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Health Claims loophole now threatened

Published: 4 Mar 2010

By Joe Lederman and Charles Fisher
FoodLegal Lawyers and Consultants
© Lawmedia Pty Ltd, March 2010

The “Transitional” Health Claims Standard 1.1A.2 of the Australian New Zealand Food Standards Code has allowed food marketers to find various legal avenues that permit the marketing of the healthier aspects of their products without infringing the Food Standards Code. In 2009, one of these avenues was challenged by a government regulator. Our article examines the extent to which a loophole area may still be relied upon in the marketing of the “healthy” aspects of food without infringing the law.

Use of a Trade Mark in relation to the Health Claims Standard

Transitional Standard 1.1A.2 of the Australia New Zealand Food Standards Code (the Food Standards Code) prohibits a number of prescribed claims in relation to “health” or any “therapeutic action” for a food product. One particular prohibition is in Clause 3(b) of Standard 1.1A.2, which prohibits use of the word “health” in, or in conjunction with, the name of a food product.

Yet, a search of the Trade Marks Register today produces 194 matches for the word “health” in food-related categories. The main explanation for this is the unusual legal framework for enforcement of food laws in Australia and the use of the Australian Constitution as a legal defence against potential prosecution for an alleged breach of the Food Standards Code. The Trade Marks Act 1995 is a Federal Act. The Food Standards Code is also a Federal legislative instrument. However, the laws which make it a criminal offence to breach the Food Standards Code are in fact the Food Acts enacted in each State and Territory.

While the use of a registered trade mark is endorsed by Federal legislation the prohibition on making certain health claims is enforced by State legislation. According to Section 109 of the Australian Constitution, where a Federal and State law conflict, the Federal law will prevail over State law. This constitutional situation has been especially used to overcome the Food Standards Code prohibition on the marketing of health claims.

Clearly, basing a marketing campaign on an unregistered, health-related mark may expose a company to risk of prosecution for breach of the Food Standards Code, although registration of a trade mark may confer retrospective legal protection to the date of first application. This legal protection provided by registration of a trade mark may even extend beyond the date of original Australian application if an application to register the same trade mark had been made earlier in an overseas jurisdiction.

[Other legal benefits arising from the use of registered trademarks are discussed in our article “Using certified trade marks to manage legal risks in food marketing” in the April 2009 issue of FoodLegal Bulletin.]

Trade mark defence under attack from NSWFA

Once a trade mark has been registered, it falls under the protection of the Trade Marks Act. However, Section 42(b) of the Trade Marks Act also states:

An application for the registration of a trade mark must be rejected if […] its use would be contrary to law.

Given that breach of a State or Territory Food Act would be considered “contrary to law”, grounds exist for a person to object to a trade mark application that arguably contravenes Transitional Standard 1.1A.2 of the Food Standards Code. This is because any breach of the Food Standards Code is a breach of State or Territory laws (namely the Food Act of each jurisdiction), as mentioned above.

During 2009, the New South Wales Food Authority (NSWFA) took the unprecedented action of opposing an application for a trade mark that arguably carried a strong health connotation. On 6 February 2007, National Foods Milk Limited had applied to register the following logo and phrases as trade marks in Australia:

"PURA HeartActive"

and

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The fact that it takes a considerable period from the making of a trade mark application to the date of hearing an opposition is illustrated by this case. The application was made in February 2007 and it took until May 2009 for the matter to be heard.

Three grounds for opposition

The NSWFA contended that the above logo and phrases (the proposed trade marks) would breach three restrictions in Transitional Standard 1.1A.2 of the Food Standards Code (and by extension Section 21 of the Food Act 2001 (NSW)). These particular restrictions are all contained in Clause 3 of Transitional Standard 1.1A.2:

(3) (a) Save where otherwise expressly prescribed by this Code, any label on or attached to a package containing or any advertisement for food shall not include a claim for therapeutic or prophylactic action or a claim described by words of similar import.

(b) Any label on or attached to a package containing or an advertisement for a food shall not include the word 'health' or any word or words of similar import as a part of or in conjunction with the name of the food.

(c) Save where otherwise expressly prescribed by this Code, any label on or attached to a package containing or any advertisement for food shall not contain any word, statement, claim, express or implied, or design that directly or by implication could be interpreted as advice of a medical nature from any person.

A claim for therapeutic or prophylactic action

The NSWFA contended that the words “HEART ACTIVE” would convey to consumers that consumption of the product (low fat milk) would defend or protect consumers from heart disease or illness, and thereby fall within the definition of a prohibited claim for a “prophylactic action”.

The Trade Mark Registrar’s Delegate hearing the matter agreed with the NSWFA that the claim was a matter of context (hence applying a similar test applied to verify whether or not a claim can be misleading or deceptive: taking into account the overall impression of the product). While he found that the words “HEART ACTIVE” carried a vague suggestion of general goodness and that the claims promoted health or healthiness, he said this did not amount to a claim for a prophylactic action. Therefore, the proposed trade marks were not found to be in breach of Clause 3(a) of Transitional Standard 1.1A.2.

It was also found to be important that, unlike Clause 3(c), the implied claims of a therapeutic or prophylactic action cannot be considered to breach Clause 3(a), but only an express claim can be considered to breach Clause 3(a).

Implied advice of a medical nature

The NSWFA argued that the words “HEART ACTIVE” suggested exercise and therefore could be interpreted by some consumers to be advice of a medical nature. The Delegate was reluctant to assess or predict the perceptions of consumers but nevertheless referred to his previous assessment that the proposed trade marks were too vague to be interpreted as “advice of a medical nature”.

The word “health” in conjunction with the name of the food

As the NSWFA admitted, the argument that the phrase "HeartActive" had the word "health" in conjunction with it was not a strong argument. The Registrar’s Delegate found that use of a trade mark would be “in conjunction” with the name of the food, however he also found that the words “HEART ACTIVE” did not have connotations similar enough to the word “health” so as to constitute a breach of the Food Standards Code.

Onus of proof

Both parties agreed that the NSWFA had to prove that the proposed trade mark would (and not could) break the law. Given that the rules of the trade mark hearings are different to those of a court, the NSWFA only had to prove that the proposed trade mark breached the Food Standards Code “on the balance of probabilities” (or put another way: that it would be more likely that the proposed trade marks broke the law than not) for the purposes of a trade mark opposition hearing.

However, if the NSWFA had been pursuing National Foods in court for breach of the Food Standards Code (in contrast to simply opposing an application for a trade mark), the NSWFA would have had to prove its case “beyond a reasonable doubt”; a much higher standard of proof.

Refusal to look at extra evidence

In this hearing, the Registrar’s Delegate refused to consider further evidence being tendered by National Foods Milk Ltd due to procedural matters (in particular that the evidence was tendered unnecessarily late). The evidence being tendered consisted of a Preliminary Assessment Report of an Application to ANZFA (the predecessor of FSANZ) made by NSW Department of Health and a letter from NSW Department of Health to ANZFA. These documents apparently constituted evidence of contrasting or conflicting views held by NSW Health in relation to the current health claims prohibitions.

Despite not accepting the evidence, the Registrar’s Delegate commented that it could have had an impact on his decision. Therefore, when any food company finds itself being opposed by the NSWFA (or any other food regulatory authority), it ought to consider making a Freedom of Information search of any such documents by the relevant government agency and tender them in a timely manner in support of registration of any proposed trade mark.

Conclusions

It is important to note that this finding by the Office of Trade Marks does not constitute binding legal precedent in an Australian Court. However, the decision is one of the few public explorations and findings by a government regulator in relation to the health claims prohibition and may serve as persuasive argument in any conflict with a food law regulator.

In this case, it was considered by the Trade Mark Registrar’s Delegate that the proposed trade marks did not make any concrete claims as to a therapeutic action, did not contain the word “health” and did not contain any implied advice of a medical nature. However, what this case demonstrates is how at least one of our food law enforcement authorities has taken action to oppose trade mark registrations that could infringe the prohibitions on health claims.

At the very least, such opposition will delay a marketing campaign.

At the worst, the trade mark will not be registered. Given that the views of the delegate were that breach of the Food Standards Code would be “contrary to law”, any trademark that is less vague or contains the word “health” or “healthy”, if opposed, could well be refused registration. All could simply depend on how vigilant bodies such as the NSWFA are in relation to trade mark applications.