Federal Court awards additional damages for flagrant infringement of halal certification trade mark

Federal Court awards additional damages for flagrant infringement of halal certification trade mark

Federal Court awards additional damages for flagrant infringement of halal certification trade mark

The Federal Court has found a kebab wholesaler and two kebab shops liable for infringing the registered trade mark of Halal Certification Authority Pty Limited (HCA) and engaging in misleading and deceptive conduct. They did so by issuing and displaying, respectively, a certificate which used HCA’s trade mark and falsely represented that HCA had certified the kebabs as halal products. 

In assessing compensatory damages for trade mark infringement, Justice Perram rejected the “licence fee approach” as inappropriate based on the facts and awarded only nominal damages. However, significantly, the Judge found the kebab wholesaler liable to pay “additional damages” under s126(2) of the Trade Marks Act to deter any further infringing conduct. Section 126(2) was introduced into the Act by the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Cth) which commenced on 15 April 2013. This is the first time the Federal Court has awarded additional damages under the new provision.  His Honour also ordered an injunction and corrective advertising against the kebab wholesaler.

Kebab shops and wholesaler infringed HCA’s halal certification trade mark

The HCA trade mark registration features a seal which incorporates the Islamic script for “halal”. HCA uses its mark on certificates which it issues under government authority to businesses who use halal practices in the preparation of their goods and services. 

HCA became aware that two kebab shops (operated by Scadilone Pty Ltd and White Heaven Pty Ltd) were displaying a “Certificate of Halal Products” which featured the HCA mark without its consent. The false certificates were issued by Quality Kebabs Wholesalers Pty Ltd and were on display for around two years.

The HCA trade mark was registered in class 42 for, amongst other things, the service of issuing halal certificates. Justice Perram found that the respondents had infringed the HCA mark by using it in relation to goods (namely kebabs) which were closely related to the service of providing halal certification in circumstances where the kebabs were supplied with an accompanying halal certificate.

Unauthorised use of HCA’s halal certification mark was also misleading and deceptive

Justice Perram found that the respondents had also engaged in misleading and deceptive conduct contrary to s18 of the Australian Consumer Law because the certificate falsely represented that it was issued by HCA. Further, his Honour found that the managing director of Quality Kebabs was knowingly involved in the contravention because he had either deliberately copied the HCA mark or instructed an employee to do so with the specific intention of misrepresenting to the public that HCA had certified his kebabs.

Failure to prove loss results in no compensatory damages for HCA

HCA argued that its loss should be quantified as the fees the respondents would have paid HCA to be certified as halal businesses. Those fees were $5,000 per annum for retailers and around $30,000 per annum for wholesalers. However, Justice Perram rejected the “licence fee approach” as inappropriate on the basis that the respondents would not have paid those fees. His Honour found that although the kebab shops had displayed the infringing certificate which represented Quality Kebabs’ kebabs as halal products, they had no desire to be certified as halal businesses themselves. In the case of Quality Kebabs, Justice Perram found that it would simply have falsified some other certificate.

Justice Perram was also unwilling to find that the infringing conduct had caused any reputational harm to HCA because there was no evidence to prove that the public who had bought the kebabs believed them to be halal and that they had subsequently learnt that this was not the case.

Justice Perram was therefore unable to identify any loss caused by the infringing conduct and awarded only the nominal sum of $10 against each respondent.

Additional damages awarded as a deterrent

HCA also sought additional damages against Quality Kebabs pursuant to section 126(2) of the Trade Marks Act. Justice Perram noted that s126(2) is almost identical to equivalent provisions in the Copyright Act and the Patents Act and he considered its overarching purpose to be deterrence.

His Honour found that each of the matters to be considered under section 126(2) was relevant to Quality Kebabs. In particular, the conduct by Quality Kebabs was flagrant and showed a complete disregard for HCA’s property rights. Further, when HCA’s complaint was first raised, Quality Kebabs did nothing and evinced an attitude to get away with the misconduct for as long as possible. Quality Kebabs had also defended the proceeding on a basis which Justice Perram found to be false (namely that an ex-employee had issued the certificates without Quality Kebabs’ knowledge). Taking into account these matters, Justice Perram imposed additional damages amounting to $91,015 being what Quality Kebabs would have paid for HCA certification over the relevant period increased by 50%.

First exercise of new “additional damages” powers after Raising the Bar reforms

Justice Perram’s decision is the first time the Federal Court has ordered the payment of additional damages pursuant to s126(2) for trade mark infringement.  The case shows that in circumstances where the trade mark owner is unable to prove that it has suffered loss through the misuse of its trade mark (for example where lost sales cannot be shown and the licence fee approach is deemed inappropriate) the trade mark owner may still be entitled to a significant damages award under s126(2). The new provision can therefore be a useful weapon in a trade mark owner’s armoury against infringers.