Facton Ltd v Toast Sales – A Postscript

We recently posted about Facton Ltd v Toast Sales Group Pty Ltd [2012] FCA 612, discussing the issues in relation to trade mark infringement and remedies for copyright infringement.  Middleton J raised two other tantalising issues which he was not required to resolve, due to the way the parties conducted their cases.

The first concerned assignment of the right to sue for copyright infringement occurring before the date of the assignment.  Toast Sales’ infringement of copyright in G-Star’s logo ended shortly after 8 October 2010, when G-Star sent Toast Sales a letter of demand.  At that  time, Stichting Litigation G-Star International owned the copyright in the G-Star logo.  On       1 April 2011, this company assigned assets, including the G-Star logo, and the right to sue for past infringement of copyright in the G-Star logo, to G-Star Raw CV.  At the time the litigation against Toast Sales commenced in late 2011, G-Star Raw was a party to the ligitation, but Stichting was not.

Toast Sales submitted that G-Star Raw had no right to sue for infringements of copyright that occurred before copyright in the G-Star logo was assigned to G-Star Raw, because the purported assignment of the right to sue for past infringements is ineffective at law.  This issue was resolved by Middleton J granting G-Star Raw leave to add Stichting as an applicant to the proceeding, which meant that he was not required to rule on what he described as “the somewhat complex question of whether a chose in action for past infringement of copyright could be assigned”.

However, this issue had been decided previously in the Federal Court.  In Microsoft Corporation v PC Club Australia Pty Ltd [2005] FCA 1522, Conti J held that a right to sue for past infringement of copyright was incidental to the rights arising from ownership of copyright, which was assigned at the same time. It followed that a right to sue for infringement of intellectual property in conjunction with an assignment of the intellectual property itself is an exception to the general rule that the right to litigate cannot be assigned.

The second issue raised by Middleton J is more troubling.

Toast Sales relied on subsection 123(1) of the Trademarks Act, which provides that “a person who uses a registered trade mark in relation to goods that are similar to goods in respect of which the trade mark is registered, does not infringe the trade mark if the trade mark has been applied to, or in relation to, the goods by, or with the consent of, the registered owner of the trade mark”.

G-Star accepted at trial that this section applied to all of Toast Sales’ use of the alleged infringing marks in promotional materials for genuine G-Star goods, and the case was decided on this basis.  However, Middleton J observed that section 123 refers to “a person who uses a registered trade mark” and that some of the marks used by Toast Sales were not the registered marks themselves, although they were deceptively similar to them.  This meant that in Middleton’s view, the marks used by Toast Sales infringed the registered marks, and section 123 did not provide a defence.

This may seem fair enough in relation to promotional materials, on the basis that if a registered trade mark is reproduced without express consent of the trade mark owner, it should be reproduced in the exact form it has been registered.  However, section 123 is often relied on as a defence to trade mark infringement by parallel importers of the trade mark owner’s genuine goods into Australia.  It would appear that trade mark owners could circumvent the section 123 defence by using a mark that differs slightly from their registered mark on their goods, in order to have a remedy against unauthorised importation or sale.  This is probably not what the legislature had in mind.