Crunch time: Victorian baker wins only some of its costs back after legal victory against granola giant Sanitarium

Irrewarra Sourdough Bakery has been awarded a proportion of its costs following a two-year Federal Court battle with Sanitarium over the use of the word granola. However, the baker missed out on a claim for indemnity costs.

In June the Federal Court found that “granola” was a descriptive word in Australia and so Sanitarium’s trademark on the word had not been infringed by the sale of granola at Geelong-based Irrewarra Sourdough Bakery.

Sanitarium had claimed Irrewarra Sourdough Bakery infringed its trademark on the word granola after the bakery sold packets “much like toasted muesli, although perhaps clumpier” labelled as ”all natural handmade granola”.

Justice Jagot rejected Sanitarium’s argument and held that the words “all natural handmade” were “plainly descriptive of the product” and said Sanitarium’s case “suffers from an air of unreality”.

Costs were not decided at the time but at a costs hearing last week the Federal Court awarded Irrewarra Sourdough Bakery a proportion of its costs while dismissing the bakery’s claim for indemnity costs which would have covered the full amount of its legal expenses.

The owner of Irrewarra Sourdough Bakery, Bronwynne Calvert, told SmartCompany the win was a “fantastic outcome” after two years in court despite not getting indemnity costs.

“It’s very hard to get indemnity costs and we thought the decision was very unfair, but we are not going to appeal it because we do have a very large proportion of our costs back,” she says.

Calvert says it cost the bakery “hundreds of thousands of dollars” to fight the case and now all those legal expense will not be recouped.

“We just felt that it’s a real disincentive for companies defending cases because if you don’t have a good chance of getting indemnity costs then you are always going to be out of pocket defending something,” she says.

“Looking at the way the law operates it’s certainly not an inducement to stand up for your rights.

“But for us the fact that we won the case was good enough and the fact that we got most of our costs back.”

Ben Hamilton, partner at law firm Hall & Wilcox, told SmartCompany for the bakery to get indemnity costs would have been “a very favourable costs order”.

“The court said that the trademark owner’s action was not unreasonable given that it owned the mark, which was granola. So the issues that were relevant included questions of fact, degree and impression,” says Hamilton.

Hamilton says the end result is now the “default” for a legal victory.

“It’s what you would normally expect when someone brings a case against another party, typically the winning party is entitled to a proportion of costs,” he says.