Federal Court of Australia

Rock Solid Industries International (Pty) Ltd v Ozi 4X4 Pty Ltd [2025] FCA 334

ORDERS

THE COURT ORDERS THAT:

1.    The Respondent pay the Applicant damages in the sum of $250,000.

2.    Pursuant to s 52 of the Federal Court of Australia Act 1976 (Cth), the Respondent is to pay interest on the judgment sum from 9 April 2024, at the rate determined in accordance with r 39.06 of the Federal Court Rules 2011 (Cth).

3.    The Respondent pay the Applicant’s costs of and incidental to the assessment of damages, such costs to be assessed on a lump sum basis in default of agreement between the parties.

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

REASONS FOR JUDGMENT

ANDERSON J:

INTRODUCTION

1    By originating application and Statement of Claim, both filed on 18 October 2023, the applicant, Rock Solid Industries International (Pty) Ltd, claimed that the respondent, Ozi 4x4 Pty Ltd infringed two of its registered designs and breached a settlement agreement made by the parties to settle previous proceedings which RSI brought against Ozi for infringement in 2022.

2    Ozi did not appear on return of the matter on 1 February 2024, where RSI indicated that it may seek default judgment. Ozi failed to file a notice of address for service, and failed to file a defence by 9 February 2024, as required by the orders I made on 1 February 2024.

3    By interlocutory application filed on 16 February 2024, RSI sought an order that judgment be entered against Ozi pursuant to rules 5.23(2)(c) and (d) of the Federal Court Rules 2011 (Cth) and sought declarations and further procedural orders for the determination of quantum.

4    On 9 April 2024, Registrar Luxton made declarations that:

(1)    Ozi had infringed Australian Design Registrations Numbers 202011929 and 202011931 (Designs) in contravention of section 71 of the Designs Act 2003 (Cth);

(2)    Ozi had breached the settlement agreement with RSI dated 9 May 2023.

5    Registrar Luxton entered judgment against Ozi pursuant to rule 5.23(2)(c) and (d) of the Rules and made procedural orders for the determination of damages. The orders, amongst other things, placed wide restraints on Ozi from making, importing or selling the Ozi Products and the Modified Ozi Products (as defined in the SoC) and products substantially similar in overall appearance to the Designs.

6    Paragraph 6 of Registrar Luxton’s orders required the following:

6.    By 23 April 2024 the Respondent file and serve an affidavit detailing the following information, and exhibiting all documents supporting the matters deposed (including in original electronic form), in respect of Ozi Products, Modified Ozi Products or other products substantially similar in overall appearance to one or both of the Designs:

(a)    the number of such products it has manufactured, imported or purchased to date, and the cost of goods for each of the items;

(b)    the number of such products it has sold to date including the sale price of all items and the date of each sale;

(c)    the number of such products it has otherwise disposed of to date including the circumstances of the disposal;

(d)    the approximate amount of profit it contends it made by the sale of those products;

(e)    the methods of allocating overheads, if any, which it regards as reasonably acceptable;

(f)    the steps or reasoning by which the approximate amount of profit has been calculated; and (g) the number of such products it retains in stock.

7    Registrar Luxton’s orders were subsequently varied by the Court to include a penal notice endorsement pursuant to r 41.06 of the Rules on 28 June 2024.

8    Ozi has not complied with the procedural orders for the determination of damages made by Registrar Luxton on 9 April 2024. On 12 July 2024, Ozi filed an affidavit from its director, Huss Safi. That affidavit did not, however, contain any of the information required to be provided by paragraph 6 of Registrar Luxton’s orders.

9    Part of the procedural orders made by Registrar Luxton required RSI to elect whether it sought damages or an account of profits. On 26 July 2024, RSI notified Ozi that it had elected to seek damages in respect of the infringement of designs.

10    On 6 December 2024, RSI filed written submissions in support of the calculation of its purported entitlement to damages pursuant to r 30.41 of the Rules.

11    On 10 December 2024, Registrar Edwards made orders for Ozi to file and serve any written submissions in response to RSI’s submissions by 20 December 2024.

12    Due to concerns which the registry had as to the scope of the relief sought by RSI in its written submissions, it was determined that the assessment of damages should be undertaken by a judge of the Court rather than a registrar pursuant to r 30.41.

13    RSI submit that Ozi wilfully and flagrantly engaged in the infringing conduct, profiteered by encroaching on RSI’s rights under the Designs Act 2003 (Cth) and caused significant reputational damage to RSI. RSI seeks an award of $50,000 in damages (being reputational damages) and $300,000 in additional damages.

14    RSI relies on the following affidavits:

(a)    Affidavit of Mark Roe-Scott affirmed 15 February 2024, together with annexures MRS- 1 and MRS-6;

(b)    Affidavit of Mark Roe-Scott affirmed on 15 August 2024, together with annexures MRS-7 and MRS-8 and confidential annexure MRS-9;

(c)    Affidavit of Harrison Hunter Ottaway affirmed on 16 August 2024 together with Annexures HH0-18 to HHO-19; and

(d)    Affidavit of Aimee Brianna Foster affirmed on 16 August 2024 together with Annexures ABF-1 to ABF-3.

15    Ozi has not filed any affidavits in response on damages, pursuant to paragraph 9 of Registrar Luxton’s orders (as extended). Ozi has also not filed submissions in response to RSI’s submissions regarding damages, pursuant to Registrar Edwards’ orders dated 10 December 2024.

16    Registrar Edwards’ orders dated 10 December 2024 provided that unless either party notified the Court that it sought to make oral submissions, the determination of damages would be made on the papers. As no parties indicated that they wished to make oral submissions, I have determined the amount of damages on the papers.

damages claim

17    Section 75(1) of the Designs Act provides that a court may grant in design infringement proceedings, damages or an account of profits, at the election of the plaintiff. In this case, RSI has made an election for damages.

18    I accept, on the evidence, that Ozi has wilfully engaged in the infringing conduct and wrongfully profited from RSI’s valuable designs, causing significant damage to RSI.

19    Ozi has been offering the Ozi Products and the Modified Ozi Products for sale since at least November 2021, being around three years. Ozi is taken to have admitted that it made a profit by reason of its default, as is alleged in [31] of the SoC. However, as a consequence of Ozi's ongoing default in complying with order 6 of Registrar Luxton’s orders, the Court has not been exposed to the quantum of sales. Therefore, there is no basis upon which the Court can assess the real impact to RSI’s sale of products and the damages it has directly suffered by lost sales which would normally form the basis of a claim for compensatory damages.

20    RSI now seeks damages in the form of damages to reputation and additional damages.

Damage to reputation

21    I accept that RSI's reputation has been damaged by the ongoing infringement of its designs over a substantial period of time by Ozi and particularly the diminution of the ongoing value of the designs and its reputation as a supplier of products with exclusive and novel designs.

22    Ozi is taken to have admitted that there is damage to RSI’s reputation, as pleaded in [29] of the SoC.

23    Damage to reputation by reason of design infringement is a separate and available head of damage based on the "probable diminution in the value of the design as a chose in action because the infringement resulted in some probable diminution in the commercial value of the design in respect of its future use": Review Australia Pty Ltd v New Cover Group Pty Ltd [2008] FCA 1589; (2008) 79 IPR 236 at [44] (Kenny J).

24    Damages to reputation in intellectual property cases have been awarded in a number of cases: see Facton Ltd v Rifai Fashions Pty Ltd (2012) 199 FCR 569; [2012] FCAFC 9 (Lander, Gilmour and Gordon JJ); Elwood Clothing Pty Ltd v Cotton On Clothing Pty Ltd (2009) 81 IPR 378; [2009] FCA 633 (Gordon J); Seafolly Pty Ltd v Fewstone Pty Ltd (2014) 313 ALR 41; [2014] FCA 321 at [594] to [620] (Dodds-Streeton J).

25    Given the nature of damage to reputation, it has been accepted that it is insusceptible of any precise calculation: Madden v Seafolly Pty Ltd (2014) 313 ALR 1; [2014] FCAFC 30 at [116] (Rares and Roberston JJ).

26    I accept that RSI has significant commercial interest in the designs, their ongoing use and its reputation as a supplier of products with exclusive and novel designs, and that their unauthorised use by a third party significantly damages its reputation. I accept the unchallenged evidence before me that:

(a)    RSI invests heavily in its design team to create original and distinctive designs and considers this crucial to its reputation for original and well-designed vehicle accessory products;

(b)    RSI's flagship product line is a stainless-steel modular vehicle canopy for trucks and utility vehicles sold under the name “SmartCap” (SmartCap Products). This includes the “SmartCap Evo Sport” and the “SmartCap Evo Adventure”, which embody RSI's designs AU 202011929 and AU 202011931, respectively;

(c)    RSI has sold SmartCap Products in Australia since 2017, through its Australian website, its showroom in Burleigh Heads, Queensland, and its 22 registered Australian dealers and 10 to 15 additional Australian retailers who periodically buy and stock the SmartCap Products;

(d)    RSI has developed a significant reputation with its retailers and retail customers in Australia for exclusive and well-designed products;

(e)    RSI can charge the prices it does for the SmartCap Products because it offers a well- designed, original and exclusive product. If RSI's designs are copied by other businesses, RSI's claim of originality and exclusivity in its products is lost. This damages RSI's brand and image and its reputation for exclusive products;

(f)    The Ozi Products and Modified Ozi Products look identical to RSI's SmartCap Products but their finish and the quality of materials is inferior. The Ozi Products and Modified Ozi Products are also sold at substantially lower price points to the SmartCap Products;

(g)    The manufacture and sale by Ozi of the Ozi Products and the Modified Ozi Products at the prices at which they are sold has damaged, and will continue to damage RSI's reputation and image in the marketplace;

(h)    Ozi appears to have a sizeable business in Australia. The Ozi Products and the Modified Ozi Products were available for sale since at least November 2021, being around 3 years. According to its website, it sells various products in addition to vehicle canopies, including bull bars, work trailers, steel trays, ute trays, roof cages, snorkels, flares, LED head lights and tail lights and aluminium ute hard lids, and has three locations in three different states;

(i)    The damage suffered by RSI includes loss of goodwill in RSI's relationship with its retail customers. These customers see value in purchasing SmartCap Products on the basis that they are buying an exclusive design. If this exclusivity is lost due to the availability of copy products in the market being advertised and sold by Ozi, customers will not be prepared to pay the higher prices of the SmartCap Products, as they will be aware that the SmartCap Products are not exclusive and that similar products are more widely available at cheaper prices;

(j)    RSI has been notified of complaints by customers in Australia that “knock off products”, such as those being sold by Ozi and other third parties, look identical to RSI's SmartCap Products. There have also been instances of confusion by customers between knock off products and genuine SmartCap Products;

(k)    The damage caused also includes loss of goodwill in RSI's relationship with its dealers. These dealers agree to stock SmartCap Products on the understanding that they are original and exclusive. They are likely to terminate their distribution arrangements or order no or reduced quantities of SmartCap Products if similar products remain available for cheaper prices. RSI has already received a number of complaints from its Australian dealers regarding the availability of knock off products.

27    I am satisfied, on the evidence, that the significant and ongoing impact of the infringing conduct of Ozi has caused RSI significant damage to its reputation and assess that damage at $50,000.

Additional Damages

28    Section 75(3) of the Designs Act provides that the Court has a discretion to award an amount in additional damages in the case of a design infringement, having regard to the flagrancy of the infringement and all other relevant matters.

29    Ozi is taken to have admitted RSI's entitlement to additional damages by reason of its default, as pleaded in [30] of the SoC.

30    The discretion of the Court to award additional damages is broad: LED Builders Pty Ltd v Eagle Homes Pty Ltd (1999) 44 IPR 24; [1999] FCA 584 at [91] (per Lindgren J).

31    When assessing additional damages, courts have considered the following factors relevant to an award:

(a)    the flagrancy of the infringement;

(b)    whether the defendant demonstrates a lack of remorse;

(c)    the need for specific and general deterrence;

(d)    any post infringement, uncooperative conduct by the defendant, including defying court orders;

(e)    the benefits accrued to the defendant as a result of the infringement, including unfair competitive advantage;

(f)    whether the infringement was deliberate;

(g)    whether the defendant's conduct evidences a disregard of the applicant's rights;

(h)    the size of the defendant company;

(i)    the need to mark the court's disapproval of the defendant's conduct; and

(j)    whether the defendant has not produced reliable evidence, prepared a version of events to suit their interests, or failed to take an active role in proceedings.

32    Whilst each case needs to be determined by reference to the particular conduct, the following is a survey of awards of additional damages for intellectual property infringement:

(a)    Elwood Clothing Pty Ltd v Cotton On Clothing Pty Ltd (2009) 81 IPR 378; [2009] FCA 633 at [35]-[41]: Justice Gordon awarded additional damages in the sum of $150,000 in light of the flagrancy of infringement, the fact that the respondent continued to sell the infringing items after being put on notice of the applicant's copyright rights and the need to deter similar infringements;

(b)    Seafolly Pty Limited v Fewstone Pty Ltd (2014) 313 ALR 41; [2014] FCA 321 at [621]-[643]: Justice Dodds-Streeton awarded $150,000 in additional damages, based on a number of factors including general deterrence, the benefit received by the infringing respondent and the fact that the respondent continued to sell the infringing garments after being put on notice of the applicant's copyright claim;

(c)    Review Australia Pty Ltd v New Cover Group Pty Ltd (2008) 79 IPR 236; [2008] FCA 1589 at [58]-[62]: Justice Kenny made an award for additional damages for design infringement in the sum of $50,000 on the basis that the respondent failed to make proper discovery, and that the respondent failed to include evidence of the commercial benefit which it obtained;

(d)    Vitaco Health IP v AFI Cosmetic Pty Ltd (No 3) [2024] FCA 598 at [97]-[113]: Justice Rofe made an award of additional damages for trade mark and copyright infringement in the sum of $250,000 on the basis that the respondents set up a sophisticated replica version of the applicant's website including copyright, trade marks and artistic works in order to mislead potential customers and divert them from the applicant's website and there was a need to deter further infringing conduct by the respondent or others.

33    I am satisfied, on the evidence, that Ozi’s conduct has been flagrant and that it is appropriate to award additional damages for the following reasons:

(a)    This is the second time that RSI has brought proceedings against Ozi for the infringement of its Designs. The first proceeding was concluded when RSI and Ozi entered into a settlement agreement pursuant to which Ozi undertook to, among other things, cease sale of the Ozi Products. In breach of that settlement agreement, Ozi continued to offer for sale the Ozi Products and the Modified Ozi Products;

(b)    Ozi has continued to engage in infringing conduct after being put on notice of RSI's design infringement claim. Ozi also appears to have continued to offer for sale the Modified Ozi Products via its website even after default judgment was awarded against it, in breach of Registrar Luxton’s orders. From screenshots of its website, it also appears to have discounted the products, potentially in in an attempt to clear the stock;

(c)    Save for the filing of Mr Safi’s affidavit, Ozi has not engaged in the proceeding and is in further default of the orders of the Court. Ozi has not provided any information regarding its sales of Ozi Products and Modified Ozi Products or the profits it has made from these sales, as required by Registrar Luxton’s orders. This has made it impossible for RSI to calculate its damages on a “lost sales” basis, as noted above. RSI has not been able to calculate the true value of its loss as it does not know the full extent of Ozi's conduct;

(d)    As noted above, in relation to damages to reputation, Ozi appears to operate a sizeable business in Australia. It has been selling Ozi Products since at least November 2021;

(e)    A substantial benefit has accrued to Ozi by reason of its infringing conduct. By copying RSI's designs, Ozi has not had to incur the very significant design overheads incurred by RSI. This means that it can achieve a much higher profit margin on Ozi Products and Modified Ozi Products or sell these products for a much lower cost than RSI's SmartCap Products. As noted above, the Court does not have any details of the commercial benefit obtain by Ozi due to Ozi's default in complying with the orders and engaging with this proceeding.

(f)    There is a strong need to deter Ozi from engaging in this conduct, particularly in light of its failure to cease offering for sale Modified Ozi Products, in breach of Registrar Luxton’s orders. There is also a need to deter other traders generally from engaging in similar conduct.

34    Taking into account all of the above matters, it is evident that Ozi’s conduct has been deliberate, such that it warrants a substantial award of additional damages. RSI has submitted that additional damages should be awarded in the sum of $300,000. I am not, in the circumstances before me, satisfied that it is appropriate to award additional damages of $300,000. However, taking into consideration the nature of Ozi’s conduct, Ozi’s lack of engagement with this proceeding, and the need to deter similar conduct by Ozi and others, I consider additional damages in the sum of $200,000 appropriate.

35    RSI seeks interest from the date on which judgment was entered against Ozi, being 9 April 2024, pursuant to section 52 of the Federal Court of Australia Act 1978 (Cth) and its costs of and incidental to assessment of damages, such costs to be assessed on a lump sum basis in default of agreement. It is appropriate that RSI have interest on its judgment from 9 April 2024, together with a lump sum costs order.

DISPOSITION

36    I will order Ozi to pay RSI damages of $250,000, reflecting $50,000 in damages to reputation and $200,000 in additional damages. Pursuant to s 52 of the FCA Act, interest will be payable on the judgment sum from 9 April 2024, at the rate determined in accordance with r 39.06 of the Rules. Additionally, Ozi will be ordered to pay RSI’s costs of and incidental to the assessment of damages, such costs to be assessed on a lump sum basis in default of agreement.

Associate:

Dated:    8 April 2025