Case review by Chloe Brayne
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Review Australia (‘Review’) was a designer and retailer of women’s clothing, which it sold through stores marked with its name, ‘Review’. The Respondents, Innovative Lifestyle and Clothing Outlets were also involved in the design, distribution and sale of women’s clothing.
On 24 June 2005, Review filed an application for registration of a design for a “ladies’ garment”, namely a dress, and thereafter commenced the commercial manufacture and sale of the item. The design was registered on 2 June 2006 and a certificate of examination issued on 13 July 2006. In September 2005, the Respondents initiated the production of new dress, branded ‘Lili’, which reached commercial manufacture in March 2006.
Review brought proceedings in the Federal Court alleging that the Respondents’ dress ‘Lili’ was a copy of the Review dress and therefore an infringement of the registered design.
In defending the infringement claim, the Respondents admitted that they had sold the Lili dress and that it was substantially similar in overall impression to the registered design, however they argued that as the dress was made by independent contractors, they themselves did not make nor did they offer to make the dress pursuant to s71(1)(a) of the Designs Act 2003 (Cth) (‘the Act’). His Honour, however, did not agree and held that there was no distinction to be made between a product made by those directly employed by a company and a product made by an independent contractor. In particular, Jessup J stated that the reference in s71(1)(a) to a person who “makes” a product includes a reference to a person who directs, causes or procures the product to be made by another, whether or not an employee of the person.
Review elected damages rather than an account of profits and submitted to the court that, in the circumstances, general compensatory damages should be awarded ‘at large.’ However, Review did not file any evidence as to the impact that the Respondent’s sale and distribution of the ‘Lili’ dress had upon the sale of its own dress, nor did they lead significant evidence as to their sales history. Accordingly, Jessup J determined that he could only award damages on the basis that the Respondent’s infringement had resulted in a minor dilution of Review’s reputation for originality. Notably, his Honour did not accept the argument by the Respondents that any award of damages pursuant to section 75(1) of the Act was discretionary.
The Respondents submitted that Review should be precluded from claiming damages due to its practice of endorsing its garments with a ‘swing tag’ stating ‘Review styles are registered designs,’ where, in reality, only 2 – 3% of the Review styles were ever the subject of registered designs. However, Jessup J, found that Review’s cause of action was in no way dependent upon the establishment of trading reputation or its honesty or integrity, but rather, the simple infringement of its registered design. Review’s conduct did not bear on the question of damages.
Finally, the Respondents argued that the Court should refuse to award damages or reduce the amount awarded pursuant to s75(2), which provides that:
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(2) The court may refuse to award damages, reduce the damages that would otherwise be awarded, or refuse to make an order for an account of profits, if the defendant satisfies the court:
(a) in the case of primary infringement:
(i) that at the time of the infringement, the defendant was not aware that the design was registered; and
(ii) that before that time, the defendant had taken all reasonable steps to ascertain whether the design was registered
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Interestingly, his Honour held that section 75(2) was not applicable given that the registered design in question was only pending during the relevant period. In particular he stated that section 75(2) operates only in relation to a design that is registered ‘at the time of infringement’, thus denying a Defendant the protection of the subsection whilst the application is pending. His Honour then stated that even should section 75(2) encompass pending registrations, the Respondents’ argument would not have succeeded due to their failure to take reasonable steps to ascertain whether the design was in fact the subject of a pending registration.
Review also sought an award of additional damages pursuant to section 75(3) of the Act, claiming that the Respondents would have certainly encountered the ‘swing-tag’ giving notice of the design registration. Jessup J, however, held that reliance upon the swing tag in order to seek the discretionary award of damages in these circumstances would place Review in a position of special advantage by reason of its own misrepresentation as, at that time, the design had not yet been registered, contrary to the statement on the ‘swing-tag’. His Honour further held that a failure to make appropriate inquiries as to whether the dress was registered or subject to a pending registration would not, on its own, constitute a flagrant infringement warranting additional damages. However, in having regard to ‘all other relevant matters’ which might justify the award of additional damages to Review, Jessup J took into account the failure of the Respondents to cease sales once notified of their infringement. His Honour held that this was not conduct synonymous with traders who were conscientious to observe their legal obligations and accordingly, he ordered that the Respondents pay additional damages of $10,000.
In summary, this case would seem to very clearly establish that the protection of section 75(2) of the Designs Act will only apply to acts of infringement occurring after a design has achieved registration. Therefore, parties that seek to preclude the award of damages on this basis would seem to be severely disadvantaged in that reasonable steps to ascertain the status of a pending design will not be enough to prevent the award of damages where infringement has been made out. Nevertheless, the case highlights the importance of taking steps to ascertain whether the sale of a product might infringe the registered rights of other traders.
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| The Court's decision is available here |
