FanFirm Pty Limited v Fanatics, LLC

Federal Court of Australia|2024-07-29|Before: Rofe J

THE COURT NOTES THAT: The respondent undertakes: A. to pursue any appeal with expedition; and B. until the hearing and determination of any appeal, to abide by such order as the Court may make in favour of the applicant for damages or an account of profits (at its election) after 17 July 2024 in the event that any appeal is relevantly unsuccessful. THE COURT ORDERS THAT:

Orders 3, 4 and 5 of the orders made at 10.15 am on 17 July 2024 (17 July Orders) be stayed until: (a) 4.00 pm on 14 August 2024; or (b) if a Notice of Appeal is filed, 28 days after the resolution of that appeal.
Order 2 of the 17 July Orders be stayed until 4.00 pm on 14 August 2024.
By 4.00 pm on 5 August 2024, the parties prepare, and provide to the Court, proposed redactions to the Court's reasons for judgment. The Court will then prepare a redacted version of the reasons for judgment, which will be made available to the public.
The parties have leave to appeal the judgment handed down on 17 July 2024 and orders 2-7 of the 17 July Orders.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Stay Principles 15 Rule 36.08 of the Rules provides: 36.08 Stay of execution or proceedings under judgment appealed from (1) An appeal does not: (a) operate as a stay of execution or a stay of any proceedings under the judgment subject to the appeal; or (b) invalidate any proceedings already taken. (2) However, an appellant or interested person may apply to the Court for an order to stay the execution of the proceeding until the appeal is heard and determined. (3) An application may be made under subrule (2) even though the court from which the appeal is brought has previously refused an application of a similar kind. 16 The principles in relation to the stay of an order are well known and were summarised by Rangiah J in Flight Centre Ltd v Australian Competition and Consumer Commission [2014] FCA 658 at [9] as follows: (a) There is an onus on the applicant to demonstrate a proper basis for a stay that will be fair to all parties. (b) There is a prima facie assumption that the judgment appealed from is correct. (c) There is a prima facie assumption that the court should not deprive a litigant of the benefit of a judgment in its favour. (d) The court has a broad discretion as to whether to grant a stay, and it is not necessary for an applicant for a stay to demonstrate special or exceptional circumstances. It is sufficient that the applicant demonstrates a reason or an appropriate case to warrant the exercise of discretion in its favour. (e) The mere filing of an appeal will not, of itself, provide a reason or demonstrate an appropriate case. (f) A stay will usually be granted if there is a real risk that the applicant will suffer prejudice or damage, if a stay is not granted, which will not be redressed by a successful appeal. (g) In the exercise of its discretion, the court will weigh considerations such as the balance of convenience and the competing rights of the parties before it. 17 A similar summary of the relevant principles was set out by Derrington J in Redbubble Ltd v Hells Angels Motorcycle Corp (Australia) Pty Ltd (2022) 168 IPR 74 at [37]; see also the summary by Halley J in Energy Beverages LLC v Cantarella Bros Pty Ltd (No 2) [2022] FCA 394 at [20]-[25].

Undertakings proffered by the respondent 18 The respondent proffered the following undertakings and proposed that the Court make the orders below. Subject to any further order of the Court, upon the Respondent undertaking: (a) to pursue any appeal with expedition; (b) to keep accounts of all sales of products which would fall within the terms of the injunction made by the Court on 17 July 2024; and (c) until the hearing and determination of any appeal, to abide by such order as the Court may make in favour of the Applicant for damages or an account of profits (at its election) in respect of any sales made as a result of staying final injunctive relief in the event that any appeal is relevantly unsuccessful. THE COURT ORDERS THAT: 1. Order 2, 3, 4, 5 and 8 of the orders made on 17 July 2024 be stayed until: (a) 4.00 pm on 14 August 2024; or (b) if a Notice of Appeal is filed, 28 days after the resolution of that appeal.

Evidence 19 Ms Platt is a partner and Head of Sparke Helmore's Intellectual Property and Technology Team, she has specialised in intellectual property law since the mid-1990s. Ms Platt gave evidence on the basis of her general knowledge and past experience in proceedings involving trade mark use in different jurisdictions that geo-blocking technology can be used to restrict access to internet content based upon users' geographical locations. 20 Ms Platt annexed a screenshot of a webpage from the Fanatics Sportsbook website. Fanatics Sportsbook is a sports betting business operated by the respondent. Under the heading "Troubleshooting Geolocation Issues" was the statement "[w]e use geolocation services to ensure you use the app from where Fanatics Sportsbook is live. These services include GSM, Wi-Fi, or GPS signals to locate you". 21 Mr Rivas is an IT consultant and the owner of Project 3 IT Pty Ltd, an IT consultancy that provides a range of IT services to businesses. Mr Rivas has provided IT consultancy services for 20 years. 22 Mr Rivas gave evidence regarding geo-blocking technology, which he described as typically used to restrict a user from accessing a server or network based on their geographical location. His evidence is that geo-blocking technology is commonly used to reduce cybersecurity attack surfaces, and to prevent users in certain geographic locations from seeing certain content on the internet. He gave Netflix as an example of a company using geo-blocking to block and restrict Australian viewers from viewing US content. 23 According to Mr Rivas, geo-blocking is not difficult to implement. Mr Rivas deposed that he reviewed the website at www.fanatics.com and discerned that the website is hosted by Akamai Technologies software (Akamai Software). While Mr Rivas had not used the Akamai Software before, he was aware of it and familiar with its features and capabilities, including geo-blocking capabilities. 24 Mr Rivas also noted that the geo-blocking settings for the Akamai Software are listed on the Akamai support website at https://techdocs.akamai.com. From his review of the www.fanatics.com website and the software used to host it, Mr Rivas estimates that it would take about a day to implement a geo-block on the www.fanatics.com website, which would restrict Australian users from accessing the website. 25 Ms Hay is a partner at KWM, and she has practiced almost exclusively in intellectual property law since her admission as a solicitor of the Supreme Court of Victoria in April 1997. Ms Hay notes that she has been instructed to file a notice of appeal on behalf the respondent, and that she expects the appeal will be heard during the November 2024 or March 2025 Full Court and Appellate sitting period. 26 Ms Hay gives evidence on the basis of her experience and also on information and belief from Ms Lan Nguyen, Senior Vice President and Head of Litigation and Regulatory of the respondent company, that if the stay is not granted, the respondent will be deprived of the fruits of a successful appeal, and suffer irreparable harm, on the basis that: (a) it would incur the significant costs, business disruption and loss of goodwill associated with changing its branding and other operational modifications in Australia pending the outcome of the appeal to the extent that the goods and services it offers under the Infringing Marks are enjoined; and (b) once the Infringing Marks are removed from the Register of Trade Marks, to the best of Ms Hay's knowledge, there is no mechanism under the Trade Marks Act 1995 (Cth) (or otherwise) whereby they can be reinstated with retrospective effect. 27 Further to [26(a)] above, Ms Hay also gives the following evidence as to the respondent's business, on information and belief: (a) The respondent has been using the Infringing Marks in Australia for more than a decade and it operates in over 180 countries globally. (b) The two main arms of the respondent's business in Australia are: (i) direct consumer e-commerce stores via domains owned and operated by the respondent; and (ii) the design maintenance and management of e-commerce stores for third parties (Partner Stores). (c) In relation to the each of the respondent's e-commerce stores which are branded with the Infringing Marks, the respondent would be required to take measures regarding their operation including to prevent consumers in Australia from purchasing the goods covered by the Injunction. These e-commerce sites include: (i) fanatics.com; (ii) fanatics-intl.com; (iii) fanatics.co.uk; and (iv) mobile applications. 28 In relation to the scale and diversity of the respondent's business, Ms Hay referred to certain paragraphs from the three affidavits of Mr Ravid and the affidavit of Mr Swallow filed in this proceeding. 29 Ms Hay also gives the evidence below as to the effect of an injunction. (a) There are a number of complex issues that the respondent is considering which arise from the Reasons. These include technical, compliance and legal issues across all aspects of its business (which comprises its own e-Commerce Stores, Partner Stores and its global manufacturing operations). (b) The respondent operates a global business and the Reasons impact multiple facets of its global operations including product labelling and shipping, customer transactions including product returns and also requires Fanatics to consider any implications for its more than 700 Partner Stores. (c) It will take a number of months at a minimum to resolve these matters and implement the Injunction. (d) As outlined by Mr Ravid in his third affidavit, if the respondent is required to rebrand in Australia there are a number of steps that would be necessary, including: (i) identifying a suitable brand for the business in Australia (including conducting market research); (ii) development of guidelines, training and educating as to how the separate brand can be used; (iii) securing, designing, developing and building a new website, mobile application and social media accounts; (iv) designing and implementing an education campaign for Australian consumers; (v) providing any necessary support for global partners and affiliates in relation to marketing and promotional materials; and (vi) legal costs associated with the rebrand. (e) If by reason of the Injunction, the respondent was required to rebrand, the loss of goodwill and brand damage would be very significant and very difficult, if not impossible to quantify.

Rectification of the Register 30 There are two aspects of the 17 July Orders which are the subject of the stay application. First, there is the Injunction preventing the respondent from using the Infringing Marks in relation to the specified goods (order 2), and second, there are the orders relating to the rectification of the Register of Trade Marks (orders 3, 4 and 5; the Rectification Orders). 31 Both parties are affected by the Rectification Orders. Both parties acknowledged the uncertainty as to whether the Court has the power to rectify the Register by reinstating removed marks following an appeal. As neither party opposed a stay of the Rectification Orders, subject to one qualification raised by the applicant, I will begin with these orders. 32 The applicant noted that the effective date of cancellation of the Infringing Marks in class 35 was important. Whilst the Infringing Marks remain on the Register, they may provide a defence to any infringing conduct of the respondent that occurs between the making of the Rectification Orders and the resolution of the appeal in the applicant's favour, thus affecting the applicant's pecuniary relief. That would cause a real and significant prejudice to the applicant if a stay was ordered. 33 In response to the applicant's qualification, the respondent proffered the undertaking in the form set out at [18] above. 34 In light of this undertaking, I will stay the Rectification Orders.

Submissions 35 The respondent submits that a stay of the injunction pending the determination of its appeal is appropriate. A stay will typically be granted if it is necessary in order to preserve the status quo and the subject matter of the appeal: Cantarella at [25(c)] (per Halley J). The respondent further relied on his Honour's observation at [35] to submit that "the fundamental consideration in whether to grant a stay is the preservation of the status quo". Given his Honour's statement at [25(c)] in Cantarella, I consider that his Honour regarded the preservation of the status quo and subject matter of the appeal to be a fundamental consideration in cases where the fruits of an appeal would be rendered nugatory without a stay of the order. This matter is not such a case. 36 The respondent submits that it has used the Infringing Marks for 14 years as part of its global business and that it has built up substantial goodwill in the Infringing Marks over that time. 37 If there is no stay and the respondent is successful on appeal, the respondent submits that it will suffer damage as a result of lost sales and goodwill that will not be able to be redressed by its success on appeal. The respondent submits that there is no mechanism to compensate it for lost sales and lost goodwill during the period the Injunction operates. In contrast, the respondent submits that calculating damages or an account of profits for the period of the stay would be a relatively straightforward process. 38 If there is no stay, the respondent submits that it will incur costs in rearranging its affairs in order to keep trading during the term of the Injunction. As the respondent operates a global business, it says that there will be a level of complexity in adopting a new mark for the Australian part of the global business. The respondent submits that it is relevant to consider more than just its costs of complying with the Injunction. The cost of rearranging its affairs is also relevant to consider, as the Injunction prevents it from selling goods by reference to the Infringing Marks, not from selling goods altogether. The respondent submits that in the event that it is successful on appeal, there is no way for the respondent to recover expenses it may incur in rearranging its affairs as a result of the Injunction. 39 The respondent referred to Buckley LJ's discussion of the factors relevant to exercising a discretion whether to stay an injunction restraining infringement in a patent case, Minnesota Mining & Manufacturing Company v Johnson & Johnson Limited [1976] 25 RPC 671, at 676: … In some cases the putting of an injunction into effect pending appeal may very severely damage the defendant in such a way that he will have no remedy against the plaintiff, if he, the defendant, succeeds on appeal. On the other hand, the postponement of putting an injunction into effect pending an appeal, may severely damage the plaintiff. In such a case, the plaintiff may be able to recover some remedy against the defendant in the appellate court with respect to this damage in the event of the appeal failing, but the amount of this damage may be difficult to assess and the remedy available in the appellate court may not amount to a complete indemnity. … In some cases it may be impossible to devise any method of ensuring perfect justice in any even, but the court may nevertheless be able to devise an interlocutory remedy pending the decision on appeal which will achieve the highest available measure of fairness. The appropriate course must depend upon the particular facts of each case. The applicant submits that the starting point of any consideration is that there is a prima facie assumption that the judgment is correct, and that the applicant is entitled to the benefits of that judgment. The applicant contends that in this case the balance of convenience favours the refusal of a stay. 40 The applicant submits that the respondent has not satisfied its onus to demonstrate a proper basis for the stay of the Injunction. This is not a case where the result of the appeal will be rendered nugatory if the stay is not granted. 41 The applicant submits that the stay application must be considered in the context of this case. The applicant submits that it has sought an injunction to prevent the respondent's use of the Infringing Marks from the time it commenced the proceedings in late 2022. Thus, the respondent had been on notice of the form of the potential injunction from late 2022, and the Injunction should not have come as a surprise to the respondent when it was ultimately unsuccessful at trial. 42 The applicant noted that the respondent was a large global entity with significantly more resources than the applicant and better placed to absorb any losses or expenses associated with the Injunction than the applicant to absorb any detriment from the stay. 43 The applicant criticised the lack of detail in the respondent's evidence to support its submission as to its likely irreparable detriment. The applicant submitted that there was very little detail as to the suggested complexities and difficulties that would arise as a consequence of the respondent complying with the Injunction. Further, much of the evidence went beyond compliance with the injunction and strayed into the costs and difficulties associated with rebranding. 44 According to the applicant, the respondent's evidence does not establish that by doing what is necessary to comply with the injunction, as opposed to what it might seek to do in order to take further steps such as rebrand its business in Australia, the respondent is suffering relevant prejudice. The applicant submits that the respondent's costs incurred in finding and adopting a new brand in Australia and transitioning customers across to the new brand are not costs incurred as a result of compliance with the Injunction and thus they should not be taken into account. 45 The applicant submits that the relevant damage or prejudice to the respondent to justify a stay must be something more than lost sales, otherwise there would be a stay in most trade mark and patent infringement cases. 46 The applicant referred to the evidence of Mr Rivas that the respondent could implement a geo-blocking facility so that its websites that utilise the Infringing Marks would not be accessible to Australian consumers - a technology which was widely available and which, according to Mr Rivas, should be able to be implemented within a day or so. The applicant notes that the respondent has no evidence to show that geo-blocking would involve any significant cost or delay or result in any material prejudice. This absence was explicable on the ground that the respondent's solicitors received correspondence from the applicant's solicitors regarding the applicant's intention to raise evidence in respect of geo-blocking technology too late to enable them to contact relevant personnel in the US to obtain instructions before the hearing.

Consideration 47 As the matter came on swiftly for hearing, the respondent had not prepared its draft notice of appeal. I noted at the hearing that for the purposes of the argument on the application to stay the Injunction, I was prepared to assume that the respondent had bona fide grounds of appeal. 48 I consider that it is likely that the appeal will be heard during the Full Court and Appellate sitting period in March 2025. As a result, any stay of the Injunction would be expected to operate for in the order of about a year. Conversely, if there was no stay and the respondent was ultimately successful on appeal, the Injunction would be in operation for a similar length of time. 49 As I noted above, I am prepared to order a stay in relation to the Rectification Orders, thus removing one of the sources of potential irreparable harm relied on by the respondent. 50 The main focus of argument on the stay application was in relation to the stay of the Injunction. According to Ms Hay the two main arms of the respondent's business in Australia are: (a) the direct to consumer e-commerce stores via domains owned and operated by the respondent such as www.fanatics.com (see J[103]−[104]); and (b) the operation of Partner Stores. 51 I discussed the respondent's Partner Stores at J[117]−[119]. At J[159], I concluded that the service of designing, setting up, managing and operating an online store for a third party, such as the respondent's Partner Stores, was a different type of service to those services covered by the applicant's registration. The ability of the respondent to provide its Partner Stores services in Australia is not impacted by the Injunction. 52 Turning to the other arm of the respondent's business, the e-commerce stores. The respondent has not filed any evidence which shows the breakdown of income or profit attributable to Australian sources from the operation of the e-commerce stores as opposed to the Partner Stores element of its business. 53 The respondent made high level submissions as to its substantial reputation and goodwill achieved through the use of the Infringing Marks in its global business, and the irreparable harm and potential irrecoverable alienation of customers if no stay was granted. Whilst the respondent may have a substantial reputation and goodwill in other jurisdictions associated with the Infringing Marks, I am not convinced that the evidence supports the claim to the respondent having a substantial reputation and goodwill in the Infringing Marks in Australia. 54 In his third affidavit, Mr Ravid annexed as a confidential annexure a table showing the net demand of all products shipped to Australia and the net demand of all products billed (in US dollars) from Australia between 2013 and part of 2023 from the e-commerce store located at www.fanatics.com. The table also identified the number of orders placed and the number of customers each year. The table displayed total sales, not profit, in US dollars. An examination of the sales figures and the customer numbers does not sustain the respondent's claims to a "substantial reputation" and likely irreparable harm from lost customers and lost sales. First, the sales and customers have been in a steady decline from a peak during 2020, they are now back to a level achieved during the period 2014-16. Second, the number of customer orders from Australia are not large. Using the 2022 orders figure (as the 2023 figure is not for a full year), the 2022 orders represent [REDACTED]. 55 The respondent operates a global business. On the figures provided by Mr Ravid, online sales to Australia do not appear to be a substantial part of that global business. If during the period of the Injunction sales equivalent to the entirety of the 2022 sales were lost, it is difficult to conclude that that would cause irreparable harm to the respondent's global business or its reputation. 56 The respondent's assertions as to the vast cost and expense required to rebrand if it is prevented from using the Fanatics brand in Australia must be viewed in the context of the case. As I outlined in my Reasons, the respondent chose to use the name Fanatics in Australia with knowledge of the applicant and its trade mark registration in respect of the word Fanatics. I set out the circumstances of the respondent's adoption of the name Fanatics at J[288] and following. At the time that the name was adopted, the respondent knew of the applicant and its registration in respect of Fanatics: J[287]. The analysis accompanying the Branding update appeared to only consider US-based competitors: J[290]. Further, neither Mr Swallow, nor Mr Ravid, nor anyone else from the respondent was able to depose to the holding of an honest belief at the time the mark was adopted that there would not be any confusion with the applicant's mark as a result of the respondent adopting the Fanatics name: J[296]. 57 Despite Mr Ravid's evidence that an "important part of the branding strategy for the Fanatics business [was] to have a single recognisable and unifying brand across those regions", no consideration was given by the respondent at the time it adopted the Fanatics brand to the branding landscape outside the US in Australia. Mr Ravid's evidence in his third affidavit as to the complex, substantial and expensive exercise entailed rebranding in Australia seems somewhat inconsistent with the disregard shown to the Australian market at the time the name Fanatics was adopted. 58 The present case is distinguishable from Minnesota Mining. In the absence of a stay, the defendant in that case would lose all its market share for a particular surgical tape to the plaintiff patentee, with the patent due to expire before the appeal could be heard. The defendant might never regain its previous market share as foreign competitors were likely to enter the market on expiry. The defendant faced substantial prejudice beyond just lost sales. 59 I do not consider that the respondent has established a proper basis for a stay of the Injunction. 60 In my view, a number of matters indicate that the balance of convenience points strongly against the stay of the Injunction. The applicant submitted, and I agree, that the nature of the damage or prejudice suffered by the respondent as a result of the Injunction does not outweigh the potential prejudice suffered by the applicant should the Injunction be stayed. The potential prejudice suffered by the applicant would include the dilution of its brand recognition by enabling the respondent to continue the process of intensification or expansion of its commercial activities directed to the Australian market identified in [27(b)(i)] above. 61 The respondent has not established that it will suffer irreparable harm as a result of the Injunction. Further, on the evidence before me, the potential geo-blocking measures raised by the applicant appear to be readily available and an efficient way for the respondent to comply with the terms of the Injunction in Australia. This potential geo-blocking measure, coupled with the relatively small number of Australian sales of the respondent also weigh the balance of convenience in favour of the Injunction. 62 As such, any damage likely to be suffered by the respondent as a result of the Injunction is also likely to be redressed if it is successful on appeal. This further tells in favour of a rejection of the stay application for the Injunction. 63 The respondent submitted that Mr Rivas' affidavit which detailed the availability of the geo-blocking measures, was received too late to obtain instructions from the relevant personnel in the US. I will grant a short stay of the Injunction beyond 29 July 2024 to allow the respondent to make arrangements to comply with the Injunction, which may include the geo-blocking of the relevant websites. If it transpires that there is some technical reason why the respondent is unable to geo-block Australian users from the websites in that time period, the respondent can seek a further short stay supported by evidence.

Conclusion 64 I am not satisfied that the respondent has discharged its onus "to demonstrate a proper basis for a stay that will be fair to all parties" in relation to the Injunction: Flight Centre at [9] (per Rangiah J). 65 For the reasons set out above, I consider that the balance of convenience does not favour granting the respondent's application to stay the execution of the Injunction order until the hearing and determination of the appeal. However, I am prepared to grant a stay for the Rectification Orders as discussed above. I certify that the preceding sixty-five (65) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Rofe.

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