TM25 Holding B.V. v Ghamloush
[2016] FCCA 2106
•23 August 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| TM25 HOLDING B.V. & ORS v GHAMLOUSH | [2016] FCCA 2106 |
| Catchwords: INTELLECTUAL PROPERTY – Infringement of trade marks and copyright – undefended hearing – declarations – injunctions – nominal damages – additional damages. |
| Legislation: Australian Consumer Law, ss.18, 29 Competition and Consumer Act 2010, Sch.2 Copyright Act 1968, ss.31(1)(b)(i), 36, 37, 115 Evidence Act 1995, s.67(4) Fair Trading Act 1987 (NSW), s.28 Federal Circuit Court Act of Australia Act 1999, ss.88F, 88G Trade Marks Act 1995, ss.120, 126 |
| Cases cited: Draper v Trist (1939) 56 RPC 429; [1939] 2 All ER 513 Facton Ltd v Mish Mash Clothing Pty Ltd (2012) 94 IPR 523; [2012] FCA 22 |
| First Applicant: | TM25 HOLDING B.V. |
| Second Applicant: | G-STAR RAW C.V. |
| Third Applicant: | G-STAR AUSTRALIA PTY LTD (ACN 084 011 852) |
| Respondent: | MOHAMMAD GHAMLOUSH |
| File number: | MLG 2388 of 2014 |
| Judgment of: | Judge Riley |
| Hearing date: | 4 July 2016 |
| Date of last submission: | 4 July 2016 |
| Delivered at: | Melbourne |
| Delivered on: | 23 August 2016 |
REPRESENTATION
| Counsel for the applicants: | Mr Tom Cordiner |
| Solicitors for the applicants: | K&L Gates |
| Counsel for the respondent: | No appearance |
| Solicitors for the respondent: | No solicitor on the record |
THE COURT DECLARES THAT:
The respondent has:
(a)infringed the following trade marks:
Australian trade mark no.
trade mark
class(es)
722849
G-STAR
3, 18, 25
722852
3, 18, 25
980122 18, 25, 35 1301292 18, 25, 35 in breach of s.120 of the Trade Marks Act 1995; and
(b)infringed the copyright in two G-Star “G” logos which are represented in Australian trade mark nos. 722852 and 980122 in breach of s.37 of the Copyright Act 1968.
THE COURT ORDERS THAT:
The respondent whether by himself, his servants, employees, agents or otherwise howsoever be restrained, in trade or commerce from:
(a)importing, manufacturing, marketing, advertising, promoting, supplying, exhibiting in public, offering for sale and selling any clothing or clothing accessories to which the G-Star trade marks, namely:
Australian trade mark no.
trade mark
class(es)
722849
G-STAR
3, 18, 25
722852
3, 18, 25
883618
25
980112
18, 25, 35
980122 18, 25, 35 999346 9, 14 999347 9, 14 999348
9, 14, 35
999349
9, 14, 35
999350
G-Star Raw Denim
9, 14, 35
999351
G-STAR
9, 14, 35
1028535
18, 25, 35
1301292
18, 25, 35
1352495
GSRD
18, 25
(“the G-Star trade marks”)
or the copyright works consisting of Australian trade marks numbered 722852, 980122 and 883618 (“the copyright works”), have been affixed or applied without the knowledge, authority or licence of the applicants (“the Counterfeit G-Star Products”);
(b)disposing or dealing with the Counterfeit G-Star Products in any other way than in accordance with order 3 below;
(c)authorising, causing, procuring or inducing any person to do any act which would be an infringement of the injunctions in paragraphs (a) and (b) of this order;
(d)representing that the Counterfeit G-Star Products are imported, manufactured, advertised, promoted, offered for sale or sold with the sponsorship or approval of the applicants;
(e)representing that the Counterfeit G-Star Products are clothing and clothing accessories designed, promoted, marketed, advertised, distributed, offered for sale, sold and branded by the second applicant and its predecessor with and by reference to the name “G-Star” (“G-Star Products”);
(f)representing that the Counterfeit G-Star Products emanate from the same trade source as the G-Star Products;
(g)representing that the Counterfeit G-Star Products are made by the applicants;
(h)representing that the Counterfeit G-Star Products are licensed, authorised, sponsored, approved or endorsed by the applicants; and
(i)passing off:
(i)his business as having the sponsorship, approval or a connection or affiliation in the course of trade with the applicants and the G-Star Products; and
(ii)the Counterfeit G-Star Products as and for the G-Star Products.
The respondent, whether by himself, his servants, employees, agents or otherwise howsoever, deliver up to the applicants:
(a)all the Counterfeit G-Star Products in his possession, custody or control; and
(b)any and all brochures, pamphlets, advertising, labels, swing tags, promotional or marketing material and the like in his power, possession, custody or control which feature the Counterfeit G-Star Products or which bear the G-Star trade marks or the copyright works identified above.
The respondent pay the applicants nominal damages of $1.00 pursuant to s.126 of the Trade Marks Act 1995 and s.115(2) of the Copyright Act 1968.
The respondent pay the applicants additional damages of $30,000 pursuant to s.115(4) of the Copyright Act 1968 and s.126(2) of the Trade Marks Act 1995.
Until further order, publication or disclosure of the annexures to the affidavit of Alastair Davies made on 11 March 2016 filed in this proceeding described as confidential annexures “AD-9”, “AD-10”, “AD-11”, “AD-12”, “AD-13” and “AD-17” is prohibited pursuant to sections 88F and 88G of the Federal Court Circuit of Australia Act 1999.
NOTATIONS:
A.Order 6 is made because it is necessary to prevent prejudice to the proper administration of justice.
B.Pursuant to rule 16.05(2)(a) of the Federal Circuit Court Rules 2001, the court may vary or set aside a judgment or order made in the absence of a party.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 2388 of 2014
| TM25 Holding b.v. |
First Applicant
And
| g-star raw c.v. |
Second Applicant
And
| g-star australia pty ltd (ACN 084 011 852) |
Third Applicant
And
| MOHAMMAD GHAMLOUSH |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application for declarations, injunctions and damages arising from certain alleged infringements of the Copyright Act 1968 and the Trade Marks Act 1995.
The respondent did not appear at the final hearing on 4 July 2016. It is clear that he was aware of the final hearing date because he appeared in person at a directions hearing on 14 October 2015 when the matter was listed for final hearing on 4 July 2016. The respondent was represented during part of the intervening period. However, he ceased to be represented well before the final hearing.
The only substantive document filed by the respondent in the proceeding is a defence dated 19 February 2016, when the respondent was represented by solicitors. The respondent has not filed any affidavits. The defence was largely a bare denial, but did admit that the respondent was the owner of the national business name, “M.S. Clothing” from 3 January 2013 to 3 January 2006 and did admit that he received certain correspondence from the applicant’s solicitors.
The essence of the claim is that the respondent is alleged to have imported certain garments to which were affixed labels bearing counterfeit trade marks and logos. The applicant claimed to have copyright in the logos which formed part of the trade marks. It is the unauthorised use of the logos and trade marks which is said to constitute the breach of the Copyright Act and the Trade Marks Act. It is not suggested that the importation of the garments themselves constituted breaches of the Copyright Act or the Trade Marks Act.
The facts
The applicants relied on:
a)an affidavit sworn by Jacques la Fontaine on 17 February 2016;
b)an affidavit affirmed by Christian De Bil on 18 February 2016;
c)an affidavit affirmed by Jonathan Ariel Feder on 29 February 2016;
d)an affidavit sworn by Alastair Davies on 11 March 2016;
e)an affidavit affirmed by Jonathan Ariel Feder on 16 March 2016; and
f)an affidavit affirmed by Jonathan Ariel Feder on 18 May 2016.
The evidence in those affidavits was not challenged. Except where otherwise stated, I accept it. The evidence is as follows.[1]
[1] The wording of this summary of the evidence is derived substantially from the applicants’ written submissions.
The first and second applicants are incorporated pursuant to the laws of the Netherlands. The third applicant is incorporated pursuant to the laws of Australia. All three applicants are able to sue in their corporate names.
The first applicant is the owner of the following trade marks:
Australian Trade Mark No.
Trade Mark
Class(es)
722849
G-STAR
3, 18, 25
722852 *
3, 18, 25
883618 *
25
980112
18, 25, 35
980122 * 18, 25, 35 999346 9, 14 999347 9, 14 999348
9, 14, 35
999349
9, 14, 35
999350
G-Star Raw Denim
9, 14, 35
999351
G-STAR
9, 14, 35
1028535
18, 25, 35
1301292
18, 25, 35
1352495
GSRD
18, 25
(“the G-Star trade marks”);
Facton, and its successor, the first applicant, granted the second applicant an exclusive licence to use the G-Star trade marks throughout the world. Since 1989, the second applicant (and its predecessor in title, G-Star International B.V.) has designed, promoted, marketed, advertised, distributed, offered for sale and sold around the world, clothing and clothing accessories branded with and by reference to the name “G-Star” (“the G-Star products”). The third applicant is and was at all material times the exclusive Australian distributor of the G-Star products pursuant to an agreement with the second applicant.
Employees of G-Star International B.V. created original, artistic works in the course of their employment with G-Star International B.V., being the trade marks marked with an asterisk in the table above, being 722852, 883618 and 980112. (There may have been copyright in the applicants’ other trade marks, but the submissions in the present case only relied on the three marked with an asterisk.) The artistic works have been used by the applicants in their advertising and promotional material. From 1994 until 1 April 2011, G-Star International B.V. was the owner of the copyright in the artistic works. By an agreement dated 31 March 2011, G-Star International B.V. sold all of its intellectual property and licences to the second applicant.
G-Star branded clothing has a substantial reputation in Australia, achieved through advertising, concept stores and other marketing techniques. In Australia, the G-Star brand has about 5% of the jeans and fashion market. The G-Star brand has a reputation for exclusivity and G-Star products are fairly expensive.
The second applicant has not granted the respondent authority to use or reproduce any of its trade marks.
From 18 June 2004 until 20 September 2007, the respondent and Alex Alwaizani were co-owners of “WOLF WEAR”, a business registered in New South Wales.
On 11 November 2010, the Australian Customs and Border Protection Service (“Customs”) sent to the applicants’ solicitors a notice of seizure to objector (“the first notice”). The first notice advised that Customs had seized:
1282 t-shirts bearing G-Star a (sic) sign that is substantially identical or deceptively similar to a trademark notified by Facton Ltd. Seized in New South Wales
The first notice also advised that the designated owner of the goods was S G Wear of 444 Punchbowl Road, Belfield NSW 2191. On 17 November 2010, the applicants’ solicitors obtained a NSW business name extract for S G Wear. The person listed as carrying on this business was Shereen Ghamloush.
On 17 November 2010, Customs sent a fax to the applicants' solicitors attaching a notice of consent to forfeit goods relating to the goods seized pursuant to the first notice. The notice of consent to forfeit goods said:
I, Mohamed Ghamloush, [the respondent] being the authorised representative of S G Wear, … hereby give notice that I consent to the goods described in the Schedule below being forfeited to the Commonwealth …
The notice of consent to forfeit goods appeared to be signed by the respondent.
On 22 November 2010, the applicants’ solicitors sent a letter of demand to Ms Ghamloush alleging that by importing counterfeit G-Star goods into Australia she had committed acts of trade mark and copyright infringement, engaged in misleading conduct and committed the tort of passing off. The letter, among other things, asked Ms Ghamloush comply to give the usual undertakings in matters such as this by 30 November 2010. Ms Ghamloush did not respond to the letter dated 22 November 2010.
On 7 December 2010, the applicants’ solicitors sent a further letter to Ms Ghamloush together with a further copy of the letter of demand dated 22 November 2010 and requested compliance with the applicants’ demands by 14 December 2010. The applicants’ solicitors did not receive response to their letters.
On 29 September 2013, Customs sent to the applicants’ solicitors a notice of seizure - objector (“the second notice”). The second notice advised that Customs had seized:
540 x shirts bearing G Star Raw trademarks, a sign that is substantially identical or deceptively similar to a trademark notified by Facton Ltd.
The second notice advised that the importer of the goods was the respondent.
On 7 October 2013, the applicants’ solicitors sent an email to Customs asking for photographs of the goods that were seized pursuant to the second notice. By email dated 11 October 2013, Customs responded to this email and attached photographs of some of the goods seized pursuant to the second notice.
On 10 December 2013, the applicants’ solicitors sent a letter of demand to the respondent alleging that, by importing counterfeit G-Star goods into Australia, the respondent had committed acts of trade mark infringement, copyright infringement, engaged in misleading conduct and committed the tort of passing off. The letter, among other things, asked that the respondent to give the usual undertakings. The respondent has not done so.
On 27 November 2015, a subpoena was issued requiring Customs to produce certain documents relating to this matter. Customs produced two sets of photographs. Mr Feder believes the photographs in exhibit JAF-19 to his affidavit affirmed on 29 February 2016 are of tags and garments the subject of the first notice. Mr Feder believes the photographs in exhibit JAF-20 to his affidavit affirmed on 29 February 2016 are of tags and garments the subject of the second notice.
JAF-19 contains photographs:
a)at CB598 of a garment with a labels and a tag bearing the trade marks 722849, 980122 and 1301292;
b)at CB600 of tags bearing the trade marks 722849 and 980122 and 1301292;
c)at CB601 of a garment with a label bearing the trade marks 722849 and 1301292;
d)at CB602 of a garment with a label and tags bearing trade marks 722849, 980122 and 1301292; and
e)at CB603 of a garment with a label bearing trade marks 722849, 980122 and 1301292.
JAF-20 at CB606 contains photographs of two T-shirts and, in the top right corner, a label bearing trade mark 722852 and, possibly, 1301292 (though the photograph is cut off).
There are no photographs exhibited to Mr Feder’s affidavit showing labels or tags with trade mark 883618.
Mr Davies gave evidence in his affidavit that he had reviewed the photographs in JAF-19, which related to the first shipment. Mr Davies said that he knew that the garments shown in those photographs were counterfeit for the reasons set out in annexure AD-17 to his affidavit. Confidentiality is sought for that exhibit, for the reason that its disclosure could alert counterfeiters to methods of more successfully counterfeiting G-Star garments. I accept that it is proper to order confidentiality for that exhibit.
It is apparent from AD-17 that, although in his affidavit, Mr Davies only said he had looked at the photographs in exhibit JAF-19, relating to the first notice, he had also looked at the photographs in JAF-20, relating to the second notice. Exhibit AD-17 states separate reasons for concluding that the garments shown in both the first and second shipments are counterfeit. I accept Mr Davies evidence that the garments shown in JAF-19 and JAF-20 are counterfeit, and also accept that his affidavit contained an insignificant drafting error when it referred only to JAF-19. As the garments shown in JAF-19 and JAF-20 were counterfeit, I infer that the trade marks on the labels on those garments and on the tags attached to them were used without the authority of the second applicant.
The documents produced under subpoena by Customs also included:
a)an information report that indicated that a caller rang the Customs hotline on 16 October 2009 and said that the respondent and A Alwai:
seem to work together to arrange the importation of counterfeit goods, including Louis Vuitton, Chanel and other designer labels. The entities [the respondent and A Alwai] sell their products at the wholesale level and only deal with persons well known to them.
b)an information report dated 15 October 2010 that indicated that the following information had been received from the Australian Federal Police:
i)[the respondent’s daughter], Shereen Gamloush, is a frequent consignee/importer of mens and ladies clothing and other items through her business, S G Ware. Between 150909 and 310810, Shereen has imported 5 X 20 foot containers ex China.
ii)the respondent had had 70 international movements since 2000;
c)an information report dated 14 July 2012 that indicated that:
i)the respondent was found to be carrying an item the name of which was redacted in the documents produced under subpoena by Customs;
ii)the respondent was suspected of trade mark and copyright infringements;
iii)the respondent was suspected of a commercial infringement;
iv)the respondent appeared to be travelling with Alex Alwaizani;
v)the respondent had in his bag seven Bvlgari brand watches that the respondent admitted were fakes but said were gifts for friends;
vi)the respondent had been on a business trip to China with Mr Alwaizani to negotiate with Chinese companies to import items that were redacted in the documents produced under subpoena by Customs;
vii)the respondent said he had previously been involved in importing clothes from China but this business did not go well and he was currently helping his brother in his business; and
viii)in the words of a Customs officer:
It seems likely that [the respondent] is importing trademark/ copyright infringed goods … ; and
d)an information report indicating that on 25 June 2014, a caller said that Alex Alwaizani was selling fake clothing.
The applicants wished to rely on the Customs’ information reports mentioned above, notwithstanding that they were hearsay. The applicants told the court that they had attempted to serve on the respondent the notice required by s.67 of the Evidence Act 1995 but without success.
Subsection 67(4) of the Evidence Act 1995 permits the court to allow hearsay evidence in even if the required notice has not been given. In the circumstances of this case, where the respondent has barely participated in the proceeding, I consider that it is appropriate to let the information reports in to evidence.
However, the information reports are not very compelling evidence. The information report dated 16 October 2009 simply records what an unidentified caller told Customs. It might not be true. The call could have been the starting point for an investigation that might have unearthed some substantial evidence. However, it does not appear that any such investigation was undertaken. The evidence contained in a call from an unidentified person, even to a recognised authority, does not approach sufficient evidence to satisfy the balance of probabilities test.
The information report dated 15 October 2010 was from the Australian Federal Police, which is obviously a very reliable source. However, that information report did not say that anyone had done anything wrong. Just because people import goods from China does not mean that they import counterfeit goods. People can legitimately travel overseas numerous times in one year for business or other purposes.
The information report dated 14 July 2012 appears to have been based on the investigations and conversations of a Customs officer. The report is a business record and I am satisfied that it is accurate. It contains an admission that the respondent was attempting to import seven fake Bvlgari watches. I reject the claim made by the respondent to the Customs officer that the respondent was attempting to import the seven Bvlgari watches as gifts for friends. That claim strikes me as implausible. I consider that the respondent imported the fake Bvlgari watches for the purposes of resale.
The information report in respect of a call on 25 June 2014 merely recorded that an unidentified caller told Customs that another person, Mr Alawizani, sold fake clothing. Although Mr Alawizani has been associated in business with the respondent, it would be drawing a very long bow to conclude from that information report, on the balance of probabilities, that the respondent was also involved in selling fake clothing.
The applicants submit that the court should find that it was the respondent, and not Shereen Ghamloush, who was the actual importer of the goods that were the subject of the first notice. It was clearly the respondent who was named on the notice of forfeiture in respect of those goods and who apparently signed the notice of forfeiture as the “authorised representative of” S G Wear. In these circumstances, I accept that the respondent was the actual importer of the goods the subject of the first notice.
Trade mark infringement
Section 120(1) of the Trade Marks Act 1995 provided at all relevant times that:
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 or services in respect of which the trade mark is registered.
The applicants submitted that the respondent imported garments in the shipment the subject of the first notice with labels and tags identical to or substantially identical to trade marks 722849, 722852 and 980122: written submissions, page 7. I have examined the relevant photographs in JAF-19 and cannot see anything resembling trade mark 722852, which consists of an elongated capital G surrounding the words G-Star. I can see signs identical or substantially identical to trade marks 722849 and 980122.
The applicants submitted that the respondent imported garments in the shipment the subject of the second notice with labels and tags identical to or substantially identical to trade marks 722849, 980112, 980122 and 1301292: written submissions, page 7. I have examined the relevant photographs in JAF-20 and cannot see anything resembling trade mark 980112. I can see signs identical or substantially identical to trade marks 722849, 980122 and 1301292.
In the present case, marks identical or substantially identical to the G-Star trade marks numbered 722849, 722852, 980122 and 1301292 appeared on the counterfeit G-Star garments the respondent attempted to import. The trade marks appeared in a way that would have seemed to consumers as possessing the character of a brand. That indicates that the respondent used the G-Star trade marks numbered 722849, 722852, 980122 and 1301292 “as a trade mark”: Shell Co ofAustralia Ltd v Esso Standard Oil (Aust) Ltd (1963) 109 CLR 407 at 425 per Kitto J (Dixon CJ, Taylor and Owen JJ agreeing); [1963] ALR 634; (1963) 37 ALJR 82; (1963) 1B IPR 523; (1963) 1A IPR 484; [1963] HCA 66; Johnson & Johnson Australia Pty Limited v Sterling Pharmaceuticals Pty Limited (1991) 30 FCR 326 at 348, per Gummow J; (1991) 101 ALR 700; (1991) 21 IPR 1; (1991) AIPC 90-823.
It is immaterial that the counterfeit G-Star garments did not make it past Customs. In Playboy Enterprises International Inc v You Tao Hong (2004) 63 IPR 533; (2004) AIPC 92-030; [2004] FCA 1205, Lindgren J said at [44]:
The single judge authorities and the texts to which I have referred consistently hold that to import goods bearing a sign for the purpose of sale or other commercial exploitation in the country in question, is to use that sign as a trade mark, notwithstanding that the goods have remained at the dock or the airport. This is so, even though in special circumstances such as those of Upmann v Forester, the result may appear harsh to the importer. It is for an appellate court to depart from a line of authority so well established.
There is no requirement under the Trade Marks Act 1995 to establish that the respondent had any particular knowledge or intention. The trade marks were affixed to the garments the respondent attempted to import without the authority of the second applicant. Consequently, the respondent infringed the G-Star trade marks numbered 722849, 722852, 980122 and 1301292.
Copyright infringement
In paragraph 10 of the amended statement of claim, the applicants claimed that G-Star International BV created copyright in trade marks 722852, 980122 and 883618. I have not found that the respondent attempted to import any products bearing the trade mark 883618. In oral submissions, counsel for the applicants referred to trade mark 980122 (Transcript page 11 line 38) as being the subject of copyright. However, I understand that was an error and counsel intended to refer to trade mark 980122. I have found that the respondent attempted to import garments bearing labels and tags with signs identical or substantially identical to the applicants’ trade marks 722852 and 980122.
By virtue of s.31(1)(b)(i) of the Copyright Act 1968, the second applicant, as owner of the copyright in the artistic works contained in the G-Star trade marks numbered 980122 and 722852, had the exclusive right to reproduce those works in material form. Pursuant to s.36 of the Copyright Act 1968, a person infringes another person’s copyright by reproducing without licence a work in which the first person holds copyright.
Section 37 of the Copyright Act 1968 provided that:
37. Infringement by importation for sale or hire
(1)Subject to Division 3, the copyright in a literary, dramatic, musical or artistic work is infringed by a person who, without the licence of the owner of the copyright, imports an article into Australia for the purpose of:
(a)selling, letting for hire, or by way of trade offering or exposing for sale or hire, the article;
(b) distributing the article:
(i) for the purpose of trade; or
(ii) for any other purpose to an extent that will affect prejudicially the owner of the copyright; or
(c) by way of trade exhibiting the article in public;
if the importer knew, or ought reasonably to have known, that the making of the article would, if the article had been made in Australia by the importer, have constituted an infringement of the copyright.
(2)In relation to an accessory to an article that is or includes a copy of a work, being a copy that was made without the licence of the owner of the copyright in the work in the country in which the copy was made, subsection (1) has effect as if the words “the importer knew, or ought reasonably to have known, that” were omitted.
The effect of s.37 of the Copyright Act 1968 was considered by Jessup J in Facton Ltd v Mish Mash Clothing Pty Ltd (2012) 94 IPR 523; [2012] FCA 22 as follows:
33.At trial, by which time it had become tolerably clear that the allegedly infringing labels had been imported by the respondents affixed to garments made in Turkey, the emphasis of the applicant’s case was upon s 37 of the Copyright Act…
Because each label was an “accessory” within the meaning of the Copyright Act, it was submitted on behalf of the applicants that s 37(1) applied as a matter of strict liability; that is to say, that, if the requirements of the subsection were otherwise satisfied, it was sufficient if the making of the article by the importer in Australia would have constituted an infringement of copyright.
34.As counsel for the applicants acknowledged, s 37 is not without its constructional difficulties. It is based upon an hypothesis that making an article in Australia may, in appropriate circumstances, constitute an infringement of copyright. In the case of an artistic work, that might be so because the work itself was something in the nature of an “article” that was “made”, or because the imported article was a three-dimensional reproduction of the original two-dimensional work (see s 21(3)(a)). The facts of the present case, however, do not fit either of those templates. Rather, the “articles” imported were the respondents’ garments with the labels sewn into them. The garments, as “made”, included the labels. To have made the garments in Australia, and to have sewn the labels on to them, would, on the applicants’ case, have amounted to an infringement of copyright, thereby activating s 37(1) in relation to the importation.
35.As mentioned above, the applicants then rely on s 37(2). Here again the terminology of the statute is not free of difficulty. It is said that subs (1) has effect “in relation to an accessory to an article” in a particular way. The problem is that subs (1) has effect in relation to the article as such. If we are talking about something less than the article, we are not, arguably, in the realm of subs (1) at all. But subs (2) must be given some work to do and, although strained to a degree, the most probable situation intended to be covered is one in which it is the presence of the accessory that would cause the making of the article, including (necessarily) the accessory, to constitute an infringement within the meaning of subs (1). On that construction, and subject to the issues to which I refer below, subs (2) would operate in the present case, and it would not be necessary to show that the importer knew or ought reasonably to have known that the making of the article in Australia by him or her would have constituted an infringement of copyright.
36.The next difficulty with the hypothesis by reference to which s 37(1) operates is that whether or not the making of an article in Australia constitutes an infringement of copyright depends on the circumstances of the making – ex hypothesi, an event which did not occur. Specifically, making an article will constitute an infringement only if it involves doing one of the things comprised in the copyright under s 31. In the present case, the applicants rely on subpara (i) of subs (1)(b) – reproduction in a material form. Coincidental creation of the same work will not amount to reproduction. So, whether the making of the imported article would have constituted an infringement of copyright would depend on whether, in so making the article, the importer would have reproduced (that is, copied) the work. Any respondent in a case such as the present is likely to assert that he or she would not have, since he or she would have done their work independently.
37.Counsel for the applicants told me that issues of this kind have not been encountered in the reported cases. He submitted that the most sensible construction to give to s 37(1) is one which would require one to assume the existence of the very facts that have been found to exist in the case at hand. That is to say, if the only difference is that the article was made in Australia by the importer rather than being made elsewhere, would the making of it have constituted an infringement of copyright? Counsel for the respondent did not resist the taking of such an approach; in any event, I consider that it is the only approach that gives a sensible operation to s 37(1) in relevant respects.
38.The labels set out in [7] and [9] above were copied, with verbal modifications, from the second of the “R-OBIN” labels set out in [5] above. So much is clear on the respondents’ own case. There is, however, no evidence as to how the “R-OBIN” label came into existence. As mentioned above, the respondents accepted that the applicants’ work was original, in the sense of not having been copied from another drawing. The applicants led evidence – not challenged by the respondents – that their products, labelled with the applicants’ marks, had been distributed and sold in Turkey. The similarities between the applicants’ work and the R-OBIN label are, in my view, so striking as to justify the inference, in the absence of evidence from the respondents, that the latter was copied from the former, either directly or by way of undisclosed intermediate drawings. If the respondents were to resist the drawing of that inference, it was, in my view, incumbent upon them to lead evidence that the R-OBIN label had been created independently of the applicants’ work. There was no such evidence; neither was there any explanation of why – for example, for logistical or practical reasons – such evidence could not be called. In the circumstances, I am the more confident in drawing the inference, which I do, that the R-OBIN label was copied, directly or indirectly, from the applicants’ work.
39.For the sake of completeness, I note that the respondents’ labels were not a precise copy of the applicants’ work, in the sense that the wording was different in a number of respects. On any view, however, what was copied was a substantial part of that work.
40.For the reasons given above, I would uphold the applicants’ case in copyright against the first respondent, as importer, under s 37 of the Copyright Act. It was an infringement for the first respondent to have imported the jeans referred to in [7] and [9] above; and, because of the presence on them of the label set out in [7], it was also an infringement to have imported the jeans referred to in [8].
Consequently, it is unnecessary for the applicants to prove that, if the labels and tags had been made in Australia, the respondent knew or ought reasonably to have known that the making of the labels and tags in Australia would have constituted an infringement of copyright. However, I accept that, in view of the fame of the G-Star brand, the respondent would have known that the making of the labels and tags in Australia would have constituted an infringement of copyright.
The garments, labels and tags that the respondent attempted to import bore reproductions of the G-Star trade marks numbered 980122 and 722852 without licence. The applicants submitted that the respondent’s attempted importations were in such quantities that they could only have been intended for sale.
The evidence of Mr Feder only shows that five garments in the shipment the subject of the first notice and one garment in the shipment the subject of the second notice had infringing labels. However, the first notice said that there had been seized:
1282 t-shirts bearing G-Star a (sic) sign that is substantially identical or deceptively similar to a trademark notified by Facton Ltd. Seized in New South Wales
It is conceivable, although very unlikely, that Customs would have happened to have photographed the only five garments in the shipment the subject of the first notice that had infringing labels and tags. However, it is much more likely that all 1282 of the garments in the shipment, which Customs said in its seizure notice bore the G-Star sign, had infringing labels and tags. That is consistent with the respondent agreeing to all 1282 of them being forfeited.
The second notice said that there had been seized:
540 x shirts bearing G Star Raw trademarks, a sign that is substantially identical or deceptively similar to a trademark notified by Facton Ltd.
The same conclusions can be drawn about the second shipment. Consequently, I am satisfied that the respondent imported for the purposes of sale the garments in the shipments the subject of both the first notice and the second notice with their infringing labels and tags. In so doing, the respondent breached s.37 of the Copyright Act 1968.
Passing off
A passing off claim is established where:
a)an applicant has a reputation in the get-up of his products;
b)the respondent misrepresents, by using the applicant’s get-up or a similar get-up, that the respondent’s products are the same as the applicant’s products or are licensed by the applicant; and
c)the misrepresentation causes damage.[2]
[2] ConagraInc v McCain Foods (Aust) Pty Ltd (1992) 33 FCR 302 per Gummow J at 356; (1992) 106 ALR 465; 91992) 23 IPR 193; (1992) AIPC 90-892; (1992) ASC 56-159; (1992) ATPR (Digest) 46-095; Consorzio del Prosciutto di Parma v Marks & Spencer plc [1991] RPC 351 at 368-9; (1989) 16 IPR 117; [1990] FSR 530; TGI Friday's Australia Pty Ltd v TGI Friday's Inc (1999) 45 IPR 43 at [25] per Wilcox, Kiefel and Emmett JJ; [1999] FCA 304
It is not necessary in a passing off claim to prove that any particular customer or potential customer was actually misled: Sydneywide v Red Bull 55 IPR 354 at [62] per Weinberg and Dowsett JJ; (2002) 234 FCR 549; [2002] FCAFC 157. Nor is it necessary to prove an intention to mislead: Sydneywide v Red Bull 55 IPR 354 at [62] per Weinberg and Dowsett JJ; BM Auto Sales Pty Ltd v Budget Rent A Car System Pty Ltd (1977) 51 ALJR 254 at 258 per Gibbs J; (1976) 12 ALR 363. Nor is it necessary to prove actual damage: Draper v Trist (1939) 56 RPC 429; [1939] 2 All ER 513.
However, there must be at least a threat of damage, as explained in Children’s Television Workshop Inc. v Woolworths (NSW) Ltd [1981] 1 NSWLR 273 at 281–2; (1980) 1B IPR 609; [1981] RPC 187 as follows:
Once it has been established, as I have held it has been established here, that there is a relevant business nexus between the activities of the plaintiffs and those of the defendants, such that the public will, by the very sale of the goods in question, wrongly believe that this activity is connected with the business of the plaintiffs, then I think it must follow that the legitimate business interests of the plaintiffs are jeopardized. Actual damage need not be proved; in fact in many passing off cases actual damage is never proved. It is the threat of damage to the complainant’s business by reason of the public confusion or deception that is the basis of the tort.
In the present case, I accept that there was the required business nexus between the applicants and the respondent because they operated in the fashion industry in Australia. The applicants have a substantial reputation in their get-up. The respondent used an identical or substantially identical get-up in the garments contained in the two shipments.
By attempting to import garments with the applicants’ get-up, there was a threat to the applicants’ business. That threat consisted of at least the possibility of the applicants losing sales as a result of people who wished to buy genuine G-Star products buying the respondent’s products instead. Consequently, the respondent committed the tort of passing off.
Misleading and deceptive conduct
Sections 18 and 29 of the Australian Consumer Law, which are in Schedule 2 of the Competition and Consumer Act 2010, relevantly provided:
18 Misleading or deceptive conduct
(1)A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
(2)Nothing in Part 3-1 (which is about unfair practices) limits by implication subsection (1).
29False or misleading representations about goods or services
(1)A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:
(a)make a false or misleading representation that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use; or
…
(g)make a false or misleading representation that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits…
Those sections also applied in New South Wales, where the relevant events occurred, under s.28 of the Fair Trading Act 1987 (NSW).
The interaction between a claim of passing off and a claim of false and misleading conduct was explained by the Full Court of the Federal Court in Vieright Pty Ltd v Myer Stores Ltd (1995) 31 IPR 361 at 373; (1995) AIPC 91-134; (1995) ATPR 41-405 as follows:
The settled course of authority holds that, as in the passing off claim, the essential question here is largely one of fact is, in all the circumstances, the respondent’s conduct likely to mislead? In the present kind of case, it will usually be the situation that if a passing off claim is established, it will be so by reason of a finding of a misrepresentation of the type discussed in the authorities. Such a misrepresentation will usually constitute a contravention of s 52, and possibly s 53 of the Trade Practices Act. Conversely, if no misrepresentation is found, it will usually follow that the Trade Practices Act claim will also fail.
To similar effect, Lindgren J said in Playboy:
13On the evidence, the trade marks are well known in Australia, and, indeed, are so well known that they have become in themselves marketable products of Playboy. I infer that Mr Hong intended, in selling the seized goods, to take advantage of the reputation of the trade marks.
14In selling the seized goods, Mr Hong would not only infringe the trade marks by using the signs on them as trade marks in relation to them (s 120): he would impliedly falsely represent that the seized goods, or he or his business, had one or other of several business associations with Playboy. In doing so, Mr Hong would, in trade or commerce, engage in misleading or deceptive conduct in contravention of s 42 of the Fair Trading Act. As well, he would pass off the seized goods as having a connection in trade with Playboy or its business, which of course, they do not have. Mr Hong has remained silent throughout in the face of the allegation that he imported for sale the seized goods bearing counterfeits of the trade marks, and he did not respond to Playboy’s request for undertakings. I infer that if he could he would sell the seized goods, and that, unless restrained, it is likely that he will again import similar “infringing goods” for sale. At least, quia timet injunctive relief should be granted against him.
It is not necessary to establish that the applicants suffered actual damage from the respondent’s misleading conduct. As there is no evidence that the respondent actually succeeded in importing any products that infringed the applicants’ trade marks and copyright, it is difficult to see how actual damage could have occurred in this case.
However, there was potential for damage to the applicants by loss of sales to customers who intended to buy genuine G-Star products, by G-Star products losing their exclusivity and by a loss of reputation through the respondent’s products bearing G-Star labels and tags being of inferior quality.
Mr Davies said in his affidavit that the respondent’s products were not manufactured from the same high quality materials the applicants used and were not manufactured with the same standard of workmanship the applicants used. That statement was based on Mr Davies’ examination of a few photographs, most of which show labels and tags and only a small part of the garments to which they are attached. Based on that limited evidence, I am not persuaded that the garments the respondent attempted to import were actually of inferior quality to the applicants’ garments.
In the present case, it is obvious that the respondent’s products could easily have been mistaken for the applicants’ because of the respondent’s unauthorised use of the G-Star trade marks numbered 980122 and 722852 and the probability that he was going to sell his products in commercial quantities. In the circumstances, there was a strong likelihood of misrepresentation and there was a likelihood of damage, if the respondent had succeeded in importing the products the subject of the first notice and the second notice.
Declarations
The applicants seek declarations that:
The Respondent has:
a.infringed the G-Star Trade Marks (as defined in paragraph 7 of the Amended Statement of Claim) in breach of section 120 of the Trade Marks Act 1995 (Cth) (Trade Marks Act); and
b.infringed the Copyright Works (as defined in paragraph 10 of the Amended Statement of Claim) in breach of section 37 of the Copyright Act 1968 (Cth) (Copyright Act).
The definition of the G-Star trade marks in paragraph 7 of the amended statement of claim includes 14 trade marks of which the first applicant is the registered owner. However, it was only claimed in this proceeding that the respondent had infringed five of them. Ultimately, I have found that the respondent infringed only four of the first applicant’s trade marks. It is appropriate that there be a declaration of infringement in respect only of those four trade marks.
Similarly, the copyright works are defined in paragraph 10 of the amended statement of claim to be the artistic works in the registered trade marks numbered 722852, 980122 and 883618. It is only in relation to the first two of those that I have found that the respondent infringed copyright. It is appropriate that there be a declaration only in respect of those two artistic works.
Injunctions
The applicants also seek injunctions as follows:
The Respondent whether by himself, his servants, employees, agents or otherwise howsoever be restrained, in trade or commerce from:
a.importing, manufacturing, marketing, advertising, promoting, supplying, exhibiting in public, offering for sale and selling any clothing or clothing accessories to which the G-Star Trade Marks and the Copyright Works have been affixed or applied without the knowledge, authority or licence of the Applicants (Counterfeit G-Star Products);
b.disposing or dealing with the Counterfeit G-Star Products in any other way than in accordance with order 3 below;
c.authorising, causing, procuring or inducing any person to do any act which would be an infringement of the injunction referred to in paragraphs (a) and (b) above;
d.representing that the Counterfeit G-Star Products are imported, manufactured, advertised, promoted, offered for sale or sold with the sponsorship or approval of the Applicants;
e.representing that the Counterfeit G-Star Products are the G-Star Products (as defined in paragraph 4 of the Claim);
f.representing that the Counterfeit G-Star Products emanate from the same trade source as the G-Star Products;
g.representing that the Counterfeit G-Star Products are made by the Applicants;
h.representing that the Counterfeit G-Star Products are licensed, authorised, sponsored, approved or endorsed by the Applicants; and
i.passing off:
i.his business as having the sponsorship, approval or a connection or affiliation in the course of trade with the Applicants and the G-Star Products; and
ii.the Counterfeit G-Star Products as and for the G-Star Products.
The injunctions sought would restrain the use of trade marks and the reproduction of copyright works that extend beyond the trade marks and copyright works that have been found to have been infringed in this case. That seems to me to be appropriate, in circumstances where the relevant trade marks and copyright works are all closely connected and are all clearly related to the G-Star brand.
Delivery up
The respondents also seek an order in the usual terms that the respondent deliver up to the applicants all the infringing product and related materials in his possession, custody or control. In all the circumstances of this case, that order is entirely appropriate.
Damages
The applicants are entitled to elect between an accounting of profits and damages for their trade mark and copyright claims. They have elected to seek both nominal damages and additional damages under s.126 of the Trade Marks Act 1995 and s.115 of the Copyright Act 1968.
Section 126 of the Trade Marks Act 1995 provides that:
(1) The relief that a court may grant in an action for an infringement of a registered trade mark includes:
(a) an injunction, which may be granted subject to any condition that the court thinks fit; and
(b) at the option of the plaintiff but subject to section 127, damages or an account of profits.
(2) A court may include an additional amount in an assessment of damages for an infringement of a registered trade mark, if the court considers it appropriate to do so having regard to:
(a) the flagrancy of the infringement; and
(b) the need to deter similar infringements of registered trade marks; and
(c) the conduct of the party that infringed the registered trade mark that occurred:
(i)after the act constituting the infringement; or
(ii)after that party was informed that it had allegedly infringed the registered trade mark; and
(d) any benefit shown to have accrued to that party because of the infringement; and
(e) all other relevant matters.
Subsection 115(4) of the Copyright Act 1968 provides that:
(4)Where, in an action under this section:
(a)an infringement of copyright is established; and
(b)the court is satisfied that it is proper to do so, having regard to:
(i)the flagrancy of the infringement; and
(ia)the need to deter similar infringements of copyright; and
(ib)the conduct of the defendant after the act constituting the infringement or, if relevant, after the defendant was informed that the defendant had allegedly infringed the plaintiff's copyright; and
(ii)whether the infringement involved the conversion of a work or other subject-matter from hardcopy or analog form into a digital or other electronic machine-readable form; and
(iii)any benefit shown to have accrued to the defendant by reason of the infringement; and
(iv)all other relevant matters;
the court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances.
The applicants seek an order for nominal damages of $1.00 pursuant to s.126 of the Trade Marks Act 1995 and s.115(2) of the Copyright Act 1968. In all the circumstances of this case, that order seems to me to be entirely appropriate.
The applicants also seek additional damages of $150,000 for the respondent’s trade mark and copyright infringements. The applicants accept that their trade mark and copyright claims are co-extensive and they do not seek to “double dip”.
In the present case:
a)the infringements were flagrant;
b)there is a need to deter similar infringements, both by the present respondent and other potential infringers;
c)the respondent readily conceded the forfeiture of the infringing garments but he did not co-operate with the applicants by providing the usual undertakings and delivery up; and
d)there is no evidence that the respondent gained anything from the infringements that have been established in this case, which relate to the first notice and the second notice; and
e)the possibility that he may have engaged in other similar conduct at other times is speculative and should not be taken into account.
Burchett J said in Autodesk v Yee (1996) 68 FCR 391 at 394; (1996) 139 ALR 735; (1996) 35 IPR 415; (1996) AIPC 91-274:
An element of penalty is an accepted feature of copyright legislation. The infringer has been regarded, at least since the 18th century, as a “pirate”, who ought to be treated accordingly.
In the Full Court of the Federal Court’s decision in Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd, (2007) 157 FCR 564 Rares J said at [116]; (2007) 239 ALR 702; (2007) 71 IPR 437; (2007) AIPC 92-257; [2007] FCAFC 40;
There is a need to deter and punish those who act or seek to act as Vidtech and Mr Parry were proved to have done. … One of the important purposes served by the power to award additional damages granted in s 115(3)(b) is that market practices of the kind engaged in by Vidtech and Mr Parry can be firmly discouraged. In a case like the present where precision of assessment of damage or profit is impossible but substantial, deliberate and flagrant infringement has been proved, a substantial sum of additional damages should be awarded.
In the Full Court of the Federal Court’s decision in Raben Footwear v Polygram Records (1997) 75 FCR 88 at 104; (1997) 145 ALR 1; (1997) 37 IPR 417; (1997) AIPC 91-324, Tamberlin J said that the broad general discretion in s 115(4) of the Copyright Act1968 should not be fettered in any arithmetic or mechanical way.
In Microsoft Corporation v Ezy Loans Pty Ltd (2004) 63 IPR 54 at [95]; (2004) AIPC 92-028; [2004] FCA 1135, Stone J said:
It is important to more than the applicants that copyright infringers are not encouraged to think that by ignoring court proceedings they can escape the consequences of calculated infringement of the rights of others in the pursuit of profits.
In XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448 at 471; (1985) 57 ALR 639; (1985) 59 ALJR 352; (1985) Aust Torts Reports 80-317; [1985] HCA 12, Brennan J said:
As an award of exemplary damages is intended to punish the defendant for conduct showing a conscious and contumelious disregard for the plaintiff's rights and to deter him from committing like conduct again, the considerations that enter into the assessment of exemplary damages are quite different from the considerations that govern the assessment of compensatory damages. There is no necessary proportionality between the assessment of the two categories. In Merest v. Harvey (1814) 5 Taunt 442 (128 ER 761) substantial exemplary damages were awarded for a trespass of a high-handed kind which occasioned minimal damage, Gibbs C.J. saying:
“I wish to know, in a case where a man disregards every principle which actuates the conduct of gentlemen, what is to restrain him except large damages?”
The social purpose to be served by an award of exemplary damages is, as Lord Diplock said in Broome v. Cassell & Co [1972] A.C. at p. 1130, “to teach a wrong-doer that tort does not pay.”
In Sanders v Snell (1997) 73 FCR 569 at 597; (1997) 143 ALR 426; (1997) Aust Torts Reports 81-425, Wilcox, O’Loughlin and Lindgren JJ said that exemplary damages:
...can apply only where the conduct of the defendant merits punishment, which is only considered to be so where his conduct is wanton, as where it discloses fraud, malice, violence, cruelty, insolence or the like; or as it is sometimes put, where he acts in contumelious disregard of the plaintiff's rights.
The applicants argued that $150,000 was an appropriate figure for exemplary damages in this case because:
a)the respondent imported infringing goods after the goods the subject of the first notice were seized and forfeited;
b)it can be assumed that he imported infringing products on other occasions as well;
c)the respondent filed an affidavit of documents that made the incredible claim that he had no documents in his possession, custody or control that related to the issues in dispute in this matter;
d)consequently, it can be assumed that he is trying to hide the true extent of the number of infringing importations he has made;
e)it is likely that the applicant has offered for sale and sold counterfeit G-Star products without the knowledge of the applicants;
f)the respondent’s infringements were flagrant, in the sense of deliberate, deceitful, serious, and with a calculated disregard for the applicants’ rights in a cynical pursuit of benefit;
g)there is a need for general deterrence.
I do not give significant weight to assertions b, d, and e. Those assertions are speculative. I accept that there are substantial grounds for suspecting each of those assertions. However, the evidence falls far short of being sufficient to satisfy the balance of probabilities test.
I also do not give any weight to assertion c. There is no record on the court file of an affidavit of documents filed by the respondent.
The applicants have referred the court to a number of cases in which they have succeeded in obtaining awards of additional damages. I have looked at all of them. The awards of additional damages have ranged from $15,000 to $100,000. Obviously, each case is different, and each case turns on its own facts. Moreover, there is a discretion that is to be freely though judicially exercised in each case. Having said that, it is proper that like cases be determined in a like manner.
Most of the awards of additional damages obtained by the applicants have been of about $30,000. The award of $100,000 was made in the matter of TM25 Holding BV v Redac International Pty Ltd [2016] FCCA 113. That case concerned breaches of copyright in garments that were described as being of such good quality that the infringers could have expected to receive a substantial profit. Additionally, the infringer was a corporation. In the present case, there was no evidence that the garments to which the infringing labels were affixed were of particularly good quality. Moreover, the infringer is not a corporation.
As additional damages are intended to be punitive, it would be appropriate to take into account the respondent’s financial circumstances. However, he has not given the court any information in this regard.
Taking into account all of the circumstances of this case, I consider that an award of additional damages of $30,000 would be proper. It seems to me that such a sum gives adequate weight to:
a)the respondent being a natural person, as opposed to a corporation;
b)the respondent’s flagrancy;
c)his established infringements on two occasions;
d)the size of the two attempted importations;
e)the respondent’s co-operation in facilitating forfeiture on two occasions;
f)his failure to co-operate with the applicant by giving the usual undertakings and delivery up;
g)his failure to make appropriate admissions in this case or otherwise facilitate its resolution; and
h)the need for specific and general deterrence.
Confidential exhibits
The applicants also seek an order that:
Until further order, publication or disclosure of the annexures to the affidavit of Alastair Davies made on 11 March 2016 filed in this proceeding described as confidential annexures “AD-9”, “AD-10”, “AD-11”, “AD-12”, “AD-13” and “AD-17” is prohibited pursuant to sections 88F and 88G of the Federal Court Circuit of Australia Act 1999.
Those exhibits contain information of a commercially sensitive nature. I am satisfied that it is appropriate to make the order sought.
Costs
The applicants asked to be able to make submissions on costs after judgment. I am satisfied that it is appropriate for the question of costs to be considered separately.
I certify that the preceding ninety-four (94) paragraphs are a true copy of the reasons for judgment of Judge Riley
Date: 23 August 2016
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