The Core of the Pink Lady Trade Mark Dispute: High Court of Australia refuses to revisit Apple and Pear Australia Ltd v Pink Lady America LLC [2016] VSCA 280 (23 November 2016)

In April 2017, the High Court of Australia refused special leave to appeal the decision of the Court of Appeal of the Supreme Court of Victoria. This resolved the long running contractual dispute over the “Pink Lady” trade mark. (It effectively ensures that all use of the “Pink Lady” trade marks used in respect of Chilean-grown apples and fruit that are exported from Chile must first be authorised by Apple & Pear Australia Limited (APAL).)

This story begins in 1973 when Western Australian pomologist John Cripps, employed by the Western Australian government’s Department of Agriculture and Food,  crossed two apple varietals, called the Golden Delicious and the Lady Williams, in order to create a new variety that exhibits both apples’ best qualities. The outcome was a juice, sweet apple with a greenish yellow base skin. It has been marketed ever since under the Pink Lady brand (but is also referred to as “Cripps Pink”).

APAL is the peak body for Australian commercial apple and pear growers. One of its functions is to commercialise the PINK LADY trade marks in foreign jurisdictions, through a variety of exporters and distributors.

A company called Brandt’s Fruit Trees Inc (BFT), incorporated under the laws of Washington State, is the owner of certain PINK LADY trade mark registrations in the United States and Mexico. BFT has licensed PLA to use and manage BFT’s trade marks.

PLA was formerly part of an organisation called the International Pink Lady Alliance. This body was formed in order to handle global marketing strategies to do with the “Pink Lady” brand. BFT and APAL are part of the International Pink Lady Alliance. It also served as the licensed distributor to a number of different entities in different territories.

In late 2006 to early 2008, PLA filed three applications in Chile to register trade marks relating to PINK LADY. PLA left the International Pink Lady Alliance in 2010. APAL opposed the Chilean trade marks.

In resolution of that dispute, APAL and PLA to enter into an “Option Deed.” Under the Option Deed, PLA would register “Pink Lady” trade marks in Chile and then assign the trade marks to APAL. APAL would then license the trade marks back to PLA on an exclusive, perpetual, and royalty-free basis use in the context of export of PINK LADY-branded apples from Chile to North America. (The licence was subsequently extended to another type of apple called the Rosy Glow variety.) In 2008, the transfer from PLA to APAL of the three pending Chilean PINK LADY trade marks was effected.

In 2008, APAL and PLA also negotiated and entered into a ‘joint export licence’ for the Chilean market. This licence was an effort at consolidation: a device for APAL and PLA to engage with Chilean apple exporters by way of one license: this joint export license replaced multiple licence documents. It was issued from time to time to by the parties to exporters, over a period of three years.

But then the relationship went sour:

  1. APAL and PLA each ceased issuing the ‘joint export licence’ in respect of exports from Chile.
  2. On or about 7 December 2012, APAL filed an application to register the Flowing Heart Mark in Chile.
  3. PLA filed an opposition to APAL’s application in March 2013.
  4. In May 2013, APAL issued a single export licence from Chile to markets which included Canada and which referred to both the Flowing Heart Mark and the Kangaroo Device Mark.
  5. In September 2013, PLA also filed its own applications to register a number of trade marks, including the Flowing Heart Mark, in Chile.

PLA alleged that the Option Deed’s terms covered not just the existing trade marks, but also any future logos to be adopted internationally for the “Pink Lady” brand. This included the most recent refresh of the logo, which consisted of a composite mark featuring a flowing pink heart and the “Pink Lady” brand in cursive font.

The lesson from contract lawyers arising from both the first instance decision and the Court of Appeal’s findings comes from this aspect of the licence:

‘…APAL will hereby grant to PLA an exclusive licence to use the Trade Marks with respect to all trade in Products between the Territory (Chile) and North America (The United States, Canada and Mexico). This licence will be royalty free, and will last in perpetuity subject only to the quality control provisions contained therein…’ (Clause 5.1),

Justice Croft said that this manifested the parties’ intention was that, once enlivened, the licence could not be brought to an end, except in that singular event of a quality control failure. (The Victorian Court of Appeal noted at length the Brand Manual, which “also emphasises the need to control brand equity throughout the world”.)  Consequently, as a matter of construction, the licence survived termination of the Option Deed. The Court of Appeal said at [222]-[223]:

The IPLA Operating Agreement is a multi-lateral agreement which binds all members of IPLA to give effect to 75 per cent majority decisions about marketing and advertising strategies. It can be accepted that the IPLA Operating Agreement required both PLA and APAL to use the refreshed mark, once this was mandated, and the Brand Manual made this plain. It can be accepted that it was in discharge of this obligation that the refreshed mark was used on the cover of the Joint Export Licence granted by PLA and APAL to approved Chilean exporters in 2010. In particular, once the IPLA members agreed to the future use of the refreshed marks, APAL was obliged as an IPLA member to permit other members to use the refreshed logos in the export trade, including in Chile. Both PLA and APAL, as IPLA members at the time, were simply giving effect to their obligations under the IPLA Operating Agreement….  But this does not mean that the rights and obligations of the IPLA Operating Agreement were to be converted into rights and obligations of the agreement under the Option Deed. Not only is the IPLA Operating Agreement a multi-party agreement and the Option Deed bilateral, but the scope of the rights and obligations are quite distinct.

For trade mark licenses, the outcome of the failure to obtain leave to appeal to the High Court is that the decision of the primary judge, that an trade mark licence can survive termination of the underlying agreement, remains good law.  Parties negotiating trade mark licences should think about the life of the licence if the underpinning agreement is terminated, especially where the license contains a perpetual or conditional clause.