Australian Courts get tough on copycats

A series of decisions involving fashion labels over the past 2 years indicate the willingness of Australian courts to send a message that slavish copying won’t be tolerated, by imposing significant damages penalties on those found to infringe intellectual property rights. Lisa Egan investigates.

Fashion brands often spend years building up a reputation in their name and unique design style. It is therefore disheartening to have this hard work copied and copy garments sold at a fraction of the price. Labels can however protect themselves by registering their names and logos as trade marks in Australia, and in any overseas jurisdictions they trade in. Designs can be registered in Australia to provide a monopoly right (meaning it is not necessary to prove copying) in that design.

Copyright, for which there is no registration system in Australia, can also be used to protect two-dimensional works such as fabric prints and graphic designs.  Finally, patents can be used to protect novel or innovative products or means of producing products. Where a brand issues proceedings based on infringement of its intellectual property rights and is successful, it may elect either an account of profits (ie that the profits made by the infringer are paid to the successful applicant), or damages.

Damages can be awarded as general damages (which include damage to reputation), as well as conversion damages (the conversion of any infringing items to the ownership of the applicant).

Finally, for design and copyright infringement, additional damages are also available, which is a discretionary remedy the Court may award having regard to factors such as the need to deter the infringing conduct and the flagrancy of the conduct in question. These remedies are in addition to the successful party ordinarily being ordered to have their legal costs paid by the infringer.

The following cases demonstrate the Court’s approach to quantifying damages:

*In Elwood Clothing v Cotton On, the Court found Cotton On reproduced a copyright work belonging to Elwood, namely the graphic design layout for a t-shirt.  The Federal Court ordered Cotton On to pay $10,000 in general damages (including damage to reputation) and $150,000 in additional damages in a case where over 22,000 infringing garments had been sold.

*In Review v New Cover Group, the Court found that a registered dress design of Review’s had been infringed by a smaller trader’s garment.  That trader was ordered to pay $35,000 in general in damages (including damage to reputation) and $50,000 in additional damages.  The Court acknowledged that the presence of the copy garment in the marketplace had an adverse impact on Reverse’s reputation and diminished the commercial value.

*In Crimson SRL v Claudia Shoes a relatively small number of infringing products (20 to 30 garments) were sold by the respondents which were held to infringe the applicants’ copyright rights.  The Federal Magistrates Court awarded the applicants $60,000 for damages to reputation.

*In G-Star v Urban Culture the Court awarded $35,000 for damage to reputation on the basis that the respondents were offering for sale approximately 100 garments which infringed G-Star’s trade marks plus additional $50,000 for additional damages.

*In Deckers v Farley the Court ordered that the makers of counterfeit footwear were to pay the trade mark owner $3.5 million in additional damages (a total of $7.5 million in damages and costs).

The above cases send a strong message to counterfeiters or would-be counterfeiters that courts will not tolerate such activities in Australia and are prepared to award significant damages sums to reflect the gravity of the conduct.  Counterfeiters who sell goods that have been designed to mislead the public as to their true trade origin and who trade off the legitimate brand’s reputation and infringe that brand’s intellectual property rights, should be aware of the potential downside of such conduct if they are taken to court.  

These cases highlight the importance of registering trade marks, patents and designs where possible and maintaining vigilant market and border watch programs to identify counterfeiters and the products they sell which infringe these and other unregistered intellectual property rights. It is important to have the right protection in place at the outset so action can be taken when a problem is identified.

Examples of things brands can do include operating a vigilant market watch program including monitoring of eBay and other online forums for sales of counterfeit goods, and having an Australian customs program in place so that customs officers will monitor incoming shipments for fake goods bearing the brand’s registered trade marks.

This positive action ensures that the label’s most valuable asset: the goodwill and reputation residing in its brand, and the hallmarks by which the public identify its brand: its trade marks and copyright works, are protected against the negative effects of counterfeiting.

The message for brand owners is clear: stay alert to counterfeits of your products in the marketplace and across all channels by which goods can be distributed and sold (markets, wholesalers, online auctions) and make use of all the preventative measures available to brand owners to prevent your businesses being targeted and your brand being eroded by counterfeiters.

Lisa Egan is a senior associate at Middletons law firm.