FEDERAL COURT OF AUSTRALIA
Seafolly Pty Limited v Fewstone Pty Ltd [2014] FCA 321
| IN THE FEDERAL COURT OF AUSTRALIA | |
| SEAFOLLY PTY LIMITED (ACN 001 537 748) Applicant | |
| AND: | FEWSTONE PTY LTD (ACN 010 496 465) Respondent |
| DATE OF ORDER: | |
| WHERE MADE: |
1. The respondent has infringed or authorised the infringement of the applicant's copyright in the copyright works identified in paragraphs 8, 11 and 13 of the reasons for judgment given by Justice Dodds-Streeton on 1 April 2014 (Copyright Works).
THE COURT ORDERS THAT:
2. The respondent pay the applicant damages in the sum of $250,333.06.
3. The respondent whether by itself, its directors, employees, servants, agents or any of them be restrained from:
(a) reproducing or substantially reproducing the Copyright Works or authorising such conduct;
(b) manufacturing, importing for sale, selling, or by way of trade, offering and exposing for sale, or exhibiting in public:
(i) items manufactured from the fabric used to manufacture the Respondent’s Garments (as defined in paragraph 15 of the third further amended fast track statement); and
(ii) the Respondent’s Garments;
(c) advertising, marketing and promoting:
(i) items manufactured from the fabric used to manufacture the Respondent’s Garments; and
(ii) the Respondent’s Garments; and
(d) disposing of possession of:
(i) the Respondent’s Garments; and
(ii) the materials used to create the Respondent’s Garments
other than in accordance with order 5 below;
4. Order 3 be stayed until 4 pm on 8 April 2014.
5. The respondent whether by itself, its directors, employees, servants, agents or howsoever deliver up to the applicant:
(a) any materials bearing reproductions of the design on the fabric used to manufacture the Respondent's Garments or any remaining stock of such fabric; and
(b) any remaining stock of the Respondent's Garments
in its possession, custody or control and by 4pm on 15 April 2014 verify on affidavit its compliance with this order.
6. Costs of the proceeding be reserved.
7. The matter be listed for directions at a time convenient to the Court and the parties after 18 April 2014.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
| VICTORIA DISTRICT REGISTRY | |
| GENERAL DIVISION | VID 488 of 2012 |
| BETWEEN: | SEAFOLLY PTY LIMITED (ACN 001 537 748) Applicant |
| AND: | FEWSTONE PTY LTD (ACN 010 496 465) Respondent |
| JUDGE: | DODDS-STREETON J |
| DATE: | 1 APRIL 2014 |
| PLACE: | MELBOURNE |
REASONS FOR JUDGMENT
Introduction
1 In this proceeding, the applicant, Seafolly Pty Limited (“Seafolly”), which designs, manufactures and sells swimwear and beachwear, alleges that the respondent, Fewstone Pty Ltd (“Fewstone”) trading as City Beach Australia (“City Beach”), which also designs, manufactures and sells swimwear and beachwear, has infringed Seafolly’s copyright in three artistic works. The works in question are the following, which Seafolly used in the manufacture of its swimwear:
(a) the English Rose artwork;
(b) the Covent Garden artwork; and
(c) the Senorita artwork.
2 Seafolly alleges that it owns the copyright in each of the above artworks pursuant to an assignment from a designer, Longina Phillips Designs Pty Ltd (“Longina”), or as author.
3 Seafolly alleges that a substantial part of each of its above artworks was, contrary to ss 14, 31(1)(b)(i) and 36 of the Copyright Act 1968 (Cth) (“the Copyright Act”), reproduced without its licence in a material form by a corresponding print or embroidery used to manufacture various City Beach beachwear garments. In particular, Seafolly alleges that:
(a) City Beach’s Fiesta Rosette print (and identical Fiesta Rosario print) (collectively, “the Rosette print”) on the fabric used to produce various City Beach beachwear garments reproduced in a material form a substantial part of Seafolly’s English Rose artwork.
(b) City Beach’s Fiesta Sienna print (“the Sienna print”) on the fabric used to produce various City Beach beachwear garments reproduced in a material form a substantial part of Seafolly’s Covent Garden artwork.
(c) City Beach’s Richelle embroidery on the fabric used to produce various City Beach beachwear garments reproduced in a material form a substantial part of Seafolly’s Senorita artwork.
4 Seafolly alleges that City Beach’s reproduction of a substantial part of each of its copyright works was not the result of independent creation but was due to copying of the Seafolly artworks from Seafolly garments which, as City Beach conceded, it purchased and used to instruct its designers.
5 Seafolly alleges that City Beach also infringed its copyright pursuant to ss 14, 37 and 38 of the Copyright Act by directing the manufacture in China of garments imprinted with or incorporating the Rosette, Sienna and Richelle artworks, which City Beach imported and sold in Australia with actual or constructive knowledge that the making of the article would have constituted an infringement of Seafolly’s copyright had it been made in Australia by the importer.
6 Seafolly sought remedies including compensatory damages, damages for damage to its reputation, additional damages, declarations, injunctions and orders for delivery up.
7 It is convenient to set out photocopies of Seafolly’s artworks and the corresponding City Beach prints or embroidery which allegedly infringed Seafolly’s copyright.
Seafolly’s English Rose artwork
8 The English Rose artwork in white and black colour ways are set out below:
City Beach’s Rosette print
9 Paper representations of the strike-offs of fabric bearing City Beach’s Rosette print (in white and black colour ways) and copies of the print production sheets, both produced in late June 2011, appear below:
10 Paper representations of the strike-offs of fabric bearing City Beach’s Rosette print produced in November 2011 appear below:
Seafolly’s Covent Garden artwork
11 Seafolly’s final Covent Garden artwork in white and black colour ways is set out below:
City Beach’s Sienna print
12 Paper representations of the strike-offs of City Beach’s Sienna print appear below:
Seafolly’s Senorita artwork
13 Seafolly’s final Senorita artwork is set out below, being the final drawings of the embroidery design:
City Beach’s Fiesta Richelle embroidery
14 Winnie Bon, who was employed by City Beach and gave evidence on its behalf, deposed that the following picture showed the Richelle embroidery on a bandeau-shaped garment as approved by City Beach:
The parties’ principal submissions
15 Seafolly alleged that the substantial part of each of its artworks reproduced by City Beach were as follows:
32. The substantial part of the English Rose print that is reproduced in the Fiesta Rosette print comprises collectively the following:
(a) the use of impressionistic and non-pictorial roses;
(b) the use of leaves surrounding the roses and sprouting from the rose head;
(c) the majority of the leaves around the roses do not have stems;
(d) the use of a motif of clustered smaller roses and big roses being placed next to each other;
(e) the shading of the roses to create depth;
(f) the balancing of the background with the roses;
(g) the use of bigger roses and smaller roses;
(h) the colour palette being the use of pink roses with green leaves on a white or black background;
(i) the use of distinct edging on the highlights for the roses between the dark prink [sic] and the light pink;
(j) the roses do not overlap;
(k) the use of a similar number of leaves around the rose head; and
(l) the proportionality of leaves to flowers to background.
33. The substantial part of the Covent Garden print that is reproduced in the Fiesta Sienna print comprises collectively the following:
(a) the use of impressionistic and non-pictorial flowers;
(b) the use of the same types of flowers;
(c) the use of fronds;
(d) the use of fronds in blue;
(e) the pictorial line appearance of the flowers;
(f) the use of a different colour or shade of colour within each flower;
(g) the use of different sized flowers;
(h) the use of popping yellows;
(i) the use of different colours within the flowers to create depth;
(j) the visible background of the base colour through the flowers, leaves and fronds;
(k) the colour palette; and
(l) the colour palette on a white or black background.
34. The substantial part of the Senorita Artwork that is reproduced in the Fiesta Richelle garment comprises collectively the following:
(a) 4 discernible horizontal lines of diamond with the top and bottom being the same and the two middle lines being the same;
(b) the top and bottom lines of diamonds are smaller than the middle lines of diamonds;
(c) the second and third rows are adjacent diamond motifs made up of double stitching with a big diamond, little diamond sequence;
(d) the relative spacing between the two middle lines and the two border lines; and
(e) the degree of contrast between the stitching colour and fabric colour.
16 City Beach did not deny the subsistence, or Seafolly’s ownership of, copyright in the English Rose or Covent Garden artworks.
17 City Beach did not admit the subsistence of copyright in the Senorita artwork. It contended that the Senorita artwork was not original in the relevant sense of originating with Seafolly’s employees or designers, and was a commonplace design inevitably produced by the type of industrial sewing machine used to manufacture both the garments bearing the Senorita artwork and the garments bearing City Beach’s Richelle embroidery. If, contrary to that submission, copyright subsisted in the Senorita artwork, City Beach conceded that Seafolly owned it.
18 City Beach did not deny that its buyers and design subcontractor, 2Chillies Pty Ltd (“2Chillies”), had access to all three Seafolly artworks (which were imprinted on Seafolly garments purchased by City Beach and photographs of which were accessed by City Beach on the internet). City Beach conceded that it used the Seafolly garments bearing the relevant Seafolly artworks as “inspiration” to create the three corresponding City Beach prints.
19 City Beach admitted that it manufactured, imported for sale, sold or, by way of trade, offered for sale or exhibited, the garments bearing the allegedly infringing prints, and authorised that conduct.
20 City Beach nevertheless denied that it had infringed Seafolly’s copyright, contending that there was no sufficient objective similarity between the Seafolly artworks and the prints used in City Beach’s garments. Further, City Beach denied that any parts taken from the Seafolly artworks were substantial in the relevant sense.
21 City Beach submitted, in that context, that Seafolly’s artworks appeared from a crowded field of prior art, and hence, while there was (at least in the case of the English Rose and Covent Garden artworks) sufficient originality for the subsistence of copyright, that which was reproduced in the City Beach prints was not original and hence, not substantial. City Beach submitted that any originality of the Seafolly artistic works was limited to their collocation of features which were, in themselves, unoriginal, commonplace and derived from the “prior art” which Seafolly itself consulted and used for inspiration in accordance with the routine practice of the fashion industry. Accordingly, when abstracted from the collocation, any individual elements taken from the Seafolly works were unoriginal and hence unprotected.
22 Alternatively, City Beach submitted that it had, at most, taken the unprotectable idea or underlying concept of the Seafolly copyright works, rather than their form of expression. It also submitted that it had derived elements of the Rosette print and, in particular, the Sienna print from other sources.
23 City Beach further contended, in that context, that because the exclusive rights of the owner of the copyright in an artistic work do not (in contrast to copyright in literary, dramatic and musical works) include the right of adaptation, it followed that the adaptation of artistic works did not constitute an infringement. From that, in City Beach’s submission, it followed that infringement of an artistic work required an exact or faithful reproduction of a substantial part of the artistic work.
24 In relation to the Senorita artwork only, City Beach relied on the defence under s 77 of the Copyright Act, contending that the smocking embroidery used in Seafolly’s garment (bearing the Senorita artwork) was a corresponding design within the meaning of s 74 of the Copyright Act.
25 City Beach denied that it ought reasonably to have known that Seafolly was the owner of copyright in the Seafolly artworks or that its acts of commercial exploitation of its garments, if done in Australia, would have been an infringement of Seafolly’s copyright in the Seafolly artworks.
26 City Beach also submitted that the works in suit were not sufficiently identified. While some witnesses expressed uncertainty as to which of several versions of particular prints was the final version, I was satisfied that the works in suit were sufficiently identified above at paragraphs 8, 11 and 13.
witnesses
Seafolly’s witnesses
27 Seafolly relied on the following affidavits from lay witnesses, who were cross-examined by City Beach:
(a) the first affidavit of Anthony Frank Halas affirmed on 21 February 2013, as amended on 12 June 2013, and Mr Halas’s second affidavit affirmed on 17 May 2013;
(b) the affidavit of Genelle Walkom affirmed on 30 October 2012, as amended on 11 June 2013;
(c) the affidavit of Madelena Antao affirmed on 30 October 2012;
(d) the affidavit of Alyssa Coundouris affirmed on 30 October 2012, as amended on 12 June 2013;
(e) the affidavit of Malis So affirmed on 30 October 2012;
(f) the affidavit of Shannon Cheung affirmed on the 22 November 2012;
(g) the affidavit of Katrina Dean affirmed on the 30 October 2012; and
(h) the affidavit of Zhang Jun affirmed on 30 October 2012.
28 Seafolly tendered and relied on the following affidavits of lay witnesses who were not cross-examined:
(a) the affidavit of Lynn Tramonte, a product development manager employed by the applicant, affirmed 14 February 2013;
(b) the affidavit of Rebecca Kerr, the creative director of Longina for over 14 years, affirmed on 30 October 2012;
(c) the first affidavit of Jonathan Ariel Feder, lawyer for the applicant, affirmed on 7 February 2013, as amended on 12 June 2013 and Mr Feder’s second affidavit affirmed on 17 May 2013; and
(d) the affidavit of Savannah Hardingham, lawyer for the applicant, affirmed on 7 February 2013; and
29 Mr Halas is Seafolly’s chief executive officer. Mr Halas was a careful and direct witness, who made sensible and appropriate concessions.
30 Ms Walkom is and was employed by Seafolly as, since 1983, its head fashion designer and creative director of design. Ms Walkom was a clear, sensible and firm witness. She was responsive and made concessions where appropriate.
31 Ms Antao was employed by the applicant since 2010, and at the time of the trial was its creative director of graphic design manager. She was previously, and at the time that the relevant garments were created, the applicant’s graphic design manager and reported to Ms Walkom. Ms Antao was a straightforward and credible witness.
32 Ms Coundouris was employed by Seafolly from June 2009 to 2011 as a junior graphic designer and reported to Ms Antao. Ms Coundouris was a responsive and credible witness.
33 Ms So was employed by Seafolly since 2006 as a graphic designer and reported to Ms Antao and Ms Walkom. Ms So was a credible witness, although her responses were not particularly confident.
34 Ms Cheung was employed by Longina from 2007 or 2008 as a designer. Ms Cheung was an honest and responsive witness with firm views of her own.
35 Ms Dean was employed by Longina since 2008 as a designer. Ms Dean was a straightforward and sensible witness.
36 Mr Zhang has been employed by Longina as a textile designer for about 19 years. Mr Zhang spoke very limited English and gave evidence by video link from Hong Kong with the assistance of an interpreter. Mr Zhang was a responsive and credible witness.
37 Seafolly relied on the expert evidence of Patrick William Snelling, the Program Director of Textile Design in the School of Fashion and Textiles at RMIT University. Mr Snelling affirmed two affidavits on 4 February 2013 and 28 May 2013 respectively, and was cross-examined by the respondent.
38 Mr Snelling was a firm, sensible and conscientious expert witness who provided assistance to the Court. While the respondent contended, based, inter alia, on Mr Snelling’s correction of errors in his first affidavit, that his views were not his own, I was satisfied that Mr Snelling satisfactorily explained his corrections and was an honest witness who presented his own opinions.
39 Seafolly also subpoenaed the following officers or design employees of 2Chillies, who gave evidence viva voce and were cross-examined by City Beach:
(a) Matthew Nielsen. Mr Nielsen was the director of 2Chillies until about March 2013 after which he did some work as part of the exit process. He was a credible and responsive witness.
(b) Suzanne Bobsien-Christie, who was employed by 2Chillies as its head of design. Ms Bobsien-Christie was a reserved witness whose recollection was limited.
(c) Rachel Love, a freelance graphic artist working for 2Chillies under a contract. Ms Love presented as a credible witness.
(d) Susie Musso-Smith who was employed by 2Chillies as a designer and production coordinator. Ms Musso-Smith was generally a credible and responsive witness although somewhat unclear or evasive at points.
(e) Briana Thompson (formerly Croughan), who was employed by 2Chillies as a graphics designer. Ms Thompson was a credible and responsive witness.
City Beach’s witnesses
40 City Beach relied on affidavits from the following lay witnesses, who were cross-examined by the applicant:
(a) the first affidavit of Karyn Michelle Knobel sworn on 8 November 2012, as amended on 14 June 2013 and Ms Knobel’s second affidavit of Ms Knobel sworn on 12 April 2013;
(b) the affidavit of Paige Michelle Hanger sworn on 29 October 2012;
(c) the first affidavit of Chloe Leigh Dunlop sworn on 19 October 2012, as amended on 17 June 2013 and Ms Dunlop’s second affidavit affirmed on 24 April 2013; and
(d) the affidavit of Winnie Vei Ling Bon sworn on 8 November 2012.
41 The respondent tendered and relied on the following affidavits of lay witnesses who were not cross-examined:
(a) the affidavit of Michael Wilson, the respondent’s chief financial officer and a qualified accountant, sworn 1 May 2013 and Mr Wilson’ second affidavit sworn 17 June 2013; and
(b) the affidavit of Krista Jean Mahoney, lawyer for the respondent, sworn 12 April 2013.
42 Ms Knobel was a senior buyer who has been employed by City Beach in that position since early 2004 (and was employed by City Beach in more junior buyer roles from July 2000). Ms Knobel was not an impressive or reliable witness. She was frequently defensive, obstructive and non-responsive. She was not forthcoming or frank and was slow to make appropriate concessions. She frequently avoided answering the questions put to her. At times, her evidence was implausible and her recall of events was selective.
43 Ms Hanger was, at the time of the trial, employed by City Beach as a buyer (and had held that position since August 2011). Between March 2010 and August 2011 Ms Hanger reported to Ms Knobel. Ms Hanger was a reasonably direct witness.
44 Ms Dunlop was employed by City Beach as a trainee buyer and had held that position since September 2010. As at the date of the trial Ms Dunlop was no longer employed by City Beach. Ms Dunlop was not an impressive or reliable witness. Her evidence was unconvincing. She was reluctant to made appropriate concessions and was, at times, evasive.
45 Ms Bon was employed by City Beach at various periods and in various positions. From 2008 to 2012, she was employed as a production coordinator for ladies’ garments in Malaysia. In that position, she coordinated denim garments and swimwear production by receiving instructions from the City Beach buyers and liaising with manufacturers and their agents in China. She presented as a credible, albeit reserved, witness, who was prepared to make appropriate concessions.
46 The respondent relied on the following affidavits from expert witnesses, who were cross-examined by the applicant:
(a) The affidavit of Dean McGregor Brough, the Bachelor of Creative Industries course coordinator and lecturer (fashion) at Queensland University of Technology, sworn 23 April 2013. Mr Brough was, although unable to respond directly to some questions, a credible and knowledgeable expert witness.
(b) The affidavit of Robert Lewis McLaurin, the NSW sales manager for Capron Carter Australia Pty Ltd, sworn 16 April 2013. Mr McLaurin was a credible and knowledgeable expert witness.
(c) The affidavit of Jessica Thurecht, a swimwear and textiles designer, affirmed on 24 April 2013. Ms Thurecht was called by the respondent as an expert witness. She acknowledged that she had previously worked for 2Chillies as an employee and, after her employment ceased, as a contractor, who had peripheral involvement in the development of the Rosette print. She was a credible witness who appeared disinterested despite her prior connection with 2Chillies.
Background facts and evidence
Seafolly
47 Seafolly is an Australian company which, since 1975, has conducted business as a designer, manufacturer, wholesaler and retailer of fashion swimwear and swimwear accessories for women, girls and boys.
48 Seafolly sells its garments through various retailers in Australia in over 500 multi-brand stores (including major department stores), in Seafolly concept boutiques, factory outlets and through a website located at www.seafolly.com.au.
49 Seafolly also sells products in 1755 retail outlets overseas, where it also maintains offices.
50 Seafolly’s chief executive officer is Anthony Halas, who has held that position since 1998. Seafolly employs over 350 people and maintains a design team of 33 people, including both graphic and garment designers, at its Sydney head office.
51 The following members of the Seafolly design team were involved in work and exchanges relevant to this case:
(a) Ms Walkom;
(b) Ms Antao;
(c) Ms Coundouris; and
(d) Ms So.
52 Although it has an “in house” design team, Seafolly also engages an external design company, Longina, to design fabrics for Seafolly according to its instructions.
53 The following designers employed by Longina were involved in work and exchanges relevant to this case:
(a) Ms Kerr;
(b) Ms Cheung;
(c) Ms Dean; and
(d) Mr Zhang.
City Beach
54 The respondent, City Beach, was established in 1985 and maintains its head office in Brisbane. It conducts business as a designer, manufacturer and retailer of clothing including beachwear, surfwear, shoes, sports equipment and accessories for men, women and children.
55 City Beach sells its goods, including clothing, through a chain of City Beach retail stores in Australia. It has 60 City Beach stores spread throughout Queensland, New South Wales, Victoria, Western Australia and the Northern Territory. It also sells its goods, including clothing, through its website http://www.citybeach.com.au.
56 City Beach retains a number of personnel as buyers. The City Beach buyers and production personnel involved in work and exchange relevant to this case were:
(a) Ms Knobel;
(b) Ms Hanger;
(c) Ms Dunlop; and
(d) Ms Bon.
57 City Beach had from time to time engaged a design company, 2Chillies, to assist in designing prints and shapes for garments to be sold by City Beach. Matt Neilson was an owner and director of 2Chillies until March 2011. The following 2Chillies designers were involved in work and exchanges relevant to this case:
(a) Ms Bobsien-Christie;
(b) Ms Musso-Smith;
(c) Ms Thompson; and
(d) Ms Love.
The creation of Seafolly’s 2010 range
Seafolly’s English Rose artwork
58 In or about June or July 2009, Seafolly’s design employees began preparations to design its summer 2010 range of garments.
59 In July 2009, Ms Walkom and Ms Antao briefed Longina to create various fabric print designs including a fifties look vintage style rose print which became known as the English Rose print.
60 Ms Walkom and Ms Antao provided Longina with the following two photographs of bathing suits printed with rose designs as part of the brief to indicate what Ms Walkom wished to achieve:
61 During the course of July 2009, a large number of email exchanges occurred between the Seafolly design staff (principally Ms Walkom and Ms Antao) and staff at Longina (principally Ms Cheung and Ms Kerr), in which Longina staff sent draft rose designs they had prepared requesting feedback and Seafolly design staff responded with comments and instructions on how to revise, modify and change the draft designs.
62 Ms Dean, a designer at Longina, was provided with the two photographs set out above at paragraph 60 and created pencil sketches (which were not retained) for original rose designs on 7 July 2009. She forwarded her sketches and the two photographs to another Longina employee, a textile designer Zhang Jun. Ms Dean stated that she also provided the two photographs to indicate style and technique for the roses’ leaves and stems and to provide Mr Zhang with “inspiration and direction”.
63 Ms Cheung of Longina also provided Ms Dean’s pencil sketches to Mr Zhang, together with the examples of rose designs forwarded by Ms Walkom (set out at paragraph 60 above), and requested him to hand paint some rose elements for use in the design.
64 Mr Zhang recalled receiving the photographs but not the sketches. He spent three hours creating a hand painted work depicting roses. Mr Zhang’s work showed clusters of roses arranged on a white background, including groups of large full blown roses of similar size, some of which had long stems and leaves, while others were open roses viewed from overhead with sketchy leaves, together with clusters of smaller roses of varied sizes grouped together, with leaves at the base and few stems.
65 In cross-examination, Mr Zhang stated that he knew that he was not expected to copy the photographs but to use his creative skills to paint roses inspired by the photographs.
66 Mr Zhang explained that while he adopted the same style as the photograph showing dark pink roses, he created a painting with different layers and more varieties and layers of colours. While the leaves were similar, in that they were a loose painterly style, on the photographs the leaves were mainly single and separated, whereas in his painting the leaves were connected to the flowers. The photograph also included some flower buds.
67 On about 14 July 2009, Mr Zhang provided his painting to Ms Cheung, who scanned it and created the initial layout of the design using the rose motifs in the painting, to make them suitable for fabric. She sent a copy of the file to Ms Walkom. Ms Cheung testified that she moved some of the roses around and added some more closed, rather than open, roses, after receiving instructions from Ms Walkom. She also reduced some stems and added some more roses, after receiving instructions from Malis So (on behalf of Ms Walkom), who, on 15 July 2009 emailed her with a printout indicating where changes should be made. When all the changes had been made, Ms Cheung forwarded the completed design to Ms Walkom.
68 On 20 July 2009, Ms Walkom received and approved the final version of the English Rose artwork in both “pink on white” and “blue on white” colours (the latter was never used). On 31 July 2009, Ms Walkom also received and approved the final English Rose artwork in a “pink on black” colour concept.
69 By a deed made on 23 July 2009, Seafolly purchased the English Rose artwork from Longina and took an assignment of the copyright in the artwork (as shown in two drawings attached to the deed depicting the English Rose artwork in a “pink on white” colour concept, a “pink on black” colour concept and the hand painted rose motifs).
70 Fabrics printed with the English Rose artwork were subsequently used to manufacture a number of different swimwear garments for Seafolly’s 2010 summer range.
Seafolly’s Covent Garden artwork
71 On 25 August 2009, Seafolly purchased from Longina an original artwork for a fabric design known as the Covent Garden artwork in two colour concepts and took an assignment of the copyright in the Covent Garden artwork from Longina.
72 On or about 25 August 2009, Ms Walkom requested Ms So to put the Covent Garden artwork into a “repeat” and to alter the colours to match Seafolly’s planned colour palette for the new season.
73 On or about 26 August 2009, Ms So showed Ms Walkom a version of the Covent Garden artwork in a black colour concept (which incorporated the changes Ms Walkom had requested) together with a modified white colour concept version.
74 Ms Walkom approved both versions of the Covent Garden artwork. Subsequently, she received “strike offs” of fabric from the printer featuring the Covent Garden artwork, from which sample garments were made and approved by Ms Walkom. Fabric printed with the Covent Garden artwork was produced.
75 Seafolly then used fabric bearing the Covent Garden artwork to manufacture various styles of swimwear for its 2010 summer range.
Seafolly’s Senorita artwork
76 At some time prior to September 2009, Ms Walkom decided that she wanted to “manufacture garments from a fabric with smocking and featuring an embroidery design”.
77 In about September 2009, Ms Walkom and Ms Antao sourced examples of smocking from a fabric manufacturer in China to provide an indication of the type of smocking that the fabric manufacturer could achieve. The samples were not manufactured on lycra, the fabric used to create Seafolly’s swimwear. Ms Walkom stated that the samples included some small and large diamond patterns. She did not agree, however, that smocking was regularly, or even commonly, of a diagonal zigzag or diamond pattern.
78 Ms Walkom told Ms Antao that she wanted “an embroidery design created which could be printed on fabric with smocking that could then be used to manufacture swimwear bras and pants”. She wished to find out what the manufacturer could do, and to work around the constraints.
79 In September or early October 2009, Ms Antao briefed Ms Coundouris to develop an embroidery design to be used on fabric with smocking. Ms Antao provided Ms Coundouris with samples of smocking on fabric that she had received from the manufacturer in China.
80 In cross-examination, Ms Antao stated:
Ms Coundouris’ task was to actually design a brand new design. We had no starting point for the design … Other than the concept of – that you could embroider onto shirring so that was an initial new concept, something that the factories had developed, and then Ms Coundouris’ job was to create our own design of the embroidered aspect of this. So the shirring aspect is one part of it but the embroider [sic] is the part that we developed. We didn’t develop the shirring.
81 Ms Coundouris, who had no previous experience in creating embroidery designs for use on fabric with smocking, liaised with Seafolly’s pattern maker, Michelle Bremer, to work out how many lines of shirring would be included in each garment style. Ms Coundouris regarded shirring as the elasticised threading stitched in horizontal lines across, and thus gathering, the fabric, onto which the embroidery stitching must catch. In designing the embroidery, it was therefore necessary to know how many shirred lines the fabric would contain. Ms Coundouris stated that smocking was completely new to her and that she did not know how the smocking samples were produced. Nevertheless, she understood that her design would be attached to the shirred line or folded fabric.
82 Between about 8 September and 1 December 2009, Ms Coundouris created various embroidery designs for use on fabric with smocking, which she showed to Ms Antao and Ms Walkom for approval.
83 Ms Walkom and Ms Antao each deposed to the “significant trial and error in the process as the smocking fabric was difficult to work with”.
84 On or about 9 October 2009, Ms Coundouris created diamond embroidery designs for use on fabric with smocking, which Ms Walkom approved.
85 Ms Coundouris’ designs were sent to Seafolly’s garment manufacturer in China, which subsequently supplied samples of the designs applied to fabric with shirring for approval.
86 After receiving the samples, Ms Antao asked Ms Coundouris to make changes in order to simplify the design.
87 Ms Coundouris incorporated the requested changes into a new version of the artwork, which Ms Walkom approved. The designs as altered were sent to Seafolly’s garment manufacturer in China, which subsequently provided further samples.
88 Ms Coundouris could not recall how many times different versions of the designs were sent to the manufacturer or how many times Ms Antao asked her to make changes. Ms Antao deposed that she and Ms Walkom instructed Ms Coundouris to “keep simplifying the embroidery designs”.
89 On or about 1 December 2009, Ms Coundouris completed her final embroidery design (the Senorita artwork).
90 On or about 1 December 2009, Ms Walkom approved the final embroidery artwork and the final “colourways”. The artwork then was sent to Seafolly’s manufacturer.
91 On or about 18 December 2009, Ms Walkom and Ms Antao received samples of swimwear containing the embroidery artwork. As the double rows of stitching on the swimwear bra looked “too busy”, Ms Walkom and Ms Antao decided to reduce them to a single line.
92 Accordingly, Ms Walkom asked Ms Antao to arrange for further bra samples in which the embroidery was reduced to a single row. Ms Antao marked up photographs of the bra sample with that instruction.
93 Ms Walkom subsequently received the bra samples incorporating the requested change and approved the garments for production.
94 The final design was named “Senorita” and Seafolly swimwear styles featuring the Senorita artwork were released in Seafolly’s summer 2010 range.
The creation of City Beach’s 2011 range
95 Ms Knobel, a senior buyer with City Beach, was chiefly responsible on a day-to-day basis for selecting the styles and “stories” or prints for City Beach’s 2011 range. While the ultimate authority lay with City Beach’s director, Mel Hicks, Ms Knobel was the effective decision-maker.
96 Ms Knobel, in cross-examination, acknowledged that City Beach had purchased a Covent Garden garment, an English Rose garment and a Senorita garment. Ms Knobel either made the purchases herself or instructed someone to do so in the course of her research. Ms Knobel’s affidavits nevertheless made no reference to the purchase of Seafolly garments.
97 City Beach had from time to time engaged 2Chillies, a design company, to prepare designs. On 13 January 2011, Ms Knobel met Mr Nielsen, a director of 2Chillies, at City Beach’s head office to discuss ideas for City Beach’s ladies’ swimwear range for the 2011/2012 summer season, including “water colour floral prints”, “white based floral prints” and “rose floral prints”. At the end of the meeting, Ms Knobel gave Mr Nielsen photographs of different bikinis in the market for inspiration. One of the photographs showed a Seafolly Covent Garden garment.
98 On 17 January 2011, Ms Knobel followed up with an email to Mr Nielsen stating that she had attached “swim samples” and that the “prints can be another talking point when I see more of what you guys have come up with so far…”. The email attached three pictures of bikini garments, one of which was a photograph of a Seafolly English Rose garment (a bikini top). Ms Knobel deposed that this email was not a request for 2Chillies to design any specific print. She deposed that:
My intention, in sending the photographs, was to provide 2Chillies with a better idea of the look or style of the prints that City Beach wanted developed.
99 She identified the use of “floral prints” and “rose prints” as a “popular trend” at that time.
100 Later that day, Ms Knobel emailed Mr Nielsen asking him to “come up with a [b]ikini along the lines of the Sierra range that 2Chillies did”. The Sierra range was a line of swimwear successfully sold by City Beach in 2009-2010, bearing a print known as Sierra, which was purchased from its designer, 2Chillies. Ms Knobel attached pictures of a dress (the City Beach border print dress), which City Beach had purchased from a Sydney supplier and sold in multiples during 2010-2011. She considered that the border print dress resembled the Sierra print, particularly in that they were both border (or placement) prints in which the print does not cover the entire garment.
101 On or about 18 January 2011, Ms Knobel telephoned Mr Nielsen. She deposed that she told him that City Beach wanted 2Chillies to develop various prints for a “swimmer”, including a “rose floral print”. She advised him that the attachments to her email dated 17 January 2011, which included a photograph of Seafolly’s English Rose garment (bikini top), were part of City Beach’s “inspiration for developing a rose floral print”.
102 On 19 January 2011, Ms Dunlop emailed Mr Nielsen and stated “please find attached more print direction. ROSE PRINT – Versions of this print with white base”. Ms Dunlop attached a scanned copy of a swatch from dress, which had a black background filled with tightly packed multi-coloured roses (the City Beach rose print dress).
103 On 20 January 2011, Ms Dunlop emailed Mr Nielsen. She asked 2Chillies to draw up designs for a number of prints, including:
SIERRA UPDATE
Please update this print and draw up in 2 colourways
Black base – Frill front bandeau and frill pant
White base – Frill front bandeau and frill pant
…
ROSE PRINT
Please draw up versions of this print with white base.
Styling to be bandeau shape with contrast bagged out tie at CF and tie side pant with contrast bagged out ties at each side.
104 Ms Dunlop attached a number of pictures, including a photograph of a swatch from the City Beach rose print dress and two photographs of the City Beach border print dress. Ms Dunlop deposed that City Beach wanted 2Chillies to create “the rose print based on the swatch but with a white background”. Ms Dunlop deposed that the colours in the City Beach border print dress were to be used in updating the Sierra print.
105 Mr Nielsen responded to Ms Dunlop’s email confirming that 2Chillies would draw up the requested designs.
106 On 24 January 2011 at 10.55 am, Ms Knobel emailed Mr Nielsen (copying in Ms Dunlop and Ms Hanger) stating that City Beach proposed to order a number of swimwear separates, including:
7. Rose Print – Bandeau – (New print based off [the] City Beach [rose print] dress)
…
11. Sierra Update – (New Print refer to [the City Beach border print] dress) White Base with multi colours -
12. Sierra update – (New print refer to [the City Beach border print] dress) Black Base with multi colours – White frill
107 Ms Knobel attached to her email a number of photographs, including a photograph of a swatch from the City Beach rose print dress and a photograph of the City Beach border print dress.
108 At 11.29 am, Ms Knobel emailed Mr Nielsen with the subject line “attached is just another print reference for a sierra update – similar to [the City Beach border print] dress”. The email attached a photograph of the Seafolly Covent Garden bikini top.
109 At 11.34 am, Ms Knobel emailed Mr Nielsen instructions about the shapes of the bikini sets. She attached a number of photographs of bikinis and dresses, including two pictures of Seafolly English Rose bikini tops.
110 At 11.45 am, Ms Knobel emailed Mr Nielsen with the subject line “SHAPE REFERENCES – FOR NEW PRINTS”. She stated “[p]lease see attached NEW SHAPE options … these are for Fiesta prints only”. She attached photographs of various garments, including photographs of a Seafolly Covent Garden bikini top and a Seafolly English Rose bikini top.
111 At 2.05 pm, Ms Knobel emailed Mr Nielsen and stated:
In reference to the white base multi floral Set we are doing... please see the attached City beach dress.
This has been one of our best sellers so we would like to translate this print into a set.
This dress is direct out of China, so we have no problems copying this print.
…
Top shape is to be a bandeau.
112 Ms Knobel attached a picture of a dress she described as the “Soho Floral dress” and a photograph of a Seafolly English Rose bikini top. Ms Knobel deposed that she attached the photograph of the English Rose garment in order to reinforce to Mr Nielsen that she wanted the bikini to be a bandeau shape.
The Sienna print
113 On 31 January 2011, Ms Musso-Smith of 2Chillies emailed Ms Knobel, Ms Dunlop and Ms Hanger, seeking clarification of Ms Knobel’s request that 2Chillies prepare an updated Sierra print. Ms Musso-Smith attached a photograph of a Seafolly Covent Garden garment and a photograph of the City Beach border print dress. Ms Musso-Smith stated:
In your pictures attached; the artwork on the bikini top is not a ‘border’ print like the previous season’s SIERRA print used to be.
Does this mean you DO NOT want a ‘border’ print?
OR are you just referring to these pictures as an indication of the type of flower and colours you want to use?
Could you please provide added information before we proceed with developing the artwork so we are sure we are doing the right thing for you?
114 Ms Hanger responded:
Karyn [Knobel] would still like a border print. The two pictures she provided were just for direction with flowers and colour.
115 In her affidavit Ms Hanger asserted that when she used the word “direction” she meant that 2Chillies should use the prints, including Seafolly’s Covent Garden print as inspiration. In cross-examination, however, she agreed that, at Ms Knobel’s direction, she provided the two pictures for “direction, flowers and colours”.
116 Ms Musso-Smith confirmed that City Beach would commence work on the artwork for the updated Sierra print. She understood that City Beach required “a border print” and that the pictures indicated the required “direction of the flowers and colours”.
117 Ms Knobel deposed that, on or about 31 January 2011, she advised Ms Musso-Smith by telephone that the Seafolly Covent Garden print “was only to be used as inspiration for the types of colours (being bright, vibrant colours)” to be used in the updated Sierra print.
118 Ms Knobel initially denied that she instructed Ms Musso-Smith to use the Seafolly Covent Garden garment as inspiration for the flowers and colours as well. She ultimately conceded, however, that the photographs of both the Seafolly Covent Garden garment and the City Beach border print dress were intended to provide inspiration for the “type of flowers and colours” and testified that by type she meant “different shapes of flowers”.
119 Ms Thompson, then a designer at 2Chillies, was asked to update the Sierra print and was given a photograph of the City Beach border print dress and a photograph of a Seafolly Covent Garden bikini top. She testified that her instructions were to produce a border print, like the Sierra print, and to use the two pictures “for the style of the actual shapes of the flowers, and the style of artwork” and colour.
120 Ms Thompson testified that she tried to use the City Beach dress for “inspiration in terms of the flower shapes” and “obviously trying to steer away from the Seafolly one … Because it’s Seafolly”. She painted the flowers using watercolours on paper and then altered the colours, making them more vibrant, on a computer in Photoshop, before turning the print into a border print. At trial, she acknowledged obvious similarities between her design and the Covent Garden garment although, at the time, she had not thought there was a problem.
121 On 1 February 2011, Ms Musso-Smith sent Ms Knobel, Ms Dunlop and Ms Hanger an email with the subject line “updated version of the ‘SIERRA’ print”. She attached drawings featuring artwork for the print prepared by 2Chillies in white and black colour ways. Ms Musso-Smith stated:
In reply to your request for an updated version of ‘SIERRA’ Print ...
We have developed this print referring to the picture you sent us and using similar flowers and colours …
122 On 3 February 2011, Ms Knobel emailed Ms Dunlop and Ms Hanger instructing them to “go ahead” with orders for the Sienna print in black and white colour ways.
123 On 10 February 2011, Ms Hanger emailed Ms Musso-Smith with the subject line “sierra update” and stated “[t]his colour way of the Sierra update is confirmed”. The print was subsequently referred to as the Sienna print. Ms Musso-Smith responded to Ms Hanger, confirming the style numbers for the Sienna print bandeau top and pant.
124 On 11 February 2011, Ms Musso-Smith emailed Ms Knobel, Ms Hanger and Ms Dunlop and attached final drawings for approval for the Sienna print bandeau and pant in black and white colour ways.
125 On 10 March 2011, Ms Musso-Smith emailed Ms Knobel, Ms Dunlop and Ms Hanger regarding the “Sienna white one-piece” stating that 2Chillies had drawn the design as an “all-over print” rather than a border print for the one-piece garment and attaching relevant artwork.
126 On 12 May 2011, Ms Musso-Smith emailed Ms Knobel, Ms Dunlop and Ms Hanger advising that 2Chillies had posted a number of strike-offs to City Beach, including garments bearing the Sienna print in black and in white and requesting feedback.
127 On 13 May 2011, Ms Dunlop emailed Ms Musso-Smith, Ms Knobel and Ms Hanger approving the Sienna print in black and white colour ways.
128 On 18 May 2011, Ms Dunlop emailed Ms Musso-Smith providing comments on the strike-off samples. Ms Dunlop advised that the bandeau in the Sienna print in the white colour way was approved. She asked 2Chillies re- position the Sienna print on the pant so that it featured more of the print.
The Rosette print
129 On 11 February 2011, Ms Musso-Smith also sent Ms Knobel, Ms Hanger and Ms Dunlop a summary of styles City Beach had ordered from 2Chillies thus far, and all pending styles. She also sought confirmation of the shape of the rose print bikinis.
130 Ms Thompson completed 2Chillies’ first attempt at the “rose print” City Beach had requested, inspired by the print used for the City Beach rose print dress.
131 Ms Knobel rejected Ms Thompson’s attempt at a rose print as “ugly”.
132 On 21 February 2011, on Ms Knobel’s direction, Ms Hanger emailed Ms Musso-Smith attaching, inter alia, photographs of a Seafolly English Rose bikini top and a black based multi-colour rose “Forever 21” bikini pant. Ms Hanger stated:
Can you please change the attached print to be as per attached pictures.
Please see the below comments.
• Please make the roses the same sizes as per the attached white base seafolly picture attached we want some bigger roses and some small roses.
• Please use the same colour tones of the attached bikini pant with the black base.
• We don’t not want the white/grey flower in this print please just choose another pink tone that would sit well in this print.
133 Ms Hanger deposed that Ms Knobel directed her to provide the photograph of the Seafolly English Rose garment to 2Chillies in order to indicate the “sort of roses” that City Beach wanted 2Chillies to design. In cross-examination, Ms Hanger agreed that by “design” she meant:
… the whole design of the print, the spacing between the flowers, the colours of the flowers, the shape of the flowers, the size of the flowers, the leaves … [a]nything to do with the design …
134 She testified that it was easiest and most effective to provide 2Chillies with visual, as opposed to verbal, direction and inspiration.
135 Ms Knobel conceded in cross-examination that, at this point in time, City Beach provided only two photographs to 2Chillies for “inspiration” in relation to the Rosette print, one of which was the photograph of the Seafolly English Rose bikini top.
136 On 22 February 2011, Ms Musso-Smith replied that City Beach’s instructions were “noted and clear”.
137 On 25 February 2011, Ms Musso-Smith sent Ms Dunlop, Ms Knobel, Ms Hanger and another an email containing the following “ROSE PRINT as requested” (the “first Rosette print”):
138 Ms Love, a freelance designer at 2Chillies, designed the first Rosette print. She was given a photograph of a Seafolly English Rose garment and photograph of a Forever 21 bikini pant. She was instructed “to create a print that had that feel” and she “probably” had regard more to the Seafolly English Rose garment. She stated that her instructions were “[t]o have a look and feel like the Seafolly one”. While she could not recall her further details of instructions, Ms Love stated “generally when we were given – like pictures for inspiration, that was usually what the client would want, that feeling – that feeling in the print, but I can’t recall if they were the exact words, but it definitely wasn’t ‘for inspiration’”.
139 Ms Love testified that while she designed the first Rosette print, Ms Thompson made the changes requested by City Beach and produced the subsequent versions of the print. Ms Love observed that there were “many changes” to the print and “we did try to make it more different, but it did keep getting changed close back to the Seafolly one … [we were trying to make it] more original”.
140 Ms Dunlop emailed Ms Musso-Smith instructing her to change the colours of the roses (shades of pink to replace the orange shades) and leaves (green rather than blue) in the print and to make the leaves 10% smaller.
141 Ms Musso-Smith subsequently sent Ms Dunlop the reworked print (the “second Rosette print”).
142 On 28 February 2011, Ms Knobel ordered swimwear garments bearing a print known as “Strawberries and Cream” from 2Chillies.
143 On 2 March 2011, a series of emails were exchanged between Ms Knobel and persons at 2Chillies.
144 At 11.58 am, Ms Knobel emailed Mr Nielsen (copying in Ms Musso-Smith and others) pictures from Seafolly’s website, including pictures of Seafolly’s English Rose and Covent Garden garments with the subject line “ROSE FLORAL IDEAS – calling you regarding this now …”. Ms Knobel deposed that her email concerned “a new rose floral print” rather than the Rosette print. The email attached eight photographs of women in bikinis, a number of which Ms Knobel knew to be Seafolly English Rose and Covent Garden garments. She testified that she had found the photographs on the internet, and possibly on Seafolly’s website.
145 At 2.02 pm, Ms Knobel sent Ms Musso-Smith an email with four photographs of bikini tops or pants, including a photograph of a Seafolly English Rose bikini top with the subject line “ROSE PRINT SEPS – please call me …”. Ms Knobel deposed that the email referred to the shape or three dimensional elements of the garments and not to the artwork.
146 Ms Knobel deposed that, later that same day, she instructed Ms Musso-Smith to change “the colours of the rose floral print … so that the roses contained within had more pink shades and the leaves green”.
147 On 3 March 2011, Ms Musso-Smith advised Ms Knobel by email that if her requested changes were made, the new rose print 2Chillies was designing would so closely resemble 2Chillies existing “Strawberries and Cream” print that City Beach might simply prefer to purchase it from 2Chillies range, rather than proceeding with its new requests. The email asked if City Beach still wished to proceed with its requests in the white colour way. The email attached the following requests, two of which referred to a “rose print similar to Seafolly print (pictured below)” and displayed photographs of Seafolly English Rose bikini tops.
148 Ms Musso-Smith acknowledged that in describing the “first request” as the creation of a print “similar to” Seafolly’s English Rose garment, she understood that City Beach wanted “a rose print, something similar to Seafolly, or in other words, inspired by Seafolly”. She understood that City Beach’s “third request” was for “that same print again, the rose print, similar to the Seafolly print, … two colour ways, white and black, and then the shape is as the picture below, but adding piping to the seams”.
149 Ms Knobel asserted that she saw Ms Musso-Smith’s email as relating to the shape of the garment, not the print. If that were so, however, the reference to the Strawberries and Cream print is inexplicable.
150 Ms Knobel deposed that she spoke to Ms Musso-Smith later that day and confirmed that 2Chillies was to draw up the shapes, not the print, of the separate styles set out in Ms Musso-Smith’s email. Ms Musso-Smith then emailed Ms Knobel, referring to their conversation and confirmed that “we’re still going ahead with all of this (that is, the three requests), thanks for clarifying this”.
151 Ms Knobel advised Mr Nielsen that City Beach did not wish to use 2Chillies’ Strawberries and Cream print because it wanted to develop its own rose floral print.
152 On 4 March 2011, Ms Knobel received the five emails from Ms Musso-Smith sent Ms Knobel five emails attaching drawings of bikinis with rose prints prepared by Ms Thompson and seeking approvals.
153 Ms Knobel deposed that these emails all related to shape, not print, as City Beach was yet to approve the print.
154 Later that day, Ms Musso-Smith emailed Ms Thompson and stated in relation to “2. CB TANKINI SET REQUEST” referring to a “Seafolly knock off – ROSE PRINT” as follows:
PRINT:
Seafolly knock off – ROSE PRINT
BLACK C/WAY ONLY (no white cway)
SHAPE:
155 In cross-examination, Ms Musso-Smith explained her reference to “a Seafolly knock off” as “loosely talking internally where instead of using the correct code number … I’m just giving it a description which is what that is, but that’s not to say that … is accurate”
156 On 7 March 2011, Ms Musso-Smith forwarded an email chain, including the email extracted above between Ms Musso-Smith and Ms Thompson, to Ms Knobel, Ms Dunlop and Ms Hanger seeking confirmation for production. Ms Knobel deposed that she did not know why the print was described as the “Seafolly knock off”, as City Beach’s intention was to create an original print.
157 Within the 2Chillies design team, concern was building because the rose print they were designing at City Beach’s behest appeared to resemble the Seafolly English Rose print. On 7 March 2011, Ms Musso-Smith emailed Mr Nielsen stating:
Here is the picture of the City Beach artwork and the 2nd picture is the Seafolly Print.
As I mentioned, the styles are not the same – it’s just the artwork.
158 Ms Musso-Smith raised her concern with Mr Nielsen on the instructions of Ms Bobsien-Christie, the head of the design team, who, as she confirmed at trial, “felt that [the Rosette print] looked like the Seafolly print … it looked close to the Seafolly print”.
159 Later that day, Mr Nielsen forwarded Ms Musso-Smith’s email to Ms Knobel and Ms Dunlop and asked City Beach to accept responsibility if the new rose print were too close to Seafolly’s print. Mr Nielsen’s email stated:
Given the print below is close to that of seafolly , I would like your confirmation that you accept the responsibility for the design should seafolly react to it.
160 Mr Nielsen testified:
My concerns were that … if any reference was to be made to a Seafolly garment or a [sic] …attempted variation or version of a Seafolly garment were to be made, that I wasn’t prepared to accept responsibility for or liability for that particular print that was being done. And therefore, I expressed my concerns to City Beach about that and requested that Karyn [Knobel] and/or the owner of City Beach accept and acknowledge responsibility should they wish to take that path.
…
[M]y concern arose from the beginning were a reference was made to a Seafolly garment and being asked to create something similar to a Seafolly garment to me just flagged an issue …
161 When Ms Dunlop raised the issue with Mel Hicks, one of City Beach’s directors, he refused to accept responsibility, stating that City Beach did not want a print resembling Seafolly’s print and that he wanted the print used by City Beach to be a different print.
162 Later again that same day, Ms Knobel emailed Ms Musso-Smith stating:
Mel will not be signing anything, we would like to amend the print. I would like to keep the courings [sic] the same but they [sic] shape of the flowers can change. Chloe [Dunlop] will call you regarding this now.
163 Ms Dunlop also told Ms Musso-Smith that City Beach would not take responsibility for the print and asked her to rework it to look “less like the Seafolly print”.
164 In March 2011, Ms Musso-Smith asked Ms Thurecht, who was employed by 2Chillies, whether the Rosette print should include other design elements. Ms Thurecht suggested the inclusion of tiny rose buds or “baby’s breath” flowers.
165 On 8 March 2011, Ms Musso-Smith sent Ms Dunlop a third version of the Rosette print, stating that the print had been “re-worked so it looks ‘less’ like the Seafolly print but the concept and colours are still the same.” She included the following drawing of the reworked print (the “third Rosette print”):
166 According to Ms Musso-Smith, the third version was achieved by removing some roses and adding two obviously different types of flowers and some rosebuds.
167 Ms Thompson testified that the changes were made “[j]ust to try and differentiate [the print] from a white based rose print which could possibly be interpreted as looking like Seafolly[’s] [print]”.
168 Both Ms Knobel and Ms Dunlop initially deposed that City Beach had wanted to develop a rose floral print containing both roses and other types of flowers. In cross-examination, however, Ms Knobel conceded that it was 2Chillies’ idea, not City Beach’s, to insert a flower other than a rose into the Fiesta Rosette print. Later she testified that “I couldn’t tell you” whether or not the idea came from 2Chillies.
169 Ms Dunlop ultimately conceded that City Beach’s objective was to produce a rose print, not a floral print with roses, and that it was 2Chillies’ idea to include flowers other than roses.
170 On 11 March 2011, Ms Dunlop sent Ms Musso-Smith (copying in Ms Thompson and others) comments on the “re-worked rose print” (the third Rosette print extracted above at paragraph 165). She included a marked up a copy of the print indicating that 2Chillies should remove two of the three newly inserted flowers (included to differentiate the print from Seafolly’s print) and replace them with the “original roses”.
171 On receiving Ms Dunlop’s instructions, Ms Thompson “had to remove a lot of the different flowers that I just placed in and replaced them back with the roses, except for one of the flowers”. Ms Thompson found the design process “very frustrating … [b]ecause we were trying to make it different and not so similar, and I felt like we were reverting back to what we had started with”.
172 Ms Musso-Smith also thought that Ms Dunlop’s instructions would lead to the print “reverting back to the original design bar one small flower”.
173 On 14 March 2011, at 9.34 am, Ms Musso-Smith responded to Ms Dunlop, advising that her requested changes would mean “basically reverting back to the original artwork – other than the one small, new flower”. She requested City Beach to accept responsibility for the design.
174 Ms Dunlop responded at 9.51 am (copying in Ms Knobel and Mr Nielsen) stating that she would again discuss the matter with Mr Hicks.
175 At 9.53 am Mr Nielsen responded to Ms Dunlop’s email and stated: “We are happy with the print. It shouldn’t be an issue”. There was some uncertainty about which version of the print Mr Nielsen was “happy with”. He was not copied into Ms Dunlop’s email requesting changes to the third version of the Rosette print which had included the changes to distance it from Seafolly. Rather, he was copied into Ms Musso-Smith’s response, which although it included Ms Dunlop’s email in the chain, did not include her marked up attachment illustrating the changes she required (and did include a picture of the third Rosette print, which contained the new types of flowers inserted by 2Chillies).
176 Mr Nielsen could not specifically recall which version of the print he was referring to in his email, but testified that 2Chillies felt that the third version of the Rosette print was “very different” from the Seafolly print. I conclude that Mr Nielsen’s email was referring to the third version of the Rosette print. Mr Nielsen testified that he no longer made any demands for indemnities after that time because:
I was happy with what I had seen, that if that was what was in fact going to go through to production that I believed that it shouldn’t be an issue. And given the nature of City Beach, I assumed that they were not going to put anything in writing. However, I had voiced my concerns pretty strongly about where we were positioned.
177 Ms Dunlop deposed that, based on Mr Nielsen’s email, she was satisfied that the third Rosette print, but as reworked in accordance with her instructions, was “sufficiently different” from Seafolly’s English Rose print. In cross-examination, she first testified that she believed Mr Nielsen was referring to her request for amendments and the reworked print incorporating those amendments (which she had yet to receive). She conceded, however, that she may have been mistaken.
178 At 3.14 pm on 14 March 2011, Ms Musso-Smith emailed Ms Dunlop and others a fourth version of the Rosette print which included small rose buds and more white space to differentiate it from the Seafolly print. Ms Musso-Smith stated:
Please see the ROSE PRINT artwork re-worked again.. we have added little rose buds to this to make it different but its [sic] still in the pretty rose theme. We have also added some more white space to the background. We think this is different enough now from the Seafolly, what do you think? Do you like it?
179 The email attached the following print:
180 Ms Musso-Smith also forwarded the following chain of emails between 2Chillies employees, which demonstrated that 2Chillies staff remained concerned about the similarity of their design to Seafolly’s English Rose print.
(1) At 10.36 am, Ms Thompson emailed Ms Musso-Smith a further attempt at the Rosette print, which was not in evidence.
(2) At 11.17 am, Ms Musso-Smith forwarded Ms Thompson’s email internally (to unknown recipients) and stated:
Before I send this new artwork to [City Beach], do you both agree this is different enough from the Seafolly print?
Can you have another look because I would hate to offer it to them and then we decide it is still too close… .
To me it still looks quite similar but I could be wrong?
(3) At 12.09 pm, Ms Thompson emailed Mr Nielsen, Ms Musso-Smith and copied Ms Bobsien-Christie, in response to Ms Musso-Smith’s email at 11.17 am, with another version of the Rosette print (not in evidence) and stated:
I have removed the flowers they asked to be removed and have spaced it out to be different from Seafolly and more like one of Jo’s new samples. I have asked Suz [Bobsien-Christie] to have a look and she and I both are still concerned in the similarity to Seafolly’s original rose print.
(4) At 12.16 pm, Ms Musso-Smith responded and stated:
I like the added space in the background however I think it still looks like Seafolly…… unfortunately. Maybe we should add the little, tiny, tiny rose buds/baby’s breath in a bunch into the print like Jess suggested. I think that would change it enough and it is still keeping it in the ‘rose’ theme. Other than that I am out if [sic] ideas of what to do with this.
(5) At 3.01 pm, Ms Thompson emailed Ms Musso-Smith, copying to Ms Bobsien-Christie, a fourth version of the Rosette print and stated “Ok what do you think of this one……..I’m all out of ideas….”.
181 In cross-examination Ms Dunlop conceded that she no longer believed that 2Chillies was happy with the print.
182 Ms Thompson testified that when concerns were raised about City Beach’s requested amendments to the third Rosette print, she reworked the print to create a fourth version. She testified that in the fourth version, “we’ve taken out some of the roses from the print and added in a different shaped flower to make it less of a rose print and more of a floral”. She testified that she “tried to … space it out a little bit more so there’s a lot more white space showing, not so many flowers everywhere [and] then add in some little tiny rosebuds so it’s cute”.
183 At 4.28 pm on 14 March 2011, Ms Dunlop emailed Ms Musso-Smith (and others) requiring that the distinguishing small roses be removed and the spacing change be reversed. The email stated:
The little rose buds are cute but now it is too spacey.
Can they please make it closer together or add one more flower to the repeat?
184 Ms Thompson recalled being told “to change [the print] back”.
185 Ms Musso-Smith found it “frustrating” as the change suggested by Ms Dunlop would cause the design to revert to its original form which was concerningly similar to the Seafolly English Rose print. She testified that 2Chillies had added more space into the print in order to “make it different from Seafolly” but City Beach rejected the change.
186 At 10.38 am on 15 March 2011, Ms Musso-Smith forwarded Ms Dunlop the “NEW ROSE PRINT – re worked” and a chain of emails between herself and Ms Thompson.
187 At 10.43 am, Ms Dunlop asked Ms Musso-Smith for “the new rose-ish prints”.
188 At 10.48 am, Ms Musso-Smith emailed Ms Dunlop warning her that if she made the changes Ms Dunlop required, the design would revert to its original state which had caused concern. Ms Musso-Smith enclosed a picture of an Abercrombie & Fitch print, explaining that it had given 2Chillies the idea of adding “more white space” in the background and stated “[l]et me know how you would like to proceed – its fine to make your changes but again as I mentioned, design are convinced by doing that it [sic] we’ll end up back at square one”.
189 At 4.30 pm, Ms Dunlop sent Ms Knobel a drawing of the fourth version of the Rosette print and a photograph of the Abercrombie & Fitch bikini. Contrary to her initial denials at trial, in the email she made clear that she was aware of 2Chillies’ unease about the Rosette print’s resemblance to Seafolly’s English Rose print.
2chillies is still wigging out about this rose print being too close to seafollys.
The attached is a revised draw up. They have got the ‘inspiration’ from an Abercrombie Bikini that was bought in LA last week.
(emphasis in original)
190 At 5.20 pm, Ms Dunlop again emailed Ms Knobel some images informing her that 2Chillies’ concern that the resemblance to Seafolly was not addressed. She explained that the images included:
The original, the reworked with the crazy flowers and the latest draw up with the white background. In the folder there is also the Abercrombie sample and a photo of the original Folly sample. (I don’t even want to mention the brand name anymore) I feel like I am going to get shot.
191 At 11.54 am on 16 March 2011, Ms Dunlop instructed Ms Musso-Smith by email to include one of the larger non-rose flowers from the third version of the Rosette print in the fourth version.
192 Ms Musso-Smith reworked the fourth version of the Rosette print in accordance with Ms Dunlop’s instructions and emailed it to her. This was the final version of the Rosette print.
193 At 3.00 pm, Ms Dunlop emailed Ms Knobel the final version of the Rosette print with the subject line “NEWEST ROSE PRINT! – THINK THIS COULD BE IT!”. At 3.01 pm, she responded to Ms Musso-Smith with a “smiling face” device.
194 In further exchanges that afternoon, Ms Knobel asked Ms Dunlop whether she liked the added non-rose flower, which Ms Dunlop stated “makes it very different from Seafolly”.
195 On 17 March 2011, Ms Knobel asked Ms Dunlop whether she would like anything else, as otherwise “we’ll just approve this”.
196 On 24 March 2011, Ms Dunlop informed Ms Musso-Smith that final version of the Rosette print (shown below) was confirmed.
197 In late June 2011, 2Chillies sent City Beach strikes off bearing the final version of the Rosette print with black and white backgrounds.
198 In early July 2011, Ms Musso-Smith and Ms Dunlop exchanged comments about the shapes of the garments and the colours. Ms Dunlop was concerned about the “maroon” colours in the roses but Ms Musso-Smith advised that:
The girls in design … LOVED it … When asking them finally about the ‘purply’ colour in the print, they all said NO they like it and wouldn’t change anything.
199 On 4 July 2011, Ms Thurecht, in response to a query from Ms Dunlop, stated:
You can’t see the purple when it’s made up at all and the purple does suit the cooler greens in the print … If it was me I would probably change the purple.
200 On 5 July 2011, Ms Dunlop asked Ms Musso-Smith “to change the colours of the roses which were more maroon and purple so that the shades used were more pink and red”. Ms Musso-Smith did so and sent Ms Dunlop an updated final version of the Rosette print with the requested colour changes.
201 On 7 July 2011, Ms Dunlop confirmed to Ms Musso-Smith that City Beach would proceed with “the Rose print as per the original strike-off and samples that [City Beach had] received”. Ms Dunlop deposed that she was referring to the strike-offs set out at paragraph 197. She could not recall why she changed her instructions.
202 In July 2011, City Beach commenced buying and selling garments bearing the final version of the Rosette print.
203 In or about November 2011, City Beach ordered new styles of bikini separates and sets bearing the Rosette print. 2Chillies prepared further strike-offs with a print that had “more purple colours” than the earlier production. Ms Dunlop and Mr Nielsen exchanged emails regarding the colour differences. City Beach then produced garments using a new printer with a better quality fabric print. As there were no garments bearing the Rosette print in store at that time, Ms Dunlop thought that the slight difference in colouring arising from the new printer would not be noticeable.
The Richelle embroidery
204 In late January, Ms Knobel instructed Ms Bon to “coordinate the production of samples of a bandeau and a pant which were to feature a shirred pattern”.
205 Accordingly, on 28 January 2011, Ms Bon emailed Welon (China) Ltd (“Welon”), a Chinese company that, amongst other things, develops clothing, photographs of a Seafolly Senorita one-piece swimsuit accompanied by a handwritten instruction to use the top row of the embroidery for a pant. Ms Bon requested a sample of a bandeau and pant featuring a shirred pattern and smocking.
206 Ms Bon instructed Welon to develop a “bandeau with shirred pattern” and a “tie sides pants with shirred pattern”. The bandeau shape was to be “as per the” original sent and the pant was to have “a line of the shirred detail as per the Top above, on the top of the pant”. For both the bandeau and the pant, she instructed “[a]ll pattern details to stay the same as original and also the colour of the surface thread – off white”.
207 Ms Bon arranged for a one-piece Seafolly Senorita swimsuit to be delivered to Welon.
208 Ms Knobel acknowledged that she “probably” herself purchased at least one of Seafolly’s Senorita garments or arranged for someone else at City Beach to purchase it. Ms Knobel then gave the Senorita garment to Ms Bon. Ms Knobel denied, however, that she provided Ms Bon with the Senorita garment so that Ms Bon could instruct Welon to copy the embroidery.
209 In cross-examination, Ms Bon stated that she asked Welon to make the sample “as close as possible to what the original looks like with the shirring idea” and agreed that her original instructions were “to copy the shirring in the [Seafolly] garment”. Ms Bon agreed that the only reference she gave to Welon (China) Ltd for the stitching was the Seafolly Senorita garment itself.
210 On 18 March 2011, after receiving from Welon samples of a bandeau and pant featuring the Richelle embroidery, Ms Bon sent Welon comments. She attached photographs of the samples and a photograph of a Seafolly Senorita garment with handwritten instructions, including to use the top row of the embroidery on the Senorita garment for the pant.
211 In cross-examination Ms Bon agreed that the only instruction she gave Welon in relation to the pattern was to reduce the size of the pattern, which should otherwise remain the same. She conceded that her intention at this stage was to copy the Seafolly Senorita garment’s stitching.
212 Sometime around May 2011, Welon provided Ms Bon with new and amended samples of a bandeau and pant featuring the Richelle embroidery. Ms Bon conceded Welon copied the Seafolly stitching. The size of the pattern was reduced by squeezing the zigzagging so that it crossed over a little more on the shirt pattern. Ms Bon stated that it was Welon’s idea to use small and large diamonds.
213 After some further amendments to the bandeau and pant which were unrelated to the stitching, Ms Bon consulted with Ms Knobel and approved the Richelle embroidery samples for manufacture.
City Beach’s sale of garments with the relevant prints
214 Mr Wilson deposed that by 29 April 2013, City Beach had sold:
(1) 749 units of the Richelle garments;
(2) 2,388 units of Sienna garments; and
(3) 8,155 units of the Rosette garments.
The Relevant legislation and legal principles
215 Section 10 of the Copyright Act defines “artistic work” as:
(a) a painting, sculpture, drawing, engraving or photograph, whether the work is of artistic quality or not;
(b) a building or a model of a building, whether the building or model is of artistic quality or not; or
(c) a work of artistic craftsmanship whether or not mentioned in paragraph (a) or (b);
but does not include a circuit layout within the meaning of the Circuit Layouts Act 1989.
216 Section 10 of the Copyright Act defines “drawing” to include a “diagram, map, chart or plan”.
217 Subject to the respondent’s submission that copyright did not subsist in the Senorita artwork discussed below, it was not disputed that each of Seafolly’s English Rose, Covent Garden and Senorita artworks constituted an artistic work within the meaning of s 10(a) of the Copyright Act.
218 The Copyright Act confers a number of exclusive rights on the owner of copyright in works and other subject-matters.
219 Section 31(1)(b) of the Copyright Act relevantly provides that:
For the purposes of this Act, unless the contrary intention appears, copyright, in relation to a work, is the exclusive right:
…
(b) in the case of an artistic work, to do all or any of the following acts:
(i) to reproduce the work in a material form;
(ii) to publish the work;
(iii) to communicate the work to the public; …
220 Section 36(1) of the Copyright Act provides:
36 Infringement by doing acts comprised in the copyright
(1) Subject to this Act, the copyright in a literary, dramatic, musical or artistic work is infringed by a person who, not being the owner of the copyright, and without the licence of the owner of the copyright, does in Australia, or authorizes the doing in Australia of, any act comprised in the copyright.
221 Section 14(1) of the Copyright Act provides:
14 Acts done in relation to substantial part of work or other subject-matter deemed to be done in relation to the whole
(1) In this Act, unless the contrary intention appears:
(a) a reference to the doing of an act in relation to a work or other subject-matter shall be read as including a reference to the doing of that act in relation to a substantial part of the work or other subject-matter; and
(b) a reference to a reproduction, adaptation or copy of a work shall be read as including a reference to a reproduction, adaptation or copy of a substantial part of the work, as the case may be.
222 Accordingly, by the combined effect of ss 36(1) and 14(1) of the Copyright Act, the applicant had the exclusive right to reproduce in a material form a substantial part of the English Rose and Covent Garden artworks and (subject to the subsistence of copyright) the Senorita artwork. It was not contended that the respondent had the applicant’s licence or authority to do any of the acts comprised in its copyright.
223 In contrast to the exclusive rights which, by s 31(1)(a), comprise the copyright in literary, dramatic and musical works, the exclusive rights which, by s 31(1)(b), comprise the copyright in artistic works, do not include the right to make an adaptation.
224 The respondent contended that, from the omission of the exclusive right to make an adaptation, it followed that the adaptation of an artistic work was not the exclusive province of the copyright owner but was free to all. Accordingly, the infringement of an artistic work required a strict, faithful and exact reproduction, as anything short of that would simply constitute an adaptation which the copyright owner was not entitled to restrain.
225 In my opinion, that submission, for which no specific authority was identified, is contrary to well-established principles.
226 Section 31(2) provides that the generality of the rights to reproduce the [literary, dramatic or musical] work in a material form is not affected by the right to make an adaptation of the work.
227 The Copyright Act does not define “adaptation” at large but in s 10 defines it specifically in relation to various forms of literary works and a musical work. The definitions of adaptation in s 10 of the Copyright Act are particularised. For example, the adaptation of the musical work is an arrangement or transcription of the work. Nevertheless, variations of musical works which are not arrangements or transcriptions, and in which “the aural resemblance need not be resounding or obvious” have been held to infringe: EMI Songs Australia Pty Ltd v Larrikin Music Publishing Pty Ltd (2011) 191 FCR 444 at [86].
228 The term “adaptation” bears very particularised meanings in the Copyright Act, which are not applicable to an artistic work. Accordingly, it does not follow that because the exclusive rights of the owner of copyright in an artistic work do not include the right to make an adaptation, variations or modifications falling short of an exact or very close copy cannot infringe.
229 In Milpurrurru v Indofurn Pty Ltd (1994) 54 FCR 240; 130 ALR 659 (“Milpurrurru”), von Doussa J noted that “adaptation has a technical meaning in the Copyright Act”. His Honour observed that in the case of an artistic work, “[t]he relevant inquiry [was] not whether the disputed [alleged reproductions] are an adaptation but whether [they] reproduce a substantial part of one of the artworks”: at 259.
230 If others were free to make any adaptation of an artistic work falling short of an exact or very close reproduction, the scope and value of the copyright in such a work would be unduly narrow. It would, in any event, be contrary to the clear recognition in numerous authoritative cases that copyright in artistic works may be infringed by reproductions which are neither complete nor exact.
231 In Eagle Homes Pty Ltd v Austec Homes Pty Ltd (1999) 87 FCR 415; [1999] FCA 138 (“Eagle Homes”), the Full Federal Court considered infringement of architectural plans, a form of artistic work which involved simple drawings of the commonplace, without marked originality.
232 Lindgren J (with whom Finkelstein and Weinberg JJ agreed) rejected the proposition that even in that context, despite actual copying, sufficient objective similarity for infringement required a very close resemblance: at [85].
233 Lindgren J concluded at [91] that, once having found actual copying occurred, the primary judge in Eagle Homes had erred in emphasising:
[T]he difficulty of proving infringement in the absence of “marked originality” and the pervasiveness of the commonplace in the plans of project homes. In no case concerning project homes of which I am aware where there has been a finding of actual copying, has it been held that nonetheless the copier will not have infringed copyright unless there is in addition an extraordinarily close resemblance between his or her drawing and the copyright work. Rather, I think that the issue of sufficient objective similarity simply poses in the case of project homes, as in other cases, the usual question whether the copyright drawing can still be seen embedded in the allegedly infringing drawing, that is, whether the allegedly infringing drawing has adopted the “essential features and substance” of the copyright works: Hanfstaengl v Baines & Co [1895] AC 20 at 31 (Lord Shand) …
234 Copyright confers exclusive rights on the owner in relation to the work or other subject matter but it is not a monopoly and may subsist in an indefinite number of identical but independently created works. It is implicit that in order to infringe the exclusive right of the copyright owner, there must be a causal connection between the copyright work and the respondent’s work, as the latter must be derived from the former, whether directly, indirectly, consciously or unconsciously. An intention to copy is unnecessary for infringement: Hanfstaengl v HR Baines & Co Ltd (Hanfstaengl v Empire Palace) [1985] AC 20, although, as discussed below, a defendant’s state of mind is relevant to indirect infringement, damages and, potentially, aspects of determining whether infringement is made out.
235 Copyright does not protect subject matter, information, techniques or methods. Nor does it protect ideas or concepts, as opposed to the form in which they are expressed. The ideas/form of expression dichotomy, frequently invoked as in the present case, may nevertheless be difficult to apply in practice, particularly, for example, where functional requirements dictate numerous and significant aspects of the work. As Lloyd LJ stated in Baigent v Random House Group Ltd (2007) 72 IPR 195 (“Baigent”) at [5]:
No clear principle is or could be laid down in the cases in order to tell whether what is sought to be protected is on the ideas side of the dividing line, or on the expression side.
236 Similarly, copyright, in Anglo-Australian law at least, protects the “look and feel” of a work only to the extent that it is represented by identifiable elements of expression in a material form. Further, as emphasised by the High Court in IceTV Pty Ltd v Nine Network Australia Pty Ltd (2009) 239 CLR 458; [2009] HCA 14 (“IceTV”), copyright contemplates that some legitimate use of the copyright work, as if less than a substantial part is taken, infringement will not be made out.
237 Copyright does not require artistic merit, complexity, excellence or distinction, but in an extreme case, protection may be denied where, for example, the author’s choice of expression of an idea or subject is so limited that the copyright protection would effectively confer a monopoly in the subject matter or idea: see Kenrick & Co v Lawrence & Co (1890) 25 QBD 99.
238 In contrast to the patents regime, copyright does not require novelty or inventiveness. Originality is, however, a pre-condition of its subsistence and is also relevant to infringement, as it informs the concept of a substantial part. The concept of originality in the context of subsistence is not on all fours with the concept operative in the context of infringement.
239 In the context of subsistence, originality is correlative with authorship and means, at its simplest, that the work was not copied but originated with the author. In the context of infringement, when determining whether a substantial part of the copyright work was taken, originality has “a broader aspect”: IceTV at [38] per French CJ, Crennan and Kiefel JJ.
What constitutes a substantial part?
240 In IceTV, the High Court discussed the meaning of originality in the context of infringement. While recognising that the computer program in issue might raise special considerations, the High Court confirmed that in order to infringe, a substantial part of the expression of the copyright work in a qualitative sense must be taken.
241 While substantiality is qualitative rather than quantitative, the reproduction of a very large part of the copyright work might take on “a qualitative mantle” as recognised in Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 480 per Northrop J and 507 per Lockhart and Gummow J, quoting from the first instance decision, CCH Australia Ltd v Accounting Systems 2000 (Developments) Pty Ltd (1991) 20 IPR 555.
242 However, even a quantitatively small part may amount to a substantial part of the copyright work if it constitutes a material or vital element, which is of value or importance to the copyright work as a whole. In Milpurrurru, von Doussa J held that a portion of an unusual border constituting no more than 5%-10% of the copyright work was highly distinctive and striking, and thus substantial: at 261-262.
243 The factors relevant to distinguishing a substantial part of the copyright work from a merely insubstantial part or from an idea or concept have been variously stated and the relative emphasis placed on various elements may shift according to the subject-matter in question. Originality is, however, consistently recognised as important to substantiality.
244 In IceTV, French CJ, Crennan and Kieffel JJ made clear that the degree of originality in the context of subsistence (correlative with authorship) might not suffice for originality in the context of infringement: at [33]-[44].
245 In IceTV, Nine Network expended significant skill and labour in preliminary work for its weekly programme schedule, for which it claimed copyright as an original literary work. IceTV built up its own programme guides by a painstaking process of, inter alia, watching and recording programmes, but used the programmes titles and times set out in the applicant’s schedule. French CJ, Crennan and Kiefel JJ emphasised the degree of originality in the expression of the part of the work reproduced: at [40]. Their Honours observed that in IceTV, the way in which information as to time and title could be conveyed was very limited and was not a form of expression which required particular mental effort or exertion: at [42]. The authors had little, if any choice, in the particular form of expression adopted, as it was essentially dictated by the nature of the information. The expression accordingly “lacked the requisite originality (in the sense explained) for the part to constitute a substantial part”: at [42]. The chronological arrangement of the times was also obvious and prosaic and thus lacked originality: at [43].
246 French CJ and Crennan and Kiefel JJ recognised that although Nine Network expended skill and labour in producing the data and making the programming decisions, partly directed to business considerations, “the critical question is whether skill and labour was directed to the particular form of expression of the time and title information, including its chronological arrangement”: at [54] (emphasis added).
247 In IceTV, Gummow, Hayne and Heydon JJ recognised the potential ambiguity and imprecision of the term “substantial”: at [154]. They endorsed the rejection in Data Access Corporation v Powerflex Services Pty Ltd (1999) 202 CLR 1 at [77]-[87] per Gleeson CJ, McHugh, Gummow and Hayne JJ of the “but for” analysis of substantiality in relation to computer programs, which overly protected the copyright owner’s interests and overlooked the need for qualitative abstraction of the material features of the computer programs: at [159].
248 Their Honours concluded that in Ice TV, the primary judge correctly approached the issue of substantiality by recognising where the expenditure of skill and effort lay: at [124]-[126], [167] (emphasis added). There was, their Honours stated, only extremely modest skill and labour in setting down the selected program time and title information in which matters of fact were inseparable from, and coextensive with, their expression: at [168]-[169]. In contrast, there were detailed and length preparatory steps of making decisions as to the selection and arrangement of programmes for broadcast in particular timeslots, in drafting the synopses and in selecting and arranging the time and title information: at [125]-[126]. Such skill and labour was not directed at the production of the literary work, but at a programme to maximise viewers: at [126].
249 The High Court in IceTV emphasised that if the originality of what was taken did not manifest itself in a form of expression, it would not constitute a substantial part of the work. Where there is virtually no available choice as to how information, data or subject-matters are expressed in a material form, the expression will lack originality in the sense necessary to constitute a substantial part, irrespective of the skill and effort expended to produce what is being expressed.
250 It is also clear that it will not infringe copyright in a work to take aspects that did not originate with the author but only attracted copyright protection when incorporated into a collocation assembled by the exercise of skill and judgment. The author of the collocation would not have copyright in the part or parts of the work which, standing alone, did not originate with him or her: IceTV at [37] per French CJ, Crennan and Kiefel JJ.
251 In Milpurrurru at 260, von Doussa J endorsed Brightman J’s statement in Ravenscroft v Herbert & New English Library Ltd [1980] RPC 193 (“Ravenscroft”) at 203 that four principal matters were to be taken into account in the context of substantiality:
First, the volume of the material taken, bearing in mind that quality is more important than quantity; secondly, how much of such material is the subject matter of copyright and how much is not; thirdly, whether there has been an animus furandi on the part of the defendant; this was treated by Page-Wood VC in Jarrold v Houlston (1857) 3 K & J 708; 69 ER 1294 as equivalent to an intention on the part of the defendant to take for the purpose of saving himself labour; fourthly, the extent to which the plaintiff’s and the defendant’s books are competing works.
252 Accordingly, in Milpurrurru, von Doussa J considered animus furandi very relevant to substantiality. In the present case, the respondent, in reliance on IceTV and Baigent, submitted that animus furandi was no longer relevant to copyright infringement.
253 Animus furandi was traditionally recognised as relevant to the infringement and could tip the balance when the objective resemblance was borderline. In Baigent, however, Lloyd LJ (with whom Rix and Mummery LJJ agreed) observed that animus furandi was relevant when the law was in a very different state and the concept was now a mere “red herring in English copyright law, which “should not be invoked in future”: at [97]. Modern authorities also adopt a circumspect or frankly disapproving approach to the traditional aphorism that “what is worth copying is prima facie worth protecting” (University of London Press Ltd v University Tutorial Press Ltd [1916] 2 Ch 601 at 610 per Peterson J). Nevertheless, the current state of Australian authority does not, on analysis, clearly exclude the relevance of animus furandi to substantiality.
254 IceTV is, on one view, consistent with the High Court’s maintenance of the traditional position. On another view, it may indicate a division of opinion on the relevance of animus furandi. In IceTV, the alleged infringer had performed a great deal of independent work itself. Moreover, the High Court found that the copyright owner had not expended much skill and labour directed to the material form of expression (which presented almost no scope for choice) in contrast to its considerable effort on the programming decisions. While the particular form of expression was taken, it was not a substantial part of the copyright work. French CJ, Crennan and Kiefel stated, in that context, that it was not necessary to consider the relevance of animus furandi. Their Honours referred to Baigent, but prefaced the reference with the word “compare”, rather than unambiguous endorsement: at [55]. Given the context, it is possible that French CJ, Crennan and Kiefel JJ agreed with Lloyd LJ’s analysis. Alternatively, they thought it unnecessary to consider animus furandi because the part taken was not substantial in any event.
255 Gummow, Hayne and Heydon JJ appeared clearly to maintain that animus furandi remains relevant to substantiality.
256 Their Honours stated at [171]:
[I]t is important also to ask whether IceTV acted as it did in preparing the Ice Guide with animus furandi, to take from the Aggregated Guides the time and title information to save itself from effort on its part.
257 The application of the idea/form of expression dichotomy has posed challenges, including in context of artistic works. Opinions not infrequently differ over whether, in a particular case, the line has been crossed.
258 In Elwood Clothing Pty Ltd v Cotton On Clothing Pty Ltd (2008) 172 FCR 580; [2008] FCAFC 197, the Full Court applied the relevant principles in the context of alleged infringement of an artistic work applied to clothing. Their Honours held that the appellant’s copyright in two designs (which were applied to the front and back of t-shirts and to a swing tag or label) had been infringed by the respondent’s designs, which were also applied to t-shirts and swing tags.
259 The designs of both parties consisted of an arrangement of words, numbers and graphics. The respondent conceded that its designers had used the appellant’s designs as a reference to create products with “the same look and feel, yet different”: at [8]. The respondent’s designers conceded that the principal, if not the only, difference between the parties’ designs lay in the content of the lettering.
260 The Full Court found that while the primary judge had correctly identified the appellant’s designs as artistic works rather than literary works, her approach to infringement was erroneous. The primary judge first identified the idea or concept of the appellant’s designs and “deducted” it, identifying that which remained as the protectable expression: at [20]. The primary judge identified the underlying concept as “a central logo surrounded by a V-shaped pattern of arched text, with a distinctive feature of numbers at the shoulder level”: at [21]. Her Honour reasoned that although the respondent copied the v-shaped graphic and the placement of the text and symbols within it, or the form, shape and placement of the graphics, it had not copied the text or the symbols and the respondent’s prints made a different impression: at [64].
261 The Full Court stated that although the texts and symbols distinguished the respondent’s t-shirts, the question was “whether [the respondent] reproduced a substantial part of [the appellant’s] original artistic work”: at [65].
262 The Full Court reiterated at [65] approvingly, the observation of Lord Hoffmann in Designers Guild Ltd v Russell Williams (Textiles) Limited (t/as Washington DC) [2000] 1 WLR 2416 (“Designers Guild”) that it was not necessary in this context that the allegedly infringing work looked like the copyright work, because:
[The question] is whether the features which the judge found to have been copied from Ixia formed a substantial part of Ixia as an artistic work … why, in answering that question, should it be relevant to consider whether Ixia did or did not look like Marguerite?
263 The Full Court noted that the substantial part of a copyright work in the requisite qualitative sense was that which was essential or material, identified by reference to the elements that made the copyright work an original artistic work.
264 The Full Court stated at [66]:
In the present case, what made the Designs original artistic works was the combination of the artistic elements of the Designs that were listed earlier.
265 The Full Court considered the evidence of the creation of the appellant’s designs and the greater effort, skill and time devoted to balancing the various elements on the front and back of the t-shirt, compared with the choice of words and numerals: at [73]. The Full Court also noted that the appellant’s design had new elements when compared with the previous successful design on which it was based: at [74].
266 The Full Court concluded that by taking features of the relevant design or layout, the respondent reproduced something that was, or included, a substantial part of that design or layout: at [74].
267 The Full Court recapitulated as follows:
[75] At [15], when addressing the artistic v literary work issue, her Honour said that the Designs were calculated to convey “a visual look and feel” rather than to be understood (read) as conveying “semiotic” meaning. In the same vein, at [16] her Honour said that consumers would purchase the NewDeal T-shirts because the selection and arrangement of the various elements (text, colour, font, shape, and so on) had been carefully made to form an aesthetically pleasing visual “look and feel”.
[76] In our opinion, the layout and the elements referred to by her Honour that gave rise to the “look and feel” and resulted in the creation of an artistic work were matters of expression, not merely matters of idea or concept. The look and feel arose from the selection, arrangement and style of the elements regarded as a whole.
[77] Having erroneously attributed to the category of idea or concept that which was in our view expression, her Honour was forced, when identifying that which was expression, to descend to “the precise selection and arrangement of the various design elements” (our emphasis) (at [27] — summarised at [24] above). Her Honour was therefore able to find, and did find, that differences in words and numbers, devices and fonts, were sufficient to avoid infringement.
[78] Cotton On took Elwood’s layout that gave rise to the “look and feel”. We referred to various “candidate concepts” at [36] above. Whatever concept is chosen, the means of its expression was the layout, the selection, arrangement, and style of the various elements, as previously described, with the very objective of creating the particular look and feel. Even though the logo and numbers were different, by taking the layout and other elements of expression that created the desired “look and feel”, Cotton On took a substantial part of the copyright work.
[79] Artistic works conveying a “total concept and feel” have been protected in cases in the United States. …
[80] We accept that the notion of “total concept and feel” or “look and feel” has some difficulties. Copyright law does not protect “concepts”, and at least a test of “feel” seems to invite the abdication of analysis: see Nimmer, op cit at p 13–46. In the present case, however, both we and the trial judge have analysed the layout and other elements of expression that gave rise to the intended look and feel. In our respectful opinion the primary judge erred by relegating them to the category of unprotectable “ideas”, even though she had correctly taken them into account for the purpose of classifying the Designs as artistic works.
268 The Full Court applied a similar analysis to the swing tags: at [81]-[82].
269 In Designers Guild, the House of Lords allowed the appeal of the plaintiff, Designers Guild Ltd, holding that the defendant, Russell Williams (Textiles) Ltd had infringed Designers Guild’s copyright in its “Ixia” fabric design of stripes with flowers placed over them at intervals. The Court of Appeal had accepted that the defendant had copied the Ixia design, but held that what was taken did not constitute a substantial part of the copyright work and hence there was no infringement.
270 On appeal, the House of Lords in separate judgments, unanimously held that the Court of Appeal had adopted an erroneous approach to the issue of substantiality, on which the trial judge had not misdirected himself.
271 The primary judge had rejected the defendant’s designers’ denial that they were aware of Designers Guild’s designs. He found, largely based on the similarities of the parties’ designs, that copying had occurred, which went “far beyond the similarities which would be expected simply from both being based on an impressionistic style or from both being based on a combination of stripes and scattered flowers and leaves”: at 2419 per Lord Hoffmann, quoting the trial judge.
272 The primary judge listed the similarities and relied on inferences from the finding that the defendant’s designers gave a false explanation of the provenance of their design: at 2419 per Lord Hoffmann. Lord Hoffmann observed at 2419 that the primary judge rejected the defence based on “the traditional form” of:
(a) dissecting the plaintiff’s design into its component elements; and
(b) advancing reasons why each was either nor original or had, in some respects, not been copied; and
(c) ultimately contending that the elements which were copied were not a substantial part of the copyright work.
273 Lord Hoffmann noted at 2420 that the primary judge stated that:
It is the combination of the flowers and the stripes, the way in which they related to each other, the way in which they were painted and the way in which there was a ‘resist’ [see through] effect which makes the overall combination the copying of a substantial part.
274 Lord Hoffmann stated that the Court of Appeal erred in dissecting the defendant’s work to the stripes and flowers, finding them different or “not copied” and concluding that this left only the unprotectable idea of combining stripes and flowers. That approach ignored the cumulative effect of all the elements that had been copied added up to a substantial part of the plaintiff’s work: at 2422.
275 Lord Hoffmann, while acknowledging that it was “in a sense” true that “the question of substantiality was one of impression”, drew attention to the statutory question itself, which is whether the features the judge found to be copied from the plaintiff’s artistic work formed a substantial part of it as an artistic work: at 2420. While answering that question was a matter of judgment or impression, it was not relevant to consider whether the plaintiff’s work looked like the defendant’s work.
276 In Designers Guild, Lord Hoffmann made clear that it is erroneous to dissect the elements of an abstracted artistic work dealing with the copied features piecemeal instead of considering their cumulative effect. The copying in Designers Guild was at 2421:
… by no means confined to the notion of stripes and flowers. There are many ways of depicting both stripes and flowers … [T]he judge identified the additional visual similarities as arising from such matters, as the brush work, the resist effect and the loose arrangement of freely drawn leaves and flowers. These features, he found, have been copied and cumulatively constituted a substantial part of the work.
277 It was wrong, Lord Hoffman said, to dismiss the significance of the copied elements because they produced visual effects that were different in certain respects. There was a fallacy involved in fixing on differences, because “[w]hen one is considering the question of substantiality, it is no longer relevant to examine in what respects the two designs are different”: at 2422.
278 Lord Hoffman recognised at 2423 that certain ideas were unoriginal or too commonplace to form a substantial part of the work. He observed that the mere notion of combining stripes and flowers would not have amounted to a substantial part of the plaintiff’s work and, at that level of abstraction, would not have represented enough of the author’s skill and labour to attract copyright protection. Lord Hoffman stated at 2423:
Generally speaking, in cases of artistic copyright, the more abstract and simple the copied idea, the less likely it is to constitute a substantial part of the plaintiff’s work. Originality, in the sense of the contribution of the author’s skill and labour tends to lie in the detail with which the basic idea is presented.
279 Lord Hoffmann stated at 2422 that:
[T]here are numerous authorities which show that the “part” which is regarded as substantial can be a feature or combination of features of the work, abstracted from it rather than forming a discrete part.
280 By way of example, Lord Hoffmann noted that the copyright of a play or novel could be infringed by a work which does not reproduce a single sentence of the original. Lord Hoffmann observed that “[i]f one asks what is being protected in such a case, it is difficult to give any answer except that it is an idea expressed in the original artwork”: at 2422.
281 The High Court’s observation in IceTV that not all uses of a copyright work fall within the ambit of the owner’s exclusive rights, and hence are not precluded, merely restates a well-established recognition to that effect. As Street J stated in Ancher Mortlock, Murray & Woolley Pty Ltd v Hooker Homes Pty Ltd [1971] 2 NSWLR 278 at 284, quoted and endorsed by the Full Federal Court in Cummins v Vella [2002] FCAFC 218 (“Cummins v Vella”) at [40]:
An architect may legitimately inspect an original plan or house and then, having absorbed the architectural concept and appreciated the architectural style represented therein, return to his own drawing board and apply that concept and style to an original plan prepared by him and in due course to a house built to such plan. There is a dividing line separating such a legitimate process from an inspection followed by a later copying of a substantial part of the physical object inspected, even though the copying be from memory; the latter exercise does infringe. In many instances it will be difficult to state categorically whether the dividing line has been crossed.
282 In Cummins v Vella, the Full Court considered whether copyright in naÏf style paintings of flowers, yachts and abstracts in bright primary coloured paint applied within an impasto technique directly from the tube was infringed by the paintings of the respondent and his daughter, who, inspired by the copyright owner’s works, took up paintings of floral and other subjects in an unsophisticated style. The copyright owner alleged that the subject matter, technique, colours, dimensions and framing of the respondent’s paintings were so similar as to appear to be the work of the same artist. The respondent admitted that he was inspired by the copyright owner’s works.
283 The Full Court found, inter alia, that the primary judge failed to apply the distinction between, on the one hand, form and expression and, on the other hand, style and technique: at [42]. Their Honours stated that reliance on “subject matter, technique, colours, dimension and framing” suggested, at least potentially, an erroneous approach, because if the similarities in subject matter, composition, primary colours, impasto application and a scraping back technique “did not go beyond style, colours, subject matter and technique, [the copyright owner’s] case of infringement would not be made out”: at [43].
The inter-related questions
284 As the above discussion reveals, it is well recognised that the questions of objective similarity, substantiality and infringement are not wholly self-contained, but mutually inform and overlap with each other.
285 In Milpurrurru, von Doussa J adopted Brightman J’s approach to the order of inquiry in Ravenscroft, as follows at 260:
[T]he first question is whether there has been copying, and then secondly whether the copying is substantial.
Was the applicant’s copyright in English Rose print infringed?
286 The respondent did not dispute that the applicant owned the copyright in the English Rose print which it had acquired by assignment from Longina.
287 In the present case, it is not alleged that any of the City Beach prints precisely, exactly or identically reproduced entirely, or any particular area or bloc of the corresponding Seafolly English Rose and Covent Garden artworks. Rather, it is alleged that the City Beach prints reproduced in a material form a substantial part of the corresponding Seafolly artworks which, as discussed above, can be a feature or combination of features abstracted from the work.
288 It is also necessary to determine whether the Rosette print was derived or copied from the English Rose artwork and whether there is objective similarity between the two works.
289 City Beach initially maintained that it independently created the Rosette print without disclosing its access to Seafolly’s English Rose artwork (as depicted on Seafolly’s garments). City Beach subsequently admitted that it had access to Seafolly’s English Rose garments. The evidence disclosed that Ms Knobel visited the internet including, probably, Seafolly’s website, to obtain images, including of Seafolly English Rose garments and subsequently purchased or directed the purchase of, inter alia, an English Rose garment.
290 City Beach on successive occasions provided numerous images of the English Rose garments to 2Chillies for the purpose of directing its design of the Rosette print, with instructions to make the roses the same sizes as in the attached picture of a Seafolly English Rose garment and requests to make “a rose print similar to [the] Seafolly print (pictured below)”.
291 Ms Knobel’s testimony that her various references to the English Rose print were directed only to shape and that she envisaged a floral, rather than a rose, print was disingenuous and unpersuasive. Her assistant, Ms Hanger, acknowledged that she provided pictures of the English Rose garments to 2Chillies to indicate how the flowers were set out, their look, colour, shape and size, the spacing between the flowers and the whole design of the print. Ms Dunlop, who also assisted Ms Knobel, retracted her initial assertion that City Beach originally wanted a floral, rather than a rose, print. She acknowledged that by providing pictures of the English Rose print, City Beach intended to convey to 2Chillies the “look” it should produce.
292 2Chillies’ staff, while clearly conscious of the dangers of trespassing on Seafolly’s rights, were in no doubt that they were to create a design similar to the Seafolly English Rose print, as evidenced by Ms Musso-Smith’s reference to a “Seafolly knock off”. I considered Ms Musso-Smith’s explanation for that description unpersuasive. 2Chillies succeeded so well in creating a similar work that its design staff became very concerned that the Rosette print exceeded any permissible taking. Their repeated caveats to Ms Knobel and Ms Duncan were disregarded and their many attempts to reduce the potentially offending similarities in the Rosette print or to add distinguishing features were consistently rejected by City Beach. While Ms Duncan initially stated that, after receiving Mr Nielsen’s email, she considered that 2Chillies was satisfied that the final Rosette print was sufficiently different, clearly, she was well aware after that date, and communicated to Ms Knobel, that 2Chillies were still “wigging out” about the similarities to the Seafolly work and was reluctant to mention its brand name, as she felt she would “get shot”.
293 Accordingly, 2Chillies’ design staff, authorised and directed by City Beach, copied features of the Seafolly English Rose print. City Beach’s use of the Seafolly work was deliberate, irrespective of whether it intended or preferred to limit its use of the copyright work to that permissible under copyright law.
294 It is also necessary to determine whether there is sufficient objective similarity between the copyright work and the allegedly infringing work. It is not, however, necessary that the latter work as a whole resembles the former as a whole or that what has been taken comprises a significant part of the infringing work, provided that it is a qualitatively substantial part of the copyright work.
295 It is primarily for the court to determine by visual inspection, assisted where appropriate, by expert evidence, whether the requisite degree of substantial similarity exists between the copyright work and the allegedly infringing work.
296 As Gilmour J stated in Barrett Property Group Pty Ltd v Metricon Homes Pty Ltd (2007) 74 IPR 52; [2007] FCA 1509 at [28]:
Ultimately, however, whether the alleged infringing works are, in each case, sufficiently similar to the copyright works such as to amount to a reproduction of a substantial part of these or any of these, is for the court to determine and the court will be assisted by expert evidence which “is of value in exposing the facets of the ultimate question to which the expert opinion evidence is directed”: Ancher, Mortlock, Murray & Woolley Pty Ltd v Hooker Homes Pty Ltd [1971] 2 NSWLR 278 at 286[.]
297 As stated above, the issues of objective similarity, substantiality and derivation are distinct but inter-related.
The expert evidence
The evidence of Patrick Snelling
298 Mr Snelling, the Program Director of Textile Design in the School of Fashion and Textiles at RMIT University, identified a considerable number of similarities between the English Rose and Rosette prints in their background colour palettes, motif style of the motif, scale of the motif, rendering of the motif, balance and the repeat style. The areas of similarity were, Mr Snelling said, all matters of choice for the designer.
299 In cross-examination, Mr Snelling conceded that he had not considered the prior art or publicly available rose prints, as he had not been asked to do so. He acknowledged that designers commonly used a number of references, including works in the public domain.
300 Mr Snelling did not restrict his analysis of design to aesthetics, but preferred to analyse a design both aesthetically and technically. He considered that the technical elements of the work informed its final appearance. He denied that he did not take into account the overall impression.
301 Mr Snelling had initial difficulty in comparing colours as he was provided with reproductions which varied in quality. He conceded that the colour of the leaves in the two designs was quite different and confirmed that, as stated in his affidavit, the English Rose print contained roses scattered more randomly, whereas the Rosette print was more regular and linear in pattern.
302 Mr Snelling maintained his view that the visible background in the Rosette and English Rose designs was the same.
303 Mr Snelling found that the English Rose and Rosette prints had similarities in the colour palettes of their background and motifs, the motif style, the scale of the motifs, the way in which the motifs were rendered and the balance between the motifs and base colour. In his first affidavit, Mr Snelling observed that he had examined a garment bearing the English Rose print, a garment bearing the Rosette print and pictures of the respective prints (the English Rose artwork and Rosette artwork). He then particularised the similarities (in terms of the design choices he had already outlined) as follows:
(i) in terms of the colour palettes used as the background and motif colours:
(A) both have used white or black as the solid base colour;
(B) both have used 7 printed colours;
(C) both have used pinks, reds and purples in the rose motif;
(D) both have used green in the leaf motif; and
(E) the tints and shades of the pinks, the reds and the purples used are similar;
(ii) in terms of the style of the motifs:
(A) both have used a traditional garden rose with leaves;
(B) both have depicted leaves in the designs surrounding the key motif being the rose;
(C) both have depicted the rose as seen from looking into the centre of the rose from above and with the rose partly opened rather than as a rose bud or as a fairly new rose in a tight bud;
(iii) in terms of the scale of the motifs in relation to the product:
(A) in both designs the designer has chosen to depict roses of different sizes;
(B) the designer has chosen to depict on both designs 4 different sizes of roses;
(C) the size of the roses in both designs are similar;
(D) the size of the leaves in both designs are similar;
(E) there is an equal amount of white/black base colour showing through the design;
(F) they are both depicted as “tossed” designs meaning that the motifs appear to have been randomly thrown onto the base colour;
(ii) in terms of the rendering of the motifs:
(A) both designers, in order to create the depth of some of the roses, have used the purple to highlight the deepest contour, the red to show the middle line of the contour and the pink to highlight the outer part of some of the roses;
(B) both designers have chosen to use darker shades of colour in the motifs to create the impression of different coloured roses;
(C) the leaves in both designs are positioned surrounding the roses in similar positions;
(D) both designs have some stems and some roses surrounded only by leaves;
(iii) in terms of the balance of the motifs compared to the solid base colour:
(A) there is equal balance of white/black solid base colour in both designs;
(B) there is an even distribution between the solid base colour and the motifs;
304 In his first affidavit, Mr Snelling noted the following differences between the English Rose and Rosette prints:
(i) in terms of the colour palettes used as the background and motif colours:
(A) the Rosario/Rosette Print uses 3 colours in the leaves as opposed to 2 colours used in the English Rose Print;
(B) the colours used on the leaves for the Rosario/Rosette Print are a light green, blue/green and a turquoise whereas the colours used for the leaves on the English Rose Print are a green and a light green;
(C) the leaves on the English Rose Print show the white/black background fabric colour through the leaves;
(ii) in terms of the style of the motifs:
(A) the English Rose Print is more of an impressionist style of rose whereas the Rosario/Rosette Print is a more solid graphic style of rose;
(B) the Rosario/Rosette Print has some flowers which are not roses but which are more of a hibiscus style without the stamen and some smaller flowers which also do not appear to be roses;
(iv) in terms of the rendering of the motifs:
(A) the Rosario/Rosette Print depicts the flower petals with a sharper definition;
(B) the Rosario/Rosette Print depicts the leaves as lighter in appearance when compared to the leaves in the English Rose Print as a result of the choice of colours and the rendering of those colours;
(v) in terms of the repeat style:
(A) whilst I did not at first identify this fact from simply reviewing the swimwear samples, I can identify from the finished designs that the Rosario/Rosette Print has adopted a more linear/stripe positioning of motifs while the English Rose Print is an “all over design” which eans that the motifs are spaced evenly over the base colour.
305 In his second affidavit, Mr Snelling corrected his previous statement that both prints used seven printed colours, observing that the copy reproductions on which he based his first opinion had been degraded.
The evidence of Dean Brough
306 Mr Brough, the Bachelor of Creative Industries Course Coordinator and Lecturer (Fashion) at Queensland University of Technology, considered that overall aesthetic which struck consumers was more relevant to a determination of the objective similarity of the prints than a micro-level analysis of colours, dimensions and other technical elements.
307 Mr Brough acknowledged that there were aesthetic similarities between the English Rose and Rosette prints as both had an obvious rose inspired design depicting natural representations of open roses with leaves clustered around the base, multiple small and large flowers at different angles, a black or white background with a prominent design, general pink red tones and repeat images.
308 Mr Brough also agreed that the colouring and highlighting of the pink roses and green leaves with purple tinges were similar. He agreed that both designs used a garden rose with leaves, the leaves surrounded the key rose motif and each similarly depicted a partly opened rose looking into the centre from above. The use of different sizes of rose was also similar, as was the style of a traditional garden rose with leaves. Mr Brough agreed that the size of the leaves was similar in both prints although the Rosette had more completed, realistic leaves and fewer “suggestions” of incomplete leaves. Nevertheless, Mr Brough regarded many of the similar features as “customary”, “common practice” and “time-honoured”.
309 Mr Brough also agreed that both prints used purple to highlight the deepest contour of the roses, with red for the middle and pink for highlights on the outer part of the roses and darker shades to create an impression of different coloured roses. He agreed that the leaves in both designs were similarly positioned, as found in nature, but stated that this layout had been extensively used throughout the history of textile and print design.
310 Mr Brough accepted that in both the Seafolly and City Beach artworks, the two large roses with extending leaves distinguished between the darker and lighter pink and the white with clear highlights around the outer-edge, and had similar clusters of the two roses with greeny/blue leaves at the base.
311 Mr Brough agreed that a bunch of small roses or flowers and the motif of three roses appeared together in both prints.
312 Mr Brough also pointed out differences between the English Rose and Rosette prints. He agreed that, as Mr Snelling noted, there were differences between the two designs, in that there was colour variation, the English Rose was more impressionistic, the Rosette incorporated a flower other than a rose and had a linear stripe created by the placement of the flowers, unlike the English Rose print.
313 Like Mr Snelling, Mr Brough viewed the English Rose print as more stylised and fluid in its interpretation of the rose, with greater depths of field (meaning more three dimensional) and “more exciting”, in contrast to the Rosette’s flatter, harder and more “formulaic” style. Mr Brough considered that the Rosette print could have been developed from a vector file. The English Rose print also had a much less obvious repeat while that of the Rosette print was distinct. The blue tone of the Rosette print’s roses had a different “aesthetic feel” from the traditional green of the English Rose print’s leaves. The Rosette print also introduced a small non-rose hibiscus shaped flower, which gave it a less “fussy” feel than that of the formal “rose only” English Rose print.
314 Mr Brough noted that the English Rose black based print had eight colours, the English Rose white based print had seven colours while the Rosette had 11 colours for each colour way. Nor was the number of different roses used in the prints the same, as the Rosette print had more than four sizes of flowers and the English Rose print had at least six. The Rosette print also added a hibiscus type flower, which Mr Brough perceived to be a particularly significant difference.
315 Mr Brough did not agree that there was an equal amount of background showing through in each print. He thought that the Rosette print had more open background space. Nor did he agree that both designs were “tossed” or “randomly thrown”, as he considered that the English Rose was random while the Rosette appeared to have a vertical, horizontal repeat, which was “highly noteworthy”.
316 Mr Brough considered that the designs had more differences than similarities and that almost every element was different in some respects.
317 Mr Brough agreed that when instructing a designer, a visual representation or print reference conveyed more clearly than oral instructions what a client wanted aesthetically from the potentially available design elements. In a sense, a visual representation reduced, when compared with an oral instruction, the potential choice of variables available to a designer. Mr Brough nevertheless thought that there was always scope for artistic expression, even within a tight timeframe, as modern computer programs eliminated the need for time-consuming hand painting and permitted the use of many variables.
318 Mr Brough readily agreed that the appreciation of aesthetics was subjective and the capacity to judge them varied between individuals. He acknowledged that, as a professional, he had a keener eye than an average consumer.
319 Mr Brough annexed to his affidavit online searches showing a mix of different ways of expressing floral prints or rose prints.
320 Mr Brough was somewhat equivocal when asked whether Seafolly and City Beach were more similar to each other than to various prints that he had extracted from the internet. Ultimately, he did not answer the question. He also responded equivocally, answering “yes and no”, when asked whether the roses in both prints were impressionistic, rather than pictorial.
321 Mr Brough thought that the balancing of the highlights and reds in the two works was dissimilar and he did not directly respond as to whether the placement of the roses was similar.
The evidence of Jessica Thurecht
322 Jessica Thurecht, a designer who worked on a freelance basis for City Beach from 12 January 2012 and had limited involvement in the design of the Rosette print in March and July 2011 (as set out at paragraphs 164 and 199) gave expert evidence on behalf of the respondent.
323 Ms Thurecht agreed with the various design choices or variables referred to by Mr Snelling, to which she added the following additional choices that would be necessary to develop swimwear fabric and patterns: the printing method; the production costs; the number of individually drawn elements; and trends and commercial viability.
324 Ms Thurecht compared the English Rose and Rosette/Rosario prints. She identified six colours in the English Rose print on a white base but 11 colours in the Rosette print on a white base. She noted that the Seafolly garment had better quality fabric, garment construction, trims and internal structure, and probably used more expensive print houses.
325 Ms Thurecht saw the “rendering style” of the two prints as very different, as there was a “very vintage, sketchy hand drawn method of illustration” in the English Rose print and “a flat, clean stencil like method” in the Rosette print.
326 Ms Thurecht agreed with Mr Snelling that the colour palettes in each print were similar in the use of black and white base colours (which she observed were a common choice). She agreed that the pinks and reds used in each print were similar, but unlike both Mr Snelling and Mr Brough, disagreed that both prints used purple, which she did not see in the English Rose print. She also disagreed that both used green in the leaf motif, stating that the English Rose print used two shades of green, while the Rosette print used two shades of blue and one green.
327 She agreed that the style of both prints was similar, as both depicted a traditional garden rose surrounded by leaves and drawn from the same viewpoint. She noted that the Rosette print included a non-rose motif, stems or sprigs and some rosebuds not present in the English Rose print.
328 Ms Thurecht agreed that the style of the motifs was similar, in the sense that both prints used different sized roses. She disagreed that both used four different sizes of roses, identifying seven sizes in the English Rose print. Nor did she agree that the size of the roses was similar, as to her, the motifs in the Rosette print appeared larger. She agreed that both prints used similar sized leaves and agreed “in part” that equal amounts of base colour showed through, as when comparing the prints on different garments, more background appeared to come through in the Rosette print. She agreed with Mr Snelling that both prints were tossed designs with the motifs randomly thrown.
329 Ms Thurecht agreed that the motifs in each print were similarly rendered, in the sense that both depicted roses with the centres in darker shades and leaves surrounding the flower motifs. She did not agree that both designs had the same stem and same rose surrounded only by leaves. She disagreed that depths was created by using purple at the deepest level and pinks on the outer edge, as she saw no purples in the English Rose print. Ms Thurecht appeared to accept, however, that in both prints contour was shown by graduating from darker colours at the heart of the rose motifs to lighter colours at the edges.
330 Ms Thurecht agreed that both prints balanced their motif to background equally, but thought that the balance of colours was not equal as the English rose used more pink and red, while the Rosette print used equal amounts of reds and blues.
331 Ms Thurecht generally agreed with the differences between the English Rose and Rosette prints noted by Mr Snelling.
332 In summary, Ms Thurecht generally agreed with many of Mr Snelling’s observations of the similarity in the style and scale of the motifs, although she qualified some concurring views and rejected some similarities he identified.
333 In cross-examination, Ms Thurecht agreed that there were a myriad of different roses that could be used and the selection of the right one involved time consuming skill and effort. She agreed that 2Chillies, at City Beach’s instruction, identified in the Seafolly print the particular interpretation of the rose that was working well in the market.
334 Ms Thurecht said that she found the English Rose and Rosette prints different, as the Rosette print was a clean vector based floral with more stems and was less painterly, while the English Rose print had a very painterly technique. That is, the English Rose print roses appeared to be depicted by painting while the Rosette print roses appeared to be drawn. She agreed that the roses in both prints were impressionists rather than photographic, as were the leaves closely associated with the flowers, which were separate, rather than merging.
335 She accepted that both prints contained groups of large roses juxtaposed against or associated with groups of smaller roses, although one was more painterly and the other more clean-drawn. Ms Thurecht agreed that both prints used different shades of colour to identify petals and contour. Both prints also included clusters of two or three larger roses differentiated by highlights and similar contrasts.
336 Ms Thurecht stated that the designer’s artistic merit and skill resided in combining or balancing the various elements. On comparison, she agreed that the English Rose and the Rosette prints designs contained a number of similar design choices and also exhibited a similar balancing of those different constituent elements. Further, she accepted that the designer’s skill and effort went into selecting and balancing the shapes of the flowers, the use of colours and the arrangement and placement. Ms Thurecht agreed that balancing the relevant design elements, including the style of flowers, how colour was represented on them, the choice of colours and how the foliage matched the flowers taken as a whole, showed apparent skill and effort.
337 Ms Thurecht noted that the prints differed in that the English Rose print was an all-over yardage, whereas the Rosette print only appeared on the front of the garments.
The applicant’s copyright in English Rose artwork was infringed
338 It was not alleged that the Rosette print reproduced the entirety of the English Rose artwork or any particular part thereof exactly. Nevertheless, on a visual inspection of the two designs, I discerned an objective similarity.
339 Both the English Rose and Rosette prints display a number of elements which are not only similar (albeit not identical) themselves but are also similarly (albeit not identically) balanced and mutually juxtaposed within the works as a whole.
340 Each design depicts impressionistic, rather than photographic or realistic, roses, with leaves which are mostly, but not exclusively stemless and are similarly placed around the roses. Each design uses groups of broadly similar shaped, styled and sized roses, which are shaded with a similarly positioned variation of colours and highlights to create an impression of contour and depths. Each depicts an edge between the lighter and darker pinks.
341 Each juxtaposes with a similar placement groups of a similar, if not identical, mixes of different sized, but relatively larger roses against similar clusters of a variety of smaller roses.
342 Each work uses pinks for roses and green for leaves against a white or black background, with, in my opinion, a similar amount of background showing through. The colour palettes were, overall, similar.
343 Each print depicts relatively distinct rather than overlapping roses and similar numbers of leaves around the flowers with a similar proportionality. Each print appears, in my view, “random” or “thrown”, albeit the English Rose print is more scattered.
344 As the expert witnesses acknowledged, there are also a considerable number of differences between the works, which in Mr Brough’s view gave rise to a different aesthetic or “feel”. The differences most obviously included a more stencilled rather than painterly rose and the less random repeat. Those differences were within the overriding context of a similarity impressionistic style of roses and tossed, not linear or geometric, designs.
345 There were many other differences of detail and degree, including the precise number of roses or the inclusion of a non-rose flower. They were not of a nature or degree to negate the significant objective similarity between the works arising from their similar combination of a number of similar elements. As the evidence set out above reveals, all the experts recognised many similarities. The similarities were also obvious to the 2Chillies design team, whose repeated attempts to avoid an unduly close resemblance to the English Rose print by altering the Rosette print were successively rejected by City Beach, which consistently insisted on reversion to the similar features. It is, in any event, unnecessary that the two works bear an overall resemblance to each other. Nor is it appropriate to dissect the copyright work piecemeal and focus on differences.
346 In my opinion, the elements and combination taken from the English Rose print cumulatively comprised a substantial part of the work in the relevant qualitative sense. They also comprised a quantitatively significant part of the work.
347 Contrary to the respondent’s submission, the elements and arrangement reproduced in its Rosette print were not shown to be merely commonplace or derived from other works. There was considerable scope for originality in the expression of traditional English roses for the application to fabric.
348 The many examples of representations of vintage roses in evidence, including those exhibited by Mr Brough, showed the variety that can be achieved within the constraints of subject matter and traditional style. The idea or subject-matter of a vintage rose print can be expressed by the choice of almost unlimited number of variables from which the designer can select individual elements and their various respective features, and the way in which they can be combined, arranged and balanced. As the expert witnesses agreed and the evidence in this case established, the effort, skill and judgement of a designer of prints for use in garment manufacture are applied both to the selection and creation of individual elements and to the balancing exercise of determining their mutual placement and relative relationship.
349 Mr Brough conceded that if many designers were orally instructed to create a pink rose print, they would produce different artistic expressions of the concept and that the designer had much room to move, including on the size of the roses, whether to include leaves and if so, how to position them, the inclusion of stems, colour, whether to depict styled or pictorial flowers and numerous other variables. Mr Brough agreed that the skill and labour of the designer in that context was the selection from those variables, including those extant in the public domain.
350 Mr Brough rejected the notion that there was “nothing new under the sun” in design. To the contrary, he thought that the eye could discern new perspectives even in well-travelled ground. He stated that it was rare to have a direct reproduction of an earlier work.
351 The evidence established that it is not uncommon in the garment design industry to use, as well as verbal instructions, samples or existing prints to give the designer a sense of what was required. Seafolly itself provided two photographs of traditional rose prints to direct its designers. Nevertheless, the designers of the English Rose artwork, including Mr Zhang, did not see any of the allegedly similar prints in evidence or copy the photographs. Similarly, Ms Walkom, who was taken to the various rose prints attached to Mr Brough’s affidavit, testified that she had never seen any of these prints although she was aware that many rose designs exist in the public domain. Rather, they spent considerable time, effort, judgement and skill in creating, amending and revising the English Rose artwork.
352 The existence of voluminous prior examples or “prior art” is not a defence to the infringement of copyright unless that which the respondent has taken from the copyright owner’s work was itself copied from the common domain or another work and was not the product of the copyright owner’s skill, labour and judgement. In such circumstances, copyright would not, as City Beach submitted, subsist in the element which the copyright owner had taken or copied from other works.
353 I was not persuaded that the particular elements in the particular combination and relationship inter se, which City Beach reproduced, were copied or derived from any other source or that the elements or their inter-relationship was merely commonplace or well-known. City Beach reproduced the selection and arrangement of detailed individual elements in the Seafolly English Rose artwork which cumulatively expressed, in a material form, its look and feel. What City Beach took far exceeded the mere idea of an old-fashioned rose print. It was both a quantitatively significant part of the English Rose artwork and an essential and material part relative to the work as a whole which, on the evidence, entailed the labour, skill and judgement of the designers.
354 In the present case, animus furandi was also established. I am satisfied that City Beach intended to make use of the Seafolly artwork in order to produce its own design and when confronted with the clear risk that the magnitude of taking had exceeded any lawful use, did not hesitate to cross that line rather than accept alterations which would diminish or negate the similarity. While I do not accept that animus furandi is irrelevant to substantiality, its relevance is no longer uniformly upheld. Animus furandi is unnecessary to, but fortifies, my conclusion that City Beach took a substantial part of Seafolly’s copyright in the English Rose artwork.
355 In my opinion, City Beach infringed the applicant’s copyright in its English Rose artwork. This is discussed in more detail below.
Was the applicant’s copyright in Covent Garden print infringed?
356 The respondent did not dispute that the applicant owned the copyright in the Covent Garden print which it had acquired by assignment from Longina.
357 City Beach asserted that it independently created the Sienna print. It initially denied having access to or obtaining examples of, the Covent Garden print or Seafolly garments bearing the Covent Garden artwork prior to designing the Sienna print, and maintained the denial in its third further amended fast track response filed on 11 June 2013.
358 While Ms Knobel did not disclose her purchase of a Seafolly Covent Garden garment in her affidavit, she acknowledged it at trial. Despite Ms Knobel’s assertions that City Beach provided the Seafolly Covent Garden garment to 2Chillies only for “inspiration for the types of colours” or garment shape, the evidence established that it was provided to give direction for types of flowers and colours, including “different shapes of flowers”.
359 Ms Thompson of 2Chillies understood that in designing the Sienna print, she was to use the two references provided, one of which was a photograph of a Seafolly Covent Garden garment, for “the style of the actual shapes of the flowers, the style of the artwork [and] colour”. At trial, Ms Thompson acknowledged the similarities between the Covent Gardent print and the Sienna print.
360 I am satisfied that 2Chillies copied features of Seafolly’s Covent Garden artwork as depicted on Seafolly’s garments at the direction of City Beach. It is also necessary to consider objective similarity and whether what was produced in the Sienna print constituted a substantial part of the Covent Garden artwork.
The expert evidence
361 In summary, the three experts broadly agreed that the Covent Garden print and the Sienna print were both stylised and impressionistic floral prints that used similar colour palettes and floral motifs, although the floral motifs in the Covent Garden print were more precise and realistic than those in the Sienna print.
362 The experts agreed that the Covent Garden print and the Sienna print each used either a black solid base colour or a white solid base colour, although Mr Brough noted that this is customary.
363 Despite some disagreement on the precise number of colours used in each print and the precise characterisation of particular colours, broadly, the experts agreed that both prints used a similar colour palette in which the rotation of colours sometimes differed. In his second affidavit, Mr Snelling also corrected some statements about the Covent Garden print colours.
364 The experts all acknowledged that the overall colour palette in both prints comprised yellow, orange, green, blue and purple. Messrs Snelling and Brough also thought that both prints used red. Ms Thurecht also ultimately agreed that, contrary to her initial opinion, the two prints used reds similarly.
365 Messrs Snelling and Brough opined that the tints, tones and shades used in the two prints were almost identical. Mr Brough added the qualification that, in his view, the predominant colour in each print differed, being, in the Covent Garden print, predominantly pink elements (and more graduations of pink hues) and, in the Sienna print, predominantly yellow elements. In cross-examination Mr Snelling agreed that the Sienna print used a bright yellow with a different saturation from the yellow used in the Covent Garden print while the Covent Garden print’s “dirty, light pink colour” was nothing like the pink in the Sienna print.
366 Ms Thurecht disagreed that the tints, tones and shades were almost identical. She opined that:
(a) The Sienna print’s blues were lighter and brighter than the Covent Garden print's blues. In cross-examination, she agreed that the two prints used similar amounts of blue.
(b) The Sienna print’s greens were fluorescent, whereas the Covent Garden print's greens were muted.
(c) The Sienna print’s yellow was clear and bright, whereas the Covent Garden print’s yellow was muted and almost an orange. Subsequently, however, Ms Thurecht agreed that the two prints were similar in their use of the colour yellow.
(d) The Sienna print’s darkest purple was darker and contained more cyan than the Covent Garden print’s darkest purple.
(e) The Covent Garden print used a burnt orange and the Sienna print did not.
(f) The Sienna print used red and a bright fluorescent coral and the Covent Garden print did not. In cross-examination, however, Ms Thurecht agreed that the two prints used red similarly.
367 Broadly, the experts agreed that the floral motifs in each print were very similar and identified the following similarities:
(a) The flowers were depicted from the perspective of viewing the centre of the flower from above with the flowers fully opened. Mr Brough asserted, however, that the perspective was common place.
(b) The flowers were drawn in two colour tones with a different colour used for the centre of the flower as compared to the outer petals.
(c) The large flowers in the Covent Garden print were a similar size to the flowers in the Sienna print.
368 Messrs Snelling and Brough agreed that both prints used pinks, purples, reds, yellow, blues and greens for the flower motifs. Ms Thurecht opined that both prints used purple, yellow and orange for the flowers and that, in addition, the Sienna print used red, coral and blue, and the Covent Garden print used burnt orange.
369 Broadly, the experts agreed that the floral motifs differed in the following respects:
(a) The Covent Garden print contained a more realistic and precise floral depiction than the floral depiction in the Sienna print which was less detailed, rougher and freer in form.
(b) The centre of the flowers in the Covent Garden print were represented more precisely than the centre of the flowers in the Sienna print, which were “more fluid” and, in the opinion of Ms Thurecht, featured “feathered radial designed centres”.
(c) The Covent Garden print used a range of different sized flowers including smaller sized “dotty” flowers that did not appear in the Sienna print. Ms Thurecht opined that the smaller flowers made up around 50% of the Covent Garden print.
(d) The Covent Garden print used random “spots”, “splashes” or “splodges” of colour that the Sienna print did not.
370 Messrs Snelling and Brough agreed that both prints contained fronds in the background of the floral print. They agreed that the frond motifs were very similar, noting that the fronds in both motifs were green and blue and, in part, similar in size. They both agreed that the fronds in the Covent Garden print were more precisely defined than those in the Sienna print.
371 Ms Thurecht identified a frond motif in the Covent Garden print but deposed that the Sienna print did not contain a frond motif, as she considered that the blue parts identified as fronds by Messrs Brough and Snelling were flowers.
372 It was common ground that the two prints contained similar green leaves that were rendered as “spiky random leaves” and were, in part, the same size. Mr Brough and Ms Thurecht considered that the leaves in the Covent Garden print were more realistic and defined, whereas the leaves in the Sienna print were, in Mr Brough’s opinion, “extremely rough” and, Ms Thurecht’s opinion, “short strokes of undefinable shapes only definable as leaves by being coloured green”.
373 The experts all agreed that the Covent Garden print was an all over print, where the print appeared across the entire garment, whereas the Sienna print was a placement or engineered print, which only appeared in a specific part of the garment. Mr Brough and Ms Thurecht both thought that this was a significant difference between the two prints.
The applicant’s copyright in the Covent Garden artwork was infringed
374 In my opinion, upon visual inspection, assisted by the expert evidence, a number of significant similarities between the Covent Garden and Sienna prints were apparent. Each used the same types of flowers, which were similarly of different sizes and depicted in an impressionistic, non-photographic style, accompanied by fronds which incorporated blue colours. Yellow was used in both prints, as were similar colour palettes overall. Tints, tones and shades were more or less the same. The flowers were very similar, shown from a similar perspective and coloured with a mix of tones in the same way. Fronds were a prominent feature of both prints. Each work had either a black or white background with base colour appearing through the melange of flowers, leaves and fronds.
375 I considered that there was an objective similarity between the two prints based on the similar combination of similar features. That in turn constituted an essential and significant part of the Seafolly Covent Garden artwork in relation to the work as a whole. The particular combination of particular features was not, on the evidence, commonplace or demonstrably derived from other sources, but rather, was the product of the author’s skill and labour. Accordingly, that which was reproduced in the Sienna print was, in my view, a qualitatively substantial part of the Seafolly artwork in the relevant sense.
376 While the Sienna print included a number of different features or variations from the Seafolly Covent Garden artwork, including the border placement, they did not negate the Sienna’s reproduction of a substantial part of the Covent Garden artwork.
377 The respondent contended that relevant features of the Sienna print were not derived from the Covent Garden print but rather from its own existing Sierra print or border print dress, which was also provided to 2Chillies for inspiration. While some features may have been derived from the border print dress, I am satisfied that the above elements and their arrangement inter se were derived from Seafolly’s Covent Garden artwork as depicted on Seafolly’s garments, of which they cumulatively constituted a substantial part.
378 In my opinion, City Beach infringed Seafolly’s copyright in its Covent Garden artwork. This is discussed in more detail below.
Was the applicant’s copyright in the senorita artwork infringed?
379 City Beach denied the subsistence of copyright in Seafolly’s Senorita artwork on the basis that it lacked originality.
380 City Beach contended that the Senorita artwork was not original in the sense necessary for the subsistence of copyright because it did not relevantly originate with Seafolly’s employees or was merely commonplace and the more or less inevitable outcome of using the type of industrial sewing machine which manufactured the garments.
381 City Beach relied, in that context, on the opinion of Messrs Brough and McLaurin that zig zag designs in smocking were commonplace and extremely simple and as such, could be reproduced only by an almost identical or identical work. While on any view, the Senorita and Richelle designs are very similar, City Beach submitted that they were not identical but had some different features.
382 Alternatively, City Beach alleged that the Senorita artwork was a corresponding design under s 74(1) of the Copyright Act which, under s 77, conferred a complete defence to an allegation of copyright infringement.
383 Alternatively, City Beach contended that Seafolly in essence sought to protect the mere idea of using white stitching on a black fabric and could not identify with precision the features of its fabric prints and smocking that allegedly constituted a reproduction of the substantial part of Seafolly’s Senorita artwork.
The expert evidence
The evidence of Patrick Snelling
384 Mr Snelling’s expert evidence was largely limited to a comparison of the Senorita artwork and the Richelle embroidery. He deposed that he compared two black “Fiesta” branded garments described in their swing tags as “Fiesta Richelle Bandeau” against one black “Seafolly” branded garment described in its swing tab as a “SenoritaSep Smocked Trapeze Singlet”. He identified the differences and similarities between these documents.
385 Mr Snelling compared the Senorita artwork and Richelle embroidery (referred to below as the Richelle artwork) as it appeared on the garment as follows:
(a) in terms of the design choices [set out above], I have noted the following similarities between the Senorita Artwork and the Richelle Artwork:
(i) in terms of the colour palettes used as the background and motif colours:
(A) for both designs the stitching for the embroidery is white and the base fabric is black;
(ii) in terms of the style of the motif:
(A) in both designs there are 4 horizontal bands of white machine embroidery;
(B) in both designs there are 2 distinct horizontal small scale cross stitches creating a small diamond design with a single thread outlining the pattern (on the Fiesta [Richelle] bottoms there is 1 distinct horizontal small scale cross stitch creating a small diamond design with a single thread outlining the pattern);
(C) in both designs there are 2 distinct horizontal large scale diamonds in the centre of the design with 2 lines of white thread outlining the pattern;
(D) in both designs a smaller diamond pattern is created in the centre of the design by the overlapping of the larger diamond pattern;
(iii) in terms of the scale of the motif in relation to the product:
(A) the scale of the top and bottom cross-stitch design are very similar;
(x) in terms of the balance of the motifs compared to the solid base colour:
(A) there is equal balance of white/black solid base colour and stitching in both designs;
(xi) in terms of the the [sic] repeat style:
(A) the repeat style used for the Senorita Artwork is the same as the repeat style used for the Richelle Artwork;
386 Mr Snelling identified the differences between the Senorita artwork and the Richelle artwork as follows:
(i) in terms of the style of the motif:
(A) the larger diamond shape in the Senorita Artwork is slightly larger than the larger diamond shape in the Richelle Artwork; and
(B) the overlapping diamond in the Richelle Artwork is slightly larger than the overlapping diamond in the Senorita Artwork.
387 In cross-examination, Mr Snelling agreed that there was considerably less overlap of double stitching in the Seafolly Senorita design (where the large diamonds met) than in the Richelle design, at least when comparing the particular Senorita artwork and Richelle bandeau-shaped garment to which he was taken. He agreed that there was less blank black area between the peaks of the large and small diamonds in the Richelle design, but characterised it as simply “a slight difference between the measurements”.
388 Although Mr Snelling did not claim expertise on the construction of garments, in cross-examination, he described a drawing of a two-dimensional design for a Senorita garment in the bandeau shape as a design for “a shirred piece of fabric” which could exist by itself, but which was applied to the shirred fabric.
389 Mr Snelling agreed that “[t]he white stitching [on a Richelle bandeau-shaped garment] is part of the garment structure – the textile structure and it has been stitched into the body of the garment through black stitching”.
The evidence of Dean Brough
390 Mr Brough identified the Senorita and Richelle garments and the designs of their respective embroidery as follows:
131. Both designs use a relatively similar diamond style smocking pattern to create the embroidery/smocking aesthetic.
132. Both designs have a distinct middle large band of embroidery surrounded by smaller outer bands of embroidery – 2 large bands in the middle and one smaller band on each outer edge, four rows in total.
133. Both designs have white smocking style stitches applied to black cloth.
391 Mr Brough identified the following differences:
129. The diamond shapes on the Senorita design appear different in size and offset values, including width, overlap and gap of the triangular shapes.
130. The smaller rows of stitching are a different pattern on each design – the Senorita design appears diamond in appearance, where as the Richelle design appears cross stitch in appearance and has a distinct horizontal small stitch flanking the cross shape.
392 Mr Brough also gave evidence on the methods of shirring and smocking. He first described the term of “shirring” as follows:
Shirring is a sewing technique, using thread and/or elastic, to reduce the fullness of the cloth. The technique is similar in principle to gathering, although it has two or more rows used to gather the cloth. Shirring has been used for centuries to provide suppression of fullness and historically was often associated with children’s clothing or peasant style tops. Shirring can be done on large areas of a garment or small sections.
In current times, most shirring uses elastic thread to create the suppression, as the elastic allows for the garment to stretch. One of the most common uses for shirring is for multi needle elastic applications on waist bands. Shirring is not a unique technique and it has been in and out of fashion for many seasons and its use traverses a broad base, from the home sewer, to the crafts arts person to commercial high end/low end fashion applications. It is often used as a simple quick technique to provide multiple body fits (without the need for stretch fabric or darting) and provides an effective way to have ‘multi-fit’ for a garment. If there is a decorative element it is generally called smocking.
393 Mr Brough noted that shirring itself can be “decorative and/or functional”.
394 Mr Brough described the term “smocking” as follows:
The terms shirring and smocking can sometimes be inter-changeable, but generally smocking is decorative in appearance.
Smocking is an embroidery technique that has been practised since the middle ages. Smocking provides garments with both fitting and comfort (due to the looseness provided from the smocked area) and was used on labours garments and then decorative uses on children’s wear (its name derives from smock – a farmer’s work shirt). Smocking was used most extensively in the eighteenth and nineteenth centuries.
395 Mr Brough deposed that the following two methods of “shirring/smocking” are commonly used:
(a) The fabric is shirred/smocked first and then the pattern is placed on the shirred cloth and then cut out – this method ensures the pattern remains true to size. Hand smocking normally uses a grid to create an even pattern.
(b) The pattern is cut in cloth and enough fullness has been added to the pattern shape to allow for suppression of fullness when the shirring/smocking is applied. Industrial shirring/smocking machines can be used for large scale production. …
396 Mr Brough opined that a “myriad of smocking/embroidery patterns are available on industrial machines”. He observed that diamond patterns or zig zag patterns have been used for “centuries” in smocking and were particularly useful in garment styles like bandeaux, as they permitted the avoidance of darts.
397 Of the Seafolly and City Beach smocked garments at issue in this proceeding, Mr Brough opined that:
The diamond pattern on both the Senorita artwork and the Richelle artwork have [sic] been created using an industrial shirring/smocking machine …
The diamond on both artworks may have been made/created by a pre-determined machine pattern with the ability to change offset values (variable distance for the depth and gap of the overlap of the triangle shapes) for the creation of the diamond/triangle shape. I acknowledge that even though I have specialist experience with industrial embroidery machinery and the software, I have not used dedicated industrial shirring/smocking machinery and my opinion would need verification from a specialist with experience in that industrial machinery.
…
The shirred portion of the Senorita embroidery and the Richelle embroidery were manufactured using a multi-needle industrial machine for the shirred area.
The white stitched pattern has been applied to the shirred portion of the Senorita embroidery and the Richelle embroidery immediately prior to the black (multi-needle) stitching. The black stitching catches the white thread onto the cloth. The white thread is not sewn onto the cloth, but is caught down by the black stitching. I believe that a specialist industrial machine would be required for this application.
To a degree, the white stitched pattern has become part of the shirring as it would be hard to remove the white thread as it is pinned down by the black thread.
It would only be possible to remove the white stitched pattern from the Senorita embroidery and the Richelle embroidery, leaving the shirred gathered fabric and the shirring intact, if the needle penetration of the black thread had not pierced the white thread. If the needle penetration had pierced the white thread the black thread would/may need to be unpicked.
If the needle penetration of the black thread pierced the white thread it would be necessary to cut one or more threads securing the decorative threads to the shirring in order to remove the white stitched pattern from the Senorita embroidery and the Richelle embroidery.
As the white thread is not sewn, only held in place by the black thread, it would not be necessary to cut the white thread if the black thread was removed. The white thread is loose and only held by the black thread. It is unlike traditional machine/computer embroidery where the thread is generally secured to the garment by numerous needle penetrations.
The evidence of Robert McLaurin
398 Mr McLaurin deposed that his employer, Capron Carter Australia Pty Ltd is Australia’s “largest and oldest supplier of industrial sewing machines to the apparel trade in Australia”. He deposed that he had inspected two Senorita garments and a Richelle bandeau-shaped garment and pant.
399 In his affidavit, Mr McLaurin described “shirring” and “smocking” as distinct processes. He stated that shirring referred “to the gathering of fabric” while “smocking”, on the other hand, is a decorative pattern that is placed on top of the shirred fabric”. Each process could be undertaken without the other.
400 Mr McLaurin then set out some relevant terminology:
A cam (or pattern cam) refers to a round plastic or metal disc that is inserted onto a sewing machine to create decorative stitches. Different cams make the front guides (which direct the thread) of the sewing machine sew those decorative stitches. …
A foot (or sewing foot) is an attachment on a sewing machine that holds the fabric in position. There is a hole in the foot that allows the needle to fit through to sew onto the fabric underneath the foot.
Horizontal bars are bars resembling long handles that sit at the base of the machine. When the machine is in operation, the horizontal bars move left and right. There are holes in each horizontal bar into which embroidery thread is threaded. The bars guide the embroidery thread into the fabric to create the smocking. … The horizontal bars move from side to side (left and right).
401 Mr McLaurin described the process of shirring and smocking as follows:
A smocking pattern is produced by placing a pattern cam (or sometimes two pattern cams) and affixing it to the back of the sewing machine, which drives two or three front guides to which the embroidery-type cotton is then threaded into various holes in the horizontal bars in front of the machine. Threading the thread through different holes in the horizontal bars creates different patterns. In my experience, most smocking machines will be supplied with a number of pattern cams that can give a variety of different patterns.
402 He explained that, “when producing a smocked pattern onto fabric, one is restricted by the availability of pattern cams and in which holes (in the horizontal bars) the embroidery thread is threaded through”.
403 Mr McLaurin deposed that “[d]iamond style patterns used in smocking are extremely common”. He explained:
This is because if one uses two needles on a smocking/shirring sewing machine, the machine will stitch from the front to the back (the stitch length is adjustable), with the horizontal bars going to the left and right, and the two needles will produce a diamond print. Due to the movement of the fabric from front to back and the horizontal bars moving left and right the smocking must thread diagonally as the shirring is produced. Using two needles for smocking produces the diamond – using one produces the diagonal line. It is not possible to produce a vertical line or horizontal line of smocking because of this and therefore smocking can only create diagonal lines. The size of the diamond (or diagonal line if only one needle is used) is controlled by the type of cam used, how many needles are crossed and into which holes the smocking thread is threaded in the horizontal bars.
404 Mr McLaurin opined that “[d]ifferent types of smocking are governed by the pattern cam and into which holes the embroidery thread is placed”.
405 Mr McLaurin deposed that his company supplied pattern cams. Using different cams, an operator could produce different decorative stitches, as the cams affect the front guides of the sewing machine, which guide the thread. Horizontal bars containing a variable number of holes through which needles are threaded, are instructed by the cams.
406 Mr McLaurin stated that a multitude of cams were made by various manufacturers which could produce an unlimited variety of sizes and shapes. Small and large horizontal stitching would be produced by two different cams (or either side of one cam), although a single cam could deal with multiple threads.
407 Mr McLaurin thought that the Senorita bandeau-shaped garment had been shirred and smocked on a multi-needle single thread chainstitch shirring/smocking machine. He was unsure whether the pant was made on the same machine using fewer needles or with another machine with the same pattern cam.
408 Mr McLaurin opined that the Richelle garments were produced on a multi-needle single thread chainstitch shirring/smocking machine.
409 Mr McLaurin noted that in contrast to the Senorita garments, the smocking on the Richelle pant was exactly the same as the two rows of smocking at the top and bottom for the Richelle bandeau.
410 In cross-examination, Mr McLaurin agreed that the cam created the pattern on the cloth by a single thread that has been smocked, or in other words, a line of smocking. The cam also governed the size of the stitching. Mr McLaurin agreed that the horizontal bars which guide the cam have different holes. The operator can select which holes to thread. The lines of thread (the smocking) are placed on to the fabric at the same time as the fabric runs through the machine.
411 Mr McLaurin initially described the numbers of available shapes as “basically … unlimited” and subsequently stated that there are “multiple” numbers of cams available.
The lay evidence
412 Ms Walkom identified the Senorita design on the bust of a Seafolly tankini or trapeze singlet. She described it thus:
The shirred stitching creates the pucker behind the design and the smocking creates the decorative part on top. Traditionally this isn’t the way smocking was done but in this case this is the way it’s done.
413 Ms Walkom agreed that the smocking was held in place by the black stitching and the black elastic stitching of the shirring, but did not agree that the smocking was consequently as three dimensional as the shirring. Rather, Ms Walkom described the smocking as “sit[ting] on top of the shirring”.
414 Ms Coundouris’ description of smocking and shirring was similar to that of Ms Walkom (at paragraph 81 above).
Copyright subsisted in the Senorita artwork
415 Originality in the context of subsistence is correlative to authorship. I am satisfied, that the Senorita artwork constituted an original artistic work which was the product of labour, skill and effort, together with a process of trial and error, on the part of the Seafolly designers, which was reflected in the material expression of the work.
416 The expert witnesses stated that diamond patterns of smocking were very common. The evidence did not establish, however, that smocking inevitably assumed the form of diamonds or diagonals, and indeed, Ms Walkom testified that in her view it was not regularly in a diamond form. While Mr McLauren believed that the Senorita embroidery was produced by a multi-needle industrial sewing machine which (if using one of many available pattern cams with two or more needles and thread running in a particular direction) only produced diagonal lines or diamonds similar to those in both the Senorita artwork and Richelle embroidery, he also conceded that even in that context, there was a huge array of different “cams” which could produce an almost indefinite variety of patterns. Therefore, the Senorita embroidery was not the inevitable outcome of the operation of an industrial sewing machine. Nor was the work so rudimentary and simple as to be unprotectable because, in essence, there was no meaningful distinction between the subject matter and the form of expression.
The applicant’s copyright in Senorita artwork was infringed
417 It is necessary to consider objective visual similarity and whether the Richelle embroidery constituted a reproduction of a substantial part of the Senorita artwork. In my opinion, Senorita artwork and the Richelle embroidery on City Beach’s Richelle bikini tops were manifestly similar. They shared a similar combination of a number of similar constituent elements which gave rise to objective similarity.
418 I accept that, as they testified, neither Ms Walkom nor Ms Coundouris had seen any of the alleged prior art produced in evidence by City Beach, some of which post-dated the creation of the Senorita artwork. The example of smocking exhibited by Mr Brough was not, in my view, as similar to the Senorita artwork as the Senorita artwork was to Richelle embroidery.
419 Both the Senorita artwork and the Richelle designs on the bandeau bikini tops consisted of four horizontal rows of diamonds, the two identical outer rows comprising much smaller diamonds, while the two identical inner lines comprised much larger diamonds. In two inner rows of larger diamonds, the larger diamonds are connected by a very small diamond at the middle of each larger diamond on either side. The Richelle embroidery has a more pronounced “cross-over” which is evident on close inspection. Each has a similar spacing between the large middle rows and the much smaller outer rows of diamonds, while each displays a similar contrast between the colour of the embroidery and the background fabric on which it is placed. The differences between the two works were, in my opinion, very minor.
420 The above objectively similar visual features constitute a significant quantity of the Senorita work. I am satisfied that they are also, cumulatively a qualitatively essential and material part of the Senorita work relative to its entirety, which the Seafolly designers applied their skill, effort, labour and judgement to achieve. They followed a process of considerable trial and error. The resulting combination of features constituted a substantial part of the Senorita copyright work.
421 The necessary nexus between the Senorita artwork and the Richelle embroidery was also clearly established.
422 City Beach, in its fast track response, denied copying the Senorita garment and asserted that the Richelle embroidery was created at a date unknown by its Chinese manufacturer. It was not until its second further amended fast track response dated May 2013 that City Beach admitted that the Richelle embroidery (subsequently amended to the Richelle garment) was created in China at its request.
423 Although Ms Knobel’s affidavit did not disclose it, the evidence revealed that Ms Knobel or another City Beach employee at her direction, purchased a Seafolly Senorita garment for use in directing or instructing manufacturers. Ms Bon provided the Seafolly Senorita garment to the Chinese manufacturer with instructions to make a swimwear sample as close as possible. Ms Bon did not provide any reference or guidance to City Beach’s Chinese manufacturer other than the Seafolly garment. She accepted that she had asked the manufacturer to copy the Seafolly garment and intended that it would be copied.
424 Ms Bon accepted in cross-examination that the first sample received from the Chinese manufacturer had been made by copying the Seafolly stitching, in accordance with her request.
425 In my opinion, the applicant’s copyright in the Senorita artwork was, subject to establishing a defence, infringed by the respondent’s Richelle embroidery.
Whether City Beach made out the corresponding design defence
426 City Beach alleged that the smocking/shirring design used in the Senorita garments was a three-dimensional embodiment of the Senorita artwork which was woven into, and had become part of, the structure of the Senorita garment. Accordingly, City Beach alleged that the Senorita artwork applied to the fabric used to make Seafolly’s garments was a “corresponding design” for the purposes of s 74(1) of the Copyright Act.
427 City Beach submitted that Seafolly industrially applied the Senorita artwork before City Beach’s garments bearing the Richelle embroidery were manufactured and sold.
428 “Industrially applied” is defined in regulation 17(1) of the Copyright Regulations 1969 (Cth) as follows:
(1) For the purposes of section 77 of the [Copyright] Act, a design is taken to be applied industrially if it is applied:
(a) to more than 50 articles; or
(b) to one or more articles (other than hand‑made articles) manufactured in lengths or pieces.
429 It was not disputed that Seafolly had sold over 50 garments bearing the Senorita artwork.
430 City Beach submitted that Polo/Lauren Co LP v Ziliani Holdings Pty Ltd (2008) 173 FCR 266; [2008] FCAFC 195 (“Polo/Lauren”), upon which Seafolly relied, could be distinguished, because in the present case, the Senorita design was stitched onto a shirred fabric. In contrast to Polo/Lauren, the design and the fabric never existed independently and were never intended to do so. In Polo/Lauren, the Full Court left open the question whether the logo in that case was three-dimensional, while holding that it was not embodied in the garment because it was not so inextricably bound up in the garment as to lose its separate identity.
431 Seafolly denied that the fabric used to the manufacture its Senorita garments constituted a “corresponding design”. It submitted that:
(a) the Senorita artwork was two dimensional, showing the placement of embroidery and depicting features of pattern and ornamentation, rather than visual features of shape and configuration; and
(b) the Senorita artwork was not “embodied” in the fabric used to manufacture the Senorita garments. Rather, the embroidery was applied to the garments.
432 Seafolly submitted that the Full Court in Polo/Lauren (although in obiter) made clear that features of pattern and ornamentation do not fall within the definition of a corresponding design under s 74(1). There was a clear distinction between features of shape or configuration (three dimensional), for which copyright is lost if the work has been industrially applied and features of pattern or ornamentation (two dimensional), for which copyright is not lost, regardless of industrial application.
433 Seafolly submitted that the stitching on the Senorita garments was not sufficiently three dimensional. The shirring under the smocking did not make it three dimensional. Rather, the smocking “plainly sits on top of the shirring”. Seafolly contended that three dimensionality required more than the height of threaded embroidery, as exact copies of oil paintings (reproducing the depths of the oil on the canvas) would otherwise constitute a reproduction of shape or configuration of the original artistic work. Moreover, Seafolly submitted that the smocking in this case did not create diamonds of appreciably different height on the fabric, so as to embody the design.
The relevant legislation and legal principles
434 The overlap between copyright and designs protection depends on complex legislation which has undergone substantial successive amendment. Different statutory regimes apply according to the date on which the artistic work in question was made. Many unresolved questions attend the overlap, which has justly been described as contentious and unsatisfactory. See Luck, J, “Section 18 of the Designs Act 2003: The neglected copyright/design overlap provisions” (2013) 23 Australian Intellectual Property Journal 68 (“Luck”) at 68.
435 Division 8, part III of the Copyright Act contains a number of provisions, commonly referred to as the copyright design overlap provisions. It relevantly provides:
Division 8—Designs
74 Corresponding design
(1) In this Division:
corresponding design, in relation to an artistic work, means visual features of shape or configuration which, when embodied in a product, result in a reproduction of that work, whether or not the visual features constitute a design that is capable of being registered under the Designs Act 2003.
(2) For the purposes of subsection (1):
embodied in, in relation to a product, includes woven into, impressed on or worked into the product.
75 Copyright protection where corresponding design registered
Subject to section 76, where copyright subsists in an artistic work (whether made before the commencement of this section or otherwise) and a corresponding design is or has been registered under the Designs Act 1906 or the Designs Act 2003 on or after that commencement, it is not an infringement of that copyright to reproduce the work by embodying that, or any other, corresponding design in a product.
…
77 Application of artistic works as industrial designs without registration of the designs
(1) This section applies where:
(a) copyright subsists in an artistic work (other than a building or a model of a building, or a work of artistic craftsmanship) whether made before the commencement of this section or otherwise;
(b) a corresponding design is or has been applied industrially, whether in Australia or elsewhere, and whether before or after the commencement of this section, by or with the licence of the owner of the copyright in the place of industrial application; and
(c) at any time on or after the commencement of this section, products to which the corresponding design has been so applied (the products made to the corresponding design) are sold, let for hire or offered or exposed for sale or hire, whether in Australia or elsewhere; and
(d) at that time, the corresponding design is not registrable under the Designs Act 2003 or has not been registered under that Act or under the Designs Act 1906.
…
(2) It is not an infringement of the copyright in the artistic work to reproduce the work, on or after the day on which:
(a) products made to the corresponding design are first sold, let for hire or offered or exposed for sale or hire; or
(b) a complete specification that discloses a product made to the corresponding design is first published in Australia; or
(c) a representation of a product made to the corresponding design and included in a design application is first published in Australia;
by embodying that, or any other, corresponding design in a product.
436 The prevailing principle of the copyright designs overlap provisions in Australia has been:
… that generally the designs of mass produced goods should only be protectable under designs law. This is mainly due to the low innovation threshold required to qualify for copyright protection, the lengthy duration of such protection and the absence of any public register to record such protection.
See: Luck at 68.
437 Division 8, part II of the Copyright Act includes s 77 which provides a defence to a copyright infringement claim. As Luck states, the copyright and design overlap provisions were intended to limit the scope of the reproduction right granted to artistic works used in industrial designs by “exclud[ing] artistic works registered or exploited as two-dimensional designs applied to the surface of articles from the scope of ss 75 and 77 of the Copyright Act and thus from the reduction in copyright protection effected by those sections”: Luck at 80.
438 In order to make out a defence under s 77 of the Copyright Act, a party must first establish that the artistic work or design containing the artistic work is a “corresponding design” within the meaning of s 74(1).
439 By s 74(1), a corresponding design in relation to an artistic work need not be capable of registration as a design. Rather:
(a) the artistic work must possess visual features of shape and configuration; and
(b) the above must be embodied in a product and the embodiment of the visual features of shape and configuration of the artistic work in the product must result in its reproduction.
440 The previous legislation, which required the reproduction of the artistic work to result from a design applied to an article, broadly speaking maintained full copyright protection for artistic works applied as two dimensional or surface designs, even if they were registered, while it excluded from copyright protection works industrially applied as three dimensional designs, save for a building, a model of a building or a work of artistic craftsmanship, unless the last-named were registered as designs.
441 In other words, copyright protection for the artistic work was lost, broadly, when it was industrially applied as a three dimensional design, but not if it was applied two dimensionally.
442 The thrust of the previous legislation is important, given the Full Court’s view in Polo/Lauren, discussed below, that amendments did not signify a radical departure.
443 In Polo/Lauren, the Full Court gave detailed consideration to the definition of “corresponding design” under subsections 74(1) and (2) of the Copyright Act. In Polo/Lauren, the applicant, Polo/Lauren Co LP (“Polo”), was the owner of the copyright in the artistic work. The work represented a polo player swinging a mallet while astride a cantering pony. It was depicted in the logo affixed to the applicant’s garments and was made up of 784 stitches. The respondents, Ziliani Holdings Pty Ltd and its principal, Mr Ziliani (“Ziliani”), without the applicant’s permission imported into Australia for sale and subsequently sold genuine Polo garments bearing Polo’s logo.
444 The importation into Australia of genuine goods bearing a trade mark legitimately affixed overseas did not infringe the applicant’s local trade mark: at [5]. Further, while Polo alleged that Ziliani had infringed its copyright by knowingly importing into Australia a copyright work without its permission under ss 37 and 38 of the Copyright Act, the Full Court found that Ziliani had established a defence under s 44C of the Copyright Act because the copyright work was a label incorporated into the surface of an article. Ziliani also relied upon the defence in s 77 of the Copyright Act, submitting that the logo was a “corresponding design” within the meaning of the Copyright Act that was not registrable and had been applied industrially to products that had been sold.
445 At first instance, Rares J held that Ziliani had established its defence under s 44C of the Copyright Act. While it was therefore unnecessary to consider whether Ziliani’s defence under s 77 was made out, Rares J concluded, in obiter, that the logo was a corresponding design within the meaning of s 74(1) of the Copyright Act, so Ziliani would have had a defence under s 77: The Polo/Lauren Co LP v Ziliani Holdings Pty Ltd (2008) 75 IPR 143; [2008] FCA 49 at [60], [84]-[85].
446 It was also unnecessary for the Full Court to determine whether the defence under s 77 was made out. However, in contrast to the trial judge, their Honours concluded, in obiter, that the s 77 defence would not have been established: at [36], [57].
447 Rares J reasoned that the defence under s 77 would have been established because the 784 stitches used to embroider the logo onto the garments created “an area of relief between the ordinary surface of the garment and the subtle, but nonetheless noticeable, rising of the surface of the garment in the places where the stitching, or embroidery, has been applied”: at [78]. His Honour stated at [81]:
Embroidery, of its nature, affects the shape of the fabric on to which the stitching is applied. … it is immediately apparent that the polo player logo is embroidered, not printed, and that the fabric surrounding the embroidery is subtly, but noticeably, differently woven to the distinct area embroidered.
448 Rares J concluded that the embroidered polo player logo fell within the definition of a “corresponding design” because it had “visual features of shape or configuration being the distinctive alternation of the fabric created by the embroidery of the logo using at least 784 stitches”: at [84].
449 In contrast, the Full Court concluded that the logo was not a “corresponding design” because it was “not embodied in the garments in the requisite sense”: at [57].
450 Ziliani submitted that the logo was sufficiently three dimensional due to the embroidery made up of 784 stitches which protruded, albeit slightly, from the surface of the garments. Ziliani also submitted that the words of s 74(2) illustrated that “embodiment” could include a design which was “woven into, impressed on or worked into the product”: at [46].
451 The Full Court rejected those submissions. Black CJ, Jacobson and Perram JJ accepted that, as Polo argued, “the language of s 74 has a statutory history which reveals that the expression ‘visual features of shape or configuration’ refers to a situation in which a three dimensional design is embodied in an article”: at [46]. It concluded that the definition of “corresponding design” was intended to apply to circumstances where an artistic work is embodied in three dimensions: at [54]. By that, the Full Court maintained the traditional position, where a design applied as the shape of a product was excluded from copyright protection, but a design exploited in basically two dimensional form continued to receive protection as an artistic work.
452 Their Honours observed that (subject to one qualification) at [48]:
… it is clear that the amendments to s 74 introduced by the Designs (Consequential Amendments) Act 2003 (Cth) were not intended to change the understanding that copyright protection was not available for three dimensional renditions of designs but was available when a design was exploited in two dimensions.
453 The Full Court noted that the words of the previous provision (which excluded “a design consisting solely of features of two dimensional pattern or ornament applicable to surface of an article”) were “drawn from designs law and connoted a two dimensional concept”, whereas the concept of “shape or configuration” was used to refer to “the embodiment of a design in three dimensions”: at [49].
454 Their Honours considered the Australian Law Reform Commission’s review of the designs legislation in its Report No 74, Designs, the Explanatory Memorandum to the Designs (Consequential Amendments) Bill 2003 (Cth), the Senate’s Economic Legislation Committee’s report into the provisions of the Designs Bill 2002 (Cth) and the Designs (Consequential Amendments) Bill 2002 (Cth) (the immediate predecessor to the bill just under consideration). They concluded that “the definition of ‘corresponding design’ was intended to cover a situation where an artistic work is embodied in three dimensions”: at [50]-[54].
455 Their Honours concluded that the insertion of wording contained in s 74(2) was not intended to remove the traditional requirement that the article “embody” the design. They stated at [55]:
Ziliani relies upon the words “woven into”, “impressed on” or “worked into the product” to show that something may be sufficiently three dimensional merely by being woven into another thing. Those words in s 74(2) were added by the Designs (Consequential Amendments) Act. Paragraphs 14 and 15 of the Explanatory Memorandum show that a debate as to whether objects such as carpets and bas-relief, whose qualities as a design might arguably be seen as either two or three dimensional, was to be resolved by requiring those objects to be protected under the designs legislation. We do not think that it was intended thereby to remove the requirement that the article “embody” the design. This is so both because there is the absence of an indication of an intention on the part of Parliament that that notion was to be removed and because the language of ss 74–77 exhibits textual examples which show that the relationship between the corresponding design and the article is one of embodiment rather than application. Section 74(1) uses the word “embody” as does s 77(2). …
456 Their Honours considered that, in context, “embody” meant to “give a material or discernible form to an abstract principle or concept”, rather than to “include as a constituent element”: at [56]. They stated at [55]-[56]:
The word “embody” is defined in the Shorter Oxford Dictionary on Historical Principles (6th ed, Oxford University Press, 2007) to mean:
1. Provide (a spirit) with a bodily form. 2. Unite into one body or mass; incorporate in a larger whole. Include as a constituent part. 3. Give a material or corporeal character to (what is spiritual). 4. Give a material or discernible form to (an abstract principle, concept, etc); express (such a principle etc.) in such a form. Of a material or actual thing or person: be an embodiment of (an abstract concept, quality, etc.) 5. Form (people) into a body, esp. for military purposes. Form or join a (military) body. 6. Coalesce, form a homogeneous mass.
(Emphasis added.)
While it is possible that the word “embody” can mean, effectively, “include as a constituent element”, we do not think, given the background to the provisions, that that is what it means in ss 74 to 77. Rather, in the cases with which ss 74 to 77 are concerned, it means “give a material or discernible form to an abstract principle or concept” — the relevant abstract principle or concept is the design itself. Once that is accepted as the meaning of “embody” in ss 74 to 77 there is no warrant for giving it the additional meaning “include as a constituent element” — such a reading would be inconsistent with the language and history of the provisions.
457 Finally, the Full Court observed that if Polo had defeated the s 44C “label” defence it would probably have failed to defeat the corresponding design defence in s 77: at [58]
458 On one view, the Full Court did not indicate whether it viewed the logo as three dimensional or not, but “did not consider it self-evident that the Logo was three-dimensional despite the noticeable protrusion of the Logo from the fabric of the garments”: Luck at 82. There are indications, however, that the Full Court rejected Ziliani’s argument on that question as, having referred to it in [46], the Full Court stated at [48] that Ziliani’s submissions should be rejected.
459 In my opinion, as Luck stated, the Full Court’s decision in Polo/Lauren indicates that features of shape and configuration can only be embodied in a product by making the product in that shape or configuration. In Luck’s view, the decision also suggests that the product must acquire its shape or configuration during the making and not by a subsequent “add-on”: Luck at 84.
460 Luck stated that, “[f]eatures of the shape or configuration of whole three-dimensional products will qualify as corresponding designs” while “features of pattern or ornamentation applied to the surface of products by a printing type process will not qualify …”: Luck at 84.
461 Luck argued that the Full Court’s decision limits the loss of copyright protection more than the language of the relevant provisions requires and may create potential difficulties if it is not self-evident how a product acquired its shape and configuration: Luck at 83.
462 In her article “Too many stitches in time? The Polo Lauren case, non-infringing accessories and the copyright/design overlap defence” (2009) 20 Australian Intellectual Property Journal 39 (“McCutcheon”), Jani McCutcheon concluded that Polo/Lauren imposes two conditions for reliance upon the defence in s 77 of the Copyright Act: at 45. First, the reproduction must embody the artistic work, which “cannot be merely a constituent element of another article”. Secondly, the reproduction must be three dimensional (although three-dimensionality is not of itself sufficient to satisfy s 77).
463 McCutcheon concluded that, on the Full Court’s interpretation of s 77, if the artistic work effectively becomes the product (such as where pump drawings become the pump) it would fall within the scope of a corresponding design, but artistic works that cannot be converted to a product, or must necessarily be manufactured as a constituent element of another product, would appear to be excluded: McCutcheon at 46.
464 The Full Court in Polo/Lauren appeared to accept that designs forming part of articles such as carpets, knits, weaves, tapestries and bas-relief could be embodied in such articles by being woven into, impressed on or worked to the product and could thus amount to corresponding designs. The Full Court referred to the Explanatory Memorandum to the Designs (Consequential Amendments) Bill 2003 (Cth) which indicated that the words in s 74(2) were introduced to clarify the status of such borderline cases. Ms McCutcheon stated at 48:
The strong similarity between embroidery and in particular tapestry would suggest that embroidery is three-dimensional, and provided the embroidery is “non-constituent”, s 77 will provide a defence unless such items are works of artistic craftsmanship (which may often be the case).
465 McCutcheon nevertheless noted that such articles are “whole article” embodiments of the artistic work and s 77 may not apply where the artistic work is only reproduced in a portion of, for example, a carpet, as s 77 was never intended to apply to the three dimensional embodiment of an artistic work in a part of a product. McCutcheon concluded that consistently with the Full Court’s decision, the reproduction of an artistic work in only a part of the product, albeit a carpet or bas-relief, would fall into the same category as the logo in Polo/Lauren and would be treated as a constituent part of the product: McCutcheon at 47.
Consideration
466 In my opinion, consistently with Full Court’s reasoning in Polo/Lauren, the Senorita diamond pattern embroidery design is not embodied in the Senorita garments.
467 The Full Court’s reasoning is not consistently explicit, but must be inferred, in some instances, from the materials it cites or extracts.
468 Further, the Full Court’s final comment (at [58]), viewed in isolation, and at face value, could suggest it would have found that the artwork on the logo in Polo/Lauren was relevantly embodied in the shirt if the logo had been applied or incorporated into the shirt in such a way that it did not exist in its own right and could not survive removal from the garment.
469 The Full Court in Polo/Lauren indicated at [58], that had the logo not been conceptually distinct from the garment, Polo would probably have failed on the corresponding design issue, because if the logo and the garment were conceptually indistinguishable, the garment would have embodied the label. The Full Court then remarked that another way of putting it was that neither party could have succeeded simultaneously on both defences, because the garments could not logically, at the one time, embody the logo and be distinct from it: at [58].
470 The observation at [58], taken literally, could indicate “embodiment” will occur if a logo is woven into the fabric of an article in such a way as to become indistinguishable. Nevertheless, that conclusion would not be consistent with the requirements for embodiment that emerge from the Full Court’s reasons as a whole. The reasons in substance indicate that it is the features of shape or configuration of an artwork (not a label on which the artwork is reproduced) that must be relevantly embodied in a product, which will occur when the product (in the present case, a garment) is made in the shape or configuration of the artwork.
471 Unless that requirement is satisfied, the defence based on a corresponding design will not be made out even if the design is placed on or in the article in a three dimensional way, as embodiment and three dimensionality are both necessary conditions.
472 In the present case, in my opinion, features of shape or configuration of the Senorita diamond pattern artwork are not embodied in the Senorita garments in the requisite sense.
473 It is true that, in contrast to the logo in Polo/Lauren itself, the reproduction of the Senorita artwork sewn on to the relevant garment may not retain a separate existence, as probably, it could not survive removal and is not conceptually distinct from the garment. Accordingly, if the Full Court’s observations in [58] represent the correct and comprehensive test, the Senorita artwork could be embodied within the meaning of s 74(1). As stated above, however, the comment at [58] does not comprehensively reflect the reasoning of the Full Court’s judgment.
474 In so far as the definition of a corresponding design may require the product to acquire its shape or configuration during the making and not as an “add on” (see Luck at 83), in this case, the evidence did not establish whether the shirring and smocking were accomplished simultaneously.
475 The evidence established that shirring and smocking are two distinct processes that can be carried out separately. Although Mr Brough stated that the terms “smocking” and “shirring” are sometimes used interchangeably and sometimes designate distinct concepts, according to the predominant usage, as in this case, shirring refers to the gathering of the fabric, while, as Mr McLaurin stated, smocking refers to a decorative pattern that is placed on top of the fabric, whether it is shirred or flat. It is clear that a garment can be shirred but not smocked, or alternatively, smocked but not shirred.
476 Further, fabric can be shirred and smocked simultaneously using one machine or, alternatively, may be first shirred after which the smocking is “placed on” or “on top of” the shirred fabric. Mr Brough’s evidence indicated that there were various methods of shirring/smocking. In one method, the shirring or gathering is accomplished first, and a pattern is then placed on top of it, according to which the decorative embroidery is applied.
477 In this case, the evidence did not establish by precisely what process the Senorita garments and the Richelle garments were shirred and smocked although the processes were evidently accomplished by a machine. Mr McLaurin did not dismantle the garments and Mr Brough acknowledged that he lacked the expertise to determine how the diamond on both artworks was created.
478 If it be relevant, in my opinion, the shirring of the garments created their three dimensional gathered structure whilst the smocking was a separate process by which a part only of the surface of the garments (albeit not flat) was embroidered (or decorated) with an artistic design. (This is so whether the processes in practice occurred concurrently (which cannot be confidently determined) and notwithstanding that the smocking was closely affixed.) Moreover, even if the shirring of the fabric and the sewing on of the smocking were achieved by simultaneous processes, it would not follow that the garment, as the product, acquired features of shape or configuration of the Senorita artwork during its making.
479 The Explanatory Memorandum accompanying the Designs (Consequential Amendments) Bill 2003 (Cth) recognised that there were certain articles (such as texture designs, bas-relief, embroidery, weaves and knits) where a design would not be strictly applied to the article’s surface, but instead would form part of the article. The addition of the words in s 74(2) was intended to clarify that, in relation to such “intermediate” articles (whose design qualities, as the Full Court stated (at [55]), might arguably be seen as either two or three dimensional) the definition of a corresponding design could be satisfied and accordingly, the articles could obtain protection under the designs, rather than the copyright, regime.
480 Following the insertion of the words “woven into”, “impressed on” or “worked into” in s 74(2), it seems clear that features of shape or configuration of an artwork can be embodied in an article which is itself a piece of embroidery, a carpet, bas-relief or similar, by being woven or worked in. This was the qualification to the maintenance of the tradition position to which the Full Court referred at [48]. The amendment to s 74(2) did not, however, apply to the circumstances of Polo/Lauren itself as the relevant product was a garment rather than a carpet, bas-relief or embroidery (although the design was applied or attached by means of embroidery or “weaving in”).
481 In the light of the Full Court’s emphasis that the position was otherwise unchanged, it would seem that it rejected Rares J’s analysis not simply or principally because the logo remained conceptually distinct from the garment, but because the garment was not made in the shape or configuration of the artistic work, irrespective of whether it was three dimensional.
482 In the present case, the smocking has stronger claims to being conceptually indistinguishable from the garment than the logo in Polo/Lauren, as it may not exist independently. It is, however, similar to the logo in Polo/Lauren in that it occupies only a part of the garment, which is not itself made in the shape or configuration of the artwork.
483 Accordingly, I do not consider that the features of shape or configuration of the Senorita artwork are embodied in the garment in the sense endorsed by the Full Court in Polo/Lauren. Rather, they are included as a constituent element. The Senorita artwork is thus not a corresponding design within the definition in s 74(1).
484 While the failure to satisfy the requirement of embodiment makes it unnecessary to consider the further requirement of three dimensionality, in my opinion the latter was not satisfied either.
485 The Full Court in Polo/Lauren stated that it was unnecessary to resolve whether the logo was three dimensional or not, but at an earlier point it appeared to reject Ziliani’s argument to that effect. The logo in Polo/Lauren was composed of hundreds of stitches and visibly, although slightly, protruded from the flat surface of the garment’s fabric.
486 In the present case, the surface of the garment onto which the smocking is sewn is not flat because the fabric is shirred. Any protrusion of the smocking from the surface is minimal and probably significantly less than that in Polo/Lauren itself, which on a fair reading of its judgment, the Full Court nevertheless thought insufficient.
487 Accordingly, the Senorita artwork is not a corresponding design and City Beach has not established a defence to infringement under s 77 of the Copyright Act.
THE Basis of INFRINGEMENT
488 Seafolly alleged that City Beach infringed its copyright both directly pursuant to s 31(1)(b)(i) and s 36 of the Copyright Act and indirectly by importation and sale pursuant to ss 37 and 38.
489 Seafolly submitted that City Beach authorised the reproductions of its works by 2Chillies and had the requisite knowledge for infringement pursuant to ss 37 and 38.
490 I am satisfied that, in the circumstances, City Beach authorised 2Chillies’ design and reproductions of the Rosette and Sienna artworks in material form in Australia and, thereby, reproductions of a substantial part of the English Rose and the Covent Garden artworks within the meaning of s 36 of the Copyright Act. The legal tests for authorisation in this context are well-established. In Roadshow Films Pty Ltd v iiNet Ltd [No 2] (2012) 248 CLR 42; [2012] HCA 16, French CJ, Crennan and Kiefel JJ stated at [69]:
An alleged authoriser must have a power to prevent the primary infringements. Australasian Performing Right Association Ltd v Jain [(1990) 26 FCR 53], [Australian Tape Manufacturers Association Ltd v The Commonwealth (1993) 176 CLR 480], [Universal Music Australia Pty Ltd v Sharman License Holdings Ltd (2005) 220 ALR 1] and [Cooper v Universal Music Australia Pty Ltd (2006) 156 FCR 380] all confirm that there must be such a power to prevent. So much had been recognised earlier, in any event, in [Adelaide Corporation v Australasian Performing Right Association Ltd (1928) 40 CLR 481 at 498-499 per Higgins J; at 503, 505 per Gavan Duffy and Starke JJ] and [University of New South Wales v Moorhouse (1975) 133 CLR 1 at 12 per Gibbs J].
491 City Beach not only had the power to prevent the reproductions of the Seafolly works but it initiated, directed and commissioned the process. It provided Seafolly English Rose and Covent Garden garments to 2Chillies with instructions and directions, as discussed in detail above.
492 City Beach also sent a physical sample and a photograph of the Seafolly Senorita garment to its Chinese manufacturer, Welon, with instructions to copy the pattern details and the colour of the surface thread.
493 City Beach admitted that it manufactured, imported for sale, sold or by way of trade, offered for sale or exhibited the City Beach garments and authorised such conduct.
494 Sections 37 and 38 of the Copyright Act provide for infringement by the importation for sale or sale (or exposing for sale) of an article or by way of trade exhibiting an article in public if the person 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.
495 In Milpurrurru, von Doussa J acknowledged the infelicitous expression of s 37 but stated at 225:
“Knowledge” for the purposes of s 37, refers to notice of facts such as would suggest to a reasonable person having the ordinary understanding expected of persons in the particular line of business that a breach of copyright was being committed: Apple Computer Inc v Computer Edge Pty Ltd (1984) 1 FCR 549 at 561-562; Kalamazoo (Aust) Pty Ltd v Compact Business Systems Pty Ltd (1985) 84 FLR 101 at 126-127; RCA Corporation v Custom Cleared Sales Pty Ltd (1978) 19 ALR 123. By virtue of the Copyright Amendment Act 1991 (Cth), s 3, it is no longer necessary to establish actual knowledge. Constructive knowledge is sufficient. Knowledge of the law is not required. It is sufficient that there be actual or constructive knowledge that intellectual property rights would be infringed, without knowing the precise nature of those rights: see Star Micronics Pty Ltd v Five Star Computers Pty Ltd (t/a Computerfair) (1990) 18 IPR 225 at 235-236.
496 City Beach denied that it had the requisite knowledge to infringe pursuant to ss 37 and 38 of the Act, submitting that it had no reasonable basis to know that Seafolly was the owner of the copyright in the Seafolly artworks, as the Seafolly garments bore no copyright notice and, accordingly, the designer or manufacturer of the garments could have owned the copyright.
497 I am satisfied, however, that on the evidence discussed in detail above, City Beach had notice of such facts as would have suggested to a reasonable person of ordinary understanding in the relevant business that Seafolly’s copyright was being infringed. It acquired images of Seafolly’s garments from the internet and purchased Seafolly garments to provide instruction to its designers. It operated in a similar business and market to those of Seafolly. Its designers in substance on a number of occasions drew to its attention the danger that Seafolly’s rights in the English Rose print could occur if City Beach’s instructions and requests were complied with.
498 Seafolly also alleged that City Beach infringed copyright by communicating the copyright works to the public within the meaning of s 31(1)(b)(iii) of the Act by advertising garments on its website.
499 In opening submissions, counsel for Seafolly observed that it would be difficult to ascertain the losses flowing from the alleged contravention. City Beach did not dispute that it sold its garments on the internet. There was, however, as Seafolly’s counsel acknowledged, no evidence before the Court of the sales of infringing garments made by City Beach through the internet. The allegation was not pursued by Seafolly in closing submissions.
500 In my opinion, infringement of s 31(1)(b)(iii) was not made out.
Relief Sought by Seafolly
501 Seafolly sought:
(a) compensatory damages for lost profits in the sum of $240,999.18;
(b) compensatory damages for damage to its reputation in the sum of $70,000;
(c) additional damages of $300,000; and
(d) conversion damages in the sum of $211,753.34.
502 Seafolly also sought declarations, injunctions and delivery up of all remaining stock of the respondent’s infringing garments.
503 Seafolly primarily relied upon the evidence of its chief executive officer, Mr Halas.
504 City Beach opposed the form, basis and quantum of the relief sought by Seafolly. It relied upon the affidavit sworn on 1 May 2013 and 17 June 2013 of its chief financial officer, Mr Wilson, a chartered accountant.
Compensatory damages for lost profit
505 Section 115(2) of the Copyright Act provides:
Subject to this Act, the relief that a court may grant in an action for an infringement of copyright includes an injunction (subject to such terms, if any, as the court thinks fit) and either damages or an account of profits.
The relevant authorities
506 The award of damages for infringement of intellectual property rights is governed by similar considerations to the award of damages in tort. Its purpose is “to compensate for loss or injury” suffered as a result of the respondent’s infringement, rather than to punish the defendant: see Bailey v Namol Pty Limited (1994) 53 FCR 102 (“Bailey v Namol”) at 110-111, quoting, in part, Lord Wilberforce in General Tire & Rubber Co v Firestone Tyre & Rubber Co Ltd [1976] RPC 197 at 212; Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (in liq) (2007) 157 FCR 564; [2007] FCAFC 40 (“Aristrocrat v DAP”) at [25], [34] per Black CJ and Jacobson J; Elwood Clothing Pty Ltd v Cotton On Clothing Pty Ltd [2009] FCA 633 (“Elwood v Cotton On”) at [5] per Gordon J; Norm Engineering Pty Ltd v Digga Australia Pty Ltd (2007) 162 FCR 1; [2007] FCA 761 (“Norm Engineering v Digga”) at [264] per Greenwood J. That caveat aside, the Full Federal Court has observed that damages should be assessed “liberally”: Bailey v Namol at 111.
507 Section 115(2) permits a successful applicant to elect either to receive damages or an account of profits. Such election must be made prior to judgment (Aristrocrat v DAP at [24] per Black CJ and Jacobson J).
508 Seafolly bears the burden of proving its loss or depreciation: Bailey v Namol at 111; Elwood v Cotton On at [6]; Aristocrat v DAP at [2]. In Aristocrat v DAP, Black CJ and Jacobson J observed that while “inferences will be more readily drawn against” the wrongdoers, the applicant must discharge the onus of proving its loss: at [34].
509 If the applicant fails to prove its loss, the Court may award nominal damages: Elwood v Cotton On at [6]; Aristrocrat v DAP at [38]-[39] per Black CJ and Jacobson J.
510 The appropriate quantum of damages is, so far as possible, “that sum of money which will put the injured party in the same position as he would have been in if he had not sustained the wrong”: Bailey v Namol at 110, quoting Lord Wilberforce in General Tire & Rubber Co v Firestone Tyre & Rubber Co Ltd [1976] RPC 197 at 212; Elwood v Cotton On at [6].
511 Where the Court finds that loss or damage has been sustained it must “do its best to quantify the actual loss even if some degree of speculation or even possible guess work is involved in this exercise”: Norm Engineering v Digga at [295]; Aristocrat v DAP at [35]. In Aristocrat v DAP, Black CJ and Jacobson J emphasised that the Court is only required to undertake that exercise where loss or damage, in addition to wrongful conduct, occurred: at [35].
512 In Elwood v Cotton On, the copyright owner and the infringer were in competition. In assessing damages under s 115(2), Gordon J (at [11]) adopted Finkelstein J’s statement in TS & B Retail Systems Pty Ltd v 3Fold Resources Pty Ltd (No 3) (2007) 158 FCR 444; [2007] FCA 151 (“TS & B”) at [207] of the measure of damages where the applicant and respondent are in actual or potential competition, which was as follows:
Then lost profit is usually the best measure of damage. The plaintiff must show that he has lost sales to the defendant as a result of the infringement and quantify the loss suffered. This requires the court to explore the counterfactual hypothesis of the contracts the plaintiff would have obtained absent the infringement and the costs associated with them. Necessarily the process will involve a degree of speculation, but that is no bar to recovery. The claim is not for loss of revenue but for loss of profits. The profits to be calculated are the lost net profits. By net profits I mean revenue less all costs including variable and indirect costs, but not including income tax. Care must be taken to ensure that costs savings are brought to account. If a plaintiff sells less of his products he will have less costs and that should be treated as a gain to be offset against the lost revenue which forms the basis of the computation of lost profits. The plaintiff is also entitled to recover indirect losses (such as damage to goodwill) as long as the cause is the infringement, the loss is foreseeable and is not unduly speculative. It will often be impossible to be precise in the calculation of lost profit. If needs be, the calculation can be rough and ready, with the benefit of any doubt favouring the plaintiff.
513 In Norm Engineering v Digga, Greenwood J found that the respondent had infringed the applicant’s copyright by reproducing the component parts of the applicant’s original artistic work, being drawings of a “4 in 1 bucket”.
514 The applicant sought damages under s 115(2) of the Copyright Act and additional damages under s 115(4).
515 Greenwood J accepted that there was a competitive market for the supply of the buckets. Further, the respondent was attracted to the applicant’s bucket and ultimately consciously copied it because it was the major selling bucket in the market, which the respondent intended to meet.
516 Greenwood J was satisfied that the applicant experienced “a significant and measurable impact upon its sales of 4 in 1 buckets” due at least in part to respondent’s sale of an immediate market substitute: at [292]. Further, it was clear on the evidence that “the respondent focused very directly upon the market position of the applicant’s bucket and the attractive force to the market of that bucket”: at [292].
517 Greenwood J estimated the profit the applicant would have derived, had it made and sold the buckets made and sold by the respondent, which represented profit lost on the sales of the bucket and then discounted that factor by 50%: at [296]. As this figure represented loss profit on sales of the bucket rather than loss due to infringement of copyright in the drawing of a pivot mechanism and as the latter was “a major component and is, on the expert evidence, central to the functioning and operation of the bucket” his Honour then discounted the already discounted figure by a further 60%: at [297]-[298].
518 In Elwood v Cotton On, Gordon J summarised the five step approach applied by Greenwood J in Norm Engineering v Digga, as follows at [13]:
(1) examine the number of sales made by the Respondent; (2) assume that the Respondent was trying to capture sales from the Applicant, the market leader; (3) assume that the number of sales made by the Respondent is equal to the number of sales lost by the Applicant; (4) discount the number in (3) to reflect the fact that not all sales made by the Respondent can be considered sales lost by the Applicant; and (5) apply any further discount necessary in the circumstances of the case …
519 Gordon J found that the applicant’s sales ceased when the respondent’s infringing product entered the market place: at [14]. Her Honour observed, however, that “the lost profits assessment depends upon a counterfactual”: at [14]. Further, although there was evidence of the number of units sold by the respondent in Australia and the applicant’s wholesale profit margin (the “very great majority of its sales were wholesale”), the evidence did not identify the market leader for the relevant product (t-shirts): at [9], [16].
520 Her Honour found that there was no basis for determining an appropriate discount factor, as the applicant and the respondent “were selling [t-shirts] to different markets at vastly different prices (approximately $50 versus $15)”: at [16].
521 As there was no evidence of the propensity to cross-purchase the parties’ t-shirts or the propensity of purchasers who purchase $15 t-shirts to purchase $50 t-shirts, Gordon J could not conclude that the applicant’s sales would have “matched the [r]espondent’s sales unit for unit”: at [19].
522 In Elwood v Cotton On, Gordon J awarded damages under s 115(2) of the Copyright Act of $120,000, which represented a two thirds discount to the total number of units sold by the respondent multiplied by the applicant’s wholesale profit margin and then rounded down to the nearest thousand: Elwood v Cotton On at [25].
523 In Axe Australasia Pty Ltd v Australume Pty Ltd (2006) 69 IPR 45; [2006] FCA 668, the respondent’s vandal resistant batten light was found to be a fraudulent imitation of the applicant’s registered design. When the parties competed as tenderers to supply their lights to a gaol, the respondent was successful. The applicant claimed damages of $36,353,79, as “the gross profit it would have earned had it been awarded the contract to supply the lights for the Kempsey Goal”: at [32].
524 Finkelstein J observed at [32]-[33]:
While it may be accepted that the profit the applicant would have earned had it been awarded the contract is in the sum claimed, it does not follow that this is the quantum of its loss.
The claimed loss is based on two hypotheses. The first hypothesis is that if the respondent had not been awarded the Kempsey Gaol contract, it would have gone to the applicant. The second hypothesis is that the applicant would have supplied the lighting at its tender price of $80,786.20 (inclusive of GST), which incorporated a gross profit of 45%.
525 Finkelstein J referred (at [34]) to the method for calculating damages explained by Deane, Gaudron and McHugh JJ in Malec v JC Hutton Pty Ltd (1990) 169 CLR 638 at 643 as follows:
If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. The probability may be very high – 99.9 per cent – or very low – 0.1 per cent. But unless the chance is so low as to be regarded as speculative – say less than 1 per cent – or so high as to be practically certain – say over 99 per cent -- the court will take that chance into account in assessing the damages. Where proof is necessarily unattainable, it would be unfair to treat as certain a prediction which has a 51 per cent probability of occurring, but to ignore altogether a prediction which has a 49 per cent probability of occurring. Thus, the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability.
526 Finkelstein J awarded damages of $25,000, which included a 35% discount on the amount claimed by the applicant, stating at [35]:
The only evidence I have to go on in assessing the probability of the applicant’s tender being accepted at the tender price is that the respondent was the successful tenderer with an almost identical product. I do not, however, know the tender price paid to the respondent. Nor do I have the prices tendered by other tenderers. This evidence could have been, but was not, made available. This makes my task difficult indeed. Doing the best I can, I am prepared to assume that if the respondent had not lodged a tender then it is more likely than not the applicant’s tender would have been accepted. But it is hard to say at what price the tender would have been accepted. Doing the best I can, I will discount the applicant’s claim by about 35%, and then round off the damages at $25,000.
527 In Review Australia Pty Ltd v Innovative Lifestyle Investments Pty Ltd (2008) 166 FCR 358; [2008] FCA 74 (“Review v Innovative Lifestyle”), Jessup J found that although the respondents’ conduct had “potential to cause loss or damage to the applicant … because both parties were sellers of similar products in much the same market”, the applicant failed to demonstrate that the respondents’ distribution and sale of its dress had a detrimental impact upon sales of the applicant’s own dress, made in accordance with the registered design: at [23]-[24].
528 The evidence did not establish that had the respondent’s dress not been on the market, the applicant would have achieved its sales: at [26]. There was no evidence that the parties’ sales outlets were proximate, and it could be inferred that their dresses would never have been sold side-by-side in the same outlet: at [26]. His Honour could not conclude that a consumer who bought the respondent’s dress would have bought the applicant’s dress had it been available: at [26].
The parties’ submissions
529 Seafolly calculated the sum of $240,999.18 for lost profits by multiplying the number of infringing garments sold by City Beach by Seafolly’s average wholesale profit margin (across the relevant garments manufactured by Seafolly) and reducing that amount by 25%.
530 Seafolly’s calculation did not, in reliance on Elwood v Cotton On at [25] and GM Holden v Paine (2011) 281 ALR 406; [2011] FCA 569 at [84], apply a discount for its overhead costs, as they were fixed and it was impossible to allocate net profit by style.
531 Seafolly submitted that a lower discount (25%) than that applied in Elwood v Cotton On should be applied in this case, because there was in this case, in contrast to in Elwood v Cotton On, an overlap in sales and the products were in the same market. Seafolly submitted that its garments were available for purchase when the respondent’s garments were available for purchase in the same market and to the same customers.
532 City Beach submitted that there should be a discount for overhead costs and no damages for profit lost on sales lost by reason of infringement. It submitted that there was no evidence of lost sales, the parties operated in different markets in respect of price and age group and there was no prospect of confusion given the clear labelling of the garments which were never sold from the same outlets.
The evidence
533 Mr Halas deposed to Seafolly’s sale of its products in 543 multi-branded stores, Seafolly concept stores, Direct Factory Outlet centres and in a further 1,755 retail outlets around the world, including department stores and boutiques which are also multi-brand stores. He described multi-branded stores as retail stores that stock Seafolly’s branded products and products of other brands, including competitor swimwear brands.
534 Mr Halas deposed that Seafolly wholesales its swimwear to almost every swimwear retailer throughout Australia save for City Beach stores, discount department stores and other vertical operators. He deposed that Seafolly is and has been since at least 2009, a major supplier of swimwear to the Billabong and Ripcurl fashion groups for sales in retail stores through Australia.
535 Mr Halas deposed that Seafolly competed in the Australian swimwear marketplace with many swimwear brands, including Billabong, Quicksilver, O’Neill and 2Chillies and that customers who purchased Seafolly’s swimwear also purchased swimwear from those brands. Seafolly supplied its products to some of City Beach’s direct competitors, although not directly to City Beach.
536 Mr Halas acknowledged that Seafolly branded products and City Beach branded products were never sold together in the same stores.
537 Mr Halas stated that Seafolly made most of its sales in wholesale which, in dollar figures, produced a significant lower profit margin (slightly less than one half) than in retail sales.
538 Although the price point for Seafolly’s swimwear varied considerably depending upon the fabric, trims, finishes and the associated cost of manufacturing Mr Halas deposed that, during 2011 and 2012, Seafolly (which sells its bikinis as a separate top and a separate bottom) sold its swimwear products at the following retail price points:
(a) $49.95 for a basic bikini top, $69.95 for a mid priced bikini top and $129.95 for a high end bikini top;
(b) $34.95 for a basic bikini bottom, $59.95 for a mid priced bikini bottom and $74.95 for a high end bikini bottom; and
(c) $139.95 for a basic one piece, $159.95 for a mid priced one piece and $189.95 for a high end one piece.
539 Mr Halas agreed that City Beach’s branded products were in a lower price bracket than those of Seafolly’s. The Seafolly brand was more “upmarket” than the City Beach brand, although City Beach stores carried some items of equivalent quality.
540 Ms Walkom testified that the purchase of Seafolly’s branded swimwear is “an in-depth purchase” and Seafolly tried to offer “a swimsuit piece for every age woman and every … sized woman in the Australian market”.
541 Ms Bobsien-Christie considered that Seafolly operated in the swimwear market for Australian women aged between 25 and 45.
542 Mr Wilson deposed that City Beach sold its goods, including its clothing, only through its chain of 60 City Beach retail stores in Australia and on its website. City Beach did not make any wholesale sales to third parties and City Beach branded merchandise was not sold through third party retail outlets.
543 Mr Wilson deposed that City Beach stores, the City Beach website and City Beach merchandise all bore City Beach trademarks. City Beach stores also sold swimwear by Billabong, Roxy, Rip Curl and O'Neill and swimwear bearing various brand names available only through City Beach stores, including “Fiesta” branded swimwear.
544 Mr Wilson testified that the competitors to City Beach’s Fiesta branded swimwear included Billabong, Quiksilver (Roxy), O’Neill, 2Chillies, Valley Girl, Cotton On and Dotti.
545 Mr Wilson deposed that City Beach’s target demographic was girls and young women between the ages of eight and 21.
546 Mr Wilson deposed that City Beach sold its Fiesta swimwear line at the lower to middle price point in the market, with retail price points typically in the following ranges:
(a) $39.99 to $79.99 for bikini sets;
(b) $59.99 to $69.99 for one piece swimsuits;
(c) $15.00 to $39.99 for bikini separates (tops or pants).
547 Mr Wilson deposed that the respondent’s swimwear typically sold at a lower retail price than swimwear brands such as Billabong and Roxy and substantially lower than that of Seafolly’s branded swimwear.
548 The Seafolly Summer 2010 range, which ran from about August 2010 until about August 2011, featured 17 different swimwear “stories”, including garments bearing the English Rose and Covent Garden and Senorita artworks.
549 The range was invoiced and delivered to wholesale customers from about July 2010 until about May 2012 and would probably have been sold for some months thereafter.
550 The range was invoiced and delivered to Seafolly’s concept stores from about August 2010 until about July 2011 and sold from August 2010 until September 2011. Any remaining stock was then sold at Seafolly’s direct factory outlet stores, Seafolly’s warehouse sales and through other clearance channels.
551 In his first affidavit, Mr Halas included the following table detailing the manufacturing costs, wholesale price and recommended retail price for each of Seafolly’s English Rose garments:
| Seafolly style number | Manufacture cost (AUD) | Wholesale price (AUD) | Recommended retail price (AUD) |
| 30059-514 | $20.93 | $43.16 | $94.95 |
| 30060-514 | $15.94 | $40.19 | $89.95 |
| 40037-514 | $8.98 | $29.52 | $64.95 |
| 40040-514 | $11.43 | $31.80 | $69.95 |
| 4430-514 | $12.12 | $34.07 | $74.95 |
| 10356-514 | $29.26 | $72.70 | $159.95 |
| 10386-514 | $33.05 | $81.80 | $179.95 |
| 51593 | $21.86 | $49.98 | $109.95 |
552 Mr Halas included the following table detailing the manufacturing costs, wholesale price and recommended retail price for each of Seafolly’s Covent Garden garments:
| Seafolly style number | Manufacture cost (AUD) | Wholesale price (AUD) | Recommended retail price (AUD) |
| 30021-520- style updated to 30068-520 | $15.70 | $36.34 | $79.95 |
| 30068-520 | $15.70 | $36.34 | $79.95 |
| 33368-520 | $12.58 | $29.52 | $64.95 |
| 30033-520 | $9.94 | $31.80 | $69.95 |
| 30019-520 | $15.79 | $40.89 | $89.95 |
| 40017-520 | $11.60 | $27.25 | $59.95 |
| 44426-520 | $10.80 | $29.52 | $64.95 |
| 40018-520 | $11.19 | $31.80 | $69.95 |
| 30022-520 | $20.22 | $59.07 | $129.95 |
| 10361-520 | $21.38 | $54.52 | $119.95 |
| 10367-520 | $19.38 | $68.16 | $149.95 |
| 51561 -520 | $11.89 | $31.80 | $69.95 |
| 51576 | $20.25 | $45.43 | $99.95 |
| 51570 | $18.61 | $45.43 | $99.95 |
| 51569 | $26.75 | $63.61 | $139.95 |
553 Mr Halas included the following table detailing the manufacturing costs, wholesale price and recommended retail price for each of the Seafolly Senorita garments:
| Seafolly style number | Manufacture cost (AUD) | Wholesale price (AUD) | Recommended retail price (AUD) |
| 30010-275 | $16.65 | $36.34 | $79.95 |
| 30011-275 | $13.83 | $31.80 | $69.95 |
| 30012-275 | $15.08 | $40.89 | $89.95 |
| 30013-275 | $14.49 | $59.07 | $129.95 |
| 40014-275 | $8.41 | $31.80 | $69.95 |
| 40013-275 | $9.84 | $31.80 | $69.95 |
| 40015-275 | $8.43 | $40.89 | $89.95 |
| 30014-275 | $15.76 | $54.42 | $119.95 |
| 10359-275 | $19.63 | $63.61 | $139.95 |
| 51548-275 | $16.76 | $54.52 | $119.95 |
554 Mr Halas acknowledged that the tables set out above showed gross, rather than net, profit and did not take into account design, management and other legitimate business expenses. While Mr Halas agreed that calculation of the net profit would require the deduction of all legitimate overhead costs, he testified that net profit could not be calculated by reference to style, because the overheads of the business are fixed. Mr Halas testified that it was only possible to show the contribution that a style has made to the gross profit.
555 Mr Halas also included tables detailing the wholesale sales, retail sales from Seafolly’s concept stores and retail sales from the applicant’s direct factory outlet stores shown by month from July 2010 until January 2013, which showed that the applicant’s sales had peaked before the respondent began selling products.
556 Seafolly’s English Rose garments were first shown to the market in about March 2010 and sold from late July 2010 until November 2012. Seafolly manufactured 63,449 units and sold a total of 63,267 units (comprising 48,750 units sold wholesale for $1,655,182, 10,342 units sold wholesale overseas, 2,755 units sold retail from its concept stores for $218,607 gross and 1,420 units sold retail from its direct factory outlet stores for $61,293 gross). Excluding the overseas sales, it sold a total of 52,925 units.
557 Seafolly’s Covent Garden garments were first shown to the market in about March 2010 and sold from August 2010 until about February 2013. Seafolly sold a total of 30,059 units (comprising 21,123 units sold wholesale for $712,687, 6,430 units sold wholesale overseas, 1,025 units sold retail from its concept stores for $75,493 gross and 1,481 units sold retail from its direct factory outlet stores for $42,221). Excluding overseas sales, it sold a total of 23,629 units.
558 Seafolly’s Senorita garments were first shown to the market in about March 2010 and sold from August 2010 until December 2012. It sold a total of 3,916 units (comprising 3,123 units sold wholesale in Australia for $98,205, 101 units sold wholesale overseas, 16 units sold retail from its concept stores for $727 gross and 676 units sold retail from its direct factory outlet stores for $23,367 gross). Excluding overseas sales, it sold a total of 3,815 units.
559 Mr Wilson deposed that City Beach’s retail stores sold the infringing Fiesta branded products summer 2011 to 2012 concurrently with swimwear by O’Neill, Billabong, Rip Curl, Roxy and Rusty.
560 Mr Wilson’s affidavit included tables setting out:
(a) the number of City Beach’s infringing garments purchased and sold by City Beach during the period commencing in July 2011 and ending 29 April 2013;
(b) City Beach’s costs of production, overhead costs and total costs for each of its infringing garments (Mr Wilson deposed that he calculated the average overhead cost per item during the period July 2011 to 29 April 2013 by applying a factor of 40% to the average retail price excluding GST); and
(c) the average retail price for each of City Beach’s infringing garments, calculating the net profit for each item (Mr Wilson deposed that he calculated the net profit by deducting the total cost from the average retail price (excluding GST) during the period commencing in July 2011 and ending 29 April 2013).
561 The information contained in the three tables is summarised in the following table:
562 Seafolly made an election for compensatory damages calculated by reference to its lost profit.
563 It is first necessary to determine whether Seafolly and City Beach’s garments competed in the same market.
A competitive market
564 The evidence established that there is a competitive market for the sale of swimwear in Australia, in which Seafolly is a leading participant. Further, I was persuaded that City Beach purchased Seafolly’s garments bearing the relevant artworks and sought to use or imitate them because Seafolly’s garments were particularly successful in the Australian swimwear market.
565 Seafolly’s products are, however, generally more expensive than City Beach’s products and while Seafolly directs its products to women of all ages, City Beach directs its products at girls and young women. Moreover, Seafolly’s and City Beach’s products are never sold in the same stores.
566 Accordingly, not all purchasers of City Beach’s garments are likely to be purchasers of Seafolly’s garments, although there is some potential overlap. I am nevertheless satisfied that Seafolly and City Beach compete within the same swimwear market. Both parties identified common competitors, even if they did not perceive each other as direct competitors.
567 As the parties compete in the same market, it is then necessary to consider the counterfactual identified by Finkelstein J in TS & B, namely, the garments that the applicant would have sold absent the infringement and the costs associated with them: TS & B at [207], endorsed by Gordon J in Elwood v Cotton On at [11].
Determining the quantum of loss
568 In that context, the five steps posited in Norm Engineering v Digga and, endorsed in Elwood v Cotton On should be applied.
569 City Beach sells its bikinis, top and bottom, as one product whereas the applicant sells its bikinis, top and bottom, as two separate products.
570 Mr Wilson deposed that from July 2011 until 29 April 2013, City Beach sold 8,155 units of its Rosette garments, 2,388 units of its Sienna garments and 749 units of its Richelle garments. In closing submissions, Seafolly submitted that City Beach had, at a late stage, disclosed the existence of another garment bearing an infringing print, of which 346 units had been sold.
571 Seafolly sold a total of 52,925 units of the English Rose garments, 23,129 units of the Covent Garden garments and 3,815 units of the Senorita garments, excluding overseas sales. Assuming that City Beach tried to capture sales from Seafolly and the number of sales made by City Beach was equal to the number of sales lost by Seafolly, then Sesafolly claimed $321,332.24 for its loss, calculated by multiplying the total units sold by City Beach (including the additional 346 units Seafolly submitted were disclosed by the respondent during closing submissions) by Seafolly’s average wholesale profit margin across the garments manufactured within the relevant three “stories”. It then reduced the figure by 25% to arrive at $240,999.18.
572 I accept that, as in Elwood v Cotton On, it is appropriate to take the wholesale profit margin. Further, I accept that it is not possible to allocate overhead costs by reference to different styles.
573 City Beach did not propose an alternative figure, merely submitting that no award for damages for lost profits should be made. Accordingly, I accept Seafolly’s base figure and consider the appropriate discount below.
574 The respondent’s sales multiplied by the applicant’s profit margin is rarely an accurate reflection of the applicant’s loss. It is usually necessary to discount that figure in recognition that not all sales made by a respondent can be regarded as sales lost by an applicant.
575 In determining whether persons who purchased the infringing garments from City Beach would have purchased Seafolly’s corresponding garments if City Beach’s infringing garments had not been available, it is important to consider whether there was a decrease in the Seafolly’s sales as a result of City Beach’s infringing products.
576 In this proceeding, City Beach’s infringing products were offered for sale at times when Seafolly’s relevant products were also offered for sale. Seafolly adduced evidence of its sales (wholesale and retail) over a period of time that both preceded and post-dated the sales of City Beach’s infringing garments.
577 The evidence was broadly consistent with a decline in Seafolly’s sales around the time that City Beach’s infringing garments entered the market, but the decline had commenced before the sale of City Beach’s infringing garments began. Further, Seafolly’s relevant garments were sold for some time prior to the sales of City Beach’s infringing garments and sales of Seafolly’s sales (with the exception of sales from its direct factory outlets) all peaked well before the commencement of sales of City Beach’s infringing garments.
578 Seafolly’s English Rose garments and City Beach’s Rosette garments were on sale concurrently for about sixteen months (July 2011 (the commencement of the sale of the Rosette/Rosario garments) until November 2012 (the cessation of the sale of English Rose garments)). Sales of City Beach’s Rosette garments commenced in July 2011. Seafolly’s English Rose garments had been sold wholesale from 31 July 2010 (continuing to 24 September 2012), from its retail concept stores from 13 August 2010 (continuing until 8 September 2011) and from its direct factory outlet stores from 11 September 2011 (continuing to 22 November 2012).
579 In summary, Seafolly made the majority of its wholesale sales to Australian retailers between August 2010 and February 2011 with sales peaking in November 2010 (10,463) and December 2010 (11,017), well prior to the commencement of the sale of the respondent’s infringing garments. Seafolly’s wholesale sales began to decrease from February 2011. In June 2011 Seafolly made wholesale sales of 449 and, in July 2011, when sale of City Beach’s Rosette garments began, it made wholesale sales of 114. After July 2011, Seafolly had months of higher sales in May 2011 (896), December 2011 (957) and January 2012 (553). The pattern was similar for retail sales from Seafolly’s concept stores. Seafolly’s sales peaked in December 2010 (910) and January 2011 (400). In June 2011, Seafolly sold 55 units, in July 2011, it sold 36, in August 2011, it sold 4 and in September 2011 (the last month), it sold 1. From September 2011, Seafolly made retail sales from its direct factory outlet stores with peak sales from those stores in December 2011 (358) and January 2012 (351).
580 Seafolly’s Covent Garden garments and City Beach’s Sienna garments were on sale concurrently for about nineteen months (July 2011 (the commencement of the sale of the Sienna garments) until February 2013 (the cessation of the sale of Covent Garden garments)). Prior to the commencement of sales of City Beach’s Sienna garments in July 2011, Seafolly’s Covent Garden garments had been sold wholesale from 3 August 2010 (continuing to 4 October 2012), from its retail concept stores from 27 August 2010 (continuing until 23 July 2011) and from its direct factory outlet stores from 4 August 2011 (continuing to 6 February 2013).
581 In summary, Seafolly made the majority of its wholesale sales to Australian retailers between August 2010 and December 2010 with sales peaking in August 2010 (9,676) and September 2010 (4,248), prior to the commencement of the sale of the respondent’s infringing garments. Seafolly’s wholesale sales began to decline significantly from January 2011. In May 2011 Seafolly sold 58 units, in June 2011, it sold 67 units and in July 2011, when sale of City Beach’s Sienna garments commenced, it sold 216 units. From July 2011 until July 2012, Seafolly sold month by month between around 9 (in April 2012) and 223 (in September 2011) units. From August 2012, the sales declined again, although Seafolly made sales of 426 in October 2012 (its final month of wholesale sales). Seafolly made the majority of its sales from its concept stores between September 2010 and January 2011 with sales peaking in December 2010 (256). Seafolly made retail sales from its direct factory outlet stores from August 2011 with higher sales in the months of March 2012 (136), June 2012 (163) and October 2012 (131).
582 Seafolly’s Senorita garments and the respondent’s Richelle garments were on sale concurrently for about seventeen months (July 2011 (the commencement of the sale of the Richelle garments) until December 2012 (the cessation of the sale of Senorita garments)). Seafolly’s Senorita garments were sold wholesale from 6 August 2010 (continuing to 4 October 2012), from its retail concept stores from 18 September 2010 (continuing until 24 June 2011) and from its direct factory outlet stores from 16 March 2011 (continuing to 27 December 2012).
583 In summary, Seafolly made the majority of its wholesale sales to Australian retailers between August 2010 and October 2010 (with sales peaking in August 2010 (1,239)), prior to the commencement of the sale of the respondent’s infringing garments. Seafolly’s wholesale sales declined from November 2010 until April 2011. In May 2011, it sold 257 units, in June 2011, it sold 103 and in July 2011, when sale of City Beach’s Richelle garments began, it sold 199. From August 2011, Seafolly’s wholesale sales declined again, although it sold 88 units in October 2012 (the final month of wholesale sales). Seafolly’s retail sales from its concept stores were very low, with peak sales of 5 units in September 2010. Seafolly made retail sales from its direct factory outlet stores from March 2011 with higher sales in the months of May 2011 (95) and June 2011 (91).
584 Some impact on Seafolly’s sales from the availability of City Beach’s infringing garments is probable. Nevertheless, a number of other factors may have contributed to the decline in sales of Seafolly’s relevant garments, including the fact that they had already been sold for a significant period of time (which included a summer season) and the change in seasons (City Beach’s products entering the market in winter). This is consistent with the decline in sales of Seafolly’s garments before the respondent’s infringing garments entered the market and the small jump in Seafolly’s sales some months after City Beach’s products entered the market.
585 City Beach’s products are generally cheaper than Seafolly’s products and importantly, City Beach’s infringing garments were considerably cheaper than Seafolly’s corresponding garments.
586 Seafolly’s “English Rose” garments (bikini tops and bikini bottoms sold separately and one-piece swimsuits) ranged in retail price from $64.95 to $179.95, while City Beach’s “Rosette” garments (bikinis (top and bottom sold together) and one-piece swimsuit) ranged in average retail price (including GST) from $28.13 to $73.20. Seafolly’s “Covent Garden” garments (bikini tops and bikini bottoms sold separately and one-piece swimsuits) ranged in price from $59.95 to $149.95, while City Beach’s “Sienna” garments (bikinis (top and bottom sold together) and one-piece swimsuit) ranged in average retail price (including GST) from $22.07 to $48.37. Seafolly’s “Senorita” garments (bikini tops and bikini bottoms sold separately and one-piece swimsuits) ranged in price from $69.95 to $139.95, while City Beach’s “Richelle” bikini (a bikini top and bottom sold together) had an average retail price (including GST) of $37.98.
587 City Beach’s target demographic is girls and young women between the ages of eight and 21. Seafolly’s target demographic is women of “every age”, Ms Bobsien-Christie opined that Seafolly operated in the market for woman aged 25 and 45. In my opinion, Seafolly and City Beach’s products are aimed at a different, although overlapping, demographics.
588 The evidence indicates that some purchasers buy several items of swimwear each season, whilst others buy only one, and that the selection of Seafolly’s swimwear is a considered and careful purchase. Nevertheless, the selection and the number of items bought may depend, at least in part, on the cost of the product. It is therefore significant that City Beach’s infringing garments were considerably cheaper than Seafolly’s garments.
589 City Beach’s infringing garments were never sold in the same stores as Seafolly’s garments and thus, as in Review v Innovative Lifestyle, they would never have been sold side-by-side in the same outlet.
590 Seafolly and City Beach, however, both sold their products on the internet and through a large number of outlets across Australia. Further, the parties perceived common brands as their competitors, albeit they did not perceive themselves as direct competitors. Accordingly, it is probable that a customer who had access to City Beach’s infringing products also had access to Seafolly’’s products.
591 A difference in price and market does not necessarily mean that none of City Beach’s sales can be said to have be taken from Seafolly’s sales. In Elwood v Cotton On, Gordon J observed that the respondent’s infringing t-shirts and the applicant’s relevant t-shirts were sold in different markets and at very different prices, but awarded damages for lost profits, applying, for a number of reasons, a discount of two thirds. Conversely, in Review v Innovative Lifestyle, there was no evidence of the potential for purchasers of the applicant and respondent’s products to cross-shop and, as discussed above, there was no award of damages for lost profit.
592 In my view, a significant discount is appropriate in the circumstances of this case. As in Elwood v Cotton On, there was a difference in price between Seafolly’s relevant garments and City Beach’s infringing garments. Further, while the markets in which the products are sold are not radically different, as in Elwood v Cotton On, the target demographics differed. However, in contrast to Elwood v Cotton On, in this case Seafolly’s and City Beach’s products were sold at the same time and there is evidence consistent with some modest impact on Seafolly’s sales as a result of City Beach’s infringing garments entering the market.
593 In light of the above and noting that Seafolly’s fixed overhead costs have not been factored in, I will discount the damages figure calculated at paragraph 571 by 75% and award damages for lost profit in the sum of $80,333.06.
Compensatory damages for damage to reputation
594 Seafolly sought damages in the sum of $70,000 for damage to its reputation due to City Beach’s infringements.
595 Seafolly relied upon the evidence of Mr Halas and submitted that:
a) the reputation attaches to the quality of the products, Seafolly’s marketing and a whole array of things that people associate with the Seafolly brand;
b) Seafolly has a reputation for being at the “forefront of fashionablity”;
c) Seafolly swimwear is always clearly branded with the Seafolly brand;
d) garments manufactured with fabric featuring the English Rose print were heavily advertised;
e) 6% of turnover from Australian sales was spent on marketing and that not all of the designs in the season were advertised equally;
f) City Beach stores carry more expensive brands that compete directly with Seafolly and which are sold in other stores that compete directly with Seafolly; and
g) City Beach and Seafolly both compete with the same surf stores being Surf Dive 'N Ski, Surefction, Jetty Surf, Osmosis.
596 City Beach submitted that no damages should be awarded for damage to Seafolly’s reputation. It submitted there was no prospect of confusion between Seafolly’s relevant garments and City Beach’s relevant garments for the following reasons:
(a) Swimwear is not an impulse-buy item. Buyers choose carefully for fit, style and fashion because swimwear is a public statement of fashion sense. It is not cheap and buyers typically do not buy many pairs of bathers in one season.
(b) Buyers look carefully at swimwear before purchasing it, examining its brands and tags, and swimwear is clearly labelled.
(c) Seafolly never sells its swimwear in City Beach’s stores and City Beach never sells its swimwear in Seafolly’s stores.
(d) The parties’ relevant garments were never sold in the same outlets.
(e) The parties’ relevant garments are in different segments of the market both as to price and age bracket.
597 City Beach submitted that there was no evidence of any reputation attaching to any of the garments in suit, which were ephemeral, evanescent seasonal designs. Further, a large proportion of the range changed each year.
598 City Beach submitted that Seafolly had failed to establish, as required by GM Holden v Paine (2011) 281 ALR 406; [2011] FCA 569 at [90] per Gordon J and Facton Ltd v Rifai Fashions Pty Ltd (2012) 95 IPR 95; [2012] FCAFC 9 at [117] per Gilmour J, “the importance of singularity, distinctiveness, quality or some other commercially valuable aspect of reputation to the victim; and … how, and to what extent, the infringing product or conduct damaged that aspect of the victim’s reputation”.
599 Mr Halas deposed that Sesafolly’s brand has been awarded a number of prestigious Australian and international prizes, participated in fashion shows and been featured in the press. He conceded that he had not referred to any particular awards or prizes for the garments at issue in this proceeding. He testified that Seafolly’s reputation attached to the quality of the garments, marketing and an array of things associated with the brand name Seafolly, including keeping up with fashion trends.
600 Mr Halas testified that Seafolly’s brand is recorded on a label attached to the garments, although the garment tags do not contain a copyright claim. Mr Halas believed that City Beach’s products were clearly branded.
601 Mr Halas deposed to the “substantial amount of money” Seafolly had spent advertising and promoting the “Seafolly” brand in Australia”. He annexed to his first affidavit a confidential schedule showing:
(a) Seafolly’s marketing expenditure for its brand for each financial year since the 2008/2009 financial year;
(b) Seafolly’s turnover from the sale of its garments to wholesale customers for each financial year since the 2008/2009 financial year broken down by year;
(c) the number of units of garments Seafolly sold to its wholesale customers for each financial year since the 2008/2009 financial year, broken down by year; and
(d) the turnover from retail sales of garments and the number of units of garments sold at Seafolly concept stores and direct factory outlet stores for each financial year since the 2008/2009 financial year broken down by year.
602 The relevant figures were substantial. I accept that, as Mr Halas deposed, by Seafolly’s marketing and promotional activities, its press coverage and awards and its merchandising and sales of products, Seafolly “has achieved a reputation as being one of the most innovative, original and recognised swimwear and beach lifestyle brands throughout Australia and the world.”
603 Seafolly spent approximately $1,542,614 promoting and advertising the Seafolly Summer 2010 season in Australia and its wholesale customers also promoted and advertised the range. That figure was, as Mr Halas conceded, spent to promote the entire Seafolly Summer 2010 range and not just the English Rose, Covent Garden and Senorita “stories”.
604 In his first affidavit Mr Halas set out details of Seafolly’s promotion and advertising for the Seafolly Summer 2010 season, which included: publication of the Summer 2010 Seafolly catalogue (made available in stores); promotion on Seafolly’s website and facebook page; the publication of Seafolly’s summer collection 2010 range book and provision to wholesale customers; in-store advertisements and signage; a short film entitled “Seafolly Behind the Scenes”; magazine covers; and articles and editorials in magazines, newspapers and other publications.
605 Mr Halas acknowledged that 6% of Seafolly’s turnover in the Australian business was spent on marketing. He maintained that the “English Rose” garments featured heavily in the marketing and promotion campaigns, although he could not specify the amount spent on marketing and promotion of those garments alone.
606 Mr Halas deposed that he regularly visits Seafolly’s concept stores, Seafolly’s direct factory outlet stores and Seafolly’s retail customers’ stores, and regularly meets with the wholesale buyers of Seafolly’s products to determine which garment styles and stories have been popular, customer feedback and how Seafolly’s brand is selling compared to its competitors. Mr Halas deposed that Seafolly is able to charge relatively high prices for its garments because it offers “original, fashionable and exclusive designs” and, accordingly, has “a market edge” over most of its competitors, including those that sell swimwear at lower prices.
607 Mr Halas observed that:
A fashion business which is in the practice of simply copying the designs and prints of other labels does not have to incur the significant design costs that a business like Seafolly expends. Also, a fashion business which is in the practice of simply copying the designs and prints of other labels has the advantage of being able to find out which designs have sold well for brands and these businesses go into the marketplace and copy the designs and prints of other labels that have sold well. This information can be easily obtained by speaking with the staff in store. The copier is also able to either sell the copied garment at a much lower price and still make a profit as it does not incur the significant design costs and research and development costs which Seafolly incurs in designing its original and new designs.
608 Mr Halas testified to the very substantial annual cost of Seafolly’s design team of 33 employees.
609 Mr Halas deposed that:
When Seafolly’s original fabric prints are copied by other businesses which targ.et their business at a similar market to Seafolly, Seafolly’s claim of originality in its fabric prints which have been copied is lost and the kudos of owning an original Seafolly design is lost. This is exacerbated when the copied fabrics are:
(a) mass produced and distributed in large volumes to retailers to whom Seafolly would not sell its garments to. This diminishes the "Seafolly" brand and market positioning as a whole;
(b) sold in stores next to or in close proximity to retailers who offer for sale and sell the original Seafolly garments. This often makes it hard for Seafolly to convince retailers to stock Seafolly products when the same or similar products not branded Seafolly can [sic] purchased and stocked for cheaper prices.
610 Mr Hallas deposed that such practices damaged Seafolly’s reputation as a designer and innovator of exclusive lines, leading consumers to assume that Seafolly's claim to unique and original designs was untrue. Accordingly, consumers, including previous customers, were less likely to purchase “Seafolly” branded garments and would be less willing to pay the higher prices if “Seafolly” garments no longer appeared exclusive.
611 Further, retailers would be less likely to buy as much Seafolly swimwear.
612 Mr Halas deposed that Seafolly’s success was “heavily dependent” upon it “maintaining exclusivity and originality its designs”. It took “all possible steps to protect its designs” including legal action against “numerous fashion houses that have copied its original designs”. In cross-examination, he agreed that Seafolly has previously taken action against both City Beach and 2Chillies.
613 Mr Halas deposed that:
I believe that the actions of [City Beach] have and are damaging to the business of Seafolly and Seafolly’s reputation in Australia and around the world as:
(a) the Respondents’ Garments (as defined in paragraph 15 of the Further Amended Fast Track Statement) are or were sold in retail stores which are in close proximity to retail stores to whom Seafolly sells its garments; and
(b) the Respondents’ Garments were sold at retail prices well below the prices charged for the Seafolly English Rose Garments, the Seafolly Covent Garden Garments and the Seafolly Senorita Garments.
614 Compensatory damages for a copyright infringement may include damages for indirect loss, including, for example, damage to goodwill, provided that the loss was foreseeable and not unduly speculative: TS & B at [207] per Finkelstein J.
615 In Elwood v Cotton On, Gordon J awarded damages for damage to the applicant’s reputation in the sum of $10,000, finding at [33]-[34]:
I find that it was reasonably foreseeable that infringement of the applicant’s copyright would cause a loss of reputation to the applicant in terms of brand-name recognition. However, the applicant adduced no evidence of the damage it allegedly suffered to its reputation by reason of the infringement of its copyright. In previous cases where damage to reputation has been quantified, evidence was usually led to establish (a) the importance of singularity, distinctiveness, quality or some other commercially valuable aspect of reputation to the victim and (b) how, and to what extent, the infringing product or conduct damaged that aspect of the victim’s reputation: see Paramount Pictures Corporation v Hasluck (2006) 70 IPR 293 ; [2006] FCA 1431 at [55]; [Review Australia Pty Ltd v New Cover Group Pty Ltd (2008) 79 IPR 236; [2008] FCA 1589] at [44]-[46] and [Review Australia Pty Ltd v Innovative Lifestyle Investments Pty Ltd (2008) 166 FCR 358; [2008] FCA 74] at [29]-[31].
What then is the commercially valuable aspect of the applicant’s reputation, and how, and to what extent, was this commercially valuable aspect damaged by the conduct of the respondent? … I am prepared to accept that the exclusivity of the applicant’s reputation was, on balance, adversely affected by the availability of the infringing products – as the availability of a product increases and its cost decreases, it will be viewed as less exclusive. … Any quantifiable figure for damage to reputation, by necessity, will depend upon the particular circumstances of the case. The starting point must be the reputation, and the harm it has suffered. … [O]n the balance it is likely that some damage to reputation was suffered. After all, as they say, success breeds success: see Prior v Sheldon (2000) 48 IPR 301 ; [2000] FCA 438 at [87]. While the precise quantification of the applicant’s lost goodwill is necessarily speculative …, I would award it an additional sum of $10,000 in this regard. That amount represents the best assessment I can make in the circumstances: [Review Australia Pty Ltd v New Cover Group Pty Ltd (2008) 79 IPR 236; [2008] FCA 1589] at [46].
616 In Review v Innovative Lifestyle, Jessup J accepted that as the applicant’s director testified, it placed “considerable value on the “perceived originality of its garments” which was “an important aspect of the applicant’s image in the market”: at [30]. Jessup J concluded at [31]:
I can well understand that, if the applicant had a reputation, however diffuse, for originality of design, a consumer might well show a particular interest in the applicant’s range of products, and be alert to the appearance of new designs from time to time. And if she took that approach, she would have to enter one of the applicant’s stores or outlets to satisfy her curiosity. If garments bearing a substantial similarity to those of the applicant started to appear in other outlets and under other brands, the consumer’s perception of the originality of the applicant’s designs would necessarily be weakened. In an extreme case, the consumer’s perception may be that the applicant’s garments were nothing very special at all, and that she might as well spend her discretionary dollar at any outlet where she noticed something to her taste. I could not, of course, find that the present was anything like an extreme case, but I am prepared to find, on the probabilities, that the market presence of the respondents’ dress did bring about some minor dilution of the applicant’s reputation for originality.
617 Jessup J awarded compensatory damages of $7,500 as the “capital value … upon the probable diminution of the applicant’s reputation for originality brought about by the respondent’s infringement”: Review v Innovative Lifestyle at [31].
618 In Review Australia Pty Ltd v New Cover Group Pty Ltd (2008) 29 IPR 236; [2008] FCA 1589 (“Review v New Cover Group”), Kenny J refused to award compensatory damages for lost profits under the Designs Act due to an absence of evidence. However, her Honour accepted that the applicant placed “substantial value on its image as ‘very feminine, girly, sort of romantic’ – an image achieved through its designs”: at [46]. Her Honour found that “it was plain enough that ‘exclusivity’ (and design ‘freshness’) was of commercial value” as the applicant chose not to sell its products through other branded stores: at [46]. According, “having regard to the effect of the infringement on the commercial value of the Review Design in respect of its future use and reputation,” her Honour assessed the effect of the infringement on the value of the relevant design as a chose in action at $35,000: at [46].
619 While the respondent submitted that Mr Halas’ evidence was largely wishful thinking, I was persuaded that Seafolly has a reputation in the Australian swimwear market based in part on its original designs and also on its substantial marketing and promotional activities. I accept that originality is a distinctive feature of Seafolly’s brand which focuses on keeping pace with changing fashion trends.
620 I accept that Seafolly places a high value on the originality of its designs and incurs significant costs in maintaining a large design team to develop them. Seafolly sells relatively high priced and exclusive garments. It expends significant resources on marketing and promotion. There was no evidence of confusion and City Beach’s garments are sole in different stores targeting a different demographic. I was persuaded, however, that City Beach’s sale of the garments bearing infringing designs would diminish and damage Seafolly’s reputation for originality and exclusivity and could decrease in consumer’s willingness to buy at the higher prices charged. Nevertheless, such damage would be modest. In all the circumstances, I consider that the sum of $20,000 is appropriate.
Additional damages
621 The applicant sought additional damages in the sum of $300,000 under s 115(4) of the Copyright Act on the basis that:
(a) The infringement of the Copyright Works was flagrant – it was done purposefully with knowledge of the copyright works and the conduct was sailing close to the wind.
(b) City Beach has copied not only one but three of Seafolly’s designs. City Beach has continued to sell City Beach’s garments long after being put on notice of Seafolly’s copyright claims.
(c) City Beach has accrued a great benefit as a result of copying the Copyright Works as it did not have to incur the costs of having designers create the fabric prints and embroidery design over a long period of time. City Beach has also achieved significant sales of the relevant City Beach garments and it has accrued a significant financial benefit.
(d) An award of additional damages will likely deter similar infringements of copyright. City Beach, a large manufacturer and retailer, knew that the designs would be “winners” and there is a public interest in deterring copying within the garment industry.
(e) City Beach failed to identify itself as the correct respondent in the dispute until after proceedings were issued.
(f) City Beach failed to disclose that it had reference to the relevant Seafolly copyright works which Seafolly claims have been infringed …
(g) City Beach has continued to sell a large number of the Fiesta Rosette/Rosario garments, the Fiesta Sienna garments and the Fiesta Richelle garments after receiving the initial letter of demand and after these proceedings were issued (see Elwood Clothing Pty Ltd v Cotton On Clothing Pty Ltd and Review Australia Pty Ltd v Innovative Lifestyle Investments Pty Ltd). Mr Wilson’s affidavit also discloses that sales were made up to at least 29 April 2013, although, he does not disclose the dates of sales so Seafolly cannot determine how many garments were sold after City Beach received the initial letter of demand.
(h) City Beach gave misleading evidence to the Court and concocted a story to try and explain away the similarities between the Fiesta prints/embroidery and the Seafolly prints/embroidery (see Review Australia Pty Ltd v New Cover Group Pty Ltd);
(i) City Beach failed to make proper discovery, in accordance with orders made by Justice Tracey, to reveal each of the garments it sold featuring the impugned fabrics. In fact, City Beach had filed 3 versions of this discovery document. Prior to City Beach’s closing submissions, City Beach revealed a further garment style manufactured from the Fiesta Rosette print and proceeded to file a fourth version of this document. Ms Knobel was cross-examined on this style as it was disclosed in the subpoena documents (item 11) produced by 2Chillies and she answered that “doesn’t look like a confirmed print…this shape doesn't ring any bells to me”. See: Kenny J in Review Australia Pty Ltd v New Cover Group Pty Ltd.
622 City Beach submitted that its conduct was not flagrant and that Seafolly was not entitled to additional damages.
623 Section 115(4) of the Copyright Act provides:
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.
624 In Aristocrat v DAP at [41]-[45], Black CJ and Jacobson J set out the principles governing s 115(4) as follows:
Flagrancy is not an essential prerequisite for an award of additional damages. It is sufficient if the Court is satisfied that any one or more of the circumstances set out in s 115(4)(b) is established: Raben Footwear Pty Ltd v Polygram Records Inc (1997) 75 FCR 88 at 93 (Burchett J), 103 (Tamberlin J), 104 (Lehane J); see also Polygram Pty Ltd v Golden Editions Pty Ltd (1997) 76 FCR 565 at 575 (Lockhart J); Sony Entertainment (Australia) Ltd v Smith (2005) 215 ALR 788 at [158].
Additional damages under s 115(4) may be awarded on principles that correspond to those governing awards of aggravated and exemplary damages at common law: Autodesk Inc v Yee (1996) 68 FCR 391 at 394 (Burchett J). The principle stated in Lamb v Cotogno (1987) 164 CLR 1 at 9-10, cited by Rares J at [114] is therefore applicable.
The objectives of an award of additional damages include deterrence: s 115(4)(b)(ia). An element of penalty is an accepted factor in the remedy; Autodesk v Yee 68 FCR at 384.
One of the factors referred to in s 115(4)(b) is any benefit shown to have accrued to a defendant by reason of the infringement: see s 115(4)(b)(iii). In construing the English equivalent provision, Brightman J said that “benefit” implies that the defendant has reaped a pecuniary benefit in excess of the damages otherwise payable: Ravenscroft v Herbert [1980] RPC 193 at 208. It is possible, however, that the benefit need not be confined to a pecuniary one: Polygram v Golden Editions 76 FCR at 576.
There need not be any proportionality between the amount of compensatory damages awarded under s 115(2) and the amount of additional damages ordered under s 115(4): Raben 75 FCR at 93, 103, 104; see also Microsoft Corporation v PC Club Australia Pty Ltd (2005) 148 FCR 310 at 409-410 (Conti J).
625 In Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd (No 2) (2008) 76 IPR 763; [2008] FCA 746 Besanko J observed at [17] (quoted and endorsed by Gordon J in Elwood v Cotton On at [36]):
First, there is no need ... to consider if an award of additional damages can be made under s 115(4) if no damages are awarded under s 115(2) because I have awarded ... nominal damages under s 115(2). Second, it is not necessary that there be a proportionate relationship between the additional damages awarded under subs (4) and the damages awarded under subs (2). An award of additional damages under subs (4) is not dependent upon the adequacy or inadequacy of an award of damages under subs (2). Third, the matters in subs (4)(b)(i)-(iv) inclusive are not preconditions to an award of additional damages. In other words, and using the flagrancy of the infringement as an example, the court must have regard to the flagrancy of the infringement in determining whether to award additional damages, but is not the case that additional damages can be awarded only if the breach involves a particular degree of flagrancy. Fourth, ... there is a distinction between conduct of a defendant after an infringement (or after being informed that he has allegedly infringed the plaintiff's copyright) and relevant to the substantive allegations against him on the one hand, and the defendant’s conduct of his defence to an action for an infringement of copyright in relation to procedural matters on the other. The former matter is within the terms of s 115(4)(b)(ib) of the [Copyright] Act, whereas ... the latter matter is a matter to be taken into account in determining the appropriate order as to costs. ... Fifth, an award under s 115(4) of the [Copyright] Act can encompass damages which at common law would be aggravated damages and exemplary damages.
[citations omitted]
626 In Norm Engineering v Digga, Greenwood J awarded additional damages of $19,450.00. His Honour observed that the respondent had made sales of 389 infringing products and although it would be unsound to assume that a sale made by the respondent would have been made by the applicant, the respondent had “derived the benefit of 389 sales incorporating the infringing three-dimensional component”: at [303]. His Honour concluded at [304]:
I propose to make an award of statutory damages pursuant to s 115(4) to take account of the conscious copying by the respondent; in recognition of an element of deterrence and having regard to the benefit derived by the respondent, on the following basis. The respondent sold 389 buckets. 50% of those buckets is 194 buckets. I have assumed a profit on each bucket of $250.00 which amounts to $48,625.00. That amount should be discounted by 60% having regard to the matters discussed earlier. The amount to be awarded is $19,450.00.
627 In Elwood v Cotton On, Gordon awarded additional damages of $150,000. Her Honour observed that the respondent’s infringement was flagrant. The respondent purchased the applicant’s work, its employees were instructed to make a garment that was “the same but different” and it failed to disclose these facts in its affidavits, only revealing them during cross-examination: at [38]. Further, after the applicant put the respondent on notice of the applicant’s copyright rights, the respondent continued to sell its infringing garments until all such garments were sold: at [39]. Finally, her Honour observed that the respondent’s method of designing garments was to employ “shoppers” who travelled the world to identify a “winner” which the respondent then copied and, where this method results in infringement of another party’s copyright, there is a public interest in deterring similar infringements: at [40].
628 In Aristocrat v DAP, Black CJ and Jacobson J and, in a separate judgment, Rares J, increased the amount of additional damages awarded by the primary judge. Black CJ and Jacobson J observed that the infringements were flagrant and the respondents sought to cover up their involvement, undeterred by the threat of legal proceedings: at [46]. The primary judge had determined that the respondents had obtained a pecuniary benefit of at least $80,000 plus interest, bringing the sum to $105,000. Black CJ and Jacobson J observed at [48]:
One of the purposes of an award of additional damages must be to strip the infringer of all pecuniary benefits received from the infringement but that is not the limit of the statutory objective which, as we have said, includes an element of penalty.
629 The Full Court increased the additional damages awarded to “reflect the flagrancy of the infringements, the need to deter similar infringements and the need to mark the Court’s disapproval of the conduct” and awarded additional damages of $200,000: at [53] per Black CJ and Jacobson J, at [116] per Rares J.
630 In Review v Innovative Lifestyle, Jessup J awarded additional damages in the sum of $10,000 under s 75(3) of the Designs Act. His Honour noted the differences between s 115(4) of the Copyright Act and s 75(3) of the Designs Act, including that the former refers to deterrence whilst the latter does not, and the different nature of the infringement in copyright and designs law.
631 His Honour observed that at [53]-[54]:
[S]ubject perhaps to such policy considerations as are embodied in s 75(2) of the Designs Act, an infringement might be constituted by an act which, in general terms, is quite innocent. This has the result, in my view, that considerations such as deterrence play out quite differently under the Designs Act from the way they do under the Copyright Act, and that this circumstance might explain the absence from s 75(3) of the former of the particular matters required to be taken into account under s 115(4) of the latter.
…
I must recognise that it is no part of the policy of the Designs Act to prevent copying per se. I accept the submissions made on behalf of the respondents that, unless they were appropriately put on notice that the dress which they copied was the subject either of an existing registered design or of an application that was pending, I should not view as especially culpable their conduct in copying that dress.
632 His Honour formed the view that the respondents’ conduct in continuing to trade in the infringing dress after they were directly informed of the applicant’s registered design should attract an award of additional damages in the sum of $10,000: at [56].
633 In Review v New Cover Group, Kenny J found that the respondent’s infringement of the applicant’s registered design was not flagrant (although she awarded additional damages on other grounds). Her Honour accepted that the respondent did not know that the applicant’s dress embodied a registered design protected under the Designs Act. Further, the respondent ceased selling the infringing articles once it became aware of the applicant’s claim at [54].
634 However, her Honour awarded additional damages in the order of $50,000 because the respondent refused to participate in the proceeding (including by attending for cross-examination) and deficiencies in discovery, responses to notice to produce and the respondent’s evidence, which did not include any evidence of the commercial benefit it obtained: at [59]-[62].
635 It is, in my opinion, clear that City Beach intended to make use of and to imitate Seafolly’s designs, albeit it intended, if possible, to avoid infringement and legal liability. City Beach took the risk that its use of Seafolly’s designs would exceed what the law allows, even in the face of, in the case of the use of the English Rose artwork, repeated warnings from 2Chillies.
636 In the case of the Richelle embroidery, City Beach simply sent the corresponding Seafolly Senorita garment to its Chinese manufacturer without any other substantive instruction. I am persuaded that City Beach made use of the Seafolly garments knowing that Seafolly was a leading brand with successful designs which sold well and were accordingly worth using. While City Beach denied that anyone within its organisation gave instructions to copy Seafolly’s designs, as a matter of substance, the sending of the Senorita garment in particular, was tantamount to an instruction to copy. 2Chillies interpreted, justifiably in the light of the exchanges, the respondent’s request for a Rosette print as requiring “a Seafolly knock off”, a construction which was not corrected by City Beach. City Beach ignored 2Chillies’ repeated caveats and attempts to avoid infringement by sufficiently altering the draft designs for the Rosette print. Ultimately, City Beach was conscious that the concerns of 2Chillies’ design staff were not allayed. I accept, however, that City Beach engaged 2Chillies to assist in the design process, thus incurring some design costs of its own, as opposed to simply copying another company’s designs. Further, City Beach did not blatantly and in terms instruct its designers to copy the Seafolly English Rose and Covent Garden prints.
637 City Beach also continued to sell its infringing garments after it was put on notice of Seafolly’s copyright claims and after the proceedings were issued, making sales at least up until 29 April 2013. The continuation of sales after notice had been received was an important factor in the award of additional damages in Elwood v Cotton On and Review v Innovative Lifestyle.
638 A number of the respondent’s important lay witnesses were not candid or responsive. They were frequently evasive, refused to make appropriate concessions and attempted to deny or explain away their reliance upon the applicant’s garments in developing the infringing designs.
639 As in Norm Engineering v Digga, City Beach obtained the considerable benefit of sales of 11,638 (including 346 units the applicant alleged were disclosed to Seafolly during the course of the proceeding) products that incorporated the infringing designs and avoided at least some of the design costs that are incurred by Seafolly in developing original designs.
640 City Beach initially failed to disclose, in its fast track response, that it had reference to Seafolly’s relevant garments, only admitting its reference to the English Rose print in its further amended fast track response on 21 December 2012, after a letter from the applicant’s lawyers, but denying reference to the Covent Garden print (including in subsequent amendments to its fast track response). The evidence made clear that City Beach did have reference to Seafolly’s relevant garments when creating the infringing designs.
641 While some difficulty attended the identification of the correct respondent, and City Beach failed properly to make discovery in accordance with the orders made by Justice Tracey, I was not persuaded that its conduct was comparable to that in Review v New Cover Group (discussed by Kenny J at [59]-[62]).
642 General deterrence from copying within the industry and specific deterrence of the respondent from further infringing conduct are necessary.
643 In the circumstances, a significant award of additional damages in the sum of $150,000 is warranted.
Conversion damages
644 The applicant sought conversion damages under s 116 of the Copyright Act in the sum of $211,753.34 and additional amounts for any further sales made since the respondent gave evidence as to its sales.
645 In Elwood v Cotton On Gordon J at [44] summarised the principles applicable to s 116 as set out by French and Kiefel JJ in Venus Adult Shops Pty Ltd v Fraserside Holdings Ltd (2006) 157 FCR 442; [2006] FCAFC 188 at [86]-[94]:
(1) Section 116 does not create a fictional conversion of infringing copies. It creates a fictional ownership in them.
(2) Conduct constituting conversion of the infringing copies according to the common law governing that tort, must be demonstrated. The facts said to constitute the conversion of the infringing copies should be pleaded (or in a fast track proceeding, at least identified).
(3) Conduct which may constitute conversion (interference with a right of possession) is diverse and includes refusal to return, taking, receipt, disposal or deprivation of title and destruction. Mere possession by a person of the goods of another does not necessarily constitute conversion.
(4) The mere production of infringing material by copying from an original work does not constitute a conversion under s 116 of the [Copyright] Act because no infringing copy comes into existence until after the reproduction has occurred: s 116(1A).
(5) Mere possession by a person of the goods of another does not necessarily constitute their conversion. However, a sale of infringing copies is not necessary for an award of damages under s 116. Conversion may be demonstrated when infringing copies are brought into existence for the purpose of sale or some other form of disposal. The conduct must “indicate an assertion of dominion over [the goods] inconsistent with the deemed ownership of the copyright owner”.
(6) Any award of damages for conversion is discretionary. It is in addition to relief under s 115 of the [Copyright] Act: s 116(1B) of the [Copyright] Act. However, if the relief the court has granted or proposes to grant under s 115 is sufficient, no additional award is made under s 116 of the Copyright Act: s 116(1C) of the Copyright Act. The “sufficiency” of the damages under s 115 will depend upon the particular circumstances of the case. By way of example, damages have been deemed insufficient where there was no way to calculate the quantum of damage under s 115 or the process of calculation required blatantly flawed assumptions to be made … Finally, there should be no overlap between the damages awarded under ss 115 and 116 of the [Copyright] Act …
[citations omitted]
646 An award of conversion damages is discretionary. In my view, it is inappropriate in this case, given the award of damages for lost profit, damage to reputation and additional damages, which will sufficiently compensate Seafolly.
Other relief sought
647 Mr Wilson, by an affidavit tendered late in the trial, deposed that generally the respondent had ceased to sell the Rosette, Richelle and Sienna garments since 31 May 2013 in its stores, online stores. An electronic stock report dated 17 June 2013 indicated that the respondent no longer had such garments available for sale in its stores, and Mr Wilson deposed that if units of stock were shown, it was likely an error which would be corrected in a physical stocktake. Mr Wilson also noted that City Beach sold a garment that was previously overlooked in store on 15 June 2013.
648 In his affidavit, Mr Wilson did not undertake that City Beach would not sell such garments in future or, in terms, depose that City Beach no longer possessed any such garments.
Conclusion
649 In my opinion, the applicant has established its claim to relief broadly in terms of that sought in its further amended originating application dated 5 April 2013. There should be a declaration that the respondent has infringed the applicant’s copyright to an order for damages in the sum of $250,333.06, and, in the absence of an undertaking, at least, an injunction and orders for delivery up.
| I certify that the preceding six hundred and forty-nine (649) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dodds-Streeton. |
Associate:
