Federal Court revisits copyright damages principles in G-Star counterfeiting case

Federal Court revisits copyright damages principles in G-Star counterfeiting case

Federal Court revisits copyright damages principles in G-Star counterfeiting case

Facton Ltd v Rifai Fashions Pty Ltd [2011] FCA 290

A recent decision of the Federal Court concerning the sale of counterfeit “G-Star” branded clothing provides a useful summary of the principles governing damages awards in copyright infringement actions. It is also a useful reminder to applicants and their legal representatives that unsupported claims for pecuniary relief will not be entertained by the Courts. The Courts will not speculate on matters which require evidence from the applicant but where such evidence is not presented.

In this case, Bromberg J ordered Rifai Fashions Pty Ltd and its sole director, Mr Rifai to pay compensatory damages and additional damages for the importation and sale of counterfeit G-Star apparel.

G-Star’s claims for damages

The Applicants—G-Star International BV, its local distributor G-Star Australia and Facton Ltd, the Dutch company which owns the Australian G-Star trade marks—own all relevant trade marks and copyright works and design, distribute and sell “G-Star” branded clothing and accessories throughout the world. They claimed that the Respondents had infringed the G-Star trade marks and copyright in the “G” logos, engaged in misleading and deceptive conduct, misrepresentation and passing off.

The Respondents admitted all claims of offending conduct. As a result of these admissions the remaining issue before Bromberg J was confined to the Applicants’ claim for damages. The Applicants sought damages reflecting their lost sales (by reason of the Respondents’ sales of counterfeit goods), damage to their reputations, additional damages for infringement of copyright and exemplary damages for passing off. (Curiously no reference is made in the judgment to the pecuniary relief for infringement of trade marks.)

The infringing conduct

In October, 2009 Mr Rifai purchased 2,857 items of counterfeit “G-Star” branded apparel in Bangkok at a cost of $32,000. Mr Rifai knew that these garments were all counterfeit. When it arrived in Australia this shipment of counterfeit goods was seized by Customs. Mr Rifai then consented to forfeiture of the goods. After demands were made on the Respondents by the Applicants’ lawyers, Mr Rifai finally gave undertakings on both his own and on his company’s behalf to cease manufacturing, importing and selling infringing products. However, despite giving the undertakings, the Respondents continued to sell counterfeit goods.

In December 2009 the Applicants’ obtained an order from the Federal Court of Australia authorising a search of the Respondents’ market stall and factory. During the execution of the search order 340 counterfeit “G-Star” branded items were located and removed. A number of documents were also seized during the search which were subsequently relied on to establish the number and retail value of counterfeit goods sold.

Damages for infringement

The documents seized during the search of the Respondents’ factory evidenced the sale of 140 counterfeit “G-Star” branded items with a retail value of $9,213 although Bromberg J commented that he felt the more likely number of counterfeit goods sold was in the order of 500. After noting the similarity between the considerations applicable when making an award of damages for copyright infringement and those relevant when assessing damages for committing a tort (at [25]) and mentioning some of the principles applied in assessing the quantum of damages (also at [25]), Bromberg J awarded the Applicants $9,213 in compensatory damages.

No award for damage to reputation without evidence

The Applicants also sought general damages to reputation of $100,000. Whilst the Respondents conceded that the Applicants had “a substantial, exclusive and valuable reputation and goodwill in Australia by reference to the G-Star Trade Marks and [G Logos]”, the Applicants made no attempt to identify the value of that reputation or the value of the loss to that reputation suffered as a result of the infringing conduct. Accordingly, the Court was unable to make any assessment of the quantum of the loss to reputation or goodwill. The Court was not prepared to speculate on a matter which was clearly within the Applicants’ control.

Exemplary and additional damages

In relation to the Applicants’ claims for exemplary and additional damages, whilst holding Mr Rifai’s conduct to be “knowing and deliberate”, Bromberg J said that no “malice or insolence” was disclosed. He accordingly declined to order exemplary damages but held that it was appropriate to award additional damages for copyright infringement to punish and deter the Respondents and to strip the Respondents of the proceeds of their infringing conduct.

In determining the amount of additional damages to be awarded, Bromberg J observed that the profits made by the Respondents were likely to be significantly higher than the $10,000 conceded by Mr Rifai. Ultimately, an award of damages totalling $20,000 was made, comprising $9,213 by way of compensatory damages and the further sum of $11,000 as additional damages. In calculating the amount for additional damages Bromberg J noted that he had also taken into account the following:

  1. that the Respondents would also be ordered to pay the Applicants’ costs (with some qualification);
  2. that the Respondents had already forfeited goods to Customs valued at $32,000;
  3. that the Respondents had admitted liability very early in the proceeding and had made various other admissions and concessions and had otherwise co-operated with the Applicants;
  4. the Respondents’ financial position.