Vertical Leisure Limited v Auz Origin Pty Ltd
[2016] FCCA 2372
•25 October 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| VERTICAL LEISURE LIMITED & ANOR v AUZ ORIGIN PTY LTD & ANOR | [2016] FCCA 2372 |
| Catchwords: COPYRIGHT – Liability for breach. PASSING OFF – False representations as to the manufacture of goods or the business marketing them. TRADE MARKS – Liability for breach. |
| Legislation: Competition and Consumer Act 2010 (Cth), ss.18, 29 |
| Cases cited: Vertical Leisure Limited & Anor v Skyrunner Pty Ltd & Anor [2014] FCCA 2033 |
| First Applicant: | VERTICAL LEISURE LIMITED |
| Second Applicant: | DANCE4ME PTY LIMITED |
| First Respondent: | AUZ ORIGIN PTY LTD |
| Second Respondent: | BILL CHEN ALSO KNOWN AS HUIRONG CHEN |
| File Number: | SYG 2189 of 2015 |
| Judgment of: | Judge Driver |
| Hearing dates: | 6-9 September 2016 |
| Delivered at: | Sydney |
| Delivered on: | 25 October 2016 |
REPRESENTATION
| Counsel for the Applicants: | Mr G Johnson |
| Solicitors for the Applicants: | Gestalt Law |
| Counsel for the Respondents: | Mr W K Soon |
| Solicitors for the Respondents: | Jackson & Associates |
ORDERS
The respondents, whether by themselves, their servants, directors, officers, agents or otherwise howsoever, be restrained from using the trade mark number 11341515 (the X-POLE Logo as defined in the statement of claim) by using in any manner signs that are substantially identical with, or deceptively similar to, the X-Polo Logo in the course of trade on or in relation to:
a)the X-Pole branded poles for dancing and exercise; and
b)any goods or services of the same description as, or closely related to the X-Pole branded poles for dancing and exercise, including but not limited to the "X-Dance Pole".
The respondents, whether by themselves, their servants, directors, officers, agents or otherwise howsoever, be restrained from:
(a)selling or by way of trade offering or exposing for sale;
(b)by way of trade exhibiting in public;
articles bearing or consisting of reproductions of the Copyright Works comprising the X-Pole Logo, X-Pole Instruction Manual Artwork, X-Pole Brochure Parts Photographs and Jamilla Deville Photograph (all as defined in the statement of claim) and the Cinematograph Film comprising the X-Pole Instructional DVD (as defined in the statement of claim), without the license or authority of the applicants, or otherwise procuring or inducing any other person to do any of the acts specified in this order.
The respondents, whether by themselves, their servants, directors, officers, agents or otherwise, be restrained from engaging in conduct that is likely to lead consumers into the false belief that:
c)the respondents' goods are manufactured by or under the authority of the applicants;
d)the respondents' goods have the sponsorship or approval of the applicants;
e)the respondents have the sponsorship or approval of the applicants by engaging in the conduct referred to in paragraphs 104, 105 and 126 of the statement of claim of the first respondent (formerly the second respondent) (Auz Origin) or paragraphs 53, 74, 106 and 128 of the statement of claim of the second respondent (formerly the third respondent) (Mr Chen).
The respondents whether by themselves, their servants, directors, officers or agents or otherwise be restrained from passing off or threatening to pass off:
(a)their goods and services as and for the applicants' goods or goods which are manufactured by or under the authority of the applicant; and
(b)their business as being that of the applicants by engaging in the conduct referred to in paragraph 130 of the statement of claim (Auz Origin) and paragraph 132 of the statement of claim (Mr Chen).
The respondents deliver up on oath to the applicants or their authorised agents for destruction under supervision all goods in the possession, power, custody or control of the respondents, or their servants, its directors, officers or agents, to which the Copyright Works or the Cinematograph Film referred to in order 2 above or a substantial part of them, have been applied without the licence or authority of the applicants.
The respondents deliver up on oath to the applicants, or their duly authorised agents, for destruction all goods, signs, posters, branding, promotional and advertising material, catalogues, brochures, DVDs, instruction manuals and other documents and any other materials in the possession, power, custody or control of the respondents or their servants, directors, officers or agents, bearing the X-Pole Logo or any names, words or marks deceptively or misleadingly similar to it to which they have been applied without the authority of the applicants.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 2189 of 2015
| VERTICAL LEISURE LIMITED |
First Applicant
| DANCE4ME PTY LIMITED |
Second Applicant
And
| AUZ ORIGIN PTY LTD |
First Respondent (formerly Second Respondent)
| BILL CHEN ALSO KNOWN AS HUIRONG CHEN |
Second Respondent (formerly Third Respondent)
REASONS FOR JUDGMENT
Introduction and background
On 5 September 2014 I gave judgment in favour of the applicants in Vertical Leisure Limited & Anor v Skyrunner Pty Ltd & Anor[1] (Skyrunner). The two respondents in that proceeding, including one of the present respondents, Mr Huirong Chen, also known as Bill Chen (Mr Chen) did not participate in that case and default judgment was given on an undefended basis. The two applicants in the Skyrunner proceedings are also the applicants in the present proceeding. The present case was commenced by application filed on 6 August 2015 because of continuing alleged infringements by the respondents, of whom the only common respondent is Mr Chen.
[1] [2014] FCCA 2033
The present proceeding was initiated against five respondents but was discontinued against the original first respondent (Aus-Sino Pacific International Pty Ltd ACN 141 607 301) as it had been deregistered. Proceedings were also discontinued against the original fourth respondent, Xiao Wen Zhou, on the basis of a settlement. At the time of the trial of this matter, a settlement was also anticipated with the original fifth respondent, Bihong Chen and the Court was advised on 29 September 2016 that the matter would be resolved as against her prior to judgment. On 24 October 2016 the parties advised the Court that consent orders would be sought dismissing the proceedings against Ms Chen. The remaining respondents are Auz Origin Pty Ltd ACN 163 638 640 (Auz Origin) and Mr Chen. For clarity and simplicity, I have removed as respondents those against whom proceedings have been discontinued or dismissed and have re-numbered the remaining respondents.
The applicants sell in Australia poles used for pole dancing known by the name X-Pole. They claim to be the market leaders, both internationally and in Australia. The respondents are alleged to have persistently and flagrantly sold inferior copies of the applicants’ products, damaging their reputation by passing off the inferior copies as the applicants’ products, placing consumers at risk of injury through misleading and deceptive conduct and flagrantly and persistently breaching the copyright and trademarks of the applicants. This conduct, in particular allegedly at the instigation of Mr Chen, is alleged to have continued notwithstanding this Court’s earlier judgment in the Skyrunner proceeding.
The respondents admit many of the facts alleged against them in respect of the acts done but do not admit the legal consequences of those acts. Other allegations were either not admitted or not pleaded to.
The pleadings, evidence and submissions
The applicants rely upon their application filed on 6 August 2015 and their statement of claim filed on the same day. The following affidavits were read by the applicants:
a)two affidavits by Lance Newman Scott made on 21 January 2016 and 2 September 2016;
b)the affidavit of Jason Green made on 6 August 2015;
c)the affidavit of Anthony William White made on 26 November 2014;
d)four affidavits by Jessica Dummett made on 6 August 2015 (to which was exhibited a folder of documents), 21 February 2016 (with annexures), 14 August 2016 (with annexures) and 2 September 2016 (with annexures).
I also received the following documents and things tendered at the trial of the matter on behalf of the applicants:
·A1 – Pole, CD and instruction manual purchased from – Pole, CD and instruction manual purchased from Auz Origin;
·A3 – X-Pole, CD, instruction manual and pamphlet;
The respondents rely upon their responses filed on 22 February 2016 and their defences filed on the same day. They read the affidavit of Mr Chen made on 23 August 2016 (with annexures).
Only Ms Dummett and Mr Chen were required for cross-examination. The representatives of the parties made oral submissions at the trial of the matter on 9 September 2016.
Consideration
The issue to be presently determined is one of liability. There are potential issues of damages and contempt (because of the earlier proceedings) which will only arise if liability is established. For the reasons which follow, I am satisfied that liability has been established. It is not seriously in question that the applicants’ intellectual property and other rights have been infringed through the importation from China (where the goods were manufactured) and sale in Australia of inferior dancing poles which were represented to consumers as similar to (or the same as) X-Poles. The main question to resolve is the liability of the respondents for those infringements.
The evidence given by Ms Dummett establishes the applicants’ case. In her first affidavit Ms Dummett deposes as to the intellectual property held by the applicants, the Skyrunner proceedings, internet and other searches she carried out, the impact of the importation and sale of superficially similar but inferior dancing poles and the relationship between Skyrunner and the respondents. In her second affidavit Ms Dummett gives further evidence about the respondents and the promotion of their goods online as well as financial records obtained under subpoena and continuing infringing sales. In her third affidavit Ms Dummett deposes as to her authorship of one of the literary works used by the respondents and the assignment of copyright in other works to Vertical Leisure. In her final affidavit Ms Dummett deposes as to her search of Australian Securities Investment Commission records about the respondents and information obtained by the applicants on subpoena from financial institutions and the Australian Customs Service, property searches she has carried out and trap purchases she has made.
Under cross-examination, Ms Dummett was a most impressive witness. She has a detailed understanding of the businesses of both the applicants and the respondents. She was able to demonstrate how the respondents’ products are inferior to those of the applicants, although marketed as equivalent to them. She is not an engineer but was able to demonstrate the features of the applicants’ poles that were absent or non functional on the respondents’ poles. I accept her evidence.
The trademark claim
The applicants are and were at all material times the registered co‑owners of Australian registered trademark number 1134515 for the word “X-Pole” in respect of a Class 28 Good, namely a “pole for dancing, exercise” (the X-Pole logo). Vertical Leisure manufactures X-Poles and Dance4me exclusively distributes X-Poles in Australia for sale. X-Poles have developed a market presence and reputation in this country. X-Poles are sold over the internet and by authorised retailers and other authorised intermediaries (for example, fitness centres and pole dancing schools). The evidence of Ms Dummett establishes that the applicants have acquired a substantial and valuable reputation with the wholesale and retail traders and the general public for X-Poles and the X-Pole logo. The name “X-Pole” is distinctive and associated with the applicants’ products even without the associated artwork.
In oral argument counsel for the respondents sought to raise a defence based on s.123 of the Trade Marks Act 1995 (Cth) (Trade Marks Act). I reject that contention. First, the defence was not pleaded by the respondents. Secondly, no evidence was advanced to support it.
The copyright claim
Vertical Leisure is the owner of copyright in the X-Pole logo as an original artistic work. Dance4me is the copyright owner of the text of “frequently asked questions” published on its website as an original literary work. Vertical Leisure is the owner of copyright subsisting in photographs of diagrams appearing in an instruction manual for the X-Poles. Vertical Leisure is also the owner of copyright in photographs of X-Pole parts appearing in brochures as artistic works. Dance4me is the owner of copyright subsisting in a photograph of Ms Jamilla Deville on the front cover of an X-Pole brochure as an original artistic work. Vertical Leisure is the owner of copyright subsisting in an original cinematograph film being an instructional digital video disc for the X-Pole.
Infringements
I accept that from a date unknown, but at least since around the end of October 2014, the now deregistered Aus-Sino Pacific promoted and advertised for sale dance and exercise poles on the website Promotional material on that website included the words “x-pole” and “X-POLE Sport”. The artwork associated with those words was not reproduced. However, given the market prominence of the X-Pole, the use of the words themselves constitutes a use substantially identical with, or deceptively similar to the registered trademark. I reject the respondents’ submissions to the contrary.
The evidence of Ms Dummett establishes that the infringing conduct of Aus-Sino Pacific was also carried on by Auz Origin using a similar process of internet promotion either directly or through an individual called “Jenny”, who, as became apparent at the hearing, was either an employee of Auz Origin or had a close working relationship with it as an independent contractor.
The applicants made a trap purchase around 29 October 2014 of a dance and exercise pole which had been advertised on by Aus-Sino Pacific. That pole was accompanied by an instruction manual and an instructional DVD. Both the manual and the DVD infringed the applicants’ copyright as described above. The DVD in particular was a direct copy of an X-Pole instructional DVD.
The similar infringing conduct was engaged in by or on behalf of Auz Origin from around 18 January 2013 in respect of advertisements on and from around October 2014 by Auz Origin on The latter infringements are verified by a trap purchase made on or about 28 October 2014 of a dance and exercise pole which had been advertised on This conduct, as well as involving breaches of the Trademarks Act and the Copyright Act also involved infringements of the Australian Consumer Law in a manner described below.
I also accept that since the end of October 2014, both Aus-Sino Pacific and Auz Origin promoted for sale goods having the same description as the X-Pole by reference to the words in the X-Pole logo. I see no significance in the fact that the variation x_pole was sometimes employed. I also accept that that company reproduced or communicated copyright material comprised in the X-Pole logo to the public. Neither Aus-Sino Pacific nor Auz Origin held a licence from Vertical Leisure. This constituted an infringement of Vertical Leisure’s copyright in the X‑Pole logo within the meaning of s.36 of the Copyright Act 1968 (Cth) (Copyright Act).
Further, since around the end of October 2014, Aus-Sino Pacific and also Auz Origin has exposed for sale, sold, distributed for the purposes of trade, a copy or a substantial part of the X-Pole instructional manual artwork, the X-Pole brochure, photographs and the X-Pole instructional DVD, again without the licence of Vertical Leisure.
The making of the relevant articles constituted an infringement of copyright or, as they were imported articles would, if the articles had been made in Australia by the importer, have constituted such an infringement. These acts constitute an infringement of Vertical Leisure’s copyright within the meaning of s.38 of the Copyright Act.
Further, since around the end of October 2014, both Aus-Sino Pacific and Auz Origin have exposed for sale, sold, distributed for the purposes of trade a copy of or a copy of a substantial part of the FAQ text and photographs without the licence of Dance4me in circumstances where Auz Origin knew or ought to have known that there was an infringement of copyright or, as these were imported articles, would, if the articles had been made in Australia by the importer, had constituted such infringement. This constituted a further infringement of Dance4me’s copyright within the meaning of ss.36 and 38 of the Copyright Act.
Australian consumer law
I accept that the acts and conduct of Aus-Sino Pacific and Auz Origin occurred in trade and commerce and have misled or deceived or are likely to mislead and deceive members of the trade and public in the false belief that the goods were manufactured with the authority of Vertical Leisure or have the sponsorship or approval of Vertical Leisure and that this conduct contravened ss.18 and 29 of Schedule 2 to the Competition and Consumer Act 2010 (Cth).
Passing off
I further accept that by reason of the matters discussed above, both Aus‑Sino Pacific and Auz Origin passed off their goods as and for Vertical Leisure’s goods and as goods which are manufactured under the authority of Vertical Leisure or which have the sponsorship or approval of Vertical Leisure. Further, the goods sold by Aus-Sino Pacific and Auz Origin have been passed off as having been approved by or connected or associated with Vertical Leisure and Dance4me. These wrongful acts by Aus-Sino Pacific and Auz Origin are likely to injure or have injured the business, reputation and goodwill of the applicants.
The involvement of Mr Chen
The available evidence establishes the infringing conduct of Aus-Sino Pacific, which has been deregistered and is no longer a respondent to this proceeding, as well as Auz Origin. It is apparent from the available evidence, as well as the earlier Skyrunner proceedings, that Mr Chen has used various corporate vehicles to carry out sales of dancing poles. Mr Chen maintains that he had a lack of knowledge of any infringements on the basis that he was engaged in business with others and did not pay attention to the markings on containers for the dancing poles, or what was in them. He claims that his “employees” were responsible for all marketing material on the internet and took care of all sales. I do not accept those denials. First, Mr Chen was the contact for the domain name He was a director of Skyrunner and is a director of Auz Origin. Mr Chen had a close working relationship with Ms Xiao Wen Zhou, formerly the fourth respondent in this proceeding, who was the director of Aus-Sino Pacific. The contact details for the website include an address which was also used by Mr Chen.
I find that Mr Chen authorised, directed or procured or had a close personal involvement in the acts of the various corporate entities involved in the infringing activity and that he is thus liable as a joint tortfeasor. The reality is that Mr Chen controls the business of the sale of goods including dancing poles and has been the controlling mind of the various entities through which the goods were promoted and sold. At all times Mr Chen authorised, directed or procured and had a close personal involvement in the acts of the corporate entities through which he traded.
Conclusion
The infringing conduct alleged by the applicants has been established and I find that Auz Origin and Mr Chen are liable for that infringing conduct. I will grant the injunctive relief sought by the applicants as well as the orders for delivery up of the infringing goods.
I will hear from the parties as to the remaining issues.
I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of Judge Driver
Date: 25 October 2016
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