Kraft v Bega

This was a commercial fight about who could keep using the familiar look of peanut butter sold in Australia. The product appearance in issue was not just a word mark or logo. The Court described the Peanut Butter Trade Dress as a jar with a yellow lid and a yellow label with a blue or red peanut device, with the jar appearing brown when filled. The parties accepted that this get-up was an unregistered trade mark.

The background matters. For many years, Kraft Foods Limited, later Mondelez Australia (Foods) Ltd, manufactured and sold peanut butter in Australia using that get-up. The Court noted that before Bega acquired the business in 2017, KFL and then MAFL had by far the largest market share of peanut butter products in Australia. The product had been sold in Australia since 1935, and the packaging had evolved over time into the familiar yellow-lid presentation used from at least 2007.

The dispute did not start with Bega. It started with a major corporate restructure in October 2012. The company then known as Kraft Foods Inc split into two independent public companies. One held the global snacks business and the other held the North American grocery business. The Kraft brand was allocated to the North American grocery business, but the global snacks business received a licence to use the Kraft brand on certain products for a period that was later reduced to end on 31 December 2017.

After that restructure, MAFL remained part of the Mondelez side of the group and continued manufacturing and selling peanut butter in Australia using the Kraft brand and the Peanut Butter Trade Dress. Then, in 2017, another major transaction occurred. Bega entered into a sale and purchase agreement for the Joey business, essentially the business and assets of MAFL, and the transaction closed on 4 July 2017.

Just before and after that sale, the branding changed in a way that set up the later dispute. In June 2017, MAFL began selling peanut butter without the Kraft brand but still using the Peanut Butter Trade Dress together with the words The Good Nut. In July 2017, after acquiring the business and assets including the Port Melbourne peanut butter factory, Bega began manufacturing and selling peanut butter under the Bega brand using the same trade dress and The Good Nut wording. Since late 2017, Bega has sold Bega branded peanut butter products using the Peanut Butter Trade Dress.

Kraft and Bega then each claimed that they, and not the other, were entitled to use the Peanut Butter Trade Dress in relation to peanut butter products. That turned the case into a dispute about ownership of goodwill, the effect of the 2012 restructure documents, the effect of the 2017 sale documents, and whether either side had engaged in misleading conduct, passing off or trade mark infringement.

The legal fight had several layers. The main issue on appeal was the proper construction of the 2012 restructure documents. Kraft argued that, on the true construction of those documents, rights relating to the Peanut Butter Trade Dress had been allocated to the North American grocery business, referred to in the documents as GroceryCo, and its IP company, GroceryCo IPCo. Kraft also argued that Bega was bound by that allocation because, under the 2017 transaction documents, Bega had assumed certain obligations connected with the earlier restructure arrangements.

Bega's position was different. Bega said the goodwill generated by Kraft branded peanut butter bearing the Peanut Butter Trade Dress had inured to the Australian operating company before the restructure and then to MAFL after the restructure, and that the rights to the Peanut Butter Trade Dress were sold to Bega when it bought the Joey business in July 2017.

The Court's summary of the primary judgment shows that the case was not confined to contract construction. Kraft relied on contract, passing off and the misleading or deceptive conduct provisions of the Australian Consumer Law. Bega also relied on passing off and the ACL. There was also a trade mark infringement issue concerning Bega's use of the Kraft hexagon logo on shippers, which are a form of shelf-ready packaging used for supermarket display.

So the Court had to deal with a practical chain of questions. Before the 2012 restructure, where did the goodwill generated by peanut butter sold with this get-up sit? After the restructure, who held the relevant rights and goodwill? Did the 2017 sale transfer the rights to the Peanut Butter Trade Dress to Bega? If Bega had bought those rights, did its use of the get-up mislead consumers or breach any obligations it had assumed? And separately, did Kraft itself engage in misleading conduct or passing off when it later used the same trade dress and certain marketing statements?

For business owners, this is a useful reminder that a dispute about packaging can quickly become a dispute about transaction construction, goodwill, ACL risk, passing off and trade mark use all at once. The answer may depend less on visual similarity alone and more on who actually acquired the business and goodwill associated with the product's look.

The appeal outcome is clear from the orders. The Full Court dismissed Kraft's appeal with costs and dismissed Bega's cross-appeal with costs.

The Court also clearly stated the central reason Kraft failed on the main issue. It rejected what it called the fundamental premise of Kraft's contentions. The Full Court held that, on the true construction of the restructure documents viewed in their commercial context, the Peanut Butter Trade Dress was allocated to the global snacks business, not to the North American grocery business as Kraft had argued.

The Court's introduction also summarised the primary judge's key findings. Those findings included that immediately before the restructure, the goodwill generated in respect of Kraft branded peanut butter bearing the Peanut Butter Trade Dress inured to KFL. After the restructure, that goodwill inured to MAFL. The rights to the Peanut Butter Trade Dress were sold to Bega in July 2017. It followed that Bega was entitled to use the Peanut Butter Trade Dress in the business it acquired and was entitled to take action to protect its goodwill in its peanut butter business by preventing use of the trade dress by others, including Kraft.

The summary also records that the primary judge found Bega did not mislead consumers under the ACL by doing what it had a contractual right to do after buying the business, recipe and goodwill including the Peanut Butter Trade Dress. The primary judge also found that, to the extent Bega had acceded to obligations under the restructure documents, it had not breached those obligations by using the trade dress.

At the same time, the case was not a complete win for Bega on every issue at first instance. The Court's summary records that one of Kraft's ACL complaints about Bega's late 2017 television and radio advertising succeeded in part, while several others did not. It also records that Kraft itself contravened the ACL by releasing a press release in October 2017 and by using the slogan Loved since 1935, and that Kraft engaged in misleading and deceptive conduct and passing off through its use of the Peanut Butter Trade Dress. On the trade mark side, the primary judge found that Bega infringed Kraft's trade marks by using the Kraft hexagon logo on shippers. Bega cross-appealed on that point, but the Full Court dismissed the cross-appeal.

That combination of findings is important. The case was not simply a declaration that one side owned everything and the other side had no rights at all. It was a mixed commercial dispute in which the ownership and goodwill issue strongly favoured Bega, but separate advertising and trade mark use issues still had to be dealt with on their own facts.

The reasons show how heavily the outcome depended on transaction documents and the commercial history of the product. On the restructure side, the Court referred to the Separation and Distribution Agreement, the Master Trademark Agreement, the Master Patent Agreement and the later trademark assignment. Those documents allocated rights between the two newly separated groups and created the licence that allowed the Mondelez side to continue using the Kraft brand for a limited period.

On the Australian operating side, the Court traced the history of the peanut butter business and the marks used with it. KFL had long sold peanut butter in Australia, had registered the Kraft word mark and Kraft hexagon logo in Australia, and had registered Never Oily, Never Dry for peanut butter. The Court also noted that the Peanut Butter Trade Dress had been used by KFL from 2007 and that there was no suggestion in the material that it had been developed or used by any other entity in the group.

The Court also paid attention to what was and was not covered by earlier licence and assignment arrangements. For example, the April 2012 assignment agreement transferred the Kraft word mark and Kraft hexagon logo from KFL to Kraft Foods Global Brands LLC, but did not refer to the Peanut Butter Trade Dress. That kind of omission can become critical when parties later argue about whether unregistered get-up moved with registered marks or remained with the operating business that had built the market recognition.

The 2017 sale documents also mattered. The Joey business was defined to include the business of developing, manufacturing, marketing, selling and distributing spreads including peanut butter in Australia and New Zealand. Bega also entered into a supplemental agreement acknowledging that certain business IP was subject to the earlier master agreements and that any transferee of such IP and related rights would assume the relevant obligations in writing. Kraft relied on that assumption language, but the Full Court still rejected Kraft's core allocation argument.

The conduct of the parties in market also mattered. MAFL sold peanut butter without the Kraft brand but with the Peanut Butter Trade Dress and The Good Nut in June 2017. Bega then continued with Bega branding and the same trade dress after completion. Those facts helped frame the dispute as one about continuity of the peanut butter business and its goodwill, not just a later attempt by a newcomer to imitate a look it had never used.

Businesses should read this case as a warning against treating brand ownership as a narrow trade mark register exercise. The Court's summary shows that the commercially decisive asset was not only the Kraft name. It was also the familiar peanut butter get-up and the goodwill attached to it. If your product is recognised by sight, the overall look may be one of the most valuable parts of the business.

The case is especially relevant in four situations. First, group restructures. If a corporate group is splitting businesses or reallocating IP, the documents need to say clearly what happens to unregistered get-up and the goodwill associated with it. Secondly, business sales. If the buyer expects to keep the product looking familiar on shelves after completion, the agreement should deal expressly with packaging, recipes, artwork, labels, slogans and goodwill. Thirdly, transitional branding. If a licence to use a house brand is ending, the parties need a practical plan for what visual elements can continue and for how long. Fourthly, relaunches. A former brand owner may assume it can return to market using a familiar look, but that assumption may be wrong if the goodwill in that look has moved with the sold business.

The case also shows that a buyer can inherit both benefits and burdens. Bega succeeded on the core ownership issue, but there were still separate disputes about advertising representations and use of the Kraft hexagon logo on shippers. Buying the business and goodwill did not remove the need to manage ACL risk and trade mark use carefully in the transition period.

For practical drafting, think beyond the headline IP schedule. Identify packaging artwork, colour schemes, label layouts, product names, slogans, recipes, manufacturing know-how, shelf-ready packaging, online product images, and any evidence showing how consumers recognise the product. If the buyer is taking over a business with strong shelf recognition, the contract should connect those assets to the goodwill being sold. If the seller wants to preserve freedom to relaunch a competing product later, that reservation needs to be explicit.

Finally, this case is a reminder that courts will read transaction documents in their commercial context. If the commercial reality is that a business has long built goodwill in a particular get-up and that business is then sold as a going concern, a court may be reluctant to accept a construction that strips the buyer of the very presentation that gives the product continuity in market.

If you are planning a sale, carve-out, internal restructure or licence involving branded products, this case gives a practical checklist. Start by mapping the customer-facing assets that actually drive recognition. In many businesses, that will include packaging shape, colour combinations, label design, recurring slogans, product names, and the overall shelf impression. Then ask who has historically used those assets, who generated the goodwill in them, and whether the documents clearly transfer or reserve them.

Next, compare the legal paperwork with the operational reality. It is common for registered marks to sit with one group company while the operating company manufactures, markets and sells the product. That split can create confusion if the documents do not also deal with unregistered get-up and the goodwill generated by local trading activity. The reasons in this case show how much turns on that distinction.

Then deal with transition mechanics. If a house brand licence is ending, can the outgoing operator continue using the old look without the old name for a short period? Can the buyer use shelf-ready packaging that still carries legacy branding? Who approves revised labels? What happens to old stock, artwork files and retailer listings? These are not minor details. They can become the basis of ACL, passing off or trade mark claims if left unclear.

Finally, preserve evidence. Keep records of packaging development, advertising history, market share, consumer recognition, manufacturing continuity and the chain of title for both registered and unregistered rights. In a later dispute, those records may be just as important as the formal IP register.