FEDERAL COURT OF AUSTRALIA

Hugo Boss Trade Mark Management GmbH & Co Kg v Sasalili Oxford Fia [2014] FCA 1328

THE COURT ORDERS THAT:

1.    The Respondents pay the Applicant:

(a)    $20,000 being compensatory damages for infringement of the Hugo Boss Trade Marks (as defined in the statement of claim); and

(b)    $10,000 being additional damages for infringement of the Hugo Boss Trade Marks,

together with interest thereupon until payment pursuant to the Federal Court of Australia Act 1976 (Cth).

2.    Pursuant to Rule 40.02 of the Federal Court Rules 2011 (Cth), the Respondents pay the Applicant’s costs of $15,223.53.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

INTRODUCTION

1    On 6 June 2014, the Court ordered that the Respondents pay the Applicant damages to be assessed for infringement of the Hugo Boss Trade Marks (as defined in the Statement of Claim), together with interest, or, at the Applicant’s election, an account be taken of the Respondents’ profits, together with interest.

2    The Applicant has elected that the Respondents pay the Applicant damages, including additional damages, together with interest.

3    The Applicant also sought orders that pursuant to r 40.02 of the Federal Court Rules 2011 (Cth) the Respondents pay the Applicant’s costs from 5 September 2014 to 14 November 2014 being a total lump sum of $15,223.53.

4    In support of orders for damages and additional damages, the Applicant relied on:

(c)    the Affidavit of Matthew Peter Keighran sworn 3 October 2014;

(d)    the Affidavit of Lauren Jane Gore sworn 5 June 2014; and

(e)    the Second Affidavit of Lauren Jane Gore sworn 3 October 2014.

5    The Respondents have been served with copies of the orders made by the Court on 6 June 2014 and a later order made on 5 September 2014, and the Respondents have not contested the orders now sought by the Applicant.

6    Copies of the Keighran and both Gore affidavits were emailed to each of the Respondents on 4 October 2014 and were also personally served on each of the Respondents on 9 October 2014.

DAMAGES

7    Pursuant to s 126(1) of the Trade Marks Act 1995 (Cth) (‘the Act’), if the owner of a registered trade mark establishes that its trade mark has been infringed, it will be entitled to elect to obtain damages.

8    The purpose of damages for trade mark infringement is to compensate the applicant for loss or injury suffered as a result of the infringement, so as to as far as possible put the applicant in the same position as he or she would have been in if he or she had not sustained the wrong: see, eg, Seafolly Pty Ltd v Fewstone Pty Ltd (2014) 313 ALR 41 at [506] and [510].

9    The authors of Kerly’s Law of Trade Marks and Trade Names, (Sweet & Maxwell, 15th ed, 2011) at p 764 identify the following principles in relation to the assessment of damages for trade mark infringement:

(1)    Damages are compensatory only, to put the claimant in the same position he would have been in had the wrong not been sustained.

(2)    The burden of proof lies on the claimant, but damages are to be assessed liberally.

(3)    Where the claimant has licensed his right, the damages are the lost royalty.

(4)    It is irrelevant that the defendant could have competed lawfully.

(5)    Where the claimant has exploited his right by his own sales, he can claim the lost profit on sales by the defendant he would have made otherwise, and lost profit on his own sales to the extent he was forced by the infringement to reduce his own price.

(footnotes omitted)

10    Authorities also support the proposition that where a trade mark has been infringed by the sale of goods, it may be appropriate to award damages on the basis that the sale of such goods tends to diminish the reputation of, and devalue, the trade mark. Despite this type of damage to reputation often being difficult to quantify, it is compensable nonetheless: see, eg, GM Holden Ltd v Paine (2011) 281 ALR 406 at [91].

11    The assessment of damages can be difficult if the respondent does not participate fully in the process. For example, where the full extent of a respondent’s dealings with an infringing product are known only to the respondent and the respondent does not make full and frank disclosure of those dealings, the process of assessing damages will be frustrated because the true extent of the infringements is concealed. By way of example, French J (as his Honour then was) in Paramount Pictures Corporation v Hasluck (2006) 70 IPR 293 at [42] stated:

Speculation and even guesswork may have a role to play where the relevant evidence is inaccessible to the applicant. That is particularly so where the inadequacy of the evidence is caused by a recalcitrant or uncooperative respondent or one who has kept no adequate records of dealings. In saying so, of course, it must be recognised that an applicant may apply to the court for an order for the examination of the respondent in aid of the assessment of damages.

(emphasis added)

12    In addition to compensatory or nominal damages, pursuant to s 126(2) of the Act the Court may include an additional amount in an assessment of damages for infringement of a trade mark if it considers it appropriate to do so. The purpose of additional damages is provided in the Explanatory Memorandum to the Intellectual Property Laws Amendment (Raising The Bar) Bill 2011 (Cth) at p 113:

Additionally, stakeholders have submitted that many counterfeiters do not maintain sufficient business records to enable a satisfactory calculation of ordinary damages or an account of profits: purely nominal damages may be regarded by counterfeiters as merely the ‘cost of doing business’, rather than an effective deterrent. The absence of additional damages under the Trade Marks Act limits the ability of a court to provide an effective deterrent to intentional counterfeiting.

The amendment remedies these problems by giving the court the discretion to award additional damages. This aligns the remedies for trade mark infringement with other forms of intellectual property. It permits the court to provide a substantial deterrent and to mark its disapproval of flagrant infringement.

(footnotes omitted and emphasis added)

13    The power of the Court to award additional damages is discretionary and, in making its assessment as to whether additional damages should be awarded, it should have regard to the factors set out in s 126(2)(a) to (e) of the Act, namely:

(a)    the flagrancy of the infringement;

(b)    the need to deter similar infringements of registered trade marks;

(c)    the conduct of the party that infringed the registered trade mark that occurred after the act constituting the infringement, or after that party was informed that it had allegedly infringed the registered trade mark;

(d)    any benefit shown to have accrued to that party because of the infringement; and

(e)    all other relevant matters.

14    In light of the factors set out in s 126(2)(a) to (e) of the Act, the Explanatory Memorandum and the recent decision of Perram J in Halal Certification Authority Pty Ltd v Scadilone Pty Ltd (2014) 107 IPR 23 (‘Halal Certification Authority’) in relation to additional damages under s 126(2) of the Act, it is clear that additional damages are to operate as a deterrent and to make infringement unattractive, not to compensate an applicant’s loss: see Halal Certification Authority at [99].

15    The Applicant sought the following heads of damages:

(a)    Compensatory damages of $20,000 to reflect:

(i)    the infringement of the Applicant’s rights in the Hugo Boss Trade Marks by the Respondents; and

(ii)    damage to the Applicant’s reputation.

(b)    Additional damages of $10,000 as deterrence, to reflect the flagrancy of the Respondents’ conduct and the conduct that occurred after the Respondents were informed that they had infringed the Applicant’s rights.

Compensatory Damages

16    The Respondents have had manufactured and offered for sale at the very least 11 different types of products, including men’s, women’s and children’s clothing and hats, bearing the BOSSIT Mark (as defined in the Statement of Claim). Further, it appears that the Respondents’ men’s, women’s and children’s clothing and hats bearing the BOSSIT Mark were priced not inexpensively, the lowest price point being $20 for a children’s t-shirt and the highest price point being $40 for a hat. Accordingly, I am satisfied that the Respondents have manufactured and offered for sale a not insignificant number of products bearing the BOSSIT Mark at non-inexpensive prices.

17    The Respondents have advertised and offered for sale products bearing the BOSSIT Mark by at least two means:

(a)    First, the infringing products were advertised, offered for sale and sold on the Respondents’ Facebook Page which was visited, and subsequently “liked”, by a significant number of consumers and which was operated by the Respondents for at least 10 months, including over the Christmas period. The Respondents also promoted and advertised on the Respondents’ Facebook Page shipping of products bearing the BOSSIT Mark to Australian and international consumers.

(b)    Secondly, the infringing products were displayed, offered for sale and sold at stalls operated by the Respondents on three separate occasions over the Christmas period at markets at three different locations in New South Wales. Two of those markets (namely, the Fairfield and Blacktown markets) are regularly attended by many thousands of Australian consumers.

18    Accordingly, products bearing the BOSSIT Mark have, through the Respondents’ Facebook Page and market stalls, received exposure to a significant number of Australian and international consumers over a non-insignificant period of time, crucially when consumer purchasing is at its highest due to the Christmas period.

19    The Respondents have disclosed that they purchased products bearing the BOSSIT Mark from at least two suppliers:

(a)    The Respondents disclosed on 12 July 2014 the name of an Australian supplier from who they claimed they had purchased all of their products and asserted that there was only one order for infringing products. The Respondents provided to Corrs Chambers Westgarth, solicitors for the Applicant, (‘Corrs’) an invoice from the Australian supplier dated 15 December 2013.

(b)    The Respondents then disclosed on 30 July 2014 the name of a Chinese supplier from whom they claimed to have purchased white and red hats bearing the BOSSIT Mark. The Respondents also claimed that the order from the Australian supplier above was their second order for infringing products. Corrs did not receive any documents from the Respondents which showed their purchase of the white and red hats from the Chinese supplier.

Accordingly, the Respondents claimed that they only purchased a total of 35 products bearing the BOSSIT Mark in only two separate purchases, each from a different supplier.

20    However, the Respondents’ Facebook Page showed before and after 15 December 2013 postings of photographs of products bearing the BOSSIT Mark that were different in type and colour from those disclosed by the Respondents on 12 and 30 July 2014, namely:

(a)    on 21 August and 23 October 2013 the Respondents posted photographs of a red and white hat bearing the BOSSIT Mark in what appeared to be a black embroidered form;

(b)    on 28 August and 29 September 2013 the Respondents posted photographs of white, red and yellow hats bearing the BOSSIT Mark in what appeared to be a black embroidered form;

(c)    on 29 September and 30 December 2013 the Respondents posted photographs of a pink women’s t-shirt bearing the BOSSIT Mark in the form of a black transfer; and

(d)    on 29 September 2013 the Respondents posted photographs of a grey men’s t-shirt bearing the BOSSIT Mark in the form of a black transfer.

21    The Respondents have failed to provide complete information as the Respondents have had manufactured and offered for sale products bearing the BOSSIT Mark, other than as disclosed by them. The failure by the Respondents to disclose these other products occurred despite requests made by Corrs on 3 and 16 July 2014 that the Respondents’ disclosures needed to be completely accurate and entirely truthful.

22    Finally, I am satisfied that the Applicant has a strong image, reputation and brand recognition within Australia as a manufacturer and retailer of top-end products that are of an excellent standard and quality. Conversely, the Respondents’ clothing and hats are inferior products because they appear to be cheaply manufactured and sold by means in which the Applicant would never engage (namely, at market stalls and on Facebook). I am satisfied that the presence of the infringing products in the Australian marketplace would significantly diminish the reputation and exclusivity of the Applicant’s Hugo Boss Trade Marks (and the products to which those marks are applied by the Applicant) and tarnish the Applicant’s brand because Australian consumers may choose not to purchase the Applicant’s products if it is seen, as a result of the Respondents’ conduct, that its brand is going down-market and its products are the subject of cheaper infringements.

Additional Damages

23    The Respondents have continually failed to comply with the Applicant’s demands:

(a)    The Applicant caused two letters of demands to be sent to the Respondents in February and March 2014. The Respondents failed to comply with the demands by the deadline set out in each letter.

(b)    From on or about 4 March 2014 until 1 May 2014, Corrs continued on the Applicant’s behalf to try to resolve the matter with the Respondents. This was undertaken through emails and telephone calls to the Respondents, during which the Respondents were provided with numerous extensions of the deadline for compliance with the demands. The Respondents also failed to comply with the demands by each of the extended deadlines.

(c)    On 1 May 2014, Corrs sent a further email to the Second Respondent stating that should the Respondents not comply with the Applicant’s demands by the close of business on 2 May 2014, that the Applicant would issue court proceedings against the Respondents. Corrs did not receive a response to its 1 May email and subsequently issued proceedings on 2 May 2014.

(d)    On 3 May 2014, Corrs received an email from the Second Respondent which stated the following:

“...I’m not in the mood or in the mind to do anything. [Y]ou can do whatever you wish take me to court lock me up when I’m in the right mind I’ll get back to you”.

It was clear from the Second Respondent’s email that the Respondents maintained that they were not going to comply with the Applicant’s demands and that they were indifferent to the Applicant instituting court proceedings against them.

24    On the basis of the evidence before the Court, I am satisfied that the Respondents have a disregard for the Applicant’s property rights in the Hugo Boss Trade Marks.

25    The Respondents’ products are the same type of goods upon which the Applicant applies the Hugo Boss Trade Marks and both parties operate in the Australian retail clothing market. This makes the Respondents’ infringement particularly insidious and in need of deterrence because their conduct has the potential to damage the Applicant’s general image, reputation and brand, to damage Australian consumers’ perception of the Applicant’s brand, to damage the Applicant’s market position in Australia as a manufacturer and retailer of products of excellent standard and quality and to diminish the standing of the Hugo Boss Trade Marks.

26    The Respondents were defiant and non-compliant with the Applicant’s demands after they were informed that they had infringed the Applicant’s Hugo Boss Trade Marks.

Disposition as to damages

27    In my view, an award of damages of $20,000 would compensate the Applicant for the damage caused by the Respondents’ conduct even if some degree of speculation and guesswork is involved: see, eg, Adidas-Salomon AG v Turner (2003) 58 IPR 66 at [5].

28    While the Applicant has limited evidence available regarding the range and cost of products bearing the BOSSIT Mark offered for sale and sold by the Respondents, the manner in which those products were sold by the Respondents, the length of exposure of those products to the Australian public and the damage to the Applicant’s reputation, that does not preclude the Court finding that compensatory damages can be awarded. In fact, in these circumstances where the Respondents have ignored, with minor exceptions, the court process and when they chose to participate they provided at best incomplete information and at worst, false information, the Court must do its best to quantify the loss suffered by the applicant by reason of the Respondents’ infringement of the Applicant’s Hugo Boss Trade Marks.

29    An award of additional damages $10,000 would be a suitable sum to deter the Respondents from engaging in the infringing conduct in the future, but would also serve as a deterrent and make infringement unattractive to other retailers in the Australian marketplace.

30    Additional damages are appropriate in light of the Respondents’ infringing conduct and particularly their conduct that occurred after they were informed that they had infringed the Applicant’s Hugo Boss Trade Marks. Their conduct showed a complete and continual disregard of their legal obligations and the Applicant’s intellectual property rights.

COSTS

31    The lump sum costs submitted for by the Applicant of $15,223.53 is in relation to the preparation of orders for damages and additional damages (‘Damages Costs’) and costs which have been incurred by the Applicant from 5 September 2014 to 14 November 2014.

32    I am satisfied that a lump sum costs order is appropriate.

33    I also accept that the lump sum Damages Costs contended by the Applicant is appropriate.

34    Professional work was carried out by Corrs amounting to $20,608.50 which included:

(a)    attending the directions hearing on 5 September 2014;

(b)    preparation of service of the court orders;

(c)    drawing the Fourth Affidavit of Gino Alfredo Zitignani proving service;

(d)    drawing the Affidavit of Matthew Peter Keighran in support of orders for damages and additional damages;

(e)    drawing the Second Affidavit of Lauren Jane Gore in support of orders for damages and additional damages; and

(f)    drawing submissions in support of orders for damages and additional damages and costs.

35    Disbursements of $1,139.40 have been incurred, which included Auscript fees for the directions hearing on 5 September 2014 (namely, $197.50) and process servers fees (namely, $941.90).

36    To reflect the discount that is likely to applied by the Court to professional fees assessed on a party and party basis, the Damages Costs should be reduced by $6,524.37 (being a discount of approximately 30%).

37    I otherwise accept that the lump sum Damages Costs proposed by the Applicant is logical, fair and reasonable and is proportionate to the nature and complexity of the matter.

CONCLUSION

38    I will therefore order that:

(1)    the Respondents pay the Applicant:

    (a)    $20,000 being compensatory damages for infringement of the Hugo Boss Trade Marks (as defined in the statement of claim); and

    (b)    $10,000 being additional damages for infringement of the Hugo Boss Trade Marks,

together with interest thereupon until payment pursuant to the Federal Court of Australia Act 1976 (Cth).

(2)    Pursuant to Rule 40.02 of the Federal Court Rules 2011 (Cth), the Respondents pay the Applicant’s costs of $15,223.53.

Associate:

Dated:    5 December 2014