Intellectual Property – Designs – Damages for reputation and additional damages
Design cases are as rare as hen’s teeth – and decisions on pecuniary relief for design infringement are as rare as hen’s teeth toothpaste (which, believe it or not, exists). While the claim for pecuniary relief in this case was not contested, Justice Anderson confirmed that infringement of a design can give rise to compensable damage to reputation; here an award of $50K. His Honour also awarded a significant sum for additional damages: $200K.
Rock Solid Industries sells a stainless-steel modular vehicle canopy for trucks and Utes sold under the name “SmartCap”. It held design registration for those products. Rock Solid Industries obtained default judgment against Ozi 4x4 for injunctive and declaratory relief in respect of Ozi 4x4’s infringement of those design registrations, and for breaching the terms of settlement resolving a previous case of infringement of the same designs.
Justice Anderson accepted that Rock Solid Industries had invested heavily to create original and distinctive designs such as the SmartCap range. It had also developed a significant reputation with its retailers and customers in Australia for its well-designed products, and was able to charge a price premium as a result. The Ozi 4x4 infringing products were identical to the SmartCap products, but of inferior finish and material quality, and sold for substantially lower prices to the SmartCap products. Instances of confusion were proven.
Justice Anderson held that damage to reputation by reason of design infringement is a separate and available head of damage based on the “probable diminution in the value of the design as a chose in action because the infringement resulted in some probable diminution in the commercial value of the design in respect of its future use”.
Justice Anderson found that, by reason of Ozi 4x4’s infringing conduct, Rock Solid Industries had suffered a $50,000 loss of reputation arising from:
- loss of goodwill in RSI's relationship with its retail customers who saw value in purchasing SmartCap products on the basis that they are buying an exclusive design, which goodwill was lost due to the availability of cheaper copycat products; and
- loss of goodwill in RSI's relationship with its dealers who agree to stock SmartCap products on the understanding that they are original and exclusive, and are likely to terminate their distribution arrangements or order no or reduced quantities of SmartCap products if similar products remain available for cheaper prices.
It is not clear how his Honour arrived at the figure above, there being no figures in the reasons for judgment which clearly support it. As his Honour observed, previous authority had accepted that reputational loss “is insusceptible of any precise calculation”.
Turning to additional damages, his Honour surveyed awards made in copyright cases with figures ranging from $50,000 to $250,000, and observed that each case needs to be determined by reference to the particular conduct alleged. Justice Anderson set out the conduct of Ozi 4x4 warranting an award as follows:
- Ozi 4x4 continued to sell its impugned products after settling an earlier proceeding promising not to do so.
- Ozi 4x4 continued to engage in infringing conduct after being put on notice of Rock Solid Industries’ design infringement claim.
- Ozi 4x4 continued to offer the impugned products for sale after being enjoined by court orders not to do so.
- Save for the filing of one affidavit, Ozi 4x4 had not engaged in the proceeding including by failing to provide any information regarding its sales of impugned products or the profits it had made, as required by order of the court, making it impossible for Rock Solid Industries to calculate its damages on a “lost sales” basis.
- Ozi 4x4 appears to operate a sizeable business in Australia and had been selling the impugned products since late 2021.
- A substantial benefit accrued to Ozi 4x4 by reason of its infringing conduct in the sense of not having incurred the very significant design overheads incurred by Rock Solid Industries to bring the impugned products to market.
- There is a strong need to deter Ozi 4x4 from engaging in this conduct, particularly in light of its failure to cease offering the impugned products for sale, in breach of Registrar Luxton’s orders. There is also a need to deter other traders generally from engaging in similar conduct.
Rock Solid Industries sought $300,000 in additional damages. His Honour considered $200,000 was the right figure and was warranted in light of the matters set out above, although it was “substantial”. As is often the case in these proceedings, minds might credibly differ as to what amount of additional damages ought be awarded. The authors consider that Rock Solid Industries’ request for $300,000 was appropriate, especially in light of the clear disregard for the Court’s orders and continued misconduct, and it is not clear why his Honour disagreed. Having said that, $200,000 is a rock-solid number to take to the bank.
Interest was awarded from the date default judgment was given, on 9 April 2024.
