New Zealand: Sticks And Stones: The Interplay Between Rights Conferred Under The Trade Marks Act 2002 And The Tort Of Passing Off / Fair Trading Act 1986

Last Updated: 31 May 2010
Article by Ian Finch

Consider this: You are a New Zealand company which has been manufacturing a product (for argument's sake, an agricultural implement) for over 30 years. You have enjoyed modest success and you are reasonably well known in the industry and amongst potential customers, but you are certainly not famous. On advice from your patent attorney you have taken the precaution of registering your name, Prosperity Group, as a trade mark.

Around three years ago there was a shift in the market involving a number of new entrants. One of those was the agricultural implement arm of a multinational corporation, let's call them Prosperity Corporation. Prosperity Corporation has very deep pockets and an extremely polished publicity department. Within a few months its name was appearing on billboards, in newspapers and magazines, in social media and on the internet. You tolerated this because there was a positive spin off for your business as you were able to piggyback on the advertising and promotion carried out by Prosperity Corporation. In fact, things were going quite well for you until you received a letter from Prosperity Corporation's lawyers telling you to cease and desist from trading under the name "Prosperity Group" because it is confusing the market and therefore amounts to passing off and a breach of the Fair Trading Act. But you have a registered trade mark and you were the first to use "Prosperity" in relation to agricultural implements in New Zealand. Can Prosperity Corporation succeed?

Unfortunately, the answer is probably yes. Why? Because, while the Trade Marks Act 2002 gives the owner of a registered trade mark the exclusive right to use that registered trade mark and to authorise others to use it, nothing in the Act affects the law relating to passing off or rights accruing under the Fair Trading Act 1986 (see section 88 Trade Marks Act 2002).

Passing off

Passing off is an action bought to protect against unfair competition between traders. The modern law of passing off is a development of a principle first enunciated in the late 1890's that "nobody has any right to represent his goods as the goods of somebody else". The above fact scenario is unlikely to give rise to a cause of action in passing off. That is because the relevant date for assessing passing off is the date on which the defendant first entered the market. In the above example, Prosperity Group could never be liable for passing off its business as that of Prosperity Corporation because it entered the market before Prosperity Corporation had a business presence in New Zealand.

The Fair Trading Act 1986

However, unlike in passing off, the relevant date for establishing reputation under the Fair Trading Act need not be the date on which the defendant commenced the conduct alleged to be in breach of the Act. That is because the Fair Trading Act is not concerned with the rights of rival traders, but with the right of the public not to be misled. Therefore, if conduct is misleading, it does not matter whether the plaintiff or defendant was the first entrant to the market (although, the timing of such entry may have a bearing on whether the plaintiff is able to establish sufficient reputation to give rise to a likelihood of misrepresentation).


This issue of timing has been considered by the New Zealand courts under the Fair Trading Act on two occasions.

In Magellan Corp Ltd v Magellan Group Ltd (1995) 6 TCLR 598 (HC) both parties were in the commercial and industrial property industry. The plaintiff ("Corp") had been in business since 1984 under various names which included the word "Magellan". In 1992 the defendant ("Group") entered the industry. By that stage, Corp's business was still active but it was not listed in the telephone directory. A company search by Group revealed the existence of Corp but Group did not recognise its name. Group incorporated under the name Magellan Group Ltd and started promoting its business under the name "Magellan". Group was a much larger company than Corp and built a stronger reputation than Corp in a short period of time. While the spheres of operation of Corp and Group were not identical, there was a major area of common activity resulting in immediate and continuing confusion.

It was common ground that representations were made to the public by Group as to its identity by using the name "Magellan" and that this was conduct in trade. Whether the conduct was in breach of the Fair Trading Act turned on the question of whether it was, or was likely to be, misleading or deceptive by causing confusion with Corp. Fisher J concluded that Group's conduct in using the word "Magellan" was inherently likely to mislead customers dealing with the two entities and had, in fact, done so. Accordingly, Group was technically in breach of the Act. However, Group had counterclaimed that Corp was breaching the Act as well. Corp argued that it could not be in breach of the Act if it was the first to use the Magellan name. In response, Group argued that the issue was not priority in time but the current level of reputation of the two parties. Noting (at 608) that consumer protection is the primary object of the Act, Fisher J continued (at 612-613):

"If a trader uses a name in a way which causes a customer to confuse the two companies or their products, associations or attributes, the trader's conduct is misleading. That is all that s.9 relevantly requires. Whether the trader acts in that way must ultimately turn upon the reputations of the two organisations as at the date of the conduct in question, however and whenever those reputations may have been derived. It could not turn upon temporal priority in adopting the name. Priority may have played its part in contributing to a superior reputation today but if the ultimate question is whether conduct is misleading it must be the reputation today which matters, not its causes or history.

That view would seem entirely consistent with the consumer-protection orientation of the Act...[T]he primary object of the statute is to protect consumers. It matters not to the consumer who uses a name first if the result of its current use is confusion. Thirdly, a newcomer will normally begin with no significant reputation in the name. At that stage the original user will be misleading nobody by continuing to use its own name. Only the newcomer's conduct will be misleading and only the newcomer could be restrained.

So far as I can see an original user could lose the right to use its own name only if its own apathy allowed that to happen...I can see nothing anomalous in the basic proposition that the original user of a name could breach the Fair Trading Act by continuing to use its own name if it has allowed an interloper to acquire its own reputation in the use of the same name. In the end the only relevant thing which matters under s.9 is whether conduct is misleading or deceptive."

On the facts of the case, Fisher J held that the conduct of Corp, in continuing to use its own name, was causing confusion of those members of the public more familiar with Group and therefore Corp was also in breach of the Act. His Honour concluded that both parties should be allowed to continue to use the name "Magellan" providing they introduced suitable distinguishing information to prevent consumers from continuing to be misled and/or deceived as to the identity of the respective parties. However, as Corp was the first to use the name, Fisher J ordered Group to pay costs.

In Frucor Beverages Limited v Red Bull GmbH & Anor (12/2/2010, Potter J, HC Auckland CIV 2009-404-006525) the complaint centred around the manner in which the plaintiff and defendant marketed their respective energy drink products. In 2009, both parties released an energy shot product – a more concentrated version of an energy drink. Frucor's product was marketed as "V Pocket Rocket". Red Bull's product was marketed as "Red Bull Energy Shot". However, in some promotional material, including window decals and brochures, Red Bull used the phrase "A blue and silver pocket rocket". The evidence showed that Red Bull's energy shot product was released to the trade in April 2009 and to the public from 6 August 2009. Frucor's energy shot product was not released to the trade until 15 June 2009 and to the public from late August 2009. Hence, Frucor was the second entrant to the market. However, the evidence suggested that, in a very short space of time, Frucor had established significantly greater reputation in the "Pocket Rocket" trade mark than Red Bull (ie a situation analogous to the situation faced by the court in Magellan). Frucor sought an interim injunction restraining Red Bull from continuing to use the phrase "A blue and silver pocket rocket" pending full trial on the basis that Red Bull's conduct in doing so breached the Fair Trading Act and amounted to passing off.

The court was not satisfied that there was a serious question to be tried in respect of passing off given clear authority that the relevant date for determining the plaintiff's reputation in passing off was the date on which the defendant first entered the market, and that preceded any use or promotion by Frucor of the POCKET ROCKET trade mark (ie Frucor had no reputation in that mark at the relevant time). In terms of fair trading, as in Magellan, Frucor argued that the issue was timing: namely the relevant date at which the alleged misleading and deceptive conduct should be assessed. Frucor argued that it had established a reputation and goodwill in respect of its "V Pocket Rocket" product on both the date of issue of proceedings and the date of hearing and that it did not matter which party launched its product first, so long as Frucor could show a reputation and a likelihood of misleading or deceptive conduct. After considering Magellan in detail, the court concluded (at paras 87-88) that:

  • It is incontrovertible that there is no misrepresentation in adopting a name at a point before any other trader has acquired a reputation in that name; and
  • If, however, the alleged objectionable conduct is assessed at a later point, for example, when proceedings were issued or at the date of hearing, it might be arguable on the basis of the approach in Magellan that the defendants are not automatically immune in continuing to use the imputed phrase, merely because at the time they began to use it the plaintiff did not have a reputation in it.

Having concluded that there was an arguable case under s.9, her Honour went on to consider the question of whether Red Bull's use of "Blue and silver pocket rocket" was actually misleading or deceptive (or likely to mislead or deceive) potential consumers of energy products. After considering a number of factors including:

  • There was no evidence of actual confusion or deception in the three and a half months the competing products had been on the market;
  • "Blue and silver pocket rocket" did not appear on Red Bull's physical products themselves;
  • Red Bull's slogan was used in conjunction with the well known RED BULL trade mark and its distinctive blue and silver packaging; and
  • The target market – 18 to 34 year old consumers – were "brand savvy";

her Honour considered that there was no likelihood of deception or confusion and, therefore, no serious question to be tried under the Act. Accordingly the application for interim injunction failed.

So what can I do to protect myself?

The simple answer is to take action in respect of any rights which you possess before those rights are inundated by the actions of another party. In the example at the beginning of this article, Prosperity Group did the correct thing by registering its name as a trade mark. However, it failed to take action when Prosperity Corporation first entered the New Zealand market selling the same goods under an almost identical mark.

Remedies available to Prosperity Group at this point in time might have included:

  • A temporary or permanent injunction restraining Prosperity Corporation from using its name;
  • Publication of corrective statements by Prosperity Corporation;
  • Damages suffered by Prosperity Group through confusion; or payment to Prosperity Group of any profits earned by Prosperity Corporation through use of its name; and
  • Payment of a proportion of Prosperity Group's legal costs.

Instead, Prosperity Group stood by and allowed Prosperity Corporation to accrue a reputation. A registered trade mark is only as good as the owner's ability and willingness to enforce it, and enforcement action should be taken as soon as possible to ensure that the registered mark remains exclusively associated with the trade mark owner.

Similarly, if there was evidence of actual confusion, Prosperity Group may have been able to take action under The Fair Trading Act, or for the tort of passing off, shortly after Prosperity Corporation entered the New Zealand market. While consumer confusion advantaged Prosperity Group in the short term, it failed to take a long term view of the market and its position in it and bore the adverse consequences of that.

The golden rules? Protect what is of value to you, be vigilant of the actions of others, take good advice and strike while the rights are current and enforceable.

For further information regarding the trade mark registration process and/or procedures for enforcement of registered and common law rights in trade marks, please contact our trade marks and/or litigation teams via the "Services" tab of our website:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

James and Wells is the 2009 New Zealand Law Awards winner of the Intellectual Property Law Award for excellence in client service.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.