Chevron unsuccessful in red canopy fascia case

This article first appeared on WTR Daily, part of World Trademark Review, in July 2021. For further information, please go to www.worldtrademarkreview.com.

In Chevron Global Energy Inc v Ampol Australia Petroleum Pty Ltd ([2021] FCA 617, 8 June 2021), a single judge of the Federal Court of Australia considered (among other things) whether the respondent was in breach of a licence agreement for failing to remove red canopy fascia from its rebranded services stations at the conclusion of a licence agreement. The decision to keep the red canopy fascia resulted not only in allegations of breach of contract, but also in claims of misleading and deceptive conduct and false representations under sections 18 and 29 of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)) (ACL).

Interestingly, in response to the allegations made, the respondent argued that the applicants were ‘advancing an unregistered trade mark case based on a single colour’ (at paragraph 27(a)). Such arguments raised considerations of whether the colour red had become a unique brand representation, or whether it was merely one part of the Caltex brand that could not be afforded protection on its own.

• at issue was whether Ampol was in breach of a licence agreement for failing to remove red canopy fascia from its re-branded service stations at the conclusion of a licence agreement
  
  
• the court found that the red canopy fascia was only one aspect of the branding, distinct from the trade marks
  
  
• no reasonable consumer was likely to think that there was any relevant association between the two entities

Facts

The applicants, Chevron Global Energy Inc and Chevron Intellectual Property LLC (together, Chevron) are American companies which have licensed trade marks, including the CALTEX trade mark, in Australia since the early 1940s.

The respondent, Ampol Australian Petroleum Pty Ltd (Ampol), is an Australian company that has carried on the business of retail service stations supplying fuel under the brand name Ampol since 1936.

Before 1995, Chevron (using the Caltex brand) and Ampol (using its Ampol brand) were competitors in the Australian fuel market. However, in 1995 the two businesses merged. Ampol became the primary operating company and, in the late 1990s, it commenced using the Caltex brand for most of its service stations.

In 2015, Chevron divested its 50% stake in the merged company (Caltex Australia Limited) and consequently entered into a trade mark licence agreement with Ampol for use of the CALTEX trade marks. In June 2018, the parties amended the agreement to reduce the minimum period of notice required when terminating without cause to six months. In July 2019, the period during which Ampol must stop using the licensed trade marks following termination of the trade mark licence agreement without cause was reduced from 48 months to 30 months (the work-out period). The final amendment to the agreement was made in July 2019, when the annual royalty was increased from A$6.5 million to A$18 million.

Under the trade mark licence agreement, the work-out period was divided into two parts:

• the exclusivity period (18-months) – where only Ampol could use the CALTEX trade marks, and;
  
  
• the non-exclusivity period (12 months) – where both Chevron and Ampol could use the CALTEX trade marks (at the same time).

Chevron gave Ampol notice it was terminating the trade mark licence agreement without cause from 30 June 2020. Consequently, under the work-out period, Ampol remained entitled to use the CALTEX trade mark exclusively until 31 December 2021 and then alongside Chevron until 31 December 2022.

Ampol decided to transition back to its Ampol brand, while Chevron acquired 360 service stations, intending to rebrand them with the Caltex brand and trade marks.

Ampol has about 1,900 service stations branded Caltex (in its network of service stations), most of which are scheduled to be re-branded to Ampol by the end of 2021 and the remainder during 2022. However, in the interim work-out period, Ampol had intended to sell fuel under both the Caltex and Ampol brands.

Issues

While Justice O’Callaghan considered four issues in this case (three main issues), this article focuses on the arguments relating to use of the red colour Pantone 485C (known as Caltex Red) on Ampol’s service station canopies.

Chevron submitted to the Federal Court that a ‘key element of the Caltex visual identity over the last 25 years is that the station canopy fascia is coloured in… Caltex Red...’. Given that Ampol previously used blue as its dominant colour, including on its canopies, Chevron was of the view that Ampol was not properly ‘debranding’ its service stations. Justice O’Callaghan considered two issues, relating to Ampol’s use of the Caltex Red canopies:

• whether Ampol breached its requirements under the trade mark licence agreement, and;
  
  
• whether Ampol had engaged in misleading or deceptive conduct, and/or made false or misleading representations (under sections 18 and 29 of the ACL).

Was Ampol in breach of the trade mark licence agreement because it has not removed the Caltex Red canopy fascia?

Justice O’Callaghan considered whether the Caltex Red canopy fascia constitutes ‘signage and/or [any] element bearing any of the trade marks’ or ‘signage and/or any other element displaying the trade marks’ within the meaning of the trade mark licence agreement.

Chevron argued that the canopy fascia displays and bears trade marks and, as such, it falls within the ordinary meaning of the clauses, requiring its removal. It also argued a purposive approach should be adopted in construction of the relevant clauses, asserting that the purpose was debranding. Such an approach was based on the reasoning that ‘the signage and other elements form, together with the trade marks, a combination of elements which signify the brand of the service station, i.e. act as an identifier of it’. Chevron pointed to other canopy fascia of third-party service stations which predominantly use the same colour scheme as their trade marks (including Shell, BP and 7-Eleven). Chevron also highlighted the way in which other service station brands are ‘readily differentiated from each other’ in order to assist consumers in identifying a particular brand.

Ampol argued that, on a plain reading of the trade mark licence agreement, the words were directed precisely to the use of the registered trade marks. According to Ampol, the construction put forward by Chevron was seeking removal of something that could only be considered an unregistered trade mark – the colour Caltex Red

Justice O’Callaghan found that the Caltex Red canopy fascia was only one aspect of the branding, distinct from the trade marks. Accordingly, His Honour found that Ampol had not breached the trade mark licence agreement, stating that:

_{‘… to impose such an obligation would be to construe an agreement granting a licence to use registered trade marks as granting to the licensor an exclusive right, as between it and the licensee, to use Caltex Red on the fascia of the canopies, in circumstances where the licensor has no registered or unregistered claim to the colour, and where the agreement never purported to license its use.’}

His Honour suggested that, if such an uncommercial and unlikely outcome had been intended, then it would have been made clear by the parties (in the licence agreement).

Did Ampol’s use of the Caltex Red canopy constitute misleading or deceptive conduct, or convey false or misleading representations, in contravention of sections 18 and 29 of the ACL?

The key consideration for this issue was ‘whether the impugned conduct [being, use of the Caltex Red canopy fascia], viewed as a whole, has a sufficient tendency to lead a person exposed to the conduct into error… about some fact or matter’.

Chevron submitted as follows:

• consumers have been educated to identify service stations through colour association;
  
  
• the colour of the canopy fascia is a particularly important part of the branding combination as it provides a shortcut to recognising a brand;
  
  
• the Caltex Red canopy fascia has been used since 1996 in accordance with specifications provided to Ampol by Chevron;
  
  
• the Caltex service station network is the largest in Australia;
  
  
• no other large service station has used Caltex Red on its retail canopy fascia;
  
  
• in May 2018 Ampol stated that Caltex Red is the primary colour consumers identify with Caltex and that the red canopy was the main driver of visitation to a site; and
  
  
• Ampol (by inference) remained of those views when it adopted the Caltex Red canopy fascia on its rebranding commencing in 2021.

Only the last two propositions were considered controversial, as Ampol accepted in closing that there may be some association with the Caltex trade mark and the colour red due to its long-standing use.

Ampol argued that:

• Chevron is trying to enforce unregistered trade mark-type monopoly rights in Caltex Red;
  
  
• Chevron has not provided evidence as to the extent of the association between the Caltex Red and the Caltex brand, in particular no survey evidence (Ampol only accepted that there may be some association given the long-standing use);
  
  
• while Caltex Red may be associated with the Caltex word mark or star logo, it does not mean consumers seeing clearly different trade marks on the red canopy fascia would conclude that the goods and services have the same commercial origin as Caltex. Ampol noted that a single colour will rarely act as a brand in itself;
  
  
• there was evidence that multiple fuel station brands can be associated with the dominant use of a single colour, including for canopies (for example, Coles’ and Shell’s use of yellow and red); and
  
  
• ‘Consumers will rely on the relevant brand that is displayed on the site, although their identification of that brand in a particular instance will likely be facilitated by the consistent use of colour’.

His Honour dismissed Chevron’s claims under the ACL, stating that:

_{‘viewed as a whole… no reasonable consumer is likely to think that there is any relevant ‘association’ between the two entities, let alone that the Caltex and Ampol brands hail from the same stable.’}

Justice O’Callaghan noted that Chevron’s Caltex Red canopy fascia argument was founded on a ‘non-sequitur’. Specifically, His Honour found that consumers associating the Caltex Red canopy with Caltex, was not the same as consumers believing that Caltex and Ampol are related. Furthermore, neither of these arguments were another way of saying that the brands are owned by the same entity, or that the entities are associated.

In the absence of any survey evidence, or the like, it was not possible to find in Chevron’s favour for these arguments. Chevron’s argument was based only on the similarity in the use of red for the service station canopy, which was insufficient given that consumers could also have regard to other branding aspects (including different Ampol signage, and the differences between the on-site stores and their colouring).

Decision

Chevron’s claims relating to the use of Caltex Red on Ampol’s canopies were all dismissed by Justice O’Callaghan.

Key takeaways

• licence agreements – branding needs to be carefully considered from the outset of a project. If the colour of a building (or, in this case, service station) is central to a brand, then it should be expressly dealt with in any licence agreement, separate from other branding components.
  
  
• survey evidence – if a party wants to rely on the association of a colour and its brand (without a registered trade mark), then it should consider what evidence will be required to show the strength of its colour branding in an ACL claim. The type of evidence required will depend on the context of the case, however one might consider survey evidence or other third-party consumer evidence. The Federal Court of Australia generally takes little notice of surveys, so the obiter dictum comments about surveys in this judgment need to be treated carefully.