Cafes and health food shops around Australia can put toasted breakfast cereal back on their menus after a legal stoush over the word ''granola'' resulted in victory for a small Victorian bakery.

Multinational food giant Sanitarium sued the Geelong-based Irrewarra Sourdough Bakery for infringing its trademark on the word ''granola'' after the bakery sold packets of toasted nut, seed and oat mix labelled ''all natural handmade granola''.

Sanitarium has a trademark on the term as part of its ''Granola Oat Clusters'' breakfast food.

The legal battle, which played out in the Federal Court earlier this month, involved forensic descriptions of granola (''like toasted muesli although perhaps clumpier''), a history of the foodstuff, and evidence from food writer Jill Dupleix.

It followed reports in late May that cafes around Australia, including the Danks Street Depot, were forced to change their menus to remove the word ''granola'' after receiving legal letters from Sanitarium.

Sanitarium argued the word ''granola'', widely understood in the United States to mean a crunchy toasted cereal, had a more ''boutique'' meaning in Australia and was limited to its own breakfast products.

The company's lawyers argued the bakery had been using the term ''granola'' as a trademark and to distinguish its product from similar cereal produced by other companies.

But lawyers for Irrewarra argued the use of the word was ''purely descriptive''.

In a judgment handed down last week, Justice Jane Jagot agreed with the bakery. She said the word did not have any prominence on the cereal packet, which was dominated by the Irrewarra Sourdough Bakery's distinctive black-and-white logo.

Justice Jagot rejected Sanitarium's case, which in her words ''appeared to reduce to the proposition that any use of the word granola on a cereal product must be a trade mark use''.

She also rejected the proposal that the word had only a limited meaning in Australia.

''The fact is that the word granola has appeared in Australian dictionaries since at least 2004 and … has had more than a century of usage in the US to percolate into the consciousness of Australians,'' she said.

Irrewarra also provided the court with evidence from food writer Jill Dupleix about the prevalence of granola products in Australia.