The battle over peanut butter trade dress

In Kraft Foods Group Brands LLC v Bega Cheese Limited, [2020] FCAFC 65 (14 April 2020), the Full Court of the Federal Court of Australia (Full Court) dismissed the appeal of Kraft Foods Group Brands LLC (Kraft), upholding a primary judgment from 2019 confirming that an unregistered trade mark cannot be assigned separate from the business which holds the related goodwill. The decision concerned ownership of an unregistered trade mark with the get-up/appearance of peanut butter packaging: “a jar with a yellow lid and a yellow label with a blue or red peanut device, with the jar having a brown appearance when filled” (the trade dress):

Kraft underwent a global restructure in 2012, splitting its business into a global snack food business and a North American grocery business. This resulted in the Australian subsidiary, and seller of KRAFT-branded peanut butter in Australia, Kraft Foods Limited, changing its name to Mondelez Australia (Foods) Limited (Mondelez) and falling under the global snack food business. However, the KRAFT brand was allocated to the grocery business. Kraft granted a license to Mondelez to use the trade dress and other trade marks.

In January 2017, Australian food manufacturer Bega Cheese Limited (Bega) acquired Mondelez’s Australian peanut butter business, including its assets and goodwill. Bega commenced selling peanut butter in Australia under the BEGA trademark in conjunction with the trade dress in July 2017. The same year, Kraft commenced selling peanut butter bearing the trade dress in connection with the THE GOOD NUT brand.

In the proceedings at first instance (Kraft Foods Group Brands LLC v Bega Cheese Limited (No 8), [2019] FCA 593), both parties claimed they were entitled to use the trade dress. Kraft relied on causes of action based on contract, passing off, and misleading and deceptive conduct under Australian Consumer Law. Bega cross-claimed for passing off, and misleading and deceptive conduct. Kraft argued that Bega never acquired the rights to the trade dress when it purchased the business from Mondelez as Mondelez was a licensee of the trade dress which was ultimately owned by Kraft. Kraft contended that the goodwill generated through use of the trade dress by Mondelez inured to the benefit of Kraft as the licensor. Bega argued that the unregistered trade dress was an inseparable part of the goodwill of the business which it had acquired.

The primary judge agreed with Bega, finding that goodwill is inseparable from the business to which it adds value, and cannot be dealt with except in conjunction with sale of that business.

Kraft appealed the first instance decision on a number of grounds. Its primary submission was that the documents relating to the Kraft business restructure in 2012 were incorrectly construed and the rights in the trade dress were assigned to its grocery business. On appeal, the Full Court unanimously rejected Kraft’s arguments, finding the rights in the trade dress to be held by the snack food business. The Full Court confirmed the rights were not assigned as part of Kraft’s restructure, as an unregistered trade mark may only be assigned by way of an assignment of the goodwill of the underlying business.

Kraft has filed an application in the High Court of Australia seeking special leave to appeal the decision of the Full Court.

This decision reinforces the value in registering distinctive trade dress (including product packaging, labelling and get-up) as trade marks in Australia, rather than relying on unregistered common law rights.

This article first appeared in the INTA Bulletin here and was reprinted with permission from the International Trademark Association (INTA). Content has been slightly modified since first publication.