Topic: Intellectual property
Who: Fage UK Ltd & Another v Chobani Ltd & Another (2012), Mr Justice Briggs, Mr Justice Hildyard
When: November 2012, December 2012
Where: Chancery division of the High Court, England
Law stated as at: 7 January 2013
What happened:
The ongoing “tablet wars” between rival electronics manufacturers have been well reported in the legal press. However marketinglaw readers may be unaware of the “Greek Yoghurt wars” which have been raging in the High Court over the past two months between established Greek Yoghurt manufacturer Fage and new UK market entrant Chobani.
Athens-headquartered Fage is a major force in Greek Yoghurt in Britain with a reported 95% market share. Fage’s product is manufactured in Greece.
Chobani, a US manufacturer, launched its own range of Greek Yoghurt in the United States in 2007. After rapid expansion in the US, Chobani launched its yoghurt in Tesco’s UK stores in February 2012. Aiming for similar growth in the UK, Chobani embarked on a 12 month plan to increase its UK market share from 1% to 10%. Part of this strategy involved giving away free samples of yoghurt at UK train stations.
This push came to the attention of Fage who launched proceedings on the basis of an extended form of passing off, the grounds of which are described below.
Passing off and extended passing off
Passing off is a common law tort (a civil wrong). Its underlying objective is to protect goodwill built up in a business carried on under a particular trade name or trading style.
In general, to succeed in a claim for passing off, a claimant will have to show that he has built up goodwill in the UK in a business carried on using a particular trading name or style and that the defendant’s use of a similar name or style is a misrepresentation that is causing or is likely to cause his business damage.
This case concerned “extended passing off.” The underlying principle of the extended form of passing off is that one should not sell one’s own goods under the pretence that they are a type of goods which they are not.
Extended passing off has developed through claims brought by parties with an interest in the collective goodwill in a trade name for a type of product (often products with reputation for superior quality) against manufacturers of (usually cheaper) alternatives. Since the Bollinger champagne case in 1960 the UK courts have played host to disputes over use of such terms as “Sherry”, “Scotch Whisky”, “Advocaat,” “Swiss Chocolate” and “Vodkat”.
November 2012 – Fage applies for an interim injunction
In the High Court in November, Mr Justice Briggs presided over Fage’s application for an interim injunction to prevent Chobani marketing its product as “Greek Yoghurt”.
When deciding whether to grant an injunction, the court must initially consider whether the underlying claim is a good, arguable case (but not that it will necessarily succeed). As such, to obtain an injunction Fage had to demonstrate that it had a real prospect of success in its passing off claim.
A good arguable case?
Fage’s case (for extended passing off) was that:
- Chobani was not Greek Yoghurt. It was made in the USA.
- genuine Greek Yoghurt was:
- made in Greece;
- thick and creamy due to the straining process used in production; and
- free from additives.
- as such “Greek Yoghurt” had a different status to “Greek Style Yoghurt”, and could therefore attract a premium price due to the goodwill in that appellation.
Chobani’s defence was that Fage’s case was unlikely to succeed as:
- it used the same straining process as described by Fage for its own product.
- there was a statement that its yoghurt was made in the USA on the packaging of its product, so any potential misrepresentation was negated.
Briggs J found it likely that Fage had a good arguable case for extended passing off.
Dealing with Chobani’s first point, he highlighted that extended passing off could be established even where the mode of processing the product was the same (following the Swiss Chocolate case mentioned above: Chocosuisse Union des Fabricants Suisses de Chocolat v Cadbury Ltd [1999] E.T.M.R. 1020).
Chobani was also unable to rely on labelling its product “made in the USA”, as if Fage succeeded in establishing that a specific attribute of “Greek Yoghurt” was that it was made in Greece, the amendment would not have met the essence of Fage’s case and would continue to inflict loss until trial.
Healthy balance of convenience?
The second test the court applies when deciding on interim injunctions is the so-called “balance of convenience” test. In a nutshell, this looks at whether the harm caused to the injuncted party would be greater than the harm caused to the party seeking the injunction by maintaining the status quo.
Briggs J found for Fage on this point as well, noting that it would also be easier to calculate the damage suffered by Chobani if Fage failed at trial following an injunction than the extra damage that would potentially be suffered by Fage due to no injunction being granted.
However, Briggs J suspended the injunction by five weeks in order to give Chobani time to relabel, readvertise and resupply its product. At this point Chobani offered an undertaking in lieu of the injunction to rebrand its product as “Authentic Strained Yoghurt” in the UK. The undertaking was accepted by Fage, making a formal injunction unnecessary.
December 2012 – survey evidence
The parties were back in the High Court in December before Mr Justice Hildyard. Chobani had applied to adduce survey evidence to assist in defending the passing off proceedings.
Apparently unconvinced by Fage and Mr Justice Briggs’ interpretation of the distinct qualities of “Greek Yoghurt”, Chobani had commissioned a pilot survey to assess consumer attitudes to this question. Fage’s expert witness stated that the questions would not be useful as they were too vague and there was no provision for consistency with regard to how respondents to the survey would inspect the product. Chobani subsequently clarified parts of the survey.
Would £10,000 survey cost be justified?
The costs of the pilot survey had been £1,800 and Chobani’s estimated cost of a full survey was £10,000. The court had to decide whether a full survey would be valuable in the main hearing and the costs justified.
Mr Justice Hildyard applied the Court of Appeal’s recent ruling in Interflora v Marks and Spencer [2012] EWCA Civ 1501*, reported in marketinglaw last month. Even if the survey evidence was technically admissible, the judge should not admit it unless: a) satisfied that it would be valuable; and b) the likely utility of the evidence justified the costs involved.
While Hildyard J felt that few surveys were able to survive sustained criticism, it was his view that the proposed exercise went to the heart of the dispute. As such, Chobani was permitted to undertake and adduce evidence of a full survey.
Hildyard J felt that Chobani’s cost estimate was too conservative and that the cost estimate was likely to be exceeded. As the judge’s conclusion to permit the full survey was reached with reservations, Hildyard J decided that a slight departure from the usual approach was to be taken. The survey was:
a) to be undertaken at Chobani’s risk with regard to costs;
b) if following consideration of criticisms of the survey Chobani wished to modify the survey it had liberty to apply to the court for approval of such changes; and
c) the court had prepared its own amended version of the survey. Subject to any objections by Fage, it was open to Chobani to adopt any of these modifications without seeking further court permission.
Why this matters:
Established producers of products in a distinctive genre will be interested in this dispute as a recent example of how extended passing off actions may be used to protect market share and the conditions for obtaining swift relief through injunctions.
Conversely, the dispute also acts as a reminder to new market entrants seeking to exploit the goodwill inherent in a particular genre of product that this carries certain risks as well as the obvious opportunities.
Hildyard J’s approach in this case is also an example of the court adopting a proactive approach to case management, not only by assessing the value of the survey in question, but by suggesting modifications which could be adopted without further reference to the court.
Any opinions expressed in this article are those of the author and do not constitute legal advice.
* Osborne Clarke is acting for Marks and Spencer in the ongoing Interflora v Marks and Spencer dispute.
