or “batts” (other than the Trade Me examples) -. The results were divided into 12 categories of use or users.
The defendants alleged as to the causative element of s 66(1)(c) that Tasman’s acts had included “protective” acts to stop use by the public of BATTS generically and “positive” acts (encouraging BATTS to become generic), with “inactivity” being the absence of or failure to take protective acts. 
(b) The second attack was that the trade mark registration for BATTS was not a valid registration and should be revoked pursuant to s 66(1)(a) of the Act because at no time during a continuous period of 3 years or more did Tasman put the trade mark registration to genuine use in the course of trade in New Zealand in relation to insulating materials. The defendants contended that there was no evidence of product produced by Tasman having been marketed under or by reference to the word BATTS alone. All Tasman’s usage had been as PINK BATTS.
Knauf and BFNG also counterclaimed that Tasman’s proceedings were unjustified proceedings in terms of s 105 Trade Marks Act 2002 as a consequence of the s 95 defence and the two challenges to registrability of the trade mark under ss 66(1)(a) and (c).
Fair Trading Act issues
In addition there were a number of claims under the Fair Trading Act 1986 by both Tasman and each of the defendants.
Tasman’s claims were that:
(a) Knauf’s brand EARTHWOOL, its use of the EARTHWOOL name and the way in which the EARTHWOOL product was distributed was liable to mislead or would mislead or deceive the public into believing that the products were made from sheep’s wool or wool from other types of animals when they were not.
(b) The second defendant, Eco Insulation’s sale, advertising and marketing of the EARTHWOOL product on its website was liable to mislead the public as to the nature, manufacturing process or characteristics of the EARTHWOOL product, in particular that:
(i) the EARTHWOOL product was made of sheep’s wool or wool from other types of animals when it was not; and
(ii) the website failed to distinguish between the EARTHWOOL product and another insulation product made from wool distributed by Eco Insulation.
(c) The manner in which the EARTHWOOL products were being marketed on the earthwool.co.nz website was liable to mislead or would mislead or deceive the public into thinking that the EARTHWOOL insulation products were not made from glass or polyester but instead made of sheep’s wool or wool from other types of animals when they were not.
(d) Tasman had used allegedly discrediting words referred to as paraphrased in a press release by Knauf and/or BFNG asserting that “a competitor” had been trying to discredit the EARTHWOOL brand of insulation products.
The defendants’ allegations under the Fair Trading Act were that:
(a) Tasman’s statement that PINK BATTS insulation products were on average over 7:1 compression ratio packed was misleading or deceptive, likely to mislead or deceive or liable to mislead the public in breach of ss 9, 10 and 13.
(b) Certain presentations made by Tasman comparing its insulation products with the EARTHWOOL brand of insulation by placing both products in water were in breach of ss 9, 10 and 13.
(1) Section 66(1)(a): Had there been genuine use of the BATTS trade mark?
(i) There is no rule that a secondary or even third level product identifier cannot be a trade mark. Secondary or even third level product identifiers can function as trade marks if they indicate to the consumer that the product originates from a particular undertaking. Each case will depend on its facts. It is possible for a mark to acquire distinctiveness, even as part of another mark. 
Fredco Trading Limited v Miller (2006) 8 NZBLC 101,761 at  referred to.
(ii) If it is possible for a sign to acquire distinctive character as a result of its use in conjunction with a registered trade mark, then it must follow that use of the first sign (once registered) in conjunction with another registered trade mark is not disqualified from consideration as genuine use for the purpose of s 66(1)(a). 
(iii) Tasman’s use of BATTS in its advertising campaigns and on packaging was not as mere description but in a style calculated to signal that its role was to denote the source of the goods and hence to function as a badge of origin. The word was required to be used as an adjective, not a noun, and with the symbol ®. The counterclaim was therefore dismissed. -
(2) Section 66(1)(c): Had the BATTS trade mark become generic in New Zealand?1
(iv) The burden of proof which an applicant for revocation must satisfy has been described as a heavy burden. Proof that the mark has become a common name must be established by cogent evidence. Whether a trade mark has become “a common name in general public use” is a question of degree. The word “common” suggests that the use of the mark must be established or widespread. -
Wing Joo Long Ginseng Hong (Singapore) Co Pte Ltd v Quinghai Xinuan Foreign Trade Co Ltd  FSR 13 referred to.
(v) The applicant for revocation also carries a burden of proving a causation element, namely that the state of the trade mark being a common name in general public use is as a consequence of the acts or inactivity of the owner. 
(vi) As to whether s 66(1)(c) had retrospective effect, s 7 Interpretation Act 1999 establishes a presumption that an enactment is not retrospective. The strength of the presumption depends on the nature and degree of the injustice that would result from the statute being given retrospective operation  and . The statement of purpose in s 3(a) of the Act and the emphasis on clarity and certainty suggested it was unlikely that the Act was passed with the intention that it would have retrospective effect, save to the extent addressed in several focused transitional provisions. Consequently, the presumption in s 7 was not rebutted and s 66(1)(c) could only be considered to the extent that the state of affairs (being a common name in general public use) had occurred as a result of the acts or inactivity of Tasman since 20 August 2003 -
(vii) As to the evidence from Trade Me listings, it was not legitimate simply to make an assumption that there was a lot of descriptive and thus generic use. The defendants’ assumption or conclusion might or might not be the position. It was for the defendants to prove their case. The making of such an assumption did not satisfy the burden of proof on an applicant for revocation contending that a trade mark had become a common name in general public use. 
(viii) Looking at the evidence presented by the defendants2, there was clearly a not insignificant degree of use of the words “batt” and “batts” to describe insulation in a generic, non-proprietary sense . The Court’s perception of the evidence was that there was a degree of loose terminology, especially in stores where PINK BATTS product was sold, as well as a degree of usage by way of synecdoche3. It was material in the form of the Trade Me listings, several of which were ambiguous on their face. Nevertheless there was also a not insignificant amount of what appeared to be generic use. Collectively this evidence was not of a quantity or quality to cause the Court to be satisfied that the trade mark had become a common name in general public use for pieces of fibrous insulation. 
(ix) If the Court’s conclusion that BATTS had not become a common name in general public use for insulation was wrong, it was desirable to consider thecausation component of s 66(1)(c).
As to positive acts, some evidence of alleged positive acts was either before the coming into force of the Trade Marks Act on 20 August 2003 and therefore disqualified from consideration  and . With other evidence there was doubt whether the examples were published in New Zealand. This evidence was not of significant assistance. 
As to inactivity, the charge of inactivity could only be levelled against Tasman in relation to use by other persons of the word “batts” about which Tasman could legitimately complain. If the use of the word was not used as a trade mark, Tasman could not take objection. Similarly if the use qualified for the s 95(c)(i) defence, Tasman could not take objection . Tasman was slow to recognise and to respond to the threat presented by listings on Trade Me. However, (if the Court was wrong in its earlier finding that “batts” had not become a common name in general public use) on the totality of evidence the defendants fell significantly short of establishing acts and inactivity of Tasman in the period following 20 August 2003. 
(3) Trade mark infringement: Was there use of a sign in the course of trade and, if so, was that use as a trade mark?
Use of a sign
(x) The defendants’ use of “BATT” and “BATTS” was use of a sign within the meaning of ss 5 and 6 of the Act. 
In the course of trade
(xi) The relevant phrase had been interpreted broadly to include any commercial transaction. The importation and sale of EARTHWOOL insulation products bearing the sign “batt” or “batts” and the use of those words in the Knauf advertisements and on the earthwool.co.nz website all occurred in the course of trade .
Was the sign as used likely to be taken as being use as a trade mark?
(xii) The Court was required to form a view as to how the defendants’ use of the words in the four instances pleaded would have appealed to those encountering them in trade. It was a matter of impression taking careful account of theMainland considerations (i.e. all the circumstances of the use; the normal meaning of the word; the way it is used in relation to the particular goods; the nature of the market, the kinds of customers and the general circumstances of trade and the goods concerned) . The Court did not proceed on the basis that there was no “normal meaning” of the word “Batt”. It was a word which appeared to have a descriptive or nominative quality in other jurisdictions as designating a piece of insulation: It was not a fancy or invented word. The fact that, presumably because of Tasman’s trade mark registration, the word had not been frequently used by others in New Zealand did not change the descriptive/nominative nature of the word. While proprietorial control observed national boundaries, the meaning of words did not. 
Mainland Products Ltd v Bonlac Foods (NZ) Ltd  3 NZLR 341 CA followed.
The installation instructions on the packaging
(xiii) Where the words “batt” and “batts” only appeared in quite densely written installation instructions in the same print size and colour as all the other words in the instructions, the public would not perceive that manner of use in that context as being use as a trade mark. 
The packaging label
(xiv) In this context the public would not perceive the manner of use of the word “BATT” and the phrase “BATT/PACK” as being use as a trade mark. 
Use on earthwool.co.nz website
(xv) The public would not perceive this manner of use of the word “batts” as being use as a trade mark. 
The use of “Batt” in the HTML code
(xvi) On seeing this page the public would be inclined to the view that use of the word “Batt” in this manner would be use as a trade mark. 
The issue of “invisible” use
(xvii) It was proper to construe invisible use of a registered trade mark by the use of a metatag, as occurred in the circumstances of this case (where the mark can be accessed and viewed by an informed Internet user) as use as a trade mark. 
Reed Executive Plc v Reed Business Information Ltd  RPC 40; Kabushiki Sony Entertainment v Nuplayer Ltd  FSR 9; Google v Louis Vuitton Malletier  RPC 19 discussed
(4) Was the use of “batt” or “batts” within ss 89(1)(a) or (c)
(xviii) It was common ground that the word “batts” was identical to Tasman’s registered trade mark for BATTS and that the word “batt” (in the singular) was similar to the BATTS registered trade mark. 
(xix) The defendants’ use of “Batt” in each of the installation instructions, the packaging label and the HTML code would be likely to deceive or confuse at the very least a significant proportion of consumers as to the trade mark origin of the product. Consequently the use of “Batt” in the HTML code was an infringement of Tasman’s trade mark. (The other instances of use of the word “Batt” and “Batts” would have constituted infringement of trade marks had the Court concluded that the use was likely to be taken as being use as a trade mark within s 89(2)).  and 
(5) Was there an available defence under s 95?
(xx) The defendants’ use of “batt” and “batts”, whether in the HTML code or (if the Court’s conclusion on use as a trade mark was in error) in the other instances of use did not come within the protection afforded by s 95(c)(i). The defendants’ use of the those words was simply as identification of the product itself and did not communicate any meaningful information about the “kind” of product or the “intended purpose” of the product. Its function in the defendants’ materials was to identify the subject matter (the insulation), not to communicate information about the kind of insulation, the intended purpose of the insulation or any other characteristics it might have.  and 
Mainland Products Ltd v Bonlac Foods (NZ) Ltd  3 NZLR 341 referred to.
(xxi) Even if the use of “Batt” in the HTML code was as a sign within s 95(c)(i), the defence would not be available in any event because the use was not in accordance with honest practices. The reason why BFNG used the word “Batt” in the HTML code was to secure an outcome whereby an Internet searcher searching for the trade mark BATTS would be directed to the earthwool.co.nz website and hence to the differently branded products marketed there. 
(6) Was there an available defence under s 66(1)(a) and (c)?
(xxii) For the reasons given for dismissal of the counterclaims, no defences were available to the defendants in reliance on s 66(1)(a) and (c). 
(7) Was Tasman’s proceeding unjustified under s 105?
(xxiii) The effect of s 105(2) is to preclude the Court from exercising the discretion conferred by subsection (1) where the respondent to the application proves that the trade mark has been infringed. The bringing of proceedings cannot be logically be said to be unjustified if the proceedings are successful or, if pressed to a conclusion, would have been successful.
Heinz Watties (New Zealand) Ltd v EFFEM Foods Pty Ltd (2001) 7 NZBLC 103,437 referred to.
(xxiv) While s 105(1) refers to a declaration with reference to “proceedings”, s 105(2) refers to proof of infringement in respect of “the acts in respect of which proceedings are brought”. Bearing in mind the reference to “acts”, it would not be appropriate to construe the provision as ceasing to apply merely because only one (perhaps de minimis) instance of infringement was established but all others failed. It would be open to the Court to make a declaration in respect of causes of action which were considered to be unjustified notwithstanding that the trade mark owner was successful on one or more other trade mark infringement causes of action. -
(xxv) The Court’s finding that the use of “Batt” in the HTML codes on the earthwool.co.nz website was an infringement precluded any relief under s 105 on that issue. 
(xxvi) So far as the other claims were concerned it was common ground that Tasman would have received legal advice before issuing proceedings and the issue was whether it had acted in a genuine belief based on reasonable grounds in bringing such claims. Although Tasman had taken a rather absolutist approach to the infringement issue based on its conviction as to the iconic status of its trade mark, the Court’s assessment was that Tasman had acted in a genuine belief based on reasonable grounds in bringing all the claims in this proceeding. The application for a declaration under s 105(1) was therefore declined. 
(8) Relief in respect of trade mark infringement
(xxvii) An injunction was granted restraining the third defendant, its directors, servants or agents from using the word “Batt” in the HTML code on the earthwool.co.nz website. 
(9) Fair Trading Act: Was the EARTHWOOL brand misleading or deceptive?
(xxviii) The defendant’s use of EARTHWOOL name and brand was misleading and deceptive because there was a real likelihood that a substantial number of people including prospective purchasers would be misled about the composition of the product. - It was the Court’s view that on seeing the dual-coloured orange/green EARTHWOOL brand, the hypothetical reasonable person would focus on or default to the word WOOL, noting its quite deep green colour and possibly the “leaf” design in the first “O” of the word “wool”. That person would be likely to make an assumption that the word “wool” meant the product grown by live animals.  Respondents to the survey gave answers indicating that they understood EARTHWOOL to be made of sheep’s wool.  The survey results were pervasive evidence that at least as a matter of initial impression, a hypothetical reasonable person was likely to form the erroneous impression that EARTHWOOL product was manufactured from animal wool, probably sheep’s wool.  There was further evidence from persons attending the Canterbury Home Show. 
Allied Liquor Merchants Ltd v Independent Liquor (NZ) Ltd (1989) 3 TCLR 328; 17 IPR 79 referred to.
(xxix) The form of order which was appropriate was a prohibition on the use of EARTHWOOL name or brand, except where the word is used in the manner of an adjective in association with the word or words identifying the composition of the product as glass or glass wool, namely:
(a) EARTHWOOL glass wool; or
(b) EARTHWOOL glass insulation.
Reckitt & Coleman Products Ltd v Borden Inc  1 All ER 873 (HL) at 877 referred to.
(10) Was the manner of marketing of the EARTHWOOL product on thewww.ecoinsulation.co.nz website misleading or deceptive?
(xxx) Both the first and second versions of the website were misleading and deceptive so far as the nature of EARTHWOOL was concerned. 
(11) Was the manner of marketing of the EARTHWOOL product on thewww.earthwool.co.nz website misleading or deceptive?
(xxxi) As there was no express statement as to the position of EARTHWOOL, at least a significant number of people would proceed to make the assumption, possibly by a subconscious process of elimination, that it was a product manufactured from animal wool. 
(12) Was the 26 August 2012 press release referring to a “competitor” false or misleading?
(xxxii) Statements made by two of the defendants that Tasman had been trying to discredit EARTHWOOL by a claim that it was “bulgy and bursty” was false and misleading in breach of s 13 of the Fair Trading Act. -
(13) Was Tasman’s 7:1 compression ratio statement misleading or deceptive?
(xxxiii) The statement that PINK BATTS products were on average over 7:1 compression packed made it clear that there must be rates of compression above and below the stated ratio. Further, where there is more than one acceptable method for making a calculation, it ought not to be objectionable that a different result is obtained by the use of a different acceptable calculation. For these reasons Knauf’s claim was not made out on the evidence. -
(14) Was the emergent test misleading or deceptive?
(xxxiv) Knauf succeeded in its claim that this test by Tasman was in breach of s 9 of the Fair Trading Act. -
(15) Relief in respect of Fair Trading Act claims
(xxxv) The following declarations were made:
(a) A declaration that the manner of marketing of the EARTHWOOL® product on the www.ecoinsulation.co.nz website in the manner stated in Issue 9 was a contravention of ss 9 and 10 of the Fair Trading Act.
(b) A declaration that the manner of marketing of the EARTHWOOL® product on the www.earthwool.co.nz website in the manner stated in Issue 10 was a contravention of ss 9 and 10 of the Fair Trading Act.
(c) A declaration that the inclusion of the words "bulgy and bursty" in the Sunday Star Times available on 21 August 2012 was a contravention of s 13 of the Fair Trading Act.
(d) A declaration that Tasman's immersion test was a contravention of s 9 of the Fair Trading Act.
1 This reads:
"(c) That, in consequence of acts or inactivity of the owner, the trade mark has become a common name in general public use for a product or service in respect of which it is registered."
2 Other than the Trade Me listings.
3 The use of the species to stand for the genus.