Pinnacle Runway Pty Ltd v Triangl Limited  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.
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. 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
 Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25 at 35-36;  HCA 50 at .