In-N-Out, an American burger chain and Hashtag Burgers Pty Ltd (now Plan B) of DOWN-N-OUT had a heated trademark dispute before the Full Court.
Hashtag Burgers Pty Ltd disputed Justice Katzmann’s decision that it was accountable for trademark violation, passing-off and false or misleading behaviour. In-N-Out Burgers, Inc then requested the ruling be revised due to the belief that Hashtag Burger directors should also share liability with company on grounds of trade mark infringement and passing off.
This article offers a full summary of the Federal Court’s decision on an appeal and cross-claim, as well as its implications for companies that have been “inspired” by another company’s branding.
Summary
With over 300 locations in the US, In-N-Out has also hosted various pop-up eateries in Australia since 2012 and owns multiple trademarks there.
In-N-Out’s eateries and events feature their signature red and yellow colour scheme. Benjamin Kagan and Andrew Saliba set up temporary burger stores in Sydney with a logo similar to that of In N Out Burger. By June 2017, Messrs Kagan & Saliba had established Hashtag Burgers as the owners of several NSW restaurants called “DOWN-N-OUT”.
In-N-Out asked Kagan and Saliba to use a different name/logo, but they refused. Even with the original DOWN-N OUT signage, Hashtag Burgers created further confusion by introducing numerous variations of their logo (e.g., punctuation changes).
When In-N-Out wasn’t given a satisfactory result from its correspondence, it took Hashtag Burgers and Messrs Kagan and Saliba to Federal Court over:
Justice Katzmann initially found in favour of In-N-Out, making Kagan and Saliba liable for any trade mark infringement or passing off prior to Hashtag Burgers’ incorporation. Afterwards only the company was responsible, so neither man were personally held accountable for such actions by their business.
Hashtag Burgers appealed
Messrs Kagan and Saliba, also known as Hashtag Burgers (the Appellants), appealed the judgment before a Full Court. In-N-Out filed an appeal of their own claiming that the primary judge had made mistakes in ruling out Messrs Kagan and Saliba were not jointly liable for trademark infringement or passing off.
The Full Court was mindful to differentiate between mistakes and disagreements in evaluation. We will look at each argument separately.
Infringement of trademarks
The Appellants argued Justice Katzmann’s assessment that the DOWN-N-OUT Marks were too much like the In-N-Out marks was wrong:
The Appellants argued that Justice Katzmann’s conclusion, that they had deliberately copied the In-N-Out Marks, was wrong. The Full Court disagreed as there was evidence indicating Messrs Kagan and Saliba chose “DOWN-N-OUT” with an understanding of the existing marks. This finding held up to scrutiny since it rested on available facts.
Moreover, Mr Kagan went to In-N-Out’s pop up event in January 2016.
Messrs Kagan and Saliba argued Justice Katzmann was wrong in claiming they had behaved dishonestly. Mr Kagan’s June 24th email to In-N-Out insisted he and his colleague hadn’t used the “Animal Style” or any other trade marks as menu items, which she thought wasn’t true; however, a majority of the Full Court found there was no evidence for her decision.
The Appellants had long been using the phrase “Animal Style” to market their food, but a 2016 media release indicated they were likely copying In-N-Out’s menu items. Despite Mr Kagan denying this intent, it was not enough proof that they did not use similar names deliberately.
The Full Court disagreed with Justice Katzmann’s ruling that the Appellants’ lack of producing relevant documents during discovery was related to Kagan and Saliba picking “DOWN-N-OUT” as their brand name.
Despite this, the court’s judgement on intent and deceptive similarity was not changed; it did not rely upon proof of dishonesty. As a result, none of the appellants’ claims that their trademark had been infringed were successful.
Misleading or deceptive conduct
The Appellants argued the DOWN-N-OUT Marks would not mislead consumers. This argument was dismissed for similar reasons to why their infringement appeal failed in full court.
Hashtag Burgers argued that their “trade dress, get-up, uniforms and other trade indicia” made it clear they weren’t affiliated with In-N-Out. The Full Court still agreed according to Justice Katzmann’s ruling: if the conduct can lead even a small number of people into making an incorrect assumption then it’s misleading or deceptive. He found some Australians would simply have assumed Hashtag Burgers was linked to In-N Out.
Hashtag Burgers argued Justice Katzmann was wrong to use the “imperfect recollection” standard for proving misleading or deceptive conduct, instead of requiring customers to be sure that DOWN-N-OUT and In-N-Out were connected. But, the Court found it reasonable that he considered how consumers would remember marks when making this decision.
Passing off
In-N-Out’s legal team for the tort of passing off claim was unsuccessful in arguing it lacked a reputation sufficient enough to support its case because In-N-Out had no local business or trade in Australia. The court dismissed this point, and Mr Lancaster SC even admitted during oral submissions that he raised this “more in hope than expectation.” The Full Court affirmed ConAgra Inc v M.‘s ruling on the matter.
In-N-Out remains an ongoing concern
In-N-Out argued Kagan and Saliba should bear responsibility for Hashtag Burgers’ trademark infringement and passing off. The Full Court concurred with them, providing five reasons to support this decision.
Key takeaway message
In February 2020, Justice Katzmann asked what the differentiating factor is between being inspired and appropriating. The Full Court’s ruling in December of that year showed that by copying some key aspects from In-N-Out’s trademarks and reputation-based rights, the Appellants had crossed into appropriation which was a breach of their registered trademarks.
The Full Court allowing In-N-Out’s cross-appeal serves as an important reminder that directors can be held personally liable if they are aware of their company engaging in wrongdoings.