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Friday, November 14, 2014

Trade mark infringer skewered by additional damages claim

By Julia Kovarsky, Associate

The 'Raising the Bar' amendments to the Trade Marks Act 1995 (Cth) (the TM Act) introduced the power of the court to award additional damages for trade mark infringement. Section 126(2) of the TM Act came into force on 15 April 2013, allowing the court to include an additional amount in an assessment of damages for an infringement of a registered trade mark, if appropriate. The provision is similar to section 115(4) of the Copyright Act 1968 (Cth) which has been in operation for quite some time and applied by the court on many occasions (from Autodesk v Cheung in 1990 to Vertical Leisure v Skyrunner in 2014). The power to award additional damages under the TM Act raises the stakes for infringers of registered trade marks. Where only a nominal amount may have been payable before, the court can now set a hefty price for infringement by awarding additional damages.


Paying the wholesale price


This lesson was learned the hard way by a kebab wholesaler, Quality Kebabs, when it forged halal certification papers using the registered trade mark of the 'Rolls-Royce' of halal certifiers – the Halal Certification Authority Pty Limited (the HCA). When two kebab shops, customers of Quality Kebabs, asked for certificates that the meat sold to them was halal, Quality Kebabs provided them with HCA-branded certificates. The only problem was, HCA had not issued those certificates. According to the director of Quality Kebabs, a rogue employee decided to forge the certificates of his own accord, complete with HCA's seal (a registered trade mark), and then absconded to Germany with the hard drive which contained the only remaining copy of the forgery. Justice Perram found this series of events to be highly improbable. Instead, his Honour held that Quality Kebabs had deliberately used HCA's seal on the forged certificates and infringed HCA's registered trade mark rights.

The main question for the court was the amount of damages to which HCA was entitled. HCA claimed that the ordinary damages it should recover equal the amount it would have charged Quality Kebabs as a wholesaler to be certified halal. However, Justice Perram did not consider this an appropriate measure of ordinary damages. His Honour concluded that if Quality Kebabs could not use HCA's trade mark it would not have asked HCA for a genuine certificate but would have forged a certificate from any of the other twelve halal certifiers. HCA would never have been paid its certification fee and so it could not claim that the loss caused by Quality Kebabs' infringement was the amount of the unpaid fee. Instead, only nominal damages could be awarded, to symbolise the depreciation in the value of the trade mark which may no longer be seen as a reliable guarantee of the status of food as halal. This nominal amount was $10.

To the dismay of Quality Kebabs, however, HCA specifically sought additional damages, pursuant to section 126(2) of the TM Act. Justice Perram took into account the factors relevant to determining an award of additional damages, including the flagrancy of the infringement, the need to deter similar infringements, the conduct of the infringer after the act of infringement or of being informed of an allegation of infringement, any benefit shown to have accrued to the infringer, and all other relevant matters. Not only were the actions of Quality Kebabs a flagrant infringement 'with the deliberate aim of peddling an untruth', its conduct after being notified of HCA's rights was unacceptable and such behaviour should be discouraged. The amount of additional damages had to be a sufficient deterrent to future infringement. Justice Perram therefore ordered that 150 per cent of the usual certification fees should be paid – totalling $91,015. Quite an increase on the $10 of nominal damages!


Retrospective effect?


Distressed by the prospect of having to pay $91,025 in damages, Quality Kebabs tried to argue that section 126(2) of the TM Act cannot be applied to conduct occurring before the section came into force on 15 April 2013. Since Quality Kebabs' infringing conduct occurred between August 2012 and September 2013, it claimed that additional damages should only total $35,890, being the amount of fees payable from 15 April 2013 to September 2013.

It is well established that statutory provisions do not normally operate retrospectively, so as to apply to conduct before they came into effect. However, a provision which has a procedural effect may apply to events from the past. A provision which does not create new rights or entitlements may be considered procedural. In the present case, HCA was already entitled to damages for trade mark infringement before section 126(2) of the TM Act came into force. Its right did not change, but the quantum of damages did. This was considered by Justice Perram to be a change of only procedural effect. Therefore, additional damages could be awarded for the whole period of infringement by Quality Kebabs and did not have to be restricted to conduct after 15 April 2013.

Consequently, Quality Kebabs had to foot the whole bill of $91,025, showing just how high the price of trade mark infringement can really be.

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