FEDERAL COURT OF AUSTRALIA

Solahart Industries Pty Ltd v Solar Shop Pty Ltd (No 3) [2011] FCA 884

THE COURT ORDERS THAT:

1.    If the parties are able to agree the form of orders, they be provided to my associate by email on Friday 12 August 2011 by 4pm.

2.    In the event that the parties cannot agree the form of orders the applicants email submissions to my associate (not longer than 3 pages) on the proposed form of orders by 4pm Wednesday 17 August 2011.

3.    The respondents to email to my associate submissions in reply (not longer than 3 pages) by Monday 22 August 2011.

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

REASONS FOR JUDGMENT

1    On 21 June 2011, I found in this matter that the second respondent had infringed two of the first applicant’s registered trade marks: Solahart Industries Pty Ltd v Solar Shop Pty Ltd [2011] FCA 700 (the ‘primary judgment’). On 7 July 2011, I made declarations and injunctions accordingly. The question of damages remains, however, to be tried.

2    The first applicant now seeks orders requiring the second respondent to file and serve an affidavit disclosing the extent of its use of the SOLARHUT mark and the extent of its revenues related to that use. It seeks this affidavit so as to assist it in deciding whether to seek an account of profits for that use or instead to pursue a claim in damages. The second respondent contends that no such affidavit should be ordered for two related reasons: first, it says that the applicant has no prospect of securing an account of profits; and second, that even if it does, the difficulties the second respondent will have in complying with the order make its provision disproportionately onerous to the likely utility it will afford the applicant such that it should, therefore, be declined on case management principles.

3    The second respondent does not dispute that, in principle, an affidavit of disclosure is conventional in intellectual property cases so as to facilitate the election by an applicant between the remedies of damages and an account of profits: cf. LED Builders Pty Ltd v Eagle Homes Pty Ltd (1996) 70 FCR 436 at 440, 448 and 451 per Lindgren J. That decision, which has often enough been applied, proceeds as a species of discovery under the former O 15 r 5 of the Federal Court Rules 1979. No occasion arises to consider how this principle interacts with the new Part 20 of the Federal Court Rules 2011 although it may be that what is involved is non-standard discovery under r 20.15.

4    Why does the second respondent say that the first applicant will not succeed in securing an account of profits? The argument proceeded as follows. The remedy of an account of profits is conferred by s 126 of the Trade Marks Act 1995 (Cth) (‘the Act’): ‘The relief that a court may grant in an action for an infringement of a registered trade mark includes: …(b) at the option of the plaintiff…damages or an account of profits’. An account of profits was an equitable remedy which is, therefore, discretionary. In the primary judgment I concluded that the mark SOLARHUT used by the second respondent was deceptively similar to the first applicant’s registered mark SOLAHART only because it sounded the same and not because the two words were deceptively similar in appearance. The uses of the mark which were found to have occurred were either visual (such as print advertising) or aural (such as a radio advertisement). In relation to the former, one could say that no person would have been misled by the use of the word SOLARHUT because its visual representation was not apt to cause any confusion with SOLAHART. In relation to the latter, customers might well be misled by hearing the word SOLARHUT but only into thinking that they had heard the word SOLAHART so that the effect of the use of the mark could only have been to direct custom in the first applicant’s direction. Consequently, so the argument concluded, one could be quite certain – even at this early stage – that the second respondent could not have made any profits from the use of the word SOLARHUT.

5    I am not disposed to accept this argument on an interlocutory basis. It may be assumed for present purposes that the grant of an account of profits under s 126 of the Act is, as the second respondent submits, a discretionary remedy. The first applicant is entitled either to damages or an account of profits for infringement. The infringements found in this case occurred under s 120(2)(a): ‘A person infringes a registered trade mark if the person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to: (a) goods of the same description as that of goods (registered goods) in respect of which the trade mark is registered’. The logic of the provision is that it is ‘uses’ of the mark which infringe and not particular instances of deceptions of the public. In this case the infringement arose from the deceptive similarity of the mark SOLARHUT to the registered mark SOLAHART. This, however, was because the two marks sounded the same. Once that conclusion was reached any use of the mark – whether aural or visual – is an infringement and this is so whether or not any particular use of it is confusing. This gives rise to the result that the visual depiction of the word SOLARHUT is an infringement even though it carries with it little capacity for confusion. This anomaly is foreseen in s 120(2) which concludes sensibly enough ‘However, the person is not taken to have infringed the trade mark if the person establishes that using the sign as the person did is not likely to deceive or cause confusion.’ The respondents sought to amend their case to rely upon s 120(2) on the second day of the trial but I declined that application on case management grounds: Solahart at [100]-[111]; cf. Cement Australia Pty Ltd v Australian Competition and Consumer Commission (2010) 187 FCR 261 at 275-277 [50]-[56] per Keane CJ, Gilmour and Logan JJ.

6    The consequence is that the second respondent will not be able to call in aid of s 120(2). This means that it will have to accept that each use of the mark is an infringement so that the inquiry will be into the extent of the profits resulting from, or the damages caused by, the infringement. Here the mark was not affixed to any goods but was instead used in advertisements and on a website. The question will therefore be the extent of the profits made by it from those uses of the mark: ‘In trade mark cases it has been generally accepted ever since Cartier v Carlile (1862) 31 Beav. 292 [54 ER 1151] (a common law trade mark) that what a plaintiff who establishes infringement is entitled to is the profit attributable to the use of the mark, and no more.’ (Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25 at 43 per Windeyer J). Granted that is so, it does not follow, as the second respondent necessarily submits, that no profit was made by the visual use of the mark SOLARHUT merely because no person was misled into thinking that what was being advertised were the first applicant’s goods. It may well be possible to say that no damage could have been done – I express no concluded view – because no trade could have been diverted but the converse of that logic does not map on to an account of profits. It is quite possible that profits were made by the use of the mark SOLARHUT. In those circumstances, I do not accept that it can be concluded that the applicant will necessarily fail to secure an account of profits. The second respondent may ultimately be able to push Colbeam into the gap left by the absence of the concluding words of s 120(2) from its defence, but I am not prepared to say, at this early stage, that it must succeed in that endeavour.

7    That conclusion has some impact on the second respondent’s second argument. I do not see that the profits which may be recovered under the account are necessarily trivial. Reliance was placed upon the evidence of Mr Thornton, the first respondent’s chief executive officer and sole director of the second respondent, to make good the notion that it was oppressive, or at least burdensome, for the second respondent to provide the information sought by the applicant. After the trial, but before the delivery of judgment, the business of the second respondent encountered the misfortune that its operational manager, Mr Branch, was dismissed; apparently on allegations that he had been involved in fraudulent activities. There are, apparently, civil proceedings by the second respondent against Mr Branch and Mr Thornton’s evidence before me was that Mr Branch had been charged with several offences by the South Australian police in relation to the same conduct.

8    The relevance of this was that this had made it necessary to wind down the business of the second respondent (it being owned by the first respondent who conducts a different photovoltaic business). Mr Thornton says that that winding down, together with the manner in which Mr Branch ran the business, has limited the number of records available. Most of the difficulties identified by Mr Thornton in his affidavit went not to the issue of oppression but, instead, to the question of whether the records sought existed. I do not think that the apparently patchy nature of the second respondent’s record keeping is a good reason for not requiring it to do the best that it can. To proceed otherwise would be to provide an incentive to resist accounts of profit by poor accounting. The only forms of prejudice I perceived from Mr Thornton’s evidence were these. First, it was possible that the second respondent did not keep track of the extent of its advertising campaigns. But it was also apparent that it had conducted those campaigns, at least in part, through advertising agencies. It might well be necessary to make inquiries of those agencies (I have not found compelling Mr Thornton’s point that the agencies were no longer engaged by the second respondent).

9    Secondly, in order to assess such matters as costs and overheads it might be necessary to retain an accountant. I accept that requiring the second respondent to engage third parties such as accountants and its former advertising agencies is a species of burden. However, given that the account of profits may well be non-trivial I do not think that it is excessive to require the exercise to be undertaken.

10    In those circumstances, the applicant is entitled to an affidavit of the kind it seeks. For the guidance of the parties and to avoid further interlocutory disputation it may be useful for me to indicate on a tentative basis that the orders proposed by the applicants appear to me to be acceptable and that the processes contemplated by them should be undertaken prior to the process contemplated by the second respondent’s proposed orders (which may, in any event, become unnecessary if the applicant makes an election). I will, however, entertain further submissions about the orders which should now be made if the parties require. The only directions I will make are:

1.    If the parties are able to agree the form of orders, they be provided to my associate by email on Friday 12 August 2011 by 4pm.

2.    In the event that the parties cannot agree the form of orders the applicants email submissions to my associate (not longer than 3 pages) on the proposed form of orders by 4pm Wednesday 17 August 2011.

3.    The respondents to email to my associate submissions in reply (not longer than 3 pages) by Monday 22 August 2011.

Associate:

Dated:    8 August 2011