The Court of Appeal of New Zealand has overturned a decision to limit the period in which the trade mark owner was entitled to an account of profits in the cling-film trade mark infringement case Intellectual Property Development Corporation Pty Ltd and or v Primary Distributors New Zealand Limited and ors [2009] NZCA 429.
In summary, the Court of Appeal considered that:
- Mere delay should not deprive an owner of its rights or remedies for enforcement (unless the delay is inordinate or something more is present);
- For a remedy to be denied because of factors outside the recognized defences, an element of unconscionability is required; and
- An account of profits is intended to prevent unjust enrichment and concentrates on the wrongful actions of the infringer and not on the position or the actions or omissions of the owner.
Background
The defendant, Primary Distributors New Zealand Ltd (PDNZ) was the exclusive distributor of the HEFTY range of cling-film wraps, papers and domestic products in New Zealand from the mid-1990s. In 2005 the owner of the HEFTY trade marks was placed in receivership and PDNZ entered into a strict three month licence agreement to sell the remaining HEFTY stock in New Zealand.
When the owner of the HEFTY trade marks went into liquidation, PDNZ attempted to purchase the HEFTY marks in New Zealand. On the assumption that the trade marks would soon be owned by either itself or its established supplier (a Thai entity which was also bidding for the marks), PDNZ continued to purchase and import HEFTY products directly from Thailand and to sell these products in New Zealand.
Unbeknown to PDNZ, the appellant Intellectual Property Development Corporation Pty Ltd (IPDC) was also negotiating to purchase the HEFTY trade marks, which were assigned to IPDC in December 2005. The assignment included the right to sue and claim (and retain) any damages and other remedies for past infringements of the trade marks.
In early February 2006 PDNZ became aware that a different party had acquired the New Zealand trade marks, yet continued to import and distribute HEFTY products up until June 2006, while undertaking preparations to launch a new brand of cling-wrap film.
The date when IPDC first became aware of PDNZ’s actions was debated by the parties. However, IPDC contacted PDNZ in July 2006 seeking undertakings to cease distribution and also financial compensation. IPDC then commenced trade mark infringement and passing off proceedings at the High Court of New Zealand.
While PDNZ accepted that it had infringed the trade marks, it argued that IPDC was aware of the infringement occurring during the latter part of the infringement period yet took no action, and therefore should not be entitled to an account of profits for that period. At first instance, Asher J held that IPDC became aware of the infringement on 18 January 2006 and restricted the period of the account of profits up to this date.
Court of Appeal Decision
Before the court of appeal, IPDC argued that Asher J was wrong to restrict the period of the account of profits merely on the basis of a five month delay in commencing proceedings. The Court considered that a delay of five months, on its own, should not deprive IPDC of a remedy.
The Court then considered whether any other factors influenced Asher J’s decision to deny a remedy for part of the infringement period. The main additional factor appeared to have been that IPDC had suffered no additional loss (as it was not in a position to trade itself in that period) and that awarding it an account of profits “may give [it] a boon it has not earned and indeed may reward its failure to protest”.
The Court of Appeal noted that for a remedy to be denied because of factors outside the recognized defences (laches or acquiescence in this case), there would need to be an element of unconscionability involved, stating “there is no duty on a trade mark owner to protest, and it must not be lost sight that PDNZ is the wrongdoer”.
Further, in considering the nature and purpose of an account of profits, the Court of Appeal noted that this remedy is designed to prevent unjust enrichment and concentrates on the wrongful actions of the infringer, and not on the position or the actions or omissions of the owner. Therefore, the Court held that the fact that IPDC was not in a position to exploit the trade marks was irrelevant and should not have been taken into account by Asher J.
Indeed, the Court considered that PDNZ may have been more culpable in the first half of 2006 than in the earlier period of infringement, as it knew for certain by this time that its attempt to purchase the trade marks had been unsuccessful and that a third party had done so.
The account of profits was ordered for the whole period claimed and the matter was remitted back to the High Court to reconsider further issues raised at the appeal.