Facton Ltd v ALI
[2011] FMCA 778
•14 October 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FACTON LTD & ORS v ALI | [2011] FMCA 778 |
| COPYRIGHT – Allegations of contraventions of Copyright Act and other statutes – passing off – failure of respondent to participate in trial and also to comply with interlocutory orders – failure of respondent to file notice of dispute to applicants’ notice to admit – assessment of compensation to be paid to applicants. |
| Copyright Act 1968, s.115 Trade Marks Act 1995, s.120 Fair Trading Act 1987, ss.42, 44 Federal Magistrates Court Rules 2001, r.13.03A(2) |
| Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433 Facton Ltd & Ors v Dash Industries & Anor [2010] FMCA 709 Adidas-Salomon AG v Turner (2003) 58 IPR 66 Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 57 ALR 167 Review Australia Pty Ltd v New Cover Group Pty Ltd (2008) 79 IPR 236 |
| First Applicant: | FACTON LTD |
| Second Applicant: | G-STAR RAW C.V. |
| Third Applicant: | G-STAR AUSTRALIA PTY LTD A.C.N. 096 765 123 |
| Respondent: | YASIR ALI |
| File Number: | MLG 1069 of 2010 |
| Judgment of: | Burchardt FM |
| Hearing date: | 30 August 2011 |
| Date of Last Submission: | 30 August 2011 |
| Delivered at: | Melbourne |
| Delivered on: | 14 October 2011 |
REPRESENTATION
| Counsel for the Applicants: | Mr M.J. Rivette |
| Solicitors for the Applicants: | Middletons |
| The Respondent: | No appearance |
THE COURT DECLARES THAT:
The respondent has infringed the G-Star Trade Marks (as defined in paragraph 5 of the claim) in breach of s.120 of the Trade Marks Act 1995 (Cth) (Trade Marks Act);
The respondent has infringed or authorised the infringement of the Copyright Works (as defined in paragraph 7 of the claim);
The respondent has contravened ss.42 and 44 of the Fair Trading Act 1987 (NSW) (FTA);
The respondent has engaged in conduct which constitutes the tort of passing off; and
The respondent has breached the undertakings (as defined in paragraph 20 of the claim.
THE COURT ORDERS THAT:
The respondent whether by himself, his servants, employees, agents or otherwise howsoever be restrained in trade or commerce from:
(a)Disposing or dealing with the Grace Garments (as defined in paragraph 10 of the claim) or any other clothing or clothing accessories to which the G-Star Trade Marks and the Copyright Works have been affixed or applied without the knowledge, authority or licence of the applicants or any of them (Counterfeit G-Star Products) in any other way than in accordance with Order (7) below;
(b)authorising, causing, procuring or inducing any person to do any act which would be an infringement of the injunction referred to in paragraph (a) above;
(c)representing that the Grace Garments or Counterfeit G-Star Products are imported, manufactured, advertised, promoted, offered for sale or sold with the sponsorship or approval of the Applicants or any of them.
(d)representing that the Grace Garments or Counterfeit G-Star Products are the G-Star Products (as defined in paragraph 3 of the claim);
(e)representing that the Grace Garments or Counterfeit G-Star Products emanate from the same trade source as the G-Star Products;
(f)representing that the Grace Garments or Counterfeit G-Star Products are made by the applicants or any of them; and
(g)passing off the Grace Garments or Counterfeit G-Star Products as:
(i)And for the G-Star Products; and
(ii)having the sponsorship, approval or a connection or affiliation in the course of trade with the Applicants or any of them and the G-Star Products.
The respondent, whether by himself, his servants, employees, agents or otherwise howsoever, deliver up to the applicants:
(a)All the Grace Garments and Counterfeit G-Star Products in his possession, custody or control;
(b)any and all brochures, pamphlets, advertising, labels, swing tags, promotional or marketing material and the like in his power, possession, custody or control which bear the G-Star Trade Marks or the Copyright Works; and
(c)any materials, products or things in the respondent’s power, possession or control, the exploitation of which by the respondent would be an infringement of the foregoing injunctions.
The respondent pay the applicants $20,000 damages as compensation for loss of sales.
The respondent pay the applicants $25,000 for damages to reputation.
The respondent pay the applicants $50,000 additional compensatory damages pursuant to s.115 of the Copyright Act.
The respondent pay the applicants’ costs fixed at $15,428.50, together with disbursements fixed at $3,233.17.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 1069 of 2010
| FACTON LTD |
First Applicant
| G-STAR RAW C.V. |
Second Applicant
| G-STAR AUSTRALIA PTY LTD A.C.N. 096 765 123 |
Third Applicant
And
| YASIR ALI |
Respondent
REASONS FOR JUDGMENT
The applicants seek damages for contravention of a number of statutes including most particularly the Copyright Act 1968 (“Copyright Act”), together with claims for the common law tort of passing off. Although various statutes have been pleaded, the precise heads of damage now asserted are loss of sales, damage to reputation, and additional damages pursuant to s.115 of the Copyright Act. The applicants seeks $55,500 for compensation for lost sales in respect of about 505 products, $35,000 for damage to reputation and $75,000 as additional damages under s.115 of the Copyright Act.
For the reasons that follow, the Court will order that the respondent pay $25,000 in respect to compensation for loss of sales, $20,000 for damage to reputation and $50,000 additional compensation pursuant to s.115 of the Copyright Act.
The application for leave to amend
On 30 August 2011, I granted leave to the applicants to substitute
G-Star Raw C.V as the second applicant to the proceeding and to file the amended application and statement of claim annexed as JAF-3 to the affidavit of Jonathan Ariel Feder affirmed 17 August 2011.
That affidavit of Mr Feder shows that on 31 March 2011, the second applicant, G-Star International B.V., entered into a business sale and purchase agreement with G-Star Raw C.V. to sell its business and assets to G-Star Raw. The applicants’ lawyers, Middletons, sent a letter dated 6 July 2011 to the respondent seeking his consent to the substitution of G-Star Raw as the second applicant and did not receive a reply.
Given that G-Star International had sold inter alia its registered intellectual property rights, its unregistered intellectual property rights and any copyright on registered or unregistered trademark rights and any domain name registered in the name of G-Star International to the proposed substitute applicant, it seemed entirely appropriate to me to grant leave as sought. For these reasons, I permitted the changes to be made.
The respondent’s default
The respondent’s participation in the proceeding has been episodic at best. He did file a response and defence on 1 and 5 November 2010 respectively at which time he was legally represented. The defence with one important exception consisted of either bare denials or non-admissions.
As is correctly submitted by the applicants in paragraph 1 of the written outline of submissions filed on 23 August 2011, the respondent has failed to comply with orders made by the Court on 20 September 2010 and 3 December 2010, most particularly in relation to discovery, inspection and the filing of affidavits of evidence. The respondent is plainly in default within the meaning of r.13.03A(2) of the Federal Magistrates Court Rules 2001 (“the Rules”). As a result, the Court may, pursuant to r.13.03B(2)(c) give judgment against the respondent for “(i) the relief that the applicant appears entitled to on the statement of claim, and the court is satisfied it has power to grant “or” give judgment or make any other order against the respondent.”
In Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433 at [3], Heerey J discussed the equivalent rule of the Federal Court Rules and said:
“… The rule does not require proof by way of evidence of the applicant’s claim; rather that on the face of the statement of claim there is a claim for the relief sought and, of course, that the court has jurisdiction to grant that relief.”
As to jurisdiction to deal with the Trade Marks Act components of the matter, see Facton Ltd & Ors v Dash Industries & Anor [2010] FMCA 709 at [12] per Riley FM. Thus, in one sense the evidentiary issues are closed save perhaps in the sense that the Court requires evidence to enable it to determine issues of remedy.
As if the default difficulty were not enough, the respondent has failed to file a notice of objection to the applicants’ notice to admit facts filed on 7 July 2011. That notice to admit facts and authenticity of documents is comprehensive and the failure to file a notice of objection leads to the result that all of what might be described as the formal matters of proof going to establish the applicants’ case are made out.
As if that were not enough, the applicants have filed comprehensive affidavit material governing almost every aspect of the case they have to prove. The only matter not formally proved by the applicants is the respondent’s ownership of the relevant premises where the offending conduct took place, and that matter is expressly admitted by paragraph 9 of the defence.
The Relevant Facts
Given the observations I have already made about the respondent’s default and the notice to admit, it is sufficient to say that I am quite satisfied that between them, the applicants have the relevant ownership of the various trademarks and copyrights asserted in the statement of claim, that they have established a reputation in the products described in the statement of claim and that the sale of counterfeit products such as those sold by the respondent causes loss and damage both in a direct sense of loss of sales and in the sense of a loss to the reputation of the applicants’ garments.
It should be noted that I am speaking of the applicants globally although of course as will be seen from the amended statement of claim, each applicant plays a different part in what might be described as the chain of events that gives rise to the sale to the public by the third applicant of G-Star products. The applicants presented their case in a global sense in that they seek only one award of damages under each of the various headings I have set out and for that reason, it is convenient to deal with it in this way.
Where it becomes necessary to look at the factual material is in order to assess the quantity of garments sold by the respondent and the nature of his conduct.
As noted earlier, the defence expressly concedes that the respondent is the registered proprietor of the New South Wales business
“Grace Trading International” and that he is the lessee of market stalls at Paddy’s Market in Flemington, New South Wales and at Parklea Market in Parklea, New South Wales.
The affidavit material filed, and not in any sense contradicted by the respondent, shows that on 7 February 2010 a Mr McAlister, an agent of the applicants, visited Paddy’s Market and saw about 160 counterfeit
G-Star clothing items on sale at the respondent’s premises.
He purchased a singlet for $20. This compares with a standard retail price of $40 and G-Star Australia’s standard wholesale price of $16.50 (see affidavit of Mr De bil at paragraph 25).
On 22 February 2010 Mr Douglas, another agent of the applicants, visited the Parklea Market and identified the respondent’s stall as having about 170 G-Star counterfeit items for sale and he bought two T-shirts for $25.
On 28 March 2010 a Ms Iannitti, another agent of the applicants, visited Paddy’s Markets and saw about 14 G-Star branded counterfeit items for sale at the respondent’s premises.
On the same day, 28 March 2010, a Ms Youssef, yet a further agent of the applicants, visited the Parklea Market and saw approximately 140 counterfeit G-Star items on sale at the respondent’s premises.
On 8 May 2010, a Ms Smith visited the Parklea Market and identified approximately 20 G-Star counterfeit items on sale at the respondent’s premises, from which she bought one pair of jeans for $65. This compares with a standard retail price of $280 and G-Star Australia’s standard wholesale price of $112.84 (see affidavit of Mr de Bil at paragraph 24).
On 23 May 2010, Ms Smith visited Paddy’s Market and identified approximately 50 counterfeit G-Star items at the respondent’s premises and purchased a hat for $25.
It should be noted that on 28 March 2010, Ms Iannitti served the respondent personally with a letter of demand which required him to give undertakings which he then purported to give. The sales that occurred on 8 May 2010 and 23 May 2010 were plainly in blatant disregard of the undertakings he had proffered.
I accept, as the applicants’ written submissions indicate, that the evidence discloses about 555 infringing products for sale.
I also note that the infringing conduct continued for a period of quite some months from February until May 2010 and involved, as is immediately apparent, a significant number of items, bearing in mind totals identified in numerous other cases before the Court and the Federal Court of Australia.
Against this background, I come now to consider the awards that should be made.
Compensation for Loss of Sales
The applicants have set out at paragraphs 125 to 132 of their written submissions a number of authorities dealing with the circumstance, as here, where the Court is aware that loss has occurred but is not able precisely to quantify it. In Adidas-Salomon AG v Turner (2003) 58 IPR 66, Goldberg J said:
“Notwithstanding the difficulty facing me on the assessment of damages the task of the court is to do the best it can on the available material.”
Goldberg J went on to quote the following passage from the judgment of the Full Court of the Federal Court in Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 57 ALR 167:
“The principle is clear. If the court finds damage has occurred it must do its best to quantify the loss even if a degree of speculation and guess work is involved. Furthermore, if actual damage is suffered, the award must be for more than nominal damages. We should add that we can see no reason why this principle should not apply in cases under the Trade Practices Act as well as in cases at common law. We emphasise, however, that the principle applies only when the court finds that loss or damage has occurred. It is not enough for a plaintiff merely to show wrongful conduct by the defendant.”
Here, the respondent was selling what in the scheme of things were substantial amounts of counterfeit goods at what the applicants submitted, correctly in my view, were premium prices. While there is self-evidently no direct evidence from any particular purchaser that they purchased the counterfeit goods in circumstances where they would otherwise have purchased the applicants’ goods, it is far more probable than otherwise that the applicants have indeed lost sales as a result of the respondent’s activities.
It is not possible, however, in my view to say that in each and every instance, the offering for sale by the respondent of a particular garment means that the applicants necessarily lost a sale in that amount.
Admitting that the matter is very much one of doing the best one can in a difficult situation, I think that I should find that the applicants have lost 250 sales as a result of the respondent’s conduct. He was selling counterfeit goods at prices which, while well below those that the applicants themselves would sell them for, were still reasonably substantial and it seems reasonable to suppose that a fair proportion of those who bought the respondent’s products would otherwise have bought the applicants’ products.
The actual amount of loss on each individual item is not the same and one has to do the best one can with the material available. I accept that the applicants lost $80 taking things across the board for each item and accordingly, there will be an award for compensation for loss of sales of $20,000 under this heading.
Damages to reputation
As I have earlier indicated, there is no question that the applicants spend a lot of time and money in establishing the reputation of their products and that they have succeeded in doing so. Likewise, there is no question on the pleadings, and on the matters admitted in the notice to admit, that the conduct of the respondent as proved has an effect upon that reputation.
The quantification of damages under this heading is, like so many other matters in this field, not a matter of precision. It is a matter of looking at the extent of the loss suffered by the applicants and the damage done to them and trying to pick a figure that fairly reflects that loss. Having regard to the scale of the contravention, and having had regard to the various decisions to which my attention has been drawn by the applicants in their written submissions, I think the appropriate figure to be awarded is $25,000. This is a somewhat higher figure than is sometimes awarded in other matters but it reflects both the scale of the contravention and the time for which it continued.
Additional compensatory damages pursuant to section 115 of the Copyright Act
Once again, these are not areas of precision. Matters which are plainly relevant in this case include:
a)General deterrence.
b)The high probability that the respondent made significant profits from the contravening conduct.
c)The contumelious failure of the respondent to abide by the undertakings he proffered to the applicants in March 2010.
d)The failure of the respondent properly to participate in the proceeding and to comply with Court orders including the failure to make discovery, to participate in the process of inspection, to respond to the notice to produce and to attend Court at the trial (as to which see generally Kenny J in Review Australia Pty Ltd v New Cover Group Pty Ltd (2008) 79 IPR 236).
e)The size and scale of the contraventions and the large number of garments involved.
Bearing all these matters in mind, in my opinion an award of $50,000 should be ordered under this heading.
Conclusion
The applicants have clearly made out their case on all points where it was necessary for them to do so. Taken with the admissions in the defence, the applicants’ case could scarcely be more conclusive. There will be declarations and orders sought by the applicants.
Costs
The applicants seek their costs and that they be fixed in the sums indicated in the Schedule provided to the Court. In my opinion, the scale costs of $15,428.50 and the disbursements of $3,233.17 are entirely reasonable. I will fix them in the sums sought.
I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for judgment of Burchardt FM
Date: 14 October 2011
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