FEDERAL COURT OF AUSTRALIA

Tivo Inc v Vivo International Corporation Pty Ltd (No 2) [2012] FCA 336

THE COURT NOTES THAT:

A.    The first respondent undertakes:

a.    to file and serve any notice of appeal within 14 days;

b.    to file and serve any application and any supporting affidavit for a further stay of orders 1 and 2 below within 14 days;

c.    to keep account of all sales of products bearing the VIVO mark, and to abide by such order as the court may make in favour of the applicants for damages or an account of profits (at their election) in respect of those sales in the event that:

i.    either, the first respondent does not file any notice of appeal; or

ii.    the first respondent files a notice of appeal but that appeal is unsuccessful.

THE COURT ORDERS THAT:

1.    The first respondent’s/cross-claimant’s Trade Mark Registration No. 1223930 for VIVO (the VIVO mark) be cancelled and the Registrar of Trade Marks rectify the Register of Trade Marks accordingly.

2.    The first respondent/cross-claimant, whether by itself, its directors, employees or agents or howsoever otherwise, be restrained from infringing the second applicant’s Trade Mark Registration No. 813297 for TIVO (the TIVO mark) by using in respect of televisions, portable DVD players, computer monitors, digital set-top boxes, digital photo frames, remote controls or home theatre systems, the VIVO mark or any other mark substantially identical with or deceptively similar to the TIVO mark.

3.    The operation of orders 1 and 2 be stayed for 14 days.

4.    The Fast Track Cross-Claim dated 9 March 2011 be dismissed.

5.    The monies deposited by the applicants/cross-respondent as security for costs pursuant to order 1 of her Honour Justice Dodds-Streeton’s orders dated:

(a)    15 June 2011; and

(b)    18 July 2011,

be released to the applicants/cross-respondent, together with any interest accrued thereon.

6.    The first respondent/cross-claimant pay the applicants’/cross-respondent’s costs of and incidental to the proceeding, including the Cross-Claim, on the following basis:

(a)    assessed or taxed up to and including 11am on 29 July 2011 on a party and party     basis;

(b)    assessed or taxed thereafter on an indemnity basis.

7.    Despite order 6, the applicants/cross-respondent pay the second respondent’s costs exclusively attributable to the claim against the second respondent for accessorial liability, assessed on a party and party basis.

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

REASONS FOR JUDGMENT

1    On 23 March 2012, I made the orders set out above for the following reasons.

2    In Tivo Inc v Vivo International Corporation Pty Ltd [2012] FCA 252, I held, inter alia, that the Register of Trade Marks should be rectified pursuant to ss 88(2)(a) of the Trade Marks Act 1995 (Cth) (“the Act”) by cancelling the registration of the trade mark (“the Vivo trade mark”) of the second respondent, Vivo International Corporation Pty Ltd (“Vivo”), on grounds that its registration could have been successfully opposed pursuant to s 44(1) and (2) and s 60 of the Act, and pursuant to s 88(2)(c) of the Act, because use of the Vivo trade mark was, by reason of the circumstances applying at the date of the application for rectification, likely to deceive or confuse.

3    I dismissed the respondents’ cross-claim that the trade mark of the applicants and cross-respondent (collectively “TiVo”) should be removed from the Register in respect of televisions for non-use.

4    TiVo’s allegation that the second respondent, Mr Grassia, the controller of Vivo, was liable as an accessory to Vivo’s infringement of the applicants’/cross respondent’s (collectively, “TiVo”) trade mark, was not, however, established. On the undertaking by Vivo, set out above, orders 1, 2, 3, 4 and 5 were made by consent.

5    A short stay of order 1 and 2, revoking the registration of the Vivo trade mark and the injunction, was thus ordered pending the filing and service of any notice of appeal and material in support.

6    The respondents did not consent to, but ultimately did not oppose, order 6, pursuant to which Vivo would pay the costs of and incidental to the proceeding of TiVo, including the cross-claim, on a party and party basis up to and including 11.00am on 29 July 2011 (when TiVo served an offer of compromise expressed to be under O 23 of the former Federal Court Rules 1979 (Cth) (“the former Rules”)), and thereafter, on an indemnity basis.

tivo’s costs

7    Order 23, r 11(4) of the former Rules provided:

(4)    If:

(a)    an offer is made by an applicant and not accepted by the respondent; and

(b)    the applicant obtains judgment on the claim to which the offer relates not less favourable than the terms of the offer;

then, unless the Court otherwise orders, the applicant is entitled

to an order against the respondent for costs incurred in respect

of the claim:

(c)    up to and including the day the offer was made — taxed on a party and party basis; and

(d)    after that day — taxed on an indemnity basis.

8    Order 23, r 11(6) of the former Rules provided:

(6)    If:

(a)    an offer is made by a respondent and not accepted by the applicant; and

(b)    the respondent obtains an order or judgment on the claim to which the offer relates as favourable to the respondent, or more favourable to the respondent, than the terms of the offer;

then, unless the Court otherwise orders:

(c)    the respondent is entitled to an order that the applicant pay the respondent’s costs in respect of the claim incurred up to 11 am on the day after the day the offer was made, taxed on a party and party basis; and

(d)    the respondent is entitled to an order that the applicant pay the respondent’s costs in respect of the claim incurred after that time, taxed on an indemnity basis.

9    The current Federal Court Rules 2011 (Cth) (“the current Rules”) came into force on 1 August 2011.

10    Rule 1.04 of the current Rules provides:

(1)    These Rules apply to a proceeding started in the Court on or after 1 August 2011.

(2)    These Rules apply to a step in a proceeding that was started before 1 August 2011, if the step is taken on or after 1 August 2011.

(3)    However, the Court may order that the Federal Court Rules as in force immediately before 1 August 2011 apply, with or without modification, to a step mentioned in subrule (2).

11    Rule 25.14(1) and (3) of the current Rules provide:

(1)    If an offer is made by a respondent and not accepted by an applicant, and the applicant obtains a judgment that is less favourable than the terms of the offer:

(a)    the applicant is not entitled to any costs after 11.00 am on the second business day after the offer was served; and

(b)    the respondent is entitled to an order that the applicant pay the respondent’s costs after that time on an indemnity basis.

….

(3)    If an offer is made by an applicant and not accepted by a respondent, and the applicant obtains a judgment that is more favourable than the terms of the offer, the applicant is entitled to an order that the respondent pay the applicant’s costs:

(a)    before 11.00 am on the second business day after the offer was served — on a party and party basis; and

(b)    after the time mentioned in paragraph (a) — on an indemnity basis.

12    TiVo’s offer of compromise was served on 28 July 2011, but was open for acceptance until 14 days after it was made. The current Rules would not apply, as the proceeding was not started on or after 1 August 2011, unless the fact that acceptance (which did not occur) was possible after that date amounted to a “step” in the proceeding that was taken on or after 1 August 2011 within the meaning of r 1.04(2). There appeared no sound basis for that construction. Under r 25.14(1) and (3) of the current Rules, indemnity costs for an additional day would apply only from the second business day after the offer was made, whereas under the former Rules, indemnity costs would apply from the next business day after the offer was made.

13    TiVo’s offer of compromise pursuant to O 23 referred to both TiVo’s application and Vivo’s cross-claim and offered a settlement as follows:

1.    In full and final settlement of all claims made by the Applicants/Cross-Respondent, and all claims made by the Respondents/Cross-Claimant, in Federal Court Proceeding No. VID 25 of 2011, the Applicants/Cross-Respondent make the following offer:

(a)    the Respondents/Cross-Claimant consent to an order that Australian Trade Mark Registration No. 1223930 for the word VIVO with device (Vivo Trade Mark) be cancelled and removed from the Register of Trade Marks;

(b)    subject to paragraph (c) below, the Respondents/Cross-Claimant consent to an order that, whether by themselves, their directors, employees or agents or howsoever otherwise they shall cease and forever refrain from using the Vivo Trade Mark or any other trade mark that is substantially identical with, or deceptively similar to, Australian Trade Mark Registration No. 813297 for TIVO;

(c)    the Respondents/Cross-Claimant be permitted to continue using the Vivo Trade Mark in connection with the sale and offering for sale of the Vivo Products (as defined in paragraph 9 of the Applicants’/Cross-Respondent’s Fast Track Statement) for a 12 month period, commencing on the date on which the Respondents/Cross-Claimants accept this offer;

(d)    the Applicants/Cross-Respondent pay the Respondents/Cross-Claimant the sum of USD$400,000 (which does not include any component for interest or costs) within 28 days of the Respondents’/Cross-Claimant’s acceptance of this offer; and

(e)    the parties consent to an order that the Fast Track Application dated 14 January 2011 and the Fast Track Cross-Claim dated 9 March 2011 be dismissed with no order as to costs.

(the Offer).

2    The Offer is open for acceptance for fourteen (14) days from the day after the date this offer is made. Acceptance of this offer must be made in writing to the Applicants’/Cross-Respondent’s lawyers.

14    As TiVo submitted, the court’s judgment was more favourable to it than the terms of the offer of compromise, as it not only upheld TiVo’s entitlement to the substantive relief specified in the offer of compromise in relation to the application and dismissed the cross-claim, but prima facie entitled TiVo to recoup its legal costs rather than paying USD$400,000 to the respondents/cross-claimant. Further, the judgment did not entitle the respondents to use the Vivo trade mark until 11 August 2012.

15    TiVo submitted:

    The Full Federal Court has repeatedly made clear that the recipient of such an offer bears the burden of establishing an “exceptional” case and rebutting the presumption that the rules should apply on their usual terms (Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 40 (Futuretronics) per Tamberlin, Finn and Sundberg JJ at [10]-[12]; IFTC Broking Services Pty Ltd v Commissioner of Taxation (2010) 268 ALR 1 (IFTC) at 4 [9(1) and (3)] per Stone, Edmonds and Jagot JJ. See also Vawdrey v Krueger (2009) 261 ALR 269 at [187] per Lindgren J, Moore and Bennett JJ agreeing at [60]). The requirement for “proper reasons” for any departure from the prima facie position of indemnity costs reflects the purpose of the rule. The rule is intended to encourage the compromise of litigation (such compromise being in both the private and public interest) and to oblige parties “to give serious thought to the risk involved in non-acceptance” on the basis that “litigation is inescapably chancy”. For these reasons “the ordinary provision is expected to apply in the ordinary case” (IFTC (2010) 268 ALR 1 at 4-5 [9(4)]). Even an offer which merely involves the offeror giving up a small part of its entitlement to costs is sufficient to engage the operation of the rule (Futuretronics [2009] FCAFC 40 at [2]).

16    In the circumstances, it was appropriate to make order 6 in the terms sought by Tivo.

second respondent’s costs

17    In the present case, the respondents submitted that TiVo should pay the costs of the second respondent, Mr Grassia, as follows:

Despite order 6, the Applicants/Cross-Respondent pay the Second Respondent’s costs of and incidental to the proceeding, assessed on a party and party basis.

18    TiVo opposed such an order.

19    The sole claim against, and basis for joinder of, Mr Grassia was his alleged accessorial liability for Vivo’s infringement of the TiVo trade mark. That claim was not established. TiVo nevertheless submitted that it should not be ordered to pay Mr Grassia’s costs in circumstances where the respondents did not point to any material costs of or arising from a significant portion of the trial or any evidence directed solely to the claim of accessorial liability. TiVo contended that Mr Grassia’s conduct was necessarily relevant to determining Vivo’s conduct (irrespective of TiVo’s claim that his role was materially separate), so apportionment of costs was not justified.

20    As TiVo correctly submitted, although the question of Mr Grassia’s accessorial liability was dealt with comprehensively in the reasons for judgment, it was not dealt with in oral submissions and comprised only three and five paragraphs respectively of the parties’ very extensive written submissions. The respondents did not contend that any evidence at trial was led solely in relation to the claim of accessorial liability and Vivo and Mr Grassia were jointly represented.

21    Thus, there was nothing to indicate that the joinder of Mr Grassia and the claim of accessorial liability had occasioned any costs additional to those Vivo would have incurred in any event.

22    I was nevertheless persuaded that, as the respondents submitted, Mr Grassia, as a respondent who had successfully defended the sole claim against him, was entitled to an order that TiVo pay any costs attributable solely to that claim of accessorial liability, although the likelihood of any such costs was not at this stage established.

23    As it was not contended that Vivo incurred any, or any material, additional costs by reason of Mr Grassia’s joinder, a more complicated order, such as that made in Peterson v Merck Sharpe & Dohme (Australia) Pty Ltd (ACN 000 173 508) and Another (No 5) (2010) 87 IPR 234, in otherwise comparable circumstances, was unnecessary.

24    I therefore made order 7 in the orders set out above.

Associate:

Dated:    3 April 2012