Comparative advertising

Thursday 1st May 2008

The Trade Marks Act 2002 changes the legal approach to comparative advertising.

The Trade Marks Act 1953

Under the Trade Marks Act 1953 comparative advertising is conduct that is likely to infringe a registered trade mark. There is a specific defence however, where the trade mark for registered in Part B of the register. This defence applies to the exceptions listed in section 8 (1A) (b) and (c), that is where the trade mark used is an identical trade mark on similar goods or services or to a similar trade mark on identical or similar goods or services. The defence does not apply where there is use of the identical trade mark on the identical goods or services for which the trade mark is registered ( PC Direct Ltd v Best Buys Ltd unreported High Court, Auckland, CP27/97).

Mitre 10 v Benchmark

A High Court decision earlier this year, considered comparative advertising (Mitre 10 (New Zealand) Ltd and Mitre 10 Ltd v Benchmark Building Supplies Ltd unreported, High Court Auckland, Cp.521-SW02, 17 March 2003, Rodney Hansen J).

The case considered Benchmark’s use of Mitre 10 brochures in three of its stores. Benchmark operates three retail hardware and garden supplies outlets under the name “Bunnings Warehouse”. Benchmark introduced a new format advertising its Benchmark stores in October 2002. It displayed copies of Mitre 10 brochures in showcases near the entrance to its stores. Coloured stickers were said to have been placed adjacent to selected items in the brochures. On the stickers were written the words “Bunnings’ price” followed by a dollar sum. The Bunnings’ price shown was lower than the price in the brochure for the specified goods. Rodney Hansen J found that there was an unmistakable representation that Bunnings was
selling the same goods for the lower price specified.

To add insult to injury, there were several errors made by Benchmark in the display of the Mitre 10 brochures. The shelf price and the ultimate selling price of the Bunnings product were higher than the price shown on the sticker and in some cases the product sold by Bunnings was different from that advertised by Mitre 10.

Rodney Hansen J applied the principles from the well-known comparative advertising cases of Villa Maria Wines and PC Direct that a trade mark is infringed where the trade mark is used to refer to the proprietor’s goods in a comparative advertisement.

Benchmark were found to have “stood on the shoulders of Mitre 10”. The brochures were “an instrument of denigration”. The brochures were found to fall squarely within the idea of use articulated in Villa Maria Wines and PC Direct and there was found to be an arguable case that the use of the brochures by Benchmark infringes Mitre 10’s trade marks.

Trade Marks Act 2002

The Trade Marks Act 2002 changes the legal approach to comparative advertising. Section 94 provides that there is no infringement for comparative advertising of registered trade marks. There is a proviso that if such use is otherwise than in accordance with honest practices in industrial or commercial matters its use must be treated as infringing if the use, without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the mark. This proviso attempts to ensure that a “no holds barred” approach to comparative advertising does not ensue.

How would the Benchmark case be treated under the Trade Marks Act 2002?

Prima facie, Benchmark’s brochures comparatively advertising using Mitre 10’s trade marks would not infringe Mitre 10’s trade marks. Mitre 10 would be powerless unless the use is dishonest and without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the mark. In this respect, the errors made by Benchmark, including incorrect prices and comparisons made to different products than those advertised by Mitre 10 may fall into that category.

The moral of the story is: comparatively advertise to your hearts content, but do it carefully.

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