LIQUID ENGINEERING CLAIMS
12 Turning to the merits of the application in WAD 189 of 2007, I begin by considering the claim that Edwards and LES infringed the "Liquid Engineering" mark. Section 120(1) of the TMA provides relevantly that:
A person infringes a registered trade mark if the person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered.
13 Section 10 of the TMA provides that a sign is deceptively similar "if it so nearly resembles that other trade mark that it is likely to deceive or cause confusion." The respondents concede that the "Liquid Engineering" mark is validly registered and owned by LE 2003. There was, however, some dispute as to how the mark was to be defined. The respondents submitted, without any citation of authority, that:
A trademark is not the word but the image of the word and it is registered in the form in which it is to be used and the question of deception is highly influenced by the get up in which it appears.
14 I reject this contention. Although it is difficult, given the generality with which the argument is put, and the lack of any reference to authority, to understand the precise nature of the submission, I assume that one of the following submissions was put. First, it may be possible that the submission should be interpreted literally as a contention that word phrases are not subject to trade mark registration as word phrases, but if that is what was intended, it is not right and need not be further considered. Secondly, it is possible that the submission was that the claim to a mark is limited to the mark as represented in a particular way: see in that regard, Koninklijke Phillips Electronics NV v Remington Products Australia Pty Ltd (2000) 100 FCR 90 at [10], [12] (stating that an image mark including a word does not cover use of that word in a different graphical configuration).
15 However, the evidence here does not support a submission that "Liquid Engineering" was registered as an image or as an image containing a word. As listed in the Register, the mark is defined only as the words "Liquid Engineering." The spaces in the Register for "Image" and "Image Constituents" are blank. There is no evidence that the mark is confined, or was intended to be confined, to a particular graphic representation of the text phrase rather than the text phrase itself, however represented graphically.
16 It is also possible that counsel intended to advance the proposition that a word mark must be considered in the context of any associated (albeit separate) image trade mark. There are some circumstances in which "a combination of a word and an image may … strip, in the mind of a consumer, the association with a trade source previously associated with the word alone": See Gallo at [186]; see also at [24]-[38] and [183]-[186] (considering when and how a sign should be defined to include both a word and an associated image, as well as the impact of any associated image in determining similarity). In this case, the "Liquid Engineering" mark was generally, if not always, used in combination with the separately registered image or device of a whirlpool. Similarly, in Gallo the registered word "barefoot" was used in combination with the image of a bare foot, and the respondent in that case submitted that the image could not be divorced from the word in assessing the similarity of the allegedly infringing mark: at [185].
17 In Gallo, Flick J rejected the respondent's submission on the basis that "the addition of the image of the bare foot did not have the consequence that the word itself as a trade mark was not also being used": at [186]. The same is true here - that LEL and LE 2003 used the mark "Liquid Engineering" in conjunction with a small whirlpool image does not mean that the text phrase is not also being used. Accordingly, the absence of the associated whirlpool in the respondents' allegedly infringing usage is merely one factor to be considered in deciding whether there has been an infringing use. Whether the absence of use of the whirlpool mark is such as to defeat a finding of deceptive similarity in the use of the word mark is a question of fact that must be viewed in light of all the circumstances which I will address presently.
18 The next step is to consider the class of goods the mark is registered in respect of. In this case, "Liquid Engineering" is registered with respect to four classes of goods: (1) chemicals used in industry; (2) chemicals for the prevention of rust and corrosion; (3) cleaning and degreasing preparations; and (4) lubricants, industrial oils, and industrial greases. Save for a few goods which I will come to in relation to the issue of quantum, there is no dispute that all of the goods in relation to which Edwards used the allegedly infringing mark were goods falling into the four classes of goods in respect of which the "Liquid Engineering" mark is registered.
19 Accordingly, in deciding whether Edwards and LFS infringed that mark, the principal question is whether the marks that Edwards and LFS used - "Liquideng" and "Liquideng Farm Supplies" - are deceptively similar to "Liquid Engineering". On that point, I again turn to Flick J, who helpfully reviewed the case law in his recent judgment in Gallo at [53]-[55]. I will take the liberty of simply reproducing the relevant passages here in full:
53 Whether a mark is "deceptively similar" is not to be determined by a side by side comparison, but rather by reference to whether there is a likelihood of deception or confusion from a recollection or impression of the registered mark: Anheuser-Busch Inc v Budejovický Budvar [2002] FCA 390 at [143], 56 IPR 182 at 216. Allsop J there observed:
[143] The question of deceptive similarity must be judged by a comparison different from the side by side comparison undertaken to assess substantial identity; the question being the likelihood of deception or confusion from a recollection or impression of the registered mark. Thus, a side by side comparison is inadequate, and too narrow a test. The comparison is between, on the one hand, the impression based on recollection of the registered mark used in a normal or fair manner that persons of ordinary intelligence and memory would have, and, on the other hand, the impressions that such persons would get from the impugned mark as it appears in the use complained of …
54 It is necessary to make an attempt to estimate the effect or impression produced on the mind of persons of ordinary intelligence and memory. It is the impression or recollection which is carried away and retained that is necessarily the basis of any mistaken belief that the challenged mark is the same: Australian Woollen Mills Ltd v F S Walton & Co Ltd (1937) 58 CLR 641 at 658 per Dixon and McTiernan JJ. See also: Global Brand Marketing Inc v YD Pty Ltd [2008] FCA 605 at [84]-[89] per Sundberg J. The "recollection" may be imperfect: Crazy Ron's Communications Pty Ltd v Mobileworld Communications Pty Ltd [2004] FCAFC 196 at [87], 209 ALR 1 at 21 per Moore, Sackville and Emmett JJ.
55. Whether a mark is likely to deceive or cause confusion is, in the end, a question of impression and common sense: Murray Goulburn Co-operative Co Ltd v NSW Dairy Corporation (1990) 24 FCR 370 at 377 per Lockhart, Pincus and von Doussa JJ. (On appeal, see: NSW Dairy Corporation v Murray Goulburn Co-operative Co Ltd (1990) 171 CLR 363).
20 With those legal principles in mind, I turn to the relevant facts. It was not disputed that LEL, on its website, brochures, and invoices, among other places, prominently displayed "Liquid Engineering." Edwards conceded that he issued invoices under the names "Liquideng" and / or "Liquid Engineering Farm Supplies", and also used those words on his cheques and business cards. There was also evidence that Edwards, at least on one occasion, displayed his wares under a large banner bearing the words "Liquid Engineering Farm Supplies." The same was also written out in large print on the side of his vehicle for at least some of the relevant time period.
21 Before proceeding any further, I first note in Brother Industries Ltd v Dynamic Supplies Pty Ltd (2007) 163 FCR 530 at [53]-[54], Tamberlin J pointed out that under ss 7 and 9 of the TMA, a trade mark is taken to be used in relation to goods and services if it is applied to, among other things, packaging labels, signs, invoices, business letters, and business papers. Here, the word "Liquideng" was applied by Edwards and LFS in just such ways. It follows that application of that word was its use as a trade mark.
22 The question which then arises is whether its use is as a trade mark "that is substantially identical with, or deceptively similar to" the trade mark "Liquid Engineering"? I consider as a matter of impression and common sense that a person of ordinary intelligence would be likely to be confused or deceived by the "Liquideng" mark. The essential and distinguishing feature of the registered mark "Liquid Engineering" lies in the use of the word "liquid". By using that same word, as well as the first syllable of the word "engineering," I find that the impugned mark "Liquideng" would leave ordinary persons with the impression or recollection that the goods sold under the mark were associated with, or stemmed from, the same source as goods sold under the "Liquid Engineering" mark. To put it even more bluntly, my view is that the overall impression that would be formed by an ordinary person is that "Liquideng" is simply the short form of "Liquid Engineering", in the same way that an ordinary person would assume that "Vic" is short for Victoria.
23 The fact that Edwards' mark also contained the additional descriptive phrase "Farm Supplies" does not alter my conclusion that it is deceptively similar to LE 2003's registered mark. It is settled that the presence or absence of an otherwise bland descriptive term, such as the word "club" added after "Polo," will not diminish a deceptively similar impression engendered by the use of the distinctive part of the mark: Polo Textile Industries Pty Ltd v Domestic Textile Corporation Pty Ltd (1993) 42 FCR 227; see also Gallo at [58]. In my view, the equally bland descriptor "farm supplies" is not distinguishable from "club" in this sense. Moreover, even if it were, I share the view of Flick J that even the addition of a more distinctive descriptor will not necessarily defeat a finding of deceptive similarity: Gallo at [61]-[63] (concluding that the addition of the distinctive Germanic word "Radler," not in English usage, did not remove the likelihood of deception where the infringer had borrowed an essential feature - the word "barefoot" - of the registered mark).
24 I also consider that the absence of an associated whirlpool device in the usage of the impugned mark is not sufficient to strip the association in the mind of the ordinary person between "Liquideng" and "Liquid Engineering". Again, the dominant element of "liquid" is maintained in both marks, along with the syllable "eng." I consider as a matter of impression that the association between a whirlpool and liquid in the context of engineering or farm supply products is not strong. That is to say, I doubt that an ordinary customer of LEL attached much significance to, or carried away any lasting impression of, the small whirlpool device in the same way that he or she might have if LEL sold, for example, spa pools; or if, for example, the name of the company or the registered mark was in fact "Whirlpool."
25 I should also add that my finding of deceptive similarity is buttressed by (although in no way dependent on) my view that Edwards in fact intended to appropriate LE 2003's registered mark. LEL's invoices contained a reference to the company's website address www.liquideng.com.au in the upper right-hand corner just above the salesman's signature block. Edwards acknowledged that he had signed hundreds of LEL invoices, but he boldly claimed never to have noticed the website address and specifically the term "liquideng" in that address. However, I consider it more probable than not that Edwards, whether subconsciously or consciously, was influenced by and was attempting to trade on, the association "liquideng" had with Liquid Engineering, which association he was aware of from the invoices. Indeed, counsel for the respondents conceded that a subconscious borrowing was "perfectly possible." The alternative - that he independently conjured up the same distinctive term "liquideng," which he agreed can be found in no dictionary and no other usage - is simply too implausible to be accepted.
26 It is axiomatic that neither proof of intent nor any element of culpability is required to make out a case of trade mark infringement: Coca-Cola Co v All-Fect Distributors Ltd (1999) 96 FCR 107 at [39]; see also Gallo at [58]. However, it is also true that where intent to deceive is established, "it should be presumed" that the impugned mark is in fact likely to deceive or confuse: Australian Woollen Mills Ltd v F S Walton & Co Ltd (1937) 58 CLR 641, 657. In such a case, the onus to rebut the presumption then falls upon the alleged infringer. Similarly, the last sentence of s 120(2) of the TMA creates an affirmative defence if the alleged infringer is able to establish that although there may be a general likelihood of confusion with respect to the marks, the particular way in which the alleged infringer used the impugned mark did not give rise to such likelihood of confusion: Gallo at [89]-[93].
27 In this case, I find that an independent basis for a finding of deceptive similarity is that Edwards' intent to deceive, established as a matter of fact, raises a presumption that his use of the "Liquideng" mark was likely to confuse, and he has failed to rebut that presumption. In his evidence, Edwards acknowledged that some customers recognised him as the "Liquid Engineering person," but he would attempt to disassociate himself from LEL in such cases because some customers "didn't like" LEL due to the fact that they had made investments in LEL which had failed.
28 However, Edwards went on to acknowledge in cross-examination that customers generally had a positive view of LEL's products (ie the products had a good reputation), whatever their views of the company itself. Moreover, he was unable, when confronted, to provide any explanation (much less a plausible one) for why, if he really wished to disassociate himself from LEL, he just happened to decide to trade under a name that had, on any view, at least some similarity to Liquid Engineering. Finally, the evidence showed that the manner in which he used the Liquideng mark, and the goods in relation to which he used it, did not dispel any likelihood of confusion: he continued to sell basically the same goods out of the back of his truck to many of the same customers using the same primary method of door-to-door cold calls: Gallo at [92] (accepting the proposition that the closer the relationship between the goods sold under the registered mark and the goods sold under the impugned mark, the more likely any similarity in the marks will prove deceptive). On that evidence, I am not satisfied that Edwards successfully rebutted the presumption that he was at some level intending to trade on an association with LEL (or at least its products) by using the "Liquideng" mark, nor am I satisfied that ordinary customers would not have been confused by the use of the "Liquideng" mark due to the particular manner or goods in relation to which he used it.
29 In short, I consider that LE 2003's prima facie case for liability for trade mark infringement against Edwards and LFS is made out. It remains only to consider Edwards' and LFS's affirmative defence of estoppel (which is also framed as a cross-claim for misleading and deceptive conduct) to the effect that Edwards is entitled to use the term "Liquideng" in light of his reasonable reliance on the acts and omissions of LE 2003 and its agents. As noted earlier, LE 2003's claim for infringement of the "Liquid Engineering" mark was not formally made until the amended statement of claim filed on 22 October 2007, long after LE 2003 first became aware in April or early May 2003 that Edwards was trading using the "Liquideng" mark. The nub of the estoppel and misleading conduct claims is that the respondents:
were entitled to assume that if over a period of 4 ˝ years despite other allegations and despite an initial reference to the Liquid Engineering [infringement] allegation some 4 ˝ years previous, that the applicant was not intending to proceed with that allegation.
30 There are several defects in this argument. First, it is not the case that LE 2003 simply stood silent for the four plus years until the filing of its amended statement of claim. On 9 May 2003 - approximately one month after LE 2003 purchased LEL's assets, including the "Liquid Engineering" trade mark, and one month after Edwards officially began trading as LFS - LE 2003's then-solicitors sent a letter to Edwards that stated in relevant part:
My client has been informed that you have been using the name Liquid Eng. Farm Supplies [sic] which is obviously an attempt to pass off an association with my client. Unless you cease using this name immediately the use by you of the name will be reported to the ACCC.
31 In the continuing exchange of letters, LE 2003's solicitors demanded on 24 September 2003 that Edwards give an undertaking to, among other things, refrain from using the "Liquid Engineering" mark in connection with any sales, advertising or promotional materials. A similar demand was again made in a letter from LE 2003's solicitors dated 8 December 2004.
32 The respondents submit that because LE 2003 did not raise the "Liquid Engineering" claim in every communication between the parties, they were entitled reasonably to rely on the interspersed silences to the effect that no claim was being pressed. I reject this submission. The correspondence history demonstrates no affirmative statement or conduct by LE 2003 to the effect that an infringement claim was abandoned or disclaimed. The fact that the infringement claims were raised only intermittently does not change this analysis. The respondents cited no authority, and I am aware of none, for the proposition that a party who fails to press an infringement claim in every (or even most) piece of correspondence with an alleged infringer is thereby estopped from later asserting such claim, or is thereby liable for misleading and deceptive conduct. Even to state the proposition is to recognise its absurdity.
33 There is another fundamental defect with the respondents' estoppel claim. At its heart lies the thesis that a party is somehow under a duty to bring a claim for trade mark infringement promptly or not at all. Thus, the argument seems to run, LE 2003's four-year delay in bringing its infringement claim is in itself fatal even assuming (contrary to fact) that it had rattled the infringement sabre in every letter and statement of counsel from May 2003 until the filing of the amended statement of claim. I reject this submission on the basis that a complete answer to it is found in s 129 of the TMA. That section provides that any person threatened with an infringement action "may bring an action" against the party making the threats (provided that the threatener has not brought the promised infringement action with due diligence: s 129(5)) in order to enjoin the threats and recover damages where such threats are shown to have been groundless. If there is a "cloud" over the title to a registered mark, any aggrieved party can bring proceedings to dispel that cloud.
34 In the circumstances, I consider that to the extent that the respondents felt themselves unjustifiably threatened by the threat of litigation dangling overhead and thereby fettered in the conduct of their business, the proper response was not to bury their heads in the sand and then plead estoppel four years down the track. Rather, they could and should have brought proceedings for injunctions and damages under s 129 of the TMA if they considered the infringement threats unjustified. In other words, to the extent that it may be said that LE 2003 was less than diligent in bringing its infringement claim (whether for strategic reasons or otherwise), the respondents had a perfectly adequate remedy at law and equity will not now come to their aid: see Bond Brewing Holdings Ltd v National Australia Bank Ltd (1990) 1 ACSR 445 (stating that generally a Court must be persuaded that there is no adequate remedy at law before equity will intervene).
35 Based on the foregoing, the cross-claim with respect to the "Liquid Engineering" and "Liquideng" marks must be dismissed with costs.
36 That brings us to the passing off claims. In its opening submissions, LE 2003 pressed these claims in some detail, on the basis that it intended to seek exemplary damages. Because exemplary damages are not available in trade mark actions (Paramount Pictures Corporation v Hasluck (2006) 70 IPR 293 at [34]-[36]), the claims thus appeared to have some independent relevance. However, despite the promise to address the Court orally regarding exemplary damages, no such oral submissions were forthcoming from counsel for LE 2003. Moreover, LE 2003's written closing submissions make only incidental reference to the passing off claims and no reference at all to exemplary damages. On that basis alone, I conclude that, even if not formally abandoned, the claim was not pressed.
37 A further consideration in this regard is that, in the peculiar circumstances of this case (which I will explain in the discussion on damages below), even an accounting of profits in trade mark will inevitably be punitive to some extent, and thus likely to have a deterrent effect: see XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1984) 155 CLR 448, 471 per Brennan J (stating that the purpose of exemplary damages is to teach the wrongdoer a lesson and deter the commission of like conduct in the future), cited with approval in Lamb v Cotogno (1987) 164 CLR 1, 9. Moreover, the evidence is that Edwards has not traded using the "Liquideng" mark or under the name LFS since April 2006, and neither he nor SK Rural has used the "Exit Rust" or "Fuel Set" marks since July 2007. In the circumstances, the need for deterrence is low. Finally, I note that Edwards made no attempt to conceal or disguise his trading from LE 2003, and the basis on which he asserted a right to do so. For those additional reasons, I would in any event be reluctant to find that any of the respondents had acted with the contumelious disregard necessary to justify exemplary damages in tort. Whether on the basis that the passing off claims are no longer pressed or on the basis that even if pressed no different relief would result, there is thus no reason to consider those claims further.