Knauf, the German building materials company, failed to get Fletcher Building's use of the "Batts" trademark for building insulation thrown out on the grounds that it is a common name in general public use.
In a 113-page High Court judgement, Justice Brendan Brown refused a request to revoke the trademark, although he limited Fletcher's claim of infringement of the trademark to the use of "Batt" in the HTML code on the www.earthwool.co.nz website which sold Knauf insulation, and said the use of the word in the installation instructions on the packaging didn't infringe trademark.
"There is clearly a not insignificant degree of use of the words "batt" and "batts" to describe insulation in a generic, non-proprietary sense," Justice Brown said. "However, collectively this evidence is not of a quantity or a quality to cause me to be satisfied that the trademark has become a common name in general public use for pieces of fibrous insulation."
Separately, Justice Brown ruled that Knauf's insulation product Earthwool contravened the Fair Trading Act, in the use and marketing of the name, and that in future it must be accompanied by the words "glasswool" or "glass insulation" in the same font and print size. Fletcher had argued that marketing of Earthwool was misleading because it conveyed the impression it was made from the wool of sheep or other animals when it was not.
Auckland-based Fletcher, New Zealand's largest publicly listed company, is facing increasing competition from Knauf, which has about $1.9 billion in annual insulation sales worldwide compared to Fletcher's $1.3 billion of total building product sales which also includes plasterboard, aluminium doors and windows, and roofing. In February, Fletcher said the local insulation market remained competitive as price declines offset volume gains.
The High Court case shows intense rivalry between the companies in New Zealand, where an estimated 15 million square metres of insulation products are sold every year, most of it made from glass. Fletcher's subsidiary Tasman Insulation makes more than 7 million square metres of insulation from recycled glass a year, sold under the Pink Batts brand.
Knauf exported some of its Earthwool insulation to New Zealand in 2011, with packaging displaying the words "batt" and "batts" in the installation instructions, with sparked the litigation. Fletcher protested the use of its trademark word "Batts", with Knauf subsequently claiming the word had become generic to describe insulation, although it later agreed to stop using the word.
In November 2011, Knauf filed to revoke the "Batts" trademark and in December, Fletcher started trademark infringement proceedings against Knauf and websites marketing its product.
In 2012, the two companies stepped up their competitive marketing campaigns, with Knauf saying its product was driving competitors "batty" and Fletcher responding in a presentation to trade customers about the durability of its rival's product, claiming it was less stiff, "susceptible to slumping" and showing photographs of how bendy the rival product was.
Knauf claimed in an advertisement that the competitor was trying to discredit its product by saying the insulation was "bendy, slumpy, bulgy and bursty" and an associated promotion required customers to enter the code "TASMAN-BS".
Fletcher's Tasman unit objected, saying it hadn't released any statement to discredit its rival using those words. Justice Brown said that although Fletcher had described the Knauf product as "slumpy" and "bendy" in presentations to its New Zealand trade audience, the reference to the product being prone to "bursting" was made by Fletcher Insulation in Australia and hadn't been presented in New Zealand.
Justice Brown therefore concluded that Knauf's inclusion of the words "bulgy and bursty" contravened the Fair Trading Act.
The court found Fletcher was itself in breach of the Fair Trading Act when it undertook "Titanic test" demonstrations to builders in which it submerged Pink Batts and Earthwool in water to show the Earthwool product sank first.
Knauf argued that the testing of buoyancy and water absorption were not relevant to the fitness of the product's use as intended and appeared designed to communicate the existence of a problem which doesn't exist. As part of the demonstration, Fletcher required that its product be removed from the water before it also sank.
Justice Brown ordered inquiries for damages and asked the parties to file memoranda as to costs.