Facton Ltd v YAO
[2010] FMCA 433
•24 June 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FACTON LTD & ANOR v YAO | [2010] FMCA 433 |
| COPYRIGHT – Breaches of copyright – counterfeit garments – damages – damages for loss of reputation – additional damages – proceeding undefended – conduct of respondents – award for damages made for $61,000 – injunctions and declarations made – costs. |
| Copyright Act 1968, ss.115(2), 115(4) Federal Magistrates Court Rules 2001 (Cth), rr.13.03A(2), 13.03B(2) Fair Trading Act 1987 (NSW), ss.42, 44 Trade Marks Act 1990 (Cth), s.120 |
| Amalgamated Mining Service Pty Ltd v Warman International Ltd [1992] FCA 542; (1992) 24 IPR 461 Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (in Liquidation) & Ors [2007] FCAFC 40; (2007) 71 IPR 437Bailey v Namol [1994] FCA 1401; (1994) 30 IPR 147 Crimson SRL & Anor v Claudia Shoes Pty Ltd & Ors (No.7) (2008) ASAL G-Star Raw Denim KFT & Anor v Urban Culture Pty Ltd & Anor [2009] FMCA 1317 Elwood Clothing Pty Ltd v Cotton On Clothing Pty Ltd [2009] FCA 633 Foxtel Management Pty Ltd & Anor v Mod Shop Pty Ltd & Ors [2007] FCA 463; (2007) 72 IPR 1 Fraserside Holdings & Anor v Venus Adult Shops & Ors [2005] FMCA 997 Microsoft Corporation and Others v PC Club Australia Pty Ltd and Others [2005] FCA 1522; (2005) 67 IPR 262 Microsoft v Goodview (2000) 49 IPR 578 Milpurrurru and Others v Indofurn Pty Ltd and Others (1994) 30 IPR 209 Review Australia Pty Ltd v Innovative Lifestyle Investments Pty Ltd and Anor [2008] FCA 74 Review Australia Pty Ltd v New Cover Group Pty Ltd [2008] FCA 1589; G- |
| First Applicant: | FACTON LTD (FORMERLY KNOWN AS G-STAR RAW DENIM KFT) |
| Second Applicant: | G-STAR AUSTRALIA PTY LTD (ACN 084 011 852) |
| Respondent: | YANAN YAO |
| File Number: | MLG 297 of 2009 |
| Judgment of: | Riethmuller FM |
| Hearing date: | 1 March 2010 |
| Date of Last Submission: | 1 March 2010 |
| Delivered at: | Melbourne |
| Delivered on: | 24 June 2010 |
REPRESENTATION
| Counsel for the Applicants: | Mr Feder |
| Solicitors for the Applicants: | Middletons |
| Solicitors for the Respondent | No appearance |
ORDERS & DECLARATIONS
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 IMPRIISONMENT, 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 5 of the Statement of Claim) in breach of section 120 of the Trade Marks Act 1990 (Cth) (Trade Marks Act);
(b)infringed the copyright in the Copyright Works (as defined in paragraph 7 of the Statement of Claim);
(c)contravened sections 42 and 44 of the Fair Trading Act 1987 (NSW) (FTA); and
(d)engaged in conduct which constitutes the tort of passing off.
AND THE COURT ORDERS THAT:
The Respondent, whether by himself, his servants, employees, agents or otherwise howsoever be restrained, in trade or commerce, from:
(a)importing, manufacturing, promoting, advertising, distributing, offering for sale, selling or exhibiting in public, the Infringing Products (as defined in paragraph 10 of the Statement of Claim);
(b)disposing or dealing with the Infringing Products in any other way than in accordance with order 2(c) below;
(c)authorising, causing, procuring or inducing any person to do any act which would be an infringement of the injunction referred to in paragraph 2(i) above;
(d)representing that the Infringing Products are imported, manufactured, advertised, promoted, offered for sale and/or sold with the sponsorship or approval of the Applicants or either of them;
(e)representing that the Infringing Products are the G-Star Products (as defined in paragraph 3 of the Statement of Claim);
(f)representing that the Infringing Products emanate from the same trade source as the G-Star Products;
(g)representing that the Infringing Products are made by the Applicants or either of them;
(h)representing that the business of the Respondent is licensed, authorised, sponsored, approved or endorsed by the Applicants or either of them;
(i)passing himself as the Applicants or either of them; and
(j)passing off the Infringing Products as:
(i)G-Star Products; and
(ii)having the sponsorship, approval or a connection or affiliation in the course of trade with the Applicants or either 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 Infringing Products in his possession, custody or control;
(b)any and all brochures, pamphlets, advertising, labels, swing tags, promotional or marketing materials and the like in his power, possession, custody or control which bear the G-Star Trade Marks and/or the Copyright Works; and
(c)any materials, products or things in the Respondent's power, possession or control exploitation of which by the Respondent would be an infringement of the foregoing injunctions.
The Respondent pay the Applicants $11,000 in general damages and $50,000 in additional damages pursuant to section 115(4) of the Copyright Act 1968 (Cth).
The Respondent pay the Applicants’ costs for this proceeding fixed in the sum of $9,148.16.
The Applicants serve a sealed copy of these orders on the Respondent as soon as practicable.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 297 of 2009
| FACTION LTD |
First Applicant
| G-STAR AUSTRALIA PTY LTD |
Second Applicant
And
| YANAN YAO |
Respondent
REASONS FOR JUDGMENT
This is an application for default judgment seeking relief under the Copyright Act 1968 (Cth) as a result of the respondent’s breach of the applicants’ copyright rights.
In an affidavit filed on 26 February 2010 General Counsel of G-Star International, Mr Christian De Bil, gave evidence of the first applicant’s name change from G-Star Raw Denim Kft to Faction Ltd.
Background to Summary Judgment
The respondent made no appearance at the hearing. I am satisfied that the respondent was aware of the proceedings: on 15 September 2009 the solicitors for the applicants received a letter via fax from Mr Stephen Alexander of Alexander Lawyers. The letter advises that Mr Alexander is acting on the respondent’s behalf in these proceedings. In the Response filed on 1 October 2009, the respondent sought for the dismissal of the application as well as costs from the applicant.
The grounds of opposition to the application were simply put as follows:
a)The respondent ‘does not know what this application is all about’; and
b)The respondent denies selling G-Star clothes.
The Response sits uncomfortably with Mr Alexander’s letter which states that his retainer is to:
‘seek a resolution under no circumstances do I have any instructions to appear at any court proceedings.’ (emphasis added)
The Response does not appear to be drafted by Mr Alexander. In the Response, the address for service is the same address where the applicants had made several unsuccessful attempts to serve documents on the respondent.
The Law
Pursuant to rr.13.03B(2)(c) and (d) of the Federal Magistrates Court Rules 2001 (Cth), the hearing may proceed undefended:
13.03B [Orders on default]
…
(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. (emphasis added)
Rule 13.03A(2) provides when a respondent is in default:
13.03A [When a party is in default]
…
(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. (emphasis added)
With the exception of the Response, the respondent provided no further material. Accordingly, the respondent has failed to comply with the orders made by the court on 17 September 2009, including an order to file a defence.
The respondent has not sought for an adjournment, nor provided any reasons as to his failure to appear at the hearing, whether in person or through an agent.
The Claims
The applicants sought relief under the Copyright Act 1968 (Cth) (the Act) for the respondent’s breach of their copyright in the copyright works, namely designer clothing:
a)Declarations as to the respondent’s infringement;
b)Injunctive orders restraining the respondent from further infringements;
c)Orders requiring the respondent to deliver up to the applicants certain items including the counterfeit garments that are in the respondent’s possession;
d)General damages pursuant to s.115(2) of the Act including damages for loss of reputation; and
e)Additional damages pursuant to s.115(4) of the Act.
The claims concern the sale of applicants’ copyright works at the respondent’s Red Chilli Store located at Newtown, New South Wales.
The Evidence
In support of their claims the applicants relied upon the affidavits of Mr Christian De Bil and Mr Stevan Musulin.
Mr De Bil provided an affidavit on matters relevant to the ownership of the copyright, the nature of the copyright works, the expense to which the copyright owner was put in the creation and maintenance of the copyright works in the marketplace, and the position and value of such works in the marketplace. His evidence provided a basis to determine damages for loss of reputation and additional damages under s.115(4).
In this affidavit Mr Musulin gave evidence of:
a)sighting garments, bearing the ‘G-Star’ brand, offered for sale at the Red Chilli Store;
b)the quantity of these branded garments that were on display at the store;
c)his purchase of two of the garments; and
d)the garments being counterfeit.
Mr Musulin’s evidence establishes the breaches of copyright and a basis for calculating the applicants’ loss of profits.
Damages
General Damages
Mr Musulin saw 12 units of the counterfeit garments in 2 different styles on display at the Red Chilli Store. He purchased one garment from each style at AUD$169 each. In light of Mr Musulin’s evidence and the lost sales of the counterfeit garments, the claimed amount of $2005.95 appears high in light of the evidence of wholesale prices. I assess damages for this item at $1,000 given that not all purchasers would be likely to buy originals at a high price.
The applicants also sought general damages for loss of reputation in the figure of $35,000, the same amount that they received last time against a similar copyright infringer in G-Star Raw Denim KFT & Anor v Urban Culture Pty Ltd & Anor [2009] FMCA 1317 (‘Urban Culture’).
I am satisfied on the evidence of Mr De Bil that the products of the applicants have a well-defined and strong position in the marketplace. They have suffered a loss of reputation by the respondent’s sale of the counterfeit garments.
As the applicants pointed out in their outline of submissions, there is no exact formula to determine the amount of damages for loss of reputation. In previous cases the number of counterfeit garments offered for sale by respondents have ranged from 20 to 28,139 garments: See Crimson SRL & Anor v Claudia Shoes Pty Ltd & Ors (No.7) (2008) ASAL; Elwood Clothing Pty Ltd v Cotton On Clothing Pty Ltd [2009] FCA 633. Awards of damages for loss of reputation have ranged from $7,500 to $35,000: see Review Australia Pty Ltd v Innovative Lifestyle Investments Pty Ltd and Anor [2008] FCA 74; Review Australia Pty Ltd v New Cover Group Pty Ltd [2008] FCA 1589; G-Star Raw Denim KFT & Anor v Urban Culture Pty Ltd & Anor [2009] FMCA 1317.
In Urban Cultures there were approximately 100 counterfeit garments being offered for sale in one of the stores. Mr Musulin’s evidence establishes that 12 items of the counterfeit garments were offered for sale at the Red Chilli Store. The small number of counterfeit garments raises a question: do the respondent’s counterfeit garments have such a presence in the market that it has brought about as significant a dilution of the applicants’ reputation for originality as it did in Urban Culture?
O’Dwyer FM in Urban Culture pointed out that smaller amounts of damages have been awarded in the range of $7500 to $10,000 in Review Australia Pty Ltd v Innovative Lifestyle Investments Pty ltd and Anor [2008] FCA 74; Crimson SRL & Anor v Claudia Shoes Pty Ltd & Ors (No.7) (2008) ASAL.
However, the factors that distinguish the applicants’ claim from the cases involving lesser awards of damages are set out in the applicants’ outline of submissions and supported by the evidence of Mr De Bil’s affidavit:
a)The second applicant 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 marketplace for cheaper prices;
b)The second applicant loses customers as the G-Star Products are no longer considered “exclusive” as cheaper copy products are available in the marketplace;
c)The second applicant’s retail customers no longer wish to purchase the G-Star Products as counterfeit “G-Star” products are being sold in retail stores within close proximity to their stores and at cheaper prices; and
d)The applicants ensure strict quality control for any products sold under or by reference to the “G-Star” marks and the respondent’s counterfeit garments are not subject to these controls.
On the balance I find that the figure of $10,000 is an appropriate amount for damages for loss of reputation in the context of this case.
Additional Damages
The Law
Section 115(4) of the Act provides that the court has discretion to award an amount in additional damages. The provision also sets out a number of factors that the court may take into consideration.
115 [Actions for infringement]
…
(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.
…
I have taken into account the following factors in deciding to exercise my discretion in favour of making an award of additional damages:
a)The respondent continued to offer for sale counterfeit garments despite being put on notice about the infringement. The solicitors for the applicants sent a letter to the respondent, dated 7 December 2007, in relation to the counterfeit garments. In her affidavit Ms Shalini Manuja Jayaweera gave evidence of purchasing a counterfeit garment from the Red Chilli store on 5 September 2009. Together with Mr Musulin’s evidence, this means the respondent continued to offer for sale the counterfeit garments from 2007 to at least September 2009.There is a need to deter similar infringements of copyright.
b)The respondent has provided no explanation for the conduct complained of by the applicants.
c)The respondent clearly evaded personal service. In an affidavit filed on 18 August 2009, Mr Stephen Hopkins stated that staff at the Red Chilli store on several occasions claimed to not know anyone with the respondent’s name. However, the address for service on the Response is the location of the Red Chilli store.
d)The counterfeit garments are extremely good copies of the G-Star Products. The respondent offered for sale and sold the counterfeit garments as if they were genuine G-Star products. In the absence of any explanation by the respondent the conduct appears to be a flagrant breach by the respondent.
e)The respondent has gained a commercial advantage in selling products which bear the ‘G-Star’ brand as the respondent was able to charge a premium on what he would otherwise have charged for such products (those of no particular brand name). The respondent was able also to trade on the long and substantial investment by the applicants in promoting the G-Star Products and the ‘G-Star’ brand.
The applicants sought an award of additional damages in the sum of $100,000. In their outline of submissions the applicants have referred to cases where additional damages have been awarded in the range of $3million to $50,000. I find an award of $50,000 will serve as a specific deterrent on the respondent as well as a general deterrent to those in their industry who may be tempted. (See Amalgamated Mining Service Pty Ltd v Warman International Ltd [1992] FCA 542; (1992) 24 IPR 461, Bailey v Namol [1994] FCA 1401; (1994) 30 IPR 147, Milpurrurru and Others v Indofurn Pty Ltd and Others (1994) 30 IPR 209, Microsoft v Goodview (2000) 49 IPR 578, Microsoft Corporation and Others v PC Club Australia Pty Ltd and Others [2005] FCA 1522; (2005) 67 IPR 262, Fraserside Holdings & Anor v Venus Adult Shops & Ors [2005] FMCA 997, Foxtel Management Pty Ltd & Anor v Mod Shop Pty Ltd & Ors [2007] FCA 463; (2007) 72 IPR 1, Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (in Liquidation) & Ors [2007] FCAFC 40; (2007) 71 IPR 437, Review Australia Pty Ltd v New Cover Group Pty Ltd [2008] FCA 1589, Review Australia Pty Ltd v Innovative Lifestyle Investments Pty Ltd and Anor [2008] FCA 74, Elwood Clothing Pty Ltd v Cotton On Clothing Pty Ltd [2009] FCA 633) and G-Star Raw Denim KFT & Anor v Urban Culture Pty Ltd & Anor [2009] FMCA 1317).
Question of Declarations and Injunctions
The applicants also sought declarations and injunctions as set out in Annexure A of their outline of submissions. Those declarations and injunctions are appropriate on the facts proved.
Question of Costs
The applicants sought an order for costs in the sum of $6,160 plus disbursements of $2,988.16, making a total of $9,148.16. Having regard to the court scale and the evidence of the case I am satisfied this is a reasonable costs claim and allow costs in the sum claimed.
Conclusion
I am satisfied on the evidence before me that there have been infringements of the applicants’ copyright. The applicants are entitled to awards of compensation in the sum of $11,000 pursuant to s.115(2) of the Act, and additional damages of $50,000 pursuant to s.115(4) of the Act.
I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of Riethmuller FM
Date: June 2010
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