Ahiida Pty Ltd v JB Trading Group Pty Ltd - [2016] FCCA 3146

FEDERAL CIRCUIT COURT OF AUSTRALIA

AHIIDA PTY LTD v JB TRADING GROUP PTY LTD

[2016] FCCA 3146

Catchwords:
INTELLECTUAL PROPERTY – Admitted infringement of design – damages hearing – whether compensatory damages should be paid to the applicant by the respondent – whether damages for reputational damage should be paid to the applicant by the respondent – whether additional damages should be paid to the applicant by the respondent – whether the respondent’s conduct was flagrant – no flagrancy – whether additional damages should be ordered in where no loss proved and infringement admitted – what constitutes other relevant matters – additional damages ordered.

Legislation:
Federal Circuit Court Rules 2001 (Cth), pt.27
Designs Act 2003 (Cth), ss.71,75
Copyright Act 1968 (Cth), s.115

Cases cited:
Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (in liq)(2007) 157 FCR 564
Placer (Granny Smith) Pty Ltd v Theiss Contractors Pty Ltd (2003) 196 ALR 257
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
GM Holden Ltd v Paine (2011) 281 ALR 406
Elwood Clothing Pty Ltd v Cotton On Clothing Pty Ltd (2009) 81 IPR 378
MJA Scientifics International Pty Ltd v SC Johnson & Son Pty Ltd (1998) 43 IPR 275
Raben Footwear Pty Ltd v Polygram Records Inc (1997) 145 ALR 1
Prior v Lansdowne Press Pty Ltd [1977] VR 65
Ravenscroft v Herbert and New English Library Ltd [1980] RPC 193
Autodesk Australia Pty Ltd v Cheung (1991) 94 ALR 472
Review Australia Pty Ltd v New Cover Group Pty Ltd [2008] FCA 1589
Microsoft Corporation v Ezy Loans Pty Ltd (2004) 63 IPR 54
Review Australia Pty Ltd v Innovative Lifestyles Investments Pty Ltd & Anor (2008) 166 FCR 358

Applicant:

AHIIDA PTY LTD (ACN 109 448 491)

Respondent:

JB TRADING GROUP PTY LTD (ACN 132 410 729)

File Number:

SYG 2363 of 2015

Judgment of:

Judge Emmett

Hearing date:

28 November 2016

Date of Last Submission:

28 November 2016

Delivered at:

Sydney

Delivered on:

19 December 2016

REPRESENTATION

Counsel for the Applicant:

Mr Greg Johnson

Solicitors for the Applicant:

Gestalt Law

Respondent:

No appearance by or on behalf of the Respondent

FEDERAL CIRCUIT
COURT OF AUSTRALIA AT
sydney

SYG 2363 of 2013

Ahiida Pty Ltd

(ACN 109 448 491)

Applicant

And

JB Trading Group Pty Ltd

(ACN 132 410 729)

Respondent

REASONS FOR JUDGMENT

1. Background

This is an application commenced by way of Statement of Claim filed on 3 October 2013, seeking damages for lost profit, damage to reputation, and additional damages allegedly arising out of the respondent’s infringement of the applicant’s Australian Registered Designs.
In October 2014, the applicant filed an Application seeking default judgment based on various failures by the respondent to comply with directions made by the Court. On 24 March 2015, by consent, the Court made Orders requiring the respondent to answer a Notice to Produce by 31 March 2015. The Orders agreed to by the parties provided that Judgment would be entered for the applicant and the Cross-Claim dismissed if the respondent failed to comply. Thereafter, the parties argued about whether or not the subpoaena had been answered. Ultimately, again by consent, Judgment for the applicant was entered by me on 9 December 2015 with damages to be assessed.
The applicant alleges that, at least since 21 February 2011, the respondent has infringed the applicant’s Australian Registered Design numbers 300231, 302022 and 302023 (“the Designs”) by importing and offering for sale Islamic swimsuit sets SS101 and SS102 which embodied the applicant’s Designs. Design 300231 was registered on 8 November 2004 and was in respect of a top connected to a headpiece. Designs 302022 and 302023 were registered on 9 June 2005 and were in respect of an article of clothing. Copies of the drawings of the Designs are attached and marked “A”.
The applicant alleges that the respondent offered to sell adult Islamic swimsuit sets SS101 via the websites and www. rayannesdesign.com.
The applicant also alleges that since 24 June 2013, the respondent has infringed the applicant’s Design 302022 by engaging in similar conduct in respect of girl’s Islamic swimsuit sets SS102.
The respondent was represented by lawyers in Perth and either appeared by counsel or otherwise by the respondent’s solicitor via telephone in all directions hearings up until 18 April 2016. On that occasion, the matter was referred by me for mediation pursuant to Part 27 of the Federal Circuit Court Rules 2001 (Cth) on the issue of damages. All evidence and submissions on the issue of damages had been filed and served by both parties prior to the mediation.
On 4 November 2016, Registrar Tesoriero certified that the matter had not settled at mediation and that the mediation had been concluded.
The matter then returned before me and I set it down for a directions hearing on 15 November 2016. No leave was given for further telephone attendance.
On 15 November 2016, the respondent did not appear. I noted that the respondent had filed evidence and submissions on the issue of damages. I made various trial directions and set down the matter for a damages hearing on 28 November 2016. The Orders made by me on that occasion included Orders that no further evidence or interlocutory application be filed without leave of the Court.
There was no appearance by or on behalf of the respondent at the damages hearing on 28 November 2016 and no leave was given to the respondent or the respondent’s representative to appear by telephone. If defended, the hearing was likely to have involved cross-examination. I had found it very unsatisfactory conducting directions hearings by telephone from Perth. In my view, it was necessary for the parties and their representatives to be present at the hearing. The matter had been hard-fought by both parties for more than three years and I was concerned that a hearing other than in person was only likely to protract the matter and make it more complex. It would not have been a case that readily lent itself to evidence by videolink.
I am satisfied that the respondent was aware of the hearing and for whatever reason chose not to attend. In the circumstances, I am satisfied that the damages hearing can proceed in the absence of the respondent.

2. The Evidence

At the commencement of the damages hearing, the applicant read three affidavits of Aheda Ann Zanetti affirmed 21 July 2014, 16 February 2015 and 1 March 2016. The applicant also tendered two affidavits of the director of the respondent, Rola Jneid, affirmed 20 October 2014 and 30 April 2015, which together were marked Exhibit 1A. These affidavits formed part of a bundle of documents prepared by the applicant for the damages hearing and of which the respondent had notice.
The affidavits of each of Ms Zanetti and Ms Jneid contained evidence that may have been objected to. However, because of the lack of appearance by the respondent, the applicant’s evidence was unchallenged. Further, because the respondent’s evidence formed part of a bundle of documents prepared by the applicant for the damages hearing, and of which the respondent had notice, that evidence also went in unchallenged. Later in these Reasons, I have endeavoured to make findings arising from that evidence.

2.1 Applicant’s Evidence

Ms Aheda Zanetti is a director of the applicant.
The affidavit of Ms Zanetti affirmed 21 July 2014 deposed that on or about 20 January 2013, the applicant purchased an adult Islamic swimsuit set SS101 from the respondent and annexed photographs of that set. Ms Zanetti further deposed that on or about 6 June 2013, the applicant purchased a girls’ Islamic swimsuit set SS102 from the respondent, and annexed photographs of that set. Those photographs are annexed and marked “B”.
On 2 April 2013, the applicant instructed its solicitors to issue formal demands to the respondent that it cease immediately sales of Islamic swimsuit sets SS101 and SS102 and provide undertakings.
That letter informed the respondent that the applicant has operated its business in designing and manufacturing Islamic swimwear and exercise-wear since 2003. The letter further informed the respondent that the applicant was the owner of the Burqini/Burkini Trade Mark. The letter asserted, inter alia, that the respondent was infringing the applicant’s Designs and alleged that “it has come to our client’s attention that you have stocked and are flagrantly selling unauthorised copycat versions of our client’s BURQINI swimsuits on the websites and www. rayannesdesign.com.au [the Infringing Product]. The Infringing Product is identical to, or substantially similar in overall impression to, our client’s Australian Registered Designs. The Infringing Product does not emanate from our client.”
Ms Zanetti’s affidavit, affirmed 16 February 2015, deposed as to the history of the development of the applicant’s Designs. Ms Zanetti said that in about April 2003, she was watching her niece play a game of netball in circumstances where her niece’s team comprised mainly Muslim women. Ms Zanetti stated that she noticed how cumbersome the Muslim clothing was for women playing netball that day. Ms Zanetti stated that, following the game, she unsuccessfully searched the internet in an attempt to locate Muslim clothing that would be suitable for sportswear.
Ms Zanetti deposed that the next day, she produced her own trial garment, intended to address general sporting considerations within the cultural needs of Muslim sportswomen. Ms Zanetti stated that she then conceived the Trade Mark Burkini for her garments to be used as swimwear. Ms Zanetti deposed that she spent more than twelve months developing Design 200231, and a further five months developing Designs 302022 and 302023.
Ms Zanetti deposed that, because of the novelty of the Designs, she knew she was required to seek and take formal religious certification. Ms Zanetti stated that the applicant’s garments were endorsed as culturally and religiously appropriate by the Australian Islamic Council and the former Mufti, Shiek Taj el-Din al-Hilali.
Ms Zanetti deposed that sporting suits, such as that worn by Cathy Freeman, and skating suits, do not have Ms Zanetti’s combination of a garment made of a front and back panel extending upwards beyond the neckline, and in which the upper most portion of the front and back panels are held in place up around the ear lobes, under the chin and around the nape of the neck. Ms Zanetti deposed that another important element of her Designs is the gathered sections of the cap. Ms Zanetti deposed that this is an important visual element because it serves a purpose of creating a pocket to hold the hair in place and secure above the nape of the neck. Ms Zanetti stated that her background as a hairdresser had been critical in understanding the management of hair and creating her Designs.
Ms Zanetti stated that the Designs had to manage performance, comfort, long hair and modesty.
In her affidavit, affirmed 1 March 2016, Ms Zanetti deposed as to various publications and media attention regarding her Designs. Ms Zanetti stated that since 2005, the applicant has operated an online store at its website where her Designs are sold to retail customers. Ms Zanetti also identified the various countries with stores that sold her Designs, and similarly identified Melbourne, Brisbane, Sydney and Perth as having stores that sold products that embodied her Designs.
Ms Zanetti stated that the applicant produced approximately 5,500 garments a year and that over 3,000 of those were sold online. Ms Zanetti deposed that the applicant used a high quality fabric produced in Australia, and that this increased the production costs for the applicant.
Ms Zanetti deposed that the applicant’s price for an adult swimsuit was $180.00 and a child’s swimsuit was $120.00.
Ms Zanetti stated that the applicant’s average profit per garment at retail was approximately $100.00 per garment.
Ms Zanetti referred to the applicant’s purchase on 20 January 2013 of the respondent’s adult Islamic swimsuit set SS101 for $99.99, as well as the applicant’s purchase on 6 June 2013 of the girls’ Islamic swimsuit set SS102 for $37.50. Ms Zanetti deposed that the girls’ Islamic swimsuit set SS102 was purchased on sale and that its usual price was $74.99.
Ms Zanetti stated that the respondent’s infringing products were inferior and shoddily made which impacted the structure, performance and longevity of the garments. Ms Zanetti deposed that, although the respondent’s products were offered at prices significantly cheaper than the applicant’s garments, many consumers would consider that they were the applicant’s products offered at a discount, particularly as the respondent was based in Australia and promoted as Australian.
Ms Zanetti deposed that she first contacted the respondent in October 2008 because she was aware of the respondent’s activities in selling Islamic clothing in Perth. Ms Zanetti deposed that, as the applicant was receiving numerous enquiries from Western Australia, the applicant was interested in the respondent as a potential purchaser of products that embodied the Designs. Ms Zanetti stated that as part of this process, she sent the respondent the applicant’s price list. Ms Zanetti stated that the footer on both pages of the price list referred to the applicant’s Australian Registered Designs.
Ms Zanetti deposed that, whilst the applicant has encountered other instances of traders selling infringing products, the respondent’s conduct has caused the applicant considerable concern given the respondent’s online presence; the location of the respondent in the applicant’s home market in Australia; the respondent’s export activities from Australia to the Muslim world; and, because the respondent supplies directly to wholesale and to trade customers.

2.2 Exhibit 1A - Respondent’s Evidence

The affidavit of the respondent’s director, Rola Jneid, affirmed 20 October 2014, referred to the applicant’s contact with the respondent in October 2008 with a view to reselling the applicant’s garments through the respondent’s store in Western Australia. Ms Jneid deposed that, upon receipt of the applicant’s price list, the respondent determined that the applicant’s garments were too expensive for the respondent’s market.
Ms Jneid stated that, instead of supplying other people’s designs, she visited China to find a supplier to manufacture designs for the respondent. Ms Jneid stated that, in China, she was shown existing designs. Ms Jneid also stated that she was aware that burkinis were sold in other countries, in particular, in Muslim countries such as Turkey. Ms Jneid further stated that she understood that the designs she was shown were already being sold in countries other than Australia. Ms Jneid deposed that the respondent subsequently commissioned the manufacture and import of an existing design that she was shown on her visit to China and sold products embodying those designs through the respondent’s website and through retailers and distributors.
Ms Jneid deposed that on her visit to China, she saw products embodying designs that she recognised to be those of the applicant; however, the respondent did not have those designs manufactured by a third party, nor have them imported.
Ms Jneid stated that on 21 February 2011, she received an email from Ms Zanetti, which she understood to be a complaint about the respondent’s use of the applicant’s registered Trade Marks for Burqini and Burkini, although she later realised that the email also mentioned the applicant’s Australian Registered Designs. Ms Jneid deposed that, prior to the receipt of that email, she had no knowledge of either the applicant’s registered Trade Marks or the applicant’s Australian Registered Designs. Ms Jneid stated that on 21 February 2011, she responded to Ms Zanetti’s email and confirmed that the applicant’s Trade Marks had been removed from her website.
Ms Jneid deposed that on 23 July 2011, she received a follow-up email from Ms Zanetti, informing her that the Burqini/Burkini name was still on the website and was being used to promote a product that looked like one that infringed the applicant’s Designs. Ms Jneid stated that on 23 July 2011, by return email, she informed the applicant that the references to Burqini/Burkini were being removed from the website; that the respondent had not copied the applicant’s Designs; and, that the respondent’s design was one from Turkey that had been manufactured for the respondent in China.
In her affidavit affirmed 30 April 2015, Ms Jneid deposed that 1,260 swimsuit sets SS101 and SS102 had been imported by the respondent in August 2010. An annexure to her affidavit showed that 924 were sold. However 333 garments did not result in any revenue because 60 were free sample and 273 were damaged or returned due to poor quality. Accordingly, the total number of swimsuits in respect of which the respondent received revenue is 591 as disclosed in Annexure RJ-4 to her affidavit.
Ms Jneid stated that the total revenue received by the respondent in relation to the sale of those swimsuits was $16,850.21.
Ms Jneid deposed that the cost attributed to generating the revenue included the costs of manufacturing and importing the swimsuits at $39,135.60, as well as various other incidental expenses amounting to about a further $9,500.00.

2.3 Findings of Fact

Based on the unchallenged evidence before me, I make the following findings:
i)The applicant sent a price list to the respondent in 2008 with a view to supplying the respondent with products that embodied the Designs for resale. On the footer of the price list was reference to registered designs and trade marks owned by the applicant. The price list also referred to the applicant’s website.
ii)The purpose of the price list was for the applicant to provide the respondent with the price at which the applicant’s garments could be supplied to her for resale. They were all identified as Burqini items.
iii)In August 2010, the respondent imported from China 1,260 garments, being a mixture of SS101 and SS102 swimsuit sets. When the respondent ordered 1,260 garments in August 2010, it was not intending to buy garments that embodied the applicant’s Designs.
iv)The purchase of the garments in 2010 was before the applicant put the respondent on notice of potential infringement of its Designs in February 2011.
v)The total revenue received by the respondent for its swimsuit garments was $16,850.21 and the costs of generating that revenue were $48,764.00.
vi)The total number of garments in respect of which revenue was received was 591 over a period of just over two and a half years between August 2010 and 2 April 2013, making an average of about 230 garments a year.
vii)The applicant produced 5,500 garments a year.
viii)On 21 February 2011, the applicant emailed the respondent complaining about the respondent’s use of the applicant’s Trade Marks, Burqini and Burkini on garments being sold by the respondent. The letter referred the respondent to its websites and its lawyers for more information. The email demanded the removal of “the product/names” within 7 days. There was no particular assertion by the applicant of infringement by the respondent of any of its Designs.
ix)By return email on 21 February 2011, the respondent confirmed that reference to the applicant’s Trade Mark Burkini had been removed. The applicant made no further response to that email.
x)On 23 July 2011, the applicant again emailed the respondent stating that the respondent was continuing to use the applicant’s Trade Mark, Burkini, to “promote a product that looks like a suspected IP design infringement”. That letter was the first clear indication to the respondent that the applicant had concerns about the garments being sold by the respondent, rather than just the use of the applicant’s Trade Marks Burqini and Burkini. However, the letter did not particularise in any way why the respondent’s garments looked like “a suspected IP design infringement”.
xi)By return email on 23 July 2011, the respondent replied as follows: “That was another mistake from our part, due to the change of websites. The website administrator used that name and we were unaware of it, we respect your rights and have removed the words burkini. Our Islamic swimwear is not a copy of aheda burkinis, it is designed in Turkey, and manufactured in China by reputable designers employed by [us]. It is our unique designs of modest swimwear for women and young girls.” The applicant did not respond to that email.
xii)In January and June 2013, the applicant bought 2 swimsuit sets from the respondent. The applicant paid $99.99 for the adult swimsuit set and $37.50 for the child’s swimsuit set.
xiii)The applicant’s profit margin was $100.00 per garment. I note that this assertion by Ms Zanetti does not identify whether there was any difference in the profit margin between the adult swimsuit and the child swimsuit. Whilst there is no other evidence to support that assertion, it was unchallenged by the respondent. Accordingly, I accept Ms Zanetti’s evidence on that point.
xiv)On 2 April 2013, the applicant’s solicitors wrote to the respondent asserting that the respondent had stocked and was “flagrantly selling unauthorised copycat versions” of the applicant’s Designs. The letter sought immediate cessation of the sale of infringing garments together with undertakings, failing which proceedings would be commenced for damages for infringement of the applicant’s Designs. (The applicant conceded that the date the letter bears of 2 April 2012 is incorrect and that the correct date was 2 April 2013).
xv)The 2 April 2013 letter was the first notification to the respondent since 23 July 2011 that the applicant had not accepted the respondent’s assertion that the products it was selling did not embody the applicant’s Designs.
xvi)The 2 April 2013 letter did not particularise in what way the applicant said its Designs were embodied in the garments being sold by the respondent. It simply attached photographs of the respondent’s garments and asserted that the garments were “identical to, or substantially similar in overall impression to, [the Designs]”.
xvii)On 3 October 2013, the applicant commenced this proceeding.

3. Relevant Legislation

Relevantly, s.71 of the Designs Act 2003 (Cth) (“the Designs Act”) provides that a person infringes a registered design if, without a licence or authority of the registered owner of the design, the person: makes or offers to make a product in relation to which the design is registered, which embodies a design that is identical to, or substantially similar in overall impression to, the registered design; or, imports such a product into Australia for sale; or, sells or offers to sell such products; or, uses such a product in any way for the purposes of trade or business; or, keeps such a product for the purpose of selling or using the product in the course of trade or business.
“Design”, in relation to a product, means the overall appearance of the product, resulting from one or more visual features of the products. The Designs Act defines a “product” as, inter alia, a thing that is manufactured or hand-made. The Designs Act defines “visual feature” to include the shape, configuration, pattern, and ornamentation of the product.
Section 75 of the Designs Act provides that, in infringement proceedings, a Court may order damages, or an account of profits, as well as additional damages, having regard to the flagrancy of the infringement and all other relevant matters.
Section 75 of the Designs Act is as follows:
“75 Remedies for infringement
(1) Without limiting the relief that a court may grant in infringement proceedings, the relief may include:
(a) an injunction subject to such terms as the court thinks fit; and
(b) at the option of the plaintiff--damages or an account of profits.
(2) The court may refuse to award damages, reduce the damages that would otherwise be awarded, or refuse to make an order for an account of profits, if the defendant satisfies the court:
(a) in the case of primary infringement:
(i) that at the time of the infringement, the defendant was not aware that the design was registered; and
(ii) that before that time, the defendant had taken all reasonable steps to ascertain whether the design was registered; or
(b) in the case of secondary infringement--that at the time of the infringement, the defendant was not aware, and could not reasonably have been expected to be aware, that the design was registered.
(3) The court may award such additional damages as it considers appropriate, having regard to the flagrancy of the infringement and all other relevant matters.
(4) It is prima facie evidence that the defendant was aware that the design was registered if the product embodying the registered design to which the infringement proceedings relate, or the packaging of the product, is marked so as to indicate registration of the design.”

4. Proceeding before the Court

The applicant was represented at the hearing by Mr Greg Johnson, of counsel.
The purpose of an award of damages is to compensate the applicant for the loss which it suffered as a result of the respondent’s infringement (see Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (in liq) (2007) 157 FCR 564 at [25] per Black CJ and Jacobson J). The applicant must prove its loss on the balance of probabilities and with as much precision as the subject matter reasonably permits (see Placer (Granny Smith) Pty Ltd v Theiss Contractors Pty Ltd (2003) 196 ALR 257 at [37] per Hayne J, with whom Gleeson CJ, McHugh and Kirby JJ agreed; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at [80], [83]-[84], per Mason CJ and Dawson J; at [138] per Toohey J; at [153] per Gaudron J; and at [161] per McHugh J).
The applicant elected not to seek an account of profits.
The applicant submitted that the respondent offered the infringing goods for sale in Australia and around the world from Australia, and that the applicant and respondent competed in precisely the same market, namely the specialised market of Islamic clothing.
Although unrepresented at the hearing, the respondent filed submissions, dated 18 April 2016, on the issue of damages and those submissions formed part of a bundle of relevant documents provided to the Court by the applicant.
The respondent submitted that the applicant took two years from when they discovered what they believed may be infringement in 2011 before they sent the letter of demand to the respondent in 2013 and that delay is significant. As stated above, at no time has the applicant specified with any degree of particularity the manner in which the applicant asserts that its Designs were embodied in the respondent’s garments SS101 or SS102.
The two year delay suggests that the applicant did not consider that the Respondent’s products necessarily embodied the Designs or that the applicant considered that it was being caused any significant harm, or indeed any harm at all or both.
Further, I accept the respondent’s submission that, although the respondent conceded liability, it has sought evidence from the applicant for some time to support the damages claim and that evidence was not forthcoming.

4.1 Compensatory Damages for Lost Profit

In written submissions in support of an award of compensatory damages for lost profit, the applicant submits that the applicant’s profit per garment is $100.00 and that the respondent had imported 1,260 garments, equating to a total lost profit of $126,000.00. The applicant further submitted that there were 610 garments sold or supplied by the respondent in the course of trade which equated to a further loss of $61,000.00. However, whilst I accept that on the respondent’s own evidence 1,260 garments were imported, there is no evidence before me to support the assertion that a further 610 garments were sold or supplied in the course of trade as claimed by the applicant and nor was I taken to any such evidence by counsel for the applicant.
In support of its claim for compensatory damages for lost profit, counsel for the applicant referred the Court to GM Holden Ltd v Paine (2011) 281 ALR 406 (“the GM Holden Case”). That case involved the sale of wheels for Holden cars that were illegally marketed as made by Holden.
However, in the case before me, I do not accept that the respondent was endeavouring to market its garments as being the garments designed, imported, produced or distributed by the applicant. The 1,260 garments were ordered by the respondent in 2010 before the respondent was put on notice in 2011 that it was the applicant’s view that the respondent may be infringing its Designs by importing and offering for sale its SS101 and SS102 garments.
Further, in the GM Holden Case, there was evidence before the Court of a sharp decline in the sale of the wheels by Holden which could have been attributable to the replica versions becoming available at around the same time. There is no such evidence before this Court, and indeed there was no evidence before this Court of any common purchaser of both the applicant’s and the respondent’s garments, either in respect of retailers or individuals. The customers in the GM Holden Case were seeking Holden products.
There is no evidence before this Court to suggest that any of the purchasers of the respondent’s garments would otherwise have bought the applicant’s garments. Merely showing that the respondent sold the garments does not by itself establish that, but for those sales, the applicant would have sold the equivalent numbers.
I accept the respondent’s submission that this is not a case of a party deliberately seeking out and copying another party’s design; nor is it a case where the applicant has a monopoly on the type of goods in question. This is a case where an existing business sought to enter a market open to competition.
In the circumstances, I accept the respondent’s submission that the respondent sold a small and commercially insignificant number of garments using a design that the respondent understood was already sold elsewhere in the world. I do not accept that the respondent was selling products that were intended to embody the applicant’s Designs.
As stated above, there is no evidence whatsoever that any of the purchasers of the respondent’s garments would otherwise have bought the applicant’s products.
In the circumstances, there has been no loss of profit proven on the balance of probabilities.

4.2 Damages for Loss of Reputation

The applicant also seeks damages for loss of reputation and submits that, as a result of the infringing goods being made available in the marketplace by the respondent, there was damage to the reputation and goodwill generated by the Design works.
It is well established that damage to reputation is a recoverable loss. In Elwood Clothing Pty Ltd v Cotton On Clothing Pty Ltd (2009) 81 IPR 378, Gordon J stated at [32] as follows:
“An award of general damages is to be that sum which will put the Applicant in the same position as it would have been in if it had not suffered the wrong. There is no dispute that, subject to issues of causation and foreseeability, any secondary loss, including damage to reputation, caused by the infringement is recoverable.”
Counsel for the applicant submitted that the applicant is one of the most widely known producers and suppliers of Islamic swimwear and is the author of the Designs. Counsel submitted that the inferior quality of the infringing garments and false representations regarding the quality and Australian nature of the respondent’s products impacted on the goodwill associated with the applicant’s products. The applicant submitted that the Court can be satisfied that the damage to reputation is substantial and that the respondent has sold both to individuals and wholesalers. The applicant submitted that $50,000.00 was appropriate as an award for damages to its reputation.
However, the applicant did not tendered any evidence to support a claim that its reputation had been damaged by the sale of a commercially insignificant number of garments into the market.
There is also no evidence before me that the products embodying the applicant’s Designs were so well known that the respondent’s products would be thought to be the applicant’s product simply because they are swimming costumes for Muslim women that cover their heads. Whilst Ms Zanetti asserts the Designs “have caught the attention of the world” and has referred to various media items and publications, none were annexed to her affidavits or otherwise exhibited.
Further, there is no evidence before me whatsoever of any purchaser of the respondent’s garments believing that they were buying the applicant’s garments and being disappointed in the quality.
In the GM Holden Case, Gordon J stated at [90] that where reputational damages are sought, evidence is usually led to establish: (a) the importance of singularity, distinctiveness, quality, or some other commercially valuable aspect of reputation to the victim; and (b) how, and to what extent, the infringing product or conduct damaged that aspect of the victim’s reputation. None of these factors have been proven by the applicant on the balance of probabilities. The applicant did not tender any evidence in support beyond self-serving assertion. They are matters in respect of which the Court would expect some corroborative evidence if the Court was to be satisfied to the requisite standard.
There is no evidence that the respondent’s products in the marketplace had diminished the reputation of the designs of the applicant or diminished the exclusivity of the Designs in the marketplace or tarnished the applicant’s brands.
In the circumstances, I am not satisfied that the applicant has suffered any reputational damage as a result of the respondent’s infringing conduct.

4.3 Additional Damages

The applicant also seeks a further award of additional damages in the sum of at least $150,000.00 in circumstances where the applicant alleges that the respondent elected to infringe despite being put on notice of the applicant’s rights on 27 October 2008, 21 February 2011 and 23 July 2011. The applicant submitted that, nevertheless, the respondent continued to sell infringing goods through to 2013.
Section 75(4) of the Designs Act states that it is prima facie evidence that a respondent is aware of the registration of a design if the product embodying the registered design, or the packaging of the product, is marked so as to indicate registration of the design. Those provisions were not enlivened by a mere reference in the footer of the price list sent by the applicant to the respondent in 2008. Moreover, on the evidence before me, the exchange between the parties was as to pricing.
When the respondent declined to sell the applicant’s products, the respondent took steps to source products that Ms Jneid believed did not infringe the applicant’s Designs. However, she took no steps or legal advice as to what may amount to an infringement of the Applicant’s Designs. With the benefit of hindsight it would have been prudent for the respondentto do so before entering a market that the applicant claimed to dominate and in respect of which it appeared to assert registered trade mark and design protection.
I do accept that the respondent was put on notice in February 2011 that it was the applicant’s view that the respondent may be infringing the applicant’s Designs by importing and offering for sale the SS101 and SS102 garments. However, as stated above, there was no particularisation as to how. The applicant’s letter did contain the applicant’s websites and lawyers details. The respondent responded immediately informing the applicant that it had removed any reference to the applicant’s Trade Mark, Burkini. As stated above, the applicant did not respond to the respondent’s email. That failure to respond suggests that the applicant was satisfied with the respondent’s response that it had removed any reference to its Trade Mark, Burkini.
On 23 July 2011, in response to the applicant’s letter referring to “a suspected IP design infringement”, the respondent responded immediately stating that it did not accept that the designs upon which SS101 and SS102 were based infringed the applicant’s Designs. Again the applicant made no response. In those circumstances, that failure to respond suggests that the applicant’s concerns were met by the removal of reference to Burkini and that the applicant had accepted the respondent’s denial of infringement.
As stated above, on 2 April 2013 the applicant first clearly put the respondent on notice that it regarded the respondent’s conduct in importing and selling those garments as infringing the applicant’s Designs, However, again it did not provide any particularisation beyond the statement that the respondent’s unidentified garments were identical or substantially similar to the applicant’s Designs.
As stated above, it was the respondent’s responsibility to ensure that any garments that it was importing or selling did not infringe any Australian Registered Design. Ms Jneid’s evidence is to the effect that she was aware of the applicant’s Designs and entered the market with a less expensive garment of inferior quality that did not embody the applicant’s Designs.
The respondent could have made further inquiries of the applicant’s infringement allegations, such as accessing the applicant’s websites or seeking legal advice. Ms Jneid deposed that she had not sought legal advice until she received the applicant’s letter in April 2013. There is no evidence before me of any steps taken by the respondent to make inquiries about the applicant’s Designs prior to that date. However, the focus and emphasis of the correspondence from the applicant to the respondent up until April 2013 was on the use of the applicant’s Trade Mark Burkini and Burqini in promoting the respondent’s garments.
An award of additional damages under s.75(3) of the Act contemplates that the infringement was flagrant, although there may be other relevant matters other than flagrancy that may give rise to additional damages.
In Review Australia Pty Ltd v New Cover Group Pty Ltd [2008] FCA 1589, Kenny J acknowledged at [53] that there are elements of penalty and deterrence in making an award for additional damages and an award of additional damages is not confined to cases of flagrancy. further stated at [55] and [61]:
“[55] In the designs context, copying per se is not, however, unlawful and does not establish a design infringement. There is nothing relevantly reprehensible in this business practice providing it does not result in design infringement. Accordingly, copying alone does not attract additional damages. Copying resulting in design infringement can, of course, justify an award of general damages, but, in general, such copying must be flagrant to justify additional damages…
[61] Considered together, the foregoing considerations illustrate that a case of design infringement in the fashion industry can be expensive and difficult to prosecute if a defendant chooses to make it so.”
In considering the meaning of flagrancy in the context of s.115(4) of the Copyright Act 1968 (Cth), Sundberg J stated in MJA Scientifics International Pty Ltd v SC Johnson & Son Pty Ltd (1998) 43 IPR 275 at 281-282 as follows:
“The requirement that the court have regard to the flagrancy of the infringement does not mean that the power to award additional damages is conditional upon a finding of flagrancy: Raben Footwear Pty Ltd v Polygram Records Inc [1997] FCA 370; (1997) 145 ALR 1 at 6, 16. It has been said that “flagrancy” involves “calculated disregard of the plaintiff's rights, or cynical pursuit of benefit”. Prior v Lansdowne Press Pty Ltd [1977] VicRp 6; [1977] VR 65 at 70; “scandalous conduct, deceit including deliberate and calculated infringement where a defendant reaps a pecuniary advantage in excess of the damages he would otherwise have to pay”: Copinger and Skone James on Copyright 13th ed (1991), 344; “the existence of scandalous conduct, deceit and such like; it includes deliberate and calculated copyright infringement”: Ravenscroft v Herbert and New English Library Ltd [1980] RPC 193 at 208; Autodesk Australia Pty Ltd v Cheung (1991) 94 ALR 472 at 478.”
Upon the commencement of the proceeding, the respondent had instructed solicitors specialising in intellectual property law and did not seek to avoid or ignore the complaint. This is not a case where there has been no participation by the respondent in the proceeding. The respondent has participated in numerous directions hearings, has filed a Defence, a Cross-Claim, evidence and submissions. The respondent participated in a mediation in person in Sydney on the issue of damages following its concession of infringement of the applicant’s Designs.
The applicant’s evidence on damages was weak and must have been apparently so during the preparation of its case on damages. In my view, such weakness does not lie at the feet of the respondent or a lack of opportunity by the applicant to cross-examine the respondent’s director. In other words, it is my view that the applicant’s damages case was not hampered by the failure of the respondent to appear at the hearing. The respondent had filed all its evidence and submissions. Whilst I have accepted the evidence of Ms Zanetti, as stated above, much of her evidence, had it been objected to, may well have been rejected. The applicant bore the onus of proving loss on the balance of probabilities and has failed to meet that onus.
On the evidence before me, I am not satisfied that the conceded infringement by the respondent was, in all the circumstances, flagrant. Flagrancy requires something more than a cavalier approach (see Review Australia Pty Ltd v Innovative Lifestyles Investments Pty Ltd & Anor (2008) 166 FCR 358 at 373 per Jessup J).
I now turn to consider whether there were other relevant matters that may demand additional damages as contemplated in s.75(3) of the Designs Act.
The respondent could have taken steps at least in July 2011 to inform itself of the nature of the registration of the Designs before it commenced manufacture of its products. There is no evidence before me of any attempts at all. As stated above, the respondent did not seek legal advice until after it had received the 2 April 2013 letter from the applicant. The respondent knew it was entering the same market in which the applicant asserted intellectual property protection. It would have been reasonable and prudent for it to have made inquiries at least in July 2011.

In my view, there is a responsibility on a trader entering a new market to be aware of the registered rights of its competitors and the restrictions that may thereby apply to that new trader. The respondent was aware of the applicant’s intellectual property protection rights in February 2011 but took no steps to further inform itself and continued to offer its products for sale.
In circumstances where ultimately the respondent has conceded infringement and the respondent failed to make reasonable inquiries as to the applicant’s protection rights in circumstances where the respondent knew that the applicant was asserting those rights, the respondent’s conduct was at least cavalier.
However, I also have regard to the failure of the applicant to make a clear assertion of infringement prior to 2 April 2013. Further, at no time did the applicant specify the manner in which it asserted that the respondent’s products embodied its Designs. Moreover, the applicant has otherwise failed to prove any loss.
In the light of those particular factors which I find to be relevant for the purposes of considering whether additional damages should be ordered pursuant to s.75(3) of the Designs Act, it is my view that the respondent should be ordered to pay additional damages in the sum of $20,000.00 to the applicant to reflect appropriate penalty and deterrence.
The proceeding should be otherwise dismissed.

I certify that the preceding ninety (90) paragraphs are a true copy of the reasons for judgment of Judge Emmett

Date: 19 December 2016

Annexure “A”

Page 1 of 3

Applicant’s Design 300231

Registration AU 300231 S Design Number 200413000

Status

Registered – Certified

Date Certified: 2007.02.15

“A”

Page 2 of 3
Applicant’s Design 302022

Registration AU 302022 S Design Number 200415750

Status

Registered – Certified

Date Certified: 2007.11.05

Statement of Newness and Distinctiveness

Newness and distinctiveness is claimed in the features of shape and/or configuration of an article of clothing as illustrated in the accompanying representations and in considering the newness and distinctiveness, the features shown in phantom are to be disregarded.

“A”

Page 3 of 3

Applicant’s Design 302023

Registration AU 302023 S Application 200415751

Status

Registered – Certified

Date Certified: 2007.11.05

Statement of Newness and Distinctiveness

Annexure “B”

Page 1 of 3

Respondent’s Products

“B”

Page 2 of 3

Respondent’s Products – Set SS101

“B”

Page 3 of 3

Respondent’s Products – Set SS102