The remedies for counterfeiting available to Australian brand owners now include additional damages, significantly increasing the stakes for counterfeiters. K&L Gates’ Tim Francis explains.
The Federal Court has recently made its first award of additional damages for trade mark infringement, ordering the infringer to pay $91,005 in additional damages, despite awarding only $10 in actual damages.
This is great news for the fashion industry which is often abused by counterfeiters who deal in fake goods branded with a registered trade mark. In fact, the World Customs Organisation consistently reports fashion sector goods as the most counterfeited products in the world.
Given that previously brand owners had little ability to seek large damages awards unless there was large-scale infringement, another weapon in the arsenal of trade mark enforcement is welcome.
Up until 15 April last year, the monetary remedies available to Australian registered trade mark owners who brought trade mark infringement proceedings, were an account of the infringer’s profits, or recompense for the damage suffered as a result of the infringement.
Trade mark owners (and their licensees) now benefit from amendments to the law that gives the Courts power to also award ‘additional damages’.
Additional damages travel beyond the amount of the loss suffered by the trade mark owner arising from an infringement, and are designed to act as a deterrent to further infringement.
In deciding whether to award additional damages, and the amount of the award, the Court can consider:
• the flagrancy of the infringement
• the need to deter similar infringements
• the conduct of the party that infringed the registered trade mark that occurred:
• after the act constituting the infringement or after that infringer was informed that it had allegedly infringed the registered trade mark
• any benefit shown to have accrued to the infringer because of the infringement
• “all other relevant matters”.
In the first case in which the Court has considered additional damages for trade mark infringement, Halal Certification Authority Pty Limited (HCA) owned a trade mark which it used on certificates issued to its customers whose products it had certified as ‘halal’.
A kebab supplier, Quality Kebabs, supplied kebabs and certificates that prominently bore HCA’s trade mark to two restaurants. These products were not certified by HCA and the certificates were false. The restaurant owners displayed the certificates at their restaurants.
HCA sued Quality Kebabs and the restaurant operators for trade mark infringement (among other things). The Court found that all three companies had infringed HCA’s trade mark.
There was some complexity in proving that HCA suffered loss as a result of Quality Kebabs’ infringement because:
• HCA operated in the market of certification of halal products, while Quality Kebabs operated in the market for the sale of kebabs
• Quality Kebabs would have falsified a different certificate, rather than actually paying for a licence of the trade mark from HCA, and therefore it was unlikely Quality Kebabs was a ‘lost sale opportunity’ for HCA.
Consequently HCA’s loss, resulting from Quality Kebabs’ conduct, was found to be nil, and nominal damages of $10 were awarded.
Fortunately for HCA, the Court also held that:
• HCA’s mark was simply copied onto the false certificates “with the deliberate aim of peddling an untruth” and “showed a complete lack of respect for the applicant’s property rights”.
• The infringer became aware of HCA’s complaint regarding the counterfeit certificates through one of the restaurant owner’s directors in 2012, but took no action. The Court held that this indicated an arrogant attitude on the part of the infringer that it would continue to get away with the misconduct for as long as possible, which added to the flagrancy of the infringement.
• There was a need for deterrence of this sort of trade mark infringement “otherwise a trade mark will be valueless”.
• As a result of the infringement Quality Kebabs obtained the benefit of being able to represent that it had been certified by HCA when it had not.
• Although there was no evidence of distribution of the counterfeit certificates to any other party than the two restaurant operators, it was unlikely that the infringing conduct was limited to those two restaurants.
Taking these factors into account, the Court awarded additional damages of $91,005 against Quality Kebabs – which in this case comprised the annual certification fees that HCA would have charged if Quality Kebabs had engaged its services legitimately, increased by 50%.
This is obviously great news for brand owners. The introduction of additional damages, together with new Customs seizure powers which require goods to be claimed by the importer before they can be released and provide for greater disclosure of importers’ information by Customs to brand owners, put Australian trade mark owners in a stronger position than ever to identify and take action against counterfeiters.
For more information about trade mark registration and enforcement, please contact Jane Owen, Partner at K&L Gates (jane.owen@klgates.com).
This article is for informational purposes and does not contain or convey legal advice.
The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer.