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Singapore: Coffee Anyone?

27th November, 2012

In the case of Sarika Connoisseur Cafe Pte. Ltd. v Ferrero SpA, the Singapore Court of Appeal upheld the Singapore High Court’s decision and adjudged Sarika Connoisseur Cafe Pte. Ltd. to have infringed the Ferrero SpA’s trademark and committed the tort of passing off.

Sarika Connoisseur Cafe Pte. Ltd. (hereinafter referred to as ‘the Appellant’) is a company incorporated in Singapore which operates in the food and beverage business and is a wholesaler of coffee, cocoa and tea. Ferrero SpA (hereinafter referred to as ‘the Respondent’) is a company incorporated in Italy and manufactures and retails confectionary including a cocoa based hazelnut spread marketed under the brand name ‘Nutella’. The Respondent is the owner of three trademarks (the ‘Nutella’ trademarks) including a ‘Nutella’ word mark.

In August 2007, the Appellant introduced a new gourmet hot coffee beverage under the ‘Nutello’ sign at its cafes. In December 2009, the Respondent issued a cease-and-desist letter to the Appellant and in January 2010, the Respondent had initiated a lawsuit against the Appellant in the High Court. The Respondent, in July 2010, ceased the sale of Nutello beverages, apparently due to an annual menu overhaul.

In its decision, the High Court had held that the Appellant had infringed the Respondent’s ‘Nutella’ word mark under Section 27(2)(b) of the Singapore Trade Marks Act as there was a similarity between the marks and goods resulting in a likelihood of confusion by the public. The High Court also had held that the Respondent’s ‘Nutella’ marks were well known trademarks both to the relevant sector of the public as well as to the public at large in Singapore. Further the High Court had adjudged that the Appellant had infringed the Respondent’s ‘Nutella’ marks under Sections 55(2) and 55(3)(a), and had diluted the Respondent’s marks under Section 55(3)(b)(i). However, the High Court had found that the Appellant had not taken unfair advantage of the distinctive character of the Respondent’s ‘Nutella’ marks under Section 55(3)(b)(ii). Consequently, the High Court had granted injunctions to restrain the Appellant from infringing the Respondent’s ‘Nutella’ trademarks and from passing off its ‘Nutello’ products as products of, or connected to, the Respondent and also ordered that damages be assessed.

The Appellant appealed the High Court’s decision in the Court of Appeal; however, the Appellant did not challenge the High Court’s findings that the Respondent’s ‘Nutella’ trademarks were well known marks. The Respondent also agreed to the High Court’s decision that there was no unfair advantage taken by the Appellant of the ‘Nutella’ trademarks’ distinctive character under Section 55(3)(b)(ii).

The Court of Appeal first dealt with the issue that whether there was trade mark infringement under Section 27(2)(b). On the aspect of the visual similarity, the Appellant argued that the ‘Nutello’ sign and ‘Nutella’ mark were visually dissimilar as they had different font, typeface, design etc. The Respondent, on the other hand, argued that length of the marks, structure of the marks etc. should be taken into account. The Court of Appeal confirmed that High Court’s decision that due to the same length and structure, the marks were visually similar. The Court of Appeal further pointed to the High Court’s finding that the variations in typeface, cursive font and design did not amount to the marks being visually dissimilar.

The Respondent successfully contented that the marks were aurally similar as the average Singaporean would pronounce ‘Nutella’ much like ‘Nutello’ and that the vowel sound in the last syllable was insufficient to conclude aural dissimilarity. The Court of Appeal, however, stated that the High Court’s finding that the marks are conceptually similar because ‘Nutello’ was derived from ‘Nutella’ with only a change to the last alphabet was flawed; thereby, concluding that the marks were conceptually dissimilar. Further, the Court of Appeal supported the High Court’s stating that as ‘Nutella’ was an inventive word, it possessed a considerable degree of inventiveness. Therefore, the Court of Appeal rendered the marks to be similar even though not all three aspects of similarity had been established.

Next, the Appellant argued that its goods were dissimilar from those of the Respondents stating that it would be wrong to find similarity of goods simply because the Nutello beverage falls within the same class i.e. ‘chocolate products’ for which the ‘Nutella’ mark was registered. The Court of Appeal agreed with the High Court’s statement that the comparison should be made between the Appellant’s Nutello beverage product, and both the actual Nutella product in use as well as the type of products for which the ‘Nutella’ word mark was registered. Making a narrow comparison between the two products, the Court of Appeal stated that the ordinary usage of the ‘Nutella’ and the ‘Nutello’ products were different, as the Nutella product was a cream spread for bread whereas the Nutello product was a gourmet beverage. The Court of Appeal further stated that the two products were different on the substitutability and trade channels accounts. However, the Court of Appeal found that the physical nature and the users of both these products were the same. The Court of Appeal further stated that market surveys and Internet blogs suggested that the Nutello beverage had in practice been regarded as a ‘chocolate product’. Therefore, the Court of Appeal rendered that the Appellant’s and the Respondent’s products were similar in nature.
On the issue of whether there was a likelihood of confusion in the general public, both the Appellant and the Respondent conducted surveys and concluded that about 30% of the relevant public was likely to be confused. Given such circumstances, the Court of Appeal concluded that there existed a real likelihood that a substantial portion of the general public and/or target consumers of the goods would be confused in a sense that they would think the parties are related or have business links between them.

Next, the Court of Appeal sided with the High Court’s judgment that there was well known trade mark infringement under Section 55(2). The Appellant contested the High Court’s decision that there was infringement by damaging connection of well-known trade mark under Section 55(3)(a). The Appellant argued that there was nothing to show that the interest of the Respondent would be damaged on the account that an average customer might feel that there was a connection between the Appellant’s and the Respondent’s products. The Court of Appeal rejected the Appellant’s arguments, thereby confirming that there was a likelihood of damage to the Respondent’s interests.

Under Section 55(3)(b)(i), the Court of Appeal dealt with the question of unfair dilution i.e. the use of the mark by the Appellant would have caused dilution in an unfair manner of the distinctive character of the Respondent’s trademark. The Appellant contented that it was conceptually wrong to find both trade mark infringement, which is based on the likelihood of confusion as to the origin of the goods, and dilution, which is not based on such confusion. The Court of Appeal refuted this argument stating that while a finding of dilution necessarily precludes a finding of infringement in the mind of a single consumer, yet both perceptions are possible among various members of the public.

The Appellant further argued that as the Respondent had failed to prove a detriment such as loss of sales or adverse changes to its customers’ behavior, dilution of an unfair manner could not be shown. However, the Court of Appeal rejected this claim stating that it was sufficient to show a real or serious probability of damage to the well-known trademark’s advertising quality or symbolic function in order to establish a dilution claim. The Court of Appeal also upheld the High Court’s decision that there had been dilution by blurring, pointing out that the public would have difficulty in associating the ‘Nutella’ mark with the Respondent’s products if the ‘Nutello’ sign were to be used on various goods, and also that the distinctiveness of the ‘Nutella’ mark would be lost should others decide to use the word variants of the ‘Nutella’ mark in their trade.

On the issue of passing off, the Court of Appeal set out to establish the three requirements of goodwill, misrepresentation and damage. The Court of Appeal upheld the findings of the High Court on the matter of goodwill and misrepresentation since the Appellant had not appealed against these two. On the element of damage, the High Court had adjudged that there was damage to the Respondent in the sense that what the Appellant did in fact restricted the Respondent’s ability to expand into the drinks business in Singapore. The Appellant argued that the actual damages need to be shown and that the Respondent lacked a real intention to expand into such a business. The Court of Appeal refuted the Appellant’s claim stating that since this was a case of future damages, the actual damages need not be proved; rather, a likelihood of damages be shown. The Court of Appeal further stated that there need to be close connection between the established activity and the extended and/or proposed activity. The Court of Appeal observed that since both the parties are engaged in the business of providing consumption foodstuff and that the Respondent had already expanded its product line to offer a Nutella Milk Shake product in France, there was a close connection between the product lines of both the parties. The Court of Appeal further noticed that despite the Respondent’s failure to produce samples of the Nutella Milk Shake or adduce evidence on the distribution of the its Milk Shake advertisement, the Respondent’s case ought not to be undermined. Therefore, the Court of Appeal upheld the High Court’s findings that there would be a real likelihood of restriction on the Respondent’s expansion of its product line into the Singapore based beverage business; thereby, establishing the Respondent’s claim of passing off.

On the above grounds, the Court of Appeal adjudged the Appellant as having failed in all its points of contention. However, as the Appellant had ceased using the ‘Nutello’ sign and selling the Nutello beverage, the Court of Appeal felt no need for the grant of an injunction and subsequently declined to order the same. Lastly, the Court of Appeal advised that on the fact that the infringement on the part of the Appellant had ceased for more than two years, the Respondent might well deem it expedient to move on instead of incurring more costs in pursuing the assessment of costs which were less than certain.