A juicy tall hamburger

Who will come out on top in the juicy trademark showdown between two burger

By James Wan

What you need to know (in a nutshell)

  1. There’s been an ongoing trademark dispute between American fast food chain In-N-Out and Australian company Hashtag Burgers over allegations of trademark infringement, passing-off, and misleading or deceptive conduct.
  2. In the initial ruling, Justice Katzmann found that Hashtag Burgers and its directors, Benjamin Kagan and Andrew Saliba, were liable for these actions prior to the incorporation of Hashtag Burgers, but only the company was found to be liable afterwards.
  3. Hashtag Burgers appealed this ruling, while In-N-Out filed a cross-claim alleging that the directors should also be held liable as joint tortfeasors for the conduct that constituted trademark infringement and passing-off

Full Article

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:

  • trademark infringement
  • misleading and deceptive conduct in accordance with the Australian Consumer Law (section 18)
  • passing off

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 disagreed with the primary judge’s conclusion that they conceded “BURGER” should be given little weight in determining deceptiveness. However, Justice Katzmann did not omit it from her analysis as she consistently referred to “IN-N-OUT BURGER mark” during her reasons.
  • The Full Court disagreed with Justice Katzmann’s omission to assess the arrows in In-N-Out Mark. However, they recognised that Appellants had conceded their point of comparison was only between word marks without deliberating on arrow - a concession which must be enforced due to it being part of the former argument.
  • The Full Court did not agree with the concept of “N-OUT” being a defining part and vital element of In-N-Out’s mark, as stated by Justice Katzmann. He had already noted that there was visual similarity between both word marks but still maintained N-OUT played an important role in it. The court accepted his opinion that N_out was crucial for its look and sound.
  • The Appellants argued that Justice Katzmann didn’t consider the distinct implications of “IN-N-OUT” and “DOWN-N-OUT”. They noted how ‘down and out’ has an association with being knocked unconscious in a fight, while ‘down under’ is connected to Australia. Nevertheless, The Full Court rejected these claims.
  • The Appellants argued that the similar sounding ‘N-OUT’ was the only basis of phonetic similarity, not taking into account how “DOWN” and “IN” were distinctly different words. The Full Court disagreed because it saw no reason why her Honour came to a conclusion based on sound alone despite obvious visual differences between them.
  • According to the Appellants, Justice Katzmann wrongly framed the question of deceptive similarity by asking if people with hazy memories of In-N-Out Marks could be misled upon seeing their marks. Though this was contested, The Full Court concluded that considering visual impression was appropriate when judging such matters.
  • Justice Katzmann made it clear that the evidence from social media posts was not very compelling and did not carry much weight. Despite this, she still saw some value in them while ignoring any lack of proof for actual confusion. The Full Court concluded her approach to be correct.

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.

  • had heard of the “famous” In-N-Out
  • confessed their name was based on In-N-Out
  • conceded that the N-OUT element was copied directly from In-N-Out Marks
  • in their May 2016 press release, IN-N-OUT was used instead of DOWN-N-OUT
  • referenced the “Animal Style” and “Protein Style” trademarks from In-N-Out
  • endorsed the designer’s news of Kagan and Saliba taking IN-N-OUT to Australia
  • copied In-N-Out’s design, including its signature red and yellow colors
  • could not provide a plausible alternative explanation.

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.

  1. Kagan and Saliba were the only directors of Hashtag Burgers
  2. Kagan and Saliba were the sole decision-makers for Hashtag Burgers
  3. Kagan and Saliba alone kept the earnings from Hashtag Burgers
  4. Kagan and Saliba’s running of the business stayed unchanged after Hashtag Burgers was established
  5. Kagan and Saliba were aware of Hashtag Burgers’ illicit activities

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.