Facton Ltd v Remmy Cardin Pty Ltd
[2014] FCCA 627
•4 April 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FACTON LTD & ORS v REMMY CARDIN PTY LTD | [2014] FCCA 627 |
| Catchwords: COPYRIGHT – Infringement – default judgment – assessment of damages. |
| Legislation: Competition and Consumer Act 2010 (Cth), ss.80, 138A, Sch.2; 18 and 29 Copyright Act 1968 (Cth), ss.36, 37, 38, 115, 131D, Part V Trade Marks Act 1995 (Cth), ss.120, 191A |
| Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (in liq) (2007) 157 FCR 564 Microsoft Corporation & Anor v Atifo Pty Ltd & Ors (1997) 38 IPR 643 Microsoft Corporation & Ors v Goodview Electronics Pty Ltd & Ors (2000) 49 IPR 578 Sony Computer Entertainment Aust Pty Ltd v Stirling [2001] FCA 1852 Sutherland Publishing Co Ltd v Caxton Publishing Co Ltd [1936] Ch 323 Wellington Newspapers Ltd v Dealers Guide Ltd [1984] 2 NZLR 66 | ||
| First Applicant: | FACTON LTD | |
| Second Applicant: | G-STAR RAW C.V. |
| Third Applicant: | G-STAR AUSTRALIA PTY LTD (ACN 084 011 852) |
| Respondent: | REMMY CARDIN PTY LTD (ACN 097 684 145) |
| File Number: | MLG 1269 of 2013 |
| Judgment of: | Judge Hartnett |
| Hearing date: | 23 December 2013 |
| Delivered at: | Melbourne |
| Delivered on: | 4 April 2014 |
REPRESENTATION
| Solicitor appearing for the Applicants: | Mr J Feder |
| Solicitors for the Applicants: | K&L Gates |
| Counsel for the Respondent: | The Respondent did not appear |
ORDERS
PENAL NOTICE TO THE RESPONDENT:
IF YOU
A. REFUSE OR NEGLECT TO DO ANY ACT WITHIN THE TIME
SPECIFIED IN THIS ORDER FOR THE DOING OF THE ACT; OR
B. DISOBEY THE ORDER BY DOING AN ACT WHICH THE ORDER
REQUIRES YOU TO ABSTAIN FROM DOING,
YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF
PROPERTY OR OTHER PUNISHMENT.
ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES
ANYTHING WHICH HELPS OR PERMITS YOU TO BREACH THE
TERMS OF THIS ORDER MAY BE SIMILARLY PUNISHED.
THE COURT DECLARES THAT:
The Respondent has:-
(a)infringed the G-Star Trade Marks (as defined in paragraph 6 of the Statement of Claim filed 13 August 2013) in breach of s.120 of the Trade Marks Act 1995 (Cth);
(b)infringed or authorised the infringement of the Copyright Works (as defined in paragraph 8 of the Statement of Claim filed 13 August 2013) in breach of ss.36, 37 and 38 of the Copyright Act 1968 (Cth);
(c)contravened ss.18 and 29 of the Australian Consumer Law as found in Schedule 2 to the Competition and Consumer Act 2010 (Cth); and
(d)engaged in conduct which constitutes the tort of passing off.
THE COURT ORDERS THAT:
The Respondent, whether by itself, its director, its employees, servants, agents or otherwise howsoever be restrained in trade or commerce from :-
(a)importing, manufacturing, marketing, advertising, promoting, supplying, exhibiting in public, offering for sale and selling the Imported Products (as defined in paragraph 12 of the Statement of Claim filed 13 August 2013), the Dandenong Store Jeans (as defined in paragraph 3 of the Affidavit of Simon Ranjitan Casinader affirmed 25 November 2013) 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 (‘Counterfeit G-Star Products’);
(b)disposing or dealing with the Imported Products, Dandenong Store Jeans and the Counterfeit G-Star Products in any other way than in accordance with order 2 below;
(c)authorising, causing, procuring or inducing any person to do any act which would be an infringement of the injunctions referred to in order(1)(a) above;
(d)representing that the Imported Products, Dandenong Store Jeans or the Counterfeit G-Star Products are imported, manufactured, advertised, promoted, offered for sale or sold with the sponsorship or approval of the Applicants;
(e)representing that the Imported Products, Dandenong Store Jeans or Counterfeit G-Star Products are the G-Star products;
(f)representing that the Imported Products, Dandenong Store Jeans or the Counterfeit G-Star Products emanate from the same trade source as the G-Star products;
(g)representing that the Imported Products, Dandenong Store Jeans or the Counterfeit G-Star Products are made by the Applicants;
(h)representing that the Imported Products, Dandenong Store Jeans or the Counterfeit G-Star Products are licensed, authorised, sponsored, approved or endorsed by the Applicants; and
(i)passing off:-
(i)its business as having the sponsorship, approval or a connection or affiliation in the course of trade with the Applicants and the G-Star products; and
(ii)the Imported Products and the Dandenong Store Jeans as and for the G-Star products.
The Respondent, whether by itself, its director, its employees, servants, agents or otherwise howsoever deliver up to the Applicants:-
(a)all of the Imported Products and the Counterfeit G-Star Products in its possession, custody or control; and
(b)any and all brochures, pamphlets, advertising, labels, swing tags, promotional or marketing material and the like in its power, possession, custody or control which bear the G-Star Trade Marks or the Copyright Works.
The Respondent pay the Applicants $500 as compensation for loss of sales.
The Respondent pay the Applicants $15,000 damages for loss of reputation.
The Respondent pay the Applicants $25,000 additional damages pursuant to s.115 of the Copyright Act 1968 (Cth).
The Respondent pay the Applicants’ costs of $13,293.19 plus interest.
The Applicants serve a copy of these Orders on the Respondent as soon as is practicable.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 1269 of 2013
| FACTON LTD |
First Applicant
| G-STAR RAW C.V. |
Second Applicant
| G-STAR AUSTRALIA PTY LTD (ACN 084 011 852) |
Third Applicant
And
| REMMY CARDIN PTY LTD |
Respondent
REASONS FOR JUDGMENT
The Applicants commenced this proceeding in relation to an alleged breach of copyright, amongst other claims, on 13 August 2013 by filing an Originating Application and Statement of Claim (‘the documents’).
The documents were served on the Respondent on 16 August 2013.[1]
[1] Affidavit of Ben Regnard affirmed on 14 October 2013
The proceeding was listed for a directions hearing on 14 October 2013. The Respondent failed to attend the directions hearing and the Respondent has failed to file and serve a notice of address for service.
At the directions hearing, Orders were made for the Applicants to file any interlocutory application seeking default judgment against the Respondent by 1 December 2013, together with any affidavit material in support of that application.
The Applicants filed an Interlocutory Application and supporting affidavits seeking default judgment against the Respondent on 29 November 2013. The Respondent was served with those documents.[2]
[2] Affidavit of Renee Louise Backman affirmed on 17 December 2013
The Applicants rely on the following affidavits in support of their application seeking default judgment against the Respondent:-
(a)Affidavit of Shalini Manuja Jayaweera affirmed on 11 October 2013 which sets out the company searches conducted for the Respondent (‘the Jayaweera Affidavit’);
(b)Affidavit of Simon Ranjitan Casinader affirmed on 25 November 2013 (‘the Casinader Affidavit’) which details Mr Casinader’s visit in November 2013 to the Respondent’s retail store, Remmy Cardin, in Dandenong Victoria (‘the Dandenong Store’) and the “G-Star” branded jeans he purchased at the Dandenong Store (‘Dandenong Store Jeans’);
(c)Affidavit of Jonathan Ariel Feder affirmed on 25 November 2013 (‘ the first Feder Affidavit’) which details the seizure of a package containing 18 pairs of “G-Star” branded jeans by the Australian Customs and Border Protection Service (‘Customs’) imported by the Respondent (‘the Imported Products’) and correspondence with the Respondent;
(d)Affidavit of Abhimanyu Arunachalam affirmed on 25 November 2013 (‘the Arunachalam Affidavit’) which details Mr Arunachalam’s visit to the Respondent’s retail store, Remmy Cardin Hip Hop Master, in Footscray Victoria and the branded clothing that was on display for sale at this retail store; and
(e)Affidavit of Piet Poelmann sworn on 28 November 2013 (‘the Poelmann Affidavit’) which details how the Imported Products and Dandenong Store Jeans were identified as counterfeit and the damage suffered by the Applicants as a result of the Respondent’s conduct;
(f)Affidavit of Jonathan Ariel Feder affirmed on 2 December 2013 (‘the second Feder Affidavit’) which details documents produced under subpoena by Customs and the Court documents and Orders made against the Respondent from a previous proceeding issued in the Federal Court of Australia by New Era Cap Company Inc.
Default judgment
Rule 13.03B(2) of the Federal Circuit Court Rules 2001 (Cth) (‘the Rules’) provides that:-
“(2) If a respondent is in default, the Court may:
(a) order that a step in the proceeding be taken within the time limited in the order; or
(b) if the claim against the respondent is for a debt or liquidated damages—grant leave to the applicant to enter judgment against the respondent for:
(i) the debt or liquidated damages; and
(ii) if appropriate—costs; or
(c) if the proceeding was commenced by an application supported by a statement of claim or the Court has ordered that the proceeding continue on pleadings—give judgment against the respondent for the relief that:
(i) the applicant appears entitled to on the statement of claim; and
(ii) the Court is satisfied it has power to grant; or
(d) give judgment or make any other order against the respondent; or
(e) make an order mentioned in paragraph (b), (c) or (d) to take effect if the respondent does not take a step ordered by the Court in the proceeding in the time limited in the order.”
Rule 13.03A(2) of the Rules defines when a respondent is in default, including the following types of default which are relevant in the present case:-
“(2) For rule 13.03B, a respondent is in default if the respondent:
(a) has not satisfied the applicant’s claim; and
(b) fails to:
(i) give an address for service before the time for the respondent to give an address has expired; or
(ii) file a response before the time for the respondent to file a response has expired; or
(iii) comply with an order of the Court in the proceeding; or
(iv) file and serve a document required under these Rules; or
(v) produce a document as required by Part 14; or
(vi) do any act required to be done by these Rules; or
(vii) defend the proceeding with due diligence.”
The Respondent is clearly in default. It has not:-
(a)filed an address for service;
(b)filed a defence or a genuine steps statement;
(c)done the acts required by the Rules; or
(d)defended the proceeding with due diligence, or at all.
Given the documents filed on 13 August 2013, together with the default of the Respondent, r.13.03B(2)(c)(i) of the Rules applies. The Court does not require proof by way of evidence of the Applicants’ claim. Rather, it needs to be satisfied that on the face of the Statement of Claim there is a claim for the relief sought, and that the Court has the necessary jurisdiction.[3]
[3] Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433 at [3] per Heerey J; Australian Competition and Consumer Commission (ACCC) v Albert [2005] FCA 1311 at [6] and [7] per Jacobson J; Facton Ltd and Ors v Dash Industries Pty Ltd and Anor [2010] FMCA 709; Facton Ltd v Erdogan (No 1) [2012] FCA 924
I am satisfied on the face of the Statement of Claim that there is a valid claim for the relief sought. That is supported by the various affidavits relied upon by the Applicants in support of their application for default judgment (as set out in paragraph 6 of these Reasons). Whilst strictly speaking, the proofs needed to support the factual assertions made in the Statement of Claim filed 13 August 2013 are not necessary, I find they exist in admissible form in the affidavits relied upon by the Applicants. The Applicants have made out their case. I am satisfied also that this Court has the necessary jurisdiction to make the declarations sought by the Applicants and order the injunctions, delivery up and damages orders as also sought by the Applicants. The Applicants seek relief for the Respondent’s trade mark and copyright infringement, false representations in trade and commerce and for the conduct of passing off.
Jurisdiction
The Court has jurisdiction with respect to Australian Consumer Law claims under Schedule 2 of the Competition and Consumer Act 2010 (Cth) (‘the Competition and Consumer Act’)[4] and may grant injunctions as deemed appropriate.[5]
[4] Competition and Consumer Act 2010 (Cth), s.138A, Sch.2
[5] Competition and Consumer Act 2010 (Cth), s.80
The Court has jurisdiction to hear and determine civil copyright matters under the Copyright Act 1968 (Cth) (‘the Copyright Act’), as amended by the CopyrightAmendment (Parallel Importation) Act2003 (Cth). Relevantly, the Court can deal with matters arising under Part V of the Copyright Act.[6]
[6] Copyright Act 1968 (Cth), s.131D
The Court also has jurisdiction under the Trade Marks Act 1995 (Cth) (‘the Trade Marks Act’) in relation to infringement actions.[7]
[7] Trade Marks Act 1995 (Cth), ss.120,191A
The Court’s power to grant declaratory relief is discretionary. It is appropriate on the facts of this case to grant declaratory relief in the terms as sought by the Applicants which is set out in Annexure A of the Applicants’ Outline of Submissions for Default Judgment filed 20 December 2013.
The Applicants also seek injunctive relief restraining the Respondent from further breaches of the same type. I adopt the reasoning of Murphy J in Facton Ltd v Erdogan(No.1) [2012] FCA 924 at [15] which is equally apposite to the facts in this case:-
“… The power of the Court to grant such relief is controlled by the concluding words of s 80(1) of the Competition and Consumer Act 2010 (Cth), to do so “in such terms as the Court determines to be appropriate”. I have granted injunctive relief in the terms in which it was sought by the applicants. In my view the injunctions sought clearly set out the conduct that the respondent is bound to refrain from, and there is a clear and sufficient nexus between the injunctions and the matter before the Court. In summary they operate to restrain the respondent from again importing, manufacturing, advertising, marketing, distributing, offering for sale and selling Counterfeit G-Star Products, or assisting, causing, procuring or inducing any person to do any act which would be an infringement of that restraint. They operate to restrain the respondent from representing that Counterfeit G-Star Products are genuine G-Star Products, or that they emanate from the same trade source, or are made by the applicants or any of them.”
The relevant facts
The Second Applicant (‘G-Star Raw’) designs, manufactures, distributes and sells G-Star products (as defined in paragraph 4 of the Statement of Claim filed 13 August 2013) throughout the world. The First Applicant (‘Facton’) licenses the use of the G-Star Trade Marks (as defined in paragraph 6 of the Statement of Claim filed 13 August 2013) to G-Star Raw for use on the G-Star products on an exclusive basis and the Third Applicant (‘G-Star Australia’) is the exclusive wholesaler and distributor of the G-Star products in Australia.
G-Star Raw and its predecessors in business have advertised and promoted the “G-Star” brand and the G-Star products since 1989. G-Star Raw owns and operates the G-Star Website.
G-Star Raw sells the G-Star products through “G-Star” branded stores and independent retailers in 70 countries. G-Star Australia sells the G-Star products to:-
(a)its franchisee who owns and operates 22 concept/flagship G-Star stores throughout Australia; and
(b)over 40 independent retailers throughout Australia which include Myer and David Jones.
G-Star Australia also owns and operates G-Star Outlet Stores in Australia.
G-Star Australia advertises and promotes the “G-Star” brand in Australia in a number of ways including:-
(a)through “Look Books” which it provides to wholesale customers and operators of concept stores;
(b)billboards;
(c)signage on public transport including dedicated “G-Star” branded trams and buses;
(d)in-store advertisements; and
(e)editorials and advertisements placed in various magazines including Men's Fitness, FHM, GQ, Rolling Stone, Acclaim and Frankie.
Further advertising is conducted through social media including Facebook, Twitter and YouTube. G-Star Raw has spent a substantial amount of money advertising and promoting the “G-Star” brand in Australia.
As deposed by Mr Poelmann in his Affidavit sworn on 28 November 2013, G-Star Australia is able to charge the prices that it does for the G-Star products for the following reasons:-[8]
(a)the materials used to manufacture the G-Star products are of a high quality as is the standard of workmanship used to manufacture these products; and
(b)G-Star Raw employs a large number of designers who are involved in creating and designing innovative clothing and accessories as part of the G-Star range. The G-Star products and the “G-Star” brand have become popular as consumers purchase the G-Star products for their innovative designs and exclusivity.
[8] Affidavit of Piet Poelmann sworn 28 November 2013 at paragraph 29
This evidence establishes, as submitted by the Applicants, that the G-Star products, the G-Star Trade Mark, the Copyright Works and the “G-Star” brand per se have a substantial reputation amongst actual and potential customers of “G-Star” branded products in Australia.
Damages
The Applicants seek damages for trade mark and copyright claims in respect of lost sales, loss of reputation and additional damage pursuant to s.115(4) of the Copyright Act. Section 115 of the Copyright Act relevantly provides:-
“Actions for infringement
(1) Subject to this Act, the owner of a copyright may bring an action for an infringement of the copyright.
(2) Subject to this Act, the relief that a court may grant in an action for an infringement of copyright includes an injunction (subject to such terms, if any, as the court thinks fit) and either damages or an account of profits.
…
(4) Where, in an action under this section:
(a) an infringement of copyright is established; and
(b) the court is satisfied that it is proper to do so, having regard to:
(i) the flagrancy of the infringement; and
(ia) the need to deter similar infringements of copyright; and
(ib) the conduct of the defendant after the act constituting the infringement or, if relevant, after the defendant was informed that the defendant had allegedly infringed the plaintiff's copyright; and
(ii) whether the infringement involved the conversion of a work or other subject-matter from hardcopy or analog form into a digital or other electronic machine-readable form; and
(iii) any benefit shown to have accrued to the defendant by reason of the infringement; and
(iv) all other relevant matters;
the court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances.”
The Applicants acknowledge that in receiving damages pursuant to the Copyright Act they are not entitled to also receive damages for breaches of the Trade Marks Act, the Australian Consumer Law claim and the Respondent’s conduct which constitutes the tort of passing off. That is, the Court will not allow the Applicants to ‘double dip’ in circumstances where damages are received for copyright infringement.
As s.115(2) of the Copyright Act does not allow the Applicants to obtain both damages and an account of profits, the Applicants have elected to seek an award of damages, rather than an account of profits.[9]
[9] Applicants’ Outline of Submissions filed 20 December 2013 at paragraph 48
Assessment of compensatory damages – lost sales profits
The purpose of an award of damages is to compensate the Applicants for the loss which they have suffered “as a result of the Respondent's breach,”[10] including by compensating the Applicants for the depreciation to the value of the copyright as a chose in action arising from the introduction of “G-Star” branded goods into the marketplace.[11]
[10] Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (in liq) (2007) 157 FCR 564 per Black·CJ and Jacobson J at [25]; Interfirm Comparison (Aust) Pty Ltd v Law Society of New South Wales (1975) 6 ALR 445 at [446], per Bowen CJ; Bailey v Namol Pty Ltd (1994) 53 FCR 102 at [111], per Burchett, Gummow and O'Loughlin JJ
[11] See Sutherland Publishing Co Ltd v Caxton Publishing Co Ltd [1936] Ch 323; 336 per Lord Wright MR where his Lordship stated the distinction between conversion damages and general damages
In particular, it is well established that a plaintiff in an intellectual property infringement case may prove an entitlement to compensatory damages on the basis that it lost the sales made by the defendant which would otherwise have been made by the plaintiff.[12]
[12] Aristocrat (2007) 157 FCR 564 at [37]; Sony Computer Entertainment Aust Pty Ltd v Stirling [2001] FCA 1852 per Emmett J at [8]
The Applicants must prove their loss on the balance of probabilities and with as much precision as the subject matter reasonably permits.[13] lf a Court finds that damage has occurred it must do its best to quantify the loss, even if some degree of speculation and guesswork is involved.[14]
[13] Placer (Granny Smith) Pty Ltd v Theiss Contractors Pty Ltd (2003) 196 ALR 257 at 266 [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; at [161], per McHugh J
[14] Aristocrat (2007) 157 FCR 564 per Black CJ and Jacobson J at [35]; Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 57 ALR 167 at [183], per Sheppard, Morling & Wilcox JJ
In the absence in these proceedings of any evidence by the Respondent demonstrating the total gross sales of the counterfeit products (or any evidence at all), the Applicants cannot adduce precise evidence of what has been lost. Otherwise:-
(a)the Imported Products were seized by Customs and therefore no damage was suffered by the Applicants as these products were not released into the marketplace; and
(b)the Applicants can only show evidence of the sale of one pair of “G-Star” branded jeans from the Dandenong Store.
However, the Applicants submit that given that a counterfeit “G-Star” product was purchased from the Dandenong Store in November 2013, the Respondent must have had and must have sold counterfeit “G-Star” products on other occasions. Thus, there would be more than one infringing garment sold.
The Applicants, in seeking compensation for lost sales, accept that the Court may only award a nominal amount in damages as there is little evidence of lost sales. The profit the Applicants would have received on the sale of one pair of genuine G-Star jeans is approximately $57. Given the failure of the Respondent to participate in these proceedings, the Court can only engage in some degree of speculation as to the exact amount suffered by the Applicants in lost sales. The selling of counterfeit G-Star products gives rise to some measure of loss, though that is unable to be precisely quantified by the Court. The Respondent however should not benefit from its lack of co-operation and lack of participating in these proceedings. In all the circumstances, I am prepared to award the Applicants $500 under this heading.
Assessment of compensatory damages – loss of reputation
The Applicants also seek general damages on the basis that, as a result of counterfeit “G-Star” branded goods being made available in the marketplace by the Respondent, there was damage to the reputation and goodwill generated by the Applicants in the G-Star Trade Marks, the Copyright Works, the G-Star brand per se and the Applicants’ “exclusivity” in the marketplace. This is a serious matter.
The Applicants rely on the authority of Kenny J in Review Australia Pty Ltd v New Cover Group Pty Ltd & Ors (2008) 79 IPR 236 at [54] – [62] and Jessup J in Review Australia Pty Ltd v Innovative Lifestyle Investments Pty Ltd [2008] FCA 74. In each of those decisions, the Court made an award of damages on the basis that the infringement of a registered design resulted in a diminution in the value of the design as a chose in action because the infringement resulted in some diminution in the commercial value of the design in respect of its future use. Furthermore, the Court found the infringing conduct was likely to have had some adverse effect on reputation and exclusivity of design.
The singularity, distinctiveness, quality and commercial value of the Applicants’ reputation are claimed in the Statement of Claim filed 13 August 2013 and supporting affidavits relied upon. The Applicants have established substantial, exclusive and valuable reputation in Australia in relation to their trade mark brands and goods.
It is not easy to identify the value of the loss of reputation by the Applicants in monetary terms but the Court is required to do so. “It is a matter of judgment as to the loss of value in a party’s reputation.”[15]
[15] Facton Ltd v Rifai Fashions Pty Ltd [2012] FCAFC 9 at [29], per Lander and Gordon JJ
According to the evidence as contained in the Affidavit of Mr Poelmann, the activities of the Respondent in selling counterfeit G-Star products at the prices which it sells these products for, causes significant damage to the Applicants’ business and their reputation for the following reasons:-[16]
(a)G-Star Australia loses sales of the G-Star Products as consumers refuse to pay the higher prices for the G-Star Products when similar looking counterfeit G-Star products are available in the market place at cheaper prices;
(b)G-Star Australia loses customers as they no longer purchase the G-Star Products as they are no longer considered “exclusive” as cheaper copy products are available in the market place; and
(c)G-Star Australia's retail customers no longer wish to purchase the G-Star Products as counterfeit G-Star products are being sold at retail stores within close proximity to their stores and at cheaper prices.
[16] Affidavit of Piet Poelmann sworn 28 November 2013 at paragraphs 30(b) to (e)
Mr Poelmann further deposes that the activities of the Respondent in selling counterfeit G-Star products is damaging to the Applicants and the “G-Star” brand per se as:-[17]
(a)the Applicants only sell “G-Star” branded garments to select stores and boutiques within Australia and New Zealand and they control the way in which the G-Star Products are displayed in-store. The Applicants cannot exert this control on the Respondent or unauthorised sellers and this damages the “G-Star” brand as the G-Star Products are not displayed and sold in the strict way that the Applicants require;
(b)when the Copyright Works are copied by another trader who targets their business at a similar market to the Applicants, the claim of exclusivity in the G-Star Trade Marks and the Copyright Works is lost;
(c)the Respondent sold the Dandenong Store Jeans at very low prices compared to genuine G-Star goods; and
(d)the presence of counterfeit “G-Star” branded goods in the marketplace has significantly diminished the reputation of the Copyright Works. This in turn has diminished the exclusivity of the G-Star Products in the marketplace and has tarnished the “G-Star” brand.
[17] Applicants’ Outline of Submissions for Default Judgment filed 20 December 2013
Finally, Mr Poelmann deposed that by simply affixing the G-Star Trade Marks and the Copyright Works to products entirely unconnected to the Applicants, distributors of these counterfeit goods are able to charge a premium on what they could otherwise charge for such garments, and in that way, they are getting a “free ride” on the basis of the long and substantial investment by the Applicants in promoting their goods sold by reference to the G-Star Trade Marks, the Copyright Works and the “G-Star” brand.[18]
[18]Affidavit of Piet Poelmann sworn 28 November 2013 at paragraph 30(f)
As for compensation for damage to reputation, the Applicants submit that an award of $15,000 is justified. I consider it proper to make an award, in the sum sought, accepting there would have been some damage to the Applicants’ reputation.
Assessment of additional damages
The Applicants seek an award of additional damages under s.115(4) of the Copyright Act in the sum of $50,000 for the following reasons, as submitted by them:-
(a)the Respondent’s infringement was flagrant. Flagrancy entails a calculated disregard for the plaintiff's rights, a cynical pursuit of benefit,[19] conduct that is deliberate, deceitful and/or serious[20] or the infliction of loss difficult to compensate and assess in the normal course.[21] The counterfeit G-Star products imported and sold by the Respondent featured exact reproductions of the Copyright Work. Furthermore, the Respondent was put on notice of the Applicants’ copyright rights by reason of a letter of demand sent on 17 August 2012 and it still continued to sell counterfeit G-Star stock in complete disregard of the Applicants’ copyright rights;
(b)there needs to be a general deterrent to prevent similar infringements of copyright, a deterrent that is known and understood in the marketplace. The documents produced by Customs under subpoena reveal that the Respondent was well aware of the law of trade marks and despite this awareness it continued to import clothing products which infringed the trade marks of well-known brands. The documents also show that the Respondent imported large commercial quantities of goods. Furthermore, the Respondent was a Respondent in a Federal Court proceeding in which allegations of trade mark infringement were proved against it and injunctive orders were made against the Respondent. Despite these Orders, the documents produced by Customs show that the Respondent continued to import clothing products which infringed the trade marks of the Applicant in that case, New Era, as well as a number of well-known brands. There is also a general need to deter other traders from engaging in similar infringements;
(c)despite being put on notice of the Applicants’ intellectual property rights by letter dated 17 August 2012, the Respondent continued to sell “G-Star” branded clothing via its Dandenong Store with a trap purchase being made in November 2013. In Review Australia Pty Ltd v Innovative Lifestyle Investments Pty Ltd [2008] FCA 74 Jessup J awarded additional damages in a design infringement case where the Respondent continued to sell the infringing product after being put on notice of the Applicant's design rights and his Honour noted at [55] that “The continued making of sales, even on this fairly modest scale, is not the conduct of traders which, having been specifically informed of the Applicant's registered design, were conscientious to observe their legal obligations”. Similarly, Justice Gordon in Elwood Clothing Pty Ltd v Cotton On Clothing Pty Ltd [2009] FCA 633 awarded additional damages in a copyright infringement case on a similar basis;
(d)Kenny J in Review Australia Pty Ltd v New Cover Group Pty Ltd & Ors (2008) 79 IPR 236 at [54] to [62] took the approach that in the absence of any evidence from the respondents as to the commercial benefit obtained in selling the infringing garments, the Court could infer that they made profits from the infringement. In the present case, the evidence is that the Respondent sold at least one “G-Star” branded item of clothing therefore a benefit has been shown to accrue to the Respondent as a result of its infringing conduct; and
(e)Kenny J in Review Australia Pty Ltd v New Cover Group Pty Ltd & Ors (2008) 79 IPR 236 also awarded additional damages against a respondent on the basis that there were deficiencies in the respondent’s discovery, response to notice to produce, and evidence of New Cover Group Pty Ltd/ Maco Collection Pty Ltd which indicated that there was a very strong possibility that the extent of the infringement had been underestimated. Her Honour made an award of additional damages of $50,000. In this case, the Respondent has taken no active role in the proceeding. The Applicants also note that the importation documents for the Imported Products do not disclose the brands of the items imported.[22] Therefore, the Applicants submit that it is likely that the Respondent brought in other importations of “G-Star” branded product which went undetected by Customs as the importation documents would not have disclosed that the goods were “G-Star” branded.
[19] Prior v Lansdowne Press Pty Ltd [1977] VR 65
[20] Microsoft Corporation & Anor v Atifo Pty Ltd & Ors (1997) 38 IPR at [648]; Microsoft Corporation & Ors v Goodview Electronics Pty Ltd & Ors (2000) 49 IPR 578 at [60]; Eagle Rock Entertainment Ltd v Caisley [2005] FCA 1238 at [31], per Tamberlin J
[21] Williams v Settle [1960] 2 ALL ER 806; Nichols Advanced Vehicle Systems Inc & Ors v Rees & Ors [1979] RPC 127; Lady Anne Tennant v Associated Newspapers Group Ltd [1979] FSR 298; Wellington Newspapers Ltd v Dealers Guide Ltd [1984] 2 NZLR 66; International Credit Control Ltd v Axelsen [1974] 1 NZLR 695 at 705
[22] see Annexure JAF-13 to the Affidavit of Jonathan Ariel Feder affirmed 2 December 2013
The damages contemplated in s.115(4) of the Copyright Act are of a punitive kind. Financial gain is unnecessary. Section 115(4) of the Copyright Act may be engaged where the owner is entitled only to nominal damages under s.115(2).[23] It is appropriate here that additional damages be awarded to “mark the Court’s recognition of the opprobrium attached to the defendants conduct.”[24] Taking into account all of the circumstances of this case and accepting the engagement of the factors listed above, as submitted by the Applicants, I consider it proper to make an appropriate award of additional damages of $25,000.
[23] Aristocrat Technologies Australia Pty Ltd v OAP Services (Kempsey) Pty Ltd (2007) 157 FCR 564
[24] Facton Ltd v Rifai Fashions Pty Ltd [2012] FCAFC 9 per Lander and Gordon JJ at [36]
There will be an order for costs in the amount claimed which is a reasonable sum with reference to this Court’s costs schedule as set out in the Rules.
I certify that the preceding forty-four (44) paragraphs are a true copy of the reasons for judgment of Judge Hartnett
Associate:
Date: 4 April 2014
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