The tricky business of entrepreneurial imitation

The tricky business of entrepreneurial imitation

Copying entrepreneurial business ideas that have succeeded overseas seems like a great opportunity. There have been many successful New Zealand businesses that started this way, like Trade Me and GrabOne.

Adopting a smart business model is a contentious area in itself, but when the trade dress, business name and overall impression of the product is too closely aligned with an original business, there is the risk of breaches of copyright, trade mark infringement, passing off and potentially misleading and deceptive conduct under the Fair Trading Act 1986

A recent High Court case shows why Kiwi companies should be careful why copying offshore ideas - it demonstrated that companies across the Tasman may be able to show reputation in New Zealand.

Late last month Muzz Buzz, an Australian owned and operated drive-thru coffee franchise, won an injunction in the High Court against the owners of Jitta Buzz, another drive-thru coffee business based in Auckland. The Muzz Buzz concept was established in 2002 and had been developed in Western Australia. The business enjoyed large success and opened several outlets across Australia all with a similar distinct building façade and branding.

Jitta Buzz, the defendant, opened two outlets in Auckland from 2010 with a similar business concept to Muzz Buzz. Further, it imported a similar building shape, colour scheme and overall brand feel as Muzz Buzz. Muzz Buzz, which entered the New Zealand market in 2012, claimed that Jitta Buzz had infringed its intellectual property rights though the use of “Buzz” and through use of similar trade dress. It is important to note that at the time Jitta Buzz was established, the Muzz Buzz logo was unregistered and the business was not operating in New Zealand.

Business reputation which has been developed overseas, rather than in New Zealand, often presents issues in trademark law, passing off and fair trading law. Because New Zealand has a global culture and due to the inherent nature of the internet, courts often have to determine to what extent reputation gained overseas is applicable in New Zealand.

Traditionally, passing off was restricted to the local jurisdiction, however this line of thinking has significantly relaxed. An early case from 1987 (Dominion Rent A Car v Budget Rent A Car Systems) found that an international company had a prior right to use of the word “Budget” in New Zealand in relation to car rental due in some part to the general reputation developed in Australia. The Court accepted that an Australian company’s reputation and goodwill can extend to New Zealand if there is a sufficient business connection. As such an Australian company will be entitled to protection here as it seems “artificial to analyse such a state of affairs by saying that the company has one goodwill in Australia and another in New Zealand. Rather the goodwill transcends boundaries.”

The Muzz Buzz case is another progressive step in this flexible approach to reputation in the trans-Tasman market.

With the with the internationalisation of trade and brands it is likely that businesses may encounter similarities of brand name legitimately used elsewhere. However, Justice Toogood concluded that the defendants were untruthful in denying that they had copied the Muzz Buzz website or that they knew nothing about the style of the Muzz Buzz kiosks. The similarities between the two businesses were too striking for this to be a bone fide example of traders in different territories adopting a similar name and instead the defendants have proactively exploited the Muzz Buzz brand.

The judgment effectively recognises that businesses operating in Australia are entitled in some circumstances to extend the protection of reputation, branding and goodwill to New Zealand, and as such favours a trans-Tasman market. This is important for business seeking trademark and brand protection going forward. The injunction entitled the owners of Jitta Buzz to continue operating the business, however, it means that the business can no longer be traded as Jitta Buzz and the appearance of their drive-through outlets and website had to be amended.

While use in Australia may be relevant in intellectual property exploitation and infringement claims, care should be taken not to exaggerate how much this case establishes a trans-Tasman market. Whether a brand has a reputation or goodwill from Australia in New Zealand will depend on the type of good, the market of buyers, and to some extent the novelty, that is the distinctiveness, of the brand. 

Mark Gavin and Josephine Norris are lawyers at intellectual property firm Hudson Gavin Martin.