Selling counterfeit poles breaches IP rights

The Australian sellers of dancing poles Vertical Leisure Ltd and Dance4Me Pty Ltd (Vertical Leisure) have been awarded AU$394,800 in damages, after a competitor Skyrunner Pty Ltd (Skyrunner) sold of inferior copies of dancing poles using promotional materials of the brand “X-Pole”.

The decision of Driver J in the Federal Circuit Court in Vertical Leisure Limited v Skyrunner Pty Ltd^[1] provides useful guidance for the calculation of damages where there have been multiple legislative breaches of intellectual property rights.

Vertical Leisure demonstrated that the Respondent had:

• infringed its copyright under the Copyright Act 1968 (Cth);
• infringed its trade mark pursuant to section 120 of the Trade Mark Act 1995 (Cth) (Trade Mark Act);
• engaged in passing off; and
• engaged in misleading and deceptive conduct pursuant to schedule 2 of the Competition and Consumer Act 2010 (Cth).

Driver J found the counterfeit poles had caused consumer confusion and damaged the reputation of the X-Pole brand. In the calculation of damages the Court focused on the breaches to the Copyright Act 1968 (Cth) (Copyright Act) in in particular compensatory damages and additional damages pursuant to s115(4) of the Copyright Act.

Compensatory damages

Compensatory damages were awarded to Vertical Leisure for:

Loss of profit

Vertical Leisure was awarded damages on the basis it had lost sales from the infringement of its intellectual property under section 115(2) of the Copyright Act. While there was some difficulty in quantifying the loss due to inaccurate sales records, the Court estimated the damage at AU$44,800.

Loss of reputation

The Court found the inferior and dangerous copies of the poles had caused substantial damage to the X-Pole brand and the goodwill generated in the marketplace. The Court awarded AU$50,000 on this basis.

Additional damages

Pursuant to section 115(4) of the Copyright Act, additional damages can be awarded based on:

• the flagrancy of the infringement;
• the need to deter similar infringements of copyright;
• the conduct of the defendant after the act constituting the infringement or, if relevant, after the defendant was informed that the defendant had allegedly infringed the plaintiff’s copyright;
• whether the infringement involved the conversion of a work or other subject-matter from hardcopy or analog form into a digital or other electronic machine-readable form;
• any benefit shown to have accrued to the defendant by reason of the infringement; and
• all other relevant matters.

Driver J awarded $300,000 under section 115(4) stating that the award of damages be made to mark the ‘Court’s recognition of the opprobrium attached to the defendant’s conduct’. The Court found Skyrunner’s actions were both flagrant and deliberate. The breach of copyright included producing exact copies of promotional materials such as DVD and images. There was also evidence that Skyrunner had been put on notice of the infringement with Vertical Leisure on several occasions. The Court also considered the importance of deterrence when making the award.

It was said by Driver J in acknowledging what has become ‘common parlance’ that the Applicants had accepted that there was to be no “double dipping” as Vertical Leisure had successfully obtained damages pursuant to the breaches of the Copyright Act there was no entitlement to obtain damages for the same conduct under the Trade Marks Act.

Calculation of additional damages

The Court found that loss of damages under section 115(2) has no bearing on the award of additional damages awarded under section 115(4). Damages under section 115(4) were punitive and could be awarded even if there was only nominal damage to the plaintiff.

The Court stated it was open to them to increase an award of additional damages if the lack of co-operation of the Respondent made it probable that the volume of sales had been underestimated.

The decision in Vertical Leisure Limited v Skyrunner Pty Ltd^[2] should serve as a deterrent to those in the digital age that sell goods online at the expense of others by using the copyright that subsists in digital images. The message is clear – ignore a letter of demand at your peril!

Links and further references

Legislation

Competition and Consumer Act 2010 (Cth)

Copyright Act 1968 (Cth)

Trade Marks Act 1995 (Cth)

Cases

Aristocrat Technologies Australia Pty Limited v D.A.P. Services (Kempsey) Pty Limited (in liquidation) [2007] FCAFC 40

Facton Ltd v Rifai Fashions Pty Ltd [2012] FCAFC 9

Eagle Rock Entertainment Ltd v Caisley [2005] FCA 1238

Review Australia Pty Ltd v New Cover Group Pty Ltd & Ors [2008] FCA 1589

Vertical Leisure Limited & Anor v Skyrunner Pty Ltd & Anor [2014] FCCA 2033

Further information

If you need assistance in either defending a breach of copyright or commencing proceedings for breach of copyright, please contact us for an obligation free and confidential discussion.

Disclaimer

This article contains general commentary only. You should not rely on the commentary as legal advice. Specific legal advice should be obtained to ascertain how the law applies to your particular circumstance.

[1] [2014] FCCA 2033.

[2] [2014] FCCA 2033.

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