Additional Damages Under the Trade Marks Act
By Chris Round
In a decision of the Federal Court in October 2015 concerning trademarks affixed to Chinese herbal teas, the Federal Court of Australia awarded additional damages to an applicant in circumstances where the evidence required to prove compensatory damages was not available.
In Truong Giang Corporation v Quach [2015] FCA 1097, the applicant Truong Giang Corporation (TG Corp) is a Californian company that produces a green leaf herbal tea product which it sells under the name “3 Ballerina Tea”. It has sold that product in the United States since 1991 and in Australia since 1994, in distinctive dark green packaging which, amongst other things, features a prominent device or mark. In this proceeding TG Corp claimed that the respondents Mr Quach, New Leaf and Mr Alexandrou were involved in selling relatively large quantities of a tea product packaged in a deceptively similar way to the genuine 3 Ballerina Tea. Since 2006, TG Corp through its agents sold substantial quantities of 3 Ballerina Tea throughout Australia, mainly through Asian supermarkets and health food stores.
Images of both packages are set out below
The Federal Court of Australia had no difficulty in finding that the respondents were distributing a counterfeit product. The difficulty for the Court was in identifying the volume of products that each respondent sold such that it could calculate damages payable to TG Corp. The respondents appeared without Counsel and needing interpreters. Their stories were inconsistent and not believed by the judge. He called the respondents unreliable and he did not believe their stories at all eventually finding that they had destroyed evidence to prevent TG Corp from learning of the true extent of their actions The Court also found that the respondents engaged in misleading and deceptive conduct and had passed off TG Corp’ s goodwill and reputation in its 3 Ballerina Tea.
The key difficulty in the case was the question of damages to be awarded in circumstances where it is impossible to know how many counterfeit products were sold. The judge was only able to rely on the counterfeit products that were proved by TG Corp and then he applied a 50% discount to account for the number of lost sales that TG Corp would have actually suffered. Only 137 cartons of counterfeit tea were therefore proved for Mr Quach and 24 for Mr Alexandrou. Compensatory damages were therefore AUD$3,000 and AUD$500 respectively.
In 2013 the Australian Trade Marks Act was amended to include a section allowing for additional damages if one or more of the following factors was present in the case:
- the flagrancy of the infringement; and
- the need to deter similar infringements of registered trademarks; and
- the conduct of the party that infringed the registered trademark that occurred:
- after the act constituting the infringement; or
- after that party was informed that it had allegedly infringed the registered trademark; and
- any benefit shown to have accrued to that party because of the infringement; and
- all other relevant matters.
This made the Australian Trade Marks Act similar to the Australian Patents Act, Copyright Act and Designs Acts which all contained similar provisions. The purpose of the new additional damages section was said to counter the fact that many counterfeiters do not maintain sufficient business records to enable a satisfactory calculation of ordinary damages or an account of profits: purely nominal damages may be regarded by counterfeiters as merely the ‘cost of doing business’, rather than an effective deterrent. The absence of additional damages under the Trade Marks Act therefore limited the ability of a court to provide an effective deterrent to intentional counterfeiting.
The amounts to be paid under the additional damages section is at the discretion of the Court and the Judge eventually weighed up the factors and the submissions of TG Corp and awarded AUD$50,000 against Mr Quach and $20,000 against Mr Alexandrou. Costs were also awarded against the respondents as is the custom in Australian litigation.
This is one of the first decisions of the Federal Court of Australia to consider additional damages. It shows that the previous decisions where the Federal Court ordered very low amounts of nominal damages because an applicant could not prove compensatory damages were a thing of the past. This should provide comfort for foreign brand owners litigating against counterfeiters in Australia. Litigation in Australia can be expensive and it is excellent that the Court is able to factor in the respondent’s behaviour into an a ward of damages.