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Brief Counsel

Champagne law on vodka facts

18 August 2010

In Diageo North America Inc v Intercontinental Brands (ICB) Ltd [2010] EWCA Civ 920, the UK Court of Appeal has developed the law of passing off on some intoxicating facts.

This Brief Counsel looks at the case, and whether the New Zealand Courts would reach the same conclusion if the same point was argued here.

Vodka v VODKAT

At issue was VODKAT: a mixture of vodka and fermented alcohol with an overall alcohol by volume of 22% (as opposed to the minimum 37.5% required under EC regulations for vodka).  The lower alcohol meant VODKAT qualified for a lower duty so could be retailed for less than standard vodkas.

The case, taken by a large vodka company, involved what is known as “extended” passing off.  Why extended?  Because the vodka people weren’t seeking protection for their product’s brand (the name, logo, style of bottle); they were seeking to protect the goodwill associated with vodka itself.

This certainly wasn’t the first time extended passing off had been tried, but it was a shift from the standard situation which has involved premiere products (sometimes with regional associations) such as Champagne, Advocaat (you’ll know if you’ve tried it) and Swiss chocolate.

The comparison with the Champagne line of cases

Similarities were drawn with the Champagne litigation.  Champagne is a region in France famous for its sparkling wine.  Many countries make sparkling wine using the same method (although none so famous as Champagne).  So should the Spanish be allowed to call their cava “Spanish Champagne”?  Some consumers would not be aware of the regional connotation in any event.  Others would assume the term simply denoted a superior type of sparkling wine.  The law though has sided with the “original”, including in New Zealand where sales of “Australian Champagne” were stopped in the 1980s.

In the Swiss chocolate case, Justice Laddie said extended passing off applied to “a descriptive term if it is used in relation to a reasonably identifiable group of products which have a perceived distinctive quality”.  The word “perceived” was important, because apparently some Spanish champagne is quite drinkable these days, and so Justice Laddie updated the former test which had a requirement of “superiority”.

VODKAT maintained that extended passing off still needed to involve superior or luxury products but the Court of Appeal found no support in the authorities for that position.

Outcome

The result?  Injunction granted.  VODKAT could only be sold if it was actually a vodka.

Do we like this decision?  We do.  VODKAT was passing off, plain and simple, and we’d expect the same outcome in New Zealand.  One of the judges noted that this was the first time that there had been an extension of “extended passing off” to a broad generic category of products, but coat-tailing should be no substitute for creativity.

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