Dunlop Aircraft Tyres Limited v The Goodyear Tire & Rubber Company

1. The respondent pay 40% of the applicant's cost of this proceeding. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

NICHOLAS J: 1 I made orders and published reasons on 6 July 2018 in two closely related proceedings that were heard together (Dunlop Aircraft Tyres Limited v The Goodyear Tire & Rubber Company [2018] FCA 1014). The parties were given an opportunity to file written submissions in relation to questions of costs which they have done. These are my reasons for decision on those questions. I have adopted the same abbreviations and definitions in these reasons as were used by me in the principal judgment ("PJ"). 2 As explained at PJ [9]-[13], the Goodyear Parties brought proceedings for trade mark infringement ("the infringement proceeding") against the Dunlop Parties, in which the Dunlop Parties filed a cross-claim seeking orders for the rectification of (inter alia) the registered trade marks upon which they were sued. In the other proceeding ("the appeal proceeding") DATL appealed against the decision of the Registrar in respect of various trade mark applications that DATL had filed for the relevant trade marks. 3 The Dunlop Parties were successful in their application to rectify the relevant trade mark registrations. As a result, the Goodyear Parties' claim for trade mark infringement failed and the infringement proceeding was dismissed. However, the Dunlop Parties failed in their appeal against the decision of the Registrar and the appeal proceeding was dismissed. 4 The Dunlop Parties now seek orders that: (a) the Goodyear Parties pay 60% of their costs of both proceedings up to 7 July 2016 (the date of which the Dunlop Parties made a Calderbank offer) and on an indemnity basis after that date; (b) or, alternatively: (i) the Goodyear Parties pay 85% of the Dunlop Parties' costs of the infringement proceeding up to 7 July 2016; (ii) the Dunlop Parties pay 40% of the Goodyear Parties' costs of the appeal proceeding up to 7 July 2016; and (iii) the Goodyear Parties pay the Dunlop Parties' costs of both proceedings from 7 July 2016 on an indemnity basis. 5 The Goodyear Parties seek orders that the Goodyear Parties pay 85% of the Dunlop Parties' costs in the infringement proceeding and that the Dunlop Parties pay the Goodyear Parties' costs in the appeal proceeding. 6 It is convenient to deal first with the Dunlop Parties' application for indemnity costs. The justification for this application is said to be the Goodyear Parties' failure to accept a Calderbank offer made by the Dunlop Parties on 7 July 2016. 7 It is common ground that in order for the Dunlop Parties to recover costs on an indemnity basis in this case it is necessary for them to show that there was an imprudent refusal of an offer of settlement which refusal was unreasonable in the circumstances: Anchorage Capital Partners Pty Limited v ACPA Pty Ltd (No 2) [2018] FCAFC 112 at [6]. 8 On 6 July 2016, the Goodyear Parties made a Calderbank offer proposing, inter alia, that: (a) the infringement and appeal proceedings be dismissed with no order as to costs; (b) the Dunlop/Flying D Marks be assigned to the Dunlop Parties; (c) the Dunlop Parties pay the Goodyear Parties $2.561 million; and (d) the Goodyear Parties grant a non-exclusive royalty-free licence permitting the continued use of the marks in the same manner as previously, including as part of their business names. 9 The payment of $2.561 million was said in the Goodyear Parties' letter of offer to be in satisfaction of their claim for costs in both proceedings and as consideration for the particular assignment of the relevant trade marks. 10 On 7 July 2016, the Dunlop Parties made a counter-offer proposing, inter alia, that: (a) the infringement and appeal proceedings be dismissed with no order as to costs; (b) the Dunlop/Flying D Marks be assigned to the Dunlop Parties; (c) the Dunlop Parties pay the Goodyear Parties $1.3 million; and (d) the Goodyear Parties grant a non-exclusive royalty-free licence permitting the continued use of the marks in the same manner as previously, including as part of their business names, except that the Goodyear Parties not use a business name in connection with their aircraft tyres businesses that included "Dunlop". 11 The Dunlop Parties submit that it was unreasonable for the Goodyear Parties not to accept the counter offer. It was submitted that the amount of $1.3 million was fair given the sales of Dunlop Branded Aircraft Tyres up to 2015. It was further submitted that the obligation that the Goodyear Parties not use "Dunlop" as part of the business name of their aircraft tyres business was consistent with the other terms of the Goodyear Parties' offer. 12 I am not satisfied that the Goodyear Parties refusal of the Dunlop Parties' offer was unreasonable in the circumstances. There are three main reasons for this. 13 First, the Dunlop Parties' offer required the Goodyear Parties to make a partial assignment of the registered trade marks to the Dunlop Parties. Although orders were made for the rectification of the trade mark registrations, DATL's case for registration of the relevant marks in its name under s 44 of the Act, was rejected. 14 Secondly, there is no evidence before me which would enable me to conclude, even when taking a very broad brush approach, that the sum offered by the Dunlop Parties as part of the settlement was reasonable or that the Goodyear Parties refusal to accept the offer which provided for a payment of that amount (approximately half the amount referred to in the Goodyear Parties' offer) was unreasonable in the circumstances. 15 Thirdly, the orders made in the infringement proceeding did not require Goodyear Australia to change its corporate or business name. This is something which the Dunlop Parties appear to have insisted on. In their letter of 7 July 2016, the solicitors for the Dunlop Parties said that their clients required that the Goodyear Parties not use a business name in connection with their aircraft businesses that included the name "Dunlop". Contrary to the Dunlop Parties' submission, this was not a requirement that was consistent with the Goodyear Parties' offer. 16 On the question of costs more generally, there was no real dispute between the parties at the level of principle. 17 The relevant principles are summarised succinctly by the Full Court in EMI Songs Australia Pty Limited v Larrikin Music Publishing Pty Ltd [2011] FCAFC 92 as follows at [9]: Costs are in the discretion of the Court (Federal Court of Australia Act 1976 (Cth) s 43). The discretion is broad but is to be exercised judicially. The fundamental purpose of the discretion is to compensate the successful party, not to punish the unsuccessful party. The furtherance of the goal of compensation means that, in general, a successful party will obtain an order for costs in its favour (Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [65]-[68]). However, "a successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party's costs of them…" (Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 at 48,136). If apportionment of costs is appropriate, the object is not mathematical precision (Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272) but a result that best reflects the interests of justice in the overall circumstances of the case. 18 Thus, while the ordinary rule is that costs follow the event, the Court exercises a broad discretion with respect to costs that permits it to adopt other approaches, which may be more appropriate in a given case, particularly in complex litigation involving a multiplicity of issues and outcomes. 19 In the present case the Goodyear Parties emphasised that the ordinary rule is that costs should follow the event, even though in their submissions in reply, they submitted that in the case of the infringement proceeding, the Dunlop Parties should receive only a percentage of their costs. Implicit in this submission is an acceptance that some adjustment should be made in this case to take account of the costs incurred by a party that successfully defended a proceeding on a range of issues, some of which were upheld and some of which were rejected. 20 It seems to me that this is a case in which it is in the interests of justice to make a global costs order that has regard to the overlap in issues in the infringement and the appeal proceedings, and which takes account of the particular issues on which the Dunlop Parties succeeded and those on which the Goodyear Parties succeeded. 21 In arriving at an appropriate figure I have had regard to the fact that, although the infringement case was dismissed, there were numerous issues argued by the Dunlop Parties on which they failed. These include the no intention to use case (PJ [146]-[159], [167]-[168]), the false suggestion case (PJ [169]), the s 44 case (PJ [262]-[273]), and the defences under s 122(1) (PJ [308]-[318]) and s 123 (PJ [319]-[320]) of the Act. 22 I have also had regard to the Dunlop Parties' lack of success in the appeal proceeding. But I am also mindful that a considerable amount of time was occupied at the trial dealing with the s 42(b) (PJ [259]-[261]), s 60 (PJ [254]-[258]), s 62 (PJ [228]-[244]) and s 62A (PJ [245]-[253]) grounds of opposition on which the Goodyear Parties failed. 23 In all the circumstances, I am satisfied that the most appropriate order is one that requires the Goodyear Parties to pay 40% of the Dunlop Parties' costs of both proceedings. I should stress that, while I propose to make an order to that effect in each proceeding, the figure of 40% is a global figure that takes account of both the overall result and time dedicated to the particular issues to which I have referred. The figure of 40% is what I would also have adopted had the two proceedings been consolidated. 24 Orders accordingly. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholas.