GENEVA MARKETING (1998) LIMITED V JOHNSON & JOHNSON AND ORS CA CA679/2008

GENEVA MARKETING (1998) LIMITED V JOHNSON & JOHNSON AND ORS CA CA679/2008 18 December 2009IN THE COURT OF APPEAL OF NEW ZEALAND CA679/2008 [2009] NZCA 591BETWEEN GENEVA MARKETING (1998) LIMITED Appellant AND JOHNSON & JOHNSON First Respondent AND JOHNSON & JOHNSON (NEW ZEALAND) LIMITED Second Respondent AND JOHNSON & JOHNSON PACIFIC PTY LIMITED Third Respondent Hearing: 17 September 2009 Court: William Young P, O'Regan and Ellen France JJ Counsel: D J Chisholm and C I Wilson for Appellant P C Dengate Thrush for Respondents Judgment: 18 December 2009 at 4 pmJUDGMENT OF THE COURT A The appeal is dismissed. B The appellant must pay the respondents costs for a standard appeal on a band A basis and usual disbursements.___________________________________________________________________REASONS OF THE COURT(Given by William Young P)Introduction[1] On 29 October 1999, the appellant, Geneva Marketing, applied for registration of SYLK as a trade mark in class 5 for "pharmaceutical preparations, namely personal lubrication in this class". The trade mark was registered on 12 May 2000 and this registration remains current. Geneva Marketing uses this mark in connection with the marketing and sale of Sylk, a personal lubricant, which it sells in New Zealand and other countries. [2] Johnson & Johnson, the first respondent, was incorporated in New Jersey in the United States. The second and third respondents operate as its agents in New Zealand and Australia. There is no need to distinguish between the three Johnson & Johnson companies and we will therefore refer to them collectively as "Johnson & Johnson". For many years, Johnson & Johnson has manufactured and sold personal lubricants internationally under its "K-Y" mark. As a result of a re-branding exercise, Johnson & Johnson registered K-Y SENSUAL SILK as a trade mark in New Zealand. The application was filed on 11 October 2006 and accepted for registration on 12 April 2007 in classes 3 and 5 for "massage oils" and "personal lubricants". It has been using this trade mark –with much emphasis on the word "Silk" – in New Zealand since early 2007. [3] Geneva Marketing challenged Johnson & Johnson's entitlement to market products in this way. A number of causes of action were advanced, including claims for infringement of the SYLK trade mark and either a declaration of invalidity or revocation of the K-Y SENSUAL SILK trade mark. But the end result was that Harrison J, in a judgment delivered on 2 October 2008, dismissed the claims advanced by Geneva Marketing and entered judgment for Johnson & Johnson. [4] Geneva Marketing now appeals against the Judge's dismissal of its infringement, invalidity and revocation claims.The factual context[5] Geneva Marketing's Sylk is made of natural materials. It is targeted at older women although the product is also purchased by sex workers. There is a medical focus to the marketing of Sylk. Within New Zealand, Sylk is sold predominantly in pharmacies but also, to a limited extent, in health stores and by mail order. As at October 2006 (when the K-Y SENSUAL SILK application was made), Geneva Marketing was selling approximately 20,000 units of Sylk in New Zealand each year and around 200,000 units world-wide. The product is sold in 40ml bottles. [6] Prior to the registration of the K-Y SENSUAL SILK trade mark, Johnson & Johnson was selling personal lubricants in New Zealand under the brands "K-Y Warming Liquid" and "K-Y Ultra Gel". The same products are now sold as "K-Y Sensual Silk Warming Liquid" and "K-Y Sensual Silk Liquid". Both are synthetic products. They are primarily targeted at women aged between 18 and 49 and are marketed on the basis that their use will enhance sexual pleasure. Although the litigation focuses on the marketing of both products, we propose to focus on K-Y Sensual Silk Liquid which is the direct competitor of Sylk. These products are substantially the same in function and, subject to the allergenic status of the user, substitutable for each other. [7] Johnson & Johnson's personal lubricants are sold in pharmacies and have at all times been the market leader in New Zealand supermarkets, enjoying a consistent 80 per cent market share in the seven years preceding 2006. [8] Consumers of personal lubricants are mainly repeat purchasers. Given the nature of the product and its use, purchasers are likely to be discriminating. Those who purchase from supermarkets can be expected to select the product without staff assistance whereas those who buy from pharmacies (where these products tend to be discreetly located) may seek assistance from staff. [9] The packaging and marketing of the competing products (that is Sylk and K-Y Sensual Silk Liquid) have some common features:(a) Both products are sold in similarly sized bottles, with the result that the packages are of similar size. (b) On the packaging of the Geneva Marketing product, the word "Sylk" is predominant. On the packaging of K-Y Sensual Silk Liquid, the word "Silk" is in the largest font. (c) On the Sylk packaging there is an alliterative description, "Silky smooth and slippery". On the packaging of K-Y Sensual Silk Liquid there is a similar alliterative phrase, "seductively silky, smooth sensation", which includes repetition of the Sylk words "silky smooth". In other respects the get-up of the two products is not particularly similar. Indeed, the products use different colour schemes and layouts. [10] Johnson & Johnson's packaging is produced in Canada where it has apparently registered SENSUAL SILK as a separate trade mark. This is reflected in the style of the labelling. On the front of the packaging there is a box in which K-Y appears in the form "K-Y®" followed by "BRAND MARQUE" in a small font. Beneath this is "sensual" and then, in font which is more than three times the size of "sensual", there is the word "Silk". The labelling on the back of the packaging begins in this way:K-Y® BRAND SENSUAL SILK™ personal lubricant. Discover the seductively silky, smooth sensation of SENSUAL SILK™ and enhance the pleasure of intimacy. [11] Johnson & Johnson spends far more on promotion than Geneva Marketing. For example in 2007 Johnson & Johnson spent approximately $190,000 whereas Geneva Marketing spent approximately $14,000. Much of the promotion funded by Johnson & Johnson is on radio and television. In this advertising the word "silk" is spoken but never on its own, but rather in conjunction with "K-Y" and "sensual".[12] Two other aspects of the marketing of K-Y Sensual Silk Liquid should be mentioned: (a) In a Pharmalines catalogue of April 2007, the Johnson & Johnson product was referred to only as "Silk" in the context of the following claim:Silk Attracts Women because it is Sensual, Sexy & SAFE.In this instance, the word "Silk" was used by itself. The evidence suggests that the use of "Silk" in this way was an isolated incident and something of a mistake. (b) Supermarket shelf-descriptors (an image, typically of the product's name or logo, displayed on the shelf directly below the product) for the Johnson & Johnson product contain only the words "Sensual Silk" with the word "Sensual" very much smaller than the word "Silk". The result is that in the photographs which were produced as exhibits it is almost impossible to see or read the word "Sensual". [13] Market share evidence indicates that the Johnson & Johnson 2007 re- branding exercise did not affect sales of Sylk.The legal contextThe infringement claim[14] The infringement claim is based on s 89(1) of the Trade Marks Act 2002 which provides:89 Infringement where identical or similar sign used in course of trade(1) A person infringes a registered trade mark if the person does not have the right to use the registered trade mark and uses in the course of trade a sign—(a) identical with the registered trade mark in relation to any goods or services in respect of which the trade mark is registered; or (c) similar to the registered trade mark in relation to any goods or services that are identical with or similar to any goods or services in respect of which the trade mark is registered, if that use would be likely to deceive or confuse; or We have set out s 89(1)(a) because Geneva Marketing allege that Johnson & Johnson's use of the word "Silk" on its packaging and bottles of personal lubricant involves the use of a sign which is "identical" to the SYLK trade mark "in respect of its audible use". Section 89(1)(a), however, was not pressed before us. The focus of the infringement claim was s 89(1)(c). Given the obvious similarity between two products (Sylk and K-Y Sensual Silk Liquid) the key issues on this claim were whether Johnson & Johnson were using a sign, "Silk", which is similar to the SYLK trade mark and, if so, whether this use was "likely to deceive or confuse". [15] Johnson & Johnson denied infringement in general terms (a denial which necessarily extends to similarity and the likelihood of deception or confusion) but also relied on s 93 of the Trade Marks Act which provides:93 No infringement where more than 1 identical or similar registered trade marks usedA registered trade mark is not infringed by the use of another registered trade mark in relation to any goods or services for which that other trade mark is registered.This defence was anticipated by Geneva Marketing seeking a declaration that the K-Y SENSUAL SILK trade mark was invalid or its revocation. In the alternative, Geneva Marketing submits that the s 93 defence is not open to Johnson & Johnson as the infringing sign, "Silk", is not being used in its full registered form of K-Y SENSUAL SILK.Revocation and invalidity of the Johnson & Johnson trade mark[16] Under s 73(1) of the Trade Marks Act, Geneva Marketing is entitled to a declaration of invalidity if Johnson & Johnson's trade mark should not have been registered. The particular ground of invalidity relied on by Geneva Marketing is provided for in s 17(1)(a) of that Act in this way:The Commissioner must not register as a trade mark or part of a trade mark any matter the use of which would be likely to deceive or cause confusion.The alternative remedy of revocation was sought on the basis provided for in s 66(1)(e):In consequence of the trade mark's use by the owner or with the owner's consent in relation to the goods or services in respect of which the trade mark is registered, the trade mark is likely to deceive or confuse the public, for instance as to the nature, quality, or geographical origin of those goods or services.General requirement of deception and confusion[17] There are some variations in the statutory language used in s 89(1)(c) ("would be likely to deceive or confuse"), s 17(1)(a) ("would be likely to deceive or cause confusion") and s 66(1)(e) ("is likely to deceive or confuse the public"). Plainly, however, the underlying test is the same, albeit that the stand-point from which it is applied and its subject matter differ depending on the context. For the purposes of invalidity and revocation claims the subject matter is the use of the impugned trade mark (here K-Y SENSUAL SILK) whereas for the infringement claim the focus must be on the impugned sign (here "Silk"). As well, for the invalidity claim, the test applies as at the date of application whereas for infringement and revocation, the test is applied by reference to the circumstances as they develop. [18] The relevant test for likelihood of deception or confusion was explained by Richardson J in Pioneer Hi-Bred Corn Company Limited v Hy-Line Chicks Pty Ltd[1978] 2 NZLR 50 at 62 (CA):(8) For a mark to offend against s 16 it is not necessary to prove that there is a commercial probability of deception leading to a passing off or infringement action. Detriment or financial loss to an opponent need not be established. It is sufficient if the result of the registration of the mark will be that persons to whom the mark is addressed are likely to be deceived or confused. "Deceived" implies the creation of an incorrect belief or mental impression and causing "confusion" may go no further than perplexing or mixing up the minds of the purchasing public (New Zealand Breweries Ltd v Heineken's Bier Browerij Maatschappij NV [1964] NZLR 115, 141). Where the deception or confusion alleged is as to the source of the goods, deceived is equivalent to being misled into thinking that the goods bearing the applicant's mark come from some other source and confused to being caused to wonder whether that might not be the case. (9) The test of likelihood of deception or confusion does not require that all persons in the market are likely to be deceived or confused. But it is not sufficient that someone in the market is likely to be deceived or confused. A balance has to be struck. Terms such as "a number of persons" (Jellinek's Application), "a substantial number of persons" (Smith Hayden & Co Ltd's Application), "any considerable section of the public" (New Zealand Breweries Ltd v Heineken's Bier Browerij Maatschappij NV), and "any significant number of such purchasers" (Polaroid Corporation v Hannaford & Burton Ltd) have been used. As Cooke J put it in his judgment in this case: "The varying terminology in the judgments is a reminder that it is not always necessary that large numbers of people should be, or should probably be, of the state of mind in question: rather it is a question of the significance of the numbers in relation to the market for the particular goods" ([1975] 2 NZLR 422, 429). (10) Where goods are sold or may be sold to the general public for consumption or domestic use, the judge or officer making the decision is entitled to take into account his own experience and his own reactions as a member of the public, as will as evidence from other members of the public, when considering whether buyers would be likely to be deceived or confused by use of a trade mark. But where the goods are of a kind not normally sold to the public at large, but are ordinarily sold and expected to be sold in a specialist market consisting of persons engaged in a particular trade, evidence of persons accustomed to dealing in that market as to the likelihood of deception or confusion is essential (GE Trade Mark [1973] RPC 297, 321; [1972] 2 All ER 507, 515).[19] To put this more directly in the context of the present case: (a) The concepts of deception or confusion refer to whether the K-Y SENSUAL SILK trade mark or use of the sign "Silk" can be expected to perplex the minds of the potential purchasers or create a mental impression that the Johnson & Johnson product is in fact Sylk.(b) Such deception or confusion is only legally relevant if it reflects the likely states of mind of a significant number of purchasers.Identifying the issue[20] The case turns on the use by Johnson & Johnson of the word "Silk" as part of its use of its K-Y SENSUAL SILK trade mark. If Geneva Marketing cannot establish prima facie liability under s 89(1)(c), it cannot logically meet what seem to us to be (at least in this context) the rather more stringent statutory tests under ss 17 and 66. As well, if prima facie liability under s 89(1)(c) has not been established, there is no need to go to s 93. As will become apparent, we are of the view that, on this aspect of the case, prima facie liability has not been established. This conclusion resolves the main part of the infringement claim, logically controls the outcome of the invalidity and revocation claims and avoids the necessity to discuss the s 93 defence. [21] As noted (see [12] above), Johnson & Johnson has sometimes used the sign "Silk" otherwise than as part of its trade mark. Evidence as to this was relied on by Geneva Marketing, presumably for contextual purposes because it did not specifically claim that those particular uses infringed its trade mark. Rather the focus of the claim was the use of the word Silk on labelling and packaging.The evidence as to deception and confusion[22] Direct evidence of deception and confusion is limited. [23] General factors suggesting a likelihood of confusion are: (a) The products are functionally the same and are marketed using names (Sylk and Silk) which are phonetically identical and visually similar and represent the same idea. (b) That the words sound the same is particularly relevant to television and radio advertising in relation to Johnson & Johnson's products, andthe likelihood that customers in pharmacies may ask staff for the product by name. (c) The likely imperfect recollection of customers. [24] Factors associated with the way Johnson & Johnson have marketed their products which are material to likelihood of confusion are: (a) The heavy emphasis given on packaging and marketing generally to the word "Silk" which appears in much larger letters than either "K-Y" or "Sensual". (b) The Pharmalines catalogue of April 2007 and the supermarket shelf descriptors. [25] Evidence of actual deception or confusion was as follows: (a) One letter of satisfaction received by Geneva Marketing referred to its product as "SILK". (b) In another letter, a customer complained that she had bought the Johnson & Johnson product from a supermarket thinking that it was "Sylk". (c) The brother of Mr Kevin Kite, one of the principals of Geneva Marketing, left a message for him about "Sylk" being advertised on television, which must have been a reference to "Silk" as Johnson & Johnson advertises on television but Geneva Marketing does not. (d) A friend of Mr Kite who, on the recommendation of his surgeon, was seeking to buy "Sylk" for use with a catheter was offered "Silk" by a pharmacy assistant. (e) When Mr Kite purchased "Sylk" from a pharmacy, the pharmacy assistant recorded the sale as being of "Silk".The approach of the Judge[26] The approach of the Judge was to address first invalidity, then revocation, and finally infringement (which he addressed in conjunction with the s 93 issue). Because of the serial way in which the Judge addressed these issues, there is some repetition. For present purposes, it is sufficient to refer to two passages of his judgment as they fairly represent the flavour of his views. [27] The first of these summarises his reasons for rejecting the invalidity claim:[31] Taking all the relevant evidence into consideration, I am not satisfied there was a likelihood, even a reasonable possibility, that a significant number of buyers in this small market would have been deceived or confused by Johnson & Johnson's fair and proper use of the 'K-Y Sensual Silk' mark in late 2006. Registration of the composite phrase 'K-Y Sensual Silk', where K-Y had long been associated with Johnson & Johnson, would not be likely in late 2006 to create an incorrect belief or mental impression among buyers in this market that the particular product was the same as another product sold under a different mark. The mark would not have been likely to perplex or mix up the minds of purchasers. [32] The relevant customer associations were with the distinctive products and their respective manufacturers. The addition of the words 'sensual silk' to the existing 'K-Y' mark would not be likely to materially affect existing brand loyalty to or preference between either of the principal brands. The additional 'sensual silk' words would not cause any visual deception or confusion with a product of the same generic nature but with distinctively different physical characteristics and apparently directed towards a different section of the buying public. A purchasing decision for this particular product would be much more influenced by a visual than an aural impression, and the phonetic similarities between one word among four in the new mark and the one word existing mark would be of little import: compare the Heineken case at 139-141.[28] The second relevant passage comes from his discussion of the infringement claim:[54] The result of this cause of action is largely dictated by my previous findings on invalidity and s 93. However, a comparison of the marks in the form in which they are used reinforces my conclusion. Without doubt the words 'SYLK' and 'Silk' sound the same; and they apply to goods of a similar but not identical type: Pianotist (1906) 23 RPC 774, per Parker J at 777. [55] But, as a matter of impression and context, any relevant similarities end there.In my judgment, when considering deception and confusion, the visual dissimilarities predominate. As already emphasised, 'SYLK' is astand-alone mark whereas 'Silk' appears as the last word of four. The comparison, I repeat, is between the marks as a whole, not different components. The spelling and casing of the only common word differs. A broad focus is required. On a global appreciation, they create significantly divergent impressions. [56] I repeat my findings on the discerning nature of the market. Buyers are by necessity relatively knowledgeable and informed. They are unlikely to perceive the two marks as applying to the same product brand. There is little realistic risk of prospective buyers falling into the trap of imperfect recall between the competing marks. Each conveys a significantly different idea or impression. In my judgment Geneva's claim for infringement falls well short of the necessary threshold and must fail.Does use of the sign "Silk" when used as part of the K-Y Sensual Silk trade mark have a tendency to deceive or confuse?[29] The issue is far from easy. Indeed we see it as closely balanced. [30] Mr Chisholm, for Geneva Marketing, noted that a side by side comparison did not provide the appropriate test and challenged the approach of the Judge on a number of grounds, including his contentions that the Judge: (a) Paid insufficient regard to the likely imperfect recollection of consumers and attributed too much product awareness to consumers, not all of whom will be repeat purchasers; (b) Relied inappropriately on what would be apparent only from a side- by-side comparison; (c) Over-emphasised the natural and synthetic distinction; and (d) Did not allow for the evidence of actual confusion. [31] "Sylk" and "Silk" are visually very similar and aurally identical. And, contrary to what the Judge indicated at [56] (see [28] above), we think that they represent the same idea. That this is so is illustrated by the fact that the packaging of the competing products both contain the words "silky smooth" (albeit that this also indicates the obviousness of that underlying idea). Although the word "Silk" isalmost always displayed with the remainder of Johnson & Johnson's registered trade mark, its font-size is larger than that of the other words. As well, it does not always appear as part of a continuous phrase. [32] Also of relevance is the apparent claim on the Canadian-sourced packaging to a separate trade mark for "Sensual Silk" standing alone, a claim which reflects the situation in Canada but not in New Zealand. On the other hand, this particular aspect of the labelling must be assessed in light of the reality that the K-Y SENSUAL SILK mark (albeit with some additions) is also used. [33] Allowing for imperfect customer recollection and the reality that not all consumers will be repeat purchasers, confusion on the part of at least some customers is inevitable, at least to some degree. The real question is whether the extent of the confusion (in terms of the number of customers likely to be confused) is sufficiently significant to engage the relevant statutory provisions. [34] We accept that use of a trade mark in a way which heavily emphasises a feature which comprises, or is similar to, another trade mark may have the potential to deceive or confuse. That this is so is illustrated by Eli Lilly & Co Ltd v Chelsea Drug Chemical Co Ltd [1966] RPC 14. However, as Mr Dengate Thrush for Johnson & Johnson, emphasised that case is very different from the present. The plaintiff's trade mark was V-CIL-K which it used for a brand of penicillin. The defendant's mark for its competing brand of penicillin was ECONOCIL-VK which it used, rather provocatively, in the form econoCIL-VK. Unsurprisingly the evidence as to likelihood of confusion was far stronger than in this case. [35] All of that said, and recognising that the issue is closely balanced, we agree with the conclusion of the Judge. Because this is, ultimately, a matter of impression, our reasons for this are necessarily evaluative and conclusory. Given the function of the products, the rather different target markets and the discerning nature of purchasers, we see the relevant differences as distinctly more important than the similarities, particularly given that "K-Y" is a very distinctive and well-known brand. Anyone who buys K-Y Sensual Silk Liquid thinking it is Sylk can be expected to realise the mistake reasonably quickly and vice versa. Since mostcustomers are repeat purchasers the overall proportion of purchases which are affected by confusion must necessarily be a very small percentage of all purchases. The differences in the visual appearance of the marks as used are sufficiently significant to mitigate against the likelihood of substantial confusion due to imperfect customer recollection.Disposition[36] The appeal is dismissed. [37] The appellant must pay the respondents costs for a standard appeal on a band A basis and usual disbursements.Solicitors: LeeSalmonLong, Auckland for Appellant McCabe and Company, Wellington for Respondents