G-Star on Toast…again

For the second time this year, the owners and distributors of the “G-Star” brand (“G-Star”) have won a pyrrhic victory in relation to infringement of the copyright in a G-Star logo, establishing infringement but not receiving a remedy.  The most recent case is Facton Ltd v Toast Sales Group Pty Ltd [2012] FCA 612.  G-Star sued Toast Sales Group Pty Ltd for copyright and trade mark infringement resulting from the sale of genuine G-Star goods at pop-up sales conducted by Toast Sales.  G-Star’s allegations were that:

  •     Toast Sales had infringed G-Star’s registered trade marks by using them in relation to retail services (on promotional materials for the sales – an example is shown below) without G-Star’s consent;
  •     Toast Sales had infringed the G-Star trade marks by importing into Australia genuine G-Star products sold to Toast Sales by a G-Star European distributor in breach of the distribution agreement, which prohibited sales outside the distributor’s European territory; and
  •     Toast Sales had infringed copyright in the G-Star logo (which was also a registered trade mark) by reproducing it on promotional materials for the pop-up sales without G-Star’s consent
Some of the registered marks in question included:
Trade Mark No. Trade Mark
722849 and 999351 G-STAR
980112 and 999346  2012_61202.jpg
999347 (also the ‘logo’)  2012_61205.jpg


Toast Sales admitted it had infringed copyright in the logo, but denied trade mark infringement.  Middleton J found that the use of the G-Star trade marks on the promotional materials was not use as a trade mark in relation to retail services, because the G-Star trade marks were not used to identify the source of the retail services (Toast Sales).  This use on promotional materials was use in relation to the G-Star goods on sale, which did not infringe G-Star’s trade mark rights, because the G-Star registered trade marks had been applied to the goods with G-Star’s consent (section 123(1) Trade Marks Act). An example of the promotional material is shown below:

G-Star argued that section 123 did not apply to Toast Sales’ use of the G-Star trade marks on the parallel imported products, because G-Star’s consent was limited to application of the trade marks onto products sold in Europe.  Middleton J rejected this argument.  The goods had not been manufactured specifically for Toast Sales or for sale outside Europe.  Therefore that at the time the marks were applied to the goods, the distributor was acting within the distribution agreement, and G-Star consented to the application.  (In  contrast, in Paul’s Retail Pty Ltd v.Sporte Leisure Pty Ltd [2012] FCAFC 51, the importer was held to have infringed trade marks applied to clothing manufactured by a distributor specifically for sale outside the licensed territory, and accordingly without the consent of the trade mark owner).

Toast Sales’ infringement of the copyright in the G-Star logo was “innocent” infringement as defined by the Copyright Act, because Toast Sales had obtained permission from G-Star’s Australian distributor to reproduce the logo, in the belief (which was not correct) that the distributor had authority to grant permission.  When Toast Sales received a letter of demand from G-Star, it stopped using the logo.

Because the copyright infringement was “innocent” infringement, G-Star was not entitled to damages (section 115(3) of the Copyright Act).  For this reason, G-Star sought an account of profits (an order that Toast Sales pay to G-Star the profits Toast Sales had made from use of the G-Star logo).  G-Star claimed it was entitled to entire profit Toast Sales had made from the pop-up sales which it had promoted using the logo.

Middleton J refused to grant an account of profits.  He held that although section 115(3) specifically provides that an account of profits may be awarded against an innocent infringer, the remedy retains its historical quality as a discretionary equitable remedy which the court is not obliged to grant, even if copyright infringement is proved.

Middleton J exercised his discretion against G-Star on the ground that G-Star had not provided any evidence that Toast Sales had made any profit by reproducing the G-Star logo (as opposed to making a profit by lawfully using the G-Star trade marks).  G-Star should have been in a position to provide some evidence after discovery of documents and cross-examination of a representative of Toast Sales.  His Honour also held that the difficulties, complexities and costs of carrying out an account were relevant to the discretion not to award it.  G-Star also failed to obtain a declaration that Toast Sales had infringed copyright in the G-Star logo or an injunction to prevent it doing so again, as these remedies were held to be unnecessary in view of Toast Sales’ admissions and the fact that it had stopped reproducing the G-Star logo.

Finally, Middleton J indicated that applying the normal rule that the unsuccessful party pays the successful party’s costs would mean that G-Star would pay Toast Sales’ costs, since G-Star had not obtained any of the relief it sought.


Below: An example of Toast Sales’ promotional material