Adidas AG v Pacific Brands Footwear Pty Ltd

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1368 of 2010

JUDGE: ROBERTSON J DATE: 9 DECEMBER 2013 PLACE: SYDNEY

REASONS FOR JUDGMENT Background 1 On 12 September 2013 I gave my reasons for concluding that the applicants were entitled to relief based on the infringements I had found: see Adidas AG v Pacific Brands Footwear Pty Ltd (No 3) [2013] FCA 905. I directed the parties to confer for the purposes of agreeing on the appropriate orders to give effect to those reasons and also in relation to costs. In the event that there was no agreement within 28 days, the matter would be relisted for short argument on those issues. There was only limited agreement and these are my short reasons for the orders I shall make in relation to relief and in relation to costs.

The competing contentions 2 There was agreement between the parties that the Court should declare that the respondent had infringed the first applicant's registered trademarks numbered 131325 and 924921 by supplying the footwear depicted in Exhibits E, K and L being the footwear depicted in Annexures A, B and C to the proposed orders. 3 There was also agreement that judgment should be entered for the applicants as against the respondent in the sum of $20,000. 4 Subject to the questions of injunctions and costs, it was also common ground that the proceedings otherwise be dismissed. 5 The points of difference between the parties were, first, whether the Court should grant injunctive relief and, if so, on what terms and, second, the appropriate costs order.

Injunctive relief 6 As to injunctive relief, the respondent submitted that the Court should grant injunctive relief in respect of the three styles of footwear which the Court had found to infringe the trade marks and also that the injunction should extend to the respondent "otherwise infringing" the 3-Stripe Trade Marks, being the first applicant's registered trademarks numbered 131325 and 924921. The respondent contended that there should be no relief by way of final injunction. 7 I would not grant injunctive relief in relation to Exhibit E as the evidence is, as recorded at [158] of my reasons for judgment in Adidas AG v Pacific Brands Footwear Pty Ltd (No 3) [2013] FCA 905, the respondent last had commercial dealings in this footwear some seven years ago and I am not persuaded that there is any relevant threat or sufficient risk of further infringement. The Court should not issue idle or empty orders. The expression "sufficient risk" comes from Perram J's judgment in Solahart Industries Pty Ltd v Solar Shop Pty Ltd (No 2) (2011) 282 ALR 43; 92 IPR 197 at [8]. 8 As to Exhibit K and Exhibit L, in my opinion injunctive relief is appropriate because although the relevant dealings in relation to this footwear were in 2009 and the evidence was that the footwear was no longer stocked by the respondent, nevertheless no unconditional undertaking was proffered by the respondent. Indeed the respondent gave a broad undertaking on 5 January 2009 which, on the findings I have made, was apparently breached by the footwear in these exhibits. The respondent's evidence as to its division Global Trading being closed is not in my view sufficiently cogent to divert me from this conclusion. The evidence to which I refer is the affidavit of Colin Patrick O' Donnell sworn 23 March 2012 at [8] and the cross-examination of Mr Russell on 19 April 2013 at transcript page 87. I am satisfied that in relation to the shoes there is sufficient risk of further infringement. 9 I will not grant an injunction restraining the respondent from "otherwise infringing" the 3-Stripe Trade Marks, being the first applicant's registered trademarks numbered 131325 and 924921, because, as these proceedings have shown, such an order would lack sufficient clarity and definition and the Court should not make an order in relation to conduct where a person would not readily know whether or not its proposed conduct breached the order. What is the appropriate relief must depend on the facts and on the underlying dispute and I do not derive much assistance from the form of relief granted in trade mark cases which concerned primarily words because infringements by words are generally clearer than by designs.

Costs 10 As to costs, the applicants submitted the respondent should pay the applicants' costs of the proceedings. The respondent submitted the applicants should pay 25% of the respondent's costs in the proceedings. 11 The applicants submitted that costs should follow the event and the applicants had succeeded in the overall event against the respondent in that it had been held that the respondent had infringed the first applicant's registered trademarks numbered 131325 and 924921. It was difficult to see how the issues in relation to the footwear found not to infringe could properly be regarded as distinct or severable from the issues in relation to the footwear that was held to infringe. It was submitted that this was not a case in which the arguments in relation to the footwear held not to infringe took up any significant time at the trial. 12 The respondent submitted that the applicants had enjoyed very modest success and no success in relation to their quest for broad injunctive relief. The respondent submitted that 12 examples of footwear were pleaded by the applicants to support their claim to broad injunctive relief, which failed, and to fix the respondent with an intention, which also failed and on which the applicants placed much emphasis and in relation to which there was wide-ranging discovery and much time and expense. The only success that the applicants had enjoyed was that three of the original 12 shoes were found to infringe. 13 The respondents drew attention to the acceptance by the applicants on the first day of the trial, without notice, that by reason of accord and satisfaction or estoppel, they were not entitled to relief in respect of three of the 12 examples of footwear. The evidence of one of the witnesses was directed to one of those three abandoned examples. The respondent also referred to the fact that each of the 12 examples of footwear was the subject of expert evidence and extensive written submissions. 14 The respondent submitted that the number of shoes pleaded was linked to the applicants' overall objective of proving a strategy and obtaining broad injunctive relief, as opposed to securing 12 individual findings of infringement. I accept that submission. 15 The respondent submitted that the limited costs order which was appropriate should be further reduced by a costs order in favour of the respondent in relation to the costs of the intention issue and the costs of the survey evidence. The respondent also referred to the provision of the Federal Court Rules providing that when the party is awarded judgment for less than $100,000 costs would be reduced by one-third of the amount otherwise allowable unless the Court otherwise ordered: see for proceedings initiated before 1 August 2011 O 62 r 36A. 16 In reply the applicant submitted that the facts and evidence in relation to each of the pleaded footwear were inextricably linked. The fact that the applicants' infringement case with respect to some of the pleaded shoes failed did not warrant a reduction of the costs otherwise awarded in favour of the applicants. The Court's decision to afford the applicants' survey little weight did not justify a reduction of the costs otherwise ordered in the applicants' favour. The evidence in support of and in answer to the applicants' case on intention was inextricably linked to the evidence on infringement more generally. 17 The applicants submitted it was not clear that O 62 r 36A of the former Federal Court Rules applied. Rule 40.08 of the Federal Court Rules 2011 was, it was submitted, materially different in its terms. 18 The relevant transitional provision in the Federal Court Rules 2011 is as follows: 1.04 Application (1) These Rules apply to a proceeding started in the Court on or after 1 August 2011. (2) These Rules apply to a step in a proceeding that was started before 1 August 2011, if the step is taken on or after 1 August 2011. (3) However, the Court may order that the Federal Court Rules as in force immediately before 1 August 2011 apply, with or without modification, to a step mentioned in subrule (2). 19 The former rule provided: O62 r 36A Reduction in costs otherwise allowable (1) Where a party is awarded judgment for less than $100,000 on a claim (not including a cross-claim) for a money sum or damages any costs ordered to be paid, including disbursements, will be reduced by one-third of the amount otherwise allowable under this Order unless the Court or a Judge otherwise orders. (2) If the Court or a Judge is of the opinion that a proceeding (including a cross-claim for a money sum or damages) brought in this Court could more suitably have been brought in another court or in a tribunal and so declares, then any costs to be paid, including disbursements, will be reduced by one-third of the amount otherwise allowable under this Order. (3) This rule does not apply to a proceeding under the Admiralty Act 1988. The newer rule provides: 40.08 Reduction in costs otherwise payable A party other than in a proceeding under the Admiralty Act 1988 may apply to the Court for an order that any costs and disbursements payable to another party in the proceeding be reduced by an amount to be specified by the Court if: (a) the applicant has claimed a money sum or damages and has been awarded a sum of less than $100 000; or (b) the proceeding (including a cross-claim) could more suitably have been brought in another court or tribunal. In any event, the applicants submitted, the Federal Court was the appropriate forum for the determination of the present case, a submission which, I apprehended, the respondent accepted. Thus the relevant rule was that which concerned the monetary amount only. 20 In my opinion it is relevant to take into account the dimensions of the case which were far larger than would have been necessary in order for the applicants to succeed if their focus had been entirely on examples of footwear rather than on a larger and overarching issue or in respect of the footwear on which they did succeed. In that sense the dimensions of the case were not in proportion to their substance or the applicants' success. 21 I do not approach the question of costs merely on the basis of arithmetic, three cases of infringement found, and three cases of abandonment on the first day of the trial, out of a total of 12 examples of footwear, but I do take into account that each infringement is itself a cause of action. In my opinion, relevantly to the question of costs, the applicants had limited success. 22 As to the survey evidence, in my opinion it is appropriate to take into account that the respondent sought to prevent the use of survey evidence and did so formally, albeit unsuccessfully at that time: see Adidas AG v Pacific Brands Footwear Pty Ltd [2011] FCA 1205. It is also relevant to the question of costs that, in the result, I gave the survey little weight as explained at [195] and following of Adidas AG v Pacific Brands Footwear Pty Ltd (No 3) [2013] FCA 905. The survey evidence involved a substantial amount of expert evidence. In my opinion, the appropriate costs order should reflect these factors. Counsel for the applicants referred to Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602 at [74]-[75] but in my opinion that case involved a different sort of survey and, in any event, a broad judicial discretion should not be exercised by reference only to how that discretion was exercised in different circumstances. 23 Turning to the relevant Rules, for the reasons given in Loyola v Cryeng Pty Ltd (No 2) [2012] FCAFC 98 at [15] the former Rules should apply and I so order. As Besanko and Perram JJ there said, the making of an order for costs is a step in the proceeding for the purposes of r 1.04(2) and, on the face of it, the Federal Court Rules 2011 apply in relation to costs. However, an order should be made under r 1.04(3) that the earlier rules apply to the determination of the costs because the purpose of the two costs rules is to penalise parties who bring and continue (small) proceedings in an inappropriate court in the judicial hierarchy. The qualifying factor for the operation of the rules is the decision to bring and maintain a case in a particular court. In this case that occurred well before the Federal Court Rules 2011 commenced. 24 In my opinion, following Shahid v Australasian College of Dermatologists (No 2) [2008] FCAFC 98, the rule does apply even though the case does not involve a claim for a money sum only. However I would not, in this case, consider it appropriate that there be an automatic one-third discount of the amount of any award of costs by reference to the monetary amount of $20,000 and the fact that these proceedings were commenced in the Federal Court. In my view the money sum was not the principal concern of the proceedings and this Court was the appropriate Court in which to commence the proceedings given their subject matter and complexity. I therefore make an order under O62 r 36A that any costs ordered to be paid not be reduced by one-third of the amount otherwise allowable under O62. Nevertheless I note that the monetary amount of $20,000 is small, but place greater weight on my earlier observations at [20] that the dimensions of the case were far larger than would have been necessary in order for the applicants to succeed if their focus had been entirely on examples of footwear and in that sense were disproportionate. 25 Taking these considerations into account I exercise my discretion to order that the respondent pay 30% of the applicants' costs, as agreed or taxed.

Conclusion 26 For these reasons I make the orders I shall now pronounce. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.