Federal Court of Australia

Fanatics, LLC v FanFirm Pty Limited (Costs) [2025] FCAFC 111

ORDERS

THE COURT ORDERS THAT:

1.    Save for the costs referred to in paragraph 2 of the orders of Yates J dated 2 November 2023, paragraph 1 of the orders of Yates J dated 28 February 2024 and paragraph 1 of the orders of Bromwich J dated 21 March 2025, the Appellant pay 70% of the Respondent’s costs of the appeal, including the cross-appeal.

2.    The issue of the costs of the first instance proceedings be remitted to the primary judge.

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

REASONS FOR JUDGMENT

THE COURT:

1    On 9 July 2025, we published our reasons for judgment in Fanatics, LLC v FanFirm Pty Limited [2025] FCAFC 87 (Fanatics FC). This judgment relates to the issue of the costs of the appeal. Definitions adopted in Fanatics FC will also be adopted in these reasons.

Background

2    The relevant background is set out in Fanatics FC at [1]–[26].

3    The outcome of the appeal is set out at [27] of Fanatics FC as follows:

(1)    the primary judge erred in her evaluation that the packaging labels or care labels used on certain Fanatics goods, in the absence of other Fanatics branding, constitute use of the word “Fanatics” as a trade mark (section 2.3);

(2)    with the exception of the Corporate Goods (as defined below) and the “Fanatics Branded” goods sold by Fanatics on its website (as described below), which were correctly found to infringe, the primary judge erred in finding that the use of the FANATICS Marks on Fanatics’ websites constituted use in relation to class 24 and 25 goods and thus infringed the FanFirm Word Mark (section 2.4);

(3)    the primary judge erred in finding that towels and blankets fall within FanFirm’s class 24 registration for the FanFirm Marks (section 2.5);

(4)    Fanatics has not demonstrated error in the finding that it could not rely on the defence of ‘good faith use of its own name’ under s 122(1)(a)(i) in respect of its infringement of the FanFirm Word Mark in relation to the Infringing Goods (as defined below) (section 3.4);

(5)    Fanatics has not demonstrated error in the finding that it could not rely on the defence of ‘honest concurrent use’ under ss 122(1)(f) or (fa) and s 44(3) in respect of its infringement of the FanFirm Word Mark in relation to the Infringing Goods. However, her Honour erred in finding that s 58 would prevent Fanatics from relying on the defence in respect of the FANATICS Flag Mark (sections 3.5 and 3.6);

(6)    Fanatics has not demonstrated error in the finding that the FANATICS Marks should be cancelled pursuant to s 88(2)(a), on grounds under ss 44, 58 (in respect of the FANATICS Word Marks only) and 88(2)(c). However, her Honour erred in finding that s 60 provided an additional ground for cancellation of the FANATICS Marks pursuant to s 88(2)(a) (section 4);

(7)    as we have upheld the primary judge’s finding that the FANATICS Marks should be cancelled, it was not necessary to consider Fanatics’ appeal regarding its infringement case against FanFirm (section 5.1);

(8)    Fanatics has not established error in the finding rejecting its claims under the ACL and passing off (section 5.2); and

(9)    the primary judge erred in finding that the defence under s 122(1)(e) was available to Fanatics in respect of its infringement of the FanFirm Word Mark in relation to the Infringing Goods, and erred in making Order 6 otherwise dismissing FanFirm’s claim (section 6).

4    Fanatics submits that each party should bear its costs of the appeal, and that Fanatics should pay 50% of FanFirm’s costs of the proceedings at first instance on a party-party basis. FanFirm contends that it should have its costs of the appeal, including the cross-appeal, and of the proceedings at first instance, on the basis that it has achieved substantial success, and that costs should follow the event.

Applicable principles relating to costs

5    The principles relating to the award of costs are clear and well-settled. The award of costs is at the discretion of the Court, which discretion is broad but is to be exercised judicially: Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd (No 2) [2018] FCAFC 7 at [3] (Nicholas, Beach and Burley JJ). The fundamental purpose is to compensate the successful party, not to punish the unsuccessful party.

6    As set out by the Full Court in Les Laboratoires Servier v Apotex Pty Ltd (2016) 247 FCR 61; [2016] FCAFC 27 at [303] (Bennett, Besanko and Beach JJ), the usual principle is that costs follow the event:

Without amounting to an absolute rule, the principle remains that, subject to certain limited exceptions generally linked to the disentitling conduct of the successful party, a successful party in litigation is entitled to an award of costs (Oshlack per McHugh J at [67]-[68], in dissent but not in this aspect of the principle and with whom Brennan CJ agreed). That is not to punish the unsuccessful party but to compensate the successful party. There is no absolute rule that, in the absence of disentitling conduct, a successful party is to be compensated by the unsuccessful party, nor is there a rule that there is no jurisdiction to order a successful party to bear the costs of the unsuccessful party (Oshlack at [40] per Gaudron and Gummow JJ). However, the Courts have been slow to order a successful party to pay the costs where it has been unsuccessful on some issues. In Mok v Minister for Immigration, Local Government and Ethnic Affairs (No 2) (1993) 47 FCR 81, Keely J was of the view (at 84) that, without attempting to fetter the discretion, this power ought to be exercised only where the Court, on a consideration of all of the circumstances, has concluded that the raising of an issue by the applicant on which it has failed was so unreasonable that it is fair and just to make the order.

7    Where there is a mixed outcome in proceedings, an unsuccessful party is not automatically entitled to costs in respect of those issues of fact or law on which the successful party failed: Inspector-General in Bankruptcy v Bradshaw (No 2) [2006] FCA 383 at [12] (Kenny J). Justice Mortimer (as her Honour then was) stated in Plaintiff S111A/2018 v Minister for Home Affairs (No 5) [2022] FCA 603 at [42] that “the authorities caution against apportioning the costs of a successful party by some kind of division into the issues on which the party succeeded and those the party did not”.

Consideration

Costs of the appeal

8    Each party in the appeal achieved some success. However, this is not a case where it is appropriate for a rigorous issue-by-issue allocation of costs based on the outcome of particular issues, as there was significant interplay between the issues raised by the parties on their respective claims. It would be difficult to isolate the costs of each of those issues and to do so would detract from the task of doing substantive justice to the parties.

9    The “event” in a litigation, to which the usual rule refers, relates to the overall result in the sense of a party’s substantive success or failure. It does not entail success on every issue. There is no doubt that FanFirm has been the successful party in the litigation overall, notwithstanding that Fanatics has had some limited success on appeal.

10    Fanatics submits that it has achieved a “major legal and commercial victory” on appeal in respect of use as a trade mark of the FanFirm Marks, and that FanFirm “failed to remove Fanatics’ commercially important registrations in class 42 at first instance”. It submits that this limits the scope of any pecuniary remedies because key aspects of Fanatics’ conduct were found to be non-infringing.

11     However, the issues upon which Fanatics succeeded on appeal were confined. As we observed at [304] of Fanatics FC:

… In short, Fanatics has had some limited success on appeal insofar as it concerns its challenge to findings of infringement based on trade mark use in the context of the goods and services of the FanFirm Marks. It has had some very limited success in the context of its defences under s 122(1) of the Trade Marks Act, none of which are consequential. Put another way, it has succeeded in part on its first move on the chess board, but not on the others.

(Emphasis added.)

12    As a consequence of its limited success, an order that each party bear their costs of the appeal, as sought by Fanatics, is not appropriate. Rather, we consider that costs should follow the event and FanFirm should have its costs of the appeal, including the cross-appeal.

13    However, some discount to FanFirm’s costs is warranted to reflect that Fanatics has had some limited success in the appeal. FanFirm submits that a discount of no more than 10% would be appropriate. However, we consider that a discount of 30% is appropriate. Mathematical exactitude is not required, and a discount of 30% reflects that Fanatics was successful in narrowing the scope of findings of infringement.

Costs of the first instance proceedings

14    The costs orders made by the primary judge on 17 July 2024 were as follows:

8.    Subject to paragraph 9 below, the [appellant] pay the [respondent’s] costs of the whole proceeding, including the cross-claim.

9.    If either party seeks a variation of the costs orders in paragraph 8 above, it may, within 14 days, file and serve a written submission (of no more than two pages). The issue of costs will be determined on the papers.

15    On 31 July 2024, Fanatics filed submissions in accordance with order 9 contending, inter alia, that Fanatics should only pay 75% of the Respondent’s costs below. That was resisted by FanFirm. The primary judge has not ruled on that application.

16    As FanFirm achieved substantial success in the litigation, there is no basis for making the order sought by Fanatics concerning the costs of the first instance proceedings. Furthermore, as the application before the primary judge that Fanatics should pay only 75% of FanFirm’s costs below is still on foot, it should be for the primary judge to consider any variation of the costs of the first instance proceedings in accordance with order 9 of the 17 July 2024 orders.

Interloctory costs orders

17    On 21 March 2025, Bromwich J made interlocutory costs orders in favour of FanFirm in relation to Fanatics’ two failed stay applications. Interlocutory costs orders were also made by paragraph 2 of the orders of Yates J dated 2 November 2023 and paragraph 1 of the orders of Yates J dated 28 February 2024. It is appropriate that these costs orders are accounted for separately so that they are not subject to any discount.

Conclusion

18    For these reasons, we will order that, subject to the interlocutory costs orders, Fanatics pay 70% of FanFirm’s costs of the appeal, including the cross-appeal, and will remit the question of the costs of the proceedings below to the primary judge.

Associate:

Dated:    11 August 2025