SINGAPORE - The company that runs gourmet cafe chain tcc - The Connoisseur Concerto has lost its appeal against a court ruling that it had violated the Nutella trademark. But it may not have to pay damages, going by the Court of Appeal's judgment.
In a 63-page decision made public this week, the appellate court said that Nutella maker Ferrero SpA, which had sued Sarika Connoisseur Cafe Pte Ltd in the High Court, "might well deem it expedient to just move on instead of incurring more costs in pursuing an assessment which is less than certain".
High Court Judge Chan Seng Onn had, in ruling in favour of Ferrero, ordered that damages be assessed. In a "cease-and-desist" letter issued in December 2009 to Sarika, Ferrero had sought damages of $50,000 before filing suit in January 2010.
But since July 2010, Sarika's Nutello - an espresso drink mixed with the chocolate spread Nutella - had been dropped, ostensibly under a menu overhaul.
Hence, the appellate court's remarks, after it noted that "the infringement and/or breach on the part of Sarika had ceased for more than two years, and unless there is real evidence as to loss suffered by Ferrero during the period".
Ferrero was represented by M Ravindran and Sukumar Karuppiah of Ravindran Associates, and Sarika by Senior Counsel Tan Tee Jim and Zechariah Chan of Lee & Lee.
The Court of Appeal, comprising judges of appeal Chao Hick Tin, Andrew Phang and VK Rajah, upheld Justice Chan's findings that Sarika had "committed the tort of passing off" by selling Nutello.
"One would be hard-pressed to say that the relevant public will not call to mind the 'Nutella' mark upon seeing the 'Nutello' sign."
Sarika's use of the Nutello sign over time thus creates a serious likelihood that the distinctiveness of Ferrero's Nutella trademark may be weakened in the medium to long term, it added.
In upholding Justice Chan's ruling on the likelihood of confusion, the Court of Appeal cited both parties' surveys that had found that 30 per cent of the relevant public were likely to be confused into thinking both parties were related or have business links.
"By any standard, 30 per cent cannot be said to be insignificant, and indeed, we would hold that that it constitutes a substantial portion of the relevant public."
The Court of Appeal also upheld the High Court's findings that there was "dilution by blurring", which occurs when consumers no longer see a trademark as indicating a distinctive source of a product.
It noted that it was significant that Sarika's witness had admitted during cross-examination during the trial that the name Nutello had been derived from Ferrero's Nutella mark, and that it was intended that the consumers be informed by the Nutello sign that Sarika's product was a mixture of espresso and Nutella spread.
The Court of Appeal also agreed with the High Court's findings that "the head of damage under the passing off claim was made out" because the parties' fields of business are closely related, and that Fererro had expanded its product line overseas to include a Nutella-based milk shake.
In upholding Justice Chan's ruling, the appellate court found that Sarika's use of the Nutello sign was likely to restrict Ferrero's expansion of its product line into the Singapore beverage scene.
"The fact that Ferrero had gone into the drinks business in France a few years ago demonstrates that it has taken real steps to expand its line of business. In view of this development, we find that this is not a case where Ferrero is only interested in ring-fencing a new market as a possible preserve for future exploitation."