NSW disclosure requirements apply to suppliers outside NSW

Suppliers outside New South Wales

New South Wales has introduced a new law that requires suppliers, before they supply goods or services, to take reasonable steps to ensure that the consumer is aware of the substance and effect of any term or condition relating to the supply that may substantially prejudice the interests of the consumer (consumer disclosure rules).  “Consumer” can include certain business purchases as well as personal purchases.


This change to the Fair Trading Act applies not only to suppliers located in NSW, but also to conduct within or outside NSW that:

(a)  is in connection with goods or services supplied in NSW; or

(b)  affects a person in NSW; or

(c)  results in loss or damage in NSW.

This means that the law applies to suppliers located outside NSW who supply goods or services to consumers in NSW (including online).  Suppliers in other Australian States may not be aware of these changes.

This law came into effect on 1 July 2020, but NSW Fair Trading has not penalised businesses for its first six months.  This transitional period ended on 31 December 2020, so penalties may now apply for breaches.


Reasonable steps

This is a substantial change to how many companies do business.  It is often the case that contracts contain clauses that prejudice the interests of the other party, sometimes substantially.  To comply with this law the supplier must either:

  • Delete the term; or
  • Take reasonable steps to make sure that the consumer is aware of the term.

There are no specific requirements for what amounts to “reasonable steps”, but NSW Fair Trading suggests that the disclosure should be:

  • Clear and easy to understand;
  • Easily accessible so that the consumer does not need to seek out the information; and
  • A standard part of each transaction.

Examples of appropriate disclosures include:

  • Short, plain English summaries on the front page of a contract;
  • Providing information in short chunks at key times eg on the information or payment pages;
  • Scrollable text boxes on screens;
  • Comics, illustrations or icons to highlight and explain relevant information.

To determine whether a consumer is aware of the term, NSW Fair Trading recommends that the supplier check with them, either by:

  • Asking them;
  • Getting the consumer to initial the explanation in the contract;
  • Checking a box online.


Terms that may substantially prejudice

The legislation gives the following four examples of terms that may substantially prejudice the interests of the consumer (although contracts may contain other such terms):

  • the term excludes the liability of the supplier; or
  • the term provides that the consumer is liable for damage to goods that are delivered; or
  • the term permits the supplier to provide data about the consumer, or data provided by the consumer, to a third party in a form that may enable the third party to identify the consumer; or
  • the term requires the consumer to pay an exit fee, a balloon payment or other similar payment.

Term (a) – exclusion of liability clauses are common in contracts – where one party claims that it will not have to compensate the other party for some or all loss that it causes.

Term (c) – providing consumer data to a third party – these clauses are commonly found in privacy statements.

Term (d) – An “exit fee” is a payment to end a contract.  A “balloon payment” is a large final payment at the end of a loan to clear the debt.


Consequences of breach

Breaches of the consumer disclosure rules are punishable by fines of up to $110,000 (for corporations) and $22,000 (for individuals) for breaches.  Suppliers can also be ordered to compensate the consumer for any loss or damage they have suffered.  Penalty notices of $1,100 per offence (for corporations) or $550 (for individuals) can also be issued.

The NSW Civil and Administrative Tribunal can hear certain claims by consumers against suppliers where goods or services were, or would be, supplied in NSW.  NCAT has previously been prepared to hear a claim against Swiss company eBay International AG on the basis that it supplied services in NSW – the use of the eBay website and related services.  This means that a supplier outside NSW could have to pay compensation to a NSW consumer for breach of the consumer disclosure rules.


Rules can apply to business consumers

It is important for businesses to realise that the consumer disclosure rules can apply to some business purchases as well as individual purchases.  The rules apply to consumers as defined in the Australian Consumer Law (ACL), which means that they apply to:


  • goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption – for any price – even if they were actually purchased for a non-domestic purpose;
  • goods or services for a price of not more than (currently) $40,000 for a non-domestic purpose;
  • a vehicle or trailer acquired for use principally to transport goods – for any price (domestic cars are already covered by paragraph (a) above).


The rules will not apply in some business circumstances eg:

  • where goods are acquired for re-supply;
  • where goods will be used up or transformed in the course of production, manufacture or repairing other goods.


Increase of limit for non-domestic goods and services

From 1 July 2021 the cut-off figure of $40,000 is scheduled to increase substantially to $100,000, which means that many more business contracts will be caught by the NSW consumer disclosure rules.  This increase also applies to the consumer guarantee provisions of the ACL – which impose guarantees of, for example, acceptable quality and fitness for purpose in contracts for the supply of goods or services.

There is an error with the drafting of this increase to $100,000.  It is supposed to apply to supplies of both goods and services, but currently only applies to goods.  However, I do not recommend relying on this error.  It is possible that the Federal Government may fix it, even retrospectively, so that the increase to $100,000 applies to both goods and services from 1 July 2021.


Unfair terms in standard form contracts

For some years businesses have been subject to the provisions of the ACL which void unfair terms in standard form consumer contracts and small business contracts.  There is an overlap between these provisions and the consumer disclosure rules.  However, rather than a consumer having to wait for a Court to declare a particular term void, the NSW rules impose a positive obligation on businesses to make clear, upfront disclosure of terms that may substantially prejudice the interests of the consumer (instead of them being buried in the fine print).  Failure to do so is punishable by penalties.


Other issues

A second part of the consumer disclosure rules requires the disclosure of financial incentives, such as commissions, payable to an intermediary, such as a travel agent or comparator website, when a consumer is purchasing goods or services.  This is beyond the scope of this blog, but I am happy to provide further information upon request.

An update to the issue of unfair terms in standard form consumer and small business contracts is a recent announcement of Government Ministers who have decided that these terms will be made unlawful and subject to penalties.  This, however, is not yet law.


Action to take

Businesses who deal with parties in NSW need to review their contracts immediately for compliance with the consumer disclosure rules, if they have not done so already.

With the ACL consumer guarantees to apply to many more business contracts from 1 July 2021, a full review of standard form contracts is also important.  I can assist businesses to make their contracts compliant.


This information sheet provides general information only, and is not intended as legal advice specific to your circumstances.  Please seek the advice of a legal professional if you have any particular questions.


Liability limited by a scheme approved under Professional Standards Legislation


© Margaret Ryan, Melbourne, Australia, 2021

Unity of purpose – new test for control of trade mark use

The Full Court of the Federal Court has overturned a finding that a trade mark owner did not control the use by its parent company of its marks: Trident Seafoods Corporation v Trident Foods Pty Ltd [2019] FCAFC 100 (20 June 2019).  This decision is significant because it provides a more flexible, less legalistic, approach to what amounts to control of trade marks within a corporate group.

The Facts
Trident Foods was the owner of two trade mark registrations for the word TRIDENT.  These marks were blocking Trident Seafoods’ application to register a logo mark including the word TRIDENT.  Trident Seafoods tried to remove the word mark registrations from the Trade Marks Register on the basis of non-use.

The TRIDENT marks were, in fact, being used by Trident Foods’ parent company, Manassen.  The companies had common directors, operated from the same business premises and were part of the same corporate group.  Manassen’s TRIDENT products were labelled “Registered trade mark of Trident Foods Pty Ltd”.

It may come as a surprise to some trade mark owners that, if a registered trade mark is not used, it can become vulnerable to being removed from the Trade Marks Register for non-use.  The Trade Marks Act adopts a “use it or lose it” approach, wanting to declutter the Register of unused marks.

Control of trade mark use
If someone uses a trade mark under the “control” of the owner, that is called “authorised use” and this will protect the trade mark from being removed from the Register for non-use. A previous Full Court decision had held that “control” required actual control.  It was not sufficient to have a licence agreement which included provisions for control of the licensee’s use that were not, in fact, exercised.

Trial judge’s findings
The trial judge in the Trident case held that, because Trident Foods was a wholly owned subsidiary of Manassen, it could not control its parent.  The fact that the two companies had common directors did not, on its own, allow Trident Foods to control its parent.  There were no examples of actual control by Trident Foods over Manassen’s use of the TRIDENT marks.  This meant that the trade marks were not used by Trident Foods during the non-use period and were vulnerable to be removed from the Register.

The Full Court’s findings
The Full Court overturned this finding and held that the question was not whether one company controlled the other but whether Trident Foods had control over Manassen’s use of the TRIDENT marks.  The fact that the two companies had the same directors was significant, given that the directors of Trident Foods had a duty to maintain the value of the trade marks (which had a book value of $10 million).  Trident Foods necessarily controlled Manassen’s use of the marks by reason of the fact that it owned the marks and its directors, who were also Manassen’s directors, must have had one common purpose – to maximise sales and to enhance the value of the brand.  The two companies therefore operated with a “unity of purpose” regarding the use of the trade marks.

The lack of evidence of actual control exercised over Manassen’s use was unsurprising, in the Full Court’s opinion, given the relationship between the companies.  The Full Court also accepted one director’s evidence that it was unnecessary to give directions to Manassen, as supporting the finding of the unity of purpose of the two companies.

Significance of decision
The Full Court’s decision will be very welcome to many corporate trade mark owners where the registered owner is often not the holding company.  Several recent decisions, including that of the trial judge in the Trident case, seem to have taken a strict legal approach to corporate groups, finding sufficient control where the user is a wholly owned subsidiary of the trade mark owner, but finding a lack of control in other corporate structures.  The Full Court has taken a more realistic approach to corporate groups and has implemented a new “unity of purpose” test to determine whether owner and user are in lock step regarding the use of trade marks.

Arm’s length licences
Nonetheless, where a user is not related to the trade mark owner, as in an arm’s length licence agreement, care needs to be taken that actual control over the licensee’s use is exercised, and is recorded so that evidence can be produced if the owner needs to defend a non-use action.  I can provide advice on measures to protect a trade mark owner from the loss of valuable registered rights.

This blog entry provides general information only, and is not intended as legal advice specific to your circumstances.  Please seek the advice of a trade marks professional if you have any particular questions.

Liability limited by a scheme approved under Professional Standards Legislation

© Margaret Ryan, Melbourne, Australia, 2019

Three Myths about Commercial Agreements

Having practised for 30 years, I know that there are certain misconceptions about drafting commercial agreements:

  • All that a lawyer does to produce an agreement is just take a precedent off the shelf and insert the names and addresses of the parties.

In the area of intellectual property (“IP”) agreements, it couldn’t be further from the truth.  Apart from a few exceptions, most IP agreements eg licences, distribution agreements, software agreements etc, involve several hours of legal work.  They are bespoke agreements, specifically tailored to the client’s requirements.   Although a lawyer may base the agreement on existing agreements, the new agreement has to be drafted for the new situation.  This involves talking to the client to find out what they want in their agreement, conceptualising the new agreement, choosing from a range of clauses and amending them, free hand drafting new clauses and checking the final product.

  • It doesn’t matter which side drafts the agreement – it is all the same agreement – and it will save costs to let the other side draft the agreement.

This can be a dangerous assumption to make.  In every agreement there are two sides.  A lawyer will normally draft an agreement to benefit their side – slanting it in favour of their client.  Sometimes the first draft can be very one-sided and unfair to the other side, or the agreement may not be well-drafted and is unclear.  Not all lawyers are equally skilled at drafting agreements.  In cases such as these, it can easily cost as much to try and correct the agreement as it would to re-draft it from scratch.  My motto is always to “get hold of the drafting” if at all possible, so that I can draft for the benefit of my client.

  • The parties are in agreement over the deal so that it will be OK and cost-effective for them to use the one lawyer.

This is also a dangerous assumption.  Lawyers have ethical duties to avoid conflicts of interest and acting for both sides of a transaction is a classic conflict of interests.  As set out above, there are two sides to every agreement, and an option that will benefit one side will usually be to the detriment of the other.  This is why, if the two sides come to a lawyer’s office, the lawyer will normally have to turn one party away to seek legal representation elsewhere.

Commercial agreements, such as IP agreements, are complex beasts.  They will govern the relationship between the parties in relation to valuable IP rights, perhaps for several years.  A well-drafted agreement will clearly set out the rights and responsibilities of each party and will hopefully avoid future disputes because everyone knows where they stand.  IP agreements need to be drafted with care by an experienced IP practitioner working solely in the interests of their client.

This blog entry provides general information only, and is not intended as legal advice specific to your circumstances.  Please seek the advice of a legal professional if you have any particular questions.

Liability limited by a scheme approved under Professional Standards Legislation

© Margaret Ryan, Melbourne, Australia, 2019

Important changes to labelling of hand sanitiser

Since the start of the COVID-19 pandemic many companies have been making hand sanitiser. But issues have arisen about their effectiveness, alcohol content and the risk of ingestion.  New rules commenced on 25 November 2020 to address these issues.  The rules apply to hand sanitiser that is regulated under cosmetics regulations.  From 25 May 2021 their container must be labelled with:

  • the amount of alcohol contained in the hand sanitiser as a percentage (%), by volume per volume (v/v) on the container; and
  • compulsory wording (or pictograms) setting out the risks of the product.

Products manufactured up until 24 May 2021 can comply with either the new rules or can be labelled in accordance with the existing cosmetics regulations.

The new rules apply to hand sanitiser that, in summary:

  • is an antibacterial skin care product containing one or more antimicrobial active substances;
  • is represented as, or is likely to be taken to be:
    • for use on hands when soap and water are not available;
    • applied to the hands without rinsing off; and
    • intended to destroy bacteria on the skin; and
  • contains alcohol as the primary active ingredient;
  • but the rules do not apply to:
    • hand sanitiser regulated by the Therapeutic Goods Act 1989 (TGA) (products that claim to kill specific organisms (e.g. E. coli or viruses) or are to be used in clinics or hospitals; or
    • hand sanitiser that is excluded from the TGA (80% ethanol hand sanitiser and 75% isopropyl alcohol hand sanitiser that comply with specific requirements as to their formulation, manufacture and labelling).

I am experienced in advising on product labelling.  Please contact me for more details of the new hand sanitiser rules.

This article provides general information only, and is not intended as legal advice specific to your circumstances. Please seek the advice of a legal professional if you have any particular questions.

High penalties for misrepresentations

Penalties for making false or misleading statements about goods and services can be substantial.  Maximum penalties have dramatically increased from $1.1 million for companies to a maximum of the greater of:
  • $10 million; or
  • 3 times the value of the benefit received by the company from the breach; or
  • if the value of the benefit cannot be determined, 10% of the company’s turnover for the previous 12 months.

The law covers a wide range of misrepresentations including false representations:

  • that goods or services have a particular standard, quality, value, grade or performance characteristics;
  • that goods are new or have a particular composition or place of origin;
  • regarding testimonials for goods or services;
  • regarding the availability of spare parts;
  • regarding the existence or effect of any warranty, guarantee or remedy;
  • regarding the sponsorship or approval of goods or services or of the supplier.

Thus it is more important than ever that claims on websites, contractual material and the packaging and advertising of products and services are correct.

I can provide advice on product and service claims before publication to assist clients in minimising the risks of liability for misleading statements.

This article provides general information only, and is not intended as legal advice specific to your circumstances. Please seek the advice of a legal professional if you have any particular questions.

Is a descriptive trade mark the best mark for your business?

Businesses often choose a trade mark that exactly describes their business or product eg Smith & Co Plumbing, being the plumbing business run by Mr Smith.  There is nothing wrong with this.  The name is easy to remember and easily searchable.  If the business is likely to remain a small, family owned business that will never take legal action against anyone else with a similar name, it is a perfectly satisfactory name.

However, if the business has ambitions to grow and may wish to stake out its territory against similar businesses, a descriptive mark is perhaps not such a good idea.  This is because names that are descriptive (Plumbing) as well as names that include common surnames (Smith) are generally not registrable as trade marks before the Trade Marks Office.  Even if they do achieve registration (eg because of long and extensive use eg McDonalds) the registration may provide only limited protection against a business with a similar name because small differences may be sufficient to distinguish the two businesses.  The reason is that, as a matter of policy, trade marks law does not allow businesses to monopolise common names and words that other traders are likely to want to use as trade marks.

I acted in a trade mark opposition against an application for the logo mark: for non-alcoholic drinks.  Although the application was accepted by the Trade Marks Examiner, the decision was overturned because the word “ICY” was a synonym of the word “cold” and so descriptive of a cold drink.  The word could not work as a trade mark because other traders would want to use the mark or something similar for cold drinks.

Similar difficulties apply to descriptive words used as trade marks even if they are not registered.  The Sydney Building Information Centre Ltd tried to stop another company, Hornsby Building Information Centre Pty. Ltd., from using its name.  Customers were confused about whether the two were connected.  However, the High Court held that the problem arose not because of any misleading conduct by the Hornsby Centre, but because the Sydney Centre had chosen such a descriptive name in the first place.

The best trade mark is a mark that has an indirect reference to the business/goods or services but is sufficiently clever/vague that it does not directly describe them eg TUB HAPPY for washable clothes.

I can provide advice on the registrability of a proposed trade mark or the invalidity of a registered trade mark.

Appeal court flushes away ACCC claims on flushable wipes

The Full Court of the Federal Court has rejected the appeal by the Australian Competition and Consumer Commission (“ACCC”) in its unsuccessful case against Kimberly-Clark (“K C”), where the ACCC claimed that K-C had made misrepresentations about its “flushable” wipes.

K-C made wipes (moist towelettes) from fibres that were hydroentangled, or blasted by fine jets of water so as to bond the fibres together. K-C designed the wipes so that they could break down with agitation in water, such as when the wipes passed through the sewerage system.

K-C labelled the wipes with terms such as “flushable” and “safe to flush”. In one instance, K C stated that the wipes “will break up in the sewerage or septic system like toilet paper”. However, this last statement was immediately clarified by saying that in extreme cases just one sheet could plug a toilet. K-C went on to make recommendations as to use, including not to flush more than two sheets at a time.

The ACCC claimed that these statements were misleading because, it said, the K-C wipes caused, or contributed to, harm to household plumbing and public sewerage systems by causing blockages.

The trial judge held that K-C had not made misrepresentations. This was essentially because the ACCC had not been able to prove that K-C’s wipes caused, or contributed to, any harm to sewerage systems, or even presented a materially greater risk of harm than toilet paper (which was accepted as “flushable”).

The ACCC appealed this decision but was unsuccessful. The Full Court held that the trial judge had not made any errors and had properly considered the various arguments made by the ACCC.

Much of the evidence at trial showed problems caused by wipes generally (that were not supposed to be flushable) rather than identifying any damage caused by wipes that were designed to be flushable, such as K C’s wipes. The Full Court noted that even toilet paper can cause blockages.

K-C had argued that its flushability claims were supported by the fact that its wipes passed the tests of the INDA/EDANA GD3 Guidelines. These were tests of flushability that had been developed by industry. The ACCC strongly disputed the legitimacy of these Guidelines, but the Full Court held that the trial judge was correct to accept the Guidelines as a reasonable benchmark for making a claim of flushability, in the absence of substantial evidence that the K-C wipes caused harm.

The trial judge accepted that K-C’s wipes did not break down as easily as toilet paper but there was insufficient proof of harm. The Full Court held that where K-C had stated that its wipes would break up “like toilet paper”, the fact that K-C had immediately qualified this statement was sufficient to prevent any misrepresentation.

Too late to change case
In the appeal the ACCC argued that the K-C wipes were not suitable for flushing down the toilet because there was a real risk that they could cause harm. The Full Court rejected this argument because this was not how the ACCC had run its case during the trial. Rather, the ACCC’s claims against K-C were made on the basis that the wipes caused actual harm (which it failed to prove). The Full Court noted that, if the ACCC had relied on the lower standard of “real risk of harm”, K-C might have introduced different evidence to defend this different claim. It was now too late for the ACCC to try to change its case.

There was also a late suggestion by the ACCC that K-C’s wipes could harm septic systems. Again, the Full Court rejected this argument because it was too late – the ACCC had run its case on the basis that harm was caused to sewerage systems, not septic systems.

This decision is helpful to suppliers of wipes that are designed to be flushable, but it is limited to its facts – to the case that the ACCC was trying to prove. Importantly, however, the Full Court approved the trial judge’s acceptance of the INDA/EDANA GD3 Guidelines as to flushability, provided that there is no evidence of actual harm caused by the wipes in question.

The ACCC was unable to uncover evidence of harm caused specifically by the K-C wipes. There could be a different result if hard evidence were to emerge that particular wet wipes labelled as “flushable” were causing blockages in sewerage systems to a greater extent than ordinary toilet paper.

In addition, the decision does not explore the impact of K-C flushable wipes on domestic septic systems.

Moving forward
Sections 18 and 29 of the Australian Consumer Law (“ACL”) prohibit misleading representations about goods or services. Businesses can be liable to anyone who suffers damage because of the misrepresentations, but, in addition, a misleading representation can be an offence under section 151 of the ACL. Breaches can give rise to substantial monetary penalties (which can be in the millions of dollars depending on the circumstances). The ACCC can prosecute offences under the ACL and recover these penalties.

Whether any particular labelling or marketing claims can be considered to be misleading depends on the precise claims made and their context (including surrounding words and images). But for now, the term “flushable” should be available for use in Australia if:

(a) a suppler can prove that its “flushable” products pass at least the INDA/EDANA GD3 Guidelines;
(b) the marketing and labelling refer to these Guidelines (to explain what the supplier means by “flushable”);
(c) there are no actual problems with the flushability of the products; and
(d) the supplier does not make comparisons with toilet paper, such as that the products are similar to toilet paper or will disintegrate in a similar manner to toilet paper.

However, given that this is a controversial and well-litigated area, legal advice should be sought before making flushability claims.

Attempts are currently being made to establish an Australian Standard on flushability. If a Standard is established, this may alter what can be said on labelling and marketing materials.

This article provides general information only, and is not intended as legal advice specific to your circumstances. Please seek the advice of a legal professional if you have any particular questions.

The Curious Case of Pinnacle and the Bikinis – Part 2

Pinnacle Runway Pty Ltd v Triangl Limited [2019] FCA 1662 (10 October 2019) is a curious case in more ways than one. I have previously blogged about the relevance of the case to trade marks law – here.  The case is also a cautionary tale about the risks of litigation.

The applicant, Pinnacle, sent Triangl a letter of demand alleging infringement of its trade mark DELPHINE registered for swimwear.  Triangl ceased using DELPHINE on bikinis within three weeks of receiving the letter of demand and agreed to desist from the allegedly infringing use prior to litigation commencing.  Normally this would be considered a successful result to a trade marks dispute and the matter would often stop there.  However, Pinnacle proceeded to sue Triangl.  Justice Murphy started his judgment with the following words:

These are ill–advised proceedings in respect of alleged trade mark infringement and cancellation of a trade mark, and there is no clear winner.

His Honour held that there was no trade mark infringement, and Triangl’s cross-claim to remove the DELPHINE mark from the Trade Marks Register failed.  Justice Murphy also stated that:

Even if Pinnacle had been successful in its claim, its damages entitlements were not worth the powder and shot.

Nonetheless Pinnacle has filed an appeal.

Pinnacle was a relatively young brand at the time.  While it had launched a DELPHINE range of women’s fashion that included bodysuits and leotards, Justice Murphy found that it had not sold any swimwear under the DELPHINE trade mark.  Thus, Pinnacle was unable to claim compensation for lost sales of swimwear. 

Pinnacle’s lack of a substantial reputation (only having been in the market for a year), and the fact that Triangl’s bikinis were not inferior-quality counterfeits, meant that any damage to Pinnacle’s reputation was de minimis.  If Pinnacle had established that Triangl had infringed its mark (which it failed to do) Justice Murphy would have awarded only $2,500 for damage to its reputation.

Additional Damages

Many applicants in intellectual property (“IP”) cases seek additional damages.   This is because they can be substantially higher than the amount of compensation awarded. Additional damages essentially punish the respondent and deter future infringements.  However, there usually needs to be flagrant conduct by the respondent.  This can be either in the act of infringement itself, such as a respondent knowingly infringing and cynically pursuing their own benefit, or following infringement, including acts of dishonesty or flagrant disregard of court orders.

Pinnacle claimed $25,000 in additional damages.  However, these damages were rejected altogether by Justice Murphy.  Triangl had not known about the Pinnacle trade mark before receiving the letter of demand.  It ceased selling its DELPHINE bikinis 10 days after the letter of demand’s deadline, which his Honour considered was not an excessive delay. 

Triangl’s director initially denied Pinnacle’s claim.  He raised the difficulty of serving court documents on Triangl (based in Hong Kong) and suggested that the cost of the dispute would not be worth Pinnacle’s while.  Justice Murphy did not think that this was flagrant conduct.  The director was simply trying to persuade Pinnacle not to take the matter further. 

In addition, there was no benefit to Triangl in using the name DELPHINE.  Sales of its bikinis actually increased once the name was changed from DELPHINE to DELILAH.

Account of profits
An alternative measure of compensation is an account of the profits made dishonestly by the alleged infringer.  This was not claimed by Pinnacle.  An account of profits requires that the alleged infringer knowingly infringed the trade mark in question.[1]    However, if the alleged infringer were able to establish that they were an “innocent infringer”, they would only be liable for an account of profits made after they knew of the trade mark owner’s rights (such as after receiving a letter of demand). 

Risks of litigation
Litigation can be unpredictable and costly, as well as distracting senior executives from the business.  In IP litigation the main remedy usually sought is an injunction to stop the respondent’s infringing conduct – to stop the damage being caused to the applicant.  Often the potential monetary compensation will not be substantial and can be exceeded by legal costs.  Additional damages are not awarded in every case.  Although most cases settle before a hearing, legal costs can build up quickly and recovering money from the alleged infringer can often become about recovering costs already paid. 

Once litigation is commenced, it can be difficult for a party to extricate itself from the court case unless the parties agree to settle.  This is because withdrawing from the case without the consent of the other side can make the party liable for a proportion of the other side’s legal costs.  One party may feel that the other side’s settlement offer is simply unacceptable.  Nonetheless, most cases do settle and Justice Murphy was critical of the parties in the Pinnacle case for not having settled this dispute. 

What to think about before litigation
When contemplating suing someone for IP infringement it is essential that:

  • the objectives of the litigation are clearly defined;
  • the value to the business of the infringed IP is assessed – is it worth the effort?
  • the risks are understood, including:
    • potential costs;
    • possible exposure to liability to the other side;
    • any possibility that the IP could be removed from its Register; and
  • a realistic assessment is made of what a win might look like and what a loss might look like;

so far as they can be determined at this early stage.  (As the litigation goes on more information can come to light and may change these assessments.)

Lawyers can assist their clients in this process to try and ensure that the client who wishes to commence IP litigation understands what they are getting into. 

This blog entry provides general information only, and is not intended as legal advice specific to your circumstances.  Please seek the advice of a lawyer if you have any particular questions.

Liability limited by a scheme approved under Professional Standards Legislation

© Margaret Ryan, Melbourne, Australia, 2020

[1] Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25 at 35-36; [1968] HCA 50 at [23].

The Curious Case of Pinnacle and the Bikinis

The case of Pinnacle Runway Pty Ltd v Triangl Limited [2019] FCA 1662 (10 October 2019) considered whether Pinnacle’s trade mark DELPHINE, which was registered in class 25 for clothing, headwear and swimwear, was infringed by use of the word DELPHINE as a style of one of Triangl’s bikinis. 

Triangl sold a range of approximately 35 styles of bikini over the Internet.  These were all displayed on a page of its website when the “View All” button was clicked.  Each bikini would appear above the style name for that bikini. One of these styles was called DELPHINE.  Clicking on the “New Arrivals” button of Triangl’s website would take a consumer to a selection of four new bikini styles – PALOMA, LOTTE, BIBI and DELPHINE.  

Triangl’s DELPHINE bikini was sold in three colour/pattern variants – FIORE, FIORE ROSA and FIORE NERO.  One internal page of its website showed all three variants with the words DELPHINE FIORE, DELPHINE FIORE ROSA and DELPHINE FIORE NERO in small writing.  Clicking on the DELPHINE FIORE ROSA bikini image displayed the following internal page.

Triangl also sent direct email communications to three persons who had signed up on its website.  These communications included the following image:

Pinnacle claimed that these uses of the word DELPHINE infringed its trade mark registration.

Evidence showed that, within the women’s fashion industry, style names, which were frequently female names, were used as product names because this was more convenient than using a number or code.

Justice Murphy held that there was no trade mark infringement of Pinnacle’s mark because Triangl had not used DELPHINE as a trade mark.

The Pinnacle case is a demonstration of the principle that, for trade mark infringement, context is all-important.[1]  At first blush, the way the word DELPHINE is used in the two images above looks like use as a trade mark.  It is not used as a description.  It is capitalised and prominent.

Pinnacle’s marketing evidence referred to TOYOTA which has sub-brands such as YARIS, COROLLA and RAV4.    A consumer may refer to any of these without using the corporate brand name TOYOTA.  However, the Judge considered that the situation was different in the fashion industry, where many hundreds of products are named after women’s names.  There was also evidence that consumers do not remember fashion style names and only remember the head brand.   A similar situation arises for different colours of paints and different styles of carpets and other floor coverings. 

Justice Murphy held that consumers were likely to scroll through Triangl’s numerous bikini styles on its website, showing their different style names, and understand that Triangl offered a range of bikini styles, each with a name, including DELPHINE, but that TRIANGL was the source of the bikinis.  His Honour rejected the argument that DELPHINE and the rest of the 35 names were sub-brands like YARIS, COROLLA and RAV4. 

Justice Murphy commented that, in Triangl’s marketing, the word DELPHINE was never used without the brand TRIANGL.  Normally this would not assist a defendant as it is well established that use of an infringing mark as a trade mark in conjunction with the defendant’s trading name does not avoid infringement.  (This can, however, be relevant to the separate action for passing off.[2])

However, the critical issue was whether DELPHINE was used as a trade mark.  Section 17 of the Trade Marks Act 1995 (Cth) provides:

 A trade mark is a sign used, or intended to be used, to distinguish goods or services dealt with or provided in the course of trade by a person from goods or services so dealt with or provided by any other person.

His Honour considered that Triangl did not use DELPHINE as a trade mark, or badge of origin, to distinguish Triangl’s bikinis from the bikinis of other traders, but rather to differentiate between products within the Triangl brand. 

Use as a trade mark
“Use as a trade mark” is probably the most difficult concept in trade mark law.  It is hard to explain to a client how a word exactly the same as the registered trade mark that appears in relation to goods exactly covered by the registration (as was the case here) does not infringe a mark.[3]

All cases turn on their own facts.   The manner of use of the allegedly infringing mark in its context must be analysed carefully. Is it used to show that goods or services come from a particular source, even if the source is not known, or is it used for some other purpose, such as a description or, as here, as a code to identify a style?  The distinction recognised by Justice Murphy between a style and a trade mark can be difficult to draw and Pinnacle has appealed this decision.  The Full Court decision will be very interesting if the matter proceeds to a hearing. 

This blog entry provides general information only, and is not intended as legal advice specific to your circumstances.  Please seek the advice of a trade marks professional if you have any particular questions.

Liability limited by a scheme approved under Professional Standards Legislation

© Margaret Ryan, Melbourne, Australia, 2020

[1] Shell Co of Australia Ltd v Esso Standard Oil (Australia) Ltd [1963] HCA 66; (1963) 109 CLR 407 (26 July 1963) Kitto J [4].

[2] Saville Perfumery Ltd v June Perfect Ltd (1941) 58 RPC 147.

[3] See for example Re Johnson and Johnson Australia Pty Limited v Sterling Pharmaceuticals Pty Limited [1991] FCA 310 (the CAPLETS case).

I paid for it – why don’t I own it? – the copyright trap

If your business commissions a graphic artist to create a logo and brand collateral for the business, who owns the copyright in the artwork?  Have you thought about this?

It is important that businesses do think about this when commissioning third parties to create artistic works and literary works.  These works can include:

  • logos;
  • artwork and wording on product packaging and brand collateral;
  • product information such as manuals;
  • photographs;
  • advertising; and
  • social media.

This is because the default position in Australia is that the author or his/her employer will own the copyright, not the commissioning party.  This usually comes as a shock to most businesses because they assume that “if I pay for it, I own it”.  In order to own the copyright, it is normally necessary to obtain a written copyright assignment from the author or his/her employer, such as the graphic design company or advertising agency.

It is best that this be done at the start of the engagement, when the business can exercise the maximum leverage over the author/employer.  If the author is not prepared to assign the copyright, the business can go elsewhere.

If there has not been a copyright assignment, the business can still use the copyright material for the purpose for which it was prepared.  However, problems can arise if the business wishes to use the material for a different purpose – for instance, instead of just using artwork on shopping bags, caps and T-shirts promoting the products, the business wants to use the artwork on a wide range of merchandise to be sold separately.  Without a copyright assignment or an agreement from the author to use the artwork in such a broad way, the business would need to go back to the author and ask for permission to do this – and possibly pay an additional fee.

The question of ownership of copyright often comes up when someone else is copying the logo or collateral of the business.  This may amount to a copyright infringement, which can be a useful claim for the business to be able to make to stop the infringing conduct.  However, unless the business owns the copyright (or at least has a written exclusive licence to use the copyright) the business cannot make this claim.  It is often at this time that a lawyer will suggest that the business try and get an assignment of the copyright.  However, this may not be so easy if there is no ongoing relationship with the author or the author is difficult to locate.  Alternatively, the author may be prepared to assign the copyright but only for a (sometimes substantial) fee.

It is recommended that a business think about copyright ownership at the outset of commissioning artistic or literary works so that they can agree in writing on who owns the copyright.  This is best practice for businesses who understand that copyright is an important business asset.

This information sheet provides general information only, and is not intended as legal advice specific to your circumstances.  Please seek the advice of a legal professional if you have any particular questions.

Liability limited by a scheme approved under Professional Standards Legislation

© Margaret Ryan, Melbourne, Australia, 2020