Subtitled: Law and, or, versus the Marketers: Evidence in the Cadburys v Darrell Lea case

I’ve been hearing rumours for some time now about evidence issues/problems/disasters in the recently concluded hearing in the case of Cadburys versus Darrell Lea, before Justice Heerey down here in the Vic Federal Court. So imagine my excitement when I realised there were no less than three decisions up on AustLII. They’re really interesting decisions because they say a lot about how law interacts with marketing people, marketing experts in these cases that are all about how consumers behave. Yes, I am a sad IP law geek. Never mind, I’ve come to terms with that. The decisions are:

I was fascinated, partly because the Judge has chosen to exclude a whole lot of stuff (which must annoy the Cadburys lawyers), and partly because I’m currently teaching Trade Mark Law to undergraduate students. Of course, one thing you spend time talking about in such a course is matters of proof. Since I’ve had to dissect the reasoning for my students, I want to spend a little time in this post putting my thoughts out there. Comments welcome of course!

What the proceedings are about

The case is one brought by chocolate company Cadbury, alleging that another Chocolate company, Darrell Lea is either passing off its goods, or engaging in misleading/deceptive conduct contrary to ss 52/53 of the Trade Practices Act, by using ‘the colour Cadbury purple or any colour bearing a striking and obvious likeness to the colour Cadbury purple.’

OK, first issue: when does a colour ‘bear a striking and obvious likeness’ to another colour? Dunno about you, but to me, that’s a fairly incongruous notion. Surely a colour might be ‘close’ to another colour, but it won’t ‘bear a resemblance’. It is not like you can tote up the similarities and differences, is it? Either it’s a similar colour or it’s not. Anyway, perhaps it’s just semantics – although it will be intriguing to see how a judge interprets this concept in his final decision. Depending on what he says, his comments may have some considerable bearing on when those controversial colour trade marks (like the BP Green, still on appeal to the Full Federal Court) are held to be infringed. I’ve often wondered when a court would find that one colour was ‘deceptively similar’ to another….

Since that question is unresolved for now, let’s leave it to one side and look at what the judge has been talking about.

The Cadburys Expert Decision: Judges buy chocolate too!

This decision is maybe the most interesting. Cadburys wanted to tender evidence from Dr Brian Gibbs. Gibbs is no dilettante. He researches and teaches primarily within the field of consumer behaviour, and has taught not only at MBS, but also at the Graduate School of Business at Stanford University, the Owen Graduate School of Management at Vanderbilt University, and at the Sloan School of Management at MIT.

The problem was not Gibbs’ expertise. Rather, it was two rules of evidence:

  • the opinion rule: that prevents opinions being admitted to prove facts about which opinion is expressed, unless ‘a person has specialised knowledge based on the person’s training, study and experience … [and the opinion is] wholly or substantially based on that knowledge.’
  • the rule (really part of the opinion rule, I guess) that an expert’s opinion is admissible only to furnish the court with scientific information which is likely to be outside the experience and knowledge’ of the trier of fact (ie the judge). That is, if the matters addressed are not outside the experience of ordinary persons, they are not admissible.

Justice Heerey decided that Gibbs’ evidence went to matters within the judge’s experience – how ordinary consumers behave, buying ordinary, low cost type goods. Hang on, Heerey J said – judges buy chocolate too. Such evidence shouldn’t be admitted because of the rules of law above, which are based on sound policy: avoiding overcomplicated, expensive trials with lots and lots of evidence and cross-examination and warring experts. The judge is clearly concerned that admitting the evidence in this case will lead to it being expected in all of these types of cases.

Note that Justice Heerey is very careful not to denigrate Dr Gibbs’ expertise. Dr Gibbs is an expert, his Honour suggests – it’s just that his kind of expertise is not something courts should be getting into – otherwise the floodgates will open and cases – at least the cases with money behind them – will get bigger, hairier, uglier, with experts at 50 paces. I can understand the concern. Despite this, I bet the marketing people are annoyed, because if followed generally, the decision cuts out a whole swathe of potential influence on court decisions.

This is an interesting decision in many respects. It’s clearly true that judges buy chocolate, and make ordinary kinds of consumer decisions. So do I for that matter. I’ve bought chocolate a few times in my life, including at this particular time of year.

But that doesn’t mean that I know how I make those kinds of decisions, or what kinds of unconscious processes go on in my mind. Or at least I didn’t, until I read the little summary that Justice Heerey includes in his judgment. It’s amazing how many levels I’m apparently confused on when I see someone else other than Cadbury’s use purple. Apparently:

  • There’s misidentification: I might want to buy Cadbury but buy Darrell Lea instead. This leads to cognitive dissonance and violated expectations;
  • There’s miscuing: this is where I use purple as a ‘spurious cue in decision making and choice’. Having used ‘purple’ as a shortcut to choosing chocolate (after I’ve been conditioned to respond to purple), I have my expectations violated again;
  • There’s misinference: where I ‘try to make sense’ of the fact that both brands use purple; (sorry, I don’t follow this one either) and
  • And finally there’sMisassociation: when all those positive ‘associative networks’ in my brain that associate positive Cadbury-feelings with purple get invoked when I see Darrell Lea’s purple. This leads to dilution of the Cadbury brand, and reduced differentiation between Cadbury and Darrell Lea. This is the biggy, according to Gibbs.

I’m just getting confused on so many levels, aren’t I! A lot of it subconscious, apparently. And some of this is going to happen even though rationally I know that Darrell Lea is different from Cadburys. The ‘misassociation’ and ‘dilution’ of Cadbury’s ‘associative networks’ could happen despite the absence of rational mistake. Ever after seeing Darrell Lea’s purple, the ability of the colour to act as a ‘cue’ to Cadburys is diminished. And the warm fuzzies get cued, subsconsciously, even if the consumer knows the difference between the companies.

It’s kind of interesting if you think about this a little more: had Heerey J included this evidence, his Honour might have had to consider whether effects that are purely subconscious can be the subject of an action in passing off/section 52.

Actions under ss 52/53 and passing off are provide relief where consumers are misled. You might assume that there would have to be some mistake, and that if rationally consumers know there isn’t an association, then no action will lie even if Cadburys is harmed. Courts have long accepted that the misrepresentation doesn’t have to be well articulated (following Burchett J in the Pacific Dunlop v Hogan case), but I would think it still has to be a misrepresentation in the land of the conscious.

Dr Gibbs, however, while he is talking about consumers being misled, is talking about effects on consumers that are not about mistaken consumer beliefs – but about subconscious reactions to stimuli. Does passing off arise from the evocation of subconscious, positive feelings? Even where the big Darrell Lea signs on the chocolate remove any conscious mistake? Having refused to admit the evidence, his Honour can presumably side-step this question entirely. Shame really.

Another point to note (thank you, Aaron Newell) is that this is exactly the kind of evidence that would be used in a claim for trade mark dilution – which Patrick Keyser FLYNN, that’s Patrick FLYNN (sorry Patrick K) and Maurice Gonsalves recently argued, in an European Intellectual Property Review article, is protected under Australian law. Interesting, very interesting.

The Cadbury Survey Decision

This decision, fortunately for Cadbury, actually went its way. It’s about a study done by National Field Services in which 102 participants were shown chocolates of undisclosed origin and asked various questions, including whether they recognised the brand of chocolate. Damn, why didn’t they ask me to take part in this ‘chocolate sensory survey’….?

The respondents said there was a hearsay problem, or the evidence was unfairly prejudicial, misleading or confusing or woudl cause or result in undue waste of time. Justice Heerey rejected the arguments: the survey was rational and professional, there could be cross-examination. No real problems.

One issue Justice Heerey did raise was the failure to comply with a Federal Court practice note on how to conduct surveys. In this case, it didn’t prevent the evidence being brought, although the judge was pretty critical of the (apparently unapologetic) attitude of Cadburys lawyers on the issue.

The decision does follow a long line of decisions on surveys. Yes, you can use them; yes, they can be picked apart by your opponents. No big deal. Makes sense.

The Cadbury Hearsay decision: he said she said he said she said … it’s Cadburys!

The final decision issued by Heerey J was on a bunch of market research documents. The key issue was whether these reports, in which the authors reported what survey people said that consumers said about reactions to colour were admissible, or excluded hearsay when tendered to prove that what the consumers said was true. The statements of the consumers (like ‘The green ooze is coming out’) were particularly edifying and crucial to the case, no doubt.

Ah, reading this decision took me back to my very first teaching job: at the University of Sydney, teaching (of all things) evidence. Justice Heerey engages in a really long discussion of the criminal case of Lee v The Queen, which was all about a case where a policeman reported that a guy called Calin had told the policeman that the defendant Lee had said Lee had shot Lee’s gun. Reliable? Not on your life. Admissible to prove Lee did shoot the gun? I don’t think so. But I remember long classes in the dungeons of the University of Sydney Law school, drawing diagrams on the board and working through the logical reasoning that just confirms what we all know: that this stuff is deeply unreliable, can’t be properly tested and so shouldn’t be admitted.

Nor, on the same reasoning, was the evidence in the marketing reports of what consumers were reported to have said. Second hand hearsay. Unreliable. Untestable. Inadmissible. My gut reaction? Good decision.

What might be interesting though is this. The Reports were admissible to prove the reasons that Cadbury’s officers caused the company to take certain courses of action in marketing and packaging their products. Now, courts are used to treating evidence of a company’s actions about how consumers will react as evidence that consumers will in fact react that way. It’s known as an Australian Woollen Mills rule (after a case of that name) and it’s usually used like this: Naughty Company B seeks deliberately to confuse consumers into thinking B’s products are made by Angel Company A. B’s intention and actions are used to support an inference that consumers were confused, as the court treat’s B’s actions like ‘expert opinion’ – B is in the market, and has put its money where its mouth is.

Now, I’m not party to all the details of the Cadbury case, but think about this process of reasoning:

  • Cadbury’s officers receive information that the consumers report strong reactions to/recognition of purple as a Cadbury colour.
  • On that basis, they further emphasise purple (eg, choosing ads that don’t mention Cadburys except fleetingly, but use lots and lots of purple)
  • Court uses this as evidence to support an inference that consumers recognise purple. After all, Cadbury is a bit of an expert – it’s in the market and has put its money where its mouth is.

Indirect achievement of the result that is directly barred? oh yes. Would a court follow this reasoning? Maybe not, because the Australian Woollen Mills principle is usually used against Naughty Company B, not Angel Company A. But perhaps….