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Name Calling: When Businesses Collide

Sue Hoban | The Manly Daily | 12 May 2001

Lawyers Weekly | 14 Feb 2003

This article written by Sue Hoban of The Manly Daily covers the name and trade marks dispute between Australian beachwear business, Absolut Beach, and Vin & Sprit, owner of the Absolut Vodka brand.

For the past three months Avalon businesswoman Tina Hanson has felt as though she has been living through a nightmare. She still can't accept the reality that, in a few days' time, courts in two countries on the other side of the world will be hearing cases which are calculated to destroy the small swimwear company she and her husband set up on the northern beaches almost four years ago.

In a classic David-and-Goliath battle that should have alarm bells ringing across the Australian business community, this small company, with an annual turnover of just $100,000, has been lined up in the sights of the billion-dollar, Swedish Government-owned company Vin & Sprit.

At issue is their company name, Absolut Beach. Vin & Sprit, as owner of the Absolut Vodka brand, claims the name infringes its trademark and is using courts in the United Kingdom and the United States to force the Australian company to give up its lawfully registered company name and matching internet domain names. At the same time, it has prepared the ground for possible legal action in three other countries.

The. peak business body, the Australian Chamber of Commerce and Industry, although guarded in its rise to this case, has described it as "the tip of the iceberg" and a possible forerunner to many contentious cases as companies increasingly take up the global-trade opportunities of the Internet.

But the Australian Government, through its National Office for the Information Economy, although claiming to be sympathetic to Absolut Beach's plight, has remained on the sidelines. The office claims its experience is an isolated one and government action is therefore not warranted.

This has left these small business operators isolated asthey continue to fight tooth and nail for their survival. But Tina Hanson says the worst part of the nightmare is that, even if they win next week and succeed in their bid to have the cases dismissed at the preliminary hearing stage, they fear Vin & Sprit will simply continue its legal onslaught by appeal, or in other countries, until they are financially exhausted and unable to continue the fight.

They have already had to outlay $40,000 to engage lawyers in Britain and the US and are expecting those costs to rise quickly to at least $100,000.

... Australian lawyer, [and] intellectual property specialist Noric Dilanchian, said their fears were understandable. "Using the pressure of legal costs is a standard means used by litigants to get their way," he said. "Most people understand legal proceedings in a fairly simple way as an exercise involving perhaps a one-two punch, but the reality is it can involve death by a thousand cuts and a bigpockets litigator can bleed dry a small business. A dispute over a trademark and over name rights is going to involve great financial cost as well as enormous management time and emotional investment. In all those circumstances larger corporations can, and often do, use the position of their strength to push even flimsy legal arguments and they can ultimately win, not because of the strength of their legal argument, but because of the strength of their treasury. They can suffocate the enemy and simply grind them down with legal costs. This is a procedure that is used very often in intellectual property cases in particular."

Despite efforts this week by The Manly Daily, Vin and Sprit has failed to respond to requests for comment.

Dilanchian said Vin & Sprit's decision to launch the legal action overseas rather than inAustralia, and in two countries simultaneously, could be a calculated part of such a strategy."Taking action in a different jurisdiction to the person you are attacking can certainly put the otherparty at both a legal and financial disadvantage. It is, quite clearly a financial disadvantage to defend yourself in a jurisdiction outside your own." Hanson and her husband Bo Ernfridsson are angry that Vin& Sprit, which has been aware of their company's existence since its Australian trademark applicationwas being processed, did not pursue action in Australia. "Vin & Sprit did oppose our trademark backthen, but just a day or two before they had to hand in their evidence we got a letter from their solicitorsaying they had been advised by their client to withdraw their opposition, so it is not as though theyhaven't had a legalchance within Australia to do something about it,"

Hanson said. "They have their trademark registered in category 33, alcohol, and we have it in 25, clothing. If there was a problem why would the IP (Intellectual Property) Australia have different sectors in the first place?" She said the Swedishcompany would also have been aware from the outset that Absolut Beach intended to operate as amail order and internet business and, presumably, that it had registered the domain name absolutbeach.com and had its website up and running by the time the Australian trademark challenge was made. It also registered a second domain name - absolutebeach.com - before the challenge was withdrawn, because it had embarked on a radio advertising campaign and wanted to ensure listeners could find the site under either spelling.

For many months after this back-down, Tina Hanson continued to concentrate on building up her swimwear design and manufacturing business, oblivious to the storm clouds gathering on the other side of the world.

"Suddenly we got threatening letters quite simultaneously from solicitors in five different countries - the US, the UK, Sweden, Greece and Canada -threatening that if we didn't cease trading they would start litigation, so we immediately sought legal advice but we were confident, based on that advice, that they didn't have a leg to stand on and that it was just one of these power games, so we let it rest," she said. Then everything was quiet and we kept trading until January this year when we got a summons from the UK saying they were suing the company and us personally."

A hearing has been set down for Tuesday in the British High Court of Justice where Vin & Sprit is claiming damages and costs and seeking an injunction to stop the Australian company using the name Absolut. It is also asking the court to have it taken off the Australian companies register. On the second front, a hearing will take place on Friday in the US District Court of Eastern Virginia where Vin & Sprit is accusing Absolut Beach of trademark infringement, trademark dilution and cyber-squatting (where somebody registers a domain name in anticipation that somebody else will want it, so as to extract money for the site). The action is seeking to have the court strip Absolut Beach of its domain names and to prevent it from operating with either the word Absolut or Absolute in its name.

The founders of Absolut Beach vehemently deny they are trying to benefit by implied associationwith the Swedish company, insisting that being of Swedish origin themselves, they simply pickedup the Germanic spelling of what they regarded as very commonly used word in their nativelanguage. "It is a generic word and means exactly the same in English as in Swedish and we have justtaken the Germanic spelling which many countries use," Hanson said. "We knew the vodka brand, but what people don't realise is that alcohol cannot be advertised in Sweden. It was not allowed during the time we lived there and when we came to Australia Absolut Vodka was by no means then, and still is not, a major brand " We had no intention, and still believe we are not, infringing on anyone else."

She said Absolut Beach was actually their second choice of name and was the innocent product of a brain-storming session. "The ironic part, if you can see the humorous side -sometimes I can and sometimes I can't - is that we actually, had another name, Samba, but when we double--checked we realised it was already taken and we would have been infringing on them, so we turned around and looked for another name. "

With the Internet now posing a challenge to established territorial property rights and trademark law and seemingly racing ahead of attempts by the world's governments to develop some sort of regulatory framework, the Absolut Beach case is throwing up lessons for other businesses which plan to engage in e-commerce.

Brent Davis, the Australian Chamber of Commerce and Industry's director of international trade, said it touched on many of the complicated legal matters which would have to be addressed in international electronic commerce law and could well be a forerunner to many similarly contentious cases. "I think it is going to be a matter of potential dispute between companies," he said. "Traditionally Australian firms have focused on whether someone has a similar or the same name within Australia, now they will have to cast a wider net and be conscious whether there are similarities in other countries. "Many of these issues are important next-generation issues in international trade law. It is an issue that will have to be thought through carefully by our trade negotiators, and if we get a new trade liberalisation round these are the sorts of issues, that will have to be put on the table in talks on intellectual property. Tom Dale, regulatory general manager of the Federal Government agency, the National Office for the Information Economy, acknowledges this case has highlighted the uncertainty that surrounds internet and domain name rights and the lack of any global regulation. But he said the Government was limited in its ability to assist Absolut Beach. "The Australian Government has sympathy with any firm in this situation but, faced as we are now with a court case in another country, the scope for either the Australian Government or the UK Government to intervene is very limited," he said.

It is not the sort of issue which is really a government-to-government one at the moment, but we are watching it very closely."

He said Absolut Beach was the only Australian company he was aware of to have been confronted by such a challenge from a big overseas company to its properly registered company identity and presence on the Internet. But he said if this emerged as a bigger problem the Government would then consider action. "If that happens the Government will consult with those businesses (affected) to try to work out whether the international legal system or any of the arrangements Australia is part of, such as the World Intellectual Property Organisation, can provide the answer."

Lawyer Noric Dilanchian said the Absolut Beach case d the greater risks Australian companiesnow faced of being sued overseas for commercial rather than legal reasons. "If you are settingup a small business which is very reliant on the World Wide Web for marketing then you need toconsider your business and legal circumstances more broadly than you have ever had to," he said."That means greater cost on local companies because you need to get more legal advice and youneed to get it not just from Australia, but from other countries. If you don't, you run the risk of investing a lot of money setting up your business and then having to close it down because of a threat to your main artery - your website."

Dilanchian said this was the greatest threat the Absolut Beach owners now faced from the legal actions launched against them overseas. He said by itself, a ruling by a court in another country could not wipe out registration of a trademark in Australia. That would require follow-up proceedings to be instituted in this country. But, he said, the danger of the US action was that the computer server which hosted the Absolut Beach website was located in the US. It was therefore within the jurisdiction of the US court to close down the website, which was the key artery for the business. "Absolut Beach is a company born in the Internet," he said. "It uses the web as its main marketing mechanism. If a very large company claims it has rights which are being infringed and, through its power, is able to close down the computer that hosts the website, then that company is, in effect, able to close down the business of Absolut Beach" He said if it had to re-establish a web presence under another name the company would face enormous financial cost, a big time delay and lose the value of the publicity it had gained from the tens of thousands of people who had chosen Absolut Beach as a "favourite" or "bookmarked" site.

Tina Hanson and Bo Ernfiridsson have often been asked why they don't simply save their legal expenses, accept defeat and change their name to something that does not include either of the challenged words, Absolut or Absolute. Their response is to point to the $500,000 they claim it would cost them to engineer this and to re-establish the same level of brand recognition they enjoy after four years' investment in building the Absolut Beach brand name in Australia. Either way they lose, so they believe they have no choice but to fight. "We have invested four years of blood, sweat and tears in this business," Hanson said. "To run a business you sacrifice a lot of things. You don't go on holidays, you don't do a lot of other things because you believe in your business, you want it to be successful and you want to do the right thing by your customers and when you are little you do it all by yourself. We have worked very, very hard and it is really heart-wrenching to see what big business can do.

"This also sets a precedent which has outright dangerous implications for Australian business. I am fighting for my own business, but I am also fighting for the principle that no one should be allowed to use the laws of another country to try to circumnavigate Australian law. "

Whatever happens in next week's hearings, the couple are reconciled that they may well have to go on fighting until they are bankrupted. In this lone battle they know they are no match for a billion-dollar company. "I think if it doesn't work this time they will keep appealing and appealing and they will proceed in all of those other countries like Canada and Greece and Sweden," Hanson said. "I have learnt since this started that they don't give up. I will not be surprised to have other people knocking on my door one day with summonses. I won't be surprised at all."

Vin & Sprit was informed about this story on Wednesday morning (Swedish time) and asked its reasons for launching legal action against Absolut Beach. No response had been received at the time of going to press.


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