Telstra Corporation Ltd v Communications Network International Incorporated

[1994] FCA 716

JUDGMENT No. ..... "6 ,, ,, ~2fCm

TRADE PRACTICES - Trade Practices Act, s.52 - consumer

protection - misleading or deceptive conduct - passing off - telecommunications - interlocutory injunction - use by applicant of name "Telecom Australia" - use by first respondent of name "The Telecom Paycard" in connection with telephone credit card - whether name composed of descriptive words has become distinctive of the business of a particular person - restraint of use by first respondent of name "The Telecom Paycard".

Trade Practicuct. 1974 iCth1 - S. 52

0.M. Auto Sales Ptv Ltd v. B-et	Rent -	A	-	Car Svstems Ptv Ltd
119761 12 ALR 3m

tra Comor@tion U t e d (A- 051 775 5561

V Communications Network International Incor~oratea

4Pd Datatel -nal Ptv Ltd 008 208 688)

JUDGMENT No. ..... , 716 99 ...,. J ,-.,,,.

VICTORIA DISTRICT REGISTRY 1	IN THE FEDERAL COURT OF AUSTRALIA )
GENERAL DIVISION ) No. VG 301 of 1994
B E T W E E N :

Applicant

- and -

First Respondent

Second Respondent

CQLWJ:	Olney J
ElAQ=:	Melbourne
m:	30 September 1994  10 OCT 1994

FEDERAL COURT OF

AUSTRWA PRlNaCAL

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lXE COUBT ORDERS THBT:

1.   Upon the applicant by its Counsel providing the usual undertaking as to damages, the Court orders that pending

respondent be restrained from distributing in Australia the final determination of this proceeding each

to the public whether by itself its servants or agents or otherwise howsoever, The Telecom Paycard referred to in paragraph 6 of the statement of claim or the explanatory and promotional material referred to in paragraph 6 of the statement of claim.

2.    Costs of the application be reserved.

3.   The issue of liability be tried separately before any other questions.

4.    The trial be on affidavit evidence.

5.    Mutual discovery by 21 October 1994

6.   The applicants file and serve affidavits by 28 October

1994.

7 .    The respondents file and serve affidavits in answer by 21 November 1994.

8.    The applicants file and serve any affidavits in reply to those of the respondents by 28 November 1994.

9.    The directions hearing be adjourned to 2 December 1994.

10.  Parties have liberty to apply on 2 days written notice to the other parties.

Lux&:	Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA	)
VICTORIA DISTRICT REGISTRY	)
GENERAL DIVISION	)  No. VG 301 of 1994
B E T W E E N :

Applicant

- and -

First Respondent

Second Respondent

CQLm:	Olney J
a&4G!Z:	Melbourne
La!X:	30 September 1994

-

Since 1975 the applicant and its predecessors have carried on business in Australia as a provider of telephone and other telecommunication services. Until relatively recently the applicant and its predecessors had a statutory monopoly in

this field. Throughout this period, that is since 1975, the

business has been carried on under the name Telecom Australia, which is commonly shortened to Telecom. The Court takes judicial notice of the fact that in Australia the word Telecom

is widely used and understood to refer to the applicant's

business undertaking, and is used in association with its services and products. The evidence adduced in support of this application merely eupports what is otherwise notorious fact.

The first respondent is an American company which markets and distributes a re-chargeable debit telephone card for use by international travellers. The card in question allows the user to place direct dial telephone calls on any press button telephone from over 40 countries. The cost of these calls is debited from a credit balance on the card and as the credit is exhausted the user can purchase more time by telephoning a toll free number and billing to any major credit card. The card enables the user to make international telephone calls at prices which are much lower than those charged by hotels and public telephones, or when credit cards are used. Except for domestic calls within the USA the card is not intended for domestic use within any other country. It can, however, be used for that purpose and can be used to make domestic calls within Australia, but the cost would far exceed the cost of a local telephone call.

The first respondent's card is called The Telecom Paycard.

It is marketed and distributed in Australia by the second

respondent. The applicant seeks to have the respondents

restrained pending trial and determination of this proceeding from distributing The Telecom Paycard and certain explanatory and promotional material to the public in Australia or any other card or documentation bearing the name Telecom.

Samples of the card and the explanatory brochure have been put

in evidence. I make the following observations:

1.   The word Comet and the name Communications Network International Incorporated appear once in relatively small print on the brochure.

2.    The words The Telecom Paycard appear prominently in the brochure, once on the outside and once inside. On each occasion the word Telecom in printed in a larger typeface than the words "The" and "Paycard", and in a different colour. The words Telecom Paycard also appear in the general text of the brochure on a number of occasions but without any emphasis on any particular word.

3.   The card bears the words The Telecom Paycard on the obverse and reverse sides. On the obverse side the word Telecom is highlighted by the use of larger print and a different colour. On the reverse Telecom is in larger print, but in the same colour as the other words.

4.    The first respondent's name does not appear on the card,

nor does the name of any other company or person.

The respondents say that "telecom" is a common abbreviation for "telecommunications" and there is evidence to support that assertion. They say further that "telecom" is used in the that sense on The Telecom

Paycard and other related material. I do not agree.

In this context I refer to a passage from Gibbs J in

t Rent-a-= System Ptv Ltd

m) 12 ALR 363. At p 369 his Honour said:

It is clear law that a name composed of descriptive words may become distinctive of the business of a particular person and if a plaintiff shows that the name in fact distinguishes his business and that the use of the name by the defendant is calculated to deceive persona into supposing that the business carried on by the defendant is that of the plaintrff and is likely to cause damage to the plaintiff's business, he will be entitled to relief.

And then his Honour went on:

In the present case there was ample evidence from which it could be rnferred that the name Budget Rent-a-Car had become dimtinctive of the respondent's business in various parts of Auatralia by the year 1968.

The Telecom Paycard is not a telecommunications credit card.

It is a telephone credit card. To suggest it is otherwise is

to inaccurately describe the function of the card. I do not think that the word "Telecom" used as part of the name of the paycard is descriptive of its function. In my opinion, in the Australian context, and I emphasise that I am confining my comments to the situation in this country, the word "Telecom" has become distinctive of the applicant's business.

The general get-up of the card and brochure is in my opinion	likely to mislead or deceive all but the most astute and
inquiring minds into believing that The Telecom Paycard is a product of the applicant. In particular the use of the definite article before the word "Telecom" is strongly suggestive of the fact that Telecom in that context is used to distinguish the card as one associated with the applicant's business.
There is in my opinion a serlous question to be tried as to whether the conduct of the first respondent in promoting the card, and the conduct of the second respondent in distributing the card in Australia is conduct which is likely to mislead or deceive. This then leads to the question of whether the balance of convenience falls in favour of granting the relief sought.
The applicant's complaint is in substance that the continued promotion and distribution of the card in Australia is likely to lead to confusion amongst the users of the card and thereby cause damage to the goodwill associated with the applicant's business. Some instances of such confusion have been deposed to in the evidence. Given the complexity of the process involved in using the card, and the somewhat confusing nature of the information supplied with it, I think that there is substance in the applicant's complaint.
The applicant is of course unable to quantify any actual or
potential loss in monetary terms, but the Court cannot ignore the fact that the telecommunications system in Australia is
now intensively competitive and that telephone subscribers can very readily switch their allegiances from one provider to another. The applicant is entitled to be sensitive to the need to avoid any occasion for feelings of disaffection amongst its subscribers relating to its services.
The respondents have come into the field in Australia in very recent times. At this stage they are still developing their
market. The gross return from the use of the card by Auetralian cardholders whilst growing is very small indeed. Given the early stage of their activity in the Australian market I do not think that the respondents are likely to suffer irreparable damage if restrained from continuing to promote and distribute the card pending trial. In my opinion the balance of convenience falls in favour of granting injunctive relief.
I do not accept that the conduct of the applicant's solicitor
in approaching one of the respondents' agents after the
commencement of the proceedings in any way disqualifies the
applicant from obtaining injunctive relief. On the evidence
adduced it appears that all that was done was to seek a
statement from a person who was believed to be in a position

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to give relevant evidence. There is nothing improper in the

fact or the manner of the solicitor's conduct.

I am, however, of the opinion that the order sought is too

wide. The applicant has not made out a case for the exclusive use of the word "Telecom". There are some contexts in which the word might properly be used, for example as an abbreviation for telecommunications or as part of the name of another entity which would not convey any reference to the applicant's business.

Accordingly, I would propose to make an order in the terms of

the minute handed up by senior counsel for the applicant, but deleting from it the final words 'or any other card or documentation bearing the word 'Telecom'".

..

I certify that this and the preceding 6 pages are a true copy of the Reasons for Judgment of the Honourable Justice Olney

IieaEd:	27 September 1994
U:	Melbourne

&damant: 30 September 1994.

-	:
Mr A.C. Archibald QC and Mz A. J. Ryan (instructed by Mallesons

l

Stephen Jaques) appeared for the applicant.

Mr B.J. Hesse (instructed by Stephens Solicitors) appeared for

the respondents.