Toy Traders Pty Limited v TM Nominees Pty Limited

[1996] FCA 1153

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
NEW SOUTH WALES DISTRICT REGISTRY  )     No NG870 of 1996
  )
GENERAL DIVISION                  )

BETWEEN:TOY TRADERS PTY LIMITED

Applicant

AND:T M NOMINEES PTY LIMITED

Respondent

CORAM:    HILL J
PLACE:    SYDNEY
DATED:    13 NOVEMBER 1996

REASONS FOR JUDGMENT

On 5 November 1996 proceedings were commenced in this Court by the applicant, Toy Traders Pty Ltd ("Toy Traders"), against TM Nominees Pty Ltd, the respondent, which company trades as Southern Model Supplies ("Southern Model") seeking declaratory and injunctive relief in respect of a toy product marketed under the name "Super Loop Thriller".

In the application, Toy Traders claimed interlocutory relief and that application came before me on 7 November as duty judge.  The time available to deal with that matter on that day was short.  I put to counsel for Southern Model whether he had any defence to that part of Toy Traders' claim as related to trade marks and patents.  To that he replied that he did not.

It was in those circumstances that I granted, on the usual undertaking of Toy Traders, an interlocutory injunction restraining Southern Model from making certain representations in respect of certain trade names or claims to patent protection.  Because counsel for Southern Model had not had a great deal of time to consider the matter, I reserved liberty to apply for the vacation of the orders I had made on the giving of two business days' notice.  The matter comes before me today pursuant to that liberty to apply.

Essentially Toy Traders' claims that Southern Model are in breach of s52 of the Trade Practices Act 1974 (Cth) ("the Act") in three respects.  The first concerns the get up of the packaging in which the Super Loop Thriller product is packaged.  It is said that the package is deceptively similar to the package in which Toy Traders' competing product is packaged; that product being known as "Thunder Loop Thriller".
         The second basis for interlocutory relief is said to arise from the use of the initials "TM" after three names that appear on the package, those names being "Fast Trackers", "Dura-Lock" and "Life-Like Racing" with a logo.  The submission is that the initials "TM" after these names would be likely to lead a consumer to the conclusion that the names were the subject of registered trade marks, protected under the Trade Marks Act 1995. No such registration exists with the consequence, it was said, that the use of the initials "TM" was misleading and deceptive and in breach of s52 of the Act.

The third matter raised by the Toy Traders is the use on three occasions on the package of the word "patented". For example, it is said that the package contains two cars "with patented `downforce control'...".  This statement is alleged to imply that the cars are the subject of patent protection in Australia.  The evidence is that no such patent protection exists, although there is a patent extant in the United States of America, the registered owner of which is a company from whom Southern Model has a licence.

The tests to be applied in granting interlocutory relief are well known and not the subject of dispute, namely, that an applicant for interlocutory relief has an arguable case and that the balance of convenience warrants the grant of relief.  The case of course must also be one where damages would not be an adequate remedy or relief would not be denied on discretionary grounds.  It is not suggested here that damages would be an appropriate remedy in the circumstances.

As has been pointed out in a number of cases, including Trade Practices Commission v Santos Limited (1992) 38 FCR 382, there is a relationship between the requirement of arguable case on the one hand and balance of convenience on the other. If an applicant has a very strong case on the merits, the importance of showing the balance of convenience will be less. Where the applicant's case on the merits is weak, the importance of the balance of convenience will be greater.

Another matter that must be factored into the equation when determining whether interlocutory relief by way of injunction will be granted, is the proffering of an undertaking by a respondent.  In the present case Southern Model has proffered undertakings in essence not to sell, distribute or deal with the product in its present form of packaging, to the extent that the product is still in its possession, and to affix a notice of an appropriate kind to products owned by it but in the possession of retailers, pointing out that no registered trade mark exists for the various names appearing on the package and that no patent protection has been granted in Australia in respect of the product.

It should, however, be said that it is not the preferred position of Southern Model that an undertaking be given.  It says in the circumstances that it is entitled to have the injunction lifted for reasons which I will come to.

Southern Model filed a considerable body of evidence in support of its motion to have the injunction lifted.  Of particular relevance was an affidavit of considerable significance to the case of Southern Model.  It was an affidavit that was sought to be read sworn by Mr Catt, a patent attorney in Adelaide, who sought to say that, from his experience, the initials "TM" after a name did not denote a registered trade mark but rather an unregistered one.

He said also that in his opinion and in his experience as a patent attorney:

"...it is common practice to describe a product or a design as being patented where that product or design has not been patented within Australia but has been patented at its source."

In this case the "source" is the United States of America.  I allowed the affidavit to be read, at least a substantial part of it, over the objection of Southern Model, but in so doing, reserved for final consideration the relevance of Mr Catt's evidence.  As I indicated in the course of argument it is my view that Mr Catt's evidence, whether or not technically admissible, is of virtually no relevance in the proceedings.

The question is not whether a patent attorney might or might not be deceived by the references to trade marks or patents, or even whether there is some common understanding of the meaning of these expressions among patent attorneys or their clients. The question is, whether the persons to whom the particular product are intended to come, and that is to say consumers, be they young or old, learned in the law of patents or not, would, when seeing the initials "TM", be led to believe or be likely to be led to believe that those letters indicated that the various names in question were registered trade marks.

Similarly, in relation to the references to patents, the question is whether those references convey or would be likely to convey to such persons the implication that the product or designs were the subject of patent protection in Australia, irrespective of whether that protection might exist in some other country.  I should say of course that in Australia patent protection is not available for designs, but that is a matter of perhaps little significance.

In my view, Toy Traders has in respect of the references to trade marks and patents, a very strong case and it is not to the point to say, as counsel for Southern Model said, that there is no evidence before me to the effect that consumers of the product are or are likely to be misled or deceived by the use of these initials or the word "patented".  In my view a consumer is likely to be led to conclude from the initials "TM", even without those initials appearing in a circle, that the mark appearing immediately before them is a mark which has the full force of trade mark protection in Australia and is the subject of trade mark registration.

It is, in my view, very likely that a consumer, particularly seeing "TM" next to a logo with the words "life-like racing" under it, would be led to believe that registration of that logo and those words was obtained under the Trade Marks Act.  I do not think a consumer would for a moment believe that the initials "TM" meant no more than that the manufacturer or vendor of the product was using the logo and words as a common law trade mark, if indeed it were possible for those words with or without that logo to become the subject of a common law trade mark entitled to protection in a passing off suit.

If anything I think the case is even clearer with respect to the word "patented".  In my view a consumer faced with the word "patented" on a carton would readily conclude that patent protection of the product itself or some process of manufacture was the subject of patent protection in Australia.  It seems highly unlikely to me that a person who was considering whether to buy the product would form the view that such patent protection as there was existed in some place where the product was initially invented, which could be anywhere in the world.

The balance of convenience, if considered as a matter on its own, clearly favours Southern Model.  I am conscious of the fact that it is now November and that the peak retail season for selling toys is the next few weeks.  I am conscious also that Southern Model has sent on consignment its products to various retailers on the basis that title would not pass in the products to the retailers unless and until payment is made.  To restrain Toy Traders from selling in this peak period is clearly an undesirable step to take, if there be some other way of dealing with the matter.

I should indicate that Southern Model, through their counsel has at all times proffered an undertaking as well to keep accounts of sales.  Toy Traders' case in respect of the general getup of the carton and the similarities of the name "Thriller", the illustration of the products and so on, in my view, is not particularly strong at all.  The matter is, of course, one of impression, but even on a prima facie basis, I think it unlikely that a member of the public would be confused into believing that the two products were the same or, for that matter, were manufactured by the same company.

I therefore do not need to consider, nor would I, at an interlocutory stage, a suggestion made in the evidence that Toy Traders changed its packaging after Southern Model had introduced its product to the market.

Counsel for Southern Model submitted, first, that an injunction was inappropriate, for it had no work to do, because the references to trade marks did not represent trade mark registration and the references to patents did not represent Australian patent protection.  Secondly, it was submitted that there was no evidence that anyone looking at the cartons would be misled.  Thirdly, it was said that I should take into account the effect of injunctive relief upon commerce generally on the one hand and upon third parties, ie retailers who might be affected, on the other hand.  I should say that there is no evidence, other than the method of sale by Southern Model, to suggest that third parties would be in any way affected by the grant of injunctive relief.

On the part of Toy Traders, it was submitted that the case was a strong one, that it was clear that representations concerning registration of patents and inferentially of trade marks could constitute a breach of s52. Reference was made to the decisions of Lockhart J in Skedeleski v Underwood (1990) 17 IPR 161 at 173 and of Burchett J in Elconnex Pty Limited v Gerard Industries (1991) 22 IPR 551. I should say that I have no doubt that a representation that a patent exists where none does is a clear breach of s52, as those cases demonstrate. The present is not quite as extreme as that, in that there is patent protection, it would seem, although that patent protection is in the United States. Nevertheless, as I have already indicated, I think Toy Traders has a very strong case.

Then it is said that the evidence suggests that Southern Model has, since the granting of the injunction, acted contemptuously.  The reference is made to a particular retailer, Harris Scarfe Limited, having been told that there was no need to do anything about current packaging because the Court orders "were being overturned".

Toy Traders submits also that I should take into account, as a matter of discretion adverse to the case of Southern Model, that the references to trade marks and patents on the package are deliberate representations, not representations that are accidental.  I make no finding in respect of the deliberateness of the use of these expressions on the package.  It suffices to say that while one must assume that the use of the initials "TM" or the word "patented" was deliberate, it does not follow from that that Southern Model necessarily intended to engage in conduct that was misleading or deceptive.  It may be, and the evidence does not permit of a conclusion one way or another, that Toy Traders received advice from its patent attorney along the lines of the information contained in Mr Catt's affidavit.  Ultimately, the matter is one of balancing the various factors.  In doing that I would point out that the Court is not acting in a way to prefer one manufacturer or wholesaler to another.

The jurisdiction of the Court is a jurisdiction primarily aimed at protecting the public. The obvious purpose of s52 of the Act is to ensure that the public is protected against conduct which is misleading or deceptive or likely to mislead or deceive. While it is undoubtedly clear law that the provisions of s52 may be used by one competitor against another, that is only because a competitor will have standing and may be vitally concerned to ensure that the competition that exists between it and Southern Model is fair and that Southern Model is not acting in a way which is in breach of the standard of conduct which s52 lays down.

In the circumstances, I am of the view that I should dissolve the injunction upon undertakings being given by Southern Model in the following form, these undertakings being in addition to the undertaking earlier proffered by Southern Model to keep accounts.  The undertakings which I would accept are as follows:

1.Southern Model undertakes until further order in respect of any of the "Aussie Super Loop Thriller" sets in the possession of Southern Model by itself its servants or agents not to sell distribute or otherwise deal with the "Aussie Super Loop Thriller" as contained in exhibit 2 in the proceedings in the present form of packaging or get up in which the markings "TM" or the word "patented" appear.

2.Southern Model will ensure in respect of goods owned by it but in the possession of retailers that there will be affixed a notice in the form which is detailed below, which notice shall be firmly stapled or otherwise securely attached to the front of all the sets of the "Aussie Super Loop Thriller" contained in exhibit 2 in these proceedings.  The notice will be typed or printed on stationary no smaller than one half of an A4 size page and shall be in prominent type and read as follows:  "Important notice to purchasers.  On the carton containing your Aussie Super Loop Thriller the letters "TM" appear after the words "Fast Trackers", "Dura-Lock", and "Life-Like Racing".  This may suggest that these names are registered trade marks in Australia.  However, none of these names is so registered.  In addition, there are references to items, designs or systems said to be patented.  No patent has been granted in Australia in respect of the product or any process associated with the product."

I note the continued application of the undertaking given by Toy Traders as to damages.

There arises then the question of costs.  Toy Traders has been substantially unsuccessful in the proceedings which have taken all day and in respect of which considerable time has been taken in obtaining undertakings which have been critical to the ultimate decision to dissolve the injunction.  On the part of Southern Model it is submitted that the costs should follow the cause.  I do not think that the present proceedings should really be approached on the basis that this, is as it were, a "second bite of the cherry" following the initial hearing on 7 November.  I say this because, as I have already indicated, there was little time to deal with the matter on that day and to some extent at least counsel on that day had not had full instructions.  It is certainly true that some time has been lost in obtaining instructions about undertakings.  This has undoubtedly prolonged the hearing today from what might have taken half a day to a full day.  In the circumstances I would order that the costs of the application to dissolve the injunction including the costs of half a day be costs in the cause but that Southern Model pay Toy Traders' costs of half a day.

I note the undertaking as to the keeping of records proffered by counsel for Southern Model in the form which I have initialled and dated and which will be placed with the papers.

I certify that this and the
preceding twelve (12) pages
are a true copy of the Reasons
for Judgment herein of his Honour
Justice Hill.

Associate:

Date: 

Counsel and SolicitorsD E Grieve QC instructed by

for Applicant:Johnathan Hassett

Counsel and SolicitorsM Cashion instructed by

for Respondent:Henry Davies York

Date of Hearing:13 November 1996

Date Judgment Delivered:13 November 1996