Nokia Corporation v Cellnet Group Limited
[2005] FCA 807
•20 June 2005
FEDERAL COURT OF AUSTRALIA
Nokia Corporation v Cellnet Group Limited [2005] FCA 807
PRACTICE AND PROCEDURE: Summary Judgment Application – Alleged trade mark infringement – fairly arguable point; applicable principles; issues as to proper form of relief if infringement proved.
Trade Marks Act 1995 (Cth) ss20, 120, 126
Copyright Act 1968 (Cth) s115
Trade Marks Act 1955 (Cth) s68Federal Court Rules: Order 20 Rule 1
Theseus Exploration N.L. v Foyster (1972) 126 CLR 507
Cosmos E-C Commerce Pty Limited v Sue Bidwell & Associates Pty Limited [2005] NSWCA 81
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Wickstead v Browne (1992) 30 NSWLR 1
Louis Vuitton Malletier SA v Knierum [2004] FCA 1584
Edelsten v Edelsten (1863) 1 DeG.J & S. 184; 46 E.R. 72
The Sanitas Company, Limited v Condy (1887) 4 RPC 530
Slazenger & Sons v Spalding & Brothers (1910) 1 Ch 257
A. G. Spalding & Bros v A W Gamage Ld (1915) 32 RPC 273
Fram Manufacturing Co Ld v Eric Morton & Co (1923) 40 RPC 33
Champagne Heidsieck et Cie v Scotto & Bishop (1926) 43 RPC 101
Wayne V Myers Coy. Ld v L. E. Fields Auto Services Ld (1954) 71 RPC 435
Henderson v Radio Corporation Pty Limited (1960) 1 AIPR 620
Colbeam Palmer Limited v Stock Affiliates Pty Limited (1968) 122 CLR 25
Gillette UK Limited v Edenwest Limited (1994) 111 RPC 279
Coflexip SA v Stolt Comex Seaway MS Ltd (1999) FSR 473Roshana Kelbrick, 'Damages Against the Innocent Infringer' (1996) 4 European Intellectual Property Review 204
NOKIA CORPORATION v CELLNET GROUP LIMITED
NSD 1853 OF 2004
GRAHAM J
20 JUNE 2005
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 1853 OF 2004
BETWEEN:
NOKIA CORPORATION
APPLICANTAND:
CELLNET GROUP LIMITED (ACN 010 721 749)
RESPONDENTJUDGE:
Graham J
DATE OF ORDER:
20 June 2005
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
The Applicant’s Notice of Motion filed 16 March 2005 be dismissed.
Order that the Applicant pay the Respondent’s costs of the Motion.
Exhibits may be returned.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 1853 OF 2004
BETWEEN:
NOKIA CORPORATION
APPLICANTAND:
CELLNET GROUP LIMITED (ACN 010 721 749)
RESPONDENT
JUDGE:
Graham J
DATE:
20 June 2005
PLACE:
SYDNEY
REASONS FOR JUDGMENT
Nokia Corporation (“Nokia”) is one of the largest producers of mobile (cell) telephones in the world. It produces numerous models each of which is given a distinctive numeric identification. In many instances models which have previously been produced have been superseded by later models with different numeric identification numbers.
Each Nokia mobile phone is powered by a rechargeable battery which may be removed and replaced if circumstances so require.
Replacement batteries for Nokia mobile phones may be purchased by consumers from retail outlets or by means of orders placed with suppliers over the internet.
Nokia does not itself manufacture batteries, rather it contracts out the manufacture to third parties. One such contract manufacturer is Sanyo Electric Co Ltd of Japan (“Sanyo”).
At all material times Sanyo has been the only authorised manufacturer of “Internal Batteries” identified and known as “BMC-3” batteries for Nokia.
Batteries produced for Nokia mobile phones by authorised manufacturers are commonly made in different locations around the world.
BMC-3 batteries are offered for sale in blister packs mounted on a cardboard backing which incorporate certain artwork and, of course, the name “Nokia”. On the reverse side of the cardboard more detailed information is provided and, once again, the name “Nokia” is prominently displayed.
For BMC-3 batteries different forms of get-up have been employed depending upon the relevant part of the world in which they are to be marketed. One form of packaging is known as the “European” packaging and another is the “Asian” packaging. Batteries offered for sale in the United Kingdom are sold in the European packaging and batteries offered for sale in Australia are sold in the Asian packaging.
If one views the side of the European packaging to which the blister pack is attached the background artwork on the cardboard section is a mixture of blue colours shading down to white but is predominantly a dark blue colour. For the Asian packaging the background colour is predominantly white shading to a light blue or grey.
On the reverse side of the European packaging information is recorded in a variety of languages including English, French, German, Spanish, Italian and Arabic.
In the case of the Asian packaging information is recorded on the reverse side thereof in English and in Mandarin.
In both forms of packaging to which reference has been made it is possible to see the battery contained within the blister pack and the writing recorded on one of the faces of the battery. Each battery bears the name “Nokia” with the symbol ® immediately adjacent thereto. Each battery records that it is a “BMC-3” and that it is a 3.6 volt battery. Each battery is displayed with a barcode and amongst other things words indicating a country of manufacture, for instance “Made in Hungary” or “Made in China”.
In about mid 2003 Nokia became aware of what Miss Ying, an Intellectual Property Manager for Asia Pacific of Nokia Pte Ltd, a subsidiary of Nokia, described as a “huge counterfeit problem” in respect of Nokia batteries.
One method whereby Nokia has attempted to overcome the counterfeiting problem has been to cause batteries manufactured for it by authorised manufacturers to bear holograms (negatives produced by a form of photography in which no lens is used and in which a photographic plate records the interference pattern between two portions of a laser beam) affixed to the reverse side of genuine Nokia batteries. These holograms may be observed through small cut-out sections on the reverse side of the cardboard backings.
One of the batteries which has been tendered in evidence has endorsed upon its packaging “For Nokia 3310/3330 and compatible phones”. Another has the words “For Nokia 3310/3330/3350 and compatible phones”, and another “For Nokia 3310, 3315, 3330 and compatible phones”.
The evidence is that the barcodes reveal information concerning the place and date of manufacture and other matters concerning the batteries, but each battery does not have a unique serial number.
Nokia contends that one way of discerning whether a battery is counterfeit or not is to break open the battery and ascertain whether or not it has a “PTC” fuse installed as part of the circuitry.
The Product Purchase Agreement dated 10 January 2000 between Sanyo and Nokia Mobile Phones Ltd requires BMC-3 batteries to be manufactured in accordance with the “at each given time existing Specification(s) that have been agreed in writing between the Parties”. The relevant specification as at 10 April 2003 provided for the inclusion of PTC fuses. No evidence has been tendered to establish whether or not earlier specifications called for the inclusion of PTC fuses and no evidence has been tendered to establish that PTC fuses have invariably been incorporated in all Nokia BMC-3 batteries wherever manufactured and if so, since what date.
Mr. Haikala, a Design Engineer with Nokia in Finland from around April 2003, swore affidavits on 15 March, 12 May and 20 May 2005.
In mid October 2004 Mr. Cheong, a Product Quality Analyst with Nokia Pte Ltd in Singapore, sent Mr Haikala digital images of a BMC-3 battery which Mr. Haikala described as the “First BMC-3 Battery” with a view to his assessing whether it was a genuine Nokia product or counterfeit.
Notwithstanding that the labelling, serial number and barcode on the First BMC-3 Battery were consistent with a genuine Nokia product, Mr. Haikala was of the opinion that it was a counterfeit. In his affidavit sworn 15 March 2005 he said “The principal reason for my finding was that the First BMC-3 Battery did not incorporate a PTC fuse.”
When cross-examined Mr. Haikala was asked whether there was any other reason for his finding that the battery was counterfeit. His response was in the affirmative. It would appear that in April – May 2005 he engaged in a process of re-checking which occurred most recently on 9 May 2005. He says that the other reason for his finding that the battery was counterfeit was “on all these batteries there are inconsequences on the label and also the manufacturing code is incorrect”. Mr. Haikala’s evidence, given by audio link, was not easy to comprehend. His evidence continued “it’s just saying at, in common level the code could be okay but when checking the traceability system it’s not okay”. Later he said “So it’s in paragraph (f) (referring to paragraph 6(f) of his affidavit sworn 15 March 2005) it’s mentioned in a common level. In a common level the code is okay but when checking out traceability of the production history it is not okay.” The above passages from Mr. Haikala’s evidence have been carefully checked against the audiotapes and agreed by the parties to have been correctly transcribed.
The position would appear to be that Mr Haikala made some enquiries of Sanyo but what precisely those enquiries relevantly revealed is not clear. In any event his evidence as to what he was told was plainly hearsay and counsel for Nokia objected to it on that basis. No direct evidence was called by Nokia from Sanyo suggesting that from an external inspection of the packaging or the battery case, the First BMC-3 Battery or any other product was or could be identified as counterfeit.
Mr. Cheong’s evidence in respect of the First BMC-3 Battery was that it “appeared to bear a Nokia label, serial number and barcode that looked genuine”.
On or about 18 November 2004 Ms Ying made four additional “BMC-3 Batteries” available to Mr. Cheong. He noted that the labelling, serial numbers and barcodes were consistent with genuine Nokia BMC-3 batteries. Following the dismantling of each battery he observed that none of them incorporated a PTC fuse. In the circumstances he concluded that the four additional batteries were also counterfeit. Mr. Haikala reviewed Mr. Cheong’s report in respect of the four additional “BMC-3 batteries” and found himself in agreement with Mr. Cheong’s conclusion and also his reasoning.
Nokia is the owner of the registered trade mark “NOKIA” number 867057 in respect of the period of ten years commencing 22 February 2001 for a variety of goods including “batteries” in class 9.
Cellnet Group Limited (“Cellnet”), a listed public company, carries on business in Australia and New Zealand as a supplier of inter alia, rechargeable batteries for use in mobile phones.
In September 2004 Cellnet maintained a website “ . That website disclosed that “Telco Products > Original Accessories Nokia” could be acquired from Cellnet including BMC-3 batteries described as “Nokia 3310, 3330, 3350, 3510, 3315 Nimh Battery 900 mAh” for a recommended retail price of $30. It would appear that on 16 September 2004 one of the employees of Mainpack Pty Limited trading as Trade mark Investigation Services, as agent for Nokia placed an order for a selection of products including five Nokia BMC-3 batteries. On 17 September 2004 Huong Nguyen, an Operations Executive of Mainpack Pty Limited, attended at the premises of Cellnet located at 59 – 61 Qantas Drive, Eagle Farm in the State of Queensland and collected the goods which had been so ordered. Cellnet issued a tax invoice numbered 2173389 dated 17 September 2004 under cover of which five BMC-3 Batteries identified as “Nokia 3310, 3330, 3350, 3510, 3315 Nimh Battery 900 mAh” were supplied for $18 each, a total of $90 to which GST of $9 was added, a grand total of $99. The batteries so acquired were all in the European packaging and are The First BMC-3 Battery and the four additional BMC-3 batteries referred to above.
Nokia contends that Cellnet has acquired “BMC-3” batteries from two sources, namely Strike Group Australia Pty Limited ("Strike Group") and Dextra Solutions Limited of Cheshire in the United Kingdom (“Dextra”). Dextra is said to be an authorised supplier of genuine Nokia batteries but Strike Group Australia is not. Cellnet itself was formerly an authorised distributor of genuine Nokia batteries.
Nokia contends that the five batteries acquired from Cellnet and referred to above were not genuine Nokia batteries because they lacked PTC fuses and must have come from Strike Group Australia Pty Limited or have been counterfeit batteries supplied by Dextra. Nokia acknowledges that its current proof of infringement of the registered trade mark is limited to the absence of PTC fuses in respect of the five batteries.
By virtue of s 120(1) of the Trade Marks Act 1995 (Cth) ['the Act'] a person infringes a registered trade mark “if the person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to goods … in respect of which the trade mark is registered.”
By virtue of s 20(1) of the Act the registered owner of a trade mark has the exclusive right to use the trade mark and to authorise other persons to use the trade mark in relation to the goods in respect to which the trade mark is registered. A registered owner of a trade mark also has the right under s 20(2) to obtain relief under the Act if the trade mark has been infringed.
It is conceded that selling a rechargeable battery which is not a genuine Nokia product to which the trade mark Nokia is affixed would constitute a use of the relevant trade mark within the meaning of s 120(1) of the Act. Under s 126 the relief that a court may grant in an action for infringement of a registered trade mark includes an injunction, which may be granted subject to any conditions that the court thinks fit and, at the option of the applicant, damages or an account of profits.
In the foregoing circumstances Nokia instituted proceedings against Cellnet on 13 December 2004 in which it sought declaratory and other relief against Cellnet in respect of the alleged infringement of certain Nokia trade marks.
By a Statement of Claim filed 13 December 2004 Nokia pleaded its case in some 12 paragraphs. By its Defence dated 16 March 2005 Cellnet joined issue with the Statement of Claim in respect of all save for one paragraph.
By a Notice of Motion filed 16 March 2005 Nokia has sought declaratory, injunctive and other relief on the basis that it is entitled to summary judgment under Order 20 Rule 1 of the Rules in relation to part of its claim for relief. Order 20 Rule 1 provides as follows:-
‘1(1)Where, in relation to the whole or any part of the applicant’s claim for relief, there is evidence of the facts on which the claim or part is based, and –
(a) there is evidence given by the applicant or by some responsible person that, in the belief of the person giving the evidence, the respondent has no defence to the claim or part; …
…the Court may pronounce judgment for the applicant on that claim or part and make such orders as the nature of the case requires.”
The relevant parts of Nokia’s claim in relation to which summary judgment is sought are those parts of paragraphs 1 and 2 of the Application filed 23 December 2004 which relate to alleged infringements of Registered Trade Mark No. 867057 in respect of BMC-3 batteries, that part of paragraph 3 covered by paragraph 6 of the Notice of Motion and that part of paragraph 4 covered by paragraph 3 of the Notice of Motion.
On 8 June 2005 leave was granted to the Applicant to effect two amendments to paragraph 6 of the Notice of Motion filed 16 March 2005. In its amended form the Notice of Motion sought orders that judgment be entered in favour of the Applicant in the following terms:-
“1.it is hereby declared that use by the Respondent, whether by itself, its employees or agents or otherwise howsoever of:
(a)Australian Registered Trade Mark No. 867057 for NOKIA in classes 9, 18, 25, 38, 41 and 42;
…
or any name, word, mark, sign or device which is substantially identical or deceptively similar thereto, on or in relation to ‘BMC-3’ battery products not manufactured by or under the authority of the Applicant, in the course of trade, whether by importing, advertising, offering for sale, distributing, supplying or selling such products, constitutes an infringement of the Nokia Trade Mark(s).
2.the Respondent be permanently restrained whether by itself, its employees or agents or otherwise from importing, advertising, offering for sale, distributing, supplying or selling mobile phone batteries of the type exhibited as Exhibit ‘RAA-1’ [The First BMC-03 Battery] to the affidavit of Robert Anthony Arnold sworn 10 December 2004 or mobile phone batteries which otherwise bear (any of) the Nokia Trade Mark(s) but were not manufactured by or under the authority of the Applicant, including but not limited to mobile phone batteries sourced from the company specified in Confidential Exhibit RAA-12 [presumably Strike Group Australia Pty Limited] to the affidavit of Robert Anthony Arnold dated 16 March 2005 (“Unauthorised Goods”), or otherwise authorising, procuring or inducing any other person to do any of the acts specified in this paragraph.
3.the Respondent deliver up on oath to the Applicant or its duly authorised agents for destruction under supervision all Unauthorised Goods and related packaging in the possession, power, custody or control of the Respondent, or the possession, power, custody or control of its employees or agents or otherwise.
…
5.the Respondent pay the Applicant’s costs of and incidental to the proceedings, including the Applicant’s costs of this application.
6.there be an inquiry as to damages or at the option of the Applicant an account of profits for infringement of Nokia Trade Mark No. 867057 in respect of BMC-3 batteries together with interest.
7. such further or other orders as the Court may deem appropriate.”
Nokia has elected to seek an inquiry as to damages rather than an account of profits under paragraph 6 of the Motion.
Apart from joining issue on the facts and matters alleged in Nokia’s Statement of Claim Cellnet says that there is a gap in Nokia’s proof, namely, whether all batteries made for Nokia by its authorised manufacturer did have PTC fuses included in the circuitry. Cellnet says that it is not established that mistakes have not be made in the manufacturing process. In other words it contends that the five rechargeable batteries which are allegedly counterfeits because they lack PTC fuses may in fact be genuine Nokia batteries. It also submits that as the five alleged counterfeit batteries were in the European packaging they probably came from Dextra rather than Strike Group and an issue may arise as to whether, coming from an authorised Nokia distributor, there was some implied licence to use the trade mark on the batteries. It seems to me that this last mentioned submission is purely speculative on the current evidence.
Nokia submits that there is evidence of the facts on which that part of its claim which is the subject of the summary judgment application is based, and that there is evidence given by a responsible person that in the belief of that person Cellnet has no defence to the relevant parts of Nokia’s claim. In this regard Robert Anthony Arnold, a partner of Baker & McKenzie, the solicitors for Nokia, has sworn as follows:
‘I believe that the Respondent has no defence to the Applicant’s claims in this action and the Applicant seeks judgment in the terms of the Notice of Motion dated 16 March 2005.’
Cellnet acknowledges that for the purposes of Order 20 Rule 1(1)(a) Mr. Arnold was a "responsible person".
The word “may” in Order 20 Rule 1 is permissive. The authorities clearly indicate that summary judgment should only be granted if there is no fairly arguable point to be brought forward (see Theseus Exploration N.L. v Foyster (1972) 126 CLR 507 at 514).
In the recent judgment of the New South Wales Court of Appeal in Cosmos E-C Commerce Pty Limited v Sue Bidwell & Associates Pty Limited [2005] NSWCA 81 Pearlman AJA delivered the leading judgment with which Hodgson and Ipp JJA agreed. In paragraphs 37 –8 Her Honour said:-
"37.The basis for the exercise of a court’s jurisdiction to order summary judgment is not in doubt. In Dey v Victorian Railways Commissioners (1949) 78 CLR 62, Dixon J said at p 91 that “… a case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury”. In General Steel Industries Inc v Commissioner for Railways (NSW) and Ors (1964) 112 CLR 125 at 129. Barwick CJ stated that the jurisdiction to terminate an action “… is to be sparingly employed and is not to be used except in a clear case where the Court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion.” Both those authorities dealt with the exercise of a power of summary dismissal of a plaintiff’s claim, but, in Theseus Exploration NL v Foyster (1972) 126 CLR 507, which dealt, amongst other things, with the giving of summary judgment, Barwick CJ at 514 said:
“Perhaps the summary intervention to prevent the continuance of a plaintiff’s action ought to be much rarer than the giving of summary judgment but there is sufficient correspondence in the two situations to make apposite to this case much of what I said in General Steel Industries v Commissioner for Railways (N.S.W.) …”
38.Webster and Anor v Lampard (1993) 177 CLR 598 was also a case involving the exercise of a power to give summary judgment. At pp 602-603 in a joint judgment, Mason CJ and Deane and Dawson JJ cited both Dey v Victorian Railways Commissioners and General Steel Industries v Commissioner for Railways for the proposition that the power must be exercised with exceptional caution, and stated that ‘[n]owhere is that need for exceptional caution more important than in a case where the ultimate outcome turns upon the resolution of some disputed issue or issues of fact. ”
On an application such as that presently before the Court, the Court should examine the evidentiary material placed before it, not for the purpose of making findings of fact where the material conflicts, but to determine whether a triable issue is disclosed (see: Wickstead v Browne (1992) 30 NSWLR 1 at 9).
On the hearing of the Motion the Respondent by its Counsel offered undertakings to the Court in the following terms:-
“1.The Respondent will from the date of this order until further order of the Court or agreement of the parties, source and purchase all Nokia batteries only from authorised Nokia distributors.
2.The Respondent will, within 14 days, destroy the current stock of Nokia branded BMC-3 batteries held by it pursuant to the order of Justice Gyles of 17 December 2004 and upon completion of the destruction will file an affidavit deposing as to the destruction.”
On the hearing of the Notice of Motion before me the extent of proof offered in respect of an alleged infringement of the registered trade mark left open the question as to whether the five batteries found to be without PTC fuses were in fact genuine Nokia batteries. The highest that Nokia's case could be put was that if Sanyo did what it was required to do by the Product Purchase Agreement and the five batteries were manufactured after 10 April 2003 then they would have had PTC fuses incorporated in their circuitry.
Apart from this question and the possible argument that if the batteries came from Dextra Solutions Limited as an authorised distributor there may have been a licence to use the trade mark in respect of them even if the batteries were not genuine Nokia batteries, there were a number of questions which were raised in argument in relation to the appropriate form of relief. These included:
(a)Whether it would be appropriate to make a declaration that the trade mark had been contravened in circumstances where an injunction may not be granted due to the lack of evidence of a threat of further infringement;
(b)Whether in the light of Cellnet's proposed undertaking to the Court No. 1 above, offered on an interlocutory basis only, an injunction should be granted;
(c)Whether an injunction should be granted in circumstances where it would be impossible, short of destroying the goods which the Respondent was offering for sale, to determine whether the injunction was being breached;
(d)Whether an inquiry as to damages should be ordered where it may be found that only five "counterfeit" batteries had been sold by Cellnet, Nokia had been the relevant purchaser of those batteries, and no sale had been lost by Nokia as a result of any infringement that may be established;
(f)Whether an inquiry as to damages should be ordered if it be found that the Respondent was an "innocent infringer".
I was taken to a number of authorities on the question of what might be appropriate relief in the circumstances were an infringement to be found. These included Louis Vuitton Malletier SA v Knierum [2004] FCA 1584; Edelsten v Edelsten (1863) 1 DeG.J & S. 184; 46 E.R. 72; The Sanitas Company, Limited v Condy (1887) 4 RPC 530; Slazenger & Sons v Spalding & Brothers (1910) 1 Ch 257; A. G. Spalding & Bros v A W Gamage Ld (1915) 32 RPC 273; Fram Manufacturing Co Ld v Eric Morton & Co (1923) 40 RPC 33; Champagne Heidsieck et Cie v Scotto & Bishop (1926) 43 RPC 101; Wayne V Myers Coy. Ld v L. E. Fields Auto Services Ld (1954) 71 RPC 435; Henderson v Radio Corporation Pty Limited (1960) 1 AIPR 620; Colbeam Palmer Limited v Stock Affiliates Pty Limited (1968) 122 CLR 25; Gillette UK Limited v Edenwest Limited (1994) 111 RPC 279; Coflexip SA v Stolt Comex Seaway MS Ltd (1999) FSR 473 and (2001) 1 All ER 952. I was also taken to an article by Roshana Kelbrick from the University of South Africa in Pretoria entitled 'Damages Against the Innocent Infringer' (1996) 4 European Intellectual Property Review 204, to s 115(3) of the Copyright Act 1968 (Cth) and s 68 of the Trade Marks Act 1955 (Cth).
In my opinion it is unnecessary to decide these issues as to the appropriate form of relief, if any, on an application for summary judgment in circumstances where I consider there is a fairly arguable point as to whether the trade mark was infringed by the Respondent in the first place. It should also be remembered that even though in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 130 Barwick CJ said:
"I do not think that the exercise of the jurisdiction (in that case summary dismissal) should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim".
in Theseus Exploration NL at p 514 he said:-
"The jurisdiction to give summary judgment should not be exercised 'where a difficult question of law is raised'".
Having said that, I should refer to some passages from the decisions to which I have been taken which highlight the relevance of the questions listed above.
In Wayne V Myers Coy Ld there had been an infringement of the trade mark “Redex” on two occasions when an oil additive had been supplied from a container bearing the mark “Redex” which did not consist wholly of the plaintiff’s additive. Vaisey J said at pp 439 – 40:-
“… I think in all the circumstances that there is prima facie the right to an injunction here and now. On the other hand, it is such a futile deception, from which the Defendants cannot possibly obtain, as far as I can see, any tangible reward, such a stupid thing to have done and such a foolish invasion of the Plaintiffs’ rights, that I can hardly believe they would ever seriously contemplate repeating this kind of wrongful act. Therefore, I am rather disposed to think, although the right to an injunction has been made out, having regard to what I think is the extreme improbability of any intention to inflict damage on the Plaintiffs, the granting of an immediate injunction is almost too large a weapon with which to deal with so trifling and so trumpery an affair. I feel disposed to give the Plaintiffs liberty to apply for an injunction so that if there is the least suspicion of this sort of thing happening again (and I warn the Defendants that they must be careful) the Defendants can be restrained. There would be liberty to apply in this action for an injunction based on a declaration which I can make, if necessary, in an appropriate form, that the Plaintiffs have established to my satisfaction an infringement of their trade mark rights and a passing-off of goods as theirs, but I should say in the order, being satisfied that the acts of the Defendants were not malicious, or intentional, or something of that kind, or were by inadvertence or misunderstanding, I should only give liberty to apply for an injunction.
I think I must make an order for an enquiry as to damages. I think those damages will be confined to the infringement of trade mark. Unless the Plaintiffs are in possession of some evidence which would enable them to establish damages, I cannot imagine that such an enquiry is likely to lead to any result, but I will make the order for an enquiry, and I sincerely hope that there will be some small payment by the Defendants to the Plaintiffs which they will accept in full satisfaction of their claims so that it will not be necessary to go through this process in what I venture to call a rather trumpery case of directing the Master to have a formal enquiry.”
In Louis Vuitton Malletier SA, a case where the Court had been asked to make orders by consent against an unrepresented litigant, which Finkelstein J declined to make, His Honour said in paragraph 15 of his reasons:-
“The true position is this. The basis for the grant of an injunction in an intellectual property case is in every respect the same as in any other case. The plaintiff must show there is a risk that the defendant will engage in infringing conduct in the future. If the plaintiff is unable to make good that proposition, he will not obtain an injunction.”
In Colbeam Palmer Limited Windeyer J said at p 32:-
“The distinction between an account of profits and damages is that by the former the infringer is required to give up his ill-gotten gains to the party whose rights he has infringed: by the latter he is required to compensate the party wronged for the loss he has suffered. The two computations can obviously yield different results, for a plaintiff’s loss is not to be measured by the defendant’s gain, nor a defendant’s gain by the plaintiff’s loss. Either may be greater, or less, than the other. If a plaintiff elects to take an inquiry as to damages the loss to him of profits which he might have made may be a substantial element of his claim …”
Later at p 35 His Honour said:-
“… I find positively that the defendant did not know of the registration of the name Craftmaster as a trade mark until at the earliest 30th August 1965 when it learnt of the letter received by one of its retailer customers. …
…
… I consider that the account of profits for which the plaintiff asked ought not to go further back than 30th August 1965. As profits, not damages, were asked for, it is irrelevant to contrast the position in regard to damages. Nevertheless, because something was sought to be made of it during the argument, I merely mention that different considerations may govern an inquiry as to damages; for damages being in origin a common law remedy, it seems that if it were not for s.68 a plaintiff could be entitled to be compensated for the whole loss that he suffered by the defendant’s usurpation of his proprietary rights in a registered mark: see A. G. Spalding & Bros. v A W Gamage Ltd (a passing-off case) and Henry Heath Ltd v Frederick Gorringe Ltd (an infringement of a registered mark). The cases on this point are, however, conflicting: see Halsbury’s Laws of England, 3rd ed., vol. 38, p.646. Whatever view be taken of this, I see no reason for enlarging accountable profits because damages might be calculated in respect of a longer period.”
In Edelsten Lord Westbury, the Lord Chancellor, said at p 178:-
“… although it is well founded in reason, and also settled by decision, that if A has acquired property in a trade mark, which is afterwards adopted and used by B in ignorance of A’s right, A is entitled to an injunction; yet he is not entitled to any account of profits or compensation, except in respect of any user by B. after he became aware of the prior ownership.”
In Slazenger & Sons Neville J said at p 261
“I think Edelsten v Edelsten is still applicable, and that in a case where the infringement of a trade mark is made without the knowledge of the existence of the plaintiffs’ rights there is not a right to compensation, but only a right to an injunction. …”
In Fram Manufacturing Co Ltd, a case where the defendants are alleged to have acted innocently in respect of contraventions of the trade mark “Fram” applied to razors, Lush J said at p 36:-
“But he pleaded that he had acted innocently, being unaware that the mark on the razors was a Trade Mark, …
… The Plaintiffs did not accept the Defendant’s statement that he had acted innocently, and evidence was called on this issue. I must decide that issue in favour of the Defendant; I think that he did act innocently and when the razors were bought, as they were in Germany by the Defendant’s father, and when they were sold, the Defendant had no knowledge that he was infringing the Trade Mark.
…
… He (the Defendant) also contended that it is not the practice to award damages against a defendant who has innocently infringed a trade mark, and that, on that ground …, I ought to dismiss that part of the claim. …
With regard to damages, I think that Mr. Moritz’s contention that no damages are recoverable is right. I do not agree that damages cannot in a proper case be awarded against an innocent infringer …
…it does not follow, because there has been a falling-off of business, that the damage is attributable to the infringement; and unless the Plaintiffs can prove that the manufacture and sale of articles bearing the Plaintiffs' mark caused the damage they cannot recover damages or ask for an inquiry or an account. …So far, therefore, as the claim for damages is concerned, I think that it fails.
In my opinion, however, the Plaintiff … is entitled to an injunction. I think that, as the registered proprietor of the Trade Mark, he was entitled to have it protected and to prevent an infringement …”In Champagne Heidsieck et Cie the plaintiffs were producers of two qualities of champagne, one prepared for Continental consumption and the other for consumption in England. Some champagne prepared for Continental consumption had been sold to some restaurants in the West End of London bearing English labels that were forgeries of the plaintiff’s labels. Tomlin J said at p 105 in respect of the second defendant, Mr. Bishop:-
“It seems to me that, on the material before me, I am bound to accept the conclusion that Mr. Bishop did, as he said, I rather gathered, out of good nature, act as an intermediary in placing parcels of wine with West End restaurant-keepers to whom he was known on behalf of a wine-merchant with whom he had been acquainted for many years. Of course, that conclusion of fact does not relieve Mr. Bishop of liability in respect of the relief which is asked by the writ. It may be that as a result of that no claim for damages may be made against him, but it still exposes him to this, namely, that he has, in fact, been a party to a transaction which I hold was an infringement of the trade mark right, and in fact a passing off, although he was not aware of it, and it seems to me that, so far as he is concerned, there must also be an injunction against him.”
In Gillette UK Limited, another razor case, in which summary judgment had been sought, Blackburne J said at pp 289 – 291:-
“It is not necessary for this court to examine the limits of any discretion which exists to refuse an enquiry, because in my view the present case cannot realistically be said to fall within the ambit of any such discretion as does exist. If the plaintiffs have an arguable case for claiming damages, the court would (as a matter of ordinary justice) make an order for an enquiry to enable them to pursue it.
In the case before me the evidence discloses that counterfeit razors were sold by Edenwest to M&S Toiletries and that a quantity of those razors were subsequently sold to William Morrisons for sale to the public. In those circumstances the plaintiffs have, at the very least, an arguable case for saying that they have suffered damage by reasons of Edenwest’s acts of passing off and trade mark infringement arising out of that sale. That being so I should, as a matter of ordinary justice, direct the inquiry which the plaintiffs seek, of course, at their own risk as to costs.
Mr. Nicol submits, however, that Edenwest has acted innocently in the matter, in the sense that when supplying the counterfeit razors to M&S Toiletries, it had no knowledge that it was infringing the first plaintiff’s registered trade mark or that it was passing off counterfeit goods as goods of the plaintiffs. In those circumstances, he submits, the Court cannot require Edenwest to pay damages and therefore I should refuse an inquiry. Mr. Miller for the plaintiffs did not dispute Edenwest’s innocence in the sense that I have just described but submitted that such innocence is irrelevant to the plaintiffs entitlement to damages. I confess that I was startled by Mr. Nicol’s submission since it seemed to me and, despite argument, still seems to me that if the plaintiffs have suffered loss by reason of Edenwest’s actions there can be no good reason why they should not recover damages to compensate them for that loss.
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As regards infringement of a registered trade mark I take the view that it is well settled law, and has been for very many years, that innocence on the part of the infringer is no defence to a claim to damages and that the law in this regard is accurately stated in Kerly’s Law of Trade Mark’s and Trade Names, 12th Edition, at paragraph 15-80. That paragraph, so far as relevant, reads as follows:Damages are a matter of right; the account of profits is an equitable remedy and the court has a discretion whether or not to grant it. Accordingly, a successful plaintiff in an infringement action is entitled to an inquiry as to damages (at his own risk as to costs) in any case where there is a reasonable prospect that the inquiry would reach a positive result; whilst only in certain cases will the court grant an account of profits … An account is generally refused if the defendant had no knowledge of the plaintiff’s mark and, when ordered, is limited to the period during which such knowledge had existed; whilst knowledge or absence of knowledge does not affect the right to damages.
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In Henry Heath Ltd v Frederick Gorringe Ltd (1924) 51 RPC 457, Eve J declined to follow Slazenger v Spalding and directed an inquiry not withstanding the innocence of the defendant infringer.Since then, as far as I am aware, innocence on the part of the infringer has never at any rate in this country been found to justify denying damages to the plaintiff. On the other hand my attention has been drawn to a number of decisions where an inquiry was directed notwithstanding the defendant’s innocence see, for example, Flalho v Simond & Company Ltd (1937) 54 RPC 193; Ravenhead Brick Company Ltd v Ruabon Brick and Terra Cotta Company Ltd (1937) 54 RPC 341, and Sony Corporation and anr v Anand [1982] FSR 200. In none of those cases was there any discussion whether damages were available where the infringement was innocent – doubtless because everyone assumed that the law was well settled on this point.”
In Coflexip SA, a patent case, Laddie J had granted a limited injunction in the first instance. His injunction was discharged and replaced by one in the normal form. In the Court of Appeal Aldous J said:-
“65.The judge seemed to believe that injunctions which restrained infringement of a patent were broad injunctions: but they equate to the statutory right given, a right which has been held to have been validly granted and infringed. The injunction granted by the judge would allow the defendant to do other acts even though they may infringe. The defendant in those circumstances would be better off in that a change from that which is described and shown in the process description would allow him to continue in business without having to seek guidance from the court before adopting the change. The advantage to the defendant of only having the injunction cover a particular article or process is clear. If he makes a change he will not be in breach and it will be up to the patentee to bring another action. However the disadvantage to the patentee is equally clear. To obtain an injunction he has to establish his monopoly and that it has been infringed, and the judge must conclude that further infringement is apprehended. From his point of view, it is the infringer who should seek guidance from the court if he wishes to sail close to the wind. In the normal course of events that would be reasonable.”
In relation to the issue of the appropriate form of relief against an “innocent infringer” Roshana Kelbrick said in her article (referred to above) in relation to Blackburne J’s decision in Gillette UK Limited:-
“Is the court’s reliance on Kerly’s categorical statement that ‘knowledge or absence of knowledge does not affect the right to damages’ correct? Kerly’s authority is Spalding & Bros v A W Gamage Ltd – which dealt with passing off, not infringement of a registered mark – and Henry Heath – an instance of trade mark infringement where an inquiry as to damages was granted but no reasons for judgment were given . …
The finding by the Edenwest court that the point is ‘settled law’ seems justified when only the most recent decisions are considered. However, the chronological review of all the decisions on the point illustrates that this finding was not justified. …”
For my part I would have thought that there may be two classes of “innocent infringer” to whom reference should be made in considering the question of appropriate relief, namely, those who had no knowledge of an applicant’s trade mark and those who, having knowledge of it, were unaware that, by their conduct, they had engaged in a contravention of that mark. A proper basis for finding that an infringer was unaware of a contravention might include, amongst other things, the price at which it had been possible for the alleged infringer to acquire the product that ultimately proved to be counterfeit. Were the price unusually low it could well sound alarm bells of which the alleged infringer would have to take notice.
In the light of the conclusion that I have reached on the summary judgment application, it would seem inappropriate for me to reach any concluded views on the other matters which have been raised. Suffice it to say that there are some interesting questions which will arise for consideration at a later trial.
In my opinion the application for summary judgment should be dismissed with costs.
I certify that the preceding sixty-three (63) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham J.
Associate:
Dated: 20 June 2005
Counsel for the Applicant:
R Webb SC
Solicitor for the Applicant:
Baker & McKenzie
Counsel for the Respondent:
D J Jackson QC with M Condon
Solicitor for the Respondent:
Clarke and Kann
Date of Hearing:
25 May 2005, 8 and 9 June 2005
Date of Judgment:
20 June 2005
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