A Sydney burger chain passed itself off as a "legendary" US fast food outlet In-N-Out Burger when it operated as "Down N' Out", the Federal Court has found.
Hashtag Burgers, which runs the Sydney chain, was sued in 2017 after the California-based restaurant took exception to its name, similar yellow arrow logo, and use of In-N-Out's registered trademarks "animal style" and "protein style".
The trademarks, which form part of In-N-Out's "secret menu", are descriptions for burgers or fries with added fillings and a burger wrapped in lettuce instead of bread.
Down N' Out opened as a pop-up in Sydney in 2016, originally styling its name as "Down-N-Out", and has since had a presence in the CBD, Penrith, Wollongong, Crows Nest, Ryde and the Gold Coast.
In a Federal Court hearing last year, business owners Benjamin Kagan and Andrew Saliba said through their lawyers that they were "inspired" by In-N-Out, but the other side accused them of "clinging to In-N-Out's coat-tails".
In a judgment this week, Justice Anna Katzmann found the Australian operators "sailed too close to the wind" and said the case considered "the line between inspiration and appropriation".
Justice Katzmann said the businessmen ran a burger event in the Sydney suburb of Chippendale in 2015, where patrons were told on social media to expect "the legendary In’N’Ou … I mean the Down’N’Out burger".
For that "Funk-N-Burgers" event, Mr Saliba emailed a copy of the In-N-Out logo to a graphic designer and asked him to make "a funk n burgers sign like in n out burger (sic)". The designer complied.
In 2016, when Down-N-Out opened, the logo initially included red text and a yellow arrow, similar to In-N-Out. A media release described the business as the "cheekily named Down-N-Out" and "Sydney's answer to In-N-Out burgers".
The business was sent a cease and desist letter in June that year, so the logo was changed and the name restyled as "D#WN N’ OUT". In correspondence with the graphic designer, Mr Kagan said there had been "legal issues" and added, "need to differentiate ourselves ASAP before we get sued lol".
Lawyers for In-N-Out claimed in court Down-N-Out was "deceptively similar", passed itself off as In-N-Out, infringed In-N-Out's registered trademarks, and engaged in misleading and deceptive conduct.
Justice Katzmann said it was "no coincidence" that Mr Kagan and Mr Saliba settled on the name "Down-N-Out", which was adopted to remind consumers of the other restaurant. She said the name, when used with a "secret menu", is likely to have fostered confusion.
"The respondents’ own media release referred to the adoption of the name as 'cheeky', thereby owning up to their impudence," she said.
"I therefore find that the respondents sought to attract potential customers by having them wonder whether Down-N-Out was, indeed, In-N-Out Burger, perhaps a down-market or down-under version, or at least that the two were connected or allied in some way. That was what was cheeky about its choice of name."
Justice Katzmann said In-N-Out has hosted eight "very popular" pop-ups in Australia since 2012, which all reported long queues and burgers selling out within hours.
A substantial number of people in Australia were aware of In-N-Out when Down-N-Out started in 2016, Justice Katzmann said, including from past media reports that the restaurant was "Ian Thorpe's favourite fast food place" because of the lettuce wrap and his no-carbohydrate diet.
"There is a sufficiently close resemblance between the two names to give rise to a real, tangible danger of confusion," she said.
The case will return to court next month.