Vertical Leisure Limited v Skyrunner Pty Ltd
[2014] FCCA 2033
•5 September 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| VERTICAL LEISURE LIMITED & ANOR v SKYRUNNER PTY LTD & ANOR | [2014] FCCA 2033 |
| Catchwords: TRADE MARKS – Infringement. CONSUMER PROTECTION – Misleading and deceptive conduct and passing off. PRACTICE AND PROCEDURE – Default judgment. |
| Legislation: Competition and Consumer Act 2010 (Cth) Copyright Act 1968 Federal Circuit Court Rules 2001 (Cth) |
| Aristocrat Technologies Australia Pty Limited v D.A.P. Services (Kempsey) Pty Limited (in liquidation) [2007] FCAFC 40; (2007) 157 FCR 564 Review Australia Pty Ltd v Innovative Lifestyle Investments Pty Ltd [2008] FCA 74 Sony Computer Entertainment Aust Pty Ltd v Stirling [2001] FCA 1852 |
| First Applicant: | VERTICAL LEISURE LIMITED |
| Second Applicant: | DANCE4ME PTY LIMITED |
| First Respondent: | SKYRUNNER PTY LTD |
| Second Respondent: | HUIRONG CHEN |
| File Number: | SYG 3145 of 2013 |
| Judgment of: | Judge Driver |
| Hearing date: | 3 September 2014 |
| Delivered at: | Sydney |
| Delivered on: | 5 September 2014 |
REPRESENTATION
| Counsel for the Applicant: | Mr D Scully |
| Solicitors for the Applicant: | 1Place Patent Attorneys + Solicitors |
| No appearance by or on behalf of the Respondents |
ORDERS
The Respondents, whether by themselves, their servants, directors, officers, agents or otherwise howsoever, be restrained from using the trade mark no.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 Cinemotograph 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 it likely to lead consumers into the false belief that:
(a)the Respondents’ goods are manufactured by or under the authority of the Applicants;
(b)the Respondents’ goods have the sponsorship or approval of the Applicants.
(c)the Respondents have the sponsorship or approval of the Applicants
by engaging in the conduct referred to in paragraph 46 of the Statement of Claim (First Respondent) or paragraphs 48 and 69 of the Statement of Claim (Second Respondent).
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 49 of the Statement of Claim (First Respondent) and paragraphs 51 and 71 of the Statement of Claim (Second Respondent).
The Respondents, whether by themselves, their servants, directors, officers, agents or otherwise, be restrained from engaging in conduct referred to in paragraph 78 of the Statement of Claim (First Respondent) and paragraph 81 of the Statement of Claim (Second Respondent).
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, directors, officers or agents, to which the Copyright Works or the Cinematograph Film referred to in order 2 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 has been applied to without the authority of the Applicants.
The Respondents shall pay to the Applicants compensatory damages in the sum of $94,800 within 28 days.
The Respondents shall pay to the Applicants additional damages pursuant to s.115(4) of the Copyright Act 1968 (Cth) in the sum of $300,000 within 60 days.
The Respondents shall pay interest up to judgment pursuant to s.77 of the Federal Circuit Court of Australia Act 1999 (Cth) and rule 26.01 of the Federal Circuit Court Rules 2001 (Cth) at the rate of 8 per cent.
The Respondents are to pay the Applicants’ costs and disbursements of and incidental to the application which, if not agreed, are to be taxed in accordance with the Federal Court Rules.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 3145 of 2013
| VERTICAL LEISURE LIMITED |
First Applicant
DANCE4ME PTY LIMITED
Second Applicant
And
| SKYRUNNER PTY LTD |
First Respondent
HUIRONG CHEN
Second Respondent
REASONS FOR JUDGMENT
Introduction and background
On 3 September 2014 I made orders restraining infringements of copyright, trademarks and passing off and awarding damages and costs against the respondents. The following are my reasons for making those orders.
Procedural history
The Applicants commenced these proceedings on 17 December 2013 by filing an Originating Application and Statement of Claim. The applicants sell in Australia poles used for pole dancing known by the name X-Pole. They are the market leader 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.
The Originating Application and Statement of Claim were served on the Respondents on 14 January 2014[1].
[1] Affidavit of Anthony William White dated 29 January 2014 at [6]
The proceedings were listed for first directions on 6 February 2014. Orders were made for the Applicants to file and serve their Responses within 14 days, with liberty to the Applicants to apply for default judgment if the Respondents failed to do so. These orders were subsequently served on the Respondents[2]. The Respondents did not file their responses within 14 days or at all. The Respondents have taken no part in the proceedings.
[2] Affidavit of Lance Newman Scott dated 28 February 2014
On 4 March 2014 the Applicants filed an application for default judgment, and the Respondents were subsequently served with this application[3].
[3] Affidavit of Lance Newman Scott dated 4 March 2014
The hearing of the default judgment application was originally listed on 1 April 2014, but was subsequently adjourned on several occasions.
On 16 July 2014 I made orders listing the hearing of the default judgment application for 3 September 2014 with the Applicants to file and serve on the Respondents any material they relied upon in support of the Application for default judgment no less than four working days before the hearing date.
Evidence relied upon by the Applicants
The Applicants rely on the following affidavits in support of their application seeking default judgments against the Respondents:
a)Affidavit of Jessica Dummett dated 27 August 2014 (Dummett Affidavit);
b)Affidavit of Michael Anthony Rumore dated 27 August 2014 (Rumore Affidavit); and
c)Affidavit of Lance Newman Scott dated 27 August 2014 (Scott Affidavit).
All of the above materials, along with the orders of 16 July 2014 listing the matter for hearing on 3 September 2014, along with a further copy of the application for default judgment, were served on the Respondents on 28 August 2014[4].
[4] Affidavit of Lance Newman Scott dated 28 August 2014
Default judgment
The application is pursuant to rule 13.03B(2)(c) of the Federal Circuit Court Rules 2001 (Cth) (Rules). The Respondents are in default by failing to comply with an order by the Court that they file responses (rule 13.03A(1)(a)).
Proof by way of evidence of the Applicants’ claims is not required. Rather, the Court must be satisfied that on the face of the statement of claim there is a claim for the relief sought and that the Court has the jurisdiction to grant the relief[5].
[5] Arthur v Vaupotic Investments Pty Ltd[2005] FCA 433 at [3] per Heerey J; Australian Competition and Consumer Commission (ACCC) v Albert [2005] FCA 1311 at [6] and [7] per Jacobson J; Facton Ltd and Ors v Dash Industries Pty Ltd and Anor[2010] FMCA 709 at [4] – [5]; Facton Ltd v Erdogan (No 1) [2012] FCA 924 at [4] – [5]
Jurisdiction
The Applicants seek relief for the Respondents’ infringement of trademark, infringement of copyright, misleading or deceptive conduct in trade or commerce and for passing off.
The Court has jurisdiction under the Trade Marks Act 1995 (Cth) (Trade Marks Act) in relation to infringement actions[6]. The relief the Court may grant includes injunctive relief[7].
[6] Trade Marks Act ss.120, 191A
[7] s.126(1)(a)), damages (s.126(1)(b) and additional damages (s.126(2)
The Court has jurisdiction with respect to claims under Schedule 2 to the Competition and Consumer Act 2010 (Cth) (Australian Consumer Law)[8]. The relief the Court may grant includes injunctive relief[9] and damages[10].
[8] Section 138A, Schedule 2
[9] Section 5
[10] Section 87
The Court has jurisdiction to hear and determine civil copyright matters under the Copyright Act 1968 (Cth) (Copyright Act). Relevantly, the Court can deal with matters arising under Part V of the Copyright Act[11]. The relief the Court may grant includes injunctive relief[12].
[11] Section 131D
[12] Section 115(2), damages (s.115(2)) and additional damages (s.115(4))
Damages
Damages are sought for:
a)lost profit;
b)damage to reputation;
c)additional damages pursuant to s.115(4) of the Copyright Act.
The Applicants accept there can be no “double dipping”. That is, if damages are awarded pursuant to the Copyright Act there can be no entitlement to damages for the same conduct for breaches of the Trade Marks Act, the Australian Consumer Law or passing off.
Since all of the conduct is alleged to constitute an infringement of Copyright, the Applicants are content to simplify matters by pressing only for damages for infringement of Copyright.
Lost profit – compensatory damages
The purpose of an award of damages is to compensate the Applicants for the loss which they have suffered as a result of the Respondents’ breach[13].
[13] Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (in liq) [2007] FCAFC 40; (2007) 157 FCR 564 per Black·CJ and Jacobson J at [25]; Interfirm Comparison (Aust) Pty Ltd v Law Society of New South Wales (1975) 6 ALR 445 at [446], per Bowen CJ; Bailey v Namol Pty Ltd [1994] FCA 1401; (1994) 53 FCR 102 at [111], per Burchett, Gummow and O'Loughlin JJ
It is well established that an applicant in an intellectual property infringement case may prove an entitlement to compensatory damages on the basis that it lost sales made by the defendant which would otherwise have been made by the plaintiff[14].
[14] Aristocrat [2007] FCAFC 40; (2007) 157 FCR 564 at [37]; Sony Computer Entertainment Aust Pty Ltd v Stirling [2001] FCA 1852 per Emmett J at [8]
The Applicants must prove their loss on the balance of probabilities and with as much precision as the subject matter reasonably permits[15].
[15] Placer (Granny Smith) Pty Ltd v Theiss Contractors Pty Ltd (2003) 196 ALR 257 at 266 [37], per Hayne J, with whom Gleeson CJ, McHugh and Kirby JJ agreed; Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 at [80], [83]-[84], per Mason CJ and Dawson J; at [138], per Toohey J; at [153], per Gaudron J; at [161], per McHugh J
If a Court finds that damage has occurred it must do its best to quantify the loss, even if some degree of speculation and guesswork is involved[16].
[16] Aristocrat [2007] FCAFC 40; (2007) 157 FCR 564 per Black CJ and Jacobson J at [35]; Enzed Holdings Ltd v Wynthea Pty Ltd [1984] FCA 373; (1984) 57 ALR 167 at [183], per Sheppard, Morling & Wilcox JJ
In circumstances where the Respondents have failed to participate in the proceedings, the Applicants are unable to adduce precise evidence of the number of relevant sales.
Attempts were made by the Applicants to obtain information as the relevant quantum of poles sold by issuing a subpoena upon the Australian Customs and Border Protection Service to ascertain the number of poles imported. However, the level of generality with which the items imported were described on customs documentation did not permit the Applicants to identify the number of dancing poles imported[17].
[17] Scott Affidavit [9]–[10]
In the circumstances, as to quantity sold I accept:
a)the Respondents have been marketing and selling dance poles using the Applicants’ intellectual property since at least early 2010 utilising a number of different website platforms and this continued until at least December 2013 when the Statement of Claim was filed. In particular:
i)early 2010 - via eBay (Dummett Affidavit [34] – [37]);
ii)in July to August 2011 - via the website 7db.com.au, a website operated by the Second Respondent (Mr Chen) [18];
iii)in or around August 2013 - via 7db.com.au and gumtree.com.au[19];
iv)as at 16 December 2013 when the Statement of Claim was prepared, Mr Chen continued to advertise dance and exercise poles on the website 7db.com.au utilising photographs of a Ms Katie Coates and the word “X-Pole”[20];
v)as at 16 December 2013 when the Statement of Claim was prepared, the First Respondent (Skyrunner) continued to advertise its dance and exercise poles on gumtree.com.au utilising the Coates Photographs and using the word “X-Pole”[21];
b)the Respondents also offered for sale and sold poles on a wholesale basis. The Applicants are aware of one such instance where Mr Chen sold at least 40 poles to a bona fide purchaser, Gymtime Pty Ltd, on or after 12 September 2013 which were in turn sold on the website livingsocial.com[22]
[18] Statement of Claim [23] – [25]; Dummett Affidavit [39] – [42]
[19] Statement of Claim [26] – [29]; [52] – [56]; Dummett Affidavit [45] – [47]
[20] Statement of Claim [77]
[21] Statement of Claim [82]
[22] Dummett Affidavit [48] – [49]; Annexure E to the Scott Affidavit; Annexure F to the Scott Affidavit
In the circumstances it can be conservatively estimated that the Respondents have sold at least 160 counterfeit poles utilising the Applicants’ intellectual property, comprising 40 poles supplied via each of the websites eBay, gumtree.com.au and 7db.com.au and a further 40 poles supplied to the wholesaler Gymtime Pty Ltd.
This is a conservative figure when one has regard to the evidence as to the size of the pole market in Australia and the fact that X-Pole is the number 1 branded pole – with in excess of 10,000 X-Pole poles being sold in Australia[23].
[23] Dummett Affidavit [12]
The First Applicant’s total profit per pole is $AUS280[24].
[24] Dummett Affidavit [32]
160 poles therefore equates to a total lost profit of $44,800. I therefore accept that an award of $44,800 is appropriate as damages for lost profit.
Compensatory damages – loss of reputation
The Applicants also seek general damages on the basis that, as a result of counterfeit “X-pole” branded goods being made available in the marketplace by the Respondents, there was damage to the reputation and goodwill generated by the copyright works[25].
[25] Review Australia Pty Ltd v New Cover Group Pty Ltd & Ors [2008] FCA 1589; (2008)79 IPR 236 at [54]– [62]and Jessup J in Review Australia Pty Ltd v Innovative Lifestyle Investments Pty Ltd [2008] FCA 74
As to reputation, X-Pole is one of the most widely recognised brands in the industry[26].
[26] Statement of Claim [15]; Dummettt Affidavit [13] – [20]
As to damage to reputation, the Applicants rely on [21] – [29] of the Dummett Affidavit. In short, the inferior and dangerous counterfeit poles marketed and sold by reference to the X-Pole brand are leading to confusion amongst consumers and a dilution of the X-Pole brand[27].
[27] See too (a) examples of emails from confused consumers at Annexures B, D and I to the Dummett Affidavit, noting in particular the email at Annexure D where the consumer is assured that the product is a genuine X-Pole product (b) the web advertising at Annexure H where the consumer is led to believe the pole is a genuine X-Pole sold at a discounted price
It is not an easy task for the Court to identify the value of the loss of reputation by the Applicants in monetary terms. It is a matter of judgement[28].
[28] Facton Ltd v Rifai Fashions Pty Ltd [2012] FCAFC 9 at [29], per Lander and Gordon JJ
In this case I am satisfied that the damage to reputation is substantial. In this regard, it was noted that there have been other instances of counterfeit sellers of X-Pole products. However, the First and Second Respondents have been the only recurring sellers[29]. Further, as noted above, the Respondents have not only sold to individuals but have also sold to wholesalers. Thus, the Respondents have caused damage to reputation at both the wholesale and retail level.
[29] Dummett at [51]
I accept that an award of $50,000 is appropriate award for damage to reputation.
Additional damages
The Applicants submit that a substantial award of additional damages in the sum of $300,000 is warranted having regard to the following circumstances[30]:
[30] Section 115(4) of the Copyright Act
a)the Respondents’ infringements were flagrant[31]. The relevant infringements involved a deliberate, deceitful and calculated disregard for the Applicants’ rights[32]. In this regard, the products sold by the Respondents featured exact copies of the instructional DVD for the genuine X-Pole products, reproductions of images and artwork from genuine X-Pole documentation and were marketed by reference to the X-Pole trademark. Further, the Respondents used a variety of different selling platforms, including selling under different names on Gumtree in an effort to avoid detection[33];
[31] Section 115(4)(b)(i)
[32] Prior v Lansdowne Press Pty Ltd [1977] VicRp 6; [1977] VR 65; Microsoft Corporation & Anor v Atifo Pty Ltd & Ors (1997) 38 IPR at [648]; Microsoft Corporation & Ors v Goodview Electronics Pty Ltd & Ors (2000) 49 IPR 578 at[60]; Eagle Rock Entertainment Ltd v Caisley [2005] FCA 1238 at [31], per Tamberlin J
[33] Statement of Claim at [53(iii)] – “Melody”
b)the need for deterrence to prevent similar infringements of trademark and copyright[34]. This is particularly so in the case of exercise equipment where if inferior products are sold consumers are at risk[35];
[34] Section 115(4)(b)(ia)
[35] Dummett Affidavit [26]
c)the Respondents continued to infringe despite being repeatedly put on notice of the Applicants’ rights[36]. In this regard, the evidence discloses the following:
[36] Section 115(4)(b)(ib)
i)Mr Chen was first sent a cease and desist letter on 29 March 2010[37] after the Applicants became aware of sales on eBay;
[37] Scott [3] Annexure A
ii)in response to this letter Mr Chen emailed indicating “We’ve stopped selling this product two weeks ago. We don’t have any stock now”[38];
[38] Scott [4], Annexure B
iii)a further cease and desist letter was sent to Mr Chen on 26 September 2011 after the Applicants became aware of sales on 7db.com.au[39] No response was received from Mr Chen but during a telephone call on 4 October 2011 Mr Chen indicated:
[39] Scott [5], Annexure C
The product what I am selling is coming with the brand name x-dancing. Not x-pole. I print my contact details of (sic) the packing box.
iv)as to the assertions by Mr Chen during this 4 October 2011 phone call the evidence is that a trap purchase had been made of one of the poles from the website 7db.com.au in June 2011[40]. The poles were supplied in a box marked “X Dancing Pole” and:
·included an instruction manual which contained direct copies of the First and Second Respondent’s copyright works; and
·included an instructional DVD which was a direct copy of the genuine X-Pole instructional DVD;
v)on 23 September 2013 a further cease and desist letter was sent to Mr Chen, after the Applicants became aware that the Respondents were selling poles via the websites 7db.com.au and gumtree.com.au[41] No response was received[42] and infringements continued[43];
vi)this case also involves a situation where the Mr Chen has in the face of notices to cease expanded from an eBay seller to selling to a wholesaler (Gymtime Pty Ltd) in the face of notices to cease.
[40] Dummett Affidavit [39] – [42]
[41] Scott Affidavit [6], Annexure D
[42] Scott Affidavit [6]
[43] Statement of Claim [75] – [82]
As to the relationship between damages and additional damages, the Applicants note:
a)there need not be proportionality between the amount of additional damages awarded under s.115(4) and the amount of compensatory damages awarded under s.115(2). Additional damages may be awarded even though the copyright owner might only be entitled to nominal compensatory damages[44];
b)it is also open to the Court to increase an award of additional damages on the basis that the lack of participation of the Respondents in the proceedings make it likely that the volume of sales has been underestimated[45].
[44] Aristocrat Technologies Australia Pty Limited v D.A.P. Services (Kempsey) Pty Limited (in liquidation) [2007] FCAFC 40 at [54]
[45] Kenny J in Review Australia Pty Ltd v New Cover Group Pty Ltd & Ors [2008] FCA 1589; (2008) 79 IPR 236 at [59]
The damages contemplated by s.115(4) of the Copyright Act and s.126(4) of the Trade Marks Act are of a punitive kind. Financial gain is unnecessary. This is a case where it is appropriate that a substantial award of additional damages be made to “mark the Court’s recognition of the opprobrium attached to the defendants conduct”[46]. I will award additional damages of $300,000.
[46] Facton Ltd v Rifai Fashions Pty Ltd [2012] FCAFC 9 per Lander and Gordon JJ at [36]
The applicants are also entitled to interest up to judgment and costs.
I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of Judge Driver
Associate:
Date: 5 September 2014
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