FEDERAL COURT OF AUSTRALIA

Vitaco Health IP Pty Ltd v AFI Cosmetic Pty Ltd (No 3) [2024] FCA 598

ORDERS

THE COURT NOTES THAT:

The Australian Trade Mark Registration Numbers 514257 and 1220216, in the name of the first applicant, will be referred to the first applicant’s marks in these orders.

THE COURT DECLARES THAT:

1.    By using and displaying the trade mark “HEALTHERIES”, including the form of the devices:

and

the first respondent has engaged in conduct which is misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law (ACL) as set out in Sch 2 of the Competition and Consumer Act 2010 (Cth).

2.    The first respondent has, by engaging in the conduct in para 1, made false or misleading representations that the first respondent is associated or affiliated with the applicants, contrary to s 29(1)(g) and (h) of the ACL.

3.    The first respondent has, by engaging in the conduct in para 1, committed the tort of passing off.

4.    The first respondent has, by engaging in the conduct in para 1, infringed the first applicant’s marks.

5.    The first respondent has, by engaging in the conduct in para 1, infringed the first applicant’s copyright in the artistic works depicted in Annexure A.

6.    In respect of the first respondent’s use of the first applicant’s marks, the second respondent has

(a)    directed or procured or entered into a common design with the first respondent’s infringement of the first applicant’s marks pursuant to s 120(1) of the Trade Marks Act 1995 (Cth);

(b)    aided, abetted, counselled, procured, induced or been directly or indirectly knowingly concerned in the first respondent’s contravention of s 18 of the ACL; and

(c)    directed or procured or entered into a common design with the first respondent in engaging in the tort of passing off.

THE COURT ORDERS THAT:

7.    The respondents be restrained from operating any website at the domain name containing the name HEALTHERIES, including the websites at <healtheries.net> and <healtheries.net.au>.

8.    Pursuant to s 126(1) of the Act, the respondents, by themselves, their servants, their officers or howsoever otherwise be restrained from:

(a)    displaying the word “HEALTHERIES” (including the stylised form depicted in Annexure A) and the Chinese characters 贺寿利 in any manner whereby such display distinguishes the respondents’ cosmetic face masks, children’s dentifrices, and children’s skin care products from those of other traders; and

(b)    otherwise using the word “HEALTHERIES” (including the stylised form depicted in Annexure A) and the Chinese characters 贺寿利 in relation to the respondents’ cosmetic face masks, children’s dentifrices, and children’s skin care products or any other goods or services that are the same, similar or closely related to goods or services listed in either of the first applicant’s marks.

9.    Pursuant to s 126(1) of the Act, the respondents, whether by themselves, their directors, employees, servants, agents or others be restrained from infringing the first applicant’s marks.

10.    The respondents, whether by themselves, their directors, employees, servants, agents or others be restrained from infringing the first applicant’s copyright in the artistic works depicted in Annexure A, including by way of:

(a)    reproducing such works in material form;

(b)    publishing such works; and

(c)    communicating such works to the public.

11.    Pursuant to s 232 of the ACL, the respondents, whether by themselves, their directors, employees, servants, agents or others be restrained from making the following statements:

(a)    any statement falsely suggesting that the respondents are in partnership with, or otherwise associated with, the applicants;

(b)    any statement falsely suggesting the respondents are in partnership with, or otherwise associated with, a business that was founded in New Zealand;

(c)    any statement falsely suggesting the respondents are in partnership with, or otherwise associated with, a business founded in 1904.

12.    The respondents, within 21 days, are to transfer the registration of the domain names <healtheries.net> and <healtheries.net.au> to the first applicant and are required to take all necessary steps to assist with such transfer.

13.    Pursuant to s 88 of the Act, the Australian Trade Mark Registration Number 2325650 in the name of the second respondent be cancelled.

14.    The respondents, jointly and severally, pay damages to the applicants in the amount of $280,000.

15.    The respondents pay the applicants’ costs of and incidental to these proceedings, to be taxed.

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

REASONS FOR JUDGMENT

ROFE J:

INTRODUCTION

1    By its interlocutory application dated 15 April 2024, the applicants, Vitaco Health IP Pty Ltd and Vitaco Health Australia Pty Ltd, seek default judgment against the respondents, AFI Cosmetic Pty Ltd and Shikai Han, pursuant to r 5.23(2)(c) and/or (d) of the Federal Court Rules 2011 (Cth).

2    This proceeding was commenced by way of an originating application dated 14 November 2023 and a statement of claim of the same date. At the commencement of the proceedings, the applicants had also sought urgent interlocutory injunctive relief to restrain the ongoing online publication of two identical websites by the first respondent which were submitted to be flagrant infringements and highly misleading. I granted the urgent relief sought in my capacity as duty judge and published reasons for my decision on 22 November 2023: Vitaco Health IP Pty Ltd v AFI Cosmetic Pty Ltd [2023] FCA 1463 (November Reasons). I also made orders for deemed service and substituted service on the second respondent on 19 February 2024: Vitaco Health IP Pty Ltd v AFI Cosmetic Pty Ltd (No 2) [2024] FCA 99 (February Reasons). The November and February Reasons and the statement of claim provide context and background to the present application.

3    In their application for default judgment, the applicants rely upon:

(a)    the first affidavit of its solicitor, Mr Leonard Hickey of Cornwalls, dated 14 November 2023 (Hickey-1);

(b)    the second affidavit of Mr Hickey, dated 15 November 2023 (Hickey-2);

(c)    the affidavit of Mr Craig Dawson Kearney, Chief Executive Officer of Vitaco Australia and a director of applicants and their parent company Vitaco Holdings Ltd, dated 15 November 2023 (Kearney);

(d)    the third affidavit of Mr Hickey, dated 21 November 2023 (Hickey-3);

(e)    the fifth affidavit of Mr Hickey, dated 15 April 2024 (Hickey-5);

(f)    the sixth affidavit of Mr Hickey, dated 23 April 2024 (Hickey-6); and

(g)    the affidavit of Mr Ian Ross, director of CR Formulations Pty Ltd, dated 23 April 2024.

4    For the reasons that follow, I have determined that judgment should be entered in favour of the applicants. Further, the applicants are entitled to the damages sought and their costs of these proceedings.

APPLICANTS’ CLAIMS

5    The final relief sought by the applicants is set out below.

6    First, the applicants seek a declaration that, by engaging in the conduct pleaded in the statement of claim, the respondents have,

(a)    infringed the first applicant’s Australian Registered Trade Mark Numbers 514257 (HEALTHERIES Word Mark) and 1220216 (together, the Registered Marks);

(b)    infringed the first applicant’s copyright in the artistic works depicted in Annexure A (Artistic Works);

(c)    contravened s 18(1) and s 29(1)(g) and (h) of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth) (the ACL); and

(d)    engaged in the tort of passing off.

7    Second, the applicants seek an order that the respondents, by themselves, their servants, their officers or howsoever otherwise:

(a)    desist from further publishing the websites that appeared at <healtheries.net> and <healtheries.net.au> as at 22 November 2023;

(b)    cease:

(i)    displaying the word “HEALTHERIES” (including the stylised form depicted in Annexure A) and the Chinese characters 贺寿利 (HEALTHERIES Chinese Characters) in any manner whereby such display distinguishes the respondents’ cosmetic face masks, children’s dentifrices (toothpaste), and children’s skin care products from those of other traders; and

(i)    otherwise using the word “HEALTHERIES” (including the stylised form depicted in Annexure A) and the HEALTHERIES Chinese Characters in relation to the respondents’ cosmetic face masks, children’s toothpaste, and children’s skincare products or any other goods or services that are the same, similar or closely related to goods or services listed in either of the Registered Marks.

(c)    cease infringing the Registered Marks;

(d)    cease infringing the first applicant’s copyright in the Artistic Works, including by way of:

(i)    reproducing such works in material form;

(ii)    publishing such works; and

(iii)    communicating such works to the public;

(e)    cease making the following statements to Australian consumers:

(i)    any statement falsely suggesting that the respondents are in partnership with, or otherwise associated with, the applicants;

(ii)    any statement falsely suggesting the respondents are in partnership with, or otherwise associated with, a business that was founded in New Zealand; and

(iii)    any statement falsely suggesting the respondents are in partnership with, or otherwise associated with, a business founded in 1904.

8    Third, the applicants seek an order that the domain names <healtheries.net> and <healtheries.net.au> be transferred to the first applicant and that the respondents take all steps necessary to assist with such transfer.

9    Fourth, the applicants seek an order that the respondents pay damages in the amount of $280,000.

10    Fifth, the applicants seek a declaration that, at all material times, Australian Trade Mark Registration Number 2325650 in the name of second respondent (the 650 Mark) was invalid.

11    Sixth, the applicants seek an order pursuant to s 88 of the Trade Marks Act 1995 (Cth) (TMA) that the 650 Mark be cancelled.

12    Seventh, the applicants seek an order for the respondents to pay their costs.

PRELIMINARY MATTERS

13    In accordance with s 90 of the TMA, the applicants notified the Registrar of Trade Marks of these proceedings concerning cancellation of the 650 Mark on 12 April 2024. The Registrar has not indicated a wish to participate in the proceedings.

14    The applicants submit, and I accept, that it is of no significance that the Registrar was notified in the later stage of the proceedings as the requirement that the Registrar be notified of the applicants’ application to cancel the 650 Mark has been fulfilled: Yarra Valley Dairy Pty Ltd v Lemnos Foods Pty Ltd (2010) 90 IPR 117 at [284] (per Middleton J).

RELEVANT BACKGROUND

15    The factual background to these proceeding, including the ownership of the Registered Marks, has been set out in the November and February Reasons and will not be repeated here.

16    I will however touch upon some other matters relevant to the present application.

Service on first respondent

17    On 19 December 2023, I made orders allowing the applicants to effect service of the first respondent by sending copies of any further documents filed in the proceeding to both:

(a)    the email address at kf@onlinezh.net; and

(b)    the mailing address of Level 6, 552 Lonsdale Street, Melbourne VIC 3000.

18    I was satisfied on the evidence provided that the mailing address referred to at [17(b)] above is the registered address for the first respondent.

19    In Hickey-3, Mr Hickey deposed to service of the originating application, statement of claim and the affidavits (Hickey-1, Hickey-2 and Kearney) on the first respondent by:

(a)    sending an email attaching the documents to kf@onlinezh.net; and

(b)    causing the documents to be posted to the first respondent’s registered address.

Service on second respondent

20    On 9 February 2024, the applicants filed an interlocutory application seeking orders for deemed service and substituted service on the second respondent. I granted the application on 19 February 2024.

21    In the February Reasons I held that the originating application and statement of claim were deemed to be served on the second respondent on 6 February 2024.

22    Mr Hickey gave evidence of the service of the applicants’ further and better particulars of loss and damage, and Hickey-5.

23    In Hickey-6, Mr Hickey set out in a table details of the documents that have been served on the respondents. The “date of service” in the table refers to the latest date the document was served on both respondents by being sent to the email and mailing addresses in accordance with:

(a)    order 1 of the Court’s orders made on 19 December 2023, in relation to the first respondent; and

(b)    order 3 of the Court’s orders made on 19 February 2024, in relation to the second respondent.

This table is set out in Annexure B to these reasons.

24    Accordingly, I am satisfied that service of all the relevant Court documents has been reasonably effected on both respondents in accordance with my orders, and the respondents ought to have been on notice of these proceedings.

Impugned conduct of the respondents

25    As pleaded in the statement of claim, the applicants rely on the following alleged conduct of the respondents.

26    In or about May 2023, the first respondent registered the domain name containing “HEALTHERIES”, namely <healtheries.net> and <healtheries.net.au>.

27    From a date unknown to the applicants, but since at least 9 October 2023, the first respondent published online publications that:

(a)    contained reproductions, or substantial reproductions, of the Artistic Works;

(b)    promoted the sale of cosmetic face masks, children’s toothpaste and children’s skincare products (AFI Products) to Australian consumers;

(c)    used the trade marks HEALTHERIES and in relation to the AFI Products (Healtheries Marks);

(d)    used the HEALTHERIES Chinese Characters in relation to the AFI Products;

(e)    displayed the following image: and

(f)    made statements indicating that the first respondent is a partner of Healtheries.

Applicants’ reputation in Australia

28    Since at least 2004 (Date of First Australian Use), the applicants have made significant sales of health food, sports nutrition and supplement products in Australia bearing the HEALTHERIES Word Mark, and since 2008, bearing one or more of the Registered Marks and/or the Artistic Works. The HEALTHERIES Word Mark was first coined and used in New Zealand in 1904 by one of the first applicant’s predecessors in title.

29    Since about 2009, the second applicant has published a website directed at Australian consumers located at <www.healtheries.com.au> (HEALTHERIES Website) where it has:

(a)    promoted its health food, sports and nutrition and supplement products under the first applicant’s Registered Marks;

(b)    prominently displayed the first applicant’s Registered Marks and the Artistic Works;

(c)    since about 2021, displayed the following image on the home page: and

(d)    informed website visitors about the history of the HEALTHERIES brand, including that the brand was founded in 1904 in New Zealand.

30    Since at least about 2008, the second applicant has engaged in significant further promotion of health food, sports and nutrition and supplement products under the first applicant’s Registered Marks in Australia and the HEALTHERIES Chinese Characters and such products have been recognised in various press articles and awards.

31    I am satisfied on the evidence set out above that the applicants have acquired and maintained since at least 2009 a substantial and valuable reputation in both;

(a)    the first applicant’s Registered Marks and the HEALTHERIES Chinese Characters used in association with those marks; and

(b)    the Artistic Works;

in relation to health food, sports and nutrition and supplement products amongst consumers of such goods in Australia.

RELEVANT PRINCIPLES ON DEFAULT JUDGMENT

32    Rule 5.22 of the Rules provides:

5.22     When a party is in default

A party is in default if the party fails to:

(a) do an act required to be done, or to do an act in the time required, by these Rules; or

(b) comply with an order of the Court; or

(c) attend a hearing in the proceeding; or

(d) prosecute or defend the proceeding with due diligence.

33    Rule 5.23(2) of the Rules provides:

5.23     Orders on default

…

(2) If a respondent is in default, an applicant may apply to the Court for:

(a) an order that a step in the proceeding be taken within a specified time; or

(b) if the claim against the respondent is for a debt or liquidated damages—an order giving judgment against the respondent for:

(i) the debt or liquidated damages; and

(ii) if appropriate, interest and costs in a sum fixed by the Court or to be taxed; or

(c) if the proceeding was started by an originating application supported by a statement of claim or an alternative accompanying document referred to in rule 8.05, or if the Court has ordered that the proceeding continue on pleadings—an order giving judgment against the respondent for the relief claimed in the statement of claim or alternative accompanying document to which the Court is satisfied that the applicant is entitled; or

(d) an order giving judgment against the respondent for damages to be assessed, or any other order; or

(e) an order mentioned in paragraph (b), (c) or (d) to take effect if the respondent does not take a step ordered by the Court in the proceeding in the time specified in the order.

34    To make orders for default judgment under r 5.23(2)(c) the Court must be satisfied that the applicants are entitled to relief based on what is claimed on the face of the statement of claim. In the absence of a defence to the contrary, facts pleaded in the statement of claim are taken to be admitted. If the Court is satisfied that there is an entitlement to relief upon such admissions, then r 5.23(2)(c) will be met: Chamberlain Group Inc v. Giant Alarm System Co Ltd (No 2) [2019] FCA 1606 at [14] (per Yates J).

35    The principles applicable to r 5.23(2) have been helpfully summarised by McEvoy J in Kidd v Kwek (No 2) [2024] FCA 194 at [21]−[24]. His Honour said at [21]:

The Court retains a discretion as to whether or not to make any order or an order of a particular kind in relation to an application pursuant to r 5.23, and whether that discretion should be exercised depends, inter alia, upon “the nature of the default itself, any explanation provided for the default, the manner in which the party in default has conducted the proceeding to-date and whether the Court could have any confidence that a proceeding would henceforth be conducted in an orderly and proper manner”: BJ International Limited v Asghar (No 2) [2013] FCA 580 at [13] (Flick J). An order may be made entering default judgment against a respondent in circumstances where the default is such as to manifest an intention on the part of a respondent not to comply with orders which have been made with a view to preparing a case for hearing; a single act of default may be sufficient; and in other circumstances a single act of default may not warrant an order being made: BJ International at [14].

36    The respondents respectively have engaged in the following defaults under r 5.22:

(a)    the first respondent:

(i)    failed to appear at a hearing on 22 November 2023 in breach of r 5.22(c);

(ii)    failed to file and serve a Notice of Address for Service by 24 January 2024 in breach of order 2 of the orders made on 19 December 2023;

(iii)    failed to file and serve any defence by 24 January 2024 in breach of order 4 of the orders made on 19 December 2023;    

(b)    the second respondent:

(i)    failed to file and serve a Notice of Address for Service by 20 March 2024 in breach of order 2 of the orders made on 19 February 2024; and

(ii)    failed to file and serve any defence by 20 March 2024 in breach of order 2 of the orders made on 19 February 2024.

37    In addition to the above-mentioned defaults, Mr Hickey gave evidence that the respondents have not responded to any communications from the applicants’ lawyers concerning these proceedings. This is despite the fact that numerous communications have been sent since the initial letter of demand.

38    I am therefore content to consider the applicants’ application for final relief on a default basis, having been satisfied that the relevant Court documents have been served on the respondents, and the respondents have not participated in the proceedings in any form whatsoever.

39    I will now deal in turn with each ground of relief sought by the applicants.

TRADE MARK INFRINGEMENT

40    Section 120(1) of the TMA states:

120    When is a registered trade mark infringed?

(1) 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.

41    The High Court observed in Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd (2023) 408 ALR 195 (per Kiefel CJ, Gageler, Gordon, Edelman and Gleeson JJ) that the question of whether a mark was used as a trade mark is an objective one and said at [24]:

Whether a sign has been "use[d] as a trade mark" is assessed objectively without reference to the subjective trading intentions of the user. As the meaning of a sign, such as a word, varies with the context in which the sign is used, the objective purpose and nature of use are assessed by reference to context. That context includes the relevant trade, the way in which the words have been displayed, and how the words would present themselves to persons who read them and form a view about what they connote…

(Footnotes omitted.)

42    On the basis that the respondents are taken to have admitted the allegations pleaded against them in the statement of claim, the first respondent has admitted:

(a)    using the Healtheries Marks in relation to “cosmetic face masks, children dentifrices and children’s skin care products” promoted to Australian consumers, which are goods appearing in the specifications for the Registered Marks; and

(b)     it engaged in such use through the registration and use of the domain names containing “HEALTHERIES”, namely <healtheries.net> and <healtheries.net.au>.

43    The first respondent admitted using the Healtheries Marks to promote the AFI products to Australian consumers and therefore I consider that the first respondent has used the marks as badges of origin. The Healtheries Marks are substantially identical to the Registered Marks. I consider that the first respondent has infringed the Registered Marks pursuant to s 120(1) of the TMA.

44    The second respondent admitted that:

(a)    he has been a director of the first respondent since its incorporation on 9 April 1996;

(b)    he was the sole director and controlling mind of the first respondent who directed the first respondent to engage in the above conduct; and

(c)    he was “fully aware” that he had no lawful right to engage in that conduct.

45    The principles concerning liability as a joint tortfeasor have been summarised by Moshinsky J in Playgro Pty Ltd v Playgo Art & Craft Manufactory Ltd (2016) 117 IPR 489 at [150]−[154]. The authorities provide that when considering whether a respondent has acted as a joint tortfeasor, the following two elements must be satisfied:

(a)    whether the joint tortfeasor was acting concurrently with the primary infringer; and

(b)    whether there was a common design.

46    I am satisfied, on the basis of the admissions, that the second respondent has been acting concurrently with the first respondent during the relevant times during which the impugned conduct took place, and that there was a common design.

COPYRIGHT INFRINGEMENT

47    The copyright infringement claim concerns the Artistic Works depicted in Annexure A to these reasons. I set out at [36] of the November Reasons the evidence as to ownership of the Artistic Works. The Works are authored by Nutra-Life Health and Fitness (NZ) Limited (NHF) who fully assigned the copyright to the first applicant in on 8 November 2023. In addition, the facts relating to creation and chain of title, and the fact of ownership of the Artistic Works are taken to be admitted by the respondents.

48    On the basis of these matters, I am satisfied that the Artistic Works are original artistic works in which copyright subsists and are owned by the first applicant and such copyright is protected by the provisions of the Copyright Act 1968 (Cth) (CRA).

49    The first respondent admits reproducing and publishing the Artistic Works online on the impugned websites. The second respondent has admitted that it authorised that conduct. In doing so, the respondents have been reproducing and publishing the Artistic Works and communicating them to the public without the first applicant’s licence or consent.

50    Reproducing and publishing artistic works and communicating artistic works to the public are exclusive rights of a copyright owner under s 31(1)(b) of the CRA. Therefore, by engaging in this conduct without licence or consent, I consider that the respondents have engaged in infringement under s 36(1) of the CRA. The second respondent is also liable for the infringement under s 36(1) as a joint tortfeasor.

51    Copyright infringement is established on the admitted facts and the Court has jurisdiction to grant the relief set out in s 115 of the CRA. The applicants claim that additional damages under s 115(4) are appropriate in this case. I will consider this below.

BREACHES OF THE ACL AND PASSING OFF

52    The applicants allege that the respondents have contravened ss 18(1), 29(1)(g) and 29(1)(h) of the ACL and engaged in passing off.

53    The relevant sections of the ACL are set out below:

18    Misleading or deceptive conduct

(1) A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

…

29     False or misleading representations about goods or services

(1) A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:

…

(g) make a false or misleading representation that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits; or

(h) make a false or misleading representation that the person making the representation has a sponsorship, approval or affiliation; …

54    The applicants contend, and the respondents are taken to admit, that the applicants’ HEALTHERIES brand has a long and established history of use.

55    Since 2008, the second applicant engaged in significant further promotion of products under the HEALTHERIES Chinese Characters, which are a transliteration of the word HEALTHERIES.

56    In addition to admitting to use of the first applicant’s Registered Marks and Artistic Works, the first respondent admits to:

(a)    using almost identical imagery to that displayed on second applicant’s website since 2021;

(b)    making statements indicating it was a partner of Healtheries; and

(c)    using the HEALTHERIES Chinese Characters to promote its products.

57    The first respondent further admits that this conduct resulted in it making the following representations to Australian consumers in trade or commerce:

(a)    that it was, in fact, the first applicant, or authorised by the first applicant to use its Registered Marks, Artistic Works and the HEALTHERIES Chinese Characters;

(b)    that it is a partner of, or otherwise commercially affiliated with, the applicants; and

(c)    that its products are sponsored by, or approved by, the applicants.

58    On the basis of the admitted facts, I consider that the first respondent has contravened ss 18(1), 29(1)(g) and 29(1)(h) of the ACL and engaged in passing off. Further, based on the same facts I consider that joint tortfeasorship is established: the second respondent aided, abetted, counselled and procured these contraventions and was knowingly concerned in them.

59    The following statement was published on the webpage <https://healtheries.net/about>, captured on 23 October 2023:

History

Healtheries, an internationally renowned brand, was founded in 1904 and originated from New Zealand, which is known as the world’s last pure land. It initially focused on producing healthy food. In 1979, it began collaborating with an Australian company to produce health products primarily for children. In 2019, it partnered with [the first respondent] in Australia to develop natural and healthy products.

(Emphasis added.)

60    To be clear, the respondents admit that they do not have any partnerships or affiliation with the applicants and therefore these statements are false and misleading.

61    It is apparent that the conduct of the respondents was deliberate and flagrant, and I do not consider that there is any realistic possibility that this conduct could have been carried out in good faith.

CANCELLATION OF SECOND RESPONDENT’S MARK

62    The second respondent admits filing a trade mark application to register the HEALTHERIES Chinese Characters for the following goods in class 3 on 3 January 2023: cosmetics; beauty masks; facial cleansers; cleansing milk for toilet purposes; perfumes; sunscreen preparations; skin whitening creams; essential oils; cosmetic preparations for slimming purposes; soap; and anti-wrinkle cream.

63    The application proceeded to registration, being Australian Trade Mark Registration Number 2325650. The priority date for this registration is 3 January 2023.

64    The applicants seek to cancel the 650 Mark pursuant to s 88 of the TMA. The applicants rely on ss 42(b), 60 and 62A of the TMA as the grounds of cancellation:

(a)    section 42(b) provides that an “application for the registration of a trade mark must be rejected if … its use would be contrary to law”;

(b)    section 60 provides that the registration of a trade mark may be opposed if another trade mark had a pre-existing reputation in Australia and use of the first-mentioned trade mark “would be likely to deceive or cause confusion”; and

(c)    section 62A provides that the “registration of a trade mark may be opposed on the ground that the application was made in bad faith”.

65    The factual matters relevant to s 42(b) and s 60 largely overlap with the matters raised under the misleading or deceptive conduct ground.

66    The respondents admit that the applicants are aggrieved persons for the purposes of s 88 of the TMA.

67    For the same factual reasons that use of the HEALTHERIES Chinese Characters would constitute misleading and deceptive conduct and passing off, grounds of cancellation exist under s 42(b) and s 60 of the TMA, together with s 88(2)(a) of the TMA.

68    The test as to whether a trade mark application has been made in bad faith involves simply asking if a reasonable person standing in the shoes of the applicant and adopting the standards of acceptable commercial behaviour observed by reasonable and experienced persons would reason that they ought not apply for registration: DC Comics v Cheqout Pty Ltd (2013) 101 IPR 334 at [63] (per Bennett J); Fry Consulting Pty Ltd v Sports Warehouse Inc (No 2) (2012) 94 IPR 551 at [165] (per Dodds-Streeton J).

69    As noted by Dodds-Streeton J in Fry Consulting at [166], “mere negligence, incompetence or a lack of prudence to reasonable and experienced standards would not, in themselves, suffice, as the concept of bad faith imports conduct which, irrespective of the form it takes, is of an unscrupulous, underhand or unconscientious character”.

70    In Ragopika Pty Ltd v Padmasingh Isaac trading as Aachi Spices and Foods (2023) 174 IPR 351, Kennett J found at [74] that to be in “bad faith” the conduct “[i]f not actually fraudulent or dishonest … needs to have some quality that makes it repugnant to the purposes for which the statutory regime exists”.

71    Further, whilst the inquiry to be made is one of whether bad faith existed as at the filing date, conduct occurring after the filing date can be taken into account to ultimately prove bad faith “as at” the filing date: DC Comics at [74]−[77] (per Bennett J) and Fry Consulting at [167] (per Dodds-Streeton J). Therefore, the second respondent’s continued infringing conduct after the date of filing the trade mark application is relevant to inferring his dishonest state of mind as at the filing date of 3 January 2023.

72    The applicants submit the impugned conduct of the respondents is unscrupulous, underhanded and unconscientious. Further, such conduct is both dishonest and repugnant to the purposes of the TMA, which includes the purpose of maintaining an accurate register of trade marks which perform a proper statutory function of indicating the correct trade origin of goods and services: Health World Ltd v Shin-Sun Australia Pty Ltd (2010) 240 CLR 590 at [22] (per French CJ, Gummow, Heydon and Bell JJ).

73    The second respondent admits as a matter of fact that a reasonable person in his position adopting standards of acceptable commercial behaviour observed by reasonable and experienced persons would have reasoned that they ought not have made the application for registration.

74    The applicants submit the second respondent was operating with dishonest intent when filing the application to register the 650 Mark. The applicants note that the second respondent has also admitted that when engaging in the subsequent trade mark infringements and copyright infringements (which appeared on the same websites as the 650 Mark) he was “fully aware” of his lack of lawful rights.

75    On the basis of the admitted facts, I consider that the s 62 ground of cancellation is made out.

76    On the basis of the matters admitted, I consider that the second respondent’s 650 Mark should be cancelled pursuant to s 67A, together with s 88 of the TMA.

77    Also on the matters admitted, I consider that the respondents have shown flagrant disregard towards to the rights of the first applicant as conferred by the TMA by virtue of being the owner of the Registered Marks.

DECLARATION, INJUNCTIVE RELIEF AND DOMAIN NAME TRANSFER

78    The applicants seek a declaration in line with the findings as to liability, and injunctive relief corresponding to such findings. I consider it is appropriate to make the declaration sought.

79    The applicants submit that whilst it would appear the impugned websites have been removed from publication, infringing products have very recently been discovered in the Australian market.

80    Mr Hickey gave evidence of an online store on Ali Express called the “LUERLING Store”. Mr Hickey’s evidence was that the LUERLING Store displayed the same imagery and text as appeared on the respondents’ websites, including reproductions of the first applicant’s Artistic Works. A search of trade mark registration applications for “LUERLING” revealed applications made in the name of the second respondent. A trap purchase of products from the LUERLING Store was made and on arrival, Mr Hickey observed that each product bore the Healtheries Marks. On the basis of his investigations Mr Hickey believes that the LUERLING Store is operated by the respondents.

81    Accordingly, the applicants seek injunctive relief to protect themselves and their consumers from any further similar infringing or unlawful conduct.

82    Due to the respondents’ failure to engage with these proceedings or respond to the applicants’ various attempts to communicate, the applicants have no assurances that the respondents will permanently cease and desist their infringing conduct. The applicants rightly maintain that they have no assurances that the respondents are uninvolved in the recently discovered infringing products and, rather, they have sensible and rational reasons to believe the contrary.

83    I will grant the injunctive orders sought.

84    Further, the applicants seek a transfer of the domain names <healtheries.net> and <healtheries.net.au>. As submitted by the applicants, it is within the Court’s power to order the transfer of the domain names: see Nasib Baik Pty Ltd v Sydney Ridelender Pty Ltd [2022] FCA 301 at [57]−[58] (per Markovic J).

85    The applicants have established registered rights in the Registered Marks, which the Healtheries Marks are substantially identical to. It follows that the domain names employing the use of the Healtheries Word Mark ought to be transferred to them to avoid consumers being deceived or misled.

ENTITLEMENT TO PECUNIARY RELIEF

86    The applicants claim against the respondents:

(a)    $30,000 in damages for diminution of the applicants’ reputation; and

(b)    $250,000 in additional damages for copyright and trade mark infringement.

87    I will deal with these separately.

Reputation Loss

88    The applicants claim damages in the sum of $30,000 for loss of reputation pursuant to s 126(1) of the TMA, s 115(2) of the CRA, and s 236 of the ACL. These provisions are set out below.

89    Section 126(1) of the TMA provides:

126    What relief can be obtained from court

(1)    The relief that a court may grant in an action for an infringement of a registered trade mark includes:

(a)    an injunction, which may be granted subject to any condition that the court thinks fit; and

(b)    at the option of the plaintiff but subject to section 127, damages or an account of profits.

90    Section 115(2) of the CRA provides:

Subject to this Act, the relief that a court may grant in an action for an infringement of copyright includes an injunction (subject to such terms, if any, as the court thinks fit) and either damages or an account of profits.

91    Section 236 of the ACL provides:

236    Actions for damages

(1)    If:

(a)    a person (the claimant) suffers loss or damage because of the conduct of another person; and

(b)    the conduct contravened a provision of Chapter 2 or 3;

the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.

(2)    An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued.

92    The respondents have wilfully engaged in the impugned conduct and profited off the longstanding and valuable reputation of the applicants.

93    The applicants submit that the facts required to establish this head of damage have been admitted by default because such damage may occur through flagrant infringements in which a respondent misleads consumers into believing it is the brand owner or associated with the brand owner: Facton Ltd v Rifai Fashions Pty Ltd (2012) 95 IPR 95 at [26]–[29] (per Lander and Gordon JJ) and [117]–[128] (per Gilmour J). Further, the respondents are taken to have admitted that the applicants have suffered loss of reputation.

94    In terms of the amount to be awarded under this head, the applicants submit that such damage to reputation need not be identified with precision. The applicants rely on the following observations of Rares and Robertson JJ in Madden v Seafolly Pty Ltd (2014) 313 ALR 1 at [116]:

While the trade mark “Seafolly” may have been owned by another company in the group, the applicant below had the word “Seafolly” as part of its corporate name and traded in Australia. It is likely to have suffered some damage to its business reputation by Ms Madden’s misleading and deceptive conduct. This was not a case for nominal damages. A serious attack of this nature by a commercial competitor, that attracted not insubstantial publicity, will have caused some real damage to Seafolly’s business reputation that is insusceptible of any precise calculation. The Court in such cases can only estimate a sum necessary to compensate for that damage caused by the contravention of s 52: compare Comalco, Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257; [2003] HCA 10 at [38] per Hayne J with whom Gleeson CJ, McHugh and Kirby JJ agreed at [6]–[7] and [7].

(Emphasis added.)

95    While it cannot be said the respondents are commercial behemoths, it is conversely true that the respondents are not a small business, or as put by the applicants, “commercial minnows”. As evidenced in Hickey-6, the second respondent has a commercial presence in more than one jurisdiction. Further, screen captures of the respondents’ infringing websites before they were removed show that significant web development, requiring not insubstantial resources, was undertaken. The content is extensive in quantity and detail. The respondents’ website is not a small and insignificant website.

96    In these circumstances, I consider that an award in the amount of $30,000 as sought by the applicants for reputational loss is appropriate.

Additional Damages

97    The applicants seek an award of $250,000 in additional damages for copyright and trade mark infringement. The Court has a broad discretion to award additional damages: LED Builders Pty Ltd v Eagle Homes Pty Ltd (1999) 44 IPR 24 at [91] (per Lindgren J).

98    Section 126(2) of the TMA and s 115(4) of the CRA both set out five relevant matters to which the Court must have regard in determining whether to award additional damages. The matters to which the Court must have regard under s 115(4) of the CRA are not in the nature of preconditions which must be satisfied in order to make the award: Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd (No 2) (2008) 76 IPR 763 at [17] (per Besanko J); QAD Inc v Shepparton Partners Collective Operations Pty Ltd (2021) 159 IPR 285 at [145] (per Thawley J (affirmed on appeal in Shepparton Partners Collective Operations Pty Ltd v QAD Inc [2021] FCAFC 206 (per Greenwood, Jagot and Rofe JJ)). The statutory factors set out in that section do not exhaust all relevant matters for consideration, but they do indicate the considerations to which Parliament turned its attention.

99    Wigney J considered the relevant principles in Truong Giang Corporation v Quach (2015) 114 IPR 498 at [133]–[139]. His Honour noted that given the similarity of s 126(2) of the TMA to s 115(4) of the CRA, it is relevant to consider the principles that have been applied in the copyright context.

100    Section 126(2) of the TMA is not a general grant of a power to award any damages the Court thinks fit but is instead a power circumscribed by the concept of deterrence; that is to say, the damages under s 126(2) are awarded not to compensate loss but to make infringement unattractive: Halal Certification Authority Pty Limited v Scadilone Pty Limited (2014) 107 IPR 23 at [99] (per Perram J). The concept of deterrence encompasses both specific deterrence of repetition of the conduct by the infringer and, by their example, general deterrence of other would-be infringers: QAD Inc at [152] (per Thawley J). An award of additional damages ought to deter an infringer from seeing the risk of liability as simply a “cost of doing business”: Truong at [130] (per Wigney J) quoting the Explanatory Memorandum to the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Cth).

101    Lander and Gordon JJ observed at [36] in Facton that additional damages will be awarded under s 115(4) of the CRA when the conduct of the defendant is such that an award of punitive damages should be made to mark the Court’s recognition of the opprobrium attached to the defendant’s conduct.

102    In Dynamic Supplies Pty Limited v Tonnex International Pty Limited (No 3) (2014) 107 IPR 548 at [38], Yates J noted that additional damages may be given on principles corresponding to those governing awards of aggravated and exemplary damages at common law.

103    Determination of an appropriate amount of additional damages is not an exact science. There is no scientific approach or mathematical formula to be applied: LED Builders at [91] (per Lindgren J). The Court’s assessment of the appropriate amount of additional damages is a discretionary judgment taking into account all the relevant factors to arrive at a single result: QAD Inc at [145] (per Thawley J).

104    The applicants submit that the respondents’ conduct in developing the infringing websites, including copying the first respondent’s Registered Marks and Artistic Works was deliberate and calculated to mislead, and sufficiently egregious to merit a substantial award of additional damages. The applicants contend that a substantial award of additional damages would demonstrate the Court’s recognition of the opprobrium attached to the respondents’ conduct, as well as acting to deter similar conduct by the respondents, and others.

105    The applicants drew the Court’s attention to three authorities that, while not analogous to the present proceeding, go towards explaining the methodology adopted by the applicants to arrive at the amount of $250,000 sought by them by way of additional damages.

106    First, the applicants drew attention to the following observations of Jacobson J in Sony Entertainment (Australia) Pty Ltd v Smith (2005) 64 IPR 18 at [163]:

There have been a number of cases in the area of infringement of copyright in computer software in which judges of the Court have awarded amounts of $300,000 to $500,000 for additional damages. Those were extreme cases in which the illegality was concealed, deliberate and for the considerable pecuniary benefit of the respondents; see Microsoft Corp v Ezy Loans Pty Limited [2004] FCA 1135 at [95] – [96] (Stone J); Microsoft Corp v Tyn Electronics Pty Limited (in Liq) [2004] FCA 1307 at [46] – [48] (Stone J); Microsoft Corp v Goodview Electronics Pty Limited (2000) 49 IPR 578 at [61] – [64] (Branson J).

(Emphasis added.)

107    The applicants note that with the passage of time and inflation, it would now be expected that the appropriate award range for such severe conduct would be higher.

108    Second, in Halal Certification, Perram J awarded additional damages of $91,015 for trade mark infringement concerning the limited use of a certification mark in kebab outlets. The commercial use of the infringing mark in that case, although flagrant, was small in scale.

109    Third, in Universal Music Publishing Pty Ltd v Palmer (No 2) (2021) 158 IPR 421, Katzmann J awarded $1,000,000 in additional damages for copyright infringement in circumstances where, inter alia, the factor of specific deterrence weighed in favour of a large award following the respondent’s admissions under cross examination that he did not “care about having to pay out $180,000 to Universal, since he deals in billions of dollars”: at [523].

110    The applicants have not put on any evidence as to sales lost by them (if any) due to the respondents’ infringing conduct. When considering specific deterrence, an infringer’s financial position and resources may be a relevant matter to be considered: QAD Inc at [154] (per Thawley J). In this matter, there is no evidence before me that the respondents would be able to pay the amounts sought, contrary to the circumstances with respect to the respondent in Palmer.

111    I consider that the respondents’ conduct is such as to merit the award of additional damages. The respondents’ conduct in setting up a sophisticated replica version of the applicant’s website including copying the first applicant’s Registered Marks and Artistic Works, in order to mislead potential customers of the applicant and divert them from the applicant’s website is a particularly flagrant example of trade mark and copyright infringement.

112    Mr Hickey’s evidence suggests that the respondents are operating a further infringing online store, the LUERLING Store, again copying the first applicant’s Registered Marks and Artistic Works. In these circumstances, specific deterrence of further infringing conduct by the respondent is an important factor in considering an appropriate amount of additional damages.

113    I consider that the amount of $250,000 is an appropriate amount of additional damages to order in this case. That figure marks the Court’s recognition of the opprobrium attached to the respondents’ conduct, and is an amount intended to deter further infringing conduct by the respondents, or others.

CONCLUSION

114    In light of the reasons above, judgment should be entered for the applicants against the respondents.

115    I will make orders granting relief substantially in the form sought by the applicants in their interlocutory application. The respondents should bear the applicants costs of these proceedings.

Associate:

Dated:    7 June 2024

ANNEXURE A

ANNEXURE B