The Supreme Court of Victoria ruled today Bega Cheese Ltd (ASX: BGA) is entitled to use the Bega trademark on products outside the scope of the Fonterra Shareholders' Fund (ASX: FSF) licence without the fund's consent.
The ruling means, in practical terms, that Bega may use the Bega trademark on its products such as peanut butter and Vegemite, while Fonterra's licence on the trademark will continue on natural and processed cheddar cheese, string cheese, and butter.
Bega's counterclaim, which alleged multiple breaches of the licence agreement by Fonterra, was dismissed.
Response by both parties
In a statement released to the ASX, Bega said it was "pleased that its right to use its brand on [peanut butter and Vegemite] has been confirmed by the court."
René Dedoncker, managing director of Fonterra Australia, gave the following statement to Motley Fool Australia in response.
"We're pleased with the decision that Fonterra will retain exclusive licence for the Bega cheese brand for cheese and butter. We will continue to invest in the Bega brand because we believe in it."
"Although we're disappointed with the decision on the trademark claim, we are confident that we can work together with Bega Cheese Limited to continue to grow the value of the brand."
"We will review the judgement in the coming days and consider our options."
Background to the case
In 2002, Bega Cheese and Fonterra came to an agreement for Fonterra to licence the Bega trademark until 2026 – including blocks and slices of cheese, and Stringers.
According to the ABC, the deal was going well until Bega Cheese announced in 2017 it was buying a suite of Kraft products from Mondelez International Inc (NASDAQ: MDLZ). Subsequently, the Australian dairy manufacturer replaced the Kraft logo on these products with its own Bega logo.
During initial proceedings, Fonterra alleged Bega were "diluting the distinctiveness of the [Bega] brand" and would cause "significant damage to the existing reputation of the Bega trademarks."
Fonterra and Bega share price snapshots
Bega Cheese hit a 52-week high yesterday and this momentum has carried on into today. At the time of writing, the Bega Cheese share price was up on yesterday by 9 cents to $6.24.
Fonterra's share price has also risen today, up by 4 cents to $4.67. This rise has come off the back of a narrowed earnings guidance.
It is not yet clear whether today's court ruling will have any impact on each company's share price.
