Samsung Electronics Australia Pty Ltd v LG Electronics Pty Ltd
[2011] FCA 664
•18 May 2011
FEDERAL COURT OF AUSTRALIA
Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd
[2011] FCA 664
Citation: Samsung Electronics Australia Pty Ltd v LG Electronics Pty Ltd [2011] FCA 664 Parties: SAMSUNG ELECTRONICS AUSTRALIA PTY LIMITED v LG ELECTRONICS AUSTRALIA PTY LIMITED File number: NSD 615 of 2011 Judge: RARES J Date of judgment: 18 May 2011 Catchwords: TRADE PRACTICES – application for interim injunctions under s 234 of the Australian Consumer Law to prevent publication of advertisements pending application for permanent injunction under s 232 – whether advertisements conveyed representations that were misleading or deceptive or likely to mislead or deceive contrary to s 18 of the Australian Consumer Law – characteristics of class or classes of ordinary reasonable viewers – effect of conduct complained of on such viewers – use of tests for ordinary reasonable viewer in proceedings for defamation
Held: application for interim injunctions refused
Legislation: Australian Consumer Law ss 18, 232, 234
Competition and Consumer Act 2010 (Cth) Sch 2
Trade Practices Act 1974 (Cth)Cases cited: Amalgamated Television Services Pty Ltd v Marsden (1998) 43 NSWLR 158 followed
Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 followed
Campomar Sociedad Limitada v Nike International Limited (2000) 202 CLR 45 followed
Knight v Beyond Properties Pty Ltd (2007) 242 ALR 586 considered
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 followedDate of hearing: 18 May 2011 Date of last submissions: 18 May 2011 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 78 Counsel for the Applicant: Mr DB Studdy SC with Mr JM Hennessy Solicitor for the Applicant: Blake Dawson Counsel for the Respondent: Mr M Walton SC with Mr L Shipway Solicitor for the Respondent: Truman Hoyle Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 615 of 2011
BETWEEN: SAMSUNG ELECTRONICS AUSTRALIA PTY LIMITED
Applicant
AND: LG ELECTRONICS AUSTRALIA PTY LIMITED
Respondent
JUDGE:
RARES J
DATE OF ORDER:
18 MAY 2011
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The application for interlocutory relief be refused.
2.The applicant pay 80% of the respondent’s costs in respect of the application for interlocutory relief heard today.
THE COURT NOTES THAT:
3.The applicant by its senior counsel gives to the Court the usual undertaking as to damages, and that thereupon, the respondent, by its senior counsel, undertakes to the Court that the respondent will not, until a final hearing or earlier other order, by itself, its servants or agents cause to be broadcast on television in Australia the television advertisement described in sub-paragraphs (e) to (i) of the particulars to paragraph 16 of the statement of claim filed on 12 May 2011 (the flickering advertisement).
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 615 of 2011
BETWEEN: SAMSUNG ELECTRONICS AUSTRALIA PTY LIMITED
Applicant
AND: LG ELECTRONICS AUSTRALIA PTY LIMITED
Respondent
JUDGE:
RARES J
DATE:
18 MAY 2011
PLACE:
SYDNEY
REASONS FOR JUDGMENT
(REVISED FROM THE TRANSCRIPT)
Samsung Electronics Australia Pty Limited is a well known subsidiary of its Korean parent company. It markets, among other things, three dimensional televisions, known as 3D televisions. Likewise, LG Electronics Australia Pty Limited is a well known subsidiary of its Korean parent and also markets 3D televisions in Australia.
In 2010, Samsung began marketing a new form of active three dimensional television technology, 3D TV technology. Subsequently, early this year, LG began marketing what is called passive technology 3D televisions. The technical distinctions of these two technologies were explained sufficiently for present purposes in the first affidavit affirmed by John Fragiadakis who is Samsung’s technical marketing manager in its corporate marketing division.
ACTIVE 3D TECHNOLOGY
Essentially, active-shutter technology of the kind used by Samsung and referred to in the evidence as conventional 3D technology, consists of a liquid crystal layer applied to the lenses of glasses worn by a viewer of the television. The liquid crystal layer on these glasses becomes dark when voltage is applied to the layer, but is otherwise transparent. The lenses darken alternately to each other at approximately 120 times per second, a speed so quick that it tricks the brain into seeing the image as a whole. The consequence for the viewer is that active-shutter technology can deliver full high definition picture quality to each eye in 3D or three dimensions or 3D mode. Televisions which utilise that technology do not require the presence of any polarising film or layer on the television screen itself. These televisions also produce a full high definition (“HD”) picture when viewed in two dimensional, or normal, television mode. When viewed in 3D mode, the television blends the left and right images into one, making it look blurry to viewers who do not wear the treated glasses. The television then emits a syncing signal to tell the glasses when to darken over each eye and that signal synchronises with the image displayed on the television screen so as to trick the eyes into seeing a perception of depth. Until earlier this year, at least, Samsung, LG, Panasonic, Sony and Sharp, all well known manufacturers of electronic products, marketed 3D televisions with active-shutter technology in Australia and internationally.
PASSIVE 3D TECHNOLOGY
Earlier this year, LG began to market what is called passive technology 3D televisions or film patterned retarder televisions. Mr Fragiadakis said that this technology has polarisation on the flat panel screen of the television itself, in the form of a tinted patterned film placed over the screen. That means that a tinted film is present on the screen, even when a viewer is watching the television in a 2D format and, therefore, it has less clarity. The patterned film on the screen filters the left and right images from a single frame, reducing the image quality to each eye. The vertical resolution is about half of that of active technology and does not deliver a full HD picture.
Mr Fragiadakis said that, when viewed in 2D mode, the patterned film blocks up to 25% of the picture brightness and that to enhance brightness in that mode, additional lighting and other tools are required that could result in poor resolution in 2D viewing. He said that glasses are also required to view the passive technology screens but that these are not synced with the television and do not require a battery or any other connection. Those glasses are not electronic, but are simply plastic frames with different polarised lenses for each eye, one horizontal and one vertical, so that when the television polarises the lenses, either horizontally or vertically, it has the effect of blocking the corresponding eye from seeing on the television screen the images that are polarised the same way. He said, as there is no further technology required for passive 3D viewing, the polarised film treating the screen is inexpensive. According to Mr Fragiadakis, passive technology is cheaper and the glasses used are lighter than those required for active-shutter technology.
THE MARKETING PERIOD FOR TELEVISION
It is common ground that the period in the Australian market for marketing new technology televisions, such as those the subject of these proceedings, involves a launch occurring in the period between April and June each year. Critically, such a launch is combined with an advertising campaign in the media. Hence, Samsung launched its active- technology products around April 2010. LG launched its passive technology products with a series of advertisements that began to go to air on about 1 May this year.
Again, it is common ground that the launch of new technology products, such as 3D televisions, has an initial phase. In the first year, the launch targets people who marketing executives call “early adopters”. This is apparently a characteristic of the Australian market. Thus, when the active-technology 3D televisions were launched into the Australian market commencing in April 2010, the persons who then bought those products were “early adopters”. In the year subsequent to the launch of a new technology, the market opens up opportunities to those brands that achieved significant success in the early adoption phase. On the evidence, Samsung’s active-technology 3D televisions placed it in the leading position in the Australian market from March 2010 to March 2011 with a significant market share of over 50%. In contrast, although LG was then marketing its active-technology televisions, its market share was considerably smaller.
The advantage to the market leader or leaders in the early adoption phase is that, because of their apparent popularity, it or they subsequently tend to attract an early majority of purchasers in the next phase. In other words, more people will buy the product perceived as being that of the market leader in the early adoption phase and as a result, it becomes more established in contrast to the other brand or brands.
Samsung is seeking to protect the advantages that have inured to it by reason of its success with the early adopters in its 2010 product launch with its improved 3D active technology televisions in the current market period.
SAMSUNG DECIDES TO SEEK INJUNCTIVE RELIEF
On 2 May 2011, just after LG had launched its advertising campaign, two of LG’s television advertisements came to the notice of Samsung’s Mark Dunn, who is its legal counsel. After he saw these advertisements, Mr Dunn was required to report back to the Korean headquarters via Samsung’s Singapore office to ascertain whether or not legal proceedings should be taken. Samsung decided on 6 May to demand that LG cease to publish its advertisements for 3D televisions. Samsung claimed that they conveyed representations that were misleading or deceptive or likely to mislead or deceive, contrary to what is now s 18 of the Australian Consumer Law, being Schedule 2 to the Competition and Consumer Act 2010 (Cth). In substance, s 18 is a restatement of the general norm of conduct that had been prescribed since the Trade Practices Act 1974 (Cth), except that rather than being confined principally to the conduct of corporations, s 18(1) now provides:
“A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”
Under s 234 of the Law, the Court has power to grant an interim injunction if it considers it desirable to do so, pending the determination of an application under s 232 for a permanent injunction.
Samsung approached a judge of the Court on 12 May 2011 for ex parte relief when LG had not indicated that it would desist employing the advertisements then complained of in its advertising campaign. By then, Samsung had become aware of a third advertisement that it said was misleading or deceptive. His Honour granted that relief up to today. Those three advertisements included one that, because of an undertaking given by LG earlier today, is no longer in issue. Subsequently, on 16 May 2011, I granted, as duty judge, a further ex parte injunction in respect of a fourth advertisement. The injunctions that were granted by the other judge and myself prohibited publication up to and including today of the four advertisements that I will describe shortly.
THE ADVERTISEMENTS COMPLAINED OF
The four advertisements are each of 15 seconds duration. The format of each advertisement consisted of a man in a white coat who could be thought to be a laboratory assistant or a scientist. He usually held a pointer indicating on a white poster board the name of a test for a particular feature of the 3D televisions. The advertisements showed a divided screen. The left hand side depicted “conventional” or, as I infer, active technology 3D televisions or some attribute of these and the right hand side depicted the new, passive technology of LG.
There is little doubt that the use of this comparative technique would be capable of conveying to an ordinary reasonable viewer of the advertisements that, by reason of its market leadership and prominence, Samsung, if not the comparator, was at least within the class of comparators for the conventional product. Hence Samsung’s interest in seeking to restrain publication of the four advertisements.
THE BRIGHTNESS ADVERTISEMENT
The first advertisement portrayed the man in the white coat standing next to a poster which read “3D TV TEST”, and underneath “(# 5)” and then underneath that, the word “BRIGHTNESS”. Then, the man in the white coat pulled a cord which turned off the light in the room. Next, a split screen appeared, the left hand side depicting the conventional 3D television and the silhouettes of two persons apparently sitting on a couch in upright positions in the dark. At the foot of that side of the screen, in quite large type, were the words “CONVENTIONAL 3D TV”. It is common ground that there was an asterisk that then said in smaller type “Refers to 2010 3D TVs using shutter glasses”. At least, so far as the evidence was displayed to me on 2D television screens in the courtroom, it was not easy for me to read the words asterisked but I accept that they appeared there. It may or may not have been easy to read the content of the asterisked wording in a lounge room or a bedroom being the places where I assume the ordinary reasonable viewer would be when viewing these advertisements. I will assume that he or she was able to distinguish this with better eyesight than my own.
The right hand side of the screen showed two people sitting on a couch in relaxed positions wearing 3D glasses. They were bathed in light. A text appeared stating “LG CINEMA 3D” at the foot of that side of the screen. A voiceover stated “Conventional 3D TV delivers a dimmer viewing experience.” The man in the white coat appeared again, standing in the dark, and turned a light back on to reveal the poster of the “3D TV # 5 BRIGHTNESS” test. The left hand side of the split screen lit up to show that one of the silhouettes was a dog and that the three people in the room apparently were shocked while a voiceover said “Still sitting in the dark?”. At the end of the advertisement, a flat screen LG TV was depicted with the words “THE NEXT GENERATION 3D TV” accompanied by LG’s corporate logo, followed by the words “CINEMA 3D SMART TV”. The advertisement then panned out to show a family watching the LG television wearing 3D glasses. That scene was accompanied by a voiceover stating “Introducing the next generation 3D TV: LG Cinema 3D, with light boost technology”.
THE FLICKERING ADVERTISEMENT
The second advertisement dealt with an issue of flickering. This advertisement is no longer the subject of these proceedings because of the undertaking given to the Court this morning by LG that it would not continue to display this advertisement. The flickering advertisement was presented in a similar format to the first. It commenced with the man in the white coat pointing to a poster with “3D TV TEST”, “# 10” and “FLICKERING” written on it. It dealt with a feature of conventional 3D glasses to which I have already referred, namely, that they operate with a film that is activated on each lens alternatively in sync with images on the television screen so as to create, through the reception by each eye of different images, the appearance of the three dimensions. However, the advertisement asserted that those glasses flickered up to 60 times a second. The evidence is that this materially understated the amount of flickering which is up to about 120 times per second. Obviously, the more frequently the flickering occurs, the less likely it is to be noticed, particularly where it occurs at twice the speed asserted in the advertisement. Although this advertisement is no longer the subject of the current application for an injunction, Samsung relies upon its earlier publication as part of a back-to-back programming sequence with the brightness advertisement. It contends that these advertisements delivered a misleading or deceptive message overall about its own product and brand name.
THE WEIGHT ADVERTISEMENT
The third advertisement had a “test” described on the poster as “WEIGHT” that was presented in a similar way to the others. It concerned the weight of the glasses worn for watching television in 3D mode. The advertisement showed a man sitting in an armchair wearing quite obviously heavy, black-framed glasses on the conventional television side of the screen. On the other side is a man sitting comfortably wearing much thinner and less prominent glasses. A voiceover says: “Conventional 3D glasses can be a little heavy”. Next, the head of the man with the heavy looking glasses moves towards one side of his body, as if the weight of the glasses was so great that his neck was not capable of supporting them. Subsequently, his chair falls through the floor, disappearing with the man in it as his shoes fly up in the air. A voiceover says: “Still feeling overweight?” while on the other side of the screen, the other man is shown still wearing the LG glasses. Finally, a voiceover says: “Introducing the next generation 3D TV: LG Cinema 3D, with comfortable lightweight glasses.”
THE BATTERIES ADVERTISEMENT
The fourth advertisement depicts a test described on the poster as “BATTERY”. It depicts, on the conventional side, a man wearing, again, a thick pair of black-framed glasses with a long cord coming out of them. On the other side, in the LG frame, a man is shown wearing LG’s light frame glasses. A voiceover says: “Conventional 3D glasses require frequent recharging.” The depiction of the conventional television viewer then shows him being pulled off to the left of the screen by the cord as a voiceover talks about the need for frequent recharging, and asks whether the viewer is “Still battery dependent?”. At the same time, on the right side of the screen, the LG viewer is shown comfortably wearing glasses that have no cord or battery. As the advertisement ends a voiceover says: “Introducing the next generation 3D TV: LG Cinema 3D, battery free, hassle free” while the image of a family watching TV wearing the LG 3D glasses pans out on the screen.
Each of the advertisements ends in the same way as the first, with the LG logos and promotion. Samsung also complained of a number of representations on LG’s Australian website and on YouTube that I will deal with later.
THE REPRESENTATIONS COMPLAINED OF
Samsung complained that, relevantly:
·the brightness advertisement conveyed a representation that consumers of 3D televisions that utilise active technology, including the Samsung 2010 3D TV and the Samsung 2011 3D TV, will be in darkness when viewing their television, as their screen will not give off the same glow or brightness as the LG 2011 3D TVs (“the brightness representation”);
·the weight advertisement conveyed representations that:
(1)consumers of 3D televisions that utilise active technology, including the Samsung 2010 3D TV and the Samsung 2011 3D TV, would suffer discomfort and/or adverse side effects from which they would need to “recover”; and
(2)Samsung Australia’s 3D glasses are heavy and require frequent, disruptive recharging (“the weight representation”);
·the batteries advertisement conveyed a representation (which was also a corollary of the second weight representation) that Samsung’s 3D glasses required frequent, disruptive recharging (“the battery representation”).
Samsung asserted that each of these representations was false. It said that the brightness representation was false because viewers would not have to be in darkness when watching their conventional 3D television, including, in particular, Samsung’s 2010 and 2011 products, as their screen would give off at least the same glow or brightness as the LG 2011 3D TVs. Samsung asserted that the weight representations were false because, in effect, viewers utilising active technology would not, through using the active 3D glasses, suffer discomfort and/or adverse side effects from which they would need to recover. It also argued that active 3D glasses were not heavy and that they did not require regular, disruptive recharging. Samsung also relied on the latter reason for falsification to negate the battery representation.
PRINCIPLES FOR INTERLOCUTORY RELIEF
Each party produced a considerable amount of evidence in a very short time for the purposes of this interlocutory proceeding. In a judgment such as this, which I must give urgently, for reasons which I will shortly explain, it is not possible to summarise fully or completely all of the relevant evidence.
In determining whether or not to grant interlocutory relief, the Court must undertake two substantive inquiries: first, whether the applicant for relief has made out a prima facie case in the sense that, if the evidence remains as it is, there is a probability that, at the trial of the action, it will be found to be entitled to the relief; secondly, whether the inconvenience, or injury, that the applicant would be likely to suffer if an injunction were refused, outweighs, or is outweighed by, the injury which the respondent would suffer if the injunction were granted.
In order to establish such a prima facie case, an applicant need not show that it is more probable than not that it would succeed at a trial. It is sufficient that it shows a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending the trial: Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 at 81-82 [65] per Gummow and Hayne JJ, with whose identification of these organising principles Gleeson CJ and Crennan J agreed at 68 [19]. Justices Gummow and Hayne explained that, for the purposes of undertaking the first inquiry, the degree of strength of the probability that, at the trial, the applicant would succeed that must be established, depends upon the nature of the rights that the applicant for relief asserts and the practical consequences likely to flow from the order the applicant seeks: O’Neill 227 CLR at 82 [65].
The governing consideration is that the requisite strength of the probability of ultimate success depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory order sought. In particular, the practical consequences of such an order require the Court to have regard to the particular considerations that arise where the grant or refusal of an interlocutory injunction, in effect, will dispose of the action finally in favour of whichever party succeeds on the application: O’Neill 227 CLR at 84 [71]-[72].
In defamation proceedings, Courts have long had regard to differences that affect the derivation of messages or meanings conveyed by transient publications on radio or television as compared with those conveyed by the printed word. Additionally, there is an obvious similarity to the considerations that apply to consideration of whether messages or meanings are conveyed by the printed word with those that apply to publications on the internet. An ordinary reasonable reader of matter on the internet is able to read it in circumstances very similar to those were he or she to look at printed matter that, like a book or newspaper, has a permanence and can be revisited. There may be differences in approach, not presently material, when an internet user looks at videos or audio clips that he or she accesses on the internet that can be replayed at the viewer’s or listener’s convenience.
In determining whether a publication, such as the present television advertisements complained of, convey the representations asserted, the Court applies an objective test. First, it is necessary, because these advertisements are shown to a wide range of people on a large number of television publications throughout Australia, to identify the characteristics of the class or classes of viewers to whom the representations are alleged to have been made. This is in order to assess, on an interlocutory basis, whether or not particular representations are likely to be found to have been conveyed, were the matter to go to trial. Thus, in these proceedings, it is necessary to identify the relevant class or classes of ordinary reasonable viewers who, when seeing each advertisement, could be misled or deceived, were any particular representation conveyed and were it incorrect.
Has Samsung established the likelihood of a sufficiently strong prospect of success, in the sense that I have explained, namely, that viewers of each advertisement would understand it to have conveyed one or more of the representations complained of? Because this is a case of representations to the public, it is also necessary to identify the ordinary or reasonable members of the class who would be likely to see the advertisements in order to assess whether, at the end of a final hearing, any such representation would be likely to be found to have been conveyed to that class of ordinary, reasonable viewers and whether the class would have been misled or deceived by the representation: Campomar Sociedad Limitada v Nike International Limited (2000) 202 CLR 45 at 85 [102] per Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ. Their Honours pointed out that a class of consumers can be expected to include a wide range of persons, but said that an objective attribution of certain characteristics had to be made to isolate the ordinary or reasonable members of the class. In this respect, the legislation does not impose burdens that operate for the benefit of persons who fail to take reasonable care of their own interests. And, depending on the type of situation that arises in the proceedings, prospective consumers can have particular characteristics apposite to those circumstances. So, in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 210-211, Mason J concluded that whilst it was unlikely that an ordinary purchaser would notice very slight differences in the appearance of two items of furniture there in question, nevertheless, such a prospective purchaser reasonably could be expected to attempt to ascertain the brand name of the particular type of furniture on offer.
It is necessary to identify a hypothetical person whose characteristics will provide the Court with the means to ascertain whether the conduct complained of will, or is likely to, mislead or deceive the members of the class or classes of potential consumers. This requires the Court to consider why any misconception complained of would arise, or would be likely to arise, in the mind of the ordinary or reasonable potential consumers of the televisions depicted in the advertisements were no injunctive relief granted. The Court held that the analogue to s 18 must be regarded as contemplating the effect of the conduct on reasonable members of the class or classes of potential consumers: Campomar 202 CLR at 85 [103]; see too Knight v Beyond Properties Pty Ltd (2007) 242 ALR 586 at 597 [51] per French, Tamberlin JJ and myself.
Section 18 is intended to protect consumers against conduct that, if left unchecked, would create an erroneous assumption, being the consequence of the misleading or deceptive character of the conduct complained of. However, the Court must assess whether an ordinary reasonable member of the class or classes of viewers of each advertisement would have been caused to arrive at a misconception or erroneous assumption by the advertisement. Generally, an ordinary reasonable member of the class or classes of viewers of the advertisements would not arrive at a misconception or assumption that is not only erroneous, but extreme or fanciful. Hence, the need to consider whether the misconceptions or deceptions alleged to arise, or be likely to arise, are properly to be attributed to the ordinary or reasonable members of the class or classes of prospective purchasers or viewers: Campomar 202 CLR at 85-87 [103]–[105].
The law of defamation provides some assistance. That has developed principles over a long course of time as to how an ordinary reasonable person in the community understands matter alleged to be defamatory. The principles in the law of defamation applicable to how an ordinary reasonable viewer of a television publication would understand it, and the meanings he or she would derive from it, have a sound basis. Those principles can be of assistance in considering whether television advertisements alleged to be misleading or deceptive would convey the representations relied on by an applicant: cf Knight 242 ALR at 597-599 [53]-[62]. The common law principles in such cases were summarised lucidly by Hunt CJ at CL with whom Mason P and Handley JA agreed in Amalgamated Television Services Pty Ltd v Marsden (1998) 43 NSWLR 158 at 164A-167G.
I am of opinion that it is reasonable to draw upon the principles developed in the law of defamation to determine how an ordinary reasonable viewer would understand the advertisements complained of and whether they would convey any of the alleged representations to him or her. The ordinary reasonable viewer is a person who would not understand the advertisements to convey a strained, forced or utterly unreasonable interpretation. Such a viewer is a person of fair, average intelligence, who is not perverse, nor morbid nor suspicious of mind, nor avid for scandal nor similarly, likely to see the worst in things or the best in things. He or she does not live in an ivory tower but can and does read between the lines in light of that person’s general knowledge and experience of worldly affairs. Likewise, the mode or manner of publication is material in determining whether a particular representation is capable of being conveyed by a transient, albeit repeated, publication, such as these. The context in which the advertisements are published is also relevant. A court must draw on its own experience of how ordinary reasonable people view television advertisements to determine what, ultimately, are the meanings they are likely to take away from that viewing.
THE ENVIRONMENT IN WHICH THE ADVERTISEMENTS WERE PUBLISHED
The evidence is that these advertisements are part of a campaign by LG that involves the rotational playing of a number of advertisements, including those currently complained of, initially over an intensive campaign period for the next two months, but extending out towards October 2011. Therefore, an ordinary reasonable viewer of the advertisements complained of is not likely to have seen them just once or to have seen each in isolation from the others conveying messages about LG’s passive 3D technology.
The evidence suggests that advertisements of this kind are intended to assist in the creation of marketing opportunities, hence the parties’ keen interest in attacking and defending respectively what was conveyed by the advertisements. The price range of the 3D televisions on the Australian market is between about $1,700 and $3,300. The marketing expert evidence suggests that the purchase of a 3D television is not an impulse purchase but one made by persons who will investigate the product to some degree before purchasing. The principal market to which LG’s advertisements in this campaign are directed consists of males of between 25 and 54 years of age. Those persons are likely to search on the internet, including searching for information from the manufacturer’s website, prior to visiting a shop in order to purchase these products. Potential female purchasers tend to begin their investigation of such purchases by visiting the shop in the first instance. However, the most influential information source for all potential purchasers was the store, especially the sales person, where inquiries were ultimately made.
Conventional and the new LG 3D televisions are purchased in shops. The ordinary reasonable viewer would know this and before making any purchase, would also, attend at a shop or shops where these electronic products are on display. There is no dispute that when persons visit shops selling televisions, they find that there are many operating televisions of various kinds with various characteristics on display, generally all showing the one program. A sales person in the shop will attend to inquiries about the television product or products in which that person is interested. These particular 3D television products, obviously, will require a sales person to attend to a potential purchaser because he or she will need to obtain whichever form of glasses that is necessary to watch a 3D television and assess it as a potential purchase.
So, in assessing what capacity each television advertisement has to convey a misleading or deceptive representation to, or one that is likely to mislead or deceive, the ordinary reasonable viewer, it is necessary to bear in mind the fact that such a person will, ordinarily, be expected to look after his or her own interests and not simply to act on what he or she sees on the television advertisement. That does not, of course, undermine the persuasive, powerful effect of that medium in creating impressions about products. Such impressions may, or may never, be displaced by subsequent events: Knight 242 ALR at 597-598 [54]-[56]. But, in order to determine whether the test for the grant of interlocutory relief to which I have referred, should lead to a particular outcome, I must have regard to the whole of the circumstances likely to attend upon purchasing considerations and decision making by the ordinary reasonable viewer of these advertisements.
The advertisements convey a light-hearted or humorous approach to the comparison of the two products: active technology (or conventional) and passive technology 3D televisions. That does not mean that ridicule or humour cannot be a very powerful and persuasive weapon. Humour can be deployed by an advertiser to induce loyalty to its product or to disparage its competitor’s. Again, it is the way in which the humour is used and the likely impressions to be left with the consumer that must be weighed in all the circumstances, in order to determine whether there is a sufficient likelihood that, at the trial, the representations will be found to have been conveyed and also be found to be misleading or deceptive.
CONSIDERATION – THE BRIGHTNESS REPRESENTATION
Samsung argued that the brightness representation would be conveyed because the viewer would be led to believe that when the active glasses were being used, it was necessary to do so in the dark. This was because, it argued, the left hand side of the screen depicting conventional 3D technology was in darkness that needed to be eliminated by the clicking of the light switch and references were made in the voiceover to a dimmer view and the viewer being in the dark.
When looking at the brightness advertisement, I am not sufficiently persuaded that it is likely that Samsung will establish at the trial that the ordinary reasonable viewer would have understood it to convey that those viewing conventional 3D televisions would be sitting in the dark and that they had to use their active glasses in the dark in order to see the product properly.
Even if the humour in the advertisement conveyed such an impression, it would be immediately dispelled as soon as anyone walked into an ordinary electronics shop simply by the fact that there would be no display of any television products being in the dark in order to view them. There was no evidence to suggest any shops displayed any 3D televisions in a darkened area. It is highly likely that the ordinary reasonable viewer contemplating a purchase of a 3D television would enter a store and see an array of televisions in front of him or her, including all brands of conventional 3D ones. So, in a practical sense, the likelihood of damage flowing from any misleading or deceptive impression that might initially have been conveyed by the brightness advertisement, that one had to view the conventional 3D televisions in the dark, is remote. Any such impression would be dispelled at the point of sale: Knight 242 ALR at 598 [54]-[55].
Secondly, LG argued that the advertisement conveyed a representation that LG screens were brighter than the conventional alternative. That is certainly one possible representation that the advertisement is capable of conveying, although it does not necessarily exhaust the representations that it conveys. I do not think it is far fetched that the advertisement could have conveyed the representation that conventional 3D television screens were darker than the LG 3D television screens.
Moreover, Mr Karatzis, LG’s executive engineering officer, gave evidence that brightness or luminance was a measure of visible light intensity. He said that brightness for 3D televisions was measured by identifying the light intensity displayed or produced by the screen in units called “nits”. Those are units of visible light intensity. The higher the number of nits, the greater the brightness. Australian Digital Testing conducted a test of the LG 3D television with conventional 3D televisions, including Samsung’s. The test results showed that effectively, when viewed in 3D mode with glasses, LG’s passive technology television had a brightness of 202.2 nits, while conventional 3D televisions had brightnesses of less than 60 nits. And, if viewed without glasses, the LG product had more than twice the brightness rating of the conventional ones tested in standard mode with a back lit control set at 100%.
Thus, it follows that at trial, if the evidence remains the same, the LG products are likely to be found to be brighter than others, including Samsung’s. The brightness advertisement appears to be a more graphic way of demonstrating the comparative brightness of LG’s screens as against its competitors and to be accurate in that regard. And, on balance, having regard to the tests in O’Neill 227 CLR 57, I am not satisfied that the brightness representation is of the character for which damages would not be an adequate remedy, even if at trial it were found that it conveyed the misleading or deceptive impression or representation that one had to view conventional 3D television in darkness for it to give off the same glow or brightness as a new LG 3D television.
CONSIDERATION – THE WEIGHT REPRESENTATION
The weight representation alleged to arise from the weight advertisement is that essentially, in contrast to Samsung’s 3D glasses which are heavy and cause discomfort, or other adverse effects that people need to recover from, LG’s have no such deficiencies.
The weight of glasses on viewers can affect their comfort. Indeed, as Mr Fragiadakis observed, the premium rechargeable glasses that Samsung now sells with its 2011 televisions were redesigned. This made them more ergonomic and comfortable and divided the weight in half at the front and rear parts to provide balance. His use of the description “more ergonomic and comfortable” implicitly accepted, as I find to be the fact, that other glasses on the market which are exhibits in these proceedings were less ergonomic and less comfortable than the redesigned ones. And, as a matter of commonsense and experience, weight becomes quite important to the wearer of glasses, especially over time.
The evidence demonstrates that LG’s passive technology glasses are significantly lighter than all the active technology 3D glasses. Even Samsung’s 2011 premium, redesigned glasses are twice the weight of LGs. The effect of heaviness of glasses on the wearer is a matter of individual perception. But it is, I think, fair to say, having tried all of the various glasses that are exhibits, that the LG glasses are perceptibly lighter, as a matter of fact, than any of the others, including Samsung’s 2011 glasses.
The essence of the complaint in the weight representation is that Samsung’s 3D glasses are noticeably heavy when worn. In essence, it is likely to be found at trial that, because this is comparative advertising, the ordinary reasonable viewer would understand the comparison to include all Samsung’s 3D glasses, even the premium ones, as being in the category of heavy compared to LG’s. The weight advertisement was simply seeking to demonstrate, as the voiceover says, that LG’s product came with lightweight glasses and that those were more comfortable than others on the market. There was nothing misleading or deceptive about that. I am of opinion that it is unlikely that at trial it will be found that the weight representation was misleading or deceptive. Indeed, were I the tribunal of fact, I would find that LG’s glasses were lighter.
I am not persuaded that, having regard to the tests that I have identified for the grant of interlocutory relief, a sufficiently strong prima facie case has been established that Samsung would succeed at trial on the weight representation or that the balance of convenience favours the grant of an injunction. As a matter of impression and having worn the exhibited glasses myself, I am satisfied that all of Samsung’s 3D glasses are perceptibly heavier than LG’s passive technology ones. Regardless of whether that is the appropriate test, at the end of the day I have to ascertain what the likelihood is, at a final hearing, of a trial judge finding that it was false to say that Samsung’s glasses were heavy in comparison with LG’s glasses. I am not satisfied that Samsung’s case, that such a result would eventuate, is sufficiently strong to warrant the grant of interlocutory relief.
CONSIDERATION – THE BATTERIES REPRESENTATION
The batteries advertisement is humorous. It can be said to be denigratory of LG’s competitors by the use of the cord to depict what would look like old-fashioned technology. I think the ordinary reasonable viewer would understand that when the advertisement was referring to batteries, in reality, there would be no cord attached to any 3D glasses and that what was being done with the cord was to seek to convey the impression that the technology using batteries was as old-fashioned as would be the use of a cord, as compared with what LG was seeking to publicise, namely, that one did not need to use batteries at all in order to view its product. It is likely that, at trial, the representation complained of, that batteries would require frequent and disruptive recharging, would be found to have been conveyed by the batteries advertisement.
The conventional 3D glasses themselves are, on any view, much more bulky than the new LG glasses, partly to accommodate batteries. Even the premium Samsung glasses must accommodate some space for batteries at the back where the arms wrap around the wearer’s head. The batteries for the premium Samsung glasses have a life of about 70 hours whereas the earlier models have a battery life of around 30 hours. Obviously, the frequency with which one would need to change batteries will depend on the user’s viewing habits including for how long he or she watched the 3D television in operation with those glasses. The evidence is silent about those matters.
I think the ordinary reasonable viewer would be likely to understand from the battery advertisement that the features of the LG glasses, not shared with conventional 3D glasses, were that it had no batteries and was simple to use. That is, the ordinary reasonable viewer would have understood that the new LG 3D television avoided the need to charge batteries for the viewing glasses at regular, or frequent, intervals either by recharging them or by inserting substitutes, depending upon the type of batteries installed.
The use of the words “frequent recharging” eschews what the evidence shows is one of the other modes of powering the conventional glasses, namely, replacing their batteries. However, I am not satisfied that this omission is of character that is sufficiently serious, even if established at the trial as being misleading or deceptive, to require an injunction to protect against any likely damage to Samsung. The effective thrust of the battery advertisement is that conventional 3D glasses have batteries that must be recharged or replaced. That is an activity that involves the consumer having to be concerned with batteries as opposed to what LG’s comparison offers, namely, that no batteries are needed. The absence of evidence as to the viewing habits and the likely times during which viewers would view 3D televisions using these glasses, in order to show how frequently 30 or 70 hours of viewing time would elapse, means that I am not able to say that it is likely that at trial it would be found that the representation about frequent recharging would mislead or deceive. Nor is it possible to conclude that the battery representation would cause damage of the kind that would warrant the grant of interlocutory relief, having regard to the strength of the case and the consequences of doing so.
THE CAMPAIGN REPRESENTATIONS
At the hearing today, Samsung complained that, in addition, the advertisements, viewed as part of a campaign on LG’s website and YouTube, conveyed representations (“the campaign representations”) that:
·the LG 2011 3D TV underlying technology is superior to conventional 3D TV technology, including Samsung’s 2010 and 2011 3D TV technologies, including in the following respects:
(1)LG’s is brighter and clearer with no or less image overlap;
(2)LG’s has reduced blur; and
(3)LG’s provides more immersive 3D images; and
·the LG 2011 3D TV technology allows bigger audiences to view the screen from a wider angle than conventional 3D TV technology, including Samsung’s 2011 3D TV technology.
Last, Samsung said that the campaign representations were false because LG’s 2011 passive technology was not superior to conventional 3D technology, including Samsung’s 3D technology, because LG’s product:
·was not brighter or clearer with no or less image overlap;
·did not have reduced blur;
·did not provide for more immersive 3D images; and
·did not allow bigger audiences and wider viewing angles.
The repetition of the campaign representations made on LG’s Australian website was also the subject of complaints by Samsung. Not much time was spent in argument dealing with those matters. In essence, those complaints are that on LG Australia’s website, a number of statements are made that are laudatory of its new 3D television product. In particular, the website depicts a television with a 4-wheel-drive coming out of the screen against a caption that states:
“The LG Cinema 3D experience is one of comfort and quality. Our innovative technology provides you with an image with reduced blur and the ultimate in 3D brightness. Our lightweight battery-free glasses and flexible viewing angles have revolutionized the home 3D TV experience in Australia.”
Mr Fragiadakis gave evidence that both the 2010 and 2011 Samsung products produced vivid, bright, 2D and 3D picture quality and the “brightness is thrown out into the room, illuminating viewers”. He said that Samsung used superior chip sets and backlight technology in its products to generate sharp images. As I have said, Mr Karatzis’ evidence concerning the tests for brightness, suggests that at a final hearing, if the evidence remains the same, it is likely that Samsung’s case will not be of the strength to warrant the grant of final injunctive relief, or indeed that its case would be made out on this issue.
There was no particular evidence to which I was directed by LG to deal with the suggestion of reduced blur. However, my impression is that the ordinary reasonable reader of the website would look at that as part of a puff. There is no suggestion that the reduction in blur is anything other than something that may or may not have been a feature of LG’s own previous technologies. And, I am not satisfied that there is sufficient in that matter, in itself, to warrant the grant of relief.
Under the heading “Quality Cinema 3D TV Picture” the website also depicts a picture of a screenshot showing what look like flowers with the caption:
“LG’s Advanced 3D technology delivers a superior viewing experience that is brighter and clearer with less image overlap than experienced with conventional 3D TVs”.
That caption conveys a comparative element.
However, there is no evidence about the quality of the image overlap to which I was directed. Therefore, I am not able to make a finding that anyone would be misled by that statement.
In addition, the website continues in a similar vein with a heading “Bright Cinema 3D TV image technology”. Underneath this is a depiction of a screen with what appears to be a covering film on it and butterflies emerging out of it, presumably to convey a 3D sensation with the following caption:
“Our next generation 3D panel provides clearer images that are brighter than conventional 3D TVs*. Tru Motion is activated to clearly produce fast and dynamic 3D images, meaning you get more immersive 3D images for dynamic entertainment content such as action films, sports and games.
* Defined as 2010 shutter glass 3D TVs.”
Underneath that is a picture of a person sitting on a lounge watching a television showing a screen shot of tropical fish swimming in and out of the screen with the heading “Flexible wide 3D TV viewing angle” and a text:
“LG CINEMA 3D TV technology provides a 3D viewing angle that is wide enough to allow bigger audiences and flexible viewing positions. Enjoy consistently clear and bright 3D pictures lying down or leaning back.”
LG’s Mr Karatzis explained that the word “immersion” refers to a viewer being immersed in the 3D experience resulting in him or her having the feeling of being part of the event. He said that LG’s new 3D TVs achieve “immersion” through the use of various forms of video enhancing technology and that the circular polarisation of the glasses LG used, together with the screen, allows viewers the flexibility of experiencing 3D viewing while in a range of viewing positions, including lying down or leaning back.
Samsung’s Mr Fragiadakis explained that viewers can watch each of the 2010 and 2011 Samsung products at around 178 degree angle from a flat screen panel. He said that they could potentially be positioned at a greater angle than that and that they could watch each of the 2010 and 2011 Samsung products within 10 metres of the screen, even though the average viewing distance is three to five metres.
Bradley Wright, Samsung’s national sales and marketing manager of audio visual products, also explained that its 2011 product allowed a viewing angle of 178 degrees. He said that in effect this permitted someone in a room to watch the screen from any part of the room other than from behind the screen. He said that in its advertisements, LG was seeking to appeal to Australian consumers’ desire to get together with friends and watch events, particularly sports events, on television and to suggest that this activity would not be possible with active 3D technology televisions.
I am not satisfied that on a final hearing, Samsung’s case is sufficiently strong that the trial judge would draw that conclusion. In my opinion, it is more likely that the ordinary reasonable reader of the LG website would understand this material simply as a form of self promotional puffing by LG about having “bigger audiences” and more “flexible viewing positions”, without its being comparative. The screen dump of this material has all the hallmarks of an advertising puff which would not be taken as being denigratory of competitors, including Samsung.
SAMSUNG’S OTHER COMPLAINTS
Samsung also relied on other evidence, such as YouTube videos. These represent, quite clearly, that LG’s advertisements are making comparisons between Samsung’s and LG’s products. However, one of the problems with this argument is that each of Samsung and LG are, as I have said, Australian subsidiaries of Korean corporations that are engaging in worldwide trade in these products. There is nothing in the material in evidence to suggest that LG, being the respondent, is the person responsible for the publication of the YouTube advertisements, although there is everything to suggest that some entity in its corporate group is the likely source of the YouTube material. However, neither the Korean parent nor any other LG company is a party to these proceedings.
I am not satisfied that it would be appropriate to enjoin publication of the current advertisements because of what people might infer if they also viewed the YouTube advertisements, or versions of them.
BALANCE OF CONVENIENCE
It would be apparent from what I have said that I have had regard, in forming these views as to the grant of interlocutory relief, both to the element of prima facie case and balance of convenience. I have done that because there is some difficulty in segregating the two in the present controversy. But, there are additional factors going to the balance of convenience with which I should also deal shortly.
The effect of the grant of an interlocutory injunction here would be finally to determine the rights of the parties. The current advertising campaign of LG is structured and planned as part of a worldwide campaign. On the evidence, no complaint has been made about any of the advertisements by any of LG’s competitors, including Samsung, in the international markets. The consequence of granting an interlocutory injunction in Australia would hamstring LG here at the critical time of the year when the marketing activity of both parties is at a crucial stage.
Samsung argued that LG’s advertising campaign had chosen to target it and its products. Samsung contended that this was a factor that should be weighed in assessing the balance of convenience. However, for the reasons I have given, I am not satisfied that the case is one where, weighing all of the factors, this factor swings the balance of convenience in its favour.
Both parties’ evidence demonstrates that the calculation of damages that might flow either to Samsung or to LG from the grant or refusal of interlocutory relief will not be easy. Having regard to my assessment of the weakness of Samsung’s case, I am of my opinion that this difficulty of establishing damages, weighs heavily against an extension of the ex parte injunctions that were granted.
LG argued that the grant of an injunction restraining the publication of the three advertisements complained of would produce catastrophic effects upon it and mean that it could not pursue its current advertising campaign in the future. There is no evidence that such a catastrophic effect would be visited on LG. Samsung pointed to the fact that LG’s Mr Barnes had given evidence that the global marketing materials had been adapted by the Australian LG by making small and limited changes for use in the local market to incorporate the disclaimer and a URL, lg.com.au/cinema3d. Mr Barnes said that those changes were made prior to April 2011 when there were no 2011 competing products on the market because these were only launched in April. He relied on the use of the disclaimer in the advertisements which appear, he said, for about between five and six seconds in the 15 second advertisement.
As I have said, I accept that the disclaimer is there but, in my opinion, it is unlikely to be something the ordinary reasonable viewer would pay any attention to or necessarily see, having his or her attention focussed on other things in the advertisements. I do not think the disclaimer would be likely to be found to qualify, in any relevant respect, any of the representations that the advertisements conveyed.
LG’s advertisements had been developed well before April 2011. The evidence demonstrates that there is a significant advertising campaign that has been planned and for which LG has spent or committed many millions of dollars. In addition, as a matter of common sense, were an injunction to be granted, some time would need to be taken for LG to arrange for replacement advertisements, assess how to construct them and decide what message or messages should be conveyed by them, as well as to check them for their potential to give rise to further proceedings for misleading or deceptive conduct. That process would not take place in a few days, but would require a period of consultation between those involved in the advertising industry and LG to create replacement advertisements that avoided the risk of further proceedings.
In that context, there would be a significant interruption to LG in the middle of the critical period for advertising which both parties accept is vital to their 2011 product launches and sales. That circumstance also weighs the balance of convenience in LG’s favour because it is likely that it would take a number of weeks to develop a new series of advertisements.
Having regard to all of the circumstances, I am not satisfied this is an appropriate case for the grant for an interlocutory relief. I refuse to continue the ex parte injunctions.
COSTS
LG has sought an order for costs in respect of Samsung’s claim for interlocutory relief. LG has substantially succeeded in resisting it. However, at the commencement of the proceedings today, LG offered an undertaking not to publish further the flicker advertisement, subject to receiving from Samsung the usual undertaking as to damages. Samsung accepted that offer and immediately offered the undertaking as to damages. Up until that point, both parties had had to prepare for, and deal with, so far as at least Samsung was aware, that issue in the proceedings. There was a degree of overlap in evidence relevant to the flicker advertisement because it was published back to back with the brightness advertisement. But, I am satisfied that it would not be just simply to order Samsung to pay the whole of the costs of the applications for ex parte and interlocutory relief.
In my opinion, having regard to the measure of success of both parties, including that reflected by the offer and acceptance of the undertaking, I should order Samsung to pay 80% of the costs of LG in respect of the application for interlocutory relief heard today.
I certify that the preceding seventy-eight (78) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. Associate:
Dated: 14 June 2011
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