When a Licence Almost Took a Brand Away From Its Owner

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Published: 11 November 2025 | Reviewed: 5 December 2025
(3-minute read)

How one clause decided who could use the name “Bega”, and
why clarity protects more than creativity.

A company licensed its own brand to another business,
then years later was told it might no longer be allowed to use its own name on new products.

The Structural Risk Exposed in the Judgment

This dispute was not about cheese. It was about the power of words in a contract, and what happens when one party believes exclusivity stretches further than the contract actually says.

In 2001, Bega Cheese licensed Fonterra (and its subsidiary Bonland) to use Bega trade marks on very specific categories: cheddar, string cheese and butter. The agreements were detailed, negotiated, and built around a defined list of “Products”.

Years later, when Bega began expanding its brand into new categories such as peanut butter, parmesan and spreads, Fonterra argued that the original agreements prevented Bega from using the “Bega” mark on any product, unless Fonterra consented.

Fonterra said “exclusive” meant exclusive across everything.

The Court disagreed.

Justice McDonald held that the licence covered only the Products precisely defined in the agreements. Nothing more. The restriction on Bega’s use of its own trade marks was limited to those Products, not to all goods. The text was clear, the definitions precise, and the Court refused to “rewrite” the deal to broaden Fonterra’s control. Fonterra Brands (Australia) Pty…

Other claims, rectification, restraint of trade, breach of consumer law, breach of marketing obligations, all failed. Both sides lost some ground, but the structural truth was unmistakable:

If a contract restricts your rights, it only restricts them to the extent the wording actually says.

Why This Still Matters Today

Fonterra v Bega is now a foundational case in Australian brand licensing. Its lessons cut across every commercial relationship:

Exclusive rights extend only as far as the contract defines.
Assumptions about “total control” or “whole-brand exclusivity” carry no weight unless written.

Courts do not fill gaps with hindsight.
They enforce clarity, not commercial convenience.

Definitions are destiny.
A single defined term can decide whether you control a market segment — or lose it.

For businesses negotiating licences, partnerships, brand extensions or joint ventures, the case is a reminder that fairness is not found in intention. It is found in precision.

What Went Wrong Structurally

Nothing about Fonterra’s claim was dishonest. The issue was structural.

The agreements contained:

• clear definitions of the licensed Products

• clear references to cheddar, string cheese and butter

• no language giving Fonterra broader category control

Fonterra sought to expand the meaning of the words after commercial circumstances changed. But the Court emphasised that unambiguous wording cannot be displaced by what one party believed was meant.

The structural flaw was not behaviour, it was misalignment between expectation and text.

The Universal Lesson

Contracts do not protect what you meant. They protect what you wrote.

If a business relies on assumptions about exclusivity, scope, or rights without ensuring the drafting matches those assumptions, the risk is structural and unavoidable.

Fairness in agreements comes from clarity at the start, not litigation at the end.

The Structural Fix: Independent Statements for Contract Clarity

The conflict in Fonterra v Bega grew from uncertainty about what each party thought the contract covered. Clean Law’s Independent Statement principle eliminates that risk.

At the beginning of every engagement:

• the client confirms what each clause means to them

• the advocate confirms the same, independently

• any mismatch is resolved before work begins

• both records form part of the engagement file

This independent, two-voice confirmation protects against exactly the type of dispute that cost Fonterra and Bega years of litigation. It ensures meaning is aligned, not assumed.

Where the judgment shows how unclear expectations can threaten a brand worth hundreds of millions, the Independent Statement shows how structure keeps intention and text in harmony.

Power Lives in Precision

Fonterra v Bega is not merely a commercial fight. It is a reminder that power in agreements sits inside the words, not around them.

A few defined terms preserved Bega’s right to use its own name.
A broader reading, if accepted, could have frozen a national brand.

Fairness is not a matter of voice or bargaining strength. It is a matter of clarity, discipline and structure, long before conflict arises.

See how Independent Statements create clarity that lasts through every stage of your matter.

If you want structural safeguards built into your next agreement:
Request a Confidential Call

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Read Fonterra Brands (Australia) Pty Ltd v Bega Cheese Ltd [2021] VSC 75

By Nicky Wang
Principal Solicitor
Legal Liaison Ltd (trading as Clean Law)
Prepared in accordance with public-interest governance,
annual Law Society trust-account audits, and ACNC-reported standards.

Disclaimer: This page is intended to provide general information only and is not legal advice. The contents may not reflect the most current legal developments and do not take into account your individual circumstances. You should not act or refrain from acting on the basis of this information without obtaining legal advice tailored to your situation.