FEDERAL COURT OF AUSTRALIA

Facton Ltd v Mish Mash Clothing Pty Ltd [2012] FCA 22

THE COURT ORDERS THAT:

1.    The applicants’ case under the Trade Marks Act 1995 (Cth) with respect to registered marks Nos 980112, 999350 and 102853 be dismissed.

2.    The proceeding be listed at 10:00 am on 13 February 2012 for the purpose of receiving the parties’ submissions as to the other orders which should be made to reflect the court’s reasons for judgment published this day, and as to costs.

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

REASONS FOR JUDGMENT

1    The first applicant, Facton Ltd, is incorporated pursuant to the laws of Hungary and is the registered owner of Australian trade marks Nos 883618, 980112, 999350 and 102853 (together, “the applicants’ marks”). Until 1 April 2011, G-Star International B.V (“G-Star International”), a company incorporated pursuant to the laws of The Netherlands, was the exclusive licensee of those marks, and was also the owner of such copyright as subsisted in a work (“the applicants’ work”) which corresponds to trade mark No 883618. On and after 1 April 2011, second applicant, G-Star Raw C.V, also incorporated pursuant to the laws of The Netherlands, was and remains the exclusive licensee of the applicants’ marks and the owner of the copyright in the applicants’ work. The third applicant, G-Star Australia Pty Ltd, is incorporated in Australia and is the Australian wholesaler and distributor of clothing and clothing accessories in the branding and promotion of which the applicants’ marks are used.

2    The first respondent, Mish Mash Clothing Pty Ltd, is a manufacturer, importer, wholesaler and retailer of clothing by reference to the brand “MISH MASH”. It operates six retail outlets in NSW and, until 30 June 2010, it operated three retail outlets in Victoria. The second respondent, Ilhami Yildirim, is the sole shareholder and director of the first respondent.

the facts

3    The applicants’ marks, and the goods or services in respect of which they are registered (to the extent presently relevant), are as follows:

No. 883618

Class 25: Clothing footwear, headgear

No. 980112

Class 25: Clothing, footwear, headgear

No. 1028535

Class 25: Clothing, footwear, headgear

G-Star Raw Denim

No. 999350

Class 35: Franchising services; administrative services provided in respect of the closing of franchise agreements for – among others – goods like soaps, perfumery, essential oils, cosmetics, hair lotions, leather and imitations of leather and goods made of these materials and not included in other classes, bags of leather for packaging, pocket wallets, trunks and travelling bags, suitcases, leather belts for clothing, umbrellas, clothing, footwear, headgear; aforementioned franchise agreements are made especially for the commercial exploitation of shops selling clothing, footwear, headgear, watches, clocks, sunglasses, spectacles, frames for spectacles, jewellery and other fashion accessories; advertising; business management; business administration; office functions; aforementioned services also provided via Internet being services in class 35

4    From 1989 until 31 March 2011, G-Star International sold goods under the “G-Star” brand, either through “G-Star” stores or by way of independent retailers in more than 40 countries. Since the latter date, the second applicant has undertaken these activities. In Australia, the third applicant sells these goods to its own franchisee which operates 22 “G-Star” concept stores, and to more than 40 independent retailers. The third applicant advertises and promotes the G-Star brand on billboards, on public transport signage, by way of in-store advertisements and in editorials and advertisements in magazines appropriate to the consumer cohort that might be interested in goods of the relevant kind.

5    In early September 2009, the second respondent travelled to Turkey to purchase stock for the first respondent. He visited a warehouse in Istanbul in which a business called “Robin Textiles” was being carried on. He viewed some denim jeans that were labelled as follows:

And he saw some other denim jeans labelled as follows:

6    At the warehouse, the second respondent spoke to two gentlemen called Mehmet and Mariah, who were selling the garments there. He told them that he liked the jeans and the labels, but asked if the word “Robin” could be changed to “Mish Mash”. Mehmet readily agreed, saying that he would use the term “M-Mash as Mish Mash [would] not fit on the label.”

7    As a result of this transaction, the first respondent imported 208 pairs of jeans which bore the following label:

Of those, 142 pairs of jeans had been sold by the time the first respondent received, and reacted to, the applicants’ letter of demand, as mentioned in para 11 below.

8    The first respondent also imported 194 pairs of jeans which bore the label depicted in the previous paragraph in conjunction with the following label:

Of those, 126 pairs of jeans had been sold by the time the first respondent received, and reacted to, the letter of demand.

9    The first respondent also imported 42 pairs of jeans which bore the following label:

None of those pairs of jeans had been sold by the time the first respondent received, and reacted to, the letter of demand.

10    While he was talking to Mehmet and Mariah in the warehouse in Istanbul, the second respondent said that he also wanted to buy some shirts, and received from Mehmet a recommendation that he go upstairs to a firm called “Desar Textiles”. The second respondent did so, the following day, and spoke to a gentleman there called Metin. Metin had shirts with the “R-OBIN” label on them. The second respondent said that he really liked those shirts, and asked Metin if he could order some, but with the label changed to “M-MASH”, “the same as Robin Textiles is doing for me downstairs”. Metin replied that that would not be a problem and, in the result, the first respondent imported 217 shirts which bore the following label:

Of those, 200 shirts had been sold by the time the first respondent received, and reacted to, the letter of demand.

11    The letter of demand to which I have referred was sent by the applicants’ solicitors and received by the first respondent on 5 July 2010. Within the following two days, acting on the instructions of the second respondent (who was overseas at the time), the operations manager of the first respondent had removed from sale all the remaining garments that bore “M-MASH” or “Raw Denim” labels. Those garments were held in store until December 2010, when they were delivered to the respondents’ solicitors.

12    In this proceeding, the applicants allege that the first respondent has infringed the applicants’ marks by applying to items of apparel imported, distributed and sold by it or under its authority marks which are deceptively similar to the applicants’ marks in ways to which I shall refer below. With respect to the applicants’ work, and in relation to the representation shown in trade mark No 883618, corresponding allegations of infringement of copyright are made. The applicants allege that the second respondent is liable because he authorised these infringements, or as joint tortfeasor.

the applicants’ trade mark case

13    By s 120(1) of the Trade Marks Act 1995 (Cth):

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 goods or services in respect of which the trade mark is registered.

In the present case, the respondents accepted that the labels which they applied to their garments as set out above were signs used as trade marks, and that they were used in relation to goods in respect of which the applicants’ marks Nos. 883618, 980112 and 1028535 were registered. The applicants did not submit that any of the respondents’ labels were substantially identical with any of the applicants’ marks. The question which remains under the Trade Marks Act, therefore, is whether any of the respondents’ labels was deceptively similar to one or more of the applicants’ marks. With respect to the applicants’ mark No. 999350 there is an additional consideration, but I shall return to it later.

14    The test for deceptive similarity under s 120(1) is given in s 10 of the Trade Marks Act:

For the purposes of this Act, a trade mark is taken to be deceptively similar to another trade mark if it so nearly resembles that other trade mark that it is likely to deceive or cause confusion.

The approach which a court must take in the application of s 10 to a concrete situation is not to lay the registered mark and the allegedly infringing mark side by side for a direct visual comparison. Rather, the comparison is that described by Kenny J in QS Holdings Sarl v Paul’s Retail Pty Ltd (2011) 92 IPR 460, 466 [19]:

In considering deceptive similarity, the comparison is between the impression based on the recollection of the applicant’s mark that “persons of ordinary intelligence and memory would have” and the impression that such a person would have from the defendant’s alleged use: see Shell Co, at CLR 415; ALR 309; IPR 529; Australian Woollen Mills Ltd v FS Walton & Co Ltd (1937) 58 CLR 641 at 658; Southern Cross Refrigerating Co v Toowoomba Foundry Pty Ltd (1954) 91 CLR 592 at 594–5 ; [1955] ALR 115 at 118 ; (1954) 1A IPR 465 at 468; Registrar of Trade Marks v Woolworths Ltd (1999) 93 FCR 365 ; 45 IPR 411 ; [1999] FCA 1020 at [50]; and Food Channel Network Pty Ltd v Television Food Network GP (2010) 185 FCR 9 ; 269 ALR 17 ; 86 IPR 437 ; [2010] FCAFC 58 at [84]–[95]. It is sufficient if persons who only know one of the marks and have perhaps an imperfect recollection of it are likely to be deceived: Aristoc Ltd v Rysta Ltd [1945] AC 68 at 86–7 ; [1945] 1 All ER 34 at 39 ; (1944) 1B IPR 467 at 473. While it is necessary to show a tangible danger of deception or confusion, it is enough if an ordinary person entertains a reasonable doubt. See Crazy Ron’s Communications Pty Ltd v Mobileworld Communications Pty Ltd (2004) 209 ALR 1 ; 61 IPR 212 ; [2004] FCAFC 196 at [73]–[79].

15    On the applicants’ case, mark No. 883618 was infringed by the three respondents’ labels in which the word “ORIGINAL”, or the word “ORIGINALS”, prominently appears. They pointed to the layout, orientation and style, and to the non-verbal elements, of those labels as most obviously providing a source of deception or confusion within the meaning of s 10. Unsurprisingly, the respondents concentrated upon the verbal elements of their labels as putting them apart from the registered mark. They submitted that, both in the mark and in the labels, the verbal elements were such a striking feature as to make it quite unlikely that anyone would be deceived or confused.

16    In the exercise required by s 10, consideration must be given to the two marks as a whole. Marks which may be quite similar in their layout and orientation may be rendered dissimilar by other, possibly verbal, differences. However, the mere existence of verbal differences would not always conclude the question adversely to the owner of the registered mark in question.

17    In the present case, the label reproduced at para 9 above appears to me to be extremely similar to registered mark No. 883618, and to differ therefrom in two respects only: it uses light and dark colours in an arrangement which is the reverse of that on the mark, and it employs the words “M-MASH” in place of the words “G-STAR”. These differences, in my view, are quite insufficient to remove the source of deception or confusion that so clearly arises from the shape, font, orientation and non-verbal elements generally of the label, as well as from the use of the words “ORIGINALS”, “RAW” and “DENIM”.

18    The darker colour on the respondents’ label is blue, but the applicants’ mark is registered without limitations as to colour, with the consequence that I am required to approach the question arising under s 10 by reference to any colour, including that which may be most favourable for the applicants: Trade Marks Act, s 70(3).

19    The respondents submitted that, in the comparison required, the applicants ought not to be allowed the benefit of the similarity between their mark and the respondents’ label constituted by the words “ORIGINALS”, “RAW”, and, particularly, “DENIM”, since those words were descriptive and ought to be available to any manufacturer of garments of the kind to which they naturally refer. In the context of s 10, the respondents’ point was that a buyer of such garments would not, upon seeing those words, be caused to wonder whether he or she was looking upon the registered mark, since he or she would assume, reasonably, that the words were merely describing the nature and characteristics of the garment as such. I accept that the mere use of descriptive words would not provide a very propitious basis for an action for infringement, but here we have more than the mere use of descriptive words. In the respondents’ label the words are used in the same appearance and orientation, and relationship as between each other, as may be seen on the applicants’ mark. To the extent that these words are descriptive, that circumstance is not, in my assessment, sufficient to detract from the conclusion as to deceptive similarity which I would otherwise draw.

20    The applicants’ case is not quite so strong with respect to the label reproduced in para 7 above, ie that in which the “ORIGINAL” is used in the singular. That is not a very convincing point of differentiation, of course, but there are two other features of this label which place it further away from the registered mark, albeit only slightly: the strikingly different font used in the words “M-MASH” and the initials “MSH” by comparison with the corresponding elements on the mark, and the use of those initials in place of the word “RAW”. Notwithstanding those points of differentiation, and remembering that the exercise here is not one of side-by-side comparison, I am satisfied that someone viewing the respondents’ label would be caused to wonder whether it was the registered mark with which he or she had some previous acquaintance. The rugged brutality conveyed by the simple lines, rectangular shapes, the bold writing and the hyphen itself are, in my view, elements of the mark that find sufficient reflection in the label to justify a conclusion of deceptive similarity.

21    The final of the respondents’ labels that, on the applicants’ case, is deceptively similar to registered mark No. 883618 is the one which the respondents applied to their shirts, reproduced at para 10 above. It has the full term “MISH MASH” prominently at the head. This is a weaker case again, because of the use of that term rather than the hyphenated abbreviation which, as I have held above, provides a link with the mark. Here I am not satisfied that the viewer would be confused by such similarity as there is. He or she might well find the general feel and style of the label to be consistent with things seen elsewhere, but would not, in my view, confuse the label with the applicants’ mark. In the case of the label, there is something quite striking – almost visually compelling – about the disjointed way in which the words “MISH MASH” appear. With some passing familiarity with the strongly-organised, bold, letters of the mark “G-STAR”, I think it unlikely that a viewer interested in garments of the relevant class would come readily to a sense of wonder or confusion that the label was the mark.

22    In the two preceding paragraphs of these reasons, I have reached different conclusions under s 10 with respect to different labels, thereby implying that these labels fall either side of the line. As has often been said, the exercise under s 10 is one of impression. There will necessarily be a line, and it should be no source of surprise that some representations fall on one side, while others fall on the other. That has been the result in the present case with respect to registered mark No. 883816.

23    Finally, the applicants allege that the label reproduced in para 8 above – the horizontally-orientated panel bearing only the words “M-MASH RAW DENIM” – is an infringement of each of the registered marks Nos. 980112, 1028535 and 999350. I do not think there is any relevant similarity between the label and mark No. 980112. The only common element is the word “RAW”, and that is manifestly insufficient to give rise to the likelihood of confusion in the s 10 sense. Neither do I think that the label so nearly resembles mark No. 1028535 that it is likely to deceive or to cause confusion. The words “RAW DENIM” appear on both, but in each case in combination with other elements that the observer would reasonably suppose would indicate an association with the trader concerned. The quoted words are descriptive, and the label is not otherwise like the mark in its design, shape and general non-verbal elements to the extent necessary to justify a finding of deceptive similarity.

24    The applicants’ case is a little stronger with respect to registered mark No. 999350, since it includes little in the way of non-verbal elements. At base, the mark is the words “G-Star Raw Denim” as such, and the respondents’ label does include the words “RAW DENIM”. I am, however, of the view that in both instances those words are used descriptively, and that a consumer with some knowledge of the mark, would look upon the label and readily conclude, correctly, that it denoted the raw denim product of another trader – that is, of a trader other than the applicants or one of them. There would not, in my view, be any realistic prospect of confusion.

25    There is another aspect of the applicants’ case with respect to registered mark No. 999350. Unlike the other marks on which the applicants sue, this one is a service mark. The respondents’ label was applied to goods, not to services. Here the applicants relied on s 120(2)(d) of the Trade Marks Act, which makes it an infringement to use as a trade mark a sign that is substantially identical to, or deceptively similar to, the registered mark in relation to goods that are closely related to services in respect of which the mark is registered. The mark is registered in respect of “franchising services; administrative services provided in respect of the closing of franchise agreements for” a range of goods including clothing. The initial words, “franchising services”, are separated by a semicolon and are not limited, in my view, to the categories of goods referred to later in the description. Franchising services as such are not closely related to clothing. The fact that franchising services may be provided to those who sell clothes is no more relevant than, for example, the fact that plumbing services might be provided to those who sell clothes. There is nothing in the services here referred to, as such, which would make clothes closely related to them.

26    The description then moves to a list of fashion and other items, but is limited to a type of service that is about two removes from the goods referred to. The services in question are not the sale of these goods, nor even the franchising of outlets to sell these goods. Rather the services are administrative services provided in respect of the closing of franchise agreements for goods of the kind set out. I am not all sure that I understand what is here being referred to – the services were the subject of elaboration neither in the evidence nor in the submissions in the present case. However, I feel quite confident in the conclusion that the respondents’ garments are not closely related to such services, whatever they are. It might be possible to contend that they were related, but not closely related.

27    I would therefore, uphold the applicants’ case under the Trade Marks Act with respect to the labels reproduced in paras 7 and 9 above, but not otherwise.

the applicants’ copyright case

28    The respondents accepted that, if an image which corresponds to registered trade mark No. 883618 is an artistic work, it is an original one in the sense explained in IceTV Pty Limited v Nine Network Australia Pty Limited (2009) CLR 458, 474 [33] and the second applicant is the owner of such copyright as subsists in it. The only controversy with respect to subsistence of copyright concerns the question whether the image is an artistic work.

29    The Copyright Act 1968 (Cth) defines an “artistic work” so as to include a “drawing”. That is the part of the definition upon which the applicants rely. For their part, the respondents accept that the work was created by being drawn, whether by hand or with the assistance of a computer or other device. Their point is that there is no evidence of the process by which the work was created, nor of the knowledge, judgment and skill required for, or of the labour involved in, the creation. According to the respondents, this set the present case apart from Elwood Clothing Pty Ltd v Cotton On Clothing Pty Ltd (2008) 172 FCR 580. That case involved a pattern on a T-shirt, of which words and numerals were conspicuous features. The Full Court said that the evidence of one of the designers of the pattern –

… was to the effect that by far the greater part of the effort, skill and time involved in designing of the NewDeal T-shirt was devoted to layout rather than with the choice of words and numerals.

(172 FCR at 594 [73]). In the submission of the respondents in the present case, in the absence of evidence of the kind to which the Full Court referred, it cannot (or at least should not) be held that the work on which the applicants sue is an “artistic” work.

30    Elwood was a very particular kind of case. It involved the question whether an arrangement of words and numerals, as such and without regard to what the words and numerals actually were, could be an artistic, as distinct from a literary, work. If so, the reproduction of the arrangement, even if different words and numerals were used, would amount to an infringement. The Full Court so held in that case. By contrast in the present case, I am not concerned with the question whether the work is an artistic one or a literary one. The only question is whether it is an artistic work. In this respect, it is clear that the applicants’ work is more than merely a series of words and numerals laid out in a particular spatial arrangement. In my view of it, the work is fundamentally a rectangle which contains internal divisions and drawn elements, into which the verbal elements have been fitted. No doubt those divisions and elements, and the relationships between them, were developed with a view to emphasising the message to be conveyed by the words used, but that does not detract from the conclusion that the basic features of this artefact are drawn ones. I reach this conclusion without needing to be told by the creator how much care, effort, or skill went into the making of the work. The conclusion is, in my view, self-evident from the appearance of the work.

31    It follows that the applicants’ case that the diagram upon which mark No. 883618 is based is an original artistic work must be upheld.

32    Turning to the matter of infringement, the starting point is s 31(1)(b) of the Copyright Act, under which “copyright” in an artistic work is the exclusive right to reproduce the work in a material form, to publish the work, and to communicate the work to the public. In each case, the reference to “the work” includes a reference to a substantial part of the work: Copyright Act, s 14. Because the present case was conducted without pleadings, I do not have the benefit of low-level factual allegations by the applicants as to the infringing conduct in which the respondents are said to have engaged. In the amended Fast Track Statement, it was said that the respondents had “imported, manufactured, advertised, marketed, promoted, distributed, offered for sale or sold” clothing which bore a label corresponding to the applicants’ work. The terms of s 31(1)(b) were referred to, and it was said that the second applicant claimed that the respondents had done an act comprised in the copyright, in which respect reference was made to s 36(1). But no particular conduct on the part of the respondents was linked to a particular act which, under s 31(1)(b), is comprised in the second applicant’s copyright.

33    At trial, by which time it had become tolerably clear that the allegedly infringing labels had been imported by the respondents affixed to garments made in Turkey, the emphasis of the applicant’s case was upon s 37 of the Copyright Act, which provides as follows:

(1)    Subject to Division 3, the copyright in a literary, dramatic, musical or artistic work is infringed by a person who, without the licence of the owner of the copyright, imports an article into Australia for the purpose of:

(a)    selling, letting for hire, or by way of trade offering or exposing for sale or hire, the article;

(b)    distributing the article:

(i)    for the purpose of trade; or

(ii)    for any other purpose to an extent that will affect prejudicially the owner of the copyright; or

(c)    by way of trade exhibiting the article in public;

if the importer 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.

(2)    In relation to an accessory to an article that is or includes a copy of a work, being a copy that was made without the licence of the owner of the copyright in the work in the country in which the copy was made, subsection (1) has effect as if the words “the importer knew, or ought reasonably to have known, that” were omitted.

Because each label was an “accessory” within the meaning of the Copyright Act, it was submitted on behalf of the applicants that s 37(1) applied as a matter of strict liability; that is to say, that, if the requirements of the subsection were otherwise satisfied, it was sufficient if the making of the article by the importer in Australia would have constituted an infringement of copyright.

34    As counsel for the applicants acknowledged, s 37 is not without its constructional difficulties. It is based upon an hypothesis that making an article in Australia may, in appropriate circumstances, constitute an infringement of copyright. In the case of an artistic work, that might be so because the work itself was something in the nature of an “article” that was “made”, or because the imported article was a three-dimensional reproduction of the original two-dimensional work (see s 21(3)(a)). The facts of the present case, however, do not fit either of those templates. Rather, the “articles” imported were the respondents’ garments with the labels sewn into them. The garments, as “made”, included the labels. To have made the garments in Australia, and to have sewn the labels on to them, would, on the applicants’ case, have amounted to an infringement of copyright, thereby activating s 37(1) in relation to the importation.

35    As mentioned above, the applicants then rely on s 37(2). Here again the terminology of the statute is not free of difficulty. It is said that subs (1) has effect “in relation to an accessory to an article” in a particular way. The problem is that subs (1) has effect in relation to the article as such. If we are talking about something less than the article, we are not, arguably, in the realm of subs (1) at all. But subs (2) must be given some work to do and, although strained to a degree, the most probable situation intended to be covered is one in which it is the presence of the accessory that would cause the making of the article, including (necessarily) the accessory, to constitute an infringement within the meaning of subs (1). On that construction, and subject to the issues to which I refer below, subs (2) would operate in the present case, and it would not be necessary to show that the importer knew or ought reasonably to have known that the making of the article in Australia by him or her would have constituted an infringement of copyright.

36    The next difficulty with the hypothesis by reference to which s 37(1) operates is that whether or not the making of an article in Australia constitutes an infringement of copyright depends on the circumstances of the making – ex hypothesi, an event which did not occur. Specifically, making an article will constitute an infringement only if it involves doing one of the things comprised in the copyright under s 31. In the present case, the applicants rely on subpara (i) of subs (1)(b) – reproduction in a material form. Coincidental creation of the same work will not amount to reproduction. So, whether the making of the imported article would have constituted an infringement of copyright would depend on whether, in so making the article, the importer would have reproduced (ie copied) the work. Any respondent in a case such as the present is likely to assert that he or she would not have, since he or she would have done their work independently.

37    Counsel for the applicants told me that issues of this kind have not been encountered in the reported cases. He submitted that the most sensible construction to give to s 37(1) is one which would require one to assume the existence of the very facts that have been found to exist in the case at hand. That is to say, if the only difference is that the article was made in Australia by the importer rather than being made elsewhere, would the making of it have constituted an infringement of copyright? Counsel for the respondent did not resist the taking of such an approach; in any event, I consider that it is the only approach that gives a sensible operation to s 37(1) in relevant respects.

38    The labels set out in paras 7 and 9 above were copied, with verbal modifications, from the second of the “R-OBIN” labels set out in para 5 above. So much is clear on the respondents’ own case. There is, however, no evidence as to how the “R-OBIN” label came into existence. As mentioned above, the respondents accepted that the applicants’ work was original, in the sense of not having been copied from another drawing. The applicants led evidence – not challenged by the respondents – that their products, labelled with the applicants’ marks, had been distributed and sold in Turkey. The similarities between the applicants’ work and the R-OBIN label are, in my view, so striking as to justify the inference, in the absence of evidence from the respondents, that the latter was copied from the former, either directly or by way of undisclosed intermediate drawings. If the respondents were to resist the drawing of that inference, it was, in my view, incumbent upon them to lead evidence that the R-OBIN label had been created independently of the applicants’ work. There was no such evidence; neither was there any explanation of why – eg for logistical or practical reasons – such evidence could not be called. In the circumstances, I am the more confident in drawing the inference, which I do, that the R-OBIN label was copied, directly or indirectly, from the applicants’ work.

39    For the sake of completeness, I note that the respondents’ labels were not a precise copy of the applicants’ work, in the sense that the wording was different in a number of respects. On any view, however, what was copied was a substantial part of that work.

40    For the reasons given above, I would uphold the applicants’ case in copyright against the first respondent, as importer, under s 37 of the Copyright Act. It was an infringement for the first respondent to have imported the jeans referred to in paras 7 and 9 above; and, because of the presence on them of the label set out in para 7, it was also an infringement to have imported the jeans referred to in para 8.

the position of the second respondent

41    The applicants sought to make the second respondent liable for the first respondent’s infringement of trade mark and copyright as joint tortfeasor. In this respect, they relied on Keller v LED Technologies Pty Ltd (2010) 185 FCR 449. As was implicit in the applicants’ submissions, it is regrettable that there was no single articulation of the joint tortfeasor principles in that case, but the separate reasons of Emmett J and myself make it tolerably clear that the second respondent should not be held liable on the facts of the present case. He was not using the first respondent as the instrument for his own wrong. He was, rather, undertaking a conventional trading transaction in the name of the first respondent. The reality of the matter was that it was the first respondent which caused the jeans with the offending labels to be imported from Turkey, and it was the second respondent who relevantly acted as the first respondent’s servant or agent. The second respondent was not, in my view, a joint tortfeasor.

42    With respect to his clients’ copyright case, counsel for the applicants sought to make the second respondent liable as having authorised the infringements which I have found to have occurred. But the extension of liability to a person who has authorised the act in question exists only under s 36 of the Copyright Act. It has no place under s 37. Counsel accepted that, if I should find that the garments, with the offending labels sewn on to them, had been made in Turkey, his clients would have no copyright case under s 36. I have made such a finding. The limit of the applicants’ success in copyright has been under s 37. In the circumstances, I must reject the submission that the second respondent is liable because he authorised the first respondent’s infringement.

43    It follows that the applicants’ case against the second respondent must be dismissed.

relief

44    In their money claims in the proceeding, the applicants elected to seek damages rather than an account of profits. They relied on s 126 of the Trade Marks Act and s 115(2) of the Copyright Act. They sought such damages as would compensate them for the losses which they sustained as a result of the respondents’ infringing conduct. The applicants’ case proceeded on the basis that there was no need to distinguish between the approaches required to be taken under these provisions. The respondents did not resist my taking that approach, but they submitted that the applicants had not established, as a matter of evidence, that they had suffered damage or, if they had, what was the quantification thereof.

45    The applicants’ first proposition was that I should infer that they had lost sales as the result of the presence on the market of the respondents’ garments bearing the infringing labels. They claimed that they would have made every one of the sales that the respondents made under those labels – see paras 7, 8 and 9 above. But the applicants called no evidence by reference to which I could make any such finding. There was no detailed evidence as to the retail circumstances under which the applicants’ and the respondents’ goods were sold. For example, I do not know to what extent they might be sold in close physical proximity to each other; I do not know what category of consumer might be interested in goods of this kind; and I have no expert evidence as to the tendency for such consumers to make choices by reference to labels or known trading names rather than, for instance, by reference to the fabric, quality, style, comfort and other characteristics of a particular garment. The applicants made no attempt to match particular garments of their own with garments displayed for sale by the respondents, containing one of the infringing labels, to assist the court in determining what a consumer, confronted with the latter, would most probably have done in the absence of that label. Yet the applicants ask me to infer that every consumer who purchased a pair of jeans on which an infringing label was stitched would, in the absence of that label, have purchased a product (presumably a like pair of jeans) from the applicants instead. That would, in my view, be a matter of conjecture or surmise, rather than of inference. The gap in the evidence is just too wide to be crossed by the drawing of an inference, especially since it is the applicants themselves who have chosen to go to trial on this limited evidence.

46    The applicants did place into evidence two pairs of the respondents’ jeans, purchased on behalf of the applicants, labelled as indicated in para 8 above, and one pair of the respondents’ jeans, also so purchased, labelled as indicated in para 7 above. All three were adult jeans (sizes 30, 32 and 34). In each case the label depicted in para 7 (the “ORIGINAL” label) was sized 22 mm x 39 mm. Where that label appeared alone (on one of the three pairs of jeans), it was situated on the right front, just above the pocket, and on the right rear, just below the belt. Where the label appeared in conjunction with the label depicted in para 8 (on the other two pairs of jeans), it was situated at the centre of the back, just below the belt, and on the right hip, just below the belt. The label depicted in para 8 itself (which I have found not to amount to an infringement of trade mark, and which was not suggested to amount to an infringement of copyright) was 45 mm x 163 mm and was, in each case, situated on the left front pocket. All three pairs of jeans were labelled as “MISH MASH” in the conventional position of a branding label at the inside rear waist, and also had the words “MISH MASH” impressed on the metal buttons used at the front opening and, in two instances, elsewhere. Given the size and placement of the labels, and the other indications of source, to which I have referred, I think it quite improbable that a consumer would have purchased a pair of jeans corresponding to these in the mistaken belief that they were the applicants’ product.

47    A further problem for the applicants is that they led no evidence of wholesale margins which the third applicant (by which alone the damages claim was advanced) made on garments of the kind that the respondents sold under the infringing labels, and which it was allegedly denied by those sales. That is to say, even if I were persuaded that every sale by the respondents represented a sale by wholesale lost by the third applicant, I would still have no way, on the evidence, of calculating the third applicant’s net monetary loss attributable to the loss of that sale.

48    Despite submissions made on behalf of the applicants, the present situation is very far removed from one in which an applicant has done all it reasonably can to quantify its loss and the court has no alternative but to travel the remaining distance by estimation, and possibly even – according to the authorities – by guesswork. This is a case in which the third applicant has led no evidence at all to assist on the matter of quantification, in which, inevitably, one would expect that a well-run, substantial, trading concern would be readily able to provide a figure for its margin on a particular product, and in which no explanation has been provided for the third applicant’s omission to do so. In these circumstances, it would be factually problematic (to say the least) and jurisprudentially unsound for the court to hazard an estimation of what the third applicant’s losses might be.

49    In the alternative, the applicants claimed damages for loss of reputation, substantially by reference to the approach taken in Review Australia Pty Ltd v Innovative Lifestyle Investments Pty Ltd (2008) 166 FCR 358, in Review Australia Pty Ltd v New Cover Group Pty Ltd (2008) 79 IPR 236 and in Elwood Clothing Pty Ltd v Cotton On Clothing Pty Ltd (2009) 81 IPR 378. The first two of these authorities were design cases, while the third was a copyright case.

50    In Review v Innovative, there was evidence that the applicant, which conducted its own stores, had a reputation for originality of design in relation to dresses and frocks. Unchallenged evidence had been led on behalf of the applicant that, when its designs were adopted by other traders, “the claim to originality … is lost” (166 FCR at 366 [29]). Recognising the force of that consideration, I said (166 FCR at 367 [30]):

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.

The rather special circumstances of this case, and particularly the fact that it was a designs case, ought not to be overlooked when the question arises whether it is authority for the proposition that damages are available for loss of reputation.

51    Review v New Cover was also a designs case and, as the name of the case indicates, involved the same applicant. In that case also, Kenny J accepted “that ‘exclusivity’ (and design ‘freshness’) was of commercial value” (79 IPR at 247 [46]). Her Honour’s conclusion was based upon specific evidence led in that case.

52    In Elwood, Gordon J accepted that infringement of the applicant’s copyright “would cause a loss of reputation to the applicant in terms of brand-name recognition” (81 IPR at 384 [33]). Her Honour continued (at [34]):

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? At its highest, it was submitted by the applicant that the “iconic” and “exclusive” nature of the Elwood brand was “cheapened” by the production of the infringing products of the respondent. For the moment, 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.

Gordon J then went on to grapple with the question of the quantification of this loss. A significant aspect of Elwood, in my view, was that the copyright works were central graphical features of the garments to which they were applied. This may be seen in the representations of the garments themselves which appear as annexures to the earlier judgment of the Full Court in the same matter: 172 FCR at 596-597. Thus, although a copyright case rather than a designs case, Elwood had in common with the two Review cases that the intellectual property sought to be protected was associated with something striking about the appearance of garments, in relation to which exclusivity was both asserted and established.

53    The present case is, in my view, quite different from those to which I have referred above. From the evidence which has been led, it could not be said that the applicants’ mark No 883618, or the applicants’ work, was a conspicuous feature of the appearance of the articles to which it was applied. So far as the evidence shows, in some cases labels corresponding with the mark and the work would have been noticeable to the observer, but in other cases they may not have been (eg where they may have been obscured by a belt or ornamentation, or where they may have been applied to the inside of a garment, as, for instance, on the inside collar of a shirt). Even where they were visible, the labels, as they appeared on the applicants’ garments, were not, to my way of looking at it, either a conspicuous or a significant feature of the overall appearance. Neither was there any evidence that the mark was associated with a reputation for exclusivity or originality.

54    Neither, I would add for the sake of completeness, was the applicants’ case run by reference to a proposition that their reputation for quality would be diminished if consumers, thinking that they were buying the third applicant’s garments, bought the respondents’ garments instead, only to find that the garments did not meet their expectations. There was no suggestion in the applicants’ case that the respondents’ garments were not every bit as satisfactory to the consumer as the third applicant’s garments would have been, if purchased instead.

55    For the above reasons, I am not persuaded that the third applicant has suffered any reputational damage as a result of the infringing conduct of the respondents.

56    Although not part of my reasons for the conclusion which I have expressed, I think it appropriate to add that it does not follow, from that conclusion, that a trader such as the first respondent is, in facts broadly equivalent to those of the present case, at liberty to appropriate the registered trade mark, or to infringe the copyright, of another trader, and to do so with monetary impunity. Because of the way the applicants conducted their case, I have not been called upon to consider what title they might have had to a remedy in the way of an account of profits, but I must say that it is not apparent to me why such a remedy might not have been both logical and appropriate in the circumstances of the case. I can see the sense in which a court would readily require a trader which has marketed its product under the trade mark of an opponent to yield up to that opponent the profits which it has gained thereby. Because no such claim was made on behalf of the applicants, however, I shall say nothing further about the matter.

57    The applicants also sought additional damages for infringement of copyright under s 115(4) of the Copyright Act. By para (b) of that subsection, I should have 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….

Of these items, subpara (ii) is clearly irrelevant to the circumstances of the present case. Further, there is no evidence that the respondents derived any benefit as a result of their infringement of copyright, the relevance of which, had it occurred, would have arisen under subpara (iii). The applicants did not invite me to infer that, in the absence of the infringement, the respondents would have sold fewer pairs of jeans than they in fact did.

58    Neither could I find that the respondents’ conduct was flagrant, within the context of subpara (i) of s 115(4)(b). The second respondent came by the labels which I have held infringed the applicants’ work in what appears to have been the normal course of the first respondent’s business. He bought the garments in question from a company named “Robin Textiles”. As viewed by him when he went to Istanbul, the labels on those garments reflected the name of that business. Had he turned his mind to the matter of copyright, it would not, in my view, have been unreasonable for him to have assumed that the business known as Robin Textiles either owned, or was licensed to use, any such copyright work as may have been relevant. I am not prepared to hold, in a business such as that in which the respondents engaged, that they should have approached their task of buying garments from Turkey with an in-built suspicion that Robin Textiles was not entitled to such copyright as may exist in the labels which appeared on their garments and under their own name. There was, in my view, nothing flagrant about the first respondent’s infringement.

59    It is likewise with respect to subpara (ib) of the para (b) of s 115(4). Promptly upon being notified of the applicants’ demands, the respondents withdrew from sale their remaining stock of the garments which incorporated the infringing labels. It was not suggested that they could have done more.

60    That leaves subpara (ia) of s 115(4)(b). I did, for a time, entertain the view that a trader such as the first respondent should be deterred from purchasing goods which have sewn into them labels which incorporate drawn elements without first satisfying themselves that there could not be any infringement of copyright involved in so proceeding. On reflection, however, I have come to the view that this would be too severe an application of the discretion for which s 115(4) provides in the context of the present case. Without saying anything further about the general position about such a trader, here I am faced with a situation in which the second respondent was presented with garments which bore the name of the trading house by which they were offered for sale. I am not prepared to hold it to be an object of the Copyright Act that a buyer in such a situation should be deterred from proceeding further without making inquiries as to the entitlement of the seller to use the labels in question. The present case is, of course, not one in which the very item purchased by the respondents was potentially a copyright work in itself, such as, for example, might be the case where a text, a work of art, a piece of music, or an engineering or architectural design was purchased. In the present case, the items purchased were denim jeans, and the respondents found it convenient to indicate source by the attachment of a label in the conventional way. As I have explained above in connection with subpara (i), there is no reason to think that questions of copyright were uppermost in the second respondent’s mind at the time; and I would go further and say that there is no reason to hold that they ought to have been. In the circumstances, the notion of deterrent, which finds expression in subpara (ia), is quite inapt to the facts of the case.

61    For the reasons given above, I would reject the applicants’ claim for damages, both under the Trade Marks Act and under the Copyright Act.

62    For my own part, I can think of no reason not to proceed to consider the availability of the other heads of relief sought by the applicants, declarations and injunctions. However, the applicants made no submissions on those subjects, and the respondents requested the opportunity to address the court about them, and on the matter of costs, once my reasons for judgment on liability and damages were available. In the circumstances, I shall follow the course proposed by the respondents.

Associate:

Dated:    27 January 2012