C.A. Imports Pty Ltd v Randa Products Pty Ltd

[1989] FCA 672

IN THE FEDERAL COURT OF AUSTRALIA	)
NEW SOUTH WALES DISTRICT REGISTRY	)
GENERAL DIVISION	1 NO. G489 of 1987

BETWEEN:	C.A. IMPORTS PTY. LTD. Applicant
AND :	RANDA PRODUCTS PTY. LTD. Respondent

CORAM:	GUMMOW J
DATE :	27 OCTOBER 1987

PLACE: Sydney

EX TEMPORE REASONS FOR JUDGMENT

HIS HONOUR:

These proceedings were instituted by application filed on 14 October 1987. The applicant seeks interlocutory and final relief. The claims made by the applicant are based first in the provisions of the Designs Act 1906 and, secondly, in S.

52 of the Trade Practices Act 1974.

The applicant is the registered proprietor of three design registrations currently in force; each of them is in respect of soft toy hand puppets. The registration number 90605 is dated 18 July 1985, the application having been made on 22 April 1983. The registration is in respect of a soft toy illustrated in the accompanying representations, and I will describe this design as "the koala design". Registration

number 88986 (which I shall describe as "the kangaroo design"), is dated 7 June 1984; again, the application date was 22 April

The third current registration for a soft toy puppet, held by the applicant, is number 89746. The date of registration here is 1 November 1984 and, again, the application was made on 22 April 1983. I shall describe this design as "the platypus design".

The jurisdiction of the Court in respect of the claims brought under the Designs Act is now based in the Designs Act itself, since the amendments to that legislation affected by the Jurisdiction of Courts (Miscellaneous Amendments) Act1987, which came into force on 1 September this year. Accordingly, no question arises under S. 32 of the Federal Court of Australia Act 1976.

On the matter coming before the Court on 16 October 1987 directions were given to prepare the matter for interlocutory hearing. On that date the respondent gave an undertaking to the Court that until 5 pm on Monday, 26 October it would not sell or supply by any means soft toy hand puppets

of the types which are now exhibits J, K, L, M and N. That

undertaking was extended when the matter came on for hearing yesterday, 26 October, and now continues until the disposition of the application for interlocutory relief.

As the reference to five exhibits suggests, although the applicant presently has but three current design registrations, it markets in addition to the platypus, kangaroo and koala puppets, soft toys in the form of wombat and

kookaburra hand puppets.

The basis for the protection in respect of these two puppets is sought to be found in S. 52 of the Trade Practices Act exclusively. That provision is also relied on concurrently, as it were, as a source of rights sought to be protected in respect of the other three puppets, that is to say, the platypus, the kangaroo and the koala.

The applicant and respondent companies both operate what might be called fairly substantial family businesses in the supply of soft toys. The applicant, since its incorporation in 1978, has sold a range of soft toys. The hand puppets in1 question here were, as the evidence presently stands, designed in approximately 1982/1983. Both parties obtain their supplies from manufacturers in Korea.

The applicant's sales in respect of the five puppets
in question here commenced at various dates. The marketing

of the platypus commenced in April 1983, the kangaroo in June

1983, the koala in June 1983. Sales of the two puppets in

respect of which there is no current design registration, that is to say, the wombat and the kookaburra, commenced as regards the wombat in July 1984 and the kookaburra, as the evidence presently stands, in December 1984.

There have been substantial sales of all these
products. The majority of sales being effected to wholesalers
and distributors in various States and Territories of the

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Commonwealth;	they then sell to retailers. Some sales are	I
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also made direct to smaller specialty souvenir shops.	F ,
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The puppets in question have also been used on a popular children's television programme known as Romper Room	! '

which is shown in at least four States.	In the period	..
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1986/1987 the puppets appeared some 12 times on that programme.

Between February 1984 and June 1987 the applicant supplied the respondent with a full range of soft toys, including the five species of puppet involved here. These purchases ceased in June 1987.

The evidence for the respondent is that the designs for its puppets were devised in a period commencing in the latter part of 1986 and continuing as modifications were made into April 1987. At that time orders were placed in Korea for manufacture. Sales commenced here in June/July 1987. Goods are sold directly by the respondent and also by wholesale distributors to retailers. The evidence indicates that many

schools use these puppets as teaching aids.

To date, sales of the respondent's puppets, in respect of which the complaint is made by the applicant, have been

substantial. A firm order was placed in September 1987 before,

as the evidence now stands, notice of these proceedings was	I
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received.	The order was placed in Korea for a contract price	1
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of some $US57,000.	There are also existing supplies on hand to	I
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a value of some $12,000.	8 .
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It appears that the parties both expect the coming months to provide a peak period for the sale of products of this description. They refer, in particular, to the basis of their expectations in the Bicentenary celebrations and the Expo Fair in Brisbane. Accordingly, both parties point to the importance over that period of either staying in or keeping the other side out of the market, as the case may be. The evidence suggests that the respondent's products have a wholesale list price of $6.35 and the applicant's a wholesale list price of $6.65.

I should mention also the existence of three design registrations held by Jossies Pty Limited in respect of koala, kangaroo and platypus soft toy puppets. The design applications were all made on 5 March 1982. The koala design, number 86682, is dated 3 December 1982; the kangaroo design, number 86687, is dated 26 November 1982; the platypus design, number 86683 is dated 26 November 1982.

The evidence is that sales by Jossies Pty Limited commenced in about late March 1982 and have continued. That company also has registrations for and sales of wombat and kookaburra puppets. The existence of the earlier design registrations has particular significance as does the marketing activity since 1982, for questions that have been raised as to validity of the koala, platypus and kangaroo registrations held by the applicant.

The Jossiesl puppets, the evidence indicates, have a wholesale list price of approximately $11.25. The respondent indicates that at the final hearing there will be an attack upon the validity of the three designs of the applicants, and directions made this morning provide for the necessary cross-claim to bring that issue before the Court.

As to the general approach to be adopted, particularly as to matters of fact in interlocutory applications of this type, I refer to the judgment in Ricegrowers' Co-operative Limited v Howling Success Australia Pty Limited [l9871 ATPR 40-778.

I refer to the discussion there of the importance for lay clients to understand that the factual situation as it appears and has to be assessed on an interlocutory injunction application by no means necessarily represents the factual situation that will appear when there is a final hearing. This is in part because of the availability of more time for the preparation of the case, and of interlocutory procedures	designed to assist each party to elicit from the other	admissions or documents which may assist the case of the party
seeking those admissions or documents.
The significance to be attached to an attack upon the validity in a case for interlocutory relief for infringement of a petty patent or a design appears from the discussion by Lockhart J in Peter Pan Electrics Pty Limited v Newton Grace Pty Limited (1985) 8 FCR 557. I refer in particular to the passage at 564-565.
What is said there in relation to an attack of validity of a petty patent applies in my view equally to a case such as the present one. I should refer also to the judgment of King J in the Victorian Supreme Court in the case of State Sport v Puma (Australia) Pty Limited (1985) 4 IPR 120 at 124-125. I should also point out that as mentioned in the Ricegrowers' Co-operative Case, the balance of convenience in these cases may itself be affected by the Court's evaluation or perception of the seriousness of the question to be tried, that is to say, by the Court's evaluation or perception of the weight of the applicant's case at the interlocutory stage. Reference is there made to the observations by the present Chief Justice of the High Court in Castlemaine Tooheys Limited v State of South Australia (1986) 161 CLR 148 at 155.
I turn now to consider first the applicant's case for interlocutory relief based on contravention or apprehended contravention of the provisions of S. 52 of the Trade
Practices Act.

As it will be apparent, the essence of the applicant's

case on S. 52 must be that the get-up, shape, design and appearance of the five glove puppets marketed by it have attracted reputation and distinctiveness such as to give rise to misleading or deceptive conduct where the respondent markets its products.

It is said that the likelihood of misleading or deceptive conduct arises both with wholesalers and with retailers dealing with the general public. Reference was made in submissions to the significance or otherwise for the use of S. 52 in cases where the moving party did not have, though could have had, registered design protection.

In the present case, there is no presently subsisting registered design protection for two of the puppets and there is design protection in respect of the other three. The evidence in respect of the two puppets is that there was design protection but that it is no longer current.

In Parkdale Custombuilt Furniture Pty Limited v Puxu Pty Limited 149 CLR 191 at 220-224, there is a discussion by Brennan J of difficulties in utilising s. 52 in such a case. On the other hand, Mason J, as he then was, plainly was of the view, as appears at pages 202-207, that there was no reason why the same set of facts might not give rise to concurrent rights

Trade Marks Act, and under the Trade Practices Act. I also	to relief, both under the Patents Act or the Designs Act or the
have taken into account the judgment on this point of Smithers J in Chris Ford Enterprises v Badenhop (1985) 7 FCR 75. AS I understand it, the principal point of departure between the judges in the Puxu Case was whether, granted the relevant reputation and distinctiveness or get-up of the furniture of the applicant, there was, nevertheless, the necessarydeception or likelihood of deception in the circumstances of that case, involving as they did a consideration of the prominence of different labelling and the habits of customers in inspecting
furniture - particularly expensive furniture - for labels before purchasing the same.
The High Court was agreed as to the possession by the applicant's furniture of the necessary distinctive appearance or shape with consumers, but they differed, with Murphy J dissenting, on the question of likelihood of deception flowing from the marketing practices of the contestants.
In particular, at 195, Gibbs CJ said that the lounge suites in question were the subject of fairly extensive advertising and had acquired an established reputation, and that the lounges and chairs were of distinctive appearance and design. Likewise, Mason J at 200 referred to the unusual and distinctive appearance and extensive advertisement of the range of furniture. Murphy J said that the chair and lounge suite manufactured by the applicant had become well known to the public. Brennan J at 215 said that the size and mode of construction was distinctive and he again referred to the level
of advertising.
That brings me to what I see as the difficulty in the path of the applicant as the evidence stands at present. I appreciate that the evidence is by no means in its final form on this issue but I have to assess the matter on the materials as they are now available.
First, there is evidence that the Jossie puppets have been sold, as I said, for the period commencing in late March 1982; secondly, it would appear that there is in the trade a practice of retailers selling soft toys of this type side by side in, for example, one bin, thereby perhaps detracting from what otherwise would be the distinctive force of the appearance of the goods of each particular supplier. Thirdly, it appears from exhibits 3C and ?.E, and from paragraph 27 of Mr Bidder's second affidavit for the applicant, that of 23 October 1987, that koala and kangaroo hand puppets have been distributed by another company, Australian Souvenirs & Marketing Pty Limited, and that these were manufactured by the applicant, although not marketed under its name.
This appears to have been the situation since Mr Bidder acted upon an approach by Australian Souvenirs & Marketing Pty Limited in early 1986. As matters now stand on the issue of a prima facie case of contravention of S. 52, I am not satisfied that there is, in the necessary sense, a serious question to be tried.
I come then to the question of a prima facie case as it affects the three design registrations. Each counsel has drawn my attention to the puppets sold by the respondent and invited comparison with the representations forming part of the design registrations for the three designs held by the applicant.
In view of the interlocutory nature of the proceedings it is, as Lockhart 3 emphasised in the Peter Pan Case, 8 FCR at

565, not desirable to analyse in depth or express any detailed views upon evidence going to such an issue. However, it is sufficient for me to say that I am satisfied there is a serious question to be tried as regards the possibility of infringement of the three designs.

However, it is necessary also to put into the scales on the question of a prima facie case the question of validity and, indeed, the question of validity perhaps has to be looked at first as an anterior question to that of infringement.

There is some debate in the authorities as to the correct formulation of the test for a prima facie case where invalidity is raised to resist an application for interlocutory relief. The authorities speak of a serious question or issue, a substantial case or a genuine case as to invalidity. The parties, I think, were content to follow the approach to principle indicated by Lockhart J in the Peter Pan Case at 564-565.

The case for invalidity at present is put four ways. In particular, it is here that the respondent seeks to gain comfort both from the existence of the three Jossie design registrations, dated as they are in 1982, and to the marketing of the Jossie puppets since late March 1982, as the evidence now stands. Those are the first two matters on which the respondent relies for invalidity.

Thirdly, the respondent claims comfort from what it

says are admissions by the applicant as to the provenance of

~ t s three designs.

The admissions are said to flow from correspondence between solicitors, that is to say between the applicant's solicitors and solicitors for a third party. The correspondence is contained in exhibit 8.

Lastly, the respondent relies upon what it says will be evidence that the showing of prototypes to major soft toy buyers is a common but not universal practice and one that was followed in this case.

The result of all this, the respondent contends, will be the counterclaim for rectification of the register under S. 32 of the Designs Act and will be supported by a case under S. 17 that in respect of each design it is not new or original.

My view is (a) - that as the evidence stands at present

there is a serious question that does arise as to the

invalidity of the applicant's three designs and (b) - that it is

to this that predominant weight must be given in evaluating the various factors which go to decide the issue of prima facie case of design infringement.

I come then to the question of balance of convenience. As I have indicated, in each case, that is to say prima facie case for design infringement and prima facie case for contravention of S. 52, it is appropriate to weigh the strength

or weakness of the claim to prima facie case when dealing with
the balance of convenience.

In the Ricegrowers' Co-operative Case there is discussion at 48-492 of the somewhat different approach to be adopted to balance of convenience in S. 52 cases. There, interlocutory injunctive relief is sought under S. 8 0 of the Trade Practices Act. In particular, whilst the difference in the wholesale list price between the products of the applicant and the products of the respondent to which I have referred, may well be a significant matter in dealing with the balance of convenience so far as concerns design infringement, the loss of sales by competition between goods of similar appearance that were not of demonstrably inferior quality may not ordinarily be a factor that would weigh in favour of granting an interlocutory injunction under S. 8 0 of the Trade Practices Act, at least where consumers do not identify the goods by a particular trade name or trade mark. The effect of an injunction in such a case would be to remove that element of competition which is of assistance to consumers, and ss. 52 and

consumers rather than to give effect to the proprietary rights	8 0 operate in a case such as the present primarily to protect
between the parties. The proprietary rights here, of course, flow from the design registration.
On the question of balance of convenience, there is, as I have said, evidence of a peak sale period shortly approaching and that peak sale period would occur in the time during which the case is being got ready for a final hearingl

I would expect that final hearing to be in the early months of

1988.

The respondent offers an undertaking to the Court pending determination of the proceedings to keep full and proper accounts of all sales or other distribution by the respondent of the five soft toy hand puppets, examples of which are exhibits J, K, L, M and N. I bear in mind the circumstances of the case, particularly what has been said as to the inconvenience and risks involved to both parties by the respective grant or refusal of interlocutory relief, and also what counsel for the applicant said this morning as to the possible difficulty in adequately assessing any damages under S. 82 that might flow from sales in contravention of S. 52 of

the Trade Practices Act.

Nevertheless, I am of the opinion that the appropriate position to be achieved pending the final hearing is to accept the undertaking offered by the respondent to keep accounts and therefore to absolve the respondent from further observance of

extended yesterday, namely that the respondent would not sell	the undertaking first given to the Court on 16 October and
or supply by any means soft toy hand puppets of the types which are exhibits J, K, L, M and N.
The applicant also made complaint of alleged contravention of S. 52 of the Trade Practices Act in another aspect. Paragraph 4 (a) of the application sought to restrain the respondent in trade or commerce from engaging in conduct by

representing that soft toy hand puppets manufactured and/or sold and distributed by or on behalf of the respondent meet and exceed all Australian safety regulations including the "Flammability Act".

Evidence was prepared to deal with that issue but in the event it is not necessary for me to do so beyond accepting the undertaking offered by the respondent whereby the respondent undertakes to the Court that pending final determination or further order the respondent will not, in trade or commerce, represent that soft toy hand puppets sold or distributed by it "meet and exceed all Australian safety regulations including Flammabililty Act" or words to that effect.

The result then is:

(1) the Court accepts the undertaking offered by counsel for the respondent to the Court that pending determination of the proceedings, the respondent will keep full and proper accounts of all sales or other distribution by the respondent of the glove puppets,	examples of which are exhibits J, K, L,
M and N in these proceedings. I

(2) the Court also accepts the undertaking

offered by counsel for the respondent that pending further order the respondent will not in trade or commerce represent that soft toy hand puppets sold or distributed by it "meet and exceed all Australian safety regulations including FlammabilityActt1

or words to that effect.

( 3 ) the applicant's applioation for

interlocutory injunctive relief is

refused.

(4) the Court gives the following
directions for the preparation of the

mat te r f o r f i n a l hear ing:

( a ) t he a p p l i c a n t f i l e and se rve i t s

s ta tement of	c la im on or before 4
November 1987;

( b )	t h e respondent f i l e i t s defence and any cross-c la im on o r before 15 November 1987;
( C )	t he a p p l i c a n t f i l e i t s r e p l y and
any defence t o cross-c la im on o r

before 23 November 1987;

( d )	t h e a p p l i c a n t f i l e i t s a f f i d a v i t s i n ch ie f on o r before 23 November 1987;
( e )	on o r before 4 December 1987;

t h e respondent f i l e i t s a f f i d a v i t s

( f )	t h e a p p l i c a n t f i l e i ts a f f i d a v i t s
i n r ep ly on o r be fo re 1 6 December

1987;

( g )	d i r e c t t h a t t h e p a r t i e s be a t
l i b e r t y a t t h e f i n a l hea r ing t o
read again t h e a f f i d a v i t s read a t
t h e i n t e r l o c u t o r y a p p l i c a t i o n ;
( h )	s t and the mat te r over f o r f u r t h e r
d i r e c t i o n s be fo re me on 18

December 1987 a t 9.30 am.

( 5 )	Costs reserved.
( 6 )	E x h i b i t s may be re turned wi th t h e
except ion of e x h i b i t s J, K , L , M and N.

1 c e r t i f y t h a t t h i s and t h e preceding pages t o be a

t r u e copy of	t h e Reasons f o r Judgment of h i s Honour Mr
J u s t i c e	Gummow.

Assoc ia te :  &#$&o$&&l .

Date: 27 October 1987

Counsel for the Applicant	Mr D.M. Yates
Solicitors for the Applicant	Messrs Dawson Waldron

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Counsel for the Respondent	Mr D.K. Catterns
Solicitors for the Respondent	Messrs Williams Niblett :' 8 '3

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