FEDERAL COURT OF AUSTRALIA

Adidas-Salomon AG v Turner [2003] FCA 421

DAMAGES – assessment – summary judgment previously ordered in relation to infringement of applicant’s trade marks – limited evidence of the purchase, offering for sale or sale of infringing items – applicant incurred damage by virtue of loss of sales and diminished reputation.

Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 57 ALR 167, applied

Sony Computer Entertainment Australia Pty Ltd v Stirling [2001] FCA 1852, applied

ADIDAS-SALOMON AG v VINCENT TURNER

V 254 of 2002

GOLDBERG J

30 APRIL 2003

MELBOURNE

THE COURT ORDERS THAT:

1.         The respondent pay the applicant damages for infringement of the Adidas trade marks referred to in par B(1) of the Order of 18 December 2002 in the sum of $2,000.

2.         The respondent pay the applicant’s costs reserved on 12 March and 9 April 2003 and the costs of the applicant of and incidental to the hearing on 30 April 2003.

3.         The proceeding be otherwise dismissed.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

REASONS FOR JUDGMENT

1                     This application has been brought by the applicant (“Adidas”) against the respondent alleging infringement of certain registered trade marks.  On 18 December 2002, on the application of Adidas, I ordered that there be summary judgment for Adidas in terms of declarations of infringement of the registered trade marks set out in par B(1) of that order, injunctions restraining the further infringement of those trade marks, and delivery up on oath of infringing items.

2                     I adjourned for further consideration the issue of the assessment of damages or alternatively, an account of profits.  Consistently with principle, Adidas had an election which it was entitled to make:  whether to seek an assessment of damages or an account of profits.

3                     Subsequent to that date there were further hearings, including an examination of the respondent by way of cross‑examination, to determine the extent to which infringing items had been sold and offered for sale by him.  Notwithstanding the attempts of Adidas to obtain documentary evidence of the sales said to have been made by the respondent, the respondent has been unable to produce any documents evidencing either the purchase by him, whether by importation or otherwise, or the sale by him, of infringing items.  The only document relevant to this was a statutory declaration filed by the respondent on 12 March 2003 in which he acknowledged selling an “infringing Adidas trade mark item on or around October 2001”.  The respondent asserted in the statutory declaration he did not have any documentation regarding the sale and he had not sold items since that time.  He contended that he did not hold any stock.  Rather, he did business on the basis, as I understand it, of advertising on the Internet the availability of products and when he received orders for products he then sought to meet those orders by purchasing-in relevant product from whatever source was available to him. 

4                     Adidas today has elected to seek an assessment of damages instead of an account of profits.  The difficulty which I face is the limited evidence available before me to underpin an assessment of the damages suffered. 

5                     Nevertheless, notwithstanding the difficulties facing me on the assessment of damages, the task of the Court is to do the best it can on the available material.  The principle was stated succinctly by the Full Court in Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 57 ALR 167 where the Full Court, comprising Sheppard, Morling and Wilcox JJ, said at 183:

“The principle is clear.  If the court finds damage has occurred it must do its best to quantify the loss even if a degree of speculation and guess work is involved.  Furthermore, if actual damage is suffered, the award must be for more than nominal damages.  We should add that we can see no reason why this principle should not apply in cases under the Trade Practices Act as well as in cases at common law.  We emphasise, however, that the principle applies only when the court finds that loss or damage has occurred.  It is not enough for a plaintiff merely to show wrongful conduct by the defendant.”

This principle was recently restated by Emmett J in Sony Computer Entertainment Australia Pty Ltd v Stirling [2001] FCA 1852, particularly at [7] where his Honour said:

“If a court finds damage has occurred as a result of wrongful conduct that gives rise to a cause of action, it must do its best to quantify the loss, even if a degree of speculation and guesswork is involved.”

His HonourthenreferredtoEnzedHoldingsv Wynthea Pty Ltd (supra).  His Honour continued:

“In such a case the Court is, in effect, doing what is required of a jury when it may have to form conclusions on matters on slender material and to make allowances for contingencies, even to the extent of guesswork or speculation.  Uncertainty in the quantification of damage, even in the case of contracts, does not prevent an assessment, provided that some broad estimate can be made.”

6                     I am satisfied on the material before me that there has been some damage suffered by Adidas.  Firstly, damage was suffered where infringing items were sold and those items were what are called colloquially “counterfeit” items, so that there has been a benefit obtained by the respondent from selling items bearing trade marks which he was not entitled to offer for sale or sell.  That damage consists of the loss of sales that might otherwise have been made had the sales made by the respondent not occurred. 

7                     Secondly, a further matter of loss and damage arises because of the fact that the respondent offered infringing items, and in particular the items which are the subject of the declarations made in the order of 18 December 2002.  The respondent offered those items for sale over the Internet and the availability of those items for sale was made apparent to the public and such persons as would go to his website.  It is unlikely that the purchasers of the items, or persons looking at the website, would reasonably have believed that the items were genuine Adidas items.  I am prepared to draw an inference that, in general terms, a buyer would be satisfied that in order to obtain a genuine Adidas garment, one would need to buy it through more official channels and that it would have been apparent by reference to price that these were not genuine Adidas items.  I am satisfied that the fact that infringing items were available in the circumstances in which the respondent was offering them for sale tended to diminish the reputation of the genuine product sold by Adidas and tended to devalue the products that Adidas offers for sale. 

8                     Like Emmett J in the Sony Computer Entertainment Australia Pty Ltd v Stirling (supra), I find it very difficult to place any specific figure on the loss that would have been suffered by Adidas by way of additional devaluation of its products by reason of the conduct of the respondent.  However, I am satisfied that such damages in the circumstances would not be nominal, having regard to the extensive audience which is available to a website such as the respondent’s website.

9                     In all these circumstances, I consider an appropriate measure of Adidas’ damages to be $2,000 and I propose to order that the respondent pay Adidas’ damages for infringement of the Adidas trade marks referred to in par B(1) of the order of 18 December 2002 in the sum of $2,000. 

Associate:

Dated:              7 May 2003