Narhex Australia Pty Ltd v Sunspot Products Pty Ltd
[1990] FCA 412
•14 AUGUST 1990
Re: NARHEX AUSTRALIA PTY LIMITED
And: SUNSPOT PRODUCTS PTY LIMITED and WARWICK JOHN PLUNKETT
No. G882 of 1989
FED No. 412
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Foster J.(1)
HEARING
SYDNEY
#DATE 14:8:1990
ORDER
(A) as to the application:
(1) that the respondents, by themselves, their servants or agents or otherwise, be restrained from representing that any product manufactured or marketed by or on behalf of either of them which contains cross-linked elastin contains:
(i) 10% cross-linked elastin,
(ii) approximately 1mg per ml of active elastin,
(iii) 10% of cross-linked elastin CLR solution.
(2) that the respondents by themselves, their servants or agents or otherwise, be restrained from representing that any product manufactured or marketed by or on behalf of either of them contains any proportion of cross-linked elastin except by stating the specific percentage of cross-linked elastin contained in the product as a whole.
(3) that the operations of orders 1 and 2 shall be stayed until 1 September 1990.
(4) that liberty to be reserved in respect of order 2 should the appellant cease to market its cross-linked 10/60 elastin products.
(B) as to the cross-claim:
(1) that the applicant shall not by itself, its servants or agents or otherwise, whether by way of dissemination, preparation, distribution or autherisation of advertising (whether by way of print or electronic media) packaging, promotional, instructional or distributional literature associated with or relating to the product known as "Cross-linked 10/60 Elastin" or "Narhex Cross-linked 10/60 Elastin" represent that the applicant is French and/or its product is manufactured in, distributed in, and/or distributed from France and/or Paris, or has some other connection with France or Paris.
(2) in relation to the applicant's stock of packaged products referred to in the affidavit of J.W. Majewski of 7 August 1990, it shall be deemed sufficient compliance with the above order if each package is over-labelled on a side panel with a sticker containing the statement "This product is not made or distributed in France", such overlabelling to be effected on or before 18 September 1990.
(3) in relation to the advertisements referred to in the affidavit of J.W. Majewski of 7 August 1990, it shall be deemed sufficient compliance with the above order if, in respect of each advertisement, commencing with the advertisement arranged for 18 August 1990 there be,
(a) a deletion of the word "Paris" and
(b) the insertion, in a clear and prominent manner of the statement "these products are not manufactured, distributed or marketed in France and have no other connection with that country".
(4) in respect of all other advertising to be undertaken by or on behalf of the applicant up to and including 31 December 1990 the same steps shall be taken, if necessary, as set out in orders (3) (a) and (b).
(5) liberty is reserved to apply on one day's notice in respect of the implementation of these orders.
Futher as to the cross-claim.
It is noted that the applicant gives the following undertakings to the court:-
The applicant will not, by itself, its servants or agents or otherwise, represent that:
(a) the applicant developed or was partly responsible for developing a product called kappa elastin,
(b) kappa elastin is made or markated only by the applicant,
(c) only the applicant's Cross-linked 10/60 Elastin, being the range of products marketed under that name, contains cross-linked elastin.
JUDGE1
I have now heard submissions as to the orders which I should make to give effect to the findings I have made in these proceedings on the question of breaches of s 52 of the Act. These reasons should be read with those previous reasons. Both sides have adduced further evidence on this aspect of the case and have made specific submissions as to the orders that they seek and oppose. They have demonstrated some measure of agreement, but there are significant areas of disagreement which I shall refer to as these reasons progress.
It is convenient to refer in the first place to the orders sought by the applicant.
The applicant seeks, firstly, an order that "the respondents, by themselves, their servants or agents or otherwise, be restrained from representing that any product manufactured or marketed by or on behalf of either of them which contains cross-linked elastin contains:
(i) 10% cross-linked elastin, (ii) approximately 1mg per ml of active elastin, (iii) 10% of cross-linked elastin CLR solution."This order is consented to. It is appropriate in view of the findings I have made. Accordingly I shall make an order in this form.
The second order sought is, again, consented to subject to liberty to apply in certain circumstances. The order sought is as follows:
"That the respondents by themselves, their servants or agents or otherwise, be restrained from representing that any product manufactured or marketed by or on behalf of either of them contains any proportion of cross-linked elastin except by stating the specific percentage of cross-linked elastin contained in the product as a whole"
It is to be noted that no order in this form was sought by the applicant in its application. Accordingly, I would have some hesitation in making it were it not for the fact that the respondents indicate that they will consent to this order, on the basis that they do not propose that their future packaging and promotional material will contain any reference to the amount of elastin included in the product. They wish, however, to preserve the position, should the applicant cease to market products containing elastin. In the circumstances, I think it reasonable to make the order sought, by consent, and add that the respondents should have liberty to apply to vary it should the applicant cease to market its products containing elastin.
The applicant seeks, in addition, a third order that "the respondent in respect of any product manufactured or marketed by or on behalf of them, which contains cross-linked elastin CLR cause to be included on the package of any such product a statement in the following form in letters of 1mm height on the front face of the package:
`Elastin CLR is a solution containing no more than 0.5% cross-linked elastin'."
The respondents contest the making of this order. The seeking of this order relates, at least to some extent, to a problem which is common to both sides. Each has on hand, in circumstances where varying degrees of control can be exercised, quantities of packaged products, which are either currently available for sale on the shelves of pharmacies, or available, in final form, for delivery to sellers. Each side is, quite understandably, anxious to avoid the significant commercial loss which would occur if the quantities of product, so packaged, were simply required to be withdrawn from sale by reason of orders of the court. Each wishes, in respect of these amounts of their respective products to achieve a situation whereby they can be marketed after some suitable physical alterations have been made to their current packaging and promotion to take account of the findings which the court has made. The problem occurs in a more acute form in the case of the applicant. I shall consider proposed alterations to its present packaging and advertising, when I consider the orders sought under the cross-claim. However, it would appear that the third order sought by the applicant really relates to the steps that the respondents propose to take in relation to their existing packaging which they do not wish to abandon, pending the production and use of a new form of packaging which it is intended will not produce any infringement of the section.
The proposed amendment consists of the over-labelling of the existing packaging in the manner indicated in the example which became exhibit 1 in this part of the proceedings. The proposed over-labelling contains the words "WITH SOLUBILISED CROSS-LINKED ELASTIN CLR". It is intended that the box retain the current side panel which relates the allegedly successful use of "cross-linked elastin CLR solution" in clinical trials of the Academy of Medicine, Poland.
The difficulty with the proposed order is that it can only relate to an issue which was not litigated before me, namely whether a reference to "cross-linked elastin CLR" is likely to mislead in the absence of some explanation as to the amount of active elastin contained in the substance so described. Accordingly I decline to make the order sought. Equally, as I indicated during the course of submissions, I am not prepared to give, as it were, a "clearance" for the use of the proposed over-labelling, it being conceded that I have no power to do so.
There is no opposition to the granting of a stay of operation of the orders that I propose to make until 1 September 1990. I am satisfied that this a reasonable period to allow for the respondents to take steps to ensure compliance with the orders. I accordingly grant this stay.
I turn to the orders sought on the cross-claim.
The applicant offers the following undertaking to the court through its director Mr Majewski, namely that:
"The applicant will not, by itself, its servants or agents or otherwise, represent that:
(a) the applicant developed or was partly responsible for developing a product called kappa elastin,
(b) kappa elastin is made or marketed only by the applicant,
(c) only the applicant's "Cross-Linked 10/60 Elastin", being the range of products marketed under that name, contain cross-linked elastin."
The respondents are satisfied that undertakings to the court be given in these terms and, that having been done, they do not seek injunctions in relation to this aspect of the case. I note that these representations, although quite vigorously put forward in the earlier part of the applicants' extensive advertising and promotional campaign, have not been asserted since late last year. In these proceedings, it was conceded that they had been made and that they were relevantly misleading. In all the circumstances, the undertakings to the court may be accepted in lieu of injunctive relief.
The next question is what relief should be granted in respect of the finding that the applicant in its packaging, advertising and promotional material has made relevantly misleading representations: "that the applicant is French and/or its product is manufactured in, distributed in and/or distributed from France and/or Paris, or has some other close connection with France or Paris". These representations have been referred to generically, in argument, as "the French connection". I consider that the misrepresentation as to this connection with France was a serious one. It was made repeatedly, with emphasis at the outset of the campaign upon the collaboration between the applicant and "French scientists" in the production of cross-linked kappa elastin. Although these assertions have been dropped from the promotional program, it is only realistic to assume that their influence will not yet have fully abated. The appearance of strong association with France is, indeed, still being maintained in the applicant's packaging and promotional material, by the use of the word Paris, French language on the outside of the packet, and instructions in French in the insert material inside the packet with further reference in that material to "Paris" and the "Laboratoire de Narhex" in that city. I am quite satisfied that there must be an injunction in general terms restraining this activity. I therefore intend to make the following order:-
that the applicant shall not by itself, its servants or agents or otherwise, whether by way of dissemination, preparation, distribution or authorisation of advertising (whether by way of print or electronic media) packaging, promotional, instructional or distributional literature associated with or relating to the product known as "Cross-linked 10/60 Elastin" or "Narhex Cross-linked 10/60 Elastin" represent that the applicant is French and/or its product is manufactured in, distributed in, and/or distributed from France and/or Paris, or has some other close connection with France or Paris.
The immediate implementation of this injunction would result in the applicant's being prevented from using its current packaging, including the advertising and instructional insert, and also advertisements which Mr Majewski swears have been booked for some time into the future. It has been submitted that the immediate enforcement of this injunction would, in fact, occasion enormous financial hardship to the applicant which could effect the viability of its whole business. It appears that the basic problems are that if the applicant is not able to make use of its existing packaging in some way, with the result that it would have to be discarded, there would be, having regard to the very large stocks on hand, a very considerable commercial loss. Also, advertisements currently placed would have to be cancelled in circumstances where the very large amounts of money already paid or payable for these advertisements would also be lost. Additionally, totally new packaging, which would comply with the terms of the injunction, could not be available within 17 weeks, with the result that, if no use could be made of existing packaging, the applicant would suffer a very serious cash flow problem.
I find it difficult to be overly sympathetic about these matters. The problem in relation to "the French connection" must have been evident to the applicant for at least the whole of this year if not before. No steps have, however, been taken to eliminate the problem which still exists up to this moment. However, it must be said that interlocutory relief was not sought by the respondents and Mr Majewski has been making, apparently, not inconsiderable efforts to establish a French connection by setting up a distribution network in France. Also it appears that what might be called the French focus of the advertising campaign was allowed to fade somewhat into the background sometime ago.
With some hesitation I have come to the view that, in all the circumstances, it is appropriate that, in addition to the general injunction which I propose to grant, I should make some mandatory orders in relation to the existing packaging and advertising which should have the effect of allowing that material to be used whilst, at the same time, during its use, sufficiently protect the public.
In the course of argument there was considerable debate about the form of any such mandatory orders. I shall refer briefly to the main points of dispute. Firstly, in relation to the packaging, it was submitted on behalf of the applicant that all that was reasonably necessary to correct the misleading representations as to "the French connection" was to over-label the word "Paris" on the outside of the package. It was said that the elimination of this vital word would either destroy the representation entirely or at least defuse it. This was heavily disputed by the respondents who pointed to the fact that the French wording on the outside panels would remain, as would the French wording on the insert together with its references to "Paris" and the "Laboratoire de Narhex". It was submitted that, having regard to the overall effect of the earlier campaign, the continuance of these French references would be more than adequate to maintain the misleading representation. The respondents, therefore, asserted that appropriate mandatory orders would require not only the over-labelling of the word Paris but also of the two side panels together with the removal of the insert, if it could not be appropriately changed. To this set of arguments, the applicant replied that to add more than one over-labelling to the already over-labelled package would simply destroy it commercially: the packaging might just as well be abandoned.
There was also debate about correctional advertising. It was accepted by the respondents that the applicant's advertising campaign had done more to propagate the misrepresentation than had the packaging. The respondents sought an order that a specific advertisement of the type ordered in Janssen Pharmaceutical Pty Limited v Pfizer Pty Limited 1986 ATPR 40-654 be made. The applicant disputed this but, eventually, offered to add correctional material to advertisements in its schedule of future magazine advertisements which it maintained it was commercially impossible to recall.
I have, not without some difficulty, come to the conclusion that I can make certain mandatory orders which will not be commercially impossible for the applicant to comply with, but which will nevertheless, in the short term, whilst the presently packaged material is disposed of in the market, sufficiently counter the effect of the misrepresentations currently present in that material. I am of the view that this result can best be achieved by correctional material being added rather than misrepresentational material being subtracted.
I deal first with the packaging. Whilst I do not accept the applicant's submission that the insert can for practical purposes be disregarded, on the basis that the consumer rarely if ever looks at it, I am, nevertheless, of the opinion that it can be seen as having only a small impact in the whole of the circumstances. I accept as correct the submission that more than one additional over-labelling on the package would render it commercially unviable. In these circumstances, it is most important that the over-labelling achieve the maximum possible result in negativing the misrepresentation. Whereas the over-labelling of the word "Paris" would clearly go some distance, it would be far less efficacious than some positive statement denying a "French connection". In this regard, I think a suggestion made on behalf of the respondents is a good one, namely that one of the side panels should be over-labelled with a notice stating "This product is not made or distributed in France". Although this statement would no doubt sit strangely with the word "Paris" and the statement in the French language on the other panel, it would, in my view, carry the overriding message that the suggestion of French association inherent in that material should be disregarded. I propose to adopt this approach and make an appropriate mandatory order.
I turn then to the advertisements. Although I was at first attracted to the submission that the circumstances called for an order directing the insertion of an advertisement of the Janssen type I have come finally to the conclusion that such an order is not warranted. I am satisfied that the main thrust of the applicant's advertising, at least in recent months, has been towards the alleged efficacy of the product to ameliorate facial wrinkles rather than its origin and/or acceptance in France. I think it is sufficient if suitable correctional words be added to the applicants advertising which is to take place as indicated in the schedule attached to Mr Majewski's affidavit. In this regard, I was told during the course of argument that Mr Majewski could hope to add suitable correctional material not only to the advertisements which had been marked with an asterisk in the schedule to his affidavit but also to the other advertisements. In these circumstances I propose to order, in the first instance, that the material be added to most future advertisements, but reserve to the applicant liberty to apply for variation of that order if particular difficulties emerge. I would naturally expect that every endeavour would be made by the applicant to overcome such difficulties and to comply with the court's order.
In argument, various formulations for such corrective advertising were suggested. After consideration I have reached the conclusion that the statement last suggested by the applicant is, in all the circumstances appropriate. It is as follows:- "These products are not manufactured, distributed or marketed in France and have no other connection with that country". I intend to make a mandatory order that these words be added. Of course, the statement must be clearly and prominently made in the advertisements.
As the applicant has indicated that it is possible to delete from the photographs of its products appearing in these advertisements the word "Paris", I intend also to order that this step be taken.
I propose to order that these words be inserted in the advertising which the applicant has sworn that he has already placed and which has not yet been published. It is obviously necessary to allow the applicant some time to make these arrangements, but it is reasonable to suppose that, with the obvious prospect of orders of this kind being made, at the applicant's own suggestion, some preliminary steps will already have been taken. I therefore propose to order that the corrective material be inserted in all advertisements referred to in annexure "A" of Mr Majewski's affidavit of 7 August 1990 commencing with the advertisement booked for 18 August 1990 and continuing through all advertisements thereafter as set out in that annexure. Additionally, I consider that the applicant's proposal that the same words be inserted in any further advertisements that it places in any newspapers and magazines up until 31 December this year should also be adopted. I shall make an order to this effect.
In relation to the over-labelling of the packaging, I have been requested to allow to the applicant a period of time to perform this task up to and including 18 September 1990. I was not initially attracted to an allowance of such a lengthy period, but, having regard to the very large amount of stock which is involved, I have decided to allow the period asked.
I therefore make the following orders:-
(A) as to the application:
(1) that the respondents, by themselves, their servants or agents or otherwise, be restrained from representing that any product manufactured or marketed by or on behalf of either of them which contains cross-linked elastin contains:
(i) 10% cross-linked elastin,
(ii) approximately 1mg per ml of active elastin,
(iii) 10% of cross-linked elastin CLR solution.
(2) that the respondents by themselves, their servants or agents or otherwise, be restrained from representing that any product manufactured or marketed by or on behalf of either of them contains any proportion of cross-linked elastin except by stating the specific percentage of cross-linked elastin contained in the product as a whole.
(3) that the operations of orders 1 and 2 shall be stayed until 1 September 1990.
(4) that liberty to be reserved in respect of order 2 should the appellant cease to market its cross- linked 10/60 elastin products.
(B) as to the cross-claim:
(1) that the applicant shall not by itself, its servants or agents or otherwise, whether by way of dissemination, preparation, distribution or authorisation of advertising (whether by way of print or electronic media) packaging, promotional, instructional or distributional literature associated with or relating to the product known as "Cross- linked 10/60 Elastin" or "Narhex Cross-linked 10/60 Elastin" represent that the applicant is French and/or its product is manufactured in, distributed in, and/or distributed from France and/or Paris, or has some other close connection with France or Paris.
(2) in relation to the applicant's stock of packaged products referred to in the affidavit of J. W. Majewski of 7 August 1990, it shall be deemed sufficient compliance with the above order if each package is over-labelled on a side panel with a sticker containing the statement "This product is not made or distributed in France", such overlabelling to be effected on or before 18 September 1990.
(3) in relation to the advertisements referred to in the affidavit of J. W. Majewski of 7 August 1990, it shall be deemed sufficient compliance with the above order if, in respect of each advertisement, commencing with the advertisement arranged for 18 August 1990 there be,
(a) a deletion of the word "Paris" and
(b) the insertion, in a clear and prominent manner, of the statement "these products are not manufactured, distributed or marketed in France and have no other connection with that country".
(4) in respect of all other advertising to be undertaken by or on behalf of the applicant up to and including 31 December 1990 the same steps shall be taken, if necessary, as set out in orders (3)(a) and
(b).
(5) liberty is reserved to apply on one day's notice in respect of the implementation of these orders.
Further as to the cross-claim,
It is noted that the applicant gives the following undertakings to the court:-
The applicant will not, by itself, its servants or agents or otherwise, represent that:
(a) the applicant developed or was partly responsible for developing a product called kappa elastin,
(b) kappa elastin is made or marketed only by the applicant,
(c) only the applicant's Cross-linked 10/60 Elastin, being the range of products marketed under that name, contains cross-linked elastin.
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