In-N-Out Burger restaurant wins against Sydney burger chain in Federal Court

With the emergence of several notable burger restaurants in Sydney and surrounds in the last decade, it has become important for fast food businesses to brand themselves in a way that makes them stand out, or to offer services which differentiate them from the other burger restaurants that have opened.

 Famous American food outlet In-N-Out Burgers, Inc (“In-N-Out”) took legal action against Sydney restaurant “Down N’ Out” in 2017 over the allegedly misleading use of their business name, branding, and their use of In-N-Out’s trademarks “animal style” and “protein style”.

In-N-Out alleged that the Sydney restauranteurs were passing off the In-N-Out brand as its own in order to gain a benefit in business, accusing them of cashing in on the reputation of In-N-Out. The owners of Down N’ Out (“Hashtag Burgers”) argued that while they were inspired by the US food outlet, they did not appropriate In-N-Out’s branding.

What is Passing Off and Misleading and Deceptive Conduct?

While In-N-Out relied on multiple causes of actions to assert their claim against Hashtag Burgers, two of the key areas of law relied upon were the tort of passing off, and misleading and deceptive conduct.

Passing off is an area of law that protects those who may not necessarily own a trade mark, but have developed enough of a public consciousness to their brand, that for another a business to use similar branding or marketing would be to trade off of the goodwill developed by another business. This means that if you are using a name or branding in your business, similar to another business’ branding or name, you may not be protected from legal action just because they do not hold a registered trade mark.

Misleading and deceptive conduct is an offence under the Australian Consumer Law (‘ACL’) and is, in essence, conduct that makes a false representation or connotation which is relied upon by consumers, resulting in a benefit to the business owner. This conduct may be constituted by many actions in consumer-based industries, but in this case, was Hashtag Burgers’ alleged use of In-N-Out’s branding with the intended effect of creating a perceived connection between the two businesses.

What did Hashtag Burgers do?

In-N-Out alleged that the Hashtag Burgers (through its various burger restaurants including Down-N-Out and Funk-N-Burger) deliberately tried to affiliate itself with In-N-Out to improve its business, capitalize on In-N-Out’s lack of presence in Australia at the time, and to give the impression of a relationship between the two businesses.

A Facebook promotion for an event held by Hashtag Burgers announced:

“This time on the menu we have the legendary In’N’Ou … I mean the Down’N’Out burger served up ANIMAL STYLE for all you fatties…”

There was also evidence of correspondence between the owners of Hashtag Burgers and its graphic designers which requested that the graphic design make a logo “like in n out burger”.  Attached to that correspondence was a copy of the In-N-Out logo. 

The graphic designer also designed placemats for a Hashtag Burgers pop up restaurant and informed the business owners that he would use yellow in the branding so that “it [would match] In and Out branding”.

A press release was issued by Hashtag Burgers in May 2016 titled “Sydney’s Answer to In-N-Out Burgers Has Finally Arrived”. It also contained a statement which read “The menu will be kept simple, similar to the original In-N-Out…” giving the impression that Down-N-Out was related to In-N-Out and had been adapted for the Australian market.

In June 2016 an image was posted on instagram of the Down-N-Out logo with a statement that read “we’re teaming up with @hashtag_burgers boys over this rainy weekend to bring In-N-Out down under…”

In-N-Out’s solicitors served a cease and desist upon Hashtag Burgers, which maintained that it had done nothing wrong and would only temporarily change its branding while the dispute was being resolved. Mr Kagan, a director of Hashtag Burgers, then posted a photo of the cease and desist on social media in response to comments, stating he would have the letter framed and hung in the Down-N-Out restaurants.

What did the Court decide?

In delivering her judgment this week, Justice Katzmann stated that ultimately the question was “What is the line between inspiration and appropriation?”. It was found that Hashtag Burgers “sailed too close to the wind. [And] there [was] a sufficiently close enough resemblance between the two [Business] names to give rise to a real, tangible danger of confusion.”

They were found to have infringed the trade marks owned by In-N-Out and that there was a likelihood that the branding of Hashtag Burgers would cause confusion of a connection between the two businesses. In-N-Out Burgers had been developing its reputation for over 50 years and Hashtag Burgers was found by the Court to have tried to exploit this reputation and In-N-Out’s current lack of presence in Australia.

Her Honour found, “… [Hashtag Burgers] adopted aspects of [In-N-Out’s] registered marks in order to capitalise on its reputation”, “…[Hashtag Burgers] sought to attract potential customers by having them wonder whether DOWN-N-OUT was, indeed, IN-N-OUT BURGER, perhaps a down-market or down-under version, or, at least, that the two were connected or allied in some way.”

Hashtag Burgers were also found to have conducted their business in a way that was misleading or deceptive, or likely to mislead or deceive consumers under the ACL.

The question of remedies has been deferred by the Court and will be addressed at a later date.

Takeaways

This case highlights how important it is to obtain competent and full legal advice in setting up a business or when creating logos and branding for your business. A failure to do so may result in personal liability in some cases, and may cause unnecessary stress and financial loss in the event that you are forced to rebrand your business later down the track.